Book Review

Local Money

How to make it Happen in your Community

by Peter North (Foreword by Rob Hopkins) Transition Books (Green Books) 2010

This latest addition to the series of books promoting the idea of Transition Towns looks at the role of money. It starts by looking at the ideas about the nature of money, noting that, essentially, it is a matter of 'belief'. The old view that it needed to have a commodity basis, notably on gold, has been displaced by the acceptance of 'fiat' money, and the legal status of 'legal tender', required to pay bills, taxes and debts.

He notes that 'The amount of money in the economy, how it is regulated, and who has access to it is controlled by an elite of private bankers and politicians, and this gives that elite huge power to enrich themselves and control the rest of us', and some of the dire consequences of this. He shares with Bernard Lietaer, who he refers to, the belief that local currencies are needed to achieve 'localisation', but like Lietaer, does not consider the possibility of reform of the official systems of currency, to make them simple media of exchange, instead of instruments of power and exploitation, though he does sympathetically note the spread of the Social Credit ideas of C H Douglas during the Depression years. He also recommends a viewing of the animated film 'Money as Debt', available as aDVD or to view on

While Lietaer regards the official money systems as fundamentally flawed and headed for collapse, he believes they are too strongly entrenched in the power-structure to be successfully challenged.

The author then notes that 'money' can be created locally, dependent only on its acceptance as medium of exchange within the given community.

He covers a wide range of examples historically, noting the growth of the early building societies among groups of workers, assisting them in house-purchase; and of credit unions, and the early local banks, which still exist in large numbers in the USA; also the various 'complementary currencies', notably 'stamp scrip', which arose in the depression years between the World Wars, which were outlawed in some States under pressure from the banks, when they became too successful. Virtually all ceased when the 'depression' ended with the preparations for WW2. He notes the still-continuing example of the Swiss 'WIR' inter-business interest-free system and the similar Swedish JAK bank; also the Islamic banks' efforts to avoid usury/interest charging.

As with 'Natural Capitalism', reviewed above, he notes the innovations developed in Curitiba, Brazil, citing the 'garbage exchange' programmes used to pay people in squatter settlements with bus tickets and foods, for their garbage-collection efforts.

Included in more detail are the local currency 'barter networks' which sprang up in Argentina when its national currency collapsed in 2000-2003, and draws lessons from their experiences, comparing the limitations of the more local systems with the 'arborlitos' which became more widespread and so offering a wider range of products and services, but more vulnerable to corruption. The clear basic problem with any currency is 'credit' – belief that it can be used in exchange for wanted goods or services. This is easier to achieve and maintain in more local schemes, but for a more limited range of goods or services; but becomes dependent on the authority or reputation of the issuers in the larger-area schemes.

This also raises the issue of the 'seigniorage' – the benefit of the face-value of the money created, less its cost of production and administration – accruing to the creator. In a national currency created by a government body, this becomes a public asset, but when, as now, about 97% of our national money is created by private banks as they make interest-bearing loans, we are paying them interest on nearly all the money in circulation as well as suffering under an ever-growing mountain of debt, just in order to keep that supply in existence – until now, when the system is collapsing under this burden!

He then describes in some detail the strengths, weaknesses and appropriateness for given circumstances of the more recent developments of LETSystems, time banks, Ithaca Hours, Berkshares and other complementary currencies, paper-based or using electronic means, as well as the Transition currencies recently appearing, giving many website details for further study. The problems of security and trust grow, with the size of the system. The unit cost of forgery-proof paper notes can be greater than their face-value, for small runs, while the installation of card-readers, or modification of existing ones to use with the complementary currency for convenient use of an electronic currency limits the possibilities of introducing this type. Another issue to consider is the usefulness of making it lose value over time –'demurrage' – to encourage spending, rather than saving. While the interest-charges on the bank-loans which create (and destroy) our national currency are clearly pernicious, should it not be possible to save, without penalty?

He discusses the pros and cons of linking the local to the national currency, making it either directly convertible or at some discount. For businesses to accept it, such a link is needed, but this renders it vulnerable as the national currency collapses – just when these alternatives are most needed!

In his conclusion, the author hopes that the book will have been of use in considering how 'alternative currencies' might contribute to the Transition process, believing that they have great potential, but warning against over-estimating what can be achieved 'straight away', or the amount of work needed to keep them working. He certainly gives newcomers to the subject plenty of advice and food for thought both for Transition groups thinking of starting on a project, and also for those already operating one.

Just one grouch: this book should be passed around the members of Transition groups, but the copy I received had started falling to pieces before I had finished reading it!

Brian Leslie