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Local Currencies
by Judith Schwartz

Time Magazine

July 13, 2009

http://www.time.com/time/magazine/article/0,9171,1908421,00.html

With local economies flailing communities across the U.S. are trying to
drum up more action on Main Street. "Buy Local" campaigns are one way to go.
But many towns--from Ojai, Calif., to Greensboro, N.C.--are considering
going a step further and printing money that can only be spent locally.

Issuing an alternative currency is perfectly legal, as long as it is treated
as taxable income and consists of paper bills rather than coins. In the
U.S., where local currencies were popular during the Depression, the biggest
alterna-cash system is in Massachusetts' Berkshire County. Go to one of
several banks there, hand a teller $95 and get back $100 worth of
BerkShares, a nice little discount designed to reel in users. BerkShares are
printed on special paper (by a local business, naturally--a subsidiary of
Crane Paper Co., which has been printing U.S. greenbacks since 1879). And
since the program's inception in 2006, more than $2.5 million in BerkShares
have circulated through bakeries, vets' offices and some 400 other
businesses that choose to accept the colorful bills, which feature famous
former Berkshire residents, including W.E.B. Du Bois and Norman Rockwell.

What's the point of all this pretty, community-printed currency? Money spent
at locally owned companies tends to create more business for local
suppliers, accountants, etc. The New Economics Foundation (NEF), a London
think tank, compared the effects of purchasing produce at a supermarket and
at a farmer's market and found that twice the money stayed in a community
when folks bought locally. A study of Grand Rapids, Mich., released last
fall by consulting firm Civic Economics, concluded that a 10% shift in
market share from chain stores to independents would yield 1,600 new jobs
and pump $137 million into the area. "Money is like blood," says NEF
researcher David Boyle. Local purchases recirculate it, but patronize
mega-chains or online retailers, he says, and "it flows out like a wound."

Interest in cash alternatives has skyrocketed in recent months
BerkShares.org logged nearly 42,000 hits a day in April) as the recession
has encouraged more innovation. For example, a Vermont business association
is getting ready to launch a statewide cashless trading network. Ithaca,
N.Y., which has the nation's longest-running independent currency, agreed in
June to let people start using the 18-year-old bills to buy transit passes.

But how hard is it to manage and maintain these trade boosters? Ed Collom,
an associate professor of sociology at the University of Southern Maine, has
studied volunteer-run programs like Ithaca's and found that about 80%
failed, chiefly because of administrative burnout. That's why many newer
models, like BerkShares, are now set up as nonprofits, complete with
administrative support.

Beyond spurring local trade, alternative currencies build awareness about
the effect of consumers' choices. "It has started a conversation: Why local
currency? Why buy local?" says Oliver Dudok van Heel, who last fall helped
launch the Lewes pound to help a British town become more
self-sustainable.Local currency can generate customer loyalty, but not every
business feels as though it can offer a discount like the one built into
BerkShares. "They just aren't viable for us," says Beth Parsons, whose
family owns a grocery store in Lenox, Mass. But as a consumer, she likes the
idea. Parsons recently drove to a nearby town to buy some shoes instead of
getting them online. Afterward, she says, she passed a BerkShares sign "at
the bank and thought, 'Oh, I should've bought BerkShare bucks to save money
on these.'"

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