Complementary currencies, also known as local currencies or community currencies are non-national medium of exchange, which represent a complement to national currencies. They favor the reinforcement of the whole local economic fabric, encourage employment, encourage sustainable development, support territorial growth and make it possible to envisage other modes of exchange and consumption. As an alternative economic approach they are in the same spirit as those seeking to increase the sustainability of development, to find more accurate and real indicators of wealth than GDP, taking better account of natural resources, non-market goods and resources, wealth and human or social skills.
A failed economic system
We all know the official currencies like euro, dollar, peso, the pound, the ruble or the dinar… Those currencies we use for our day-to-day trading (coins and notes) are created by central banks. It’s about fiduciary money. These coins and notes represent only 10% to 15% of the money used in the world. The other 85-90% are just postings from credit activities. That means that the 85 to 90% of the economy is based on … lines of numbers that banks (authorized to grant credits) have created in the banking and financial system. And that’s what prompted industrialist Henry Ford to declare: “If people understood the banking system, I think there would be a revolution before tomorrow morning”.
Some voices today criticize official currencies to be “at the service of a financialized economy where a minority accumulates wealth while a majority is impoverished, an economy where speculation and tax evasion prevails. Indeed, one of the major problems with the international financial system is that big companies and banks do not have the same need to maintain a healthy community, a society that works well, than people who live and work in the real economy.
A contestation story
Talking about the contestation of money and finance, one has to deal with the example of the People’s Bank of Proudhon imagined in 1840 in France. In fact, at that time, only a minority of individuals had gold coins and were the social class of bankers. They used to lend gold coins to the other people in order for them to create and manage their own business. The other were doomed to sell their lab or power for a lifetime as employees or workers. According to Proudhon, the banker owns both gold and money and captures all the wealth through his possession of the gold coin. Since the working class and the people hadn’t have access to gold, the people’s bank would have allowed exchanges via the agreement of vouchers and cash for the craftsmen being sure to have buyers. He therefore created the idea of the people’s bank but ended up in prison for insulting Napoleon and could never set up his People’s ban.
A French point of view
We can take the famous example of a local currency used in Montreuil, a city circa Paris, named La Pêche (the peach). The main goal of this currency was to relaunch the economy and make exchanges look more fluid. The founders wanted to relocate the economy and favour the real one (stop crazy finance, tax havens and China). They also wanted to give back the power to the citizens of Montreuil with a currency wich was closer to them and their values, a real money made for and by the citizens. The purpose of this local currency is to promote the circulation and anchoring of the currency. The craftsmen, the services and the municipality make it possible to circulate the local currency. One has to pay traders and services with peaches and thus make a circuit between craftsmen, traders and consumers. This is called the « funnel effect »: the peaches accumulate among the traders who sell the products, who then make the circuit work.
A Brazilian point of view
The brazilian experience with social currencies started 20 years ago following the creation of Palmas Bank in Fortaleza, CE that so far is the most important initiative in the country. Joaquim de Melo founder of Palmas bank explains that the main reason he decided to start a local currency was to stimulate consumption and to anticipate credit for dweller from Palmeiras community where Palmas circulates as a way to encourage trade, give more time and flexibility to native’s debts and fidelize consumer which is great to regional merchants. At present moment initiatives around Brazil created over 100 differents social currencies.
Heloisa Primavera is specialist on solidarity economy and social currency and founder of NeuroBank in the South Brazil. According to Primavera “the difference between a regular currency and a social currency is that one is controlled by banks and by the financial system which she declare believe are deeply antisocial because they are concentrating wealth in only a few hands, and the other is by definition a social currency because it has to be autonomy produced and controlled by people for people from these communities that are part of these social initiatives”. Primavera avaluetes that the challenge is on how to show people not to accumulate social currency, which is the only possible way to keep it working.