by Julieta Aranda and Anton Vidokle

Time banking is not barter. Barter economies have been in practice throughout history, but the idea of using time as a unit of exchange only appeared shortly after the Industrial Revolution. The origins of time-based currency can be traced both to the American anarchist Josiah Warren, who ran the Cincinnati Time Store from 1827 until 1830, and to the British industrialist and philanthropist Robert Owen, who founded the utopian “New Harmony” community. While both systems are based on the principles of mutualism and the labor theory of value, Josiah Warren’s currency was explicitly pegged to time as a measure of specific goods or labor. For example, 3 hours of carpenter’s work would be considered equivalent to 3-12 pounds of corn. Meanwhile, Robert Owen’s currency simply bore an inscription referring to a number of hours, which presumably could be exchanged for however many pounds of corn a farmer would deem adequate or labor of any kind.

There have been other examples of alternative economies in recent history, most notably the “Notgeld” emergency money that appeared in Germany after the hyperinflation of 1923. Notgeld was unofficial “money” issued by cities, boroughs, and even private companies to compensate for a shortage of official coins and bills. As long as Notgeld was accepted, no harm was done, as it was understood to be a valid certificate of debt. Notgeld was actually more stable than real money, since its denomination was often pegged to material goods, such as gold, corn, meat, and so forth. The currency itself was purposefully made to be very pretty to encourage people to save the bills. This way, the debt would never have to be paid. Notgeld was printed on all kinds of material—leather, fabric, porcelain, silk, and tin foil. Since it was not legal tender, the only people who dealt in it were those who wanted to. As a result, it had a stabilizing effect on the official currency, which was still in circulation.

The first successful contemporary time bank was started in 1991 by Paul Glover in Ithaca, New York. Following his idea, people began to exchange time, which led to the creation of a time-based currency—the “Ithaca Hours,” which even local businesses began to accept, and which still flourishes. Time banking and service exchange have since developed into a full-fledged movement, usually centered around local communities.

Time/Bank at e-flux is modeled on existing time banks. Every Time/Bank transaction will allow individuals to request, offer, and pay for services in “Hour Notes.” When a task is performed, the credit hours earned may be saved and used at a later date, given to another person, or contributed towards developing larger communal projects. For example, if you happen to be in Beijing or Hamburg and need someone to help you shop for materials or translate a press release, you would be able to draw on resources from Time/Bank without exchanging any money.

Through Time/Bank, we hope to create an immaterial currency and a parallel micro-economy for the cultural community, one that is not geographically bound, and that will create a sense of worth for many of the exchanges that already take place within our field—particularly those that do not produce commodities and often escape the structures that validate only certain forms of exchange as significant or profitable.

timebank network schematic (Mihos’ timebank network map)




‘Hours’ type: First modeled in Ithaca NY in 1991, Hours currency is based on issuing paper currency to a core group of members who agree to accept it. It is usually roughly pegged to the national money (1 Hour = $10), but cannot usually be redeemed for it. The largest and most successful system is in Ithaca NY.

Time Bank: Time Banks are like LETS systems but denominate the currency in hours of service rather than national money. Everyone in the system values their time equally, and therefore the system operates outside the sphere of the IRS. Edgar Cahn is the founder of the Time Banks movement in the USA ( However, the idea of trading time dates back for many hundreds of years in some places (most notably Bali).

“A central database is kept with everyone’s “account” information. When services are performed, the parties log it on the website and the respective accounts automatically get credited/debited. The credits (known simply as Hours) exist only in this electronic form. We may print notes someday, but strictly speaking, those aren’t necessary. (75% of all U.S. dollars exist solely in electronic form, by the way.) We need not worry about squaring everyone’s account to zero on a day-to-day basis. The system can continue indefinitely, with people vacillating from plus to minus, staying put for a while, or whatever. Hopefully no one will keep a large negative balance for a long time. If that happens, other participants can suggest ways of earning hours to that person. If that doesn’t work, people can cease performing services for them. No one is ever under any obligation to trade, for any reason. Bottom line, if something isn’t worth the price, i.e. if so and so doing 2 hours of x for you isn’t worth 2 hours of your time, then don’t have them do it. Besides mutual agreement, there are really no hard and fast rules. The point of hOURS is not to constrain anyone or be a burden in any way, but to free up possibilities and potential. The website also serves as a sort of ‘yellow pages’ in which everyone can list the goods and services they have to offer, and those which they need, which can be just about anything.

Can goods be bought and sold under the hOURS system too? Sure, just remember an Hour of money represents an hour of time. Use that to determine what a desirable price would be. If an item can be readily reconceived of as a service (the service of providing that item) use that to determine the price. Businesses can get involved as well. So why isn’t the ‘h’ capitalized you may be wondering: Because both “hours” and “ours” are good names for the program. The first is obvious, but “OURS” captures some important features of it as well. It’s literally ours, belonging to the people involved. No bank or corporation has the ability to pull funding. No absentee owners siphon off rents and dividends. A community that uses hOURS is strengthened by the increased interpersonal contacts and becomes wealthier through two mechanisms mentioned above. We need not suffer any problems that come from the so called credit crunch, nor any problems stemming from the nature of that credit, such as its control by elites.


General principles
1. Give hOURS the benefit of presumption.
hOURS is better than the main economy in the sense of being saner and having a better social impact. In terms of scale and variety of opportunity of course, it still falls way short in comparison. So people obviously still need to use the dollar economy. But let that be your rationale – that you need to, even though it will constitute the lion’s share of your economic life. The point is, don’t let force of habit or force of mindset channel you into using the dominant system. Use hOURS whenever possible.

2. The actual Hours are created by the participants.
The units of currency, Hours, do not exist in a paper form, nor are they doled out by any sort of central issuing authority. They’re created simply by two or more participants getting together and performing services. This is a democratic form of money. You can think of the system as a sort of accountant/observer. For each Hour credited to someone, another is debited. The total amount of Hours (adding up everyone’s balance) is always zero. So if you think about it, someone, in fact usually about half the participants, will be in the red. There’s nothing wrong with that, that’s how it works. If people weren’t willing to have negative balances we wouldn’t have hOURS. So please don’t have any special aversion to that. Don’t bring “dollar-think” into the system. Dollar-debt and Hours-debt are not very comparable. A negative hOURS balance isn’t even a debt at all. It just means you haven’t yet accepted back Hours that you issued. You need not earn Hours first in order to spend them. Leaving the system in the red would be very uncool, but maintaining a negative balance, even for a long time, is fine. No interest is charged.

Each Hour, the unit of currency, represents an hour of time. The price of any service is the time spent performing the service.

3. Reckon time spent from the perspective of the provider(s).
This is mentioned for the case of transactions with more than two people, where it’s not immediately obvious. But it is obvious if you think about it for a minute. Suppose someone does 6 hours of plumbing work for two hOURS participants who live together. The total transaction amount is 6. The provider gets credited 6 and each recipient debited 3. It’s not that each recipient gets debited 6 and the provider credited 12. Imagine then the provider discovered a third participant living there, could they insist on being paid 18? No, why should that matter? It makes more sense to split it three ways, each being debited 2, much as you probably would, had you hired a plumber with dollars. Similarly if two people are performing a service together, they should both be paid in full. The recipient is getting more in such a situation. e.g. the plumbing is really difficult – it takes two people an hour to do. They each get credited a full Hour, and the recipient(s) debited two.

4. Count commuting time.
If someone has to travel to come provide you a service, that’s part of their effort. That might normally be disregarded in the mainstream economy, but that doesn’t mean it’s not real. The economy sweeps a lot of stuff under the rug. That’s the main reason we have environmental destruction; the costs of it don’t show up on anyone’s balance sheet. Let’s strive for an economy that brings things into the light of day. Ivan Illich came up with the concept of shadow work, which is uncompensated labor at the service of the market economy. Examples would be commuting and shopping. They do nothing to promote subsistence and independence. But they are demanded by the market system. Their cost is borne silently by those who perform them. hOURS has a “small is beautiful” streak. It’s good to buy local in order to avoid various transportation costs. When you can choose between providers, have a tendency to go with whomever’s closer. Bringing transporatation costs into the light of day can help us come up with other ways to minimize them, say by combining trips for example. An hOURS transaction with a long commute could be scheduled for when the provider would be making the trip anyway, for other reasons. Then the cost can be split. For simple services, (that most anyone can do) like plant sitting for example, you may wish to contact people who live nearby, even if they don’t specifically offer it, rather than someone who lives further away and does offer it.

5. “Returns”/Complaints
So far there has been a strong spirit of generosity in hOURS. Between that and open communication, most everything should be able to be resolved between the parties involved. In troublesome cases, appeal to Fred for help/ideas/mediation.

6. Consent is the primary value.
As long as all parties to a transaction are happy with the outcome, everything is fine. Other concerns are secondary. Were someone to get lost for 2 hours on their way to provide a service for someone else, it’s fine if they don’t want to include that in the transaction amount. No one should say “Yeah, but we’re supposed to count commuting time.” People should do what they want. Talk it out.

7. Share your knowledge and skills.
If in the process of performing a service you can teach the recipient to do it themselves so they need not call on you again, that would be an admirable thing. hOURS isn’t a perfect economic system, just a big improvement, and a way out. One weakness could be a tendency to be “territorial”. But we can decide not to be like that.

8. No ‘faceless’ organizational members
hOURS exists in order to forge a better economy. While it’s hardly our most important goal, we can take a bite out of the alienation caused by faceless corporations. Groups and businesses are more than welcome to have an account, but they need to designate someone to be “in charge” of it and serve as a contact person. Another reason for this is that hOURS will not be caught in the middle of any group that splits up and fights over the Hours. These rules even apply to joint accounts for married couples. Note that you could have separate accounts without inhibiting any kind of sharing you may wish to do. Hours may be given as a gift. So, someone could work off their husband’s debt, for example, by earning Hours and gifting them over to him.

9. Above all, ask questions.

Exact Change (Re: It’s (Not) a Living,” Meredith Broussard, March 27, 2003)
“The surprise of seeing the local, alternative currency program I started get mentioned in your last issue was definitely of the pleasant variety. Nonetheless, I felt I should write in to clarify two things. I’m not trying to start the system anymore. (H)OURS has been up and running for nearly two years now. And, like all local currencies around the world, (H)OURS is perfectly legal. It’s not counterfeiting as we don’t issue dollars. It’s illegal to make your own coins, and if you peg your currency to the dollar, you can’t print notes with a value of less than $1. We don’t do either.” –Fred Kittelmann, via e-mail

“Fred Kittelmann has a vision to provide Philadelphia with an alternative system of trade that is socially, environmentally, and economically progressive. Last year, he started a local currency called hOURS, which stands for “helluva Organized United Reciprocation System.” Since then, over 100 people have joined, sharing their skills in a variety of areas including catering, psychotherapy, tutoring, babysitting, writing, gardening, and office assistance. Similar to Ithaca Hours, hOURS is an alternative local currency that people can use to exchange goods and services with other participants. hOURS is a “mutual credit” trading system that builds community and encourages people to share resources locally. But unlike other local currencies, hOURS is egalitarian in nature; all people’s work is valued the same – by the time spent working. hOURS is free and open to everyone.

Here’s how it works: individuals register with hOURS and list the goods or services they would like to offer, as well as goods or services that they need. Participants with common offerings/needs exchange the goods or services, paying with hOURS rather than US Currency. The provider’s account is credited with the number of actual hours they spent providing services, which they can then use to obtain services from another hOURS participant. hOURS can also be spent before they are earned, which stimulates use of the system. CASHours are used as a medium of exchange for physical goods, since they can not be directly translated into a time value. Nonprofit organizations can also participate in hOURS. Participants can donate their hOURS to local nonprofit organizations, which can use hOURS to obtain goods or services to further their missions.”

Fred Kittelmann
email : H_OURS [at] yahoo [dot] com

Why I created hOURS / by Fred Kittelmann

“The point of hOURS is to be an alternative economic system, in opposition to the competitive, monetized, capitalist, “free market” we’ve already got. hOURS is by no means intended as an ideal form of economic relations, but rather as a step along the way to unraveling all the nastiness. hOURS is of course also quite puny in scope compared to the dominant system, but others are doing similar things, and there is incredible room and potential for growth. We have to start somewhere and this is a good direction in which to proceed.

One more caveat, before I get comfortable on the soapbox. I’m amazed at how universal the appeal of hOURS has been. I’ve gotten near unanimous enthusiasm from a wide variety of folks. I don’t want to risk narrowing that appeal by emphasizing my own personal motivations, which are likely to be different from those of many of you. I would ask that you judge hOURS based on what it is: a system of reciprocation where people… Don’t judge it based on what I, think it is. In the long run that doesn’t matter.

The main means by which hOURS challenges the dominant system is by providing the opportunity to boycott the almighty dollar, indeed money in general. To replace dollars with another unit of currency, of our own creation, as other LETS’s do, would be to seriously weaken its potential. Presently, most people value money, a fictional construct, over real-life concerns such as working conditions, interpersonal relations and the environment. In conflicts between the above, people generally make decisions based on the “bottom line”. hOURS devalues money, making it less of a necessity in people’s lives. Thus it begins to tip the balance toward the “real” concerns, improving people’s quality of life.

You might ask, isn’t money good for people though? It depends on what’s meant by “people”. To think money can bring an improved standard of living is a narrow viewpoint. It helps whoever gets it, but only at the expense of others: either whoever gave it up, or in the case of more having been printed, everyone’s money becomes a little less valuable. Economic growth in general worsens the standard of living of the human race as a whole through effects like increased monetization, increased dependency on others, the destruction of non-exchange type means of providing for ourselves, and counterproductivity. Cars are a good example of the latter. If only a few people have them, the technology can enhance their quality of life by making transportation easier. But when everyone has a car it’s gridlock and no one goes anywhere. (To be fair, economic growth might not be 100% bad if the business enterprise created thereby, produces a product or service useful to the human species as a whole, and does so at a sensible level – But who has a job like that?!) hOURS is anti-growth and anti-money. By participating, people achieve a degree of autonomy from the big institutions which control the bulk of the money. If we can boycott money, we can boycott the Federal Reserve System, Wall Street, and big corporations. We won’t have to put up with any sort of moneylords, like bankers, that earn their living parasitically, presiding over transactions and skimming off the top. Even the government and professions like law and medicine would eventually be effected. Taken to its logical conclusion, a situation where everyone satisfies their material needs through hOURS rather than the current economy, such institutions lose all their power and surrender their ability to impact public policy and decide what sorts of activities people will engage in. Three cheers for that!!!

Financial empire, perhaps even hierarchy in general, is impossible under hOURS. We all have the same net worth (24/7) to spend as we see fit. The highest standards of living are possible, but fortune as a means of being able to dominate others is not. There’s little room for surplus value, or exploitation of any kind. One particular form of domination, made possible through the manipulability of an abstract concept like money, but impossible with the non-manipulability of units of time, is the wide discrepancy in how the work people do is valued. It’s not right that executives make thousands and thousands of times as much money as Wal-mart clerks do. (Especially when the latter actually do something useful by telling you what aisle such and such is in, but the former set policies that destroy the environment and make decisions like “let’s build bombs instead of bicycles”.) No wage discrepancies are legitimate. Even the neurosurgeon who saves someone’s life should not earn more than the clerk, for the former is not possible without the latter. No one can practice neurosurgery without a slew of others providing for their more mundane needs. Perhaps this is clearer if one considers a farmer rather than a clerk. If no one will grow enough food to feed others as well as themselves, we all have to be farmers. There can be no division of labor. The division of labor is a group effort in which everyone plays an equal part. Therefore everyone should be compensated equally. Neurosurgeons ought to be happy with the prestige and honor that comes with a special skill, and not feel the need to economically crush everyone else under their heel to boot. Turning back the clock a bit we can see an even better example than the farmer. What about the surgeon’s wife who cooks and cleans and so forth, whom he couldn’t do without? The dominant economy has, and continues to, define many people as not just worth less, but worthless. The homeless people on the street can’t even get that minimum wage clerk job. Full employment, according to the Federal Reserve Board, is actually 4% unemployment, a level they roughly maintain through manipulation of the money supply. True full employment would lead to a breakdown of workplace authority as the consequences of losing a job dwindle to next to nothing. hOURS rejects all that crap. In an hOURS world, everyone is welcome. Everyone is useful. And there’s no Fed to say otherwise.

