Using Local Currency for Reform – Radical or Reckless?

It seems clear that Manchester is not going to be reimbursed by central government for the full cost of the Manchester arena terrorism attack by central government presumably because central government ‘does not have enough money’ – although it prints it.

Perhaps a local currency could provide a little help.

Local currencies seem to be increasingly popular. The first in the UK, the Totnes pound is now ten years old; the Bristol Pound (“the Bristol Pound… is money that we can all control – not money that controls us.“) is well established and now part of the local Credit Union. It runs electronically as well as having a very popular text to pay phone payment system.

There are fledgling other currencies in places from Liverpool to Cardiff.

Sonantes seems to be successful in Nantes in France – as a system of mutual credit.

Even just a ‘sort of’ currency, ‘Spice’, which is a system of time credits for volunteering, seems to be successful way beyond its starting point in South Wales, although the rewards are generally limited to the leisure/discretionary sectors.

But Hullcoin seems to have run into problems with the tax authorities because it was a way of rewarding voluntary work that might actually include additional essentials such as food or rent.

Yet, particularly these last examples, are not what we really think of as currency.

We need to consider that if national governments can produce national currency, then local governments can produce local currency.

If they are to be local, the currency would still be what economists call, I believe, exogenous – i.e. no holidays in Marbella because it is directly exchangeable one to one with Sterling and nothing else. The object is simply to ease and increase economic activity within the local area of issue.

Back to Greater Manchester. Here the Mayor controls the Police, the Fire and Rescue Service as well as health and social services.

The area is crying out for a local currency.

But here is the radical bit – he has so much budgetary expenditure control that he could simply give everyone a 3% pay rise in his Manchester Pound – let’s call them Manks for short – and undertake that Manks would be accepted in payment for council fees and taxes/ business rates (already the case in Bristol, for example).

Once he does this then there would literally be so many employees paid in 3% Manks that there would quickly be a thriving market of people wanting to accept the currency all over Manchester. After all, it couldn’t be spent anywhere else. In the following years of central government austerity higher pay could be conditional on accepting a greater percentage of Manks. Then there would be scope for employing more people  – as the Central government budget received could be spread more thinly. If the Mayor really does need to contract out services then they could be contracted to be paid to the supplier in, say, 25% Manks. (Which would so please Mr Branson as he’s a great supporter of Britain and likes, we know, to keep things local.)

This may all be a little messy but cannot fail to lead to increased economic activity within Manchester and would begin to punch a hole in everlasting austerity (seven years so far and still no respite). Additionally there might actually be greater thought by everyone about why we have money and what it is.

It is quite remarkable that significant numbers of Bristol employees are paid – on a voluntary basis – partly in Bristol pounds and it is probably too recent or too obscure to have researched whether this has increased prosperity in Bristol. Certainly though the ‘Economist’ and the local statistics show it is actually a prosperous City. So one can surmise that a local currency is at least no handicap.

Yet although the Bristol pound is designed to service the whole (former) county of Avon it is not prevalent outside the City of Bristol itself and of course neither does Bristol run its own Police or Health Service. Only the fire service is still ‘Avon’ (and, since the council was abolished, seems to have suffered). Still, buses in Bristol (largely run by Aberdeen based Firstbus) accept Bristol Pounds as do Good Energy and Bristol Energy so it has expanded way beyond the Corner shop.

The potential in Manchester, an area with about 2.3 million people and with a now much more unified local government structure must be considerably greater.

Would giving Mancunians a Manks pay rise be inflationary? Only if the place is already so prosperous it cannot absorb them to pay for extra goods or services – which I doubt, or if there is nowhere for people to spend their Manks. By accepting them as payment for local taxes you fix the problem of scarcity and encourage traders to use them as well. And of course even if there were Mank inflation it would be very local. And, ultimately, if there were Mank inflation it might be indicative of remarkable success….

Comments

  1. Peter May -

    Shades of Churchill’s making the right decision only after trying all the others – let’s hope this is a presage of things to come!
    Still I think Manchester could still benefit from a local currency.

  2. Ms Christine Bergin -

    Very glad to see Bristol Pound gaining credence. Glad the local Credit union is on board with it. Not at all sure if CETA and its various iterations will tolerate local efforts that are this successful.

    1. Peter May -

      It did strike me too that the next stage would be for the banks to be claiming that local currencies were unfair competition, but it’s been only 8 years since bailout so I’d like to think they are not that stupid!

  3. Anthony Waterhouse -

    Re local currenies, as things stand they are of limited value and impact maginal, perhaps a first step. Regulations are oppressive llmiting ther design and self definition. It seems that the Bristol pound was not allowed to make a small charge to buy out into official pound.
    Might these local currencies within limits be allowed to become more self governing and experimental. Regulated not by main financial authoriies but seperate commisioners for mutual and cooperative enterprises.

    As a thought experiment, can some element of MMT be worked into local currencies, so that local created credit can be generated on a limited basis. Already the idea of anchour institutions is gaining traction, the Preston modal. If anchour intituions brought into a local currency, these funded be government or very sound, then might there not be scope for them be able to borrow (local currency) from the local currency organisation, up to perhaps double what they purchased in official pounds. Can this work? It might boost the trading done locally. Needs modaling and testing?

    1. Peter May -

      Borrowing is banking territory so local currency or not they’d need a banking licence. There is still lots of scope for local banking tackled here, which the RSA is gradually starting to roll out.

  4. Anthony Waterhouse -

    Borrowing is banking terrotory,. Banking as it is? CUs make loans, these have been shakled, should they be under the same regulators as the Banks. Should a new generation of local banks be regulataed by governace captured by the City?

  5. Peter May -

    I took it that you were advocating ‘credit creation’ which is banking territory. And as you say Credit Unions are shackled in their capabilities.
    The idea is that newly formed local banks would be co-ops and ‘not for profit’ operating solely for the good of a local area. I go into more detail here. Because they’ve rented an off the shelf banking system they seem to have overcome the normally over onerous City regulation.

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