The Future of Money | Chapter 6 | Bernard Lietaer (1999)

Reproduced from:

The Future of Money © Bernard Lietaer March 1999

Chapter 6: Community Currencies

Money symbolized the loving giving and taking among individuals which gave men the feeling of
having emotional roots in their community […]
Money originated as a symbol of man’s soul.”
William S. Desmonde1

“The economy of the future is based on relationships rather than possession.”
John Perry Barlow

“What idealists have dreamt about,
What hippies used to talk about,
Now people are just doing.”

This chapter addresses another “money question” of our Time Compacting Machine; the one relating to the Age Wave; i.e. “how will society provide the elderly with the money to match their longevity?” (see sidebar on US Congress’ own retirement plan)

But it also goes beyond that specific topic by tackling the broader issue of community breakdown. Problems in elderly and child care, education, reduction of criminality, and improvement of the general quality of life are all symptoms of the same phenomenon of community crises.

Community breakdown has become a universal pattern all over the modern world. Although it is usually not perceived that this trend relates to money, this chapter will show that both the cause of the problem and its solution can be found in money systems.

Is this why Age Wave economic problems are not urgent issues on Capitol Hill?

US Senators and Congressmen don’t pay in to Social Security, and, of course, they don’t collect from it. The reason is that they have a special retirement plan that they voted for themselves many years ago. For all practical purposes, it works like this: when they retire, they continue to draw their same pay, until they die, except that it may be increased from time to time, by cost of living adjustments. For instance, former Senator Bradley, and his wife, may be expected to draw $7,900,000, with Mrs.Bradley drawing $275,000 during the last year of her life. This is calculated on an average life span for each.

This would be well and good, except that they paid nothing in on any kind of retirement, and neither does any other Senator or Congressman. This fine retirement comes right out of the General Fund – tax money – while US citizens who pay for it all, draw an average of $1000/month from Social Security.

How long would it take for Capitol Hill to address the Age Wave issues, if they had personally to live with the same Social Security as the rest of the population?

Community Breakdown

The Bench in Muir Woods

Photograph of the bench in Muir Woods surrounded
by giant trees

 It was at the end of that very wet “El Niño” Spring of 1998. A grey-haired man was sunning on the only bench in Muir Woods where the afternoon sun-rays break through the Redwood canopy. While he was musing about which of these trees were already there when the Roman Empire fell, a young man came to sit next to him. The young man looked somewhat familiar, but the old man couldn’t remember from where he knew him. His outfit seemed a bit out of place; he was wearing a very clean but old- fashioned business suit.

“Nice day” said the old man to engage the conversation. “A great day for me! I just got my first job offer. School is finally over!” replied the young man excitedly. “Congratulations”

“Assistant Statistician at Travelers Insurance” was the proud response.

“That’s great, a good company. Actually, that’s where I started myself over thirty years ago .”

“Well, the best part is that now I can marry my sweetheart, buy my first car….”

“Don’t tell me your fiancee’s name is Sherry?” interrupted the old man.

“Yes, why?”

The old man now knew why he recognized the young man. He continued in an absent-minded voice. “You’ll have two kids. Not a bad life, all things considered. Don’t worry about that Third World War; that Korean thing will just fizzle out. Communism won’t take over the world.

Just about everybody will be able to afford a car.”

The young man stared back with a puzzled look, but the monologue just rolled on.

“What’s really strange is that it’s all the things you take completely for granted that will turn out to be problems. Obvious things, like children having two parents.

Or even being born into a family.

Or, once born, wanting to live at all.

Or the American dream in which children are supposed to be better off than their parents.

That schools are for learning.

That it is safe to walk to your downtown grocery store.”

The young man tried to intervene; the only word that he could articulate was an indecisive “But…”

Forget about not locking your house or car. You’ll end up putting a sign saying “No Radio” on your car window to try to discourage the thieves.

The young man stood up to leave, visibly disturbed. “Do you know who I am?” asked the old man.

“Yes, but I don’t believe you” answered the young man as he walked away from his older Self.

The old man’s shoulders sank in deeper as he watched the young man disappear at the curve on the path, without looking back.

In 1997, over ninety percent of the American families own at least one car. The US GNP in constant dollars tripled in thirty years, and GNP per capita more than doubled.

For the first time, over 51% of all US children live now in single-parent families2.