Not that hOURS would be a utopia. It’s still a market type system, which has many problems. One is the matter of collective goods. Markets have no incentive to create any, and tend to destroy those inherent to the aboriginal human condition, like clean air. If pollution is a side effect of a business, no incentive to rethink things will naturally ensue, for it doesn’t show up on the bottom line, whereas dealing with it would. Exchanges are dissociated from their social context. Contrary to working by consensus, who the costs and benefits of economic activity get assigned to means everything. If making widgets in a certain way saves the company $10, but the side effect is that half the world gets cancer, it’s still rational from a business perspective; even more so if the company also makes cancer medications. By the way, it’s not necessary to believe business leaders would have to be monsters to act that way. Psychological mechanisms like denial and ego defense bypass that hurdle, allowing “the system” to operate according to its own logic. Then again, some such people really are monsters. One federal official, several years ago, lauded the destruction of the ozone layer as good for the economy because it would increase sales of sunscreen and sunglasses. And you know what, he’s right. (Bet you didn’t expect me to say that.) Here’s the critical leap to make: If the economy is a thing which makes destruction of the ozone layer ok, we need to get rid of it. We need the ozone layer. We need it bad. We don’t need the economy. (What, that’s crazy.) Here’s the critical observation to help make the leap: The word “economy” has a mystifying effect. It means both the bottom line concerns of sunscreen manufacturers (and other big businesses). And it also means the way we provide for ourselves. Having the word mean both helps narrow, private interest masquerade as the public interest. Believe it or not, we can provide for our material needs without destroying the ozone layer. One thing that makes me want to puke is all the exhortations to travel and fly, and all the corporate welfare being doled out to airlines in the wake of the terrorist attack. Believe it or not, we can provide for our material needs without flinging ourselves great distances through the air. In fact, our standard of living need not suffer at all because of it. Don’t let the two senses of the word muddle your head. In the one sense, the economy is a nasty thing that’s been kicking our asses daily. If we bring it down, how do we maintain an economy in the other sense? hOURS.

All right, returning from that slight tangent, another problem with market economies is that they radically increase the amount of competition in human relations and the general ill will that breeds. We see people getting attached to their niches in the marketplace. When people’s livelihoods become attached to their niches it generates a downright demented consequence: economic activity becomes about creating needs rather than satisfying them. The significance (size) of ones niche (economic territory) becomes more important to ones success than how well that role is fulfilled. My house has a very old furnace built so well it will probably outlast me. Good job satisfying needs, but bad for business – no repeat customers. Making crappy products designed to break down is rewarded under the market system. You get to sell replacements. This problem is also apparent in the efforts of professions to drive up the need for their services.

Though hOURS is such a market type system, there are a few reasons why it can mitigate problems like these nonetheless. 1) We don’t actually have a free market economy. We have corporate socialism, which is even worse. While a marketplace works to the advantage of the strong, (The New York Times gets more out of “the marketplace of ideas” than I do. Big business gets more out of a market economy than I do. The market is a fictitious claim of “level playing field” to help justify inequities.) on rare occasions it can fail to serve the interests of the powerful. When this happens though, the truth comes out; as such results are not allowed to stand. In other words, when Chrysler fails, it doesn’t. Add this to rampant corporate welfare and it’s clear we have a system of corporate socialism designed to serve monstrosities like Chrysler. An actual free market would be a step up. 2) Under hOURS, people won’t be motivated by scarcity. Scarcity makes people freak out. The supply of money is tightly controlled. hOURS can be generated by anyone at any time. Without the need to compete for a scarce resource, people are less driven to act unethically. With an hour being an hour, it greatly reduces people’s ability to increase the value of their wares through mean-spirited anti-social mechanisms (e.g. pillaging the water supply or other collective goods, propaganda and intellectual hocus-pocus making ones skills seem more desirable, etc.) 3) Another consequence of an hour being an hour is that people can shift market niches without a loss of value. Suppose people, under hOURS, got so good at promoting holistic health that people rarely got sick anymore. Loss of livelihood? Not so. They can earn just as many hours at their new bike building business. There will be no need to defend their original business by say, promulgating advertising to dupe people who don’t need their services into thinking they do need them, or doing a crappy job to encourage repeat business. But when someone moves from an area they have expertise to one where they don’t, isn’t this an overall loss for society as a whole? No, because that’s smaller than the overall improvement in social welfare associated with the health services being less needed. It’s just plain old moving on.

An ideal economy would have true reciprocity with concern for all. This is seen in primitive societies where mutual aid is so much the norm that saying “thank you” is frowned upon. (There’s an implication one didn’t expect the thankee to be so generous, and it makes you look like a rude miserly type who keeps careful track of debts and obligations instead of mellowing out.) hOURS clearly isn’t that, but we can use it to start cleaning up the mess. I’m optimistic about its chances for success because it’s an example of a paradigm of activism I developed called “activism from superiority”. The key feature is that “doing the right thing” is the better way to live; meaning that benefits naturally accrue to those involved, in this case the building of a supportive community, not having to pay taxes, and other advantages of relief from the crushing grip of moneylords. Such a framework is more conducive to building a mass movement than traditional efforts which need to acquire resources and work on motivations like guilt and sympathy. The “force of example” to others is stronger, and you get a sort of natural selection as the flow of resources, relatively speaking, favors those who participate over those who don’t. By utilizing the value in what people have to offer that our society considers “throwaway”, and building a community of resistance that withdraws support from the system and grows stronger because of it, we can make great change.”






June 4, 1999, Toronto.

“…those performing here tonight are artists, and you may wonder what an artist is doing getting involved in a project that has to do with the structure of money. Weren’t we all taught that Art and Commerce were polar opposites? But art has to do with symbolism — the human tendency to make one thing stand for another — and money is the most deeply symbolic thing there is. Money as such is, as Oscar Wilde said, perfectly useless. You can’t eat it, drink it, shelter yourself from the cold with it, wear it, or make love with it unless deeply disturbed. In and of itself, it has no emotions, no mind, and no conscience. It doesn’t put out flowers or have children, and it makes a lousy pet. It has meaning only when it circulates, and is exchanged for other things; and money doesn’t do that for itself. People do that, using money as a symbolic token.

We have all been brainwashed into believing that there is only one kind of money — one kind of wealth — and only one measure of human worth — how much money you have — and one kind of exchange — traditional buying and selling. And only one motive to do so — the Siamese twins of consumer greed and the profit motive. We’ve also been told all of this is controlled by a mysterious god called Global Market Forces, who is now beyond our control, but to whom we are forced to sacrifice our children. Thus if international commercial interests suck up our wealth, stomp out our magazines, trash our culture, and dictate what toxic chemicals we must eat and drink and breathe, it is the will of Global Market Forces, whose ways are dark, but who is thought to have our best interests at heart in the end.”
“This extraordinary idea was inspired by a very ordinary need for more money. Now, by advertising their talents or goods in the project’s newsletter, HOUR Town, consumers can find themselves in the money. And small businesses are reaping rewards, too, since the currency gives residents more incentive to shop locally.” –Entrepreneur Magazine, April 1996


Ithaca HOURS: Local currency ‘backed by relationships’
by Anne Ju / Ithaca Journal / October 19, 2005

As has always been the case, Ithaca HOURS aren’t backed by gold, silver or any other commodity. “Ithaca HOURS is backed by our relationships,” said Rebecca Nellenback, HOURS board member. “That’s what we want our town and our community to be.” HOURS users and those interested in joining will celebrate that fact at an annual meeting next Wednesday, from 7 to 8:30 p.m. at the Greater Ithaca Activities Center. The whole community is invited to learn about the local currency system, join at a discounted rate and, for current members, elect new board members.

It’ll also be a chance to promote the local nonprofit’s Web site,, which recently went on the upswing by hiring a Web specialist. Board of Directors President Stephen Burke said they’re in the process of getting the 800-plus member directory on the Web, in part because of the worldwide attention HOURS continues to receive.

For example, just last year a representative from Japan’s Ministry of Finance stopped in Ithaca to talk to Burke about HOURS before boarding a plane to Washington for his next pit stop — with U.S. Federal Reserve Chairman Alan Greenspan. “That’s how seriously they were considering our local currency,” Burke said. Circulating in Ithaca now is about $100,000 worth of Ithaca HOURS, which translates to 10,000 HOURS, according to Burke. In recent years, the program has grown to the point where, at some businesses, employees can be paid part of their salary in HOURS.

At ABC Cafe on Stewart Avenue, employees can opt to be compensated an HOUR in exchange for an hour of labor. An HOUR of labor ends up slightly more than an hour’s wage in regular money, explained owner Ken Hallett. It’s only about 1 percent of the payroll that chooses that option, but it’s enough so that the restaurant, just two years ago, started giving customers the option of purchasing entirely in HOURS. “I think it was once we realized there were enough outlets for using them,” Hallett said. “The idea of using local currency, and having it staying in the community, was attractive.”

Another boost for HOURS has been the availability of $2,000 to $5,000 worth of interest-free HOURS loans, which have bolstered small businesses and also infused relatively large sums of HOURS into the community at once, Burke said. In general, encouraging people to earn and spend locally is, and always has been, the goal of Ithaca HOURS, according to Burke. It creates local wealth while freeing up one’s own money for savings. “It’s definitely a community spirit thing,” said Burke, who owns Small World Music on State Street and, of course, accepts HOURS. In America, “money is so divisive,” Burke said. “We want to turn that completely on its head,” he said.

Creating Community Economics with Local Currency
by Paul Glover [Founder of Ithaca Hours]

Here in Ithaca, New York, we’ve begun to gain control of the social and environmental effects of commerce by issuing over $110,000 of our own local paper money, to thousands of residents, since 1991. Tens of thousands of purchases and many new friendships have been made with this cash, and millions of dollars value of local trading has been added to the Grassroots National Product. We printed our own money because we watched Federal dollars come to town, shake a few hands, then leave to buy rainforest lumber and fight wars. Ithaca’s HOURS, by contrast, stay in our region to help us hire each other. While dollars make us increasingly dependent on transnational corporations and bankers, HOURS reinforce community trading and expand commerce which is more accountable to our concerns for ecology and social justice.

HOUR Town’s thousand listings are a portrait of our community’s capability, bringing into the marketplace time and skills not employed by the conventional market. Residents are proud of income gained by doing work they enjoy. We encounter each other as fellow Ithacans, rather than as winners and losers scrambling for dollars.

The Success Stories of 300 participants published so far testify to the acts of generosity and community that our system prompts. We’re making a community while making a living. As we do so, we relieve the social desperation which has led to compulsive shopping and wasted resources. At the same time Ithaca’s locally-owned stores, which keep more wealth local, make sales and get spending power they otherwise would not have. And over $10,000 of local currency has been donated to over 100 community organizations so far, by the elected HOUR board of directors.

As we discover new ways to provide for each other, we replace dependence on imports. Yet our greater self-reliance, rather than isolating Ithaca, gives us more potential to reach outward with ecological export industry. We can capitalize new businesses with loans of our own cash. HOUR loans are made without interest charges. We regard Ithaca’s HOURS as real money, backed by real people, real time, real skills and tools. Dollars, by contrast, are funny money, backed no longer by gold or silver but by less than nothing- $8.4 trillion of national debt.”

Paul Glover
email : paul5glover [at] yahoo [dot] com

‘[Glover is] founder of Ithaca HOURS local currency, the Ithaca Health Alliance, Citizen Planners of Los Angeles, author of several books and urban histories; degrees in Marketing and in City Management. After 35 years of community organizing on behalf of grassroots economic development and ecological repair started a consultancy called GreenPlanners.

‘Founder, Green Jobs Philly (Philadelphia, PA. 2008) network making it easy for Philadelphians to offer and request green jobs, green services, green grants, and green loans. Editor, Green Jobs Philly NEWS.’ “A reliable treasure trove of info on what’s going on right now in Philadelphia with anything related to the sustainable economy.” –Philadelphia Daily News 1/13/09

Prepare for the Best: A guide to surviving and thriving in Philadelphia’s new green future
by Paul Glover / Jan 28, 2009

Money: Give yourselves credit
Challenges: Extreme capitalism and extreme socialism trample humanity. Lack of cash and credit kills businesses, jobs and homes. Some folks still have lots of money, but most of us have less. Dollar power dwindles because dollars are backed by less than nothing: rusting industry and $10 trillion debt. So we’ll print real money — neighborhood currencies — backed by real people.
Next steps: Mutual enterprise systems (neither Wall Street nor Red Square) celebrate the spirit of regional enterprise when it serves community and nature. They applaud innovations — public and private and personal — that meet real needs. Local trading credits based on local land, skills, time and tools refresh the economy. Poverty is lack of networks more than lack of dollars, and Philadelphia has thousands of networks — business, professional, technical, fraternal, neighborhood, church, union, electoral, senior, youth, racial, sexual, athletic, hobby, family, friends. Woven together they’re a powerful base of regional trust, trade and wealth. Take your pick of neighborhood and sector currencies. Cities may not issue them but may accept them for taxes.

Local heroes: Philadelphia’s 83 credit unions, Valley Green Bank, e3bank, Equal Dollars, barter exchanges and gift economy, Philadelphia Regional and Independent Stock Exchange, Philadelphia Fund for Ecological Living (PhilaFEL).

World champions: Ithaca HOURS, Berkshares, LETS, Time Banking, National Federation of Community Development Credit Unions, Permaculture Credit Union, Grameen Bank microlending, Kiva, Robin Hood Ventures.

Big picture: Dollars control people; local currency connects people.

Chinese Government Studies Ithaca HOURS
by Paul Glover / January 2001

Ithaca’s local paper money, the Ithaca HOUR, has brought hundreds of media, tourists, activists, academics and dignitaries to Ithaca, since 1991. Two years ago, Madame Mitterand, former First Lady of France (and international socialist) visited for a day, preparatory to her visit to the President of the World Bank. Government officials and nonprofit representatives have purchased and spent HOURS, while speaking with residents about how local currency benefits them, and our community.

Last October, HOURS were visited by a high-ranking official of the government of the People’s Republic of China. Wen Tiejun wears several tall hats. He’s Chief Economist of the People’s Bank’s think tank, Senior Consultant of the State Information Center, chief of Economic Reform and Director of Research for Rural Development. He arrived from Beijing to assess the practicality and legality of Ithaca’s local currency. His report will be delivered to the President of the People’s Bank, Dai Xianglong, who will deliver it directly to China’s Premier, Zhu Rongji. Accompanying Wen Tiejun was a professor of sociology from Hong Kong, who returns to Ithaca this November.

Their visit was particularly exciting because it reaffirmed, at the highest level, the critique of global capital which has been one of the many reasons we’ve traded our own money. Wen Tiejun said that the Chinese government has become profoundly concerned about the domination of world trade by U.S. dollars. They understand that the dollar’s value is artificially inflated by U.S. military control of oil regions, extraction of irreplaceable natural resources, and by high consumer debt. “When the bubble breaks,” he said, “there will be chaos in markets. Millions of our rural poor could starve.”

China has been vulnerable to the same banking shocks that befell Thailand, Indonesia and Korea in 1997, as a result of global currency speculation. Food riots resulted. The International Monetary Fund has been pressuring China to replace socialist safety nets with market services, especially since China joined the World Trade Organization this September. Therefore the People’s Bank has been looking for a basis for stable money in an unstable world. Wen Tiejun sees HOURS as a useful tool, since local credits based on time have value which is as steady as the clock. Dollars, on the other hand, are no longer backed by gold or silver but by less than nothing– by a $5.8 trillion national debt. There is in fact not enough gold in the world to support a medium of exchange sufficient to transact the needs of six billion humans. As well, HOURS help stimulate extra trading and job creation, meeting needs on local levels that national currency does not reach. As one World Bank analyst said, the Chinese economy “badly needs a new engine of growth and job creation for tens of millions of rural migrants and laid-off urban workers” (China Watch, 5/8/98).

The Long March of Ithaca HOURS from local experiment to world standard of value will be successful if HOURS shift economic power to communities and workers, promote ecological reliance on regional resources, reinforce regional cultures, and stimulate equitable pay. In Ithaca, millions of dollars worth of HOURS have been traded by thousands of residents, including over 500 businesses (including a bank, movie theaters, bowling alley, health clubs, 55 farmer’s market vendors, doctors, lawyers, plumbers, carpenters, electricians, our hospital and our public library. HOUR grants have been made to 57 community organizations, and HOUR loans up to $30,000 value have been made interest-free.

