The forms and uses of money have varied over the centuries. The colonies each had their own form of money; using everything from shells to gold and silver to coins of other nations, such as the Spanish “pieces of eight”. The Massachusetts Bay Colony was the first to mint its own coins and then paper money, in defiance of British laws. Even after the Federal Reserve Act in 1913, unofficial “money” continued to be circulated in various parts of the country. There was a time when gaming chips were accepted as legal tender across Nevada. Most of these alternatives were eventually outlawed by the states or federal government. But alternatives to official currencies still exist.
One of the earliest examples of local currencies in the United States is the Ithaca Hour. Founded by Paul Glover around 1991, Ithaca Hours was an encouragement to others around the country to set up their own local currencies. The Ithaca Hour note has spawned the development of another local currency there known as Ithacash. Paul built on the use of “unofficial” currency that has been used throughout history around the world. Business owners issued scrip to their employees, for example that could be used at the company store. Local currencies were also used extensively during the Great Depression.
Another successful experiment in local currencies is the Berkshares project in western Massachusetts. Started in 2006, it is another example of the movement to enhance local economy and community sustainability.
Local currencies keep the money spent by residents within their community, rather than being deposited in a large bank never to be spent in that community again. There have been many local currencies in use in the United States over the years. Some are still being used while others have become inactive. But the concept remains viable and of interest to many people who want to revitalize their community and restore local empowerment.
Today, the local currency movement is kept alive by projects such as the aptly named Local Currencies Program at the Schumacher Center.
Similar, but with significant differences to local currencies is the Local Exchange Trading System (LETS). Developed by Canadian Michael Linton around 1983, it was intended as more supplementary to the official currency rather than as a replacement. He described it as having 5 characteristics:
- Cost of service: from the community for the community
- Consent: there is no compulsion to trade
- Disclosure: information about balances is available to all members
- Equivalence to the national currency
- No interest
This format is actually similar to the Unicas described in the preceding section in that, unlike local currencies, LETS currency is circulated among members of the group. In many ways LETS operates like time banking systems, wherein the “currency” is time (or person-hour). LETS balances are available for all members to see, so that as currency is exchanged within the group, everyone knows their own and each other’s balances.
Unlike local currencies which print their currency and then find ways to circulate it within the community , LETS currency is often created at the time of the transaction as mutual credit. Many time bank systems operate this way, debiting or crediting hours as they are earned or spent.
LETS allows members to spend currency that they do not have so they may at times have a negative balance in their account. How much of a negative balance they may have or how much currency one may accumulate is a decision left to the members. Important aspects of LETS is that they are nonprofit, locally controlled by its members, and democratically organized and run thereby giving each member a say and stake in the operation and success of the system.
These are just a few examples of alternatives to official currency and ways of carrying on economic activity without reliance on a strictly capitalist system. There are many variations on these basic themes and for certain many more are being experimented with.
What all these alternatives seek to do is empower people to self-organize their economic activity, realize more control over their everyday lives, and hopefully encourage people to deeper cooperation with each other, thereby creating more sustainable and resilient communities.
Another alternative currency worthy of investigation is cryptocurrency.