Between 1960 and 1991 there was a 400% increase in births to unwed mothers. In the ten major cities in the US, more than half of all births are illegitimate.3

The rate at which teenagers are taking their own lives has tripled in the past thirty years, and is now the second leading cause of death among adolescents. For every successful suicide there are fifty to one hundred unsuccessful attempts.4 Between 1995 and 1996, the number of new Prozac prescriptions for 13- to 18-year-olds grew from 148,000 to 217,000. For the 6- to 12- years-old age bracket, the jump is even more stunning: from 51,000 to 203,000.

A 30-year-old man in 1970 earned 15% more than his dad did at that age. Today’s 30-year-old man can expect to bring in 25% less than his dad did.5

Scholastic Aptitude Test (SAT) scores dropped by 73 points between 1960 and 1993. Almost half of all Americans between the ages of 21 and 25 lack basic literary skills, are unable to balance a check book, or read a map. Twenty percent of high school students now feel the need to carry a firearm, knife, razor, club or some other weapon on a regular basis6 In 1995,

1.36 million children grades 6 to 12 took a gun to school. By 1998, metal detectors and new security measures made this drop to 1 million.7

While US population increased only 41% since 1960, the number of violent crimes rose 550%, so that eight Americans out of every ten can expect to be victims of a violent crime at least once in their lives8.

Ninety-nine percent of Americans will be victims of theft at least once in their lives. Eighty-seven percent will have property stolen three or more times9.

Around the world, in rich and poor countries alike, the structure of family life is undergoing accelerated and fundamental changes. “The idea that the family is a stable and cohesive unit … is a myth. The reality is that trends like unwed motherhood, rising divorce rates, smaller households, and the feminization of poverty are not unique to America, but are occurring worldwide,” a recent study demonstrates.10 In fact, the US is in the middle range among developed countries in the percentage of births to unwed mothers. Iceland, Sweden, Denmark, France and Britain are all in a worse position in both increases over time and total percentages as of 1992. Only Japan has remained virtually unchanged over the last 30 years.11

The world over, we can hear the same complaint. “Things aren’t the way they used to be. We used to have a better sense of community.” What is referred to may be different in each culture, but the trend is identical. Its consequences are also similar, including vandalism against common property and criminality, particularly among the younger generation.

Definition of “Family” by an Australian Aboriginal Elder12

“You white people don’t understand what we mean by “family.” When a baby is born, it is given to its “mothers.” That means, the mother who bore it, all her sisters and all her aunties. They are responsible for nurturing and loving it. It is also given to all its “fathers.” That means its natural father, all his brothers and all his uncles. They are responsible for caring for it and teaching it.

Everyone else in the tribe is brother and sister. We think it is really primitive for a baby to have only one mother and one father!” Many children, in Western society, don’t even have two parents! Imagine the love, support, and caring they would experience with a whole group of mothers and fathers!

Are we, indeed, “primitive” in our assumption that two parents are enough for one child? Maybe “existential angst” is only part of Western culture – not necessarily a given of the human condition.

The more “developed” the country, the more this trend has advanced (sidebar).. For instance, Northern Europe and the US , the extended family was considered the norm during the 19th century. By the 1950’s, the nuclear family was standard.. Today, the median of social identity in the US has already moved from the nuclear family to the single parent family as 51% of all US children now live in a single parent home.13 What is even more enigmatic is that the same movement – although with different starting points – seems to happen almost everywhere.

In Italy, for instance, a few decades ago “la famiglia” still referred to the extended family: sixty or eighty people, including, of course, several generations, such as grandparents, parents, uncles, cousins, nieces, and in-laws. Now, the norm has moved toward the nuclear family, particularly in the more “modern” Northern half of the country. Other Southern European and Latin American cultures are following an identical trend.

From the Hopi in Arizona to the Kogi in Colombia and the Chipibo in the Peruvian Amazon, we hear the comment that the young are losing their connection to the tribe and identifying themselves with smaller subgroups, or even just blood relatives, “as white people do.”

All of this is usually written off – depending on the age and political persuasion of the observer – as the price of progress or the signs of decadence of society. But could community breakdown be a contagious disease? Is it thinkable that they all may have a deeper common cause? What could it be?

To understand how community is lost, we must find out how it is created.

Of all the disciplines which have studied community, the most useful insights come from anthropology. Anthropologists discovered that community does not necessarily arise out of proximity (otherwise, a 200-apartment high-rise in a big city would produce community). Similarly, common language, religion, culture, even blood, doesn’t automatically produce community either. All of these factors can clearly play a secondary support role in the process, but the key ingredient is something else.

Anthropologists have found that community is based on reciprocity in gift exchanges.14

Community building and the “gift economy”

If community were a fabric, what would be the individual thread? Or, to use another metaphor, if community were a molecule, what would be its constitutive atom, the smallest act that creates it?

