[MedTOWN] Local currencies for social & economic recovery
If the 2008 crisis has taught us anything, it is that such crises rapidly deteriorate the values and foundations of the Welfare State and distance us as a society from democratic principles and social justice. The impact of the COVID-19 crisis will be so profound on the real economies of the European Union that it is essential that public spending investments related to social and economic recovery plans have the greatest possible impact; and that this impact reaches those who need it most: SMEs, cooperatives and the self-employed, instead of remaining in large companies and financial actors, as has happened with the quantitative flexibility policies used in previous crises.
In other words, we have a new opportunity to build a different society without leaving anyone behind and where recovery measures rebuild an ecosystem of wealth and jobs that is more redistributive, sustainable and fair, and that in addition helps to build more democratic and free territories.
Since 2013, ACPP-Assembly of Cooperation for Peace, Lead Beneficiary of the MedTOWN project, has been experimenting with the use of complementary currencies to improve social policies, based on the conviction that these currencies are exceptional tools for combating poverty, inequality, social exclusion and environmental unsustainability.
From this perspective, we have promoted pilot projects that have given shape to municipal currencies on paper or in electronic form, which have proven their usefulness in building local resilience and promoting the transition through the local sphere to fairer, more resilient and sustainable societies. In a first stage, the experimentation has been limited to two municipalities: San Juan de Aznalfarache and its Ossetana currency, in Andalusia, and Santa Coloma de Gramenet and its Grama, in Catalonia.
Very few other municipalities have followed so far this trail of experimentation. The most significant to date is Barcelona City Council, which has promoted the REC. In the next few days, Seville will begin to implement a similar system within the framework of the MedTOWN project.
What have we learned so far?
- That local currencies serve as an incentive for local consumption and production and that the retention, loyalty and eventual increase of local customers by local commerce can contribute to an increase in internal demand and the generation and redistribution of wealth.
Thus, in Santa Coloma de Gramenet, where we support the city council in alliance with Learning by Doing and Clickoin, the local currency allows 95% of the money from the subsidies granted by the city council to remain in the city, activating local commerce.
- That paying direct transfers in whole or in part through local payment instruments such as those we have promoted can turn an aid programme into a programme of economic revival. Local and citizen currencies amplify the economic impact of a subsidy given to citizens, promoting its use in the local economy and encouraging recirculation in the local economy itself, which increases the multiplier effect of public spending.
For example, in San Juan de Aznalfarache, the municipality and ACPP have been able to continue supporting vulnerable families in the municipality and contribute to the recovery of small businesses, even in times of confinement due to COVID-19, with a planned injection of approximately 100 thousand euros into the municipality's real economy during the current year.
- That local currencies encourage the recirculation of money. When one euro of public expenditure reaches the economy, this euro produces a series of transactions in the defined territorial area: the economic multiplier tells us how many transactions. For example, an economic multiplier of 1.9 implies that, in addition to the transaction of the public entity making that payment, there has been an additional expenditure in the defined territorial area of 0.9 euros, on average. The transactions that this monetary unit produces afterwards are recorded in other territories and do not contribute to local prosperity.
Studies have found that the key to poverty is much more related to the systematic outflow of money from the community than to the lack of money. A low economic multiplier is the indicator that can help us detect this pattern of functioning in the economic system and a local currency can help us correct it.
The multiplier for Grama circulation in 2018 (last data published) was 3.69. Thanks to this system, and using its mobile device, it has been possible to continue supporting local commerce even in times of confinement due to COVID-19.
- Last but not least, that local currencies reward sustainable citizen behaviour, effectively contributing to shortening supply chains, promoting the cooperative, social and solidarity-based economy, the circular economy and the zero-kilometre economy.
The new financial regulation of the Eurozone has created in recent years legal figures such as electronic money or payment service providers that allow us, for the first time, an intelligent and programmable use of legal tender.
Only 10 years ago, we were faced with the challenge of pulling the eurozone out of the biggest economic crisis in the EU's history. The measures implemented through quantitative easing policies, which took too long to take effect, have greatly increased social inequalities and have impoverished the states, which are now highly indebted, in the worst possible circumstances to meet the challenges of a new economic crisis. A crisis that, besides, can potentially be much more serious.
It is time to implement different instruments to achieve different results. The new social currencies combine legality with flexibility, technology and connection with different actors in society, showing themselves to be the necessary tool for the application of public policies with a real, fast, agile and direct impact.
If you want to continue the discussion on local complementary currencies and join the MedTOWN Community of Practice, please, contact us through email@example.com