Reviewed by Henk van Arkel
People Money is the kind of book that has the quality to make people enthusiastic to start to act in the field of local currencies. Alongside introducing the key aspects of money it contains enough inspiring stories. So it has everything one might want from a good book about money introduced bottom up.
Its strengths also contain its weaknesses. The book makes designing and starting a local currency seem easy, but I can confirm from hard won experience that the job needs a lot of study and experience. Too many systems started and failed because they were based on the energy of a person with a prophetic vision, rather than simply researching what can be learned from other systems. I advise people who are enthusiastic about starting a new system to learn as much as they can by using resources like the International Journal of Community Currencies Research [...] and the Complementary Currency Resource Centre [...].
Even after those visits there is lots to learn. I have worked for the Social Trade Organisation, STRO, on Research & Development of complementary currencies for over 25 years and I do not think I know enough. We might not have contributed enough to knowledge sharing, because we made the conscious choice that the time spent sharing would limit the time for the research that was still needed, before any mutual learning process would make sense.
Typology of regional currencies
The book provides a simplified typology of regional currencies. This typology is chosen as a tool for portraying existing systems as they are, which is fitting in a book like this. The schema focuses on the main purpose and the core mechanism.
This last point deserves more attention. We at STRO are working towards some kind of breakthrough to viable new monetary systems and this core mechanism needs to focus on two aspects: the backing of the currency and the flow of purchasing power it releases. I believe that in the end, the interaction between these aspects will determine the impact of the system and the kind of goals and groups it will serve.
A greater focus on the core mechanism might lead to a typology that is less effective in portraying but is technically more useful. Let me offer you the typology STRO used to distinguish systems:
1. Mutual credit that is rooted in the social fabric of a community. The stronger this fabric is, the more impact the system can have. Although social currencies can also contribute to community spirit, the real success factor is the existence of community spirit. Mechanisms that can correct anti-social behaviour and encourage offenders to use their skills to contribute something to the community are important. If community members can trust that the mutual effort is beneficial for all, they will more easily engage.
2. Then there are the currencies that have full economic backing rooted in productive capacity (Coopvictoria, M-Pesa) or reciprocal credit between businesses with strict formal mechanisms to deal with non reciprocity (Barter and the Punto C3 for micro-enterprises). The stock of freely available capital, or in Barter of spare capacity provides both the backing and the potential to provide third parties with it.
3. The next core mechanism one can select is the one that creates a boundary around a certain quantity of normal money: monetary circuits that have implemented certain conditions and specific rules of claims on money that are circulating internally. In banks this is the money that is committed to long term saving. In regional currencies the examples described in People Money are Chiemgauer and Brixton Pounds. The trick is to persuade enough money to accept the new sets of rules. This motivation can be ideological (spend local/national) or financially when the businesses cooperating in such a system make a common effort to attract clients through a Bonus or discount, or when companies get a loan in such a circuit.
The price of having the core mechanisms dominated by predestined social objectives is failure.
Within STRO we start from the concept that one should think through the effects of the core mechanisms and then choose those that fit the social objectives best but we try to force ourselves not to mix up objectives and reality with its strategic impacts.
Demand is the key factor for local currencies
As mentioned, People Money's strong point is the enthusiasm it provokes. Its main weakness is that people are not really aware how difficult it is to start a successful program.
When we developed the model of the community banks for Banco Palmas in Brazil, our first objective was to keep the local currency relatively scarce in that the demand was at least a bit bigger then the offer. So the demand for the currency existed even before the currency was launched. Ever since, the opportunity of paying the obligations in the Banco Palmas micro credit program has provided a strong demand in the market. From then on, even people that did not have a loan accepted the local currency, knowing that there are many enterprises that are eager to earn that currency.
There are no successes only hard won results
Reading People Money it seems that there are successes in the movement ready to be copied. I do not believe that. This is exactly why STRO still considers new R&D more important than putting energy in publishing and supporting copies of our activities.
Another very successful example: at some point the STRO team, including Koen de Beer who was working at that time for STRO, initiated the Barter C3 model Punto Transacciones as one of the activities in Central America. Over the years, STRO invested a lot in that model but Koen made it really the most important thing in his life. He stopped working for other STRO projects and invested all his personal savings in Punto. Without the enormous effort of Koen and the support of Fusai Foundation and STRO this would never have been possible. Really successes are hard won.
Another example, not to discourage you, but to motivate you to be well prepared: In Porto Alegre we created CompRaS, another C3 model to test other aspects than the ones in Punto. CompRaS was the typical model of restricted money based on IT. STRO put a lot of energy into finding funding because this test cost hundreds of thousands of Euros. After 6 years, we had 2,500 small businesses and a fast growing monthly turnover at that time of 200,000 Euros. Impressive as this might seem compared to many other local currencies, it was still years away from becoming self sustainable. Since we did not have the funding to do both this as well as a program in Uruguay, we had to put CompRaS on hold.
Speaking one fact based language is essential for a lively debate.
People Money calls for a lively debate, but that is not so easy in a field where so many people are prophets and inflated images of reality are common.
What is also confusing the debate is that there does not exist a uniform unit of account.
For example the South African based Community Exchange System (CES) offers world wide trade between members of local systems and is being used in 43 countries. That seems a lot, but about what volumes are we talking?
I can relate this to our Cyclos software that gets about 100 downloads a day. People sign up easily, but this does not mean economic impact in itself. If one calculates the CES figures, the 395 systems with 1,020 companies and 22,500 members convert to averages of 3 companies and 60 members per system. But what do we learn from this figure? I am afraid nothing, not one clue about the contribution of these systems to the communities and their economies. In order to have a lively debate, we need to have a common language. And even more difficult, we need to share common objectives.
I hope you will read People Money. I hope that you engage with the community of people that are looking for breakthroughs. And finally I hope to have motivated you to take the job seriously. Good luck and I am sure we will meet somewhere in the field someday.
Henk van Arkel