If you need a box of nails, you go to the hardware store and buy one. There is no expectation by either you or the hardware clerk that any future reciprocity is involved. This is one of the main reasons why monetary exchanges are so efficient. Each transaction stands on its own. However, no community has been created either.

Now, assume that you go out for another box of nails, and that your neighbor sits on his porch. When you tell him you are going to buy a box of nails, he responds, “Oh, I just bought six boxes the other day. Here is one, it will save you the trip to the hardware store.” He also refuses your offer to pay. What has happened?

From a purely material viewpoint, in both cases you end up with your box of nails. But an anthropologist would point out that in the second case, something else has happened as well.

When you meet that neighbor again, you will definitely say hello. And if ever on a Saturday night he rings your door bell because he forgot to buy some butter, you will most likely share some of yours. The gift of the box of nails is a community-building transaction. Its purchase is not.

A commercial transaction is a closed system, the nails versus the money. In contrast, a gift is an open system. It leaves an imbalance in the transaction that some possible future transaction completes. The gift process creates something that the monetary exchange does not. A new thread has been woven into the community fabric.

The evidence for this relationship between gifts and community is overwhelming. It has been documented all over the world and at all times.

Gift Economy as an Evolutionary Social Survival Skill

Gift giving was developed as the earliest form of social security according to anthropologist Stanley Ambrose of the University of Illinois at Urbana-Champaign. “Social ties, established by gift giving, would have helped people in tough times, particularly important in a difficult or unpredictable environment.” The San hunter-gatherers from Kenya establish such networks still today by exchanging ostrich egg-shell beads, the gift helping secure future favors. The age of this egg-shell bead gift tradition was established when Dr. Ambrose discovered in a rock shelter called Enkapune Ya Muto in Kenya’s rift the remains of an ostrich- eggshell bead workshop with over 600 shell fragments and completed beads, dating back 40,000 years!

“It gave the African people an advantage over Neanderthals, who may not ha had such symbolic mechanism for social solidarity.”15

Some examples

It is funny that I needed anthropologists to discover the relationship between gifts and community building. The etymology of the word “community” could have informed about that link even more explicitly, without all that hard field work by anthropologists. “Community” derives from the two Latin roots:

cum, meaning together, among each other
and munus, meaning the gift, or the corresponding verb munere, to give.
Hence “community” = “to give among each other.”

Could it have been more obvious?

I will now provide three sets of examples of communities where this unwritten rule – that community is built over time as a result of gift exchanges – has been operational since time immemorial. They are:

  1. Monastic Communities (Christian and Buddhist);
  2. Traditional Communities (Africa, Pacific Islands, North America);
  3. Modern Society (Western world, Japan and the Scientific Community).

You can read all of them or just your favorite examples. They all validate the same principle.

1. Monastic Communities

Benedictus of Aniane introduced some Celtic concepts into early Christianity and founded the Benedictine Order during the fifth century A.D., the first Christian monastic organization in the West. Its rule book specifies that communitas is created by the way one organizes the economic necessities of these monasteries. The monks should be self-sufficient as a group, but totally inter- dependent among each other. Everybody has a function – from abbot to doorkeeper, from cook to scribe, from iron-monger to cheese maker. But each job has to be contributed as a gift to the community. Monasteries knew all about monetary exchanges, as these regularly occurred between the monastery and the rest of the world. It is, therefore, quite intentional and significant that the Benedictine rule explicitly prohibits any monetary exchanges among members of the community.


Non-Christian monastic traditions have gone even further in the same direction, without the benefit of knowing the Latin etymology of the word “community.”

For instance, “According to the Buddhist monastic code, monks and nuns are not allowed to accept money or even to engage in barter or trade with lay people. They live entirely in an economy of gifts. Lay supporters provide gifts of material requisites for the monastery, while the monastics provide their supporters with the gift of teaching. Ideally this is an exchange that comes from the heart, something totally voluntary. The returns in this economy do not depend on the material value of the object given but in the purity of heart of the donor or the recipient.”16

2. Traditional Societies

In the early 1950’s Lorna Marshall and her husband lived with a band of Bushmen in South Africa. As a farewell gift, they gave to each of the women in the band a bracelet of cowrie shells. Cowries are not available in the area, and had been bought in New York. Marshall wondered what that may do to future archeological research in the area.

When the Marshalls returned a year later, they were surprised to find none of the cowries in the original group. “They appeared, not as whole necklaces, but in ones and twos in other people’s ornaments at the edges of the region.”17 The gifts of the cowrie seashells had spread like water through the wider community.