A History of Ithaca HOURs
by Paul Glover / January 2000

HOURS were created by our community’s need and pioneer spirit. During the 1991 recession I designed prototype HOURS and began asking people to sign up to accept them. The first 30 people agreed. Had these folks said “that’s a dumb idea” or “you could get in trouble,” or had they just laughed, then maybe there’d be no HOUR money. Had there been no Farmer’s Market here, with lively vendors who saw HOURS as yet another way to barter, HOURS would have had a small food base. Catherine Martinez took the first leap of faith there, becoming the first person to accept an HOUR, for her samosa. Had the owners of two popular local movie theaters (Rich Szany & Lynn Cohen) not started taking HOURS from the beginning, at full price, then there’s have been no dramatic retail use of HOURS. Had Greg Spence Wolf not stepped in to earn HOURS cleaning these theaters, then maybe the theaters would have stopped accepting HOURS. Had the Alternatives Federal Credit Union not lent its fiscal credibility to HOURS, by accepting them for fees, acceptance of HOURS would have been slower. Michael Turback of Turback’s restaurant (the fanciest in town) accepted HOURS for full price. James Cummins of Littletree Orchards did likewise. These and dozens of other pioneers pulled lots of HOURS into circulation and spread them around.

Thousands more Ithacans have established HOURS by accepting them and spending them, and by explaining them to family and friends. Tens of thousands of conversations have defined local money and have carried it forward. History is made by public action like this, rather than by special leaders. The general public selects and rejects leaders daily, before knowing their names, without waiting to vote. History pushes individuals forward to meet human needs. That’s why credit for HOURS belongs to the community. Thus my own role, regarded as pivotal, merely was the tool of the community’s need. To emphasize this, I’ve declined to be interviewed on TV and most radio, in order to require media to showcase HOURS as a community process.

During research into our local economy in 1989, I noticed that a little county in South Dakota printed coupons for downtown merchant X-mas promotion, the first I had ever heard of local currency. Two years later, early in 1991, while drawing pictures with my girlfriend’s nieces, I sketched a cartoon “Ithaca Money” note. A few weeks later I saw a sample “Hour” note issued by British industrialist Robert Owen in 1847. This Hour was negotiable only at Owens’ company store and based, I discovered in 1993, on Josiah Warren’s “Time Store” notes of 1827.

On October 19, I bought a samosa at the Farmer’s Market with Half HOUR #751 from from Catherine Martinez– the first use of an HOUR. Neither of us knew what a Half HOUR was worth, since the $10/HOUR rate was then merely suggested. Several more Market vendors enrolled. Stacks of Ithaca Money were distributed all over town with an invitation to everyone to join the fun. Only 46 days after HOURS began, and only ten days after the Farmer’s Market closed for the season, GreenStar Co-op burned down. Local food vendors selling through GreenStar quickly organized a Mini-Market at Henry St. Johns school, and most of them decided to accept HOURS. This provided HOURS with a midwinter food base right from the beginning. Confusion arose about varied HOUR equivalencies ($5, $6, $8, $10, $12) and soon caused us to declare $10.00 as the standard. And it soon became apparent that a smaller denomination, and smaller note size, were needed. The Quarter HOUR was issued six months after we began.

Meanwhile, HOURS were being traded and discussed, and welcomed and ridiculed. A common jibe was, “printing your own money are you? Pretty good business– you must have a fat wallet!” So I showed them the disbursement sheets and explained serial numbers. Those who praised HOURS were thanked and invited to join us; those who criticized HOURS or found them threatening were invited, without resentment, to join if they came to feel differently, and many did so.

The HOUR Advisory Board incorporated as Ithaca HOURS, Inc. in 1998, and hosted the first elections for Board of Directors. Monica Hargraves, director of composting for Co-op Extension (and a former economics professor and economist with the Federal Reserve and IMF), was selected as Board chair.

Time Dollars at Work
by Edgar S. Cahn / Blueprint Magazine / April 1, 1999

Traditional entitlements are perceived as undermining the work ethic. If that is the case, is there a method of social service delivery where Americans see their role as contributors and co-producers of democracy, social justice, healthy communities, and strong families? Time Dollars, a new idea being introduced in communities around the nation and the world, do just that.

Time Dollars are private credits backed and distributed by local non-profit organizations. Time Dollars record, store, and reward transactions where neighbors help neighbors. People earn Time Dollars by using their skills and resources to help others – by providing child or elder care, transportation, cooking, home improvement. The idea is simple: One hour of service equals one Time Dollar. In turn, people spend Time Dollars to get similar help for themselves or their families when the time comes that they need it. Time Dollars can also be redeemed at clubs that gives people discounts on food or health care.

Time Dollars empower any person to convert personal time into purchasing power – stretching limited cash dollars further and matching unused capacity with unmet demand. They reinforce reciprocity and trust. They reward civic engagement and acts of decency in a way that generates social capital, one hour at a time. They are bringing people together in communities all around the nation.

There are many reasons why Time Dollars are an idea whose time has come: First, Time Dollars create the functional equivalent of an extended family in an era in which many families are too small, too fragile, or too dispersed to perform the functions we once counted on them to fulfill. Second, Time Dollars generate and reward the reciprocity and civic engagement that are the essential components of social capital. They can play a role in rebuilding the infrastructure of trust and caring that creates safe neighborhoods and healthy communities. Third, social programs – governmental, non-profit, and private sector – fail if they cannot generate sustained participation by the recipient: students, patients, beneficiaries, at-risk groups. If that participation and labor is essential, we need to define it as work and reward it accordingly. Fourth, government and human service professionals pay attention to people who bring problems, needs, and deficiencies. That inadvertently rewards dependency. We need to shift from “problem-centered” to “asset-centered” responses that enable even the most troubled to pay back by helping others and to secure rewards by using their strengths to contribute to the well-being of all. Fifth, Time Dollars can leverage the charity and pro bono work that businesses already provide by requiring recipients to pay for them in-kind – with volunteer work of their own.

Time Dollars supply a strategy for performing all of these tasks. The exchanges they generate, record, and compensate convert human capacity into the kinetic energy needed to strengthen families, rebuild community, and enhance the quality of civic life. Time Dollars are in use in more than 100 communities in 30 states and three countries (the United States, Great Britain, and Japan). Here are some snapshots of the most innovative practices:

Chicago: More than 1,000 students in 17 elementary schools have earned recycled computers loaded with software by tutoring younger students. The price: 110 Time Dollars (10 have to be earned by the parent). Older students, regardless of their own academic problems, expect and get high performance from younger students.

Washington, D.C.: For fifteen years, the pastor of a local Baptist church was relied on for guidance, comfort, or just a little conversation. However, when the Reverend – who suffers from diabetes – lost his right leg to an infection, he retired from the church. Overwhelmed by the sudden changes in his life, he lived as a recluse – refusing to leave his apartment. The local Time Dollar program helped him adjust to the seemingly insurmountable problems he faced. Once again an active member of the community, he earns Time Dollars by conducting prayer services for his fellow tenants, and he spends them to have his meals prepared by another volunteer.

Brooklyn: Seniors insured through Elderplan, a social Health Maintenance Organization, can cash in Time Dollars for a 25 percent discount on their health insurance by helping other seniors to remain self-sufficient. Seniors provide their own informal support system, including pain management seminars, telephone bingo, home repairs, shopping, rides, and peer counseling. Elderplan now offers a Time Dollar redemption catalog so members can cash in their Time Dollars for health and beauty equipment, taxi vouchers, and social events.

Baltimore: The Housing Authority has incorporated Time Dollars as part of the rent that residents have to pay through community service. Children can earn Time Dollars and pay up to 50 percent of the monthly Time Dollar rent.

Washington, D.C.: A Time Dollar Youth Court brings first offenders before a jury of their peers. Jurors earn Time Dollars as they hear cases and impose sentences that may include community service, restitution, an apology, writing an essay, and jury duty. They redeem the Time Dollars for computers recycled by other youth at three high schools. In those public housing complexes where a jury pool has been formed, a new peer culture enables one youngster to hold another accountable for their actions.

St. Louis: Grace Hill has established a network of stores where Time Dollars will purchase items such as toilet paper, tissues, shampoo, conditioner, bug spray, and detergent. There is even a resident college where Time Dollars pay the tuition.

Time Dollars are a way to compensate and reward the work that ultimately determines the future of this nation: the work that goes into building a vibrant democracy. For too long, we have taken such work for granted – treated it like pure water and clean air – as if it would always be available in abundance. Now we know that the values and virtues of civic life must be developed and carefully guarded. With Time Dollars we can create the currency for a society where reciprocal obligations are the coin of the realm.

{Edgar S. Cahn, Co-Founder and Co-Dean of Antioch School of Law and Special Counsel to Attorney General Robert Kennedy, is President of the Time Dollar Institute.}

Edgar Cahn
email : ecahn [at] udc [dot] edu

“A graduate of the Yale law school, Edgar entered the legal profession determined to use the law to achieve social justice. He started his career in government as special counsel and speechwriter for Attorney General Robert Kennedy under President John Kennedy. As part of that role, he was assigned by Kennedy to the Solicitor General’s office for the government’s amicus brief in civil rights sit-in cases. Edgar also worked to spearhead the first national campaign against hunger and malnutrition in the US, and in doing so, he authored an influential report entitled Hunger USA, which led to legislation enforcing shipments of food to severely malnourished communities on Indian reservations and in the southern United States. His work to fight hunger also involved initiating the earliest litigation to challenge the administration of the food stamp and commodities program, establishing the standing for potential recipients, and assisting in the preparation and defense of controversial documentary, “Hunger in America.”

In 1963, Edgar’s life and work seeking social justice first became known at a larger scale when the article he co-authored with his late wife, Jean Camper Cahn, titled “The War on Poverty: A Civilian Perspective” was published in the Yale Law Journal and became the blueprint for the National Legal Services program. Using their model and working closely with Sargent Shriver and the War on Poverty, Edgar and Jean co-created the National Legal Services program under the Office of Economic Opportunity in the Johnson administration.

Having left the government for work with the Field Foundation in 1968, Edgar founded the Citizens Advocate Center as watchdog on government whose primary purpose was to challenge the colonialism of the Bureau of Indian Affairs. That same year, he authored “Our Brother’s Keeper, the Indian in White America.” Leading American Indian activists did the research for the book, which was intended as a catalyst for change in national policy and which helped to spearhead the official adoption of Indian self-determination as national policy. In 1972, Edgar and his late wife created and founded the Antioch School of Law, which later became the UDC David A. Clarke School of Law and continues the tradition established in the Antioch days to emphasize social justice as a critical role for the law. As law-school deans, Edgar and Jean were the first pioneers of clinical legal education in the US, an approach which is now to be found in law schools throughout the nation.

In 1980 after a massive heart attack that nearly claimed his life, Cahn stepped outside of the law to create yet another social invention, a local, tax-exempt currency called Time Dollars, which are designed to validate and reward the work of the disenfranchised in rebuilding their communities and fighting for social justice. As a distinguished fellow at the London School of Economics, Edgar completed the work on Time Dollars that has led to Time Dollar initiatives being funded by government and major philanthropic foundations in the United States in areas as widespread as juvenile justice, community health, education, public housing, community building, wraparound services for children with emotional disorders, immigrant workers’ rights, and elder care. As the president and founder of the Time Dollar USA, Cahn’s experience with Time Dollars led him in 1995 to develop a radical new framework for social welfare and social justice that turns recipients of service into co-producers of change. He called this new approach “Co-Production.” An example of Co-Production principles at work can be seen in Washington, DC, his home city, where in 1996 he founded the Time Dollar Youth Court, whose mission is to enlist youth in changing the shape of juvenile justice in DC. Sanctioned by the DC Superior Court, the Time Dollar Youth Court is now among the largest youth courts in the nation. Its innovative design enlists more than 400 youth each year, the majority of them former delinquents, as active shapers of a new form of justice for DC youth.”

Money should work for us, not the other way around
What is money? Do we need more of it to solve some of the world’s problems? Or is money the cause of them? Ex-banker Bernard Lietaer thinks the latter is the case. And he has the solution: a new kind of money.
by Jurriaan Kamp | September 2005 issue

You have no idea what money is. Bernard Lietaer is too friendly and modest a man to say it that way, but this is the easiest possible way to sum up his message. If you did know what money was, then you—we—would see to it that we had a different monetary system. Everything revolves around money. It’s more than a cliché; it’s the daily experience of just about every world citizen not part of an indigenous tribe in the Amazon rain forest. And this daily experience involves, above all else, a continuous shortage of money. There is not enough money to send the children to school. Not enough money for hospitals, or to care for the ever-greater numbers of old people who are getting ever older. Not enough money to clean up the environment and keep it that way. There is a lot of work to do, but no money to pay for it. Who among us is not familiar with the feeling of wanting to contribute something but having “no money” to pay for that valuable contribution? The sad conclusion: If we just had more money, the world and our lives would be better. But Bernard Lietaer recommends another way around the problem: We could immerse ourselves in the meaning of money.

He sits on the edge of his chair and poses this question: “Have you ever thought about how much time you spend earning money, and managing or spending the money you’ve earned? And how often have you thought about what money actually is? We expend an enormous amount of energy—and frustration—on something we understand surprisingly little about.” What difference does it make, you might ask? Does it matter whether a fish knows it is swimming in water? Isn’t money like the weather: a given? You can’t change it. Lietaer, a business professor and former banker in Belgium, shakes his head. We are meeting on Cortes Island, off the coast of Vancouver, British Columbia, where he is attending a conference. “That is precisely the difference,” he says. “The weather, indeed, you cannot change. But money wasn’t created by God: We have forgotten that it’s a system designed by people. And I believe that this design, which dates from centuries ago, is at the root of most problems in our society. And the good news is that with a small change to the money system we can make an important contribution to the solution of a number of those problems.”

Lietaer’s proposal is to introduce—alongside the existing national currencies—complementary money systems on a large scale. Based on barter, these systems would fulfill needs and make transactions possible when “normal” money is unavailable. His idea is less revolutionary than it appears. In history, as well as in the world today, there are many successful examples of such systems—from the construction of European cathedrals in the Middle Ages and temples in Bali today to the present-day care systems for the elderly in Japan and airlines’ frequent-flyer programs. What these systems have in common is that they do not promote competition, but cooperation; they support community instead of undermining it; and they make possible important and valuable work. Lietaer says, “Complementary money systems put us in a position to be ourselves—to literally cash in on our talents. Even when there’s no official financial market for them.” According to him, the possibilities of such systems are virtually unlimited. “I’m not saying reformation of the monetary system will solve all our problems. But I know that money is one of the key functions. There is actually nothing that doesn’t have to do with money. It is an extremely vital element. I am convinced that within a generation we can realize great positive changes.”

Bernard Lietaer discovered the destructive effects of the prevailing monetary system while working in Latin America during the 1970s. “Enormous loans were being granted for senseless projects. The banks were throwing money around. I wondered if I was seeing things other people weren’t seeing.” As a professor of international finance at the University of Leuven in Belgium, he wrote a book about his experiences in which he predicted a major debt crisis. The book came out in 1979. In 1981 the crisis in South America broke loose. Lietaer’s belief that the global monetary system needed reform led him to the Belgian Central Bank, where for several years he was involved in the establishment of the “ECU,” or European Currency Unit, the precursor of the euro. He subsequently became general manager of a foreign-currency fund. His remarkable successes in that capacity attracted international attention. The influential U.S. magazine Business Week proclaimed him the world’s best currency dealer in 1991. Even more than that, Lietaer had become a genuine expert on money, privy to the deepest secrets of the financial world. He decided it was time to write new books. While teaching at the University of California in Berkeley and California’s Sonoma State University, in the 1990s, he worked on The Mystery of Money (Riemann Verlag, 2000) and The Future of Money (Random House UK, 2001). These books unravel the present concept of money and show how different approaches have different social consequences—including environmental and social sustainability.

According to economics textbooks, money is value-free. It is nothing more than a means of exchange and is regarded as having no effect on transactions. Lietaer contests that view. “Money isn’t at all value-free,” he argues. “The monetary system is programmed—albeit not deliberately—to cause certain behaviour. It promotes competition and short-term thinking; it forces economic growth; and it undervalues care, education and tasks crucial to maintaining a society. Economics theory teaches us that people compete for markets and raw materials; I think, in reality, people compete for money.” This competition is a direct consequence of the manner in which money is created. Banks put money into circulation by means of loans. For example, as soon as someone negotiates a 100,000-dollar mortgage, money is created and begins circulating in the economy. But then the bank expects the recipient of the loan to pay back a total of 200,000 dollars in repayment and interest over the next 20 years. But the bank does not create the second 100,000 dollars. The receiver of the loan must get hold of that money—the interest—one way or another, and this forces him or her to compete with others. It’s simple: Some people must lose money or go bankrupt in order to put others in the position to pay off their loans. At the same time, this collection of interest results in a concentration of wealth: Those who have money “automatically” get richer. In addition, the system forces society into an endless loop of economic growth: New money must constantly be put into circulation to pay off old loans. Lietaer says, “My conclusion is that greed and the competitive drive are not inherent human qualities. They are continuously stimulated by the kind of money we use. There is more than enough food and work for everyone. There is merely a scarcity of money.”

