The Memory Bank

Organic Trade: Towards a Global Green Currency?

September 15, 2004 by Keith Hart

How can an economic democracy be built from the bottom up? One method is exchange circuits using community currencies of which the most widespread form is called Local Exchange Trading System (LETS).

The idea of LETS is to foster exchange within local communities. Conventional money is issued by an authority in limited supply to assure that it is generally accepted as valuable in itself, no matter who has it. Such money comes and goes, in, out and through communities. LETS money goes round and round, within the community of its users, because it has no value beyond the ongoing exchange relationships that it supports. It stays within the community. One type of money encourages people to act exclusively, the other inclusively.

Community currencies are thus issued by people themselves with no mediation of central authorities. Any group or network may constitute itself as a community of exchange with its own unit of account, thereby bringing a form of direct democracy to economic life. This movement to reform the character of money is very relevant to organic agriculture, especially since its goals are broadly similar – to integrate production and consumption in more accountable ways; to help people take responsibility for their own economic actions; to bring ecological principles to economic life; and to avoid the reckless inequality that is built into capitalist markets and national money. Above all, the two share the ‘organic’ principle in its extended sense of putting things together within functional wholes; and both privilege the local at present, although virtual association at distance is a growing possibility for each.

We hear a lot about ‘communities’ these days. This may amount to no more than evoking a vague sense of shared belonging. There are communities of place, political communities, communities of interest and imagined communities. The nation-state succeeds brilliantly in unifying all these attributes and making itself the sole representative of society. It is hard to avoid unconsciously repeating this recipe whenever we try to do something different. The model lies deep within each of us. We are beset on all sides by the innumerable claims of community. Most of these are just ideas and ideas are cheap and plentiful. What communities do really matters.

I envisage a world of countless communities, associations addressing a variety of purposes, but always aiming to promote their members’ common good. So how might the individual and collective purposes of ordinary people endowed with the right of free association be reflected in their money instruments? Community currencies, the little furry mammals of our world, as yet live only in the cracks left by the dinosaurs, the states and corporations who wax fat on conventional money. Moreover, the vast majority of these experiments have been local so far, leaving their application to international trade unproven. But there has been little time yet to find out how LETS principles might work for virtual communities.

These principles are simple and general enough, but inserting them into societies made up of existing people and institutions is always complicated. National monopolies of money still have a grip on our minds. The institutional logic of the conventional money form has been around for thousands of years. Shifting popular attitudes to money is difficult. Money, long the main source of exclusive private property, should also be seen as a part of the cultural commons to which everyone has the right of open access. The digital revolution thus opens up a space for people to fight back against national and corporate monopolies through organizing exchange and money themselves.

The idea of people making their own money when liquidity fails is an old one. Historical antecedents for community currencies include instruments of credit in the pre-industrial states of the non-western world; utopian communities in the 19^th century; the Social Credit movement in North America during the Great Depression; and European experiments in the same period, such as Gesell’s stamp scrip. How can today’s community currencies emulate the strengths and avoid the weaknesses of these precursors?

Any network may constitute itself as a LETS community by nominating a currency and recording all transactions through a central register. The totality of transactions at any time sums to zero, since the circuit is closed. Anyone can get an account – I buy, I sell, giving rise to a negative or positive balance at different times. When I buy, I make a commitment to the network that I am good for the money I have just issued. The loss of individual members with negative balances does not directly affect the ability of the others to trade, as it does when the supply from a single issuer dries up. The currency itself is simply a virtual measure. It has no commodity value, therefore no price (interest), no reason to become scarce or to be hoarded. Recent developments, especially in the use of information technologies, have made community currencies a fast, cheap and effective means of carrying out normal commerce. Smart cards registering transactions in up to fifteen currencies, linking businesses and non-profit organizations as well as individuals, allow these circuits to become partially integrated into the market economy.

