The Austerity Vaccine


“Wherever the money rolls, there it has an effect. Local money doesn’t roll very far so it can get to work in my area.”

Mayor Georg Moosbrugger of Langenegg, Austria, which has introduced a local currency, the Talente.

Most of us use complementary currencies without ever realizing it. Every time we buy gas, go to the grocery store or take a flight, we receive “points” which can then be put toward future purchases. These programs benefit the businesses involved by ensuring return visits.

In recent years, a number of localities have adopted their own complementary currencies to try and keep money flowing into local businesses, who often struggle to compete with big box stores. Unlike point or loyalty programs, the purpose of these local currencies is community rather than brand loyalty. In the case of LetSystems that may include barter and services in the exchange, they can even help people keep more of their hard-earned federal “fiat” money in their pockets.

The Guernsey Experience and the Golden Age of “Scrip”

There have been many attempts at creating and sustaining complementary currencies in modern history. One early experiment was in Guernsey to help that Channel Island’s cash-starved population during the Napoleonic wars. It was so successful at building local prosperity that the existing banks in London got “a court injunction preventing the issuance of the island’s own currency.”

It’s somewhat fitting that the last time such local money was widely adopted was during the Great Depression. Some of the ways “scrip”, as many of these currencies were then called, came into use from the eastern United States to Central Europe may point to ways forward for those looking to introduce them into their communities today.

As some commentators have noted, one of the main reasons local currencies became popular during the Depression was not because of a lack of money as we might assume, but because people and institutions were hoarding cash as a hedge against economic uncertainty; it was essentially a problem of circulation. Different scrips handled this problem in different ways but among the most successful were the ones designed to guard against hoarding: “stamp scrips”.

As explained in detail on the website, the Bavarian German town of Schwanenkirchen had one of the great successes in introducing a scrip called “Wara” (the name was created by combining two  German words: “ware” the word for goods and “wahrung”, the word for currency) based on the theories of Silvio Gesell, a German businessman.

It “was designed to have 52 spaces on the reverse side, one for each week of the year, and the scrip was to have the value of its stated denomination only for one week.”In order for it to retain its value, a stamp, costing about 2% of the scrip’s value, had to be purchased from a local bank and put in the appropriate spot each week. This had the add-on effect of making people more likely to spend it quickly to avoid paying for the stamp.

With a dire economic situation throughout Germany in the 1920s and early 30s, the owner of a shuttered coal mine, formerly the main employer in the town of Shwanenkirchen (pop. 500), used a government loan to introduce Wara as a means of exchange. His plan was to use the currency to re-open his mine and put the people back to work.

The mine owner’s employees agreed to receive their salaries in the scrip and the village store agreed to receive Wara as payment for goods. To prevent the spread of this kind of currency, the German government later passed an emergency law banning it. The mine was once again closed and the small economic miracle that had been taking place in Shwanenkirchen ended soon after.

Berkshares and Brixton Pounds: Two Recent Examples of Successful Local Currencies

Considering the events of 2008, it comes as no surprise that local currencies are surging in popularity. One ongoing experiment in western Massachusetts that’s thriving is the Berkshare. This local currency is valued at par with the U.S. dollar and is issued by five local banks.

The involvement of the banks gives legitimacy to the effort and, with $2 million of them in circulation, there is no doubt the currency has boosted the local economy. Berkshares are accepted at over 400 businesses in the region and, with some help from a Dutch non-profit, the Doen Foundation, they have expanded the program to offer loans.

An argument can be made that complementary currencies work best in rural areas, but experiments in one British city and a South London neighborhood show that this doesn’t have to be the case. In Bristol and Brixton, “Local Pounds” run by nonprofit companies have piqued the interest of international media leading to a number of stories in the mainstream press.

These Local Pound programs allow businesses to pay some of their taxes using this money, expanding its use. Local authorities can also use it to pay a portion of their own employees’ salaries. As reported in The Guardian, “50 Lambeth council employees even receive some of their wages in Brixton pounds.”

Once they’re accepted by the communities they originate in, complementary currencies can increase real wages while creating spending that is good for the local economy. It also takes some of the power away from the big financial institutions who have helped to bankrupt so many towns and cities in North America and Europe.

These are far from the only examples of local currency out there and far from the most radical. In a future article, we’ll look at two alternatives to the alternative, both of which are becoming increasingly popular in North America: the LetSystem mentioned above and the idea of time as currency, a concept which is spreading quickly throughout the United States. These ideas can inspire citizens and inoculate our communities against the fiscal austerity that’s being forced on us from above, often at the behest of those whose financial misdeeds created the problems we are coping with in the first place.


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