A monetary system driven by interest payments also blocks progress toward a sustainable economy. “The environment is a time problem,” Lietaer says. “A company like Shell undoubtedly has a better idea of the next century’s energy needs than any government. But within the current monetary system we cannot entrust Shell with the future. Shell has to make a profit today. A government bears the responsibility for the future of the society.” Business investments today are weighed against interest rates. This continually leads to short-term choices. “It is financially attractive to cut down trees, sell them and put the money in the bank,” Lietaer says. “Through interest, the money in the bank grows faster than the trees. Solar panels, by contrast, require investments that are only earned back over longer periods. The long repayment period makes these investments no match for the growth of money you can put in the bank today to earn interest. “You wouldn’t be able to build a cathedral (see box) within the existing monetary system. Those were investments over decades. And they ultimately had an extremely long-term yield: Eight hundred years later people still go to Chartres every day to see the labyrinth in the cathedral—and those people still make up the majority of the clientele of the city’s merchants.”

Businesses are trying more and more often to avoid expensive, competition-promoting money. Barter now accounts for almost 15 percent of world trade. And it’s increasing every year by 15 percent, while trade conducted with money is growing at just 5 percent annually. Barter is also the basis of the complementary money systems Lietaer advocates as a solution to the social and ecological disruption our current money system causes. The emergence of complementary money systems began 20 years ago in Canada with LETS, Local Exchange Trading Systems. Certain communities issued local currencies that people could use to exchange services. You might, say, repair your neighbour’s car and use the proceeds in local currency to pay someoneto paint your house. More than 5,000 such systems are now operating in communities of between 500 and 5,000 people worldwide. That’s just a drop in the bucket of the international monetary system. Bernard Lietaer, however, sees it differently. “Complementary monetary systems are no longer marginal solutions. It is true that they have no macroeconomic impact, but they have proven that they work and can change people’s behaviour. It’s like with the Wright Brothers when they proved airplanes could fly. They literally fell down and picked themselves back up again, and their constructions were rickety. But it worked, and so they paved the way for serious high-quality planes. This is the pioneering value of the LETS systems, too.”

The next major step for the complementary money systems will involve participation by businesses. “What else are frequent flyer miles besides a currency issued by an airline?” Lietaer asks. “Initially they were mainly meant to commit customers to a certain airline, but over time you could use them to buy groceries in the supermarket, book hotel rooms and pay your phone bill. And you can earn miles without even flying.” Greater involvement by business, Lietaer says, is crucial for a breakthrough of complementary money systems. In the United States, a system is in development in which health insurers will pay customers for healthy behaviour—for example, spending an hour in the gym. People can then use this payment to buy certain things: bicycles, organic food, preventive acupuncture treatments. “This isn’t just marginal messing around,” Lietaer says. “Everyone knows health care in the United States and other Western countries is a big problem that affects millions. Health care devours money. It is a remarkable system: It’s in the system’s interest that people get sick. After all, it can’t earn money otherwise. Healthy people are of no use to the health-care system, or more accurately, medical-care system. A complementary system can work the other way around: For instance, only a century ago in China, doctors were paid by their patients when they were not sick. And he paid them, and took care of them, when they were.”

In Japan, complementary systems have been developed for care of the elderly. People can earn credits by running errands for elderly people or helping them with housework. They can use the credits to buy extra help if they get sick, or send credits to their old mothers. “This is an example of how a complementary system can be used to solve a social problem,” Lietaer notes. “Almost 20 percent of the Japanese population is older than 65, and that percentage is rising. It is unthinkable that the care for this growing population of old people can be paid for under the current social-security system. Japan is solving this with a new complementary currency, which in addition supports the social structures in the country.” In Germany, authorities are collaborating with banks to develop a complementary money system for a million participants. In Brazil, a plan is afoot to finance education for poor families using a complementary currency. Bernard Lietaer enthusiastically offers example after example. “Money is nothing more than an agreement to use something as a means of exchange,” he says. “Money is not a thing. It is an agreement, like a marriage or a business contract. And that means you can always make a new and different agreement.” Lietaer knows money can change the world: “I choose to remain optimistic. I can see how a crisis in the dollar could cause the global economy to collapse. Don’t forget that in the last 25 years almost 90 countries have suffered severe currency crises. But I also know that together we have all the knowledge and means we need for a peaceful evolution. I want to help liberate that creativity. To design money that works for us, instead of us working for it.”

Bernard Lietaer
email : blietaer [at] earthlink [dot] net / bernard.lietaer [at] accessfoundation [dot] org

“…interviewees are Prof. Mitsuya Ichien from Kansai University (author of the most
complete surveys of the early complementary currency systems in Japan), Tsutomo Hotta
(founder of the Fureai Kippu systems), Toshiharu Kato (founder of the eco-money
systems), Eiichi Morino (founder of the WAT currency system), and several dozen local
activists of different grass-root systems in Japan…”

How Businesses Can Save Themselves from the Impact of the Banking Crisis
by Bernard Lietaer / November 4, 2008

Whatever governments do for the banks, credit will be a lot harder to obtain for businesses, for many years to come. The trickiest aspect of the current situation is the simultaneous, global nature, of the banking crisis. The world economy will predictably veer towards a simultaneous recession, which in turn will worsen the banks’ balance sheets, motivating them to further reduce credits, and so on, down a vicious spiral towards either a decade-long recession, or even a possible depression. Please, get ready now for a rough ride for an uncomfortably long time. What all this means in practice is that we have now entered the period of an unprecedented convergence of the four planetary megatrends – financial instability, climate change, unemployment and an aging society – that was described in my 2001 book, The Future of Money [1].

There actually exists a very successful precedent on what business can and should do in such an environment, even if it is surprisingly little known. In 1934, sixteen business people gathered in Zurich to create a mutual credit system among themselves, with a currency unit called the WIR, equivalent in value to the Swiss Franc. Instead of borrowing money from the banks to pay each other, businesses give credit directly to each other in that business-to-business (B2B) currency, and those credits are used to buy from other businesses in the system, or partially pay staff. The system still is operational today: last year’s volume of business in the WIR currency was about $2 billion per year and involves 60,000 members, a quarter of all Swiss companies. A remarkable quantitative study [2] proves that this system is actually the secret for the proverbial robustness of the Swiss economy. WIR expands automatically when there is a recession in Switzerland, and proportionally shrinks back again when there is an economic boom. More information on the current status of the WIR is available on the web.[3] We propose that businesses take the initiative of creating such B2B systems at whatever scale makes sense to them. The big advantage, compared to what happened in Switzerland in 1934, is today’s availability of very cost-effective information technologies that make it possible to implement this approach much more rapidly than in the 1930s.

{Bernard Lietaer has been active in the domain of money systems for a period of 30 years in an unusual variety of functions. While at the Central Bank in Belgium he co-designed and implemented the convergence mechanism (ECU) to the single European currency system. During that period, he also served as President of Belgium’s Electronic Payment System. His consulting experience in monetary issues on four continents ranges from multinational corporations to developing countries. More information on the author and some technical papers that provide the theoretical and practical backing for this proposal are available on}

1 Lietaer, Bernard: The Future of Money: Creating new Wealth, Work and a Wiser World (London: Random House/Century, 2001).
2 Stodder, James: “Reciprocal Exchange Networks: Implications for Macroeconomic Stability”. Albuquerque, New Mexico: Paper presented at the International Electronic and Electrical Engineering
(IEEE) Engineering Management Society (EMS) August 2000, and

“Earthly goods and wealth belonged to the empire. Inca people gave the empire taxes in the form of goods and labor. There was apparently no Inca money as we know it, but much of the commerce was done through a barter system. When there were famines and droughts, the empire’s vast storage areas could provide for everyone.”

“According to Ferreira and Chamot “The social system of the Incas had an ancient Andean origin based on the ayllu, an extended family group with a common ancestor. The economic system was also based on ancient social structures and can be explained through several principles, namely reciprocity, redistribution, and vertical control.” These authors also add: “Redistribution , a practice employed by the state, ensured that all agricultural goods not exchanged by reciprocity were to be distributed in the different areas of the empire in the case of bad crops.”In essence, the government of the Inca functioned as a safe guard against mass starvation.”

“A brilliantly clear-sighted analysis of how on-going money innovations in dozens of countries around the world are proving that they can resolve key societal problems such as: jobless growth, community breakdown, the economic consequences of an aging society, the conflict between short-term financial thinking and long-term sustainability, and monetary instability itself. This book provides pragmatic solutions to each one of these issues. The debate it will create will be a contentious and passionate one. Lietaer starting point is that money is only an agreement within a community to use something as a medium of exchange. This agreement is being placed under an unprecedented strain, due to a wide range of factors (from the creation of cybermoney and currency speculation to social and political issues). This momentum of change could become even faster, and the effects more brutal, if the instability of the monetary system continues to spread. And the indications are that it will. The global monetary crises of the 1990s (Mexico, Russia, Asia and Brazil) proved that our money system is now sick, and that this affects everything. After all, money plays the role of modern society’s central information system – equivalent to the nervous system in our own bodies. In order to prevent a global monetary meltdown, a unique vision of sustainable abundance, and the mechanisms for achieving this, is proposed.
{London: Random House Press Release, 27/10/1999}

Creating New Wealth, Work, and a Wiser World
by Bernard Lietaer / January 2001

Your money’s value is determined by a global casino of unprecedented proportions: $2 trillion are traded per day in foreign exchange markets, 100 times more than the trading volume of all the stockmarkets of the world combined. Only 2% of these foreign exchange transactions relate to the “real” economy reflecting movements of real goods and services in the world, and 98% are purely speculative. This global casino is triggering the foreign exchange crises which shook Mexico in 1994-5, Asia in 1997 and Russia in 1998. These emergencies are the dislocation symptoms of the old Industrial Age money system. Unless some precautions are taken soon, there is at least a 50-50 chance that the next five to ten years will see a global money meltdown, the only plausible way for a global depression.

The Information Age has already spawned new kinds of currencies: frequent flyer miles are evolving toward a “corporate scrip” (a private currency issued by a corporation) for the traveling elite; a giant corporation you never heard of is issuing its own “Netmarket Cash” for Internet commerce; even Alan Greenspan, Chairman of the Federal Reserve, foresees “new private currency markets in the 21st century.” Exorbitant compensations are paid to the very few at the top: it started with movie stars and sports heroes, and has now spread to top lawyers, traders, doctors, and business leaders. In the 1960’s CEO’s salaries were only thirty times greater than those of the average worker, compared with two hundred times today. Is this the dawn of a society where “Winner-takes-all” or a short-term last gasp of the transition out of the Industrial Age?

1,900 local communities in the world, including over a hundred in the US, are now issuing their own currency, independently from the national money system. Some communities, like in Ithaca, New York, issue paper currency; others in Canada, Australia, the UK or France issue complementary electronic money. The value of barter transactions — exchanges which do not use any money as medium of exchange – totaled almost $6.5 billion in 1994 in the US and Canada, and is increasing three times faster than normal exchanges. The magazine “Barter News” covers the industry’s development and now has 30,000 subscribers. It estimates the total barter worldwide at $650 billion in 1997, and growing at an annual rate of 15%.

All of the above is part of an irreversible process of change in our money system and our societies. We are now in a transition period, an interval of great risk but also of great opportunity. The risks are not only financial, some of the emerging money technologies could create a society more repressive than anyone of us thought possible. More importantly major opportunities are also becoming available: now more than ever it has become possible to address some of the most critical issues of our times, such as enabling more meaningful work, fostering cooperation and community, even realigning long-term sustainability with financial interests. None of this is theory, real-life implementations have pragmatically demonstrated such results. Combining these innovations can make available a world of Sustainable Abundance within one generation.

Specifically in Europe, the traditional ways to handle unemployment are increasingly failing. In areas with high unemployment, people have already demonstrated that living conditions can be significantly improved by creating their own complementary currencies instead of just relying on welfare. Surprisingly, it is in fact not the first time that such solutions have been successfully implemented in the Modern world. During the 1930’s many thousands of such initiatives were operational in the US, Canada, Western Europe and other areas affected by the Depression. Complementary currencies could become a key tool to buffer a region from the shocks caused by failures and crises in the official money system. Finally, this approach is a win/win for both locally owned businesses and society at large.

The degradation of the environment due to short-term financial priorities can similarly be addressed with pragmatic money innovations. Short-term thinking is shown not to be due to human nature, but to the prevailing money system. It is also possible to reverse this process, by using a currency designed specifically for multinational trade and contracts which would make long-term thinking a spontaneous process, focusing the attention on long-term sustainable solutions without the need for regulations or taxation. Historical precedents have proven such results, some of them lasting over several centuries.”

Complimentary Currencies for Social Change
An Interview with Bernard Lietaer
by Ravi Dykema /  August 2003

What is money? And how well does it work to solve society’s ills? Bernard Lietaer, author of the upcoming book Access to Human Wealth: Money beyond Greed and Scarcity (Access Books, 2003), has made a life’s work of exploring these questions. Lietaer has been involved in the world of money systems for more than 25 years, and his experience in monetary matters ranges from multinational corporations to developing countries. He co-designed and implemented the convergence mechanism to the single European currency system (the Euro), and served as president of the Electronic Payment System in his native Belgium. He also co-founded one of the largest and most successful currency funds.

Lietaer is the author of nine books on money and finances, including The Future of Money (Random House, 2001), The Mystery of Money (Riemann Verlag, 2000) and a book for kids, called The World of Money (Arena Verlag, 2001). Formerly professor of international finance at the University of Louvain, Lietaer is currently a fellow at the Center for Sustainable Resources at the University of California, Berkeley. Beginning this fall, he will be a professor at Naropa University. Here, Lietaer shares his views on the shortcomings of our conventional currency system, the benefits of creating a complementary currency, and ways to effect lasting social change.

RD: You’re very experienced on the world stage with currencies and money-it’s the world you’ve moved in much of your life, right?
BL: Yes, both in the area of conventional money such as the Euro and more recently with less conventional money systems. Below the radar beams of official thought, there has been a resurgence all over the world for the last 15 to 20 years of what I call complementary currencies, currencies that are operating on a smaller scale than the national level, and that can solve social, environmental and education problems.

RD: People think of someone who works with currencies as being a materialist. Yet it sounds as if your interests are towards social change through complementary currencies. How did you come to be interested in this other dimension?
BL: The reason I went to the Central Bank in the first place was to check whether it was possible to improve the conventional money system from within. I had been working for a number of years in South America, and I had seen the damage that the existing money system has created on a huge scale in Latin America.

RD: You thought it was the money system and not just the governments?
BL: It’s a chicken and egg story: unstable currency equals unstable government. There is practically no way today for a developing country to have a reasonable monetary policy within the current rules of the game. Joseph Stiglitz, Nobel laureate in economics and formerly head economist at the World Bank, makes the same claims in his book Globalization and Its Discontents (Penguin, 2002). Whether you fix your currency to the dollar or let it float, you end up with an unmanageable monetary problem, like Brazil, Russia or Argentina have experienced. Eighty-seven countries have gone through a major currency crisis in the last 25 years. Their fiscal policies are imposed by an International Monetary Fund (IMF). I am afraid that if the United States had to live by the rules that are imposed on, say, Brazil, the United States of America would become a developing country in one generation. It’s the system that is currently unstable, unfair and not working. The majority of humanity has gone through a recent monetary crisis at least once already. We’re living here, in America, in an island of perceived stability. And even that is an illusion. We could have a run on the dollar under the current rules. We are dealing with an unstable system, an ailing system. Back in 1975, I had come to the conclusion that there would be a systemic series of monetary crashes, starting with Latin America. And that’s why I wrote my book on how the money system was not working and its impact on Latin American development, Europe, Latin America and the Multinationals (Praeger, 1979). I predicted that the first crash in Latin America would be in the early 1980s. It actually happened in 1981 in Mexico. Since then we have had more than 80 other countries undergoing similar monetary crises.

RD: So someone’s not connecting the dots-or are they?
BL: Let me put it this way. The powers that be have no interest in connecting the dots. If a new international monetary meeting like Breton Woods were held, the first point on the agenda would be the role of the dollar. So the United States has no interest in such a meeting. The dollar is in a very privileged position.

RD: But it would be anyway, wouldn’t it, because we’re a dominant economic player?
BL: I don’t want to spend a lot of time and energy attacking the existing system. It is an obvious fact that America is the sole super power. But when people say, “Well, there are fiscal crises in other countries because the governments are less stable,” my question is, “How long would any government last in a country if you had to repeatedly cut back on education programs, social programs, building roads and all other programs?” How could that make a stable democratic government possible? Like I said, it’s a chicken and an egg sequence. There is no way of winning in the current monetary game, particularly for the less developed countries. It’s not accidental that investments in the Third World have dropped proportionally by a third since 1975. Currently, investments happen mainly between developed countries, and that trend isn’t going to create a sustainable world anytime soon.

