The
new alchemists
Published in Resurgence magazine, January
1999
With the best will in the world, the English are not great financial innovators. The Italians invented banking, the Italians invented double-entry book-keeping, the Scots gave the world Adam Smith and John Law - whose monstrously inflationary schemes in Paris paved the way for the French revolution.
This century's innovators have been the Americans: they had to be to conjure the money to develop a vast continent out of the chickens, seedlings and know-how they arrived with on the Mayflower.
But the English did manage to invent the Bank of England, with William and Mary hustling their way to the top of the subscription list, and then they sat back waiting for their race of dull bank managers to take over the world.
They didn't. But while the Americans, for all the drawbacks of their system, have a financial system that is able to develop new kinds of money, the English are left with the worst of both worlds. We have a destructive financial system based on vast quantities of debt, and a petty-fogging small minded bank manager's attitude to money, which is always running out.
The Americans got Benjamin Franklin with his printing machine. We got Captain Mainwaring and his high street successors, endlessly eking out very small sums, while a shark like Robert Maxwell could owe twice as much as Zimbabwe.
But while we agonise about merging the pound into a Europe-wide currency, with unpredictable effects, and watch while public money for the things we hold dear - village schools, cottage hospitals - dwindles further, the money world is metamorphosing again without us.
There was a time when only governments could create money, and as Mike Rowbotham explains in his excellent book The Grip of Death, they have long since delegated 97 per cent of that responsibility to the banks - which create it in the form of mortgages or interest-bearing loans.
They are helped by the credit card companies, which give the power to customers to create their own debts - and create their own money at the same time - every time their card is swiped through a till. Credit card companies in the USA now market their products by sending $5,000 cheques through the post by mail-shot.
If you want the money, you can cash the cheque and the card and statement follows through the post. "Like feeding lettuce to hungry rabbits," according to one American commentator.
No wonder the average American family manages to amass savings of just $2,300 after 50 years work.
But now there are also supermarkets and airlines issuing their own money. Tesco, Safeway and
Sainsbury's all issue their own points to encourage regular customers. A whole range of businesses deal in air miles, which you can spend on an ever-burgeoning array of goods and services, and which then disappear when you've spent them.
Northwest Airlines even sell blocks of air miles to charities, which split them up and trade them on at a profit. At one stage they were paying for their worldwide public relations contract in air miles and they still use them to pay many of their suppliers.
In the USA, there are now a range of off-the-shelf 'incentive cards' along the same lines for
companies to offer their customers. There is even one card that acts as a combined loyalty and credit card. You can use it to buy things with 'loyalty points' you haven't earned yet, but which then have to be repaid with increased customer loyalty.
None of these innovations help us to improve either the shortage of money, the collapse of local communities or the damage done by worldwide human greed. But they do open up new possibilities for experiments with new kinds of money which are kinder to the planet - and maybe even turning the base metal of human poverty into something closer to gold.
As we know, with Local Exchange and Trading systems (LETS) in the UK, people have been experimenting with this technology to invent their own new kinds of money. LETS money is available to anyone with time and skills, less dependent on the increasingly bizarre fluctuations of the market, and do less damage to the planet by charging ruinous interest.
Similar ideas are suddenly popping up all over he world. There are now regional scrip systems like australs in Argentina, SOCS in Scotland or tlalocs in Mexico. There are computerised community barter systems like green dollars in Australia and New Zealand, banco del tempo in Italy and SEL systems in France.
But in America, as befits the great money innovators, the field is even broader, with a range of local currencies all launched to achieve a different aspect of local sustainability.
Time dollars, for example, are a way of providing non-medical services to older people, to keep them healthy and living at home and help offset the cuts in public spending. They are now operating in 200 US and Japanese cities, and are being hailed as the elusive key to rebuilding
'social capital'.
They were actually developed in the UK, at the London School of Economics in the early 1980s, the brainchild of the American civil rights lawyer Edgar Cahn, who envisaged a non-market kind
of money which recognises the contribution people make to the places they live.
Time dollars record, store and find new ways of rewarding the human transactions where neighbours help neighbours, like giving lifts to older people, taking them to the doctor or tutoring local children. One hour is worth an hour, whether you are a rich lawyer or an elderly widow making supportive phone calls to neighbours.
Research shows that 'paying' volunteers in time dollars can boost the number of volunteers available, can make people healthier and - and here's the important bit - have a major impact on a range of social problems.
"Market economics values what is scarce - not the real work of society, which is caring, loving, being a citizen, a neighbour and a human being," said Cahn. "That work will, I hope, never be so scarce that the market value goes high. So we have to find a way of rewarding contributions to it."
