By Marie Jackson
Can printing your own cash actually help revive a struggling economy? That’s just what traders in one London shopping district are hoping for, as they begin accepting a new local currency.
Short on cash? Then why not make your own. There’s no law against it, so long as you don’t try to pass it off as sterling.
And you can use whatever you please to make your money, whether cigarettes, rabbit skins or paper notes.
That’s what’s happening in Brixton, a south London neighbourhood where shoppers, from Thursday, will be able to hand over 10 Brixton Pounds (B£s) in return for their groceries.
Proponents of local currencies say they boost the community’s economy by keeping money in the area, but critics dismiss them as fashionable gimmicks, tantamount to protectionism.
HOW TO USE B£s
Exchange £20 for 20 Brixton Pounds (B£s) at Morleys department store or Opus Cafe
Spend this in any of the 70 or so shops, clubs, pubs, cafes which have signed up
On another shopping trip, accept change in B£s from the shopkeeper
Spend this change in another of the shops. And so on
B£s can be exchanged for legal tender at certain Brixton businesses
40,000 notes in 1, 5, 10 and 20 units, each featuring a revered local figure, are printed on watermarked paper with holograms and serial numbers
B£s cannot leave the area nor be banked to earn interest
They may sound experimental but have in fact been used since the Middle Ages when local currencies were all there was – it was not until the 1700s that every European country had its own currency, says Tim Leunig, an economist at the LSE.
Research suggests that when the wider economy slumps, communities turn to barter systems. In other words, when there’s little money around, people think about making their own.
The Great Depression of the 1930s saw a wide take-up in the US and much later, the Global Barter Club was born after the Argentine economy hit rock-bottom in 2001. At its height, the system was supporting three million people.
And today’s straitened times may well renew interest in complementary currencies but, as one unconvinced Brixton shopper, asks: « What’s the point? »
« A local economy is like a leaky bucket. Wealth is generated then spent in chain stores and businesses. It disappears leaving an impoverished local economy, » explains Ben Brangwyn, part of the team behind the Totnes Pound, launched in south Devon in 2007.
« Local money prevents that from happening and keeps the money bouncing around the bucket, building wealth and prosperity. »
Currently, 6,000 Totnes pounds are in circulation from an estimated local economy of £60m.
It is, stresses Mr Brangwyn, a radical experiment, still in its very early stages, but he can see a day when England has 2,000 local currencies.
Other towns joining the experiment, started by environmental group Transition Network, are Lewes in East Sussex and Stroud in Gloucestershire which introduced the Stroud Pound this week.
Brixton, with its reputation for bustling streets, a lively nightlife and a notoriety for street crime, is the first urban area to have its own currency.
Volunteers behind the project say it has not been an easy sell.
Some shopkeepers are concerned about counterfeiting and the build-up of Brixton pounds in their till. Others see it as a novel advertising tool that could become gift vouchers, or even a collector’s item.
It relies on people’s sense of wanting to shape their own economic future
Susan Witts, BerkShare co-founder
So far, £10,000 has been pledged by businesses and local people to be converted into B£s, but on the streets there is still some convincing to be done.
Project manager Tim Nichols hopes people will be drawn by the notion of a kind of « secret club » for holders of the special notes and expects Brixton’s antiestablishment spirit to work to its advantage.
« We are in London, the financial hub of the world, and are trying to do something that goes against the grain of the big banking system that we are living on the edge of. »
He is also optimistic the recession can work in its favour.
That’s the view of Susan Witts who co-founded the BerkShare, a local currency launched in 2006 in Berkshire, Massachusetts.
She puts the growth of BerkShares (from 1 million to 2.5 million in three years) down, in part, to the recession and a lot of hard work.
Almost all collapse because they don’t achieve anything
Dr Tim Leunig, LSE economist
« Introducing a new currency means more work. You have to train staff to use it, adapt accounting processes. When things are going well, it seems an unnecessary extra step.
« But in difficult times, businesses are looking at ways to make their business work. It relies on people’s sense of wanting to shape their own economic future. »
But David Boyle, of the New Economics Foundation think-tank and a supporter of alternative currencies, believes efforts in Britain are hampered by its banking system.