RD: So the Third World is just being abandoned?
BL: Yes. Entire continents. Africa for instance has been dropped off the world economic map for most practical purposes.

RD: And re-envisioning and re-engineering money itself could change this?
BL: Correct. And the good news is that such re-engineering of money has started to happen if one knows where to look.

RD: Do a lot of other people share your views?
BL: Most people haven’t looked at what’s happening in monetary innovations today. What do you think a frequent flyer mile is, but a currency issued by an airline? In Britain, you can go to J. Sainsbury, the largest supermarket chain, and use British Airway miles to buy your goods. Initially, it was only designed as a loyalty scheme for people taking planes. Today, you can earn this currency without ever taking a plane. On Visa cards you get miles. And you can use them to pay long-distance telephone calls, taxis, restaurants, hotels. First, let’s define what a currency is, because most textbooks don’t teach what money is. They only explain its functions, that is, what money does. I define money, or currency, as an agreement within a community to use something as a medium of exchange. It’s therefore not a thing, it’s only an agreement-like a marriage, like a political party, like a business deal. And most of the time, it’s done unconsciously. Nobody’s polled about whether you want to use dollars. We’re living in this money world like fish in water, taking it completely for granted. Now the point is: there are many new agreements being made within communities as to the kind of medium of exchange they are willing to accept. As I said, in Britain, you can use frequent flier miles as currency. It’s not a universal currency, it’s not legal tender, but you can go to the supermarket and buy stuff. And in the United States, it’s just a question of time before privately issued currencies will be used to make purchases. Even Alan Greenspan, the governor of the Federal Reserve and the official guardian of the conventional money system, says, “We will see a return of private currencies in the 21st century.”

RD: In other words, private currencies are coming back. How would that change the circumstances for poor people, for the Third World?
BL: I gave you that first example-a commercial loyalty currency-only because it would be familiar to most of your readers. But in addition to those commercial private currencies, there are now more than 4,000 communities around the world that have started their own currency for social purposes as well. For example, there are about 300 or 400 private currency systems in Japan to pay for any care for the elderly that isn’t covered by the national health insurance. They are called “fureai kippu” (caring relationship tickets). Here’s how they work: let’s say that on my street lives an elderly gentleman who is handicapped and cannot go shopping for himself. I do the shopping for him. I help him with food preparation. I help him with the ritual bath, which is very important in Japan. For this help, I get credits. I put those credits in a savings account, and when I’m sick, I can have other people provide such services for me. Or I can electronically send my credits to my mother, who lives on the other side of the country, and somebody takes care of her. Here is an agreement within a community to use as medium of payment something other than national currencies, to solve a social problem. And it makes it possible for hundreds of thousands of people to stay in their homes much longer than they otherwise could. Otherwise, you’d have to put most of these people into a home for seniors, which costs an arm and a leg to society, and they’re unhappy there. So nobody’s winning. In contrast, Japan has created a currency for elderly care. In the United States, Florida is the only state that has the same density of elderly people as Japan does-18 percent of the population is more than 65 years old. But Florida is a model for our collective future. Colorado will be there in 2020. Germany will be there in 2006, France in 2008, Britain in 2012. Partly because of the baby boom generation, and partly because of the fact that health care has improved and people live longer. If you put all of these elderly in homes for seniors, you’d go bankrupt. Japan has been looking for another way, and has found it by introducing a monetary innovation. Let me give you other examples, already operational here in America today. There are now several hundred “time dollar” operational systems in the United States. The unit of account is the hour. I do something for you. I have a credit for an hour, while you have a debit for an hour. If I can use my credit with someone else, this creates a currency between us. For those people who are willing to give some of their time, the money manifests automatically. It doesn’t quite work that way with dollars, does it? One of the two of us has to get dollars by competing for them somewhere outside of our community. Time dollars are helping in a lot of communities where conventional money is scarce: in ghettos, retirement communities, high unemployment zones, student communities. There are 31 states in America that are paying employees to start such time dollar systems, because it solves social problems. There are some operating in Chicago, fairly big ones in Florida. For example, in Chicago, there are entire neighborhoods that used time dollar systems to create a neighborhood watch system that got rid of drugs and gangs. It’s working, it doesn’t cost anything to the taxpayer, it doesn’t create a huge bureaucracy, and it encourages the solution of the local problems by and with the very people who know most about them.

RD: What do they use their time-dollar credits for?
BL: Well, it’s a closed circle. If I do something for you, I have a credit, which I can use with any member of the community that is part of the system. I can’t buy cars or pay my telephone bill with this system because the suppliers of such items don’t participate now in such systems; but I can obtain services-so I could have my car repaired, my house painted, my kids mentored. The inventor of the time dollar system is Edgar Cahn, who’s the author of No More Throw-Away People (Essential Works Ltd, 2000). He claims that if you can’t compete in the dollar economy, you’re thrown away. He shows how a time dollars system provides a solution to this process, because it operates in parallel with the conventional competitive economy, and it creates an environment where everybody can contribute.

RD: So you envision a world where there are a lot of these alternative currencies?
BL: I don’t call them alternative, because they aren’t intending to abolish or replace the national currency. I’m not claiming that we could or should abandon national currencies or the competitive economy. This is a complementary currency system. It facilitates exchanges additional to the normal system. It makes it possible to match unmet needs with unused resources.

RD: I can’t see how you’d be able to pay your rent with that.
BL: Well, in Ithaca, New York, there is a currency called Ithaca hours, and some people pay part of their rent with it. Not all of it: for some it is 50/50, for others it is 80/20. And the landlord or lady can go to the farmer’s market and buy his vegetables and his eggs.

RD: So the big things-transportation, housing, food-are those covered in the concept of complementary currency?
BL: It all depends on the agreement you’re making, and whom you are succeeding in including in that agreement. Let me give you a real-life example. In Curitiba, the capital city of the State of Paran in Brazil, if you bring pre-sorted garbage, you are given bus tokens. So in Curitiba, public transport is clearly part of their complementary currency system. It depends on the agreements you have with your landlord, with the transportation company, with the university, with the business community. It just depends on who wants or is willing to participate. You can’t force anybody to accept this currency. They are not what is technically called “legal tender.” I call them “common tender”: commonly accepted as payment for debts without coercion of legal means.

RD: I understand that the government wants to get its chunk out of barter transactions, just as if they were a cash transaction.
BL: Yes, and those taxes will need to be paid in “legal tender”, i.e. dollars. The tax issue has nothing to do with the currency you use in an exchange, but with the kind of transaction you’re performing. Say I’m a plumber. I come to your house and fix the plumbing. And you give me a nice cake in payment. I’m supposed to declare the value of that cake and pay taxes on it, because I’m in the plumbing business. Now say I am a professor at a university. I come to your house. I fix your faucet. You give me a $100 bill. I’m not obliged to declare it because I’m not in the plumbing business. As I said: it is not the currency used that determines whether a transaction is taxable or not, but the nature of that transaction. Interestingly, there is one complementary currency, the time-dollar system that we talked about earlier, that is officially tax-free in the United States. It’s used only to resolve social problems, and the IRS has ruled that time-dollar systems are tax-free.

RD: I think complementary currencies, barter included, should be tax-free, because they offer solutions to a social problem.
BL: Then I suggest you go and lobby for passing such a law. Currently that’s not what the law says in the United States. The use of complementary currencies is fairly recent. It took off only in the last 15 years. Even in 1990 there were less than one hundred complementary currency systems worldwide. Today there are over 4,000. It’s definitely catching on.

RD: And you would like to see it continue to expand?
BL: I think it is a useful tool to solve a number of our problems. It makes it possible to truly create a more gentle society. I spent last summer in Bali. People are remarkably artistic in that island. Their communities are unusually strong. They have festivals that are totally mind-blowing, and can last a month. They’re having a good time. It’s a comparatively non-violent society. And what I found is that it isn’t a simple coincidence that they have been using a dual currency system for many centuries. All these unusual
characteristics of Bali turn out directly to be nurtured by their dual money system. I am publishing a detailed paper on how this mechanism works in the forthcoming issue of Reflections, the journal of the Society of Organizational Learning at MIT.

RD: How does the money system lead to those outcomes?
BL: Practically all Balinese participate in a dual currency system. The first is the conventional national currency (the Indonesian Rupiah); the second is a time currency where the unit of account is a block of time of approximately three hours. This second currency is created and used within the “banjar”-this is a community entity consisting of between 50 and 500 families. It is in each banjar that the decisions are made democratically to launch any big community project. It could be to put on a festival or build a school. For each project, they always make two complementary budgets: one in the national currency, and one in time. That second currency-called “narayan banjar” (meaning work for the common good of the community)- is created by the people themselves. They don’t have to compete in the outside world to obtain that second currency, and it fosters cooperation between the members of the community. I call it a yin currency-it’s more feminine in nature. And it complements the national currency, which is a competitive currency and therefore of a yang, or masculine, nature. Here’s why it works: poor communities don’t have a lot of national currency, but they tend to have a lot of time. In rich communities, the opposite tends to be the case-people have more national currency, but less time. In either case, each banjar is capable of creating extraordinary events just by budgeting and using more of the kind of currency-national or time-in which they are rich. This balance is a key contribution to the unusually strong community spirit that prevails in Bali. And it’s not just because they’re Hindus. There are almost a billion Hindus in India, and they don’t behave that way. Here is an example of how a currency can make a difference.

RD: We have a strong emotional attachment to money, and we worry about it. So how we relate to money influences who we are and how we think of ourselves.
BL: Yes, you’re right. But it is interesting that societies that are using different kinds of currency have also very different collective emotions concerning money. The generally accepted theory-dating back to Adam Smith-is that money is value neutral. Money is supposed to be just a passive medium of exchange. It supposedly doesn’t affect the kind of transactions we make, or the kind of relations we establish while making those exchanges. But the evidence is now in: this hypothesis turns out to be incorrect. Money is not value neutral. Let’s return to the example of the fureai kippu that I was mentioning earlier, the elderly care currency in Japan. A survey among the elderly asked them what they prefer: the services provided by people who are paid in yen, the national currency; or the services provided by the people paid in fureai kippu. The universal answer: those paid in fureai kippu, “because the relationships are different.” This is one example of evidence that currency is not neutral. Another example: there is typically a reluctance among friends to pay for help provided by using national currency. If a friend is helping you move or paint and you pay him with national currency, it just doesn’t feel right. Interesting isn’t it?

RD: So people feel differently about complementary currencies than national currencies?
BL: Yes, there have been surveys in several countries that prove this to be the case. Conventional currencies are built to create competition, and complementary currencies are built to create cooperation and community, and it’s important to be aware that both can be available to make our exchanges. According to Paul Ray’s (author of The Cultural Creatives, Harmony Books, 2000) study, 83 percent of Americans believe that the top priority should be to re-build community, and yet the kind of currency we use in our transactions is precisely one that eliminates community. The word “community” comes from Latin, “cum munere.” “Munere” is “to give,” and “cum” is “among each other”-so, community means “to give among each other.” In short, it turns out that dollar exchanges tend to be incompatible with a gift economy. Complementary currencies are.

RD: Are you saying that you can’t have community if you’re using dollar exchanges?
BL: I’m saying that exclusive use of a competitive programmed currency in a community tends to be destructive for the community fabric. This isn’t theory. We’ve seen this happen at the tribe level, with the collapses of traditional societies. I’ve seen one happen myself in Peru among the Chipibo in the Amazon. That tribe had been in existence for thousands of years. When they started using the national currency among themselves, the whole community fabric collapsed in five years’ time. The same thing happened here during the 19th century in the Northwestern United States and Canada, in the traditional indigenous societies. The moment they started using white man’s currency among themselves, the community collapsed, the traditional fabric broke down.

RD: Do you think complementary currencies really can transform our planet?
BL: Yes. Bali is a perfect example that long-term use of a dual yin-yang currency system creates a different society. Thirty percent of a Balinese adult’s life happens in the space of the yin, feminine currency, which is the time currency. In contrast, we spend close to 100 percent of our time in the masculine, yang, competitive currency. That 30 percent of time spent on community activities creates another society, where everybody can become an artist, where the community fabric is stronger, where the social safety net is reliable, where abandonment is unknown. It nurtures an extraordinary feeling of trust and a higher quality of life.

RD: And you think this kind of culture and community can exist in other places, with completely different religions and cultures?
BL: The short answer is yes. We have evidence from Japan, Germany, Mexico, Brazil and the United States to show that complementary currencies make a difference in the way people relate to each other.

RD: In a really transformed world, would a community be using multiple complementary currencies as well as the national currency?
BL: Not necessarily. What has started to happen recently is an integration-many of these services that were using highly specialized complementary currencies are beginning to integrate into a single, local social-purpose currency. For example, youngsters who are taking care of the elderly in Japan using their credits in partial payment for tuition at the university, so we’re solving two problems at the same time. It provides an additional way of making things happen that otherwise is not available when national currency is scarce. Remember, complementary currencies simply enable additional matches between unmet needs and unused resources.

RD: Does the internet and electronic transfer systems offer a means for the creation of complementary currencies?
BL: I am convinced that the reason complementary currencies are developing now because of cheap computing. Do you really think American Airlines would have frequent flyer miles if they needed an army of clerks trying to keep track of your miles? I don’t think so. But today anybody with access to a PC can start a currency system. It isn’t a coincidence that about 95 percent of the social purpose complementary currencies are electronic.

RD: So can we buy an off-the-shelf program for creating a currency?
BL: Sure. There are even different freewares already available. One of them is for operating a LETS (Local Exchange Trading System). Another one that is free of charge is to start a time dollar system. We are in the process of incorporating a non-profit foundation in Boulder, the Access Foundation, whose purpose is to provide independent information on all the different complementary currency systems that are available worldwide, and on its website one will be able to download the corresponding softwares. This website ( is planned to be operational early this fall. Currently, our biggest problem with money and currencies is unconsciousness. We are not aware of what we are doing around money. We haven’t really thought about what money does to us-we believe it’s neutral, so it doesn’t matter. But it’s not neutral: it deeply shapes us and our societies. The first thing that has to happen before complementary currency systems can effect real change on a larger scale is a shift in consciousness and awareness.

RD: You mean, we need to be aware of how money works?
BL: Let me ask you this. Have you taken an inventory of the number of days you spend in life getting ready to make money? And when you have money, to manage the money or spend it? But then, think about how many hours you’ve thought about what money is. I suspect not very much. We are spending a huge amount of energy to get something about which we have surprisingly little understanding.

RD: Well, it’s like the rain. It’s something you adapt to.
BL: Yes, except that rain is not man-made. That’s precisely the difference. We’re treating money as if it is God-given, like rain or the number of planets in the solar system. But it isn’t. If you don’t like the quality of rain, there’s not much you can do about it. If you don’t like your money system, maybe you can do something about it. Assume that a Martian lands in Denver on the wrong side of the tracks. He ends up in one of the ghettos and finds that the houses are run down, the kids not taken care of, the elderly in trouble, and the trees dying. He sees all these things, and discovers that there are people and organizations absolutely equipped and ready to solve every one of those problems. So this Martian asks, “What are you waiting for?” The answer: “We’re waiting for money.” “What is money?” the Martian inquires. “It’s an agreement in a community to use something as a medium of exchange.” Don’t you think he may leave the planet believing there is no intelligent life here? The point is: if money is an agreement within the community to use something as a medium of exchange, we can create new agreements, can’t we? That is exactly what people are already doing all over the world. So why don’t we do it here? If we’re waiting for conventional currency to solve all our problems, aren’t we waiting for Godot?

RD: Is this your whole campaign now? Are you through with Belgian Central Banks?
BL: I’m trying to contribute to a consciousness shift regarding money. I believe that by a small change in the money system, we can unleash huge improvements in our social system. It’s the highest leverage point for change in our society, and surprisingly few people are looking at it. If you start a new complementary currency system, it can become self-perpetuating and facilitate additional transactions forever. You know the saying, if you want to feed someone, give him a fish. If you want to really help him, teach him how to fish. This is just a fishing lesson-what you do with it is up to you. You can take big fish or small fish, or you can choose not to fish at all. You decide what issues you want to deal with in your community, and there is a currency system that can help you with it.

