Proutist Economic Development Community and CurrencyDr. Michael Towsey

Monetary DecentralisationThe Future of Money Bernard LietaerEconomic decentalisation requires monetary decentralisation.Each community should control its own money system.

Money - Central versus LocalCommunity money system

Different Kinds of Money (1)Money is a community tool to catalyse community trading.There are many different kinds of money system.Different money systems suit different purposes.

Different Kinds of Money (2)Traditional money90% of money issued as interest-bearing debt.Created using the fractional reserve system.Producer currencyStamp currencyMutual Credit

Producer Currencies (1)Form of commodity money Workers are paid in money backed by output.Example 1: 1920s GermanyHyper-inflation - a postage stamp cost billions of marks.Miners were paid in money (Wara) backed by coal.Mine manager arranged for import of food that could be purchased with Wara.

Producer Currencies (2)Example 2: 1960s IrelandProblem: a banking strike no money to pay workers.Dublin brewery paid its workers in beer vouchers.Vouchers could be redeemed at local pubs for beer, money or other goods.

Velocity of Money$1 can catalyse $10 worth of transactionsThe velocity of moneyvelocity = total transactions volume of moneyProut Principle: keep money rolling i.e. increase velocity!How?

Stamp CurrencyCommunity currency scheme started in Wrgl, Austria, in 1932A small amount of money can exchange a lot of goods if it circulates rapidly. (high velocity of money)Holder of a note had to buy a stamp each month.Therefore money spent quickly no hoarding.Wrgl was first Austrian town to overcome unemployment.

Unemployment and the Nazi Vote

Local Enterprise Trading SystemLETSFounded in Canada spread throughout worldLETS an accounting systemFor every credit there is a debit zero sum.Mutual creditUnit of money decided locally bunya, reekyValue tied to local currency 1 bunya = $1 AUDFacilitates multilateral exchange when bank money not available.

Community Currency Taking Off !

LETS, Maleny, Australia

International Versions of LETSwww.bartercard.comwww.ebanctrade.com

A Hierarchy of CurrenciesA hierarchy of communities requires a hierarchy of money systems.

The South America ExperienceCuritiba bus tokens favelas waste for public transport

A South American Currency?Good or bad?Depends on what kind of currency and what for ....A South American currency like the Euro?A new currency for a South American trade zone?

A South American Currency (2)A South American currency like the Euro?Bad ideaSweden rejected idea because .......Shifts power from democratically elected governments to non-elected institutions such as the Central BankErodes ability of member states to implement local solutions to their economic problemsMakes it easier for TNCs to accumulate wealthOne year after adopting the euro, Portugal was forced to make massive cuts in public services and wages.Unemployment has risen in Germany and France every month since they adopted the euro.

A South American Currency (3)New mutual credit currency for a South American trade zone?If similar to Keynes Plan - good ideaOperates independently of member country currencies.Removes Venezuela from dependence on US $ and Euro.Does not erode ability of member states to implement local solutions to their economic problemsRequires an independent money standard such as Terra based on representative basket of traded commodities.