While we often have a tendency to think of gift societies as primitive and dismiss them in a condescending way, some of these gift rituals are extraordinarily complex and sophisticated. In traditional societies, these gift rituals are considered among the most important social activities within the community. Their very complexity is a sign of the significance given to them.

For example, the Tikopia who live in an archipelago in Polynesia engage in no less than twenty-four different kinds of ritual gift exchanges to complete one single wedding.18 The whole process requires several days.

In another island group, the Massim archipelago, otherwise totally useless ornaments called the Kula are always moving as ceremonial gifts from one island to the other. Specific “soulava” necklaces – worn only by women – circulate in a counterclockwise sequence among the islands, while the male “mwali” armshells circulate among the men in clockwise sequence19.


The Northwestern American Indians had great meetings of all neighboring tribes to celebrate “potlatch” (literally to nourish, to give). Status was marked by the quality and quantity of objects given. We consider people famous because they have accumulated a lot of money, or because they bear the title “Her Royal Highness.” In contrast, the Kwakiutl honorific titles characterize the generosity of the giving in which people have engaged: e.g., “Whose Property was Eaten in Feasts” or “For Whom Property Flows.”20

3. Modern Societies and Scientific Communities

What is left of our Western world family communities still occurs around the Thanksgiving and Christmas and birthday reunions, and – as all retailers will tell you – around gift exchanges. Today’s marriages – the ritual where two families formally join to create a single larger community – are still marked by the exchanges of gifts.


Japan is the one developed country which has been bucking the trends in community breakdown. This is usually attributed to a mysterious peculiarity in the Japanese social structure or psyche.

However, here too our universal key of gift exchanges is applicable. The Japanese tradition of Butsu Butsu Kokan refers to the reciprocal nature of gift exchanges, which explicitly exclude monetary exchanges. The name itself reflects that point, its literal translation being “Object-Object-Exchange.” These gifts are a key ritual in practically all aspects of the Japanese culture. Gifts are constantly exchanged not only within the extended family, but between co-workers, esteemed individuals, social and work superiors, and elders. It takes often the form of sharing one’s talents in art, calligraphy, culture, or other social graces. It is not the monetary value of the gift that matters; what counts is the intention, the quality of the personal touch.


Even the most “modern” of all communities – the scientific community worldwide – is nurtured by the same unwritten rule. Indeed, scientists who give their ideas to the community receive recognition and status. In contrast, those who do it for the money, or who write only textbooks (a commercial type activity) have no recognition, or may even be scorned. “One reason why the publication of textbooks tends to be a despised form of scientific communication [is that] the textbook author appropriates community property for his personal profit.”21 In short, to the extent you want to belong to the scientific community, you can get credit for your ideas, on the express condition you present them as gifts to the community; i.e., do not get monetary fees for them.


A contemporary German scientist, Almut Kowalski, has even developed a whole alternative theory based on gifts to explain how physical reality operates. Her claim is that from atoms to galaxies, from plants to organs in our own body, all exhibit processes which she describes as “tuning in and gently giving” as the core exchange mechanism. For instance, your kidneys are “tuning in” on what the rest of your organism needs, and “gently give” what they can for the benefit of the whole. Ken Wilber’s holon theory points to a similar idea.22

How communities break down.

It should not come as a surprise that to unravel the fabric of a community you do the opposite of what helped create it in the first place. Therefore, I propose as a general rule that communities break down whenever non-reciprocal monetary exchanges replace gift exchanges.

Let us revisit specific examples of community building described above, starting with the last one, the scientific community. They all show that community unravels every time exchanges involving the “normal” national currencies replace gifts.

Dr. Jonathan Kind, Professor of genetics at MIT, says, “In the past, one of the strengths of American bio-medical science was the freedom of exchange of materials, strains of organisms, and information….But now [that the universities are trying to make money from the commercial potential of recombinant DNA], if you sanction and institutionalize private gain and patenting of micro-organisms, then you don’t send out your strains because you don’t want them in the public sector. That’s already happening now. People are no longer sharing their strains of bacteria and their results as freely as they did in the past.”23 The fabric of one corner of the scientific community has started unraveling.

The first significant contact with Northwestern American Indians was made by Captain Cook around the time of the American Revolution. Pelt traders moved in thereafter, and the Hudson Bay Company established its first outposts in the 1830’s. All of these people were only interested in the furs, and otherwise left the Indians alone. Even decades before the missionaries arrived to try to change the “pagan” traditions of the indigenous people, some communities started to unravel because of their contact with the traders’ commercial exchanges. Tribes that had replaced the gift exchanges within their community with monetary exchanges were those that fell apart within a generation.

