Local Currencies: the Time is Right

Intuitively we know our current economic model isn’t working. We see it in the empty shops, the seemingly never ending for-lease and for-sale signs, and the evidence that millions out of work can lead to share market gains. 

That intuition plays out in the data. Take Chapel Street, Prahran, a once thriving retail destination which has seen better days. On a recent ride to work I counted 70 vacant shops in a stretch of road only 1.5 kilometres long. We see the same situation playing out across many local streets as our purchasing concentrates or moves online. 

We are also now acutely aware of the paradox of thrift, popularised by John Maynard Keynes; the idea that my discretionary expenditure is my neighbour’s essential income, and potentially their livelihood. We see this most dramatically in our restaurants and nightlife where health-based restrictions have put millions of people out of work globally, almost overnight. 

The COVID-19 lockdowns have brought to light the power of buying locally. Initially we rushed to larger retailers. Now we realise we need to support our local producers and shopkeepers. Their world has changed overnight. We benefit from them adapting in inspiring ways—from the fruit and vegetable sellers now offering pre-packaged boxes for collection (at some 30 percent cheaper than national retailers), to local pubs selling takeaway slabs and growlers, to restaurants and caterers moving to become community hubs and providers of glorious takeaway meals. 

In my local area, inner-city Richmond, we are seeing how local our lives can be. Under isolation, our shopping is more local, but in some ways our influence has grown. Take our local coffee shop that is now a provider of local produce, selling fresh pasta made in Brunswick, a mere 10 kilometres away, alongside free-range eggs and fresh bread. Before our eyes, we are seeing the potential for more local activity, more local jobs, and more options for a diverse and resilient food system.

If we want to create a different future, then in this moment of suffering and change we need to look for signs of hope. If we want to strengthen our local economies then we need to use our money to make that change. A powerful opportunity here is in deploying local currencies. 

At a fundamental level, local currencies complement an existing national currency. The main difference is that they are only accepted in a specific geographic area and often with a focus towards smaller, more locally-owned and operated shops and activities (which can include local councils for rates and service charges). 

Consumers who want to participate would buy a local currency—either paper, plastic-based or, increasingly, digital—in exchange for their existing national currency. This allows a local currency to be backed by a national currency and reduces concerns around risk. With your new currency in hand, you can go out and deliberately spend it to generate economic activity that benefits your local area. 

Local currencies aren’t new. One of the most successful examples was in the 1930s with a deliberate attempt to stimulate the local economy of Wörgl, Austria. The town had not only a conscious focus on increasing the local economy, but required a one percent monthly fee to retain the value of the currency (a form of demurrage). This payment reduces hoarding and increases the velocity of money in the economy, accelerating local economic activity. 

More recent examples are from the United Kingdom, often seeded by the Transition Towns movement which rapidly sprang into existence in the late 2000s. The most successful have been in Bristol and Brixton. Prior to that time examples exist and endure, such as the Eko, which was launched to support the intentional community in Findhorn, Scotland in 2002. While small in amount (an estimated 20,000 Ekos are in circulation with each worth one pound sterling), the Eko brings additional benefits to the local community in that the issuing entity lends the sterling that is held to local community organisations.  

If history doesn’t repeat, but often rhymes, we may be on the verge of new wave of local currencies. As our local businesses stare over the cliff’s edge, local currencies can play a part in their recovery. Australian communities and local governments should consider implementing them. Whilst there are significant hurdles to clear—like pioneering such an innovation in a difficult economic climate, as well as getting business and community interest (and ultimately acceptance)—the prize is worthwhile. 

These aren’t niche endeavours; they have the potential to positively change a community’s relationship with money and its economy. The Bristol pound has around 800 businesses accepting their distinctly colourful paper notes, or more readily, their digital currency. This is a significant uptake for a city of under 500,000 people. The Brixton pound, used in a central London borough, is accepted in an estimated 250 businesses. Australia’s diverse retail landscape could attract a substantial uptake from locally-focused businesses.

The successful local currencies of the future will be fit for our times. They will offer a digital wallet and mobile app, and an experience that attracts a broad range of demographics. They will provide discounts for shopping locally, enable loyalty incentives and help build community networks. 

Of course, it’s not all smooth sailing. Despite a rush to local currencies in the 2000s, not all have succeeded, with many endeavours not making it to a full launch. The Totnes pound, launched by the well-known Transition Towns Totnes, closed in June 2019 as the move to a cashless society made it no longer viable and their scale precluded a move to a digital option. 

Rob Hopkins, the Transition Towns founder, reflected on the success of the Totnes pound saying: “The idea that the local economy and local traders really matter is now something that has become instinctual and I think the Totnes pound hopefully will have played a part in that.” He also noted the need for local government to be more involved, as they have been in Bristol where you can pay your local taxes, business rates and energy bills using the Bristol pound. 

A key part of any local currency is genuine empowerment, for citizens and businesses. As our oligopoly-dominated economy faces growing risks of concentration post-COVID-19, we have to be alert and aware of the lack of empowerment across our society. Yet, if there was ever a need for hope, it is now. As Hopkins notes, “The sense of identity, and new story and excitement and imagination is really something precious.” Perhaps this is the something we are all yearning for.

So where could we see a full scale roll-out of a local currency in Australia? Potential areas range from Victoria’s bustling inner city areas of Melbourne, Darebin, Yarra or Port Philip. Or perhaps a regional area like Hepburn or Byron Bay. Maybe a city like Adelaide or even the state of Tasmania. Just imagine the possibilities, buying your local produce in Tasmanian Devils or Byron Bay bucks. The future will be what we want to create—perhaps a local currency will be part of yours.