The time dollars idea also helps us to see work differently, recognising that caring work - which
neighbours traditionally do for each other, and which we all rely on - is productive work.. Governments may not define it as such, economists may balk at the whole idea, but it is. And the special insight of time dollars is to recognise that crucial fact.
Then there are hours, the innovative printed currency which has revolutionised the local economy of Ithaca, in upstate New York. If time dollars are about building social capital by encouraging public goods, hours are a way of building local economies by exchanging private goods.
The idea of printing a local currency emerged after a successful local campaign to fight plans for an out-of-town Wal-mart superstore. Now Ithaca is home to what is probably the biggest local currency in the world, the brainchild of self-styled community economist Paul Glover, who wanted to find a way of keeping money circulating locally.
Like so many other small cities, Ithaca local business was threatened by large nationwide chains that took money away from local business and sent profits out of the area. The result was that local incomes were falling, economic self-determination - such as there was - was crumbling, and the city was increasingly dependent on expensive, packaged imports to the area, usually brought in from great distances by multinational traders.
Glover believed that a local currency, because it could only be spent within a 20 mile radius of
Ithaca, could at least stem the flood. It could give an advantage to local businesses which accepted hours, provide more income for people on the margins of the economy, substitute local products and services for those flooding in from outside and make the local economy more sustainable, diverse and able to survive recession.
Hours notes are a 'hard currency', designed by Glover, and incorporating the slogan 'In Ithaca We Trust' in parody of the dollar. They are accepted as being worth $10. By 1996, about 5,700 ($57,000) hours were in circulation around Ithaca, and organisers believed they had been used to create about $1.5 million in trade among local business since 1991.
The idea has caught the imagination of the decentralist movement in the USA and imitators now range from Valley Dollars in Massachusetts to K'au Hours in Hawaii. A similar idea has been launched in Portsmouth in 1998 with the help of Portsmouth City Council, but remains in its early stages.
Time dollars and hours join a range of other local currency experiments developed by other new alchemists around the USA. Like Womanshare in New York - aimed at achieving a kind of psychological sustainability for his members in New York's West Side. Or like the pioneering work being carried out by the E F Schumacher Society in the USA, ranging from farm notes and deli dollars - helping the local deli to move to bigger premises after he had been turned down for a loan by the local banks.
"It may be legal, but - geez - take one over to a colour copier and see what happens," said one Federal Reserve official.
These experiments may be difficult to sustain, but they could potentially give people the means to provide themselves with the money they need - when it normally seeps away to the big cities and massive world capital flows. Taken together, they could mean an economic breakthrough for tackling poverty and social collapse and given the implications of economic collapse in Russia or the far East, an urgent one for the whole of humanity.
Five centuries ago, the old alchemists like the mysterious Paracelsus - wandering round Europe in a coloured coat which he never washed - were the inspiration behind a protestant revolution against the old order of authority and control. They toppled the old certainties of medicine and politics with their dreams of a 'chemical revolution' which would restore the wasteland, attacking monopolies and putting power and medical knowledge in the hands of ordinary people. The new alchemists are doing the same with money.
They are the vanguard of a money revolution that allows us all to do what only governments, bankers and credit card operators have been able to do so far - create money.
So if we don't like the moral imperatives behind the kind of money which dominates our lives now, it may be that bloody revolution may be as unnecessary as it is counter-productive. But we have to start experimenting with new kinds of exchange which have different values embedded in them.
Conventional money - as we all know - derives its changing value from the psychology of the international market: our hopes, fears, weather patterns, mood swings all effect its value. And I have felt for some time that, if wealth is a psychological construct, then there must be ways in which collective belief - collective psychology - could create more of it.
Local currencies are, I think, showing us how. They have provided a tool for manifesting that non-monetary wealth which we have in ourselves, our neighbourliness, our wasted skills, our communities.
But they are something else too. They are something more natural than Wall Street or City of London money: they provide the possibility of a kind of self-generating wealth. In the natural world, when a baby sucks at its mother's breast, that act of needing produces more milk. We are moving towards a kind of money which doesn't depend on scarcity for its value, but which is generated by need.
This doesn't mean that local money should be expected to do everything which dollars and pounds can do. But there are many areas where dollars and pounds are simply not effective: they do not build communities, they do not respond to needs, they do not build families, they do not tackle poverty. Local money does, and if it works - if it provides the means of living that people need - it could represent the future.
David Boyle is the author of Funny Money: In Search of Alternative Cash, published by Harper Collins in January 1999.
