Alternative Currencies : A Local Solution to Unreliable National Currencies

Many of us take for granted that national currencies, whether it is the American Dollar or the Botswana Pula, are the ultimate measurement of value. However, history has shown over again that national currencies are unreliable and so many communities are turning to alternative currencies as a solution. An alternative currency can be defined as a currency that acts as an alternative to the national or multinational currency, also known as fiat money. These currencies can be developed and produced by individuals, organizations, local governments or national governments. If alternative companies work with national currencies they are known as complementary currencies; if they work independently they are known as local currencies.

The History of Alternative Currencies: The Wörgl Experiment

Alternative currencies are not a particularly new or foreign concept and the idea of an alternative currency at community level dates back to the 1800s with the German Credit Unions. Today there are many forms of alternative currencies that are used every day in all corners of the globe, from rural Kenya to bustling New York. One of the most famous examples of local alternative currency was used in the small town of Wörgl during the Great Depression. The Wörgl experiment saw 32,000 labour certificates printed that had a slightly lower value than shillings. The new scrip was readily accepted and was used in a wide range of transactions, from retail to public works projects. It was also found to circulate thirteen times faster than the national shilling. Overall, the alternative currency acted as a catalyst to a flailing local economy and incredibly, between 1931 and 1932, government funds increased from 2,400 AS to 20,400; unemployment rates also decreased dramatically.

How Do Alternative Currencies Work

During tough economic conditions like the Great Depression, alternative forms of trade have to be created in order for people to survive financially. The introduction of some form of alternative currency keeps trade alive and ensures that forms of value circulate within the community as opposed to leaking out into the wider economic system. It gives people the opportunity to share and redeem value in a particular local community where national money does not circulate easily. For example in the township of Khayelitsha in Cape Town, South Africa, Community Exchange System (CES) is being used as part of an ambitious plan to make the area a self-sustained economy. Someone on the periphery of fiscal life can receive credit for repairing a bicycle and can in turn trade it for a bicycle repair.

Advantages of Alternative Currencies

Local alternative currencies increase economic activity and spending. They cannot be spent abroad and so circulate locally, benefiting the local economy. They serve to counterbalance the local economy, for example the activity of an alternative currency increases if the national economy slows down and vice-versa. It also allows local economies to fully utilise its labour force independent of national demand. The advantages of local currencies are being recognised all over the world. Today there are over 2,500 local alternative currencies in use today, from the Baroon Dollar in Australia to the Brixton Pound in the United Kingdom.