Getting Community Currencies to Fly
Table of contents
No headerswith John Rogers, Value for People, www.valueforpeople.co.uk
"In theory, there is no difference between theory and practice. In practice, there is."
Yogi Berra, baseball coach.
INTRODUCTION
Where do Community Currencies (CCs) sit in the world of money and economics?
Why set them up?
Imagine a spectrum from LOVE through GIFT to MARKET to CASINO.
With unconditional LOVE we surprise each other with 'random acts of kindness and senseless beauty'.
With the GIFT some expectation begins to creep in and considerations of reciprocity and mutual survival emerge.
With the MARKET money emerges as an impersonal 'medium of exchange' and means of allocating scarce resources.
With the CASINO (speculation, futures etc.) we mortgage the future to pay for present greed.
Different forms of complementary currencies locate themselves somewhere on the spectrum between GIFT and MARKET. Some will mimic the market more, allowing for price differentials and encouraging business participation, others will look much more like the gift economy. In fact, observation of participation in systems that build community show that many people will record a few exchanges through the system then just do stuff for each other, thus achieving the goal of rebuilding community.
See part of my talk explaining this here: http://www.youtube.com/watch?v=s-x5CJYBVO8
5 PRINCIPLES FOR SUSTAINABLE COMMUNITY CURRENCY DESIGN
There have been thousands of experiments in many countries with CCs over the last 25 years. Many of them have not sustained themselves over time, a few just hobble along without achieving very much for a few people, a handful make some significant impact on their participant group.
What patterns may be observed across all of the different approaches, brands and models?
Too often CC designers pay a great deal of attention to designing currency mechanisms that may work great in theory but then crash because of poor management. It is often the people factors that cause CCs to cease operations, however good the mechanism.
Using the metaphor of flight, imagine five areas to pay attention to when designing and planning for CCs:
1. Who are the potential 'passengers' (CC participants and users) and where do they wish to fly to?
Be sure to ask them in detail in order to build up a picture of peoples' problems, goals and needs which can then be matched up with underused assets in the community: skills, resources, business inventory, restaurant and theatre seats, community spaces, custom papers, rooms, vehicles etc.
A CC is firstly an information system for helping people to solve their problems, reach their goals and meet their needs. It is secondly a reward system for those who offer their assets.
2. What's the flying weather like? What forces are working both for and against success for the CC?
What personal, community , political or financial resources are available locally, regionally or virtually to support CC development? How do we map available assets, value chains etc.?
What forces might be antagonistic? How might we deal with them?
3. How do we set up an airline? What governance structures are required?
All systems have some kind of governance at some level, even it is just a simple brain to process feedback.
Human systems in particular require mechanisms that enable decisions to be made, power to be shared and conflicts to be mediated.
Do we need a consitution, board of governance, annual meeting etc.?
Can we integrate the CC into an existing governance structure in an existing organisation?
4. How do we appoint competent staff to fly the airplanes? What management structures and processes are needed?
If we want the planes to fly we need to find good staff to fly them, whether they are volunteers or paid.
How do we identify what jobs need doing and the skill sets required to do them well?
Think about job descriptions, person specifications, marketing, monitoring, evaluation, training etc.
5. How do we design great aircraft to fly where the participants wish to go? What design choices do we have in creating successful currency mechanisms?
This is the most complex area.
I suggest a simple checklist based on economists' traditional definition of the functions of money:
Standard of Value (or Unit of Measure or Unit of Account)
Medium of Exchange
Store of Value
Each of these functions contains a choice of design features:
| FUNCTION | FEATURE CHOICES | FEATURE SUB-CHOICES | FEATURE SUB-CHOICES | COMMENTS |
| STANDARD OF VALUE | Tied to the national currency | | | Familiar reference point but also tied to inflation/deflation |
| | An hour of time | | | Universal labour standard – can be used as fixed or flexible standard |
| | A kilowatt hour of energy | | | Useful for currencies designed to maximise energy saving and use of renewables |
| | A mile of distance | | | Eg Air Miles or could be used for car sharing |
| | A square meter per year | | | Eg basis for Community Land Trust |
| MEDIUM OF EXCHANGE | Issuance | Where issued | | Establishes familiar physical location(s) for users |
| | | Mutual credit (issued by users) | | Amount of currency issued by service receivers always exactly matched to service given but can lead to stagnation |
| | | Fiat (issued by an authority) | Backed (convertible to national currency or guaranteed goods & services) | Creates confidence, especially amongst businesses but limits issuance potential |
| | | | Borrowing with legal collateral | Conventional banking, may be appropriate to large scale commercial CC only |
| | | | Borrowing without collateral | CC loans issued when credit worthiness or trust established |
| | | | Purchased and redeemable vouchers | CC purchased with national currency, circulating as CC, then redeemable for national |
| | | | Commercial vouchers | Non-redeemable for cash, redeemable for goods or services, may be given as incentives or purchased at discount |
| | | | Loyalty points | Issued for loyalty to business, organisation or community |
| | | | Central distribution | Issued directly to qualifying participants, only appropriate in special circumstances |
| | | | Grants | Only appropriate when system itself has recovered all operating costs and has surplus |
| | Redemption | Where it can be spent | | Establishes familiar physical location(s) for users |
| | | If backed by and redeemable for money | Exchange rate between currencies | Can be used to discourage too much redemption, to strengthen value of CC and to establish community support premium for local community development |
| | | | Who may trade in? | Can be used to limit redemption privilege to selected groups but could be seen as favouritism |
| | | | How often may they trade in? | Can be used to stop too much CC leaving system at once |
| | | | How much may they trade in at once? | Can be used to stop too much CC leaving system at once |
| | | | Is there a time limit on trading in? | Can be used to stop too much CC leaving system at once |
| | | | Is there a community support premium – what %? | Can be used to support local community projects and organisations selected by payers of premium |
| | Support media | Notes | | Useful to raise profile of CC, establish visible presence and strengthen local identity but requires security features, artwork and physical outlets |
| | | Coins | | Useful to raise profile of CC, establish visible presence and strengthen local identity but requires security features, artwork and physical outlets |
| | | Cheques | | Useful for individuals to keep track of spending and earning but requires administration |
| | | Vouchers | | Useful for promotions, discounts but not for circulating CC |
| | | Passbooks | | Useful for individuals to keep track of spending and earning but requires high degree of trust or signing off by authority |
| | | Swipe cards | | Useful for automation and integration into business adminstration but requires investment in technical infrastructure |
| | | SMS messages | | Useful where other media are difficult to organise but requires access to cheap mobile phone network |
| | | Computer programme | | Useful for automation, centralised record keeping and self-administration (eg through website) |
| | | | | |
| STORE OF VALUE | No interest | | | Assuming a constant standard of value for measuring, interest-free guarantees no loss or gain in value |
| | Positive interest (charged on debits) | | | Positive interest requires constant growth which is not normally appropriate to the scale of a CC |
| | Non liquidating | | | A non liquidating CC theoretically retains its value indefinitely, unless a fiat currency is over-issued |
| | Self liquidating | Expiry date | | A self liquidating CC with an expiry date loses value at an agreed point, encourages faster circulation and discourages saving |
| | | Negative interest (charged on credits) | | A self liquidating CC with negative interest (demurrage) loses value gradually, encourages faster circulation and discourages saving |
This is still a work in progress. To receive a review copy of the Community Currency Design Manual or to offer comments, corrections, deviations, innovations and insights:
April 25th 2008
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