Whereas the US has a major network of local banks willing to handle other kinds of money, banks in the UK are less willing to do that. He suggests the answer could lie with local authorities playing a more controlling role.
The vital factor though, says Mr Boyle, is belief.
« If you can maintain that belief in the community, it can work, » he says.
Other economists dismiss the whole concept as a gimmick.
« It might make people feel good, but it’s not achieving anything meaningful, » says Tim Leunig, of LSE.
There are 6,000 Totnes pounds in circulation
« You’re saying you can’t buy goods from Hackney, Southwark or China, even if they are cheaper. It’s giving Brixton shops monopoly power and in the long-run destroys incentives. Almost all collapse because they don’t achieve anything. »
The only use he can see for it is as a tax dodge, but the taxman says this is a red herring.
All businesses have to report all turnover and as every local currency is tacked to sterling, every sale, whether paid for in cream cakes, polar bears or carrots must be reported to its sterling value, the HM Revenue and Customs says.
And if you are not running a business, the HMRC has no interest because where there’s no profit motive, there’s no taxation consequence. The Treasury, meanwhile, views them as little more than gift vouchers.
So, with the government unperturbed, perhaps we could yet see Mr Brangwyn’s vision of 2,000 separate local currencies realised. But would that be a brave leap into the future or a return to the Middle Ages?
Below is a selection of your comments
A local currency is a great idea if it can delay the passing of wealth from local communities straight into the stock exchanges of the world, where it is used for unethical and environmentally-harmful purposes. The mainstream economy, as promoted by the LSE, is based on a pyramid selling scam, and is thus no good for anyone except the already wealthy.
Tom Barker, Chester, England
I can only see this working as a kind of tourist attraction for people to go and use this « monopoly money ». I can’t see it helping their local economy much and I doubt I’ll be using Teesside Tenners any time soon.
David Cook, Billingham, England
I think it would be better and more flexible to trade goods and services, e.g. a haircut for a meal. this has worked well in communities in the past and will continue to do so. arguably, it may not boost an area’s economy, but it will boost the feel good factor there instead.
Kim Shankar, London
This is wide-open to abuse – how do consumers know that the scheme won’t collapse leaving them unable to trade their worthless « currency » back into sterling? Barter economies work because the items bartered have an intrinsic value; if you swap pound coins for bits of paper with a hologram on, nowhere else will accept that as payment because they have next to no value.
If the exchange rate is tied to the pound then the Brixton pound will not keep any money in the area. Any holder of a Brixton pound could simply exchange it for sterling should they want to spend money somewhere else. A fixed rate of exchange to sterling means that every Brixton pound has to be backed by a pound of sterling. This means that no money has been created. (In fact since a Brixton pound costs money to produce but is only exchangeable for exactly one pound of sterling, the total money supply in the area may in fact be reduced).
Surely this is a complete waste of time? Whilst shops in Brixton may recognise it as legal tender, elsewhere people won’t have ever heard of it. The fact that you have to purchase the Brixton Pound using Pounds Sterling sort of destroys the point of it; you’re exchanging one currency for another, when you can use the first across the whole country and is worth more thanks to the gold standard. They can’t be banked, thus contributing to the economic slowdown more so, because the banks require our investment to keep loaning money to other people and businesses. And surely it costs more to produce the Brixton Pound than you might save by using it? And what do you use to buy the materials required? Pound Sterling.
I think the HMRC has it wrong. If you’re paid in Brixton £s for services and not goods, doesn’t this mean you not taxed. Say for example, if I’m an electrician and I fix the wiring in a persons house and I buy to parts in Brixton £s and I’m paid in Brixton £s, I don’t have to declare the earnings.
Rob, Manchester, UK
Any scheme which protects local communities from the endemic greed of the global ‘financial community’ has to be not only practical but also essential in nurturing self reliance. Big brother has made big mistakes recently and will soon be losing control when half the world is on the move
Mike Lancaster, Blackpool, UK