Cultural Sustainability in a Globalizing World: the Bali Exception
by Bernard Lietaer (Center for Sustainable Resources, University of California at Berkeley, USA) + Stephen DeMeulenaere (Rural Economic Development Consultant, Indonesia) / Draft – August 2002

Executive Summary
It is generally accepted that massive tourism and a vibrant indigenous culture are mutually exclusive. Bali has so far proven to be an exception to this rule. This article explores a hitherto overlooked socio-economic mechanism behind that exception. It is a dual complementary currency system used for  centuries by highly decentralized and democratic decision-making organizations. The reasons why such a dual currency system is so effective in mobilizing popular cultural creativity is investigated, and its potential applications in areas in the world other than Bali are described.

Defining the Problem
The process is well known, and has been observed all around the world: massive tourism and an authentic and living indigenous culture simply cannot coexist. Increasing numbers of tourists tend to ultimately destroy the exotic culture they came to experience in the first place, as the locals begin increasingly display their culture only for tourist money.  Many major tourist destinations have gone through this process: Italy and Greece during the 19th century when it became part of any gentlemen’s education to make “the tour” of the classical European civilizations (and from where the word “tourism” derives). Mexico, the Caribbean, Hawaii, Tahiti, Fiji and other Pacific Islands are well-known examples of the same process during the 20th century. Since the late 1970s, many studies have reported a systematic conflict between two desirable aims: cultural integrity and economic development through tourism. Most development plans even highlight the need for a formal trade-off in tourism between socio-cultural costs and economic benefits.[1] This built-in conflict can been summarized succinctly as “Tourism and paradise…are incompatible. For as fast as paradises seduce tourists, tourists reduce paradises…Hardly has the last paradise been discovered than everyone converges on it so fast that it quickly becomes a paradise lost.”[2]

Nevertheless, Bali seems to be an exception to this rule, where increasing numbers of tourists have not led to a corresponding destruction of Balinese culture.  This article will describe one key but generally overlooked tool that is systematically used in Bali to achieve that difference.

It is organized in seven sections as follows:
–       The Bali Exception
–       Some Insufficient Reasons proposed for this Exception
–       The Banjar as a key organization structure
–       A double currency (national currency and time currency) as the key implementation tool.
–       How the dual currency system supports cultural sustainability
–       Applicability in Other Areas than Bali
–       Conclusions

The Bali Exception
Almost everybody has heard of Bali as the “Last Paradise”, a reputation dating back to the time when Westerners first discovered it at the end of the 16th century.[3] In counterpoint, every generation during the 20th century has announced the imminent demise of the Balinese’ exceptionally rich traditional cultural heritage.

The first figures published by the Bali Tourist Bureau reported 213 visitors during the year 1924, when the local population was estimated around one million. When in the 1930s the number of visitors reached for the first time thousand per year, travel brochures entitled “Bali: the Enchanted Isle” suggested to visit Bali soon because  “in another ten years, it may be spoiled by that insidious modernism.”[4]  In the 1950s, after the Indonesian independence, the warnings would become more pressing: “This anachronistic relic of the Hindu soul is, after ten centuries, about to lose its exceptional traits. Let us hurry while there is still time, and contemplate it closely before it gives in to the contagion of modern Indonesia.”[5] In 1971 the first “Bali Tourism Development Plan” coolly predicted that by the time its project would be completed in 1985 “the cultural manifestations will probably have disappeared, but Bali can still retain its romantic image as a green and sumptuous garden.”[6] When in 1994, tourism traffic increased to over 2 million for the first time, the forewarning was repeated: “How much more tourism can the island take? …It is now clear that the unbelievably complex social and religious fabric of the Balinese is at last breaking down under the tourist onslaught.”[7] Today well over 4 million tourists[8] visit that small island of 3 million inhabitants, and are still overwhelmed by the vibrant pageantry of the thousands of religious festivals and other cultural events organized every year by the Balinese for the entertainment of the Balinese gods and themselves. Indeed, it still is true today that “at their temple feasts they combine two good purposes, namely to please their gods and amuse themselves. I would even say that these two things are identical with the Balinese.”[9] This is unlike other tourist destination sites – Hawaii, Tahiti or Fiji  – where the indigenous culture has died out to the point where traditional dances for instance, are now organized exclusively for tourists. In contrast, out of the 5,000 dance groups listed with the provincial authorities as performing in Bali, less than 200 are maintained for tourist performances, and the other 4,800 for temple time.[10]

It should be made clear from the outset that we are aware that:
–       Bali or its culture has changed under the pressures of modernization and tourism;
–       And that these millions of tourists have had negative effects on the environmental, social or cultural fabric in Bali.
Several good publications are available that are making an inventory of such damaging impacts.[11]

But what we and many other observers claim is that “tourism has not destroyed Balinese culture”[12] as it did in so many other places. Bali has been able to maintain a specifically Balinese social, cultural and religious environment against all odds; better than other major tourist destinations. In 1936, Margaret Mead in her first letter from Bali noted that “Bali seems to have learned through a couple of thousand years of foreign influences just how to use and how to ignore those influences. Accustomed to an alien aristocracy, accustomed to successive waves of Hinduism, Buddhism, and so on, they let what is alien flow over their heads.”[13] Fifty years later, this point is still valid: “Beset by invaders for millenniums, the Balinese are responding to the latest incursions as they have to past incursions, by becoming more like themselves. The fabric of Balinese society is too strong and too flexible to be rent by easy money.”[14] Another informed observer concluded that the difference is that in Bali: “The newly available consumer goods have not dethroned ceremonial expenses as a source of prestige and sign of status: the money earned from tourism feeds a competition for status that is expressed in the staging of ever more sumptuous and spectacular ceremonies – much to the delight of the tourists.”[15] This article will explore through what mechanism Bali has been able to achieve that result.

Some Insufficient Reasons
Some claim that that the Balinese exception is simply due to the fact that Balinese are somehow inherently and mysteriously different. “Bali will always be Bali. In the past, a hundred years ago, today, and even a hundred years from now…Tourism is for Bali, not Bali for tourism.”[16] Others see the religion (mainly Hinduism), the complex caste system, or racial characteristics as the explanation of that difference. Others still claim that the management of the complex irrigation systems for the rice agriculture imposes strong cooperation among all its users, thereby creating a strong social fabric at the local level.

Without denying that all these reasons can and do indeed play a role in the Bali exception, we feel that by themselves, none of them are really convincing because none of them – or even their combination – are really unique to Bali. After all, there are hundreds of millions of Hindus around the world where a similar caste system prevails; and they have not exhibited the same level of cultural resilience and creativity as the Balinese. Similarly, Bali shares with other parts of Asia a complex racial composition resulting over several millennia from successive invasions of Austronesian, Indic, Malay, Javanese and other ethnicities; as well as its irrigation and rice agriculture. Even the historical familiarity with foreign or colonial rulers, first noted by Mead, is clearly not unique to Bali.

So, is there a systemic explanation for the Bali exception? To find out, the authors made during the Summer of 2002 a series of interviews – conducted mostly in Bahasa Indonesia – with local traditional Balinese leaders. The geographical focus was on the area of and around Ubud, generally considered as the “cultural capital” of Bali, because the interface between the indigenous culture and tourism is particularly intense in that region.

On the basis of this research, we propose that the key towards Bali’s exceptional cultural resilience results from a combination of two key traditional tools generally used all over Bali: the first consists of specific local organization structures, and the second of a dual currency system systematically used by those organization structures. The organization structures are well-known from the anthropological literature: the Banjar social organization, and a less formal structure called the Sekhe (pronounced say-keuh). But the key role of the dual currency system used by both those structures has tended to be overlooked until now.  Both will be explained next.

The Banjar and the Sekhe Structures
The Banjar is the fundamental civil unit in Bali, operating in a decentralized, democratic, cooperative manner at the local level. Banjars are typically geographically bounded on one side by a major road, on two sides by secondary roads and on the end by a river, which irrigates the Banjar’s rice fields and forest which supplies food and raw materials for the many ceremonies held each year. In a small village, there is often only one Banjar; in larger towns, there may be several. In Ubud for instance, there are four Banjars in the town itself, and 9 additional ones in the immediately surrounding villages.

The Banjar structure having been amply described in the anthropological literature[17], we can be brief here. It has been succinctly defined a “residential entity whose responsibilities are at once legal, fiscal and ritual.”[18] This paper will focus particularly on its socio-economic and cultural functions.

The Banjar head, the Klian Banjar, is elected by a majority vote of the members, and “is more an agent than a ruler”[19]. He can also be dismissed at a members’ meeting by majority vote. He receives no remuneration for this function.  Each member is equal and has one vote, there is no special status granted to wealthier members of the Banjar.  Each thirty-five-day Balinese month on the average, the Kulkul bell (a wooden gong) summons the council members to the dedicated meeting place, the Bale Banjar, to decide on the next month’s activities. Special meetings can also be convened whenever necessary.

At such meetings, both new activities are proposed and on-going projects are reported on. At the same time, the contributions of time and money are decided upon for each project.  However, if a majority of members becomes opposed to a particular project for whatever reason, it is revisited at the next monthly meeting to discuss whether or not to continue with it.

In the Ubud area each Banjar has between 750 and 1200 members, who are represented at the council by the 150 to 260 male heads of each household. The four Banjar of Ubud itself have recently agreed on a single written rule book, Awig-awig, which defines the operation of the Banjar. But notwithstanding this common rule book, each Banjar tends to keep its own style and focus depending on its leadership and the socio-economic background of its members.

In the less formal structures of the Balinese countryside, the main Banjar rules are part of the adat, the traditional code of conduct. And although the overall system is very similar all over Bali, lots of small local variations in rules can be observed.

The Sekhe (literally: “to make one”) is less formal and less permanent than the Banjar. It could be defined as a “Balinese activity club”. For example, most traditional orchestras (gamelan) or dance groups take that form. Some are formally created by a Banjar council and involve members of only that specific Banjar; many result from individual initiative and include members from various neighboring Banjars. A few evolve into successful for-profit cooperative ventures (like the 200 dance groups that perform for tourists). Many in the Ubud area focus on the development of the arts (like the Sekhe initiative by a young member of the Banjar Tengah involving now 57 members from 4 different Banjars to resurrect in Ubud the almost lost tradition of bamboo gamelan). The objective of most is to have a lot of fun (like the ones created to build huge kites in the windy season, sometimes running in the yearly kite competitions)[20].   All Sekhe stand or fail on their own merits and leadership, and on their capacity to attract the enthusiasm of other participants.

What Sekhe has in common with Banjar is that they are both part of the traditional social system (‘adat’), and are widely used all over Bali: there are more than 3,000 Banjars operational in Bali, and an unrecorded multiple of that number in Sekhe. But most importantly, both use the dual currency system described next.

An Overlooked Tool: a Dual Currency System
In our meetings with the local Balinese leaders, we were repeatedly told that it is not something special about the Balinese or Hindu religion itself, but the strong system of mutual cooperation, the Banjar, that has maintained Balinese culture despite the large and increasing numbers of tourists coming to the area.

Some quotes:
– “Banjar is stronger than religion in keeping community and culture together.” Pak Agung Putra, Klian Banjar Tengah.
-“Banjar is what holds the community, each other, together.” Pak Ketut Suartana, Klian Banjar Sambahan.
– Banjar is the most fundamental organization that keeps the Balinese character intact.” Pak Wayan Suwecha, Klian Banjar Kelod.

But what holds the Banjar together?
The intriguing answer is that a key element, usually overlooked, is a dual currency system, which gives both the Banjar and the Sekhe structures an exceptionally flexible capability to mobilize local resources. The first of these two currencies is the Rupiah, the conventional national Indonesian currency. The second one is Time. A unit of Time is approximately 3 hours of work in the morning, afternoon or evening; and the kulkul gives a special summoning for people to gather when joint work is called for.

On the average, each banjar starts between seven and ten different projects every month, big and small. And for each project, the expected contributions of each family unit – in Rupiah and in time – are taken into account. In the poorer banjars, the Rupiah constraint is typically the more binding, while in the richer ones the opposite may happen.

In most cases, there is no problem finding enough people to contribute the time needed to complete an activity, and thus contributions of Time are not recorded.  In some Banjars, however, where there is a scarcity in the contribution of Time or when there are complaints from some members about the lack of contribution by others, the Klian Banjar records every contribution of Time. Those who cannot contribute their share of Time are asked to either send a substitute person, or to pay in Rupiah at an amount of between 5,000 and 10,000 Rupiah (.50 to 1.00 US Dollar) for each time block missed.  The more organized Banjars in Ubud like Banjar Sambahan make the amount of Rupiah of such substitution cost a formal decision at the initiation of each project – when it is felt that everybody’s physical presence is deemed important the substitution cost is higher than for other projects where that is less the case.

Western observers may have missed the importance of this dual currency system because they themselves come from a culture where a monopoly of national money is taken for granted. Even the remarkably insightful historical analysis of Clifford Geertz[21] seems to have missed the role of the Time currency in shaping and maintaining the local social fabric so strong in Bali in the past centuries as well.

But our interviewees themselves are quite clear about this: “Time is a form of money.” The majority even make the point that “Time is more important than Rupiah” for keeping the community strong in the banjar.

The importance of these time exchanges can also be expressed on the negative side: the main form of punishment meted out by the banjar is not a Rupiah fine, but ostracism, the exclusion from the banjar of someone who refuses three times in a row to respect the community decisions. “The Balinese still say today that to leave the Banjar council (krama) is to lie down and die.”[22] And the reason given why such ostracism is so serious is “when they have an important family ceremony, like a cremation, then nobody will give Time for helping them in the preparations.” In short, depriving someone of Time from the community is considered the ultimate retribution.

But why is such a dual currency system so important to keep community spirit and their collective cultural expressions strong?
How a Dual Currency Supports Cultural Sustainability
A Banjar leader with a more philosophical inclination described the dual currency system as being in Yin-Yang relationship, referring to the Taoist concept of complementarity.  One of these currencies, the normal Indonesian national currency in this view is of a Yang nature because it cannot be created within the community but has to be earned  by competing in the outside world. The other – Time that everybody in principle has as the same birthright – is Yin because it is generated within the community, on an egalitarian basis, and generates cooperation. It is also something that you can’t accumulate and store like conventional money: use it or lose it.

Western languages do not have words describing the Yin-Yang concept, so we will have to use the Oriental word for it. Taoism conceived all forces in complementary pairs like earth-heaven, water-fire, exhaling-inhaling, pushing-pulling, etc. Although obviously separate forces, they are really seen as parts of a single ultimate unity, and therefore necessary to each other. In the specific money and societal context of this paper, the Yin-Yang notion refers to the polarities of cooperation-competition, egalitarian-hierarchical, feminine-masculine, etc. Figure 2 provides a summary of some of these complementary aspects. It includes some of the philosophical aspects that are underlying this worldview, because they are coherent with other important aspects of the Balinese culture. For instance, to a Balinese, the Divine is not only transcendent but also immanent – present everywhere in everything – not just in the temple compound or invisible in the heavens.

This figure can be read from up to down to focus on the internal coherence of each philosophical framework; or horizontally to see the polarity between the different worldviews. What is important to realize is that from a Balinese perspective both views are equally valid, and they spontaneously developed a dual currency system that supports both worldviews.[23] This figure also highlights therefore the differences with our Modern Western culture, where a monopoly of a Yang currency and a Yang coherence has long been considered self-evident.

An interesting difference in attitude can also be observed towards the two currencies: specifically a very flexible Yin attitude prevails towards the Yin currency. If, for example, someone has a sick child that interferes with providing time, nobody will object to him or her not contributing an equal share in time commitments. What matters is the good will underlying one’s actions…

One can see why such a dual currency system within a democratic structure like the banjar provides a lot more flexibility than when on has to operate within only one currency system as is the case in most other parts of the world, including the “developed” ones. People who have a lot of conventional money tend to have little time, and people with little money tend to have more time. So the dual currency mechanism enables some automatic leveling among the social classes.

Furthermore, this dual currency system provides more flexibility in the choice of projects that get approved by the council. In poorer communities projects that require a lot of time are favored by the banjar; and in rich ones the more expensive Rupiah projects tend to pass. For example, we found one single project in a rich banjar that had a Rupiah budget of 1.2 Billion (equivalent to 1.2 million US$). But even the poorest banjar we interviewed has a large group performing at their temple a great kecak dance, which requires a lot of manpower but no expensive garments or props. In short, in both cases, a lot of local resources can get mobilized to meet whatever the community chooses to focus on. And in all cases, a mixture of Rupiah money and Time money are always involved, just the proportional mix tends to vary. This explains why, in Bali, large-scale religious or cultural events involve practically everybody, and are not limited to elitist social groups as tends to be the case elsewhere. This dual currency system may therefore be the real secret for the cultural resilience of Balinese society.

Note that this system goes also beyond cultural events. We found banjars who support their primary schools or even build themselves roads, when the central government isn’t responsive to their demands. There are of course limitations to the substitutability of the two currencies: the cement or other materials needed for such works remains part of the Rupiah budgets.

