If we wish to live more ecologically, it would make sense to adopt monetary systems that make it easier to do so.
— Richard Douthwaite, Author of The Ecology of Money
Local money (also known as local currencies or complementary currencies) is an approach to trading using voluntary vouchers (like “green dollars”) or tokens (print or electronic) instead of legal tender (such as New Zealand Dollars).
Local money circulates freely among both members and non-members, but it only retains its value near to the community that issued it in the first place. This helps sustain the local economy, reduces transportation footprints, and increases community resilience. If your community is interested in promoting 'buy local first', then local money may be the right tool.
Local money or voucher currencies have two major requirements: a way for them to be issued into circulation, and a way for them to be redeemed. This in turn requires, on one hand, an issuing organisation, such as a not-for-profit society or a business, and, on the other hand, something of value that “backs” the currency, assuring those who use it that it can eventally be redeemed for something worthwhile. Here are some common combinations.
While local money is
traditionally associated with vouchers, increasingly communities also
rely at least in part on online credits that can be traded through
smart phones. Some local currencies also use a system known as
“demurrage” where the value of the currency decreases over time,
encouraging fast trading.
Those using local
money are advised to pay taxes as they would for cash sales.
We create our exchange systems, and then they create the world we live in.
— Bernard Lietaer, Research Fellow at the Centre for Sustainability Resources (California, USA); Author of Money and Sustainability and other titles
The principal advantages of community currencies are:
- Protection against global economic instability
- Stemming ‘leakage’ of community wealth to outsiders/offshore
- Support for local small/medium businesses
- Business opportunities in import substitution
- Less fuel needed for imported product
- Increased employment opportunitie
- Less conventional money required for desirable projects
- Enhanced sense of community
- Branding opportunity for the distric
- Tourist attraction, especially for early adopters
— Helen Dew, Living Economies Trustee, in the May/June 2007 issue of Organic NZ.