Community currencies vary in their relationship to the national economy; when commercial businesses such as shops participate, the range of commodities available is greatly increased. Other sources of variation include the monetary measure (whether based on the national currency or on hours of work, for example); reliance on free labour or government grants; digital or material records of payment; involvement of businesses or individuals only; local or virtual association; forms of leadership and participation; and so on. Many LETS associations are reluctant to band together in case their autonomy is compromised. They form boards and committees, are insular and clubby, often only for the poor. Such institutions are usually time-consuming and dogmatic, with a bias against business and for public grants. Their aim appears to be to form a separate world of their own, however small, rather than integration into the national and ultimately the world economy. But this is the stuff of schism in the movement. When a community currency circuit is a stand-alone project, it unconsciously mimics the nation-state model. In future, many such currencies, reflecting diverse interests, will collaborate and compete for the public’s loyalty. And food-based currencies would have particular advantages in such a context.

Just suppose that some city consumers would like to buy locally grown organic produce and a number of farmers in the countryside nearby could satisfy that demand. Some shops and supermarkets or a weekend market might sell the produce, even if it is more expensive. City-dwellers could pay for their keep on organic farms with work. All of this is unpredictable and costly to organize. A community food currency would supplement normal cash transactions, but in many cases, given unavoidable costs in national currency, prices would be calculated as some proportion of
the two. Thus farmers could pay for seasonal labour, transport, warehousing etc partly or wholly in the food currency. Distribution outlets could likewise charge a combination of both. Consumers could offer not only farm labour in return, but their own specialist services to be exchanged within the circuit with others who share the values embodied in organic food.

People would join other circuits – for music buffs, sports fans, a church congregation, a neighbourhood. These associations would wax and wane according to their internal dynamics and their co-evolution with other circuits. Individuals could combine membership of several on one smart-card and switch their purchases between them, as we now do with credit cards. A community currency based on food and organic values in the wider sense – protection from unknowable market forces, the integration of production and consumption, city and countryside – would soon be a popular staple of the alternative economy. We eat food regularly; food is an important symbol of other values; strengthening the home market for food has economic virtue; and so on.

How might such a food currency develop in the direction of fair international trade? First, there is less incentive when using community currencies to buy cheap and sell dear, since the money itself is not scarce. Second, to combat adverse terms of trade based on average labour costs in rich and poor countries, an international exchange circuit could weight commodity values to compensate for differential labour costs. A coalition of ethical consumers might be attracted to this model. Third, regardless of price effects, at least the value generated by community trade stays in the network. The technology for such trading systems is already available. Perhaps IFOAM could help to establish a global green currency linked to networks established for organic and fair trade. It might be called the ‘eco’ – people’s money for an ecological economy.

These arguments are not just theoretical. LETS ‘Q’ in Japan is an online global-local or ‘glocal’ network that already carries out some limited international trade. So far this has been mainly in information goods such as Japanese books and videos that are expensive in London and Paris. There is a plan for fair trade in organic bananas planted in Negros, an island situated between Japan and the Philippines. Organic products – rice, coffee, soap – are already a prominent aspect of exchange in Q between city consumers and village producers. Some members of Q import Palestinian olive oil and soaps as part of an action group called ‘Power to the People’. Shimokawa, a small town in Hokkaido, has organized a LETS network whose money is named after the forest, its main industry. Its leader runs an emu farm; he also imports arts and crafts from Mongolia and sells them to members of the network as part of a fair trade initiative.

Community currencies add to purchasing power at little or no cost. The value generated in exchange stays in the circuit and abstract notions of community are grounded in everyday economic transactions. Participation teaches people a more responsible attitude to economic life. Learning to manage credit and debt in a new way shows members that the money system they know is not the only one possible. The rules of each circuit are customized by its members to suit themselves. Community currencies are thus practical exercises in local economic democracy and a great source of political education. They belong to a family of popular democratic forms that includes the organic agriculture movement. Perhaps they may eventually come together in a multi-stranded drive for a more equal world.

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