This process has repeated itself all over the world whenever traditional societies start interacting commercially with the Western world. As soon as non-reciprocal monetary exchanges begin to occur within these traditional societies, their communities start breaking down. I have seen this happen firsthand in the 1970’s in the Peruvian Amazon when the Peruvian national currency started circulating within some tribes.

In light of all of the above, we should consider community not as a state, but as a process. If it is not nourished by regular reciprocal exchanges, it will tend to decay or die. That is why I define a community as a group of people who honor each other’s gifts, who can trust that their gifts will be reciprocated someday, in some way.

Revisiting the strange global epidemic of community breakdown, we can now see what may be a common mechanism behind the breakdown of Amazon tribes, the transformation of Italian extended family into nuclear families, or the American nuclear family crisis. While other factors certainly play a role, there is one key that fits all of these phenomena. Non-reciprocal monetary exchanges have started taking place within each of these community systems. Some economic theories consider the monetization of all transactions as a key sign of “development”, because from that moment they are captured in the national statistical system. No wonder that the process of community decay is also the highest in the more “developed” countries.

The way Hazel Henderson puts it: “If you want to have breakfast prepared by Mom, go to MacDonalds where she is serving it.” In a society where you need to pay your son to cut the grass, the nuclear family breakdown is in its way. And when you decide to put Grandpa in a nursing home, not only the extended family is gone, but you will also have to pay for the day care center.

In a recent survey of the priorities of the American population, the desire to “rebuild neighborhoods and communities” received the highest ranking for an astounding 86% of the population.24 This is one priority that everybody seems to agree on.

But how can community be re-build in today’s world?

Currencies that Build Community

We just learned the apparently general rule that whenever money gets involved, community breaks down. However, this turns out to be true only when scarce, competition- inducing currencies are involved, such as our official national currencies. In fact, the use of some other types of currencies can have exactly the opposite effect of building community.

None of this is theory. We are dealing with real-life experiments which have been going on in a wide variety of countries, in some cases for decades. Theory is way behind practice in this field (see sidebar).

There are indeed currencies which have reciprocity built in, which are more compatible with a gift economy than our national currencies. Practice has demonstrated that such currencies build community instead of destroying it.

What kind of money could that be?

Complementary Currencies and Economic Theory

Economic the ry claims there is no reason why people should accept the inconveniences of dealing with complementary currencies and the national currency in parallel. However, nobody has forced anyone to do so in the examples that will be listed in this and the previous chapter. The fact is that people around the world create their own currencies and continue using them in parallel with the normal national currencies. “A fact is more respectable than the Lord Mayor of London,” goes one English saying.

Some conventional economic theorists have tried to explain away the whole non-traditional currency phenomenon on the basis of tax dodging. However, the complementary currency phenomenon cannot be explained away on such a simple basis.

The proof is that the most prevailing type of complementary currency is the Local Exchange Trading System (LETS), in which all transactions are stored in a computer. It is very easy for a tax authority to find out and tax what is going on in such a system. In fact, a lot easier than when the normal national currency is used.

Participants themselves justify the inconvenience of using two currencies in parallel because they have experienced a re-birth of community when well-designed complementary currencies are used.

The Magick Box Fairytale

A fairy tale for my seven year-old godchild will illustrate the concept behind such currencies.

 As we will soon see, some fairy tales are true.

To explain how this particular fantasy has become a real-life experience for grown-ups, the best way is not theory but a visit to real-life applications.

Some Real-Life Examples

The balance of this chapter will provide six case studies of the Magick Box concept. The first three are US applications, the others are respecively from Brazil, Japan and Mexico. Each one depicts a very different approach. You will learn something different from each, but you can also get the core concept by choosing from among the six only those examples you find most intriguing. The six case studies are:

