Local currency movements have become a trend in local economic development initiatives. These are currencies issued by a local entity for spending at local businesses.
Community Currencies, such as Ithaca HOURS, Bay Bucks of Traverse City, Michigan, or the Cascadia Hour Exchange of Portland, Oregon, help stoke local pride and improve the local economy. They work in two ways. First, they encourage customers to buy from local businesses, rather than big box stores or big corporations (buy local coffee rather than Starbucks, for example.) Second, and perhaps more importantly, they encourage local businesses to buy from each other, rather than from chains. This keeps the local economy circulating, and strengthens the social network of local business owners. For this reason, many cities and towns discuss the usefulness of their local currencies as a tool for building social and cultural capital, as much as they describe them as a tool for economic boosts.
The local currency is not meant to replace the true US dollar. Instead, it is a way to build community pride and keep money local. Studies of the Ithaca hour program show that few businesses do more than a few hundred dollars a year in Ithaca Hours (especially since the proliferation of credit and debit cards). Rather, the local currency uses boosterism to bring locals together.
There are several models for creating the local currency:
1) A nonprofit of some sort sells the currency, and a group of businesses agree to accept them. This is how Ithaca Hour works.
2) A Business Improvement District sells the currency and agrees to take a loss. For example, they sell $10 coupons for $9, and then if a business wants to redeem the coupons, they reimburse them for the full $10.
3) A Time Bank, like our neighbors in Fall River, MA have. This is more egalitarian approach. By valuing everyone’s hour equally, low-income people can access expensive services. Such as, trading an hour of lawn mowing for an hour of legal services. This involves more person-to-person bartering.
I have not yet made up my mind about local currency movements. On the one hand, it is a neat tool for promoting local boosterism. They tell folks to buy local and dodge the big box stores. On the other hand, how much can a local currency grow before it needs the trappings of a real currency: a central bank, lending, an interest rate, and the like. The Ithaca Hour has been pegged to the US dollar at $10/ 1 Hour for 20 years. Few real currencies can do that. However, many towns have reported success using these as a part of Buy Local campaigns.
If you are curious about Rhode Island’s buy local initiatives, you can look here.
For an overview of a dozen or so Local Currency programs click here.