Applicability in Areas Other than Bali
Community associations that bring people together to plan, budget and implement projects in a fully democratic and participatory way are certainly not specific to Bali. What is more rare, however, is the use by such grass-root structures of a Yin complementary currency, Time, which operates in parallel to the normal cash economy.  We believe that it is the marriage of these two concepts, the highly decentralized democratic structure of the Banjar and its use of a dual complementary currency that has enabled and continues to enable the Balinese culture to withstand the external pressures that otherwise would obliterate its rich cultural heritage.

While the combination of a decentralized democratic organization structure and the use of Yin currency is rare, it is not totally unique to Bali, however. One of the authors has recently completed the first major study for the Provincial Government of East New Britain in Papua New Guinea on the contemporary uses of the traditional shell money[24]. The key conclusion was that the use of shell money, issued locally through an organization of families, also there maintains a stronger local economy, culture and society particularly in times of downturn in the national economy.

We can therefore argue that such an approach critically contributes in maintaining the local economy, culture and society particularly whenever external forces are threatening them. By making use of a Yin complementary currency in the context of a traditional society the culture is continually nurtured, even while the people pursue market-oriented activities. It helps avoiding the degradation that normally occurs once the traditional culture is abandoned, or worse, sold off for tourist consumption in the pursuit of these commercial activities.

It is intriguing that there are many places where either one of these concepts separately are currently operational – decentralized democratic organizations, or complementary currencies. It is only their combination that remains comparatively rare.

Highly decentralized cooperative and democratic institutions are very common in many countries, including many of the local NGO’s for example.

On the complementary currency side, the use of non-conventional currencies has been spreading worldwide over the past decades. There are many traditional forms of exchange functioning throughout the Third World[25], and more surprisingly in the last decade we have seen similar activities develop exponentially throughout the First World. While there were less than a hundred such modern systems operational in the world in 1990, today there are well over 4,000.[26]  For instance, Local Exchange Trading Systems (LETS), Time Dollars and Time Banks use different forms of Yin complementary currencies. In Japan the federal government has been supporting pilot projects throughout the country to facilitate the rebuilding of community and local social capital, and the caring of one for another. Several of these exchanges make use of smart cards that process the Yin-type complementary currency.

The Balinese case study reveals that the potential for local democratically representative organizations to mobilize their membership with complementary currency systems could be quite substantial. One key ingredient would be that the membership truly and democratically participates in the selection of the projects for which their time and money would be used. Otherwise, the legitimacy of the projects would quickly be questioned. The resilience of the Balinese approach derives clearly from genuine grass-root support for every activity that the community has decided upon, and the possibility to stop any project whenever a majority in the community starts questioning it.

We obviously do not claim that dual currency systems are a panacea to solve all problems, social, cultural or otherwise. But by embedding culture and society within the economy and ecology of an area, through community associations using a Yin complementary currency, we see the possibility to get one step closer to Karl Polanyi’s vision of an economy that functions in harmony with the culture, society and environment of the area.[27]  This has been picked up by contemporary economists[28] to be called the “New Traditional Economy”, which maintains culture and society while allowing people the freedom to pursue market-oriented activities.

Most existing economic theory has as hidden hypothesis that all exchanges need to be facilitated through a monopoly of a centrally controlled currency. Furthermore, it is assumed that any currency used is implicitly value-neutral: it is supposed not to affect the transactions or the relationships among the people using it. As the English put it: “A fact is a fact, and is more respectable than the Lord Mayor of London.” And the Balinese exception provides enough facts – historical and contemporary – that should force us to put a big question mark behind both those implicit assumptions of conventional economic theory.

It is a fact that many transactions and additional activities occur in Bali thanks to the existence of the complementary Time currency systematically used at the local level. This Time currency doesn’t replace the national currency, but operates as a complement to it, and makes possible a strong involvement of even the poorest communities in the rich cultural activities of the island. The Balinese themselves claim that its existence plays a key role in creating the proverbially “strong community fabric” evidenced in their island.

Nobody is saying that community currencies all by themselves are a panacea for third world poverty and cultural degradation. A complex web of interrelated but independent, decentralized but united groups holds the Balinese society together.  But at the core of this network lives the Banjar and the Sekhe, and their dual currency system.

In a large-scale survey of the American public, no less than 83% considered that the top priority in the US should be to “rebuild community”.[29] This suggests that the automatic assumption that the dollar is the only monetary tool relevant to solve all problems, especially those of a community nature, may need to be questioned, even in the US.

Finally, one of the most frequent complaints about globalization has been that it entails an erosion of cultural specificities around the world. A  dual currency system could be of interest to those who want to rebuild a sustainable social fabric or strengthen their cultural diversities in any country, independently of its degree of economic development.

[1] Two specific conferences were the landmarks of these realizations in their respective fields. The systematic conflict between socio-cultural integrity and tourism was the main conclusion from the first conference of the American Anthropological Association devoted to “Tourism and Cultural Change” in 1974. The need for trade-offs between these two variables was the main conclusion of the joint UNESCO/IBRD “Seminar on the Social and Cultural Impacts of Tourism” held in Washington in 1976. See Smith V.L. ed. Hosts and Guests: the Anthropology of Tourism (Philadelphia, University of Pennsylvania Press,  1989);  and Picard  M. Sociétés et Tourisme: Réflexions pour la Recherche et l’Action. Paris: Unesco, 1979).
[2] Iyer, Pico Video Night at Kathmandu and Other Reports from the Not-So-Far-East (New York: Knopf,  1988) pg. 30
[3] The Westerner who first discovered Bali was the Dutchman Cornelius Houtman in 1597. After a long sojourn on the island, several of his crewmembers decided to stay, establishing the reputation back in Holland that a new “paradise” had been found. “The Last Paradise” became the title of the first book in English on Bali, published in 1930 by the American journalist Hickman Powell. See Covarrubias, Miguel Island of Bali (first edition: New York: Knopff, 1937; republished 1998 in Singapore: Periplus).
[4] quoted in Picard, Michel Bali: Cultural Tourism and Touristic Culture (Singapore: Archipelago Press, 1996) pg 37.
[5] Durtain, L. Bali, la fabuleuse et la charmante (Paris: Les Oeuvres Libres, 1956) pg 21.
[6] SCETO:  Bali Tourism Study. Report to the Government of Indonesia (Paris, UNDP/IBRD, 1971) Volume 2, pg 162.
[7] Dalton B.  Bali Handbook (Chico: Moon Publications, 1990) pg 35-36.
[8] Source for data for Figure 1: Directorate General of Tourism and Bali Government Tourism Office. Disconcertingly, there are no exact statistics of the number of tourists visiting Bali, the only firm number being total foreigners arriving directly by international flights. These rose from 23,000 in 1970 to 1,468,000 in 2000. 95% of those direct arrivals report that they come for vacations, and 30% are on a repeat visit. However, this doesn’t capture foreign or Indonesian tourists arriving via Jakarta on internal Indonesian flights, the ferry arrivals or even the cruise ships mooring at Benoa or Padang.  The estimates of total tourism arrivals range therefore between 2.5 and 4 million for 1994; and between 4 and 5 million for 2000. The lower number being the official Tourism Office estimate, it is the one we have been using in our graph.
[9] de Kleen  T. Bali: its dances and customs (Sluyter’s Monthly, 2, 1921) pg 129.
[10] Picard, Michel Bali: Cultural Tourism and Touristic Culture (Singapore: Archipelago Press, 1996) pg 138.
[11] See for example for recent opinions by Balinese themselves: Ramseyer, Urs & I Gusti Raka Panji Tisna Bali Living in Two Worlds: A Critical Self-Portrait. (Basel: Schwabe Verlag, 2000); or by foreigner observers Vickers, A. Bali: A Paradise Created (Berkeley: Periplus Editions, 1989).
[12] Norohna, R. Paradise Reviewed: Tourism in Bali in Tourism: Passport to Development? Perspectives on the Social and Cultural Effects of Tourism in Developing Countries (ed. E. de Kadt. New York: Oxford University Press, 1979) pg 201. See also Cohen E. “Authenticity and Commoditization in Tourism” Annals of Tourism Research 1988, 15/3 pg 371-386; Macnaught T.J. “Mass Tourism and the Dilemmas of Modernization in Pacific Island Communities” Annals of Tourism Research 1982  9/3: pg 359-381; McTaggart W.D. “Tourism and Tradition in Bali” World Development 1980 8 pg 457- 466.
[13] Mead, M. Letters from the field 1925-1977, ed. R.N. Aschen (New York: Harper & Row, 1977) pg 161.
[14] Elegant R. “Seeking the Spirit of Bali: Despite Fast Food and Discos, the Old Ways Live” The New York Times March 8, 1987 Travel Section, pg 9.
[15] Picard, Michel Bali: Cultural Tourism and Touristic Culture (Singapore: Archipelago Press, 1996) pg 64.
[16] Declaration of the Governor of Bali, Ida Bagus Oka, excerpt from Bali: Apa Kata Mereka (Denpasar, 1991) pg. 11
[17] Geertz, C. “Form and variation in Balinese Village Structure” American Anthropologist 1959, Vol 61: pgs  991-1012. Geertz H. & Geertz C. Kinship in Bali (Chicago: University of Chicago Press, 1975). Guermonprez, J.F. “On the Elusive Balinese Village: Hierarchy and Values Versus Political Models” Review of Indonesian and Malaysian Affairs 1990, Vol 24 pg 55-89. Warren, C. Adat and Dinas: Balinese Communities in the Indonesian State (Kuala Lumpur: Oxford University Press, 1993).
[18] Picard , Michel Bali: Cultural Tourism and Touristic Culture (Singapore: Archipelago Press, 1996) pg 12
[19] Geertz C. Negara: the Theater State in Nineteenth Century Bali (Princeton: Princeton University Press, 1980) pg 49.
[20] That fun is the main objective of such competitions is illustrated by the fact that the first prize of the biggest competition in Bali – the  Kite Festival at Padanggalak – amounts to 1.5 million Rupiah; while the Rupiah cost of the kites ranged in 2002 between 5 and 30 million Rupiah. See Wahyoe Boediwardhana “Beautiful kites fluter in Bali’s skies” Jakarta Post (Thursday, August 1, 2002 pg 18)
[21] Geertz, C. Negara: the Theater State in Nineteenth Century Bali (Princeton: Princeton University Press, 1980).
[22] Geertz C. Ibid. pg. 49.
[23] For other historical examples of dual currency systems and their collective psychological impact, see Lietaer, B. Mysterium Geld (Munich: Riemann Verlag,2001) , also available in Japanese with Diamond Press.
[24] DeMeulenaere, S. Week, D. & Stevenson, I. The Standardisation and Mobilisation of the Tabu Traditional Shell Currency (Papua New Guinea: Assaí Study, July 2002) 54 pgs.
[25] For more information about Community Exchange Systems in the Global South, see
[26] A full discussion of such modern systems is available in Lietaer B. The Future of Money (London: Random House, 2001) and on
[27] Polanyi, K. The Great Transformation: the political and economic origins of our time (Boston: Beacon Press, 1944).
[28] Rosser, B. and Rosser, M.  “The New Traditional Economy: A New Perspective for Comparative Economics?” International Journal of Social Economics, 1999; and Comparative Economics in a Transforming World Economy (Chicago: Richard D. Irwin,, 1996).
[29] Ray, P. and Anderson, S. The Cultural Creatives (New York: Harmony Books, 1999). Also, The Integral Culture Survey: A Study of the Emergence of Transformational Value in America (Research Monograph sponsored by the Fetzer Institute and the Institute of Noetic Sciences, 1996).

Community Currencies: a New Tool for the 21st Century
by Bernard A. Lietaer

The three most important concerns of our contemporaries in the developed nations are remarkably convergent–unemployment, the environment, and community breakdown–and there are strong indications that these same issues will remain on top of the agenda well into the next century. Emerging technologies promise to keep unemployment a major issue, even if all Western economies get out of recession. By 2010, China will introduce as much carbon dioxide in the atmosphere as the entire world does today. And community breakdown is one of the most systemic, deep, and complex societal trends of the past 30 years, with no signs of any reversal. Precisely because we will have to live with these issues for the foreseeable future, only a long-term structural approach can successfully resolve these problems. Here I show how community currencies could contribute to tackling all three problems and also permit us to “retrofit” economic motivation to desirable human behavior.

1. Aligning Moral and Economic Incentives
There are three main ways to induce nonspontaneous behavior patterns: moral pressure, coercion, and economic incentives. For example, recycling glass bottles can be promoted by education, by regulations, or by incorporating a refundable deposit in the purchase price. A combination of all three incentives is obviously the most effective strategy. When these incentives conflict, problems will arise. For instance, when there is an economic incentive to do something a regulation or law prohibits, we need costly and permanent enforcement systems. Even in the presence of such enforcement systems we expect smuggling and many more imaginative forms of cheating to occur. More evident are cases where moral pressure is supposed to overrule economic interests. Consider, for instance, the well-known saying, “Money is like manure; it does good only if spread around.” This sentiment has been espoused in less florid language by most religions for a long time. However, this moral pressure is diametrically opposed to the concept of receiving interest on money, which provides a built-in incentive to hoard currency. Whenever there are such structural contradictions many people are unable to afford, or simply do not care enough, to follow the moral advice. It is possible, however, to design a coherent and operational currency system so that this apparent structural contradiction disappears. In other words, by questioning some traditional implicit assumptions, we can realign the moral and economic incentives so that they are in harmony.

2. Functions of Money
To understand community currencies we need to better understand what money does. We will see that a community currency should fulfill at least some of the key roles of any currency, and that a well-designed community currency can even fill some of the roles that the “normal” national currency does not. Since the breakdown in 1972 of the Bretton Woods system, the world has been living with pure fiat currency–that is, there is nothing material backing the currencies of the world. Nonetheless, money has continued to fulfill a number of different functions, only two of which are essential:
-A standard of measure. We compare the value of the proverbial apples and oranges by expressing each of them in dollars, for example.
-A medium of exchange that is more efficient than other forms– barter, for instance.

Money has sometimes played three other roles in the past, and happens to play them today as well:
– A store of value. Historically, this has only rarely been the case. For example the word capital derives from the Latin capus, capitis, which means head, and referred to heads of cattle just as is still done today in Texas or among the Tutsi in Africa: “He is worth 1,000 head.” Another example: in Egypt through the Late Classical period, and in Europe throughout the Middle Ages and until the late 18th Century, wealth was stored mainly in land and its gradual improvements.
– A tool for speculative profit. Most emphatically today when more than 95 percent of all currency transactions in the world are motivated by speculation, and less than 5 percent are for trades of goods and services. This has been systematically possible only since August 1972, when President Nixon created the floating currency nonsystem we now have.
– A tool of empire. The control by the former Soviet Union of the external trade of Comecon countries via the “convertible ruble” is a recent example.

Though we tend to take for granted that money serves all the functions we are used to–which today means all five functions for the U.S. dollar–it is important to realize that money really needs to serve only the two essential functions in order to be an efficient currency.

3. Conflicts Among the Functions of Money
In fact, the secondary functions money serves invariably end up hurting the two essential ones. Some examples follow.

Store of Value Versus Medium of Exchange
At first sight, it really is convenient to have money also play the role of store of value. However, there is a formidable hidden cost: this identity significantly exacerbates the boom-bust economic cycle.

The theory of time preference of money, which describes the rational trade-off between consumption today and saving for the future, explains this: When someone expects higher uncertainty in the future, a larger proportion of his or her wealth is logically kept as savings, and less is thus available for immediate consumption. Therefore, at the first signs of a recession, anybody who has money will logically save more and consume less, thereby exacerbating the recession for everybody else. In boom years, consumer optimism prevails, and people will tend to simultaneously dip into their savings to buy big-ticket items such as cars and houses, thereby pushing the boom into an inflationary period. While other factors also play a role in the creation of business cycles, it has been proven many times that consumer confidence significantly exacerbates the problem. Providing incentives to ensure that the medium of exchange does not also incorporate the store of value function would therefore automatically dampen this boom-bust tendency of the current system.

Speculation Versus Standard of Value
Joel Kurtzman’s ‘The Death of Money’ convincingly describes why and how the speculation on currency undermines currency’s role as a standard of value. If, for example, a German company wants to invest in a plant in India, the biggest uncertainty lies not in the risks of the business itself but in what currency to use to make cash-flow projections: rupees, dollars, or Deutsche Mark? The initial investment is in Deutsche Mark, and the proceeds will be generated in rupees, but at what exchange rate can one match the two to determine the expected rate of return? While there are some tools available to manage this risk for short-term transactions, they often are not available for the long-term risks typical in plant investments, or they are simply too expensive. The net result: fewer cross-border investments, particularly in Third World countries, thereby reducing the worldwide efficiency of resource allocation. We will never be able to determine how many investments have not occurred because of this, but all indications suggest they are quite substantial.