  1. Time Dollars, invented by a prominent Washington lawyer, and applied now in several hundred communities in the US. Thirty different states have recently started promoting this approach to pragmatically solve local issues. (Pg. 253).
  2. Ithaca Hours, a paper currency launched by a community activist in the small university town of Ithaca, New York. Ithaca is a relatively low-income community of about 27,000 inhabitants. Similar types of paper currency systems are now operational in 39 different communities in the US. (Pg 257)
  3. The PEN Exchange, illustrating how a complementary paper currency helped build community in Takoma Park, Maryland, a well-off suburb of Washington D.C. (Pg. 259)
  4. Curitiba, a provincial capital of 2.3 million inhabitants in Brazil, where a mayor used complementary currencies for 25 years, propelling this Third World city to First World standards in less than one generation. In 1992, Curitiba was awarded the title of “the most ecological city in the world” by the United Nations. Its mayor has become a nationally recognized political hero. (Pg 264)
  5. A remarkably successful application of a specialized “Health Care Currency” operating at the national level in Japan which provides an innovative way to improve the quality of health care at no costs to the government. (Pg. 272)
  6. Tlaloc: A Mexican popular neighborhood currency provides another version of low-tech complementary currency. It operates without individual users needing access to either a computer or even a telephone (Pg 273)

This chapter concludes with two examples of hi-tech integrated payment systems, enabling dual payments in both national currency and complementary currency in one single transaction.

1. Time Dollars

Edgar S. Cahn, professor at the District of Columbia Law School and inventor of Time Dollars, did exactly what our Magick Box schoolteacher did, with startling results.

He developed his Time Dollar concept in 1986, initially for retirement homes in Florida, a school district in Chicago, and a social project in Washington, D.C. Now it has spread into hundreds of applications. One incentive is that the Internal Revenue Service (IRS, the US tax authority) has ruled that Time Dollar transactions are tax free. Even in the fairy tale I didn’t dare to go this far!

Time Dollars has an elegant simplicity. Here is how it works.

Joe doesn’t have good eyesight and can’t drive a car anymore. But he needs a special pair of new slippers from the other side of town. Julia agrees to make the one-hour drive to get the slippers. Julia gets a credit for one hour, while Joe gets a one hour debit, which they can mark on the blackboard near the superintendent’s office.

Julia can spend her credit on the cookies baked by another neighbor, while Joe will offset his debit by tending the community garden, or something else that his bad eyesight allows him to do.

If Joe was going to spend one hour working in Julia’s garden, that would be simple barter. However, the fact that Joe can work for an hour in the garden of someone else in the community to cancel his Time-Dollar debit, and that Julia can use her credit to buy Jane’s cookies, makes Time-Dollar exchanges much easier to complete than barter. Joe and Julia do not need to have “matching needs and resources” to complete the transaction.

That is why Time Dollars is real money as we defined it earlier: an agreement within a community to use something (in this case, hours of service) as a means of payment. In other words, Joe and Julia have created money. Literally, as soon as they agreed on a transaction, as in the fairy tale, the money was created. It is as simple as that.

Gary Larson Cartoon
“Einstein discoveres that time
is actually money”

The costs of starting such a system are practically nil. For small – scale communities, one can use a blackboard, or a piece of paper. For larger scale projects, a “Timekeeper” computer program can be downloaded for free on the Internet ( All participants’ names are listed with little pluses and minuses. It expands automatically to record whatever number of participants and person-hours are needed. Furthermore, whenever someone gets a credit, someone else automatically creates a debit. The sum of all the Time Dollars in the system is, therefore, always zero at any point in time. But Joe got his slippers, Julia her cookies, and the community a vegetable garden, and not one dollar was needed to make it all happen.

The goods and services exchanged are only the tip of the iceberg. A comparative survey was made of retirement homes: those using the Time Dollar approach compared with those that didn’t.25 In the retirement homes using the Time Dollar approach, they found that using this money knits the group together. People say hello to each other. When there is a birthday, it becomes a big party for the entire home. People watch out for each other. There is a potluck dinner once a week. They start a communal garden. In short, community has been created.

This simple device has changed the way people relate to each other. People feel that their contributions are rewarded. They feel valued. One totally unexpected side effect appeared. Participants got healthier! In Brooklyn, New York, a health insurance company called Elderplan has decided to accept 25% of the premiums for its senior health programs in Time Dollars. Elderplan has even created its own “Care Bank” where 125 participants log in an average of 800 hours of service per month. It started as a home repair service by which potential problems are fixed before they cause accidents. The Care Bank has as motto: A broken towel bar is a broken hip waiting to happen26. For the insurance company, this is clever marketing. But Elderplan also took these unusual initiatives because it had noticed that seniors participating in Time Dollar systems were experiencing fewer health problems. The bottom line was that their health care is less expensive for the insurance company. The Elderplan system is expanding during the year 2000 to include various boroughs of New York. A special new program focusing on diabetics and which includes a major component of self-help is being launched by the same time bank. The time credits are now also redeemable against cinema and theatre tickets, healthcare products, transport vouchers, supermarket and luncheon vouchers throughout Brooklyn.

