Complementary currencies can help eradicate poverty.

[eridani]

http://www.nationofchange.org/crime-alleviating-poverty-local-community-currency-battles-central-bank-kenya-1372688200

This was demonstrated when Will Ruddick, an American physicist, economist and former Peace Corps volunteer, introduced a complementary currency into a Kenyan slum called Bangladesh, near the coastal city of Mombasa. Will’s local development organization, Koru-Kenya, worked with over one hundred small business owners in Bangladesh, who agreed to give each other the equivalent of 400 shillings (about €3.5 or $4.60) in mutual credit in the form of business vouchers called Bangla-Pesa. Half of the vouchers would be available for spending on each others’ products and services, and half would be spent into the community on public projects such as waste collection and health services. Allocation decisions were democratic and transparent, and the new currency was backed entirely by the community’s own resources and insured by a system of group guarantors, not by the Kenyan government or a development agency.

The project was launched on May 11, 2013. The immediate effect was an increase in sales of 22%. That meant increasing incomes and purchasing power by 22%. These exchanges were of goods and services that without the additional currency would have been thrown away or gone to waste, not because they were unmarketable but because potential customers did not have the money to buy them. Introducing Bangla-Pesa worked to move the economy forward at full capacity, connecting the community to its own resources when the only things lacking were those slips of paper called “money.” A compelling video on the project is here.

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Complementary currencies are endorsed by many governments worldwide. The oldest and largest is the WIR system in Switzerland, an exchange system among 60,000 businesses – a full 20% of all Swiss businesses. This currency has been demonstrated to have a counter-cyclical effect, helping to stabilize the Swiss economy by providing additional liquidity and lending capacity when conventional credit for small businesses is scarce.

Brazil is a global leader in using the complementary currency approach for poverty alleviation. Interestingly, its experience began in much the same way as Kenya’s: Brazil’s most successful community currency, called “Palmas”, was nearly strangled at birth by the Brazilian Central Bank. How it went from criminal suspect to official state policy is told by Margrit Kennedy and co-authors in People Money:

After issuing the first Palmas currency in 2003, local organiser Joaquim Melo was arrested on suspicion of running a money laundering operation in an unregistered bank. The Central Bank started proceedings against him, saying that the bank was issuing false money. The defendants called on expert witnesses, including the Dutch development organisation Stro, to support their case. Finally, the judge agreed that it was a constitutional right of people to have access to finance and that the Central Bank was doing nothing for the poor areas benefiting from the local currencies. He ruled in favour of Banco Palmas.

What happens next shows the power of dialogue. The Central Bank created a reflection group and invited Joaquim to join in a conversation about how to help poor people. Banco Palmas started the Palmas Institute to share its methodology with other communities and, in 2005, the government’s secretary for “solidarity economy” created a partnership with the Institute to finance dissemination. Support for community development banks issuing new currency is now state policy.

[Sherman A1]

1. Interesting concept!

Thanks for posting.

[mbperrin]

2. Straight Keynesian workings.

Inject money into the hands of those who will spend it; spend money on public infrastructure, the economy will improve.

Before government became a piggy bank for the upper crust, this was the social contract - the country owes you some things, and you owe the country some things.

In this case, because the official social contract was broken, as it is in virtually every country in the world right now, these folks have formed their own defacto social contract and are acting as a government.

Good thinking and a way to get things done without having to bring down the official government, with all the uncertainty and mess that would bring. Here, using peaceful means (and shouldn't one of our societal goals be peace?), they've accomplished the same thing.

Works, no matter how much apologists for the smash and grab folks want to deny it.

[drm604]

3. I've been fascinated for a while now by the concept of alternative currencies.

Currencies are a tool for facilitating trade. They make it possible to do something beyond barter, which has very limited usefulness. With barter, I can only obtain your goods or services if I have something that you want.

If there's a lack of currency, then trade is hindered. When someone hoards most of the currency, they hinder trade.

The manpower and resources still exist, but there's no way to utilize them since there's no way to pay people for their goods or labor. An alternative or complimentary currency created by the people can alleviate this and allow the flow of goods and services.

[quadrature]

4. nothing new about scrip ..nt

[Art_from_Ark]

5. At one time, US miners, lumberjacks, etc., were paid

almost exclusively in scrip. The big problem with scrip is, it can only be used in a limited area, and if its support base collapses, then it becomes worthless.

[Benton D Struckcheon]

6. Excellent idea

This is actually a very powerful concept. Local currencies are a fetish of mine, after having read pretty much ALL the collected works of Jane Jacobs. A summary of her thought here: http://www.zompist.com/jacobs.html
I'm reading right now about Switzerland's WIR bank, mentioned in the above article. WIR can be and has been used to settle import transactions, according to what I'm reading, so it can actually function as an underground local currency within Switzerland if you choose to treat it this way as a user of WIR. Very very interesting, by far the most interesting stuff I've read in a while.