There are other kinds of money besides the traditional note and coin with which we are all familiar. This presentation introduces some new kinds of currency that may be useful for communities under certain circumstances.Many of the ideas for this presentation come from an interesting book "The Future of Money" by Bernard Lietaer. Lietaer was involved in the introduction of the euro currency in Europe. He now has a professorial position at Berkeley University in California. The essential message of this presentation is that economic decentralisation requires monetary decentralisation.A centralised monetary system cannot support economic decentralisation. Local communities require some control over their local monetary system.Money is typically defined as having three functions. 1) it is a means of exchange. 2) it is a store of wealth. And 3) it is a means of accounting. Different kinds of money can emphasise one of these functions over the others. We are interested in money as a tool to catalyse community trading and hence stimulate the local economy. One of the messages in Bernard Lietaer's book is that different money systems suit different purposes.We will not discuss traditional money in this presentation. Rather our purpose is to introduce three new kinds of currency, producer currencies, stamp currencies and mutual credit.Producer currencies are money backed by commodities. The workers in a factory, for example, could be partly paid with money denominated in the commodities they produce. Such a system was developed in Germany in the 1920s during a period of hyper-inflation. The manager of a mining company arranged to pay his workers in paper notes denominated in kilograms of coal. The notes were known as "Wara". The workers were able buy food from local stores that accepted Wara which they could redeem for coal. A second example of a producer currency occured in the 1960s in Dublin. During a bank strike there was no money to pay workers at a Dublin brewery. Instead they were paid in notes denominated in bottles of beer. These could be redeemed in pubs which also sold food and other household items.An important property of a dollar note or coin is that it is transferable. Therefore a one dollar note can facilitate the exchange of several dollars worth of goods as the note passes from person A to person B to person C and so on. The total value of transactions catalysed by the average one dollar note is referred to as the velocity of money. Sarkar places particular emphasis on keeping money rolling - that is - to increase the velocity of money. The velocity of money declines when people hold on to it. Therefore a mechanism is required to prevent people from hoarding money.Stamp currencies achieve this objective by making it costly to hold on to money. The idea was introduced in the Austrian town of Wrgl deep in the depression. The town mayor introduced the currency backed by Austrian shillings he had in a vault. If he had released the Austrian shillings, they would rapidly have left the community and done no good. The stamp currency, was however only legal within the town. A holder of a note had to affix a stamp once a month in order for the note to remain valid. (See the stamps in the top right portion of the note and the empty spaces for more stamps, bottom right.) The scheme was very successful and Wrgl was the first town to reduce its unemployment during the depression. Other towns copied the scheme. It became so successful that the Central bank of Austria became fearful that it would lose its monopoly on the printing of money. So it persuaded the government to ban the scheme.This graph shows the parallel between the increasing levels of unemployment in Germany and the rise of the vote for the Nazi party. Had the central banks of Germany and Austria not banned two successful schemes (Wara and Stamp currency) that were reducing unemployment, perhaps the tragedy in Europe could have been avoided.LETS is the third kind of money system to be described in this presentation. LETS is just an accounting mechanism to keep track of trading in a community. For any single trade between two persons, one person's account will decrease and the other will increase by the same amount. Thus the sum total of all balances for all persons in the system will be zero. There is no currency circulating as such. These kinds of accounting systems are known as "mutual credit". The unit of currency can be decided by the local community but is usually tied to the national currency. LETS schemes facilitate trade when bank money is not available.Here is a graph of the number of alternative currency schemes around the world since 1984. The graph comes from "The Future of Money".Maleny, a small town 150 kilometers north of Brisbane, Australia, has both a cooperative bank (credit union) and a LETS system in the same building. A small LETS system requires minimal hardware - just a computer program.There are international versions of LETS but their charges need to be carefully checked.Another important message in Bernard Lietaer's book is that a hierarchy of currencies can be useful in catalysing trade at each level.The Brasilian city of Curitiba has experimented with several alternative forms of money. One example is the exchange of waste in slums for bus tokens. Bus tokens can be used by poor people to get to work in other parts of town. But they are also exchangeable and hence become a form of currency.

There has been some discussion about the introduction of a South American currency. Is this is a good idea or a bad idea? It depends on the manner in which it is introduced.If the idea is a euro equivalent for South America, then the idea has long term merit but it is much too soon for the introduction of such a scheme. There are three major objections to the introduction of a "euro style" currency in South America. 1) it shifts power from democratically elected governments to non-elected institutions such as the Central Bank. 2) it erodes the ability of member states to implement local solutions to their economic problems. 3) it makes it easier for transnational corporations to accumulate wealth. In centralised money systems, capital goes to the centre in search of higher profits and jobs go to the periphery where labour is cheap.On the other hand if the proposed South American money zone is restricted for trading purposes, then the idea has much merit. Such a plan would facilitate trade between the countries of South America without making them dependent on the US dollar. Nor would it erode the ability of member countries to manage their own economies. See Bernard Lietaer for more information on how such a scheme would work. He proposes an international form of money known as the Terra.