In a world where seniors are becoming an ever-increasing proportion of society, to the point that medical expenses may bankrupt entire countries, is anybody taking notice?

Research has also proven with hard data the value of this model. Time Dollars systems have proven effective not only in boosting health care systems, but on other social problems such as youth crime, and lawlessness in run-down neighborhoods. Research by the University of Maryland Center of Aging has shown that about a third of the people taking part in time dollars had never volunteered for anything before. They also showed that the “burn-out” or “drop-out” rate which for volunteers reaches 40% per year, drops down to 3%.27

As of July 1997, more than 200 townships and social service programs have started Time Dollar systems in the US.

One of the pioneering states was Missouri, which has officially included Time Dollars as a key ingredient in its social policy. There are now 37 systems in Missouri alone. The overhaul of the US welfare system, which became law in 1996, will decentralize many programs to the state level. We can expect many states to follow Missouri in discovering the virtues of Time-Dollars, or some variation of it, over the next few years. By July 1997, Time Dollar systems had already spread to 30 states, including Massachusetts, where one of the first systems began with a $200,000 grant from the Robert Woods Foundation. Maine is the first state to have officially created a position of “Time Dollar Coordinator” as a full time state employee responsible to start dozens of Time Dollar networks and link them up among each other.28

The Time Dollar concept is definitely ready to spread outside of the traditional US circles. For example, Pat MacMaster has started three projects within the Cambodian immigrant society in the US. These are Long Beach, CA (50,000 Cambodian population); Lowell, Chelsea, MA (where 25% of the city is Cambodian); and Riviera, MAass. They are using “TimeKeeper” software which they downloaded free from the Internet to keep track of the hours for the participants. The Cambodians themselves call the system a “Community Building” money, which makes clear what they believe to be its most interesting feature. They also plan to introduce these systems back home in Cambodia, “because it can help there even more.”

2. Ithaca HOURS

Ithaca is a small university town with a population of about 27,000 in up-State New York. It is not a rich town. It has, for example, the highest percentage of “working poor” in the state of New York (people who are fully employed, but whose income is so low that they still remain eligible for food stamps).

Paul Glover, a local community activist, felt that the proximity of New York City kept diverting the community energy into the vastness of the big city. He decided to do something about this problem. In November of 1991, he launched a complementary currency designed to encourage people to spend their money and time in the community. Although it requires a little more infrastructure than Time Dollars, it still remains remarkably simple.

Photograph of sample Ithaca
HOUR bills

The core of the system is a bimonthly tabloid-style newspaper that advertises the products and services of people and businesses who accept Ithaca HOURS. One Ithaca HOUR is equivalent to $10, and represents roughly one hour’s work at a generous minimum wage in the area. There are bills in denominations of two, one, one half and one quarter of an hour. Most Ithaca HOUR bills are issued initially via the advertisers in the tabloid newspaper. Each advertiser receives four HOURS’ worth in bills when they place an advertisement in the newspaper. The community in which Ithaca HOURS can be spent is voluntarily limited to a geographical radius of 20 miles around the center of town.

The bimonthly tabloid typically includes about 1,200 listings, including over 200 businesses. These include a local supermarket, all three movie houses, the farmer’s market, medical care, lawyers, business consulting, and the best restaurant in town The local bank also accepts accounts in complementary currency, and has been able to attract a very loyal local customer base as a consequence.

One of the keys here is that the advertisers provide their quote in a combination of the two currencies. For example, a house painter advertises that he wants US$ 10 per hour, 60-40 (meaning 60% is payable in Ithaca HOURS, and 40% in regular US dollar currency for the paint, brushes, gasoline, taxes, etc.) Another painter may advertise at $11 per hour, 90-10 ( he is willing to accept up to 90% in Ithaca HOURS). So, if you happen to have more Ithaca HOURS available than dollars, you may prefer to go to the latter painter, even if his nominal rate is a bit higher.

Ithaca’s movie houses, for example, accept up to 100% in Ithaca HOURS in the afternoon because the cost of projecting a movie is a fixed cost, independent of how many people are present (i.e., the marginal cost of one more viewer as long as seats are empty is, in fact, zero).

Over one thousand people use the complementary currency regularly, and many pay rent or other services with it.

Finally, 9.5% of all Ithaca HOURS issued are being given to local non profit organizations who perform various tasks for the community at large. So far, 19 different nonprofits have benefited from these donations.

Here are some real – life stories of participants:

  • Ed provides ophthalmology (eye doctor) services for HOURS, most of which he spends on food. ”No one should lack medical care because they lack dollars,” he says. “HOURS and barter are a solution to health care needs. HOURS say that everyone’s time is important, and I like that.”
  • Richie earns HOURS in his video rental business. He has used them for shoe repairs, books, house-sitting, lawn mowing, hauling, etc. “HOURS have become the driving force behind who I patronize at the Farmer’s Market. I look for the telltale yellow sign that says, ‘We accept Ithaca HOURS.’ This keeps the money in the community and that means economic prosperity for all..”
  • Neal is one of Richies’ suppliers. He sells organic food at the Farmer’s Market. He spends his HOURS on movies, bread, and farm help during crop season. “Every community needs to grow as much local food as possible. It’s absurd when more calories are used to transport food than the food contains. Our money logo says ‘In Ithaca We Trust.’ That’s the bottom line, right?”

Other comments by actual participants illustrate the variety of motivations involved (see sidebar.) Paul Glover summarizes the benefits. “Thousands of purchases and many new friendships have been made with our own money, and hundreds of thousands of local trading has been added to what we call our Grassroots National Product.” The big decisions concerning the system as a whole (printing, denominations, manner of issue, grants) are made during twice-monthly potluck dinners, which acts as the “Ithaca Reserve Board.”

The system has been featured on national TV, first in Japan, and more recently in the United States. The participants are happy with the results, and the businesses have seen more locals stay around to spend both their regular dollars and their Ithaca HOURS. Even the people who don’t like Paul Glover’s activist style or politics have come to like his system. This system has also started spreading around the country. Paul Glover sells a kit describing how to set up such a system for $25 or two and a half Ithaca HOURS. As of 1997, there were 39 HOURS systems operational in the world.

Bottom line: It is a successful model with very low start-up costs, and it works. However, it has one drawback common to all fiat currencies: Ithaca HOURS require someone centrally deciding how much currency to issue. While this is done in a democratic way by the “Ithaca Reserve Board”, all Central Bankers will confirm that managing a fiat currency supply remains a tricky decision. The biggest risk is that if more currency is issued than people want to use, there will be inflation and devaluation of the complementary currency. This will not happen as long as Ithaca HOUR managers follow Paul Glover and his colleagues lead in remaining wisely conservative in their money supply decisions. But this risk precludes me from recommending this approach for generalized use.

3. The Pen Exchange

Olaf Egeberg lives in Takoma Park, Maryland, on the border of Washington, D.C., where the US Treasury and the Federal Reserve headquarters are located. After he retired, he wanted to give something back to his community. “In this day and age, we lose sight of the most valuable resources: each other. We can have a walking-distance society right here, where we already are. I think neighborhoods are the most important society for us to build now,” was his reasoning.

In contrast with Ithaca, this is a decidedly middle-class community with a very low unemployment level (about 1%). Olaf decided to define his neighborhood as all families within five minutes walking distance from the center of town, roughly 450 families in total. Hence, the name “Philadelphia-Eastern Neighborhood” (PEN for short) for the streets at the limit of these blocks.

He sent out fifty letters, describing how the PEN Exchange would contribute to “building a more supportive society for us here. There’s more human contact, more communication, more getting to know each other than before.” He got back zero answers.

Puzzled by this lack of response, he decided to make the tour of the houses in person. The mystery was cleared up immediately; nobody thought they had something to offer in the Exchange. They all thought that the activities involved in the Exchange would be like normal commercial transactions. For instance, an accountant who loves to forage for mushrooms on weekends had not thought that other people might be interested in learning about mushrooms. A retired person who had lived ten years in Europe never thought to exchange her knowledge of the area for something she might need.

There is quite a difference between the normal commercial yellow pages and the PEN Directory. Lots of goods and services are offered for trade in the PEN Directory for which people wouldn’t be spending US dollars . Also, many of these listings are for things that people like to do for the fun of it. This is fun work, not boring jobs.

As a consequence, there is something else that happens in Takoma Park. It turns out that the complementary currency and the directory are just the oil to get the imagination going, an excuse to make the first contacts. Most actual exchanges use the complementary currency only for part of the transaction, sometimes not at all, and involve exchanges that weren’t even thought of as items to be listed initially in the directory. Gradually, neighbors get into the habit of just helping each other out as gifts, without any currency exchange. Notice that, as Olaf’s purpose was to reconnect people, such an evolution is a positive sign.

The Washington Post29 covered the story. It quoted Mary Rodriguez, 89, who has lived in Takoma Park for over 40 years, and has never seen anything like it. “There are so many neighborhoods where you