Patacon, patacon, baker's van
Town & Country Planning,
How do you rescue a city that has run out of cash? When it's
Liverpool, and you're Mrs Thatcher in the 1980s, you probably just turned
a blind eye. When it's a city like East St Louis - so poor that the police
have to provide their own patrol cars - you just move out. But what happens
if it's actually your capital city.
I wrote about the currency ideas in Buenos Aires before, with the arrival
of the Global Barter Network in the capital city of Argentina, faced with
yet another extreme economic crisis. It's fascinating to see the way these
kind of ideas take root when conventional money disappears.
But now the world's economists are up in arms, the business pages of the
newspapers are outraged and the IMF deeply suspicious, but Buenos Aires
has done it again - and this time they're very serious and very ambitious.
Or possibly very desperate.
A new currency known as the patacon - a bond carrying seven per cent interest
- has been launched in the province around Argentina's capital by the
regional governor in a last-ditch attempt to keep the wheels of society
moving under the weight of Argentina's $153 billion debt.
Argentina's problem is that they have already linked the peso to the value
of the dollar at a one-to-one exchange rate, which retains the value of
the peso - but makes it extremely scarce. People need currency just to
carry on their lives. Something had to give.
At first sight, the patacon looked as though it might indeed be a blueprint
for cities running short of cash. The maverick economist and planning
writer Jane Jacobs - who famously described the interest of Britain's
new as going no further than grass for Christopher Robin to go hoppety-hop
- has always argued that the right size of a currency was a city region.
Singapore and Hong Kong both had their own currencies, and it gave them
efficient right information feedback about the right price for its goods,
she said in Cities and the Wealth of Nations. Detroit just had the dollar
and look what happened there.
And Buenos Aires seems to have done many of the right things with the
patacon. It agreed to accept them in payment of municipal and federal
taxes. Local telecom companies will accept it. Even McDonalds has organised
a special new 'Patacombo' meal in exchange for it.
In fact, the patacon is the real thing - all $95 million of them - a parallel
regional currency that keeps the local regional economy flowing.
So is it a breakthrough, or should the people of Buenos Aires withdrawing
their salaries partly in patacons still be a little bit worried? All I
can say is, I wouldn't speak too soon.
There are two problems with the patacon. The first is that the Argentinian
federal government is intending it to go nationwide, and that would undermine
all the benefits of it circulating just in the city region. Just circulating
in Buenos Aires, it encourages people in the city to fall back on their
own resources, to discover their own untapped raw materials and their
own wealth of imagination. Circulating across the whole country it just
apes the peso - and can only look a little bit pale in comparison.
The second is the question of what underpins it. This is why the provincial
government have designed a seven per cent bond, to give that illusion
that this is something of real value. But does it? The government is gambling
on being able to repay seven per cent on the currency, and its value hang
s on everyone's belief that they will be able to. The moment that starts
to slip, then so will the patacon.
That uncertainty is going to mean people treat the patacon a bit like
the Monkey's Paw, and get rid of it as fast as they can - which is good
for the economy. But the odd thing is that the seven per cent will - if
it's too successful - encourage them to hang onto it, which isn't.
An odd contradiction. But then, maybe that's the problem when government's
issue their own money. It all hangs on belief - and governments tend to
have peculiar ideas about whether people believe in their competence or
Perhaps Buenos Aires' new money should actually have been a negative interest
money to encourage circulation, as the great Yale economist Irving Fisher
proposed so successfully during the Great Depression - his ideas taken
up in Austria and all over North America.
Or it could be linked to the value of Argentina's raw materials, or -
as the Australian corporate raider Shann Turnbull suggested - linked to
the value of locally produced renewable energy.
Or, if they are going to be really imaginative, link the value of the
patacon to Argentina's carbon credits, which under the Kyoto Treaty, they
may soon be trading on the world markets.
But above all, keep in local. People need a choice of currencies to rely
on, not just the well-spun mirages that governments produce. But they
will work best when they are underpinned and understood in city regions,
used for the nitty-gritty aspects of life like butchers and bakers.