Tool of Empire Versus Medium of Exchange
Recent history provides a telling example of the potential conflict inherent in these two functions of money: Before the collapse of communism, there was no need for anybody to stand guard next to a plant in Poland to ensure that it would not establish closer trade relationships with the West than the Soviet Union felt comfortable with. Having the Comecon currencies convertible only in rubles was an automatic and sufficient guarantee.

4. Problems with Interest
Another feature of today’s money that we take for granted is that money produces interest. This process has become universally accepted in the West only over the past century. Indeed, for more than a thousand years all three major religions emphatically prohibited any interest on money because they considered it usury. It is only since the end of the l9th Century that the Catholic Church, for instance, “forgot” about the sin of usury.(note 2) This happened to coincide with the period when the Church itself, which for centuries used to be the largest landowner in Western Europe (that is, it was a capital user), found itself with financial assets instead of land (that is, it had become a capital supplier).

However, the problem with interest does not relate to any of these “moral” historico-religious reasons. Interest on money constitutes one of the most systematic causes of our destruction of the global environment. Consider as metaphor, for example, the life of a tree (or any other living resource): Because of interest, the net present value of any income far away in the future is negligible. So, it literally pays to cut down a tree and put the proceeds in a savings account instead of letting it grow for another decade or century. Similarly, the only types of tree worth planting commercially are the fastest-growing varieties such as pine. (Nobody plants redwoods for commercial reasons.) So even when we plant trees, we are systematically losing biodiversity.

5. Reprogramming the “Invisible Hand”
Let us assume now that we develop a currency whose sole objective is to fulfill the two main roles of money: standard of value and medium of exchange. To discourage its use as a store of value, we build in a “booster” mechanism: when someone earns the equivalent of $100 in this currency, we give him or her a purchasing power of $110 if the money is used today. It would be worth only $109 tomorrow, $ 108 the day after tomorrow, $100 on the tenth day, and $90 in twenty days, and so on.(note 3) Now, what would happen? The following patterns would become manifest: A structural incentive to separate the functions of medium of exchange and store of value would be achieved, with the advantage of reducing the boom-bust cycle. People would invest or spend this money soon, and those who receive it would in turn do the same. Therefore, additional economic activity would occur, and additional jobs would be created. Decisions would be highly decentralized, given that any recipient of the currency would become actively involved in spreading the currency and thereby activating the job creation process.

The most important structural shifts would occur in the way people would spontaneously start saving and investing. Because the booster concept discourages the use of currency as a saving device– particularly if such currencies are in widespread use– something else needs to be used to store value. The conceptual key to understanding this shift involves changing the “arrow of time” in the investment process. Under the present system, the discounted present value of any investment has to be higher than the interest rate of a risk-free government bond. This implies that anything that produces value more than twenty years in the future is basically worthless today, thus providing a systemic incentive not to care about the long-term consequences of our actions. Under the proposed system, the incentive works in the opposite way: income in the future would become more valuable than income today, thereby automatically prioritizing the long-term implications of today’s actions.

Once the basic necessities of life are covered, the logical uses of money in this new context would include investing in ways that will reduce expenses in the future (pay back mortgages, improve home insulation, improve energy efficiencies, start one’s own food gardens) and investing in anything that will keep, or increase in, value (land improvements, trees and forests, and any- thing else that grows over time). To prepare a nest egg for your grandchildren’s college, one logical step is to plant a small forest or have a “savings account” that invests in such activities. New liquid forms of savings would immediately be offered by the more agile financial institutions as soon as the demand for liquidity in the fixed assets just mentioned increased. This could stem the trend toward disintermediation, because government bonds would yield much lower returns. In general, stocks would be preferred to bonds, thereby making access to investment capital at low leverage the dominant way of financing businesses.

Consumption patterns would evolve toward products with longer lifetimes. Assume that one has $100,000 available and two types of cars are offered for sale: the usual car of today, which costs $20,000 and lasts four years, and one costing $100,000 that lasts twenty years. In today’s currency environment it is logical to buy the short-lived car because one can put the $80,000 balance in a savings account and get more value in the long run. With the proposed alternative currency it is logical to buy the long-lived car. Today nobody builds such a car because there is no demand for it. But in the future, it could spontaneously become the type of car in greatest demand. Note that the total income of the car manufacturer is the same over twenty years (assuming no inflation), but that the burden on the environment is much lower. According to the same logic, people would tend to build houses intended to last forever–and spontaneously invest in further insulation and other improvements whenever they have extra cash.

It is important to recognize that there would be no need to provide tax incentives or otherwise “educate” people to do all these things. We just reprogrammed the “invisible hand” of financial self-interest to provoke these actions. Today, many people try to convince others to act in an ecologically responsible way, but it is in the financial interest to do the opposite. With the proposed system, economic self-interest pulls automatically in the direction of ecologically sound actions. Only by such realignment of economic and moral motivations can we expect truly massive changes in behavior patterns.

6. The Validity of “Booster” Currency
The idea of a “booster” currency is just a variation of what has been variously described in the Anglo-Saxon literature as “stamp scrip” or “stamp currency” and in the German literature by “Wara” (merchandise currency) or “Frei Geld” (free money). Its theoretical concept was originally developed by Silvio Gesell about a century ago. Gesell was an Argentine businessman and economist who has been neglected by many theoretical economists because of the–at first sight–unconventional nature of his “charge” or “demurrage” concept. Gesell’s initial premise was that money as a medium of exchange should be considered a public service good (just as public transportation, for instance) and, therefore, that a small user fee should be levied on it. Instead of receiving interest for retaining such a currency, the bearer in fact pays interest. In Gesell’s time, stamps were the normal way to levy such a charge. Now, the generalized use of computers in payment and accounting systems, as well as the availability of electronic debit cards, would make this procedure much easier and convenient to implement.

Is such an unconventional concept as “charge money” a theoretically sound one? The answer is a resounding yes, and is supported by economists of no lesser stature than John Maynard Keynes. Chapter 17 of Keynes’ General Theory of Employment, Interest and Money analyzes the implications of such money, and provides a solid theoretical backing to the claims made by Gesell. Keynes specifically states: “Those reformers, who look for a remedy by creating an artificial carrying cost for money through the device of requiring legal-tender currency to be periodically stamped at a prescribed cost in order to retain its quality as money, have been on the right track, and the practical value of their proposal deserves consideration.(note 5) He concludes with the prescient statement that “the future would learn more from Gesell than from Marx.” (note 6) The second part of his statement is now accepted fact. Might he also be correct on the first part?

7. Historical Precedents
The vast majority of the books on economic and monetary theory or history never mention the possibility of such “negative interest” or “demurrage money.” Even the monumental History of Interest Rates, which covers interest from Sumer to today, does not mention it once.(note 7) Is this concept then just a theoretical idea, or is it a practical possibility? In fact, history records the remarkable ability of this concept to adapt to different cultures and circumstances–and to generate spontaneously the behaviors we are trying to promote.

Recall the biblical Joseph, who interpreted the Pharaoh’s dream and saved Egypt from “seven lean years” by stockpiling food. Why would the Egyptians have kept Joseph in such high regard for inventing stockpiling? Its use had been widespread since the beginning of the agrarian revolution several thousands of years earlier. Might there have been more to it than the Bible mentions? These stockpiles were also the basis of the Egyptian monetary system. Each farmer who contributed to the stockpile would receive a piece of pottery having an inscription of the quantity and date of delivery of his contribution, which he could then use to purchase something else. These receipts, or ostraca, have been found by the thousands and were in fact used as currency. However, what the Bible missed is the key to the system: there was a time charge on these receipts. For instance, if someone wanted to redeem an ostraca of ten bags of wheat after six months, he would only receive nine bags. This demurrage charge reflected the costs of guarding the depot and quantities lost to rodents. So we can understand that Egyptian farmers would never hoard this currency but invest in what was most handily available to them: improvements on their land and irrigation systems. This currency was used in Egypt for more than a thousand years, until the Romans forcibly replaced it with their own banking and currency system, more “modern” and having positive interest rates. Note the apparent consequences of this change: As long as negative interest currency was used, the Egyptians built monuments that would last forever and maintained their agricultural system in remarkable condition, making it the breadbasket of the Ancient World. All this quickly disappeared when the Roman currency was generalized. Since then, Egypt has remained for two thousand years a “developing” country.

The Middle Ages
What triggered the exceptional economic and spiritual prosperity in Europe, particularly from 1150 to about 1300, when the extraordinary blossoming of all the cathedrals took place? Few people are aware that this period coincides with the existence of the brakteaten monetary system, under which local lords issued silver plaques that were called back on the average every six to eight months and reissued a bit thinner, amounting to a demurrage rate of about 2-3 percent per month over this entire period. People would therefore automatically invest in anything that would last almost forever: improved land, tapestries, paintings, or cathedrals. From an economic perspective, cathedrals made sense as an investment in the future. There was fierce competition among cities to attract pilgrims from all over the Christian world, and cities competed for cathedrals, just as today they compete for Walt Disney Co. investments. The main difference, of course, is that cathedrals were also symbols of faith, masterpieces for thousands of craftsmen who chose to remain anonymous, and designed as lasting beauty. Is it a coincidence that cathedrals flourished as the most grandiose symbols of community solidarity in Western history, yet declined as soon as the brakteaten system was replaced with the king’s monopoly on the creation of currency? While the previous examples might be discounted because they seem to apply only to pre-capitalistic economies, the following examples bring us to modern times.

The 1930s in Germany
In 1930, Herr Hebecker, owner of a small bankrupt coal mine in Schwanenkirchen, Bavaria, decided in a desperate effort to pay his workers in coal instead of Reichsmark. He issued a local scrip– which he called “Wara”–redeemable in coal. On the back were small squares where stamps could be applied. A bill would remain valid only if the stamp for the current month had been applied. This negative interest charge was justified as a “storage cost.” The workers paid for their food and local services with these Wara. For example, the baker had no real choice but to accept them, and convinced his wheat suppliers to accept them in turn. The process was so successful that by 1931 this Freiwirtschaff (free economy) movement had spread through all of Germany, involving more than 2,000 corporations and a variety of commodities as backing for the Wara. But in November 1931, the German Central Bank, on the basis of its monopoly on currency creation, prohibited the entire experiment.

The 1930s in Austria
In 1932, Herr Unterguggenberger, mayor of the Austrian town of Worgl, decided to do something about the 35 percent unemployment of his constituency (typical for most of Europe at the time). He convinced the town hall to issue 14,000 Austrian shillings’ worth of “stamp scrip,” which were covered by exactly the same amount of ordinary shillings deposited in a local bank. After two years, Worgl became the first Austrian city to achieve full employment Water distribution was generalized throughout, all of the town was repaved, most houses were repaired and repainted, taxes were being paid early, and forests around the city were replanted. It is important to recognize that the major impact of this approach did not derive from the initial project launched by the city, but instead had its origin in the numerous individual initiatives taken in the process of recirculating the local currency instead of hoarding it. On the average, the velocity of circulation of the Worgl money was about fourteen times higher than the normal Austrian shillings. In other words, on the average, the same amount of money created fourteen times more jobs. More than 200 other Austrian communities decided to copy this example, but here again the Central Bank blocked the process. A legal appeal was made all the way to the Supreme Court, where it was lost.

Stamp Scrip in North America
Emergency currencies have a longer history in America than most people realize. They seem to appear with a curious regularity– the 1830s, 1890s, and 1930s–coinciding roughly with the bottom of the long-term economic cycle called the Kondratieff wave. I will concentrate on the last period because it is the best-documented example. The theoretician behind the movement in the United States in the 1930s was Irving Fisher of Yale University. He had analyzed the Worgl case in Austria and published various articles about its success. Subsequently, more than 400 cities, and thousands of communities or organizations all over the country, issued one form or other of emergency currency. Many were stamp scrip, involving the application of a stamp at prescribed intervals (monthly, for example). There was also a movement to issue this stamp script officially nationwide: Senator Bankhead of Alabama presented a bill to the Senate on February 18, 1933, and Representative Petenhill of Indiana presented a bill to the House of Representatives on February 22, 1933.

During this time Irving Fisher approached Dean Acheson, then Undersecretary of the Treasury, to obtain support from the Executive branch for the same idea. Acheson asked the opinion of one of his Harvard professors, who advised him that the system would work but that it would imply strongly decentralized decision making, which he should check out with the President. Soon thereafter, President Roosevelt prohibited any use of “emergency currency” and announced the New Deal centered around a grandiose centralized plan of large construction projects. These examples all show that the concept worked in the modern world whenever it was allowed and correctly implemented.

8. Community Currency
“If you want people to fight, throw them a bone; If you want them to cooperate, have them build a tower.”
–Saint-Exupery, Citadel

Today, local currencies are again mushrooming all over the world in an impressive diversity and increasing sophistication. As Hazel Henderson has pointed out, the key to the success of a community currency, just as for any currency, is trust. In this case it is trust in your neighbors, in the community as a whole, and in the community’s leaders. My focus here is limited to emphasizing that once you have decided to have a community currency, why not use the best design available? It is important that community currencies concentrate exclusively on the two key functions of money–standard of value and means of exchange–and therefore discourage the use of this money as a store of value or a means of speculation. The best way to ensure this, in particular for the more sophisticated electronic forms of local currency now coming online (for example, the Minneapolis Commonweal experiment), is to build in a booster or another form of the demurrage concept.

The majority of the present systems simply use a “zero interest” concept. In contrast, the majority of local currencies implemented in the 1930s explicitly built in the demurrage idea, typically through the process of requiring periodic application of stamps. Stamps are a primitive way of achieving the desired objective; today, with smart cards or electronic accounting for local exchange (LETS) systems, demurrage could be achieved much more effectively and conveniently by simply programming a small charge on outstanding balances.

This small step would have several substantial benefits:
Every participant in the local currency system will become a motivated promoter. One of the features that many organizers of LETS systems have noticed is that over time the originators tend to remain the dominant force promoting the system to new users. Some systems simply die when their original promoter is no longer available for this. Paul Glover, the founder of the Ithaca HOUR money system, mentioned that he spends a good deal of his time convincing new participants to accept the money.(note 10) This is typical, because the other members have no major incentive to actively promote new participants: they can just keep the currency until they have some use for it.

In contrast, in Worgl or in Swanenkirchen in 1930, each participant was personally motivated to convince his butcher, baker, or cousin to accept the money. One of the reasons that local currencies have multiplied in number today but have not spread as widely as in the 1930s is this structural difference in motivation for member participants. More jobs will be created. Community currencies now tend to create no more jobs in the community than normal currencies. This was not the case in Worgl, for instance, where we noticed that every shilling of Worgl money created fourteen times more jobs than a normal national Shilling.

Community spirit will be fostered. In many cases, the motivation for introducing community currencies today is often less to create jobs than to foster community spirit. Community currencies are indeed one of the most effective tools to achieve this. The word community appeared first in written English in 1283. It is etymologically derived from the Old French and Late Latin, where it referred to a group of monks who owned, operated, and lived from the fruits of their monastery. In other words, it referred to the material organization of a self-contained economic entity. Benedictus of Aniane (5th Century) felt that such a process would automatically support the sharing of the spiritual objectives of their members. Consciously promoting more frequent interactions and interdependencies with your neighbors has therefore long been successful in generating this elusive quality of community spirit. Building in the booster concept or another form of demurrage would increase the density of these interactions and therefore also spread its benefits.

Hoarding will become ill advised. Some community currencies have experienced the hoarding phenomenon. Sometimes this is even interpreted as a sign of success, because such behavior reproduces more closely the use of “normal” currency. But every time someone hoards the community currency, he or she is depriving others of its benefits. In addition, as was shown earlier in the discussion of conflict between the store-of-value and medium- of-exchange functions, there are even structural reasons why hoarding should be avoided.

Ecologically sustainable practices will occur spontaneously on a collective level. While other avenues can be used to promote sustainable behaviors, including regulations and education, why should we not use all the available tools? Reprogramming the “invisible hand” to push for ecologically sustainable behavior would be extremely helpful. These benefits will become generalized only if and when demurrage currency becomes the dominant currency. This circumstance is less farfetched than it appears, for some community currencies could play the role of prototype experiments in preparation for a new Bretton Woods agreement.

{Bernard Lietaer is currently a Research Fellow at the Center for Sustainable Resources of the University of California at Berkeley. He is working on a book about the Future of Money, about which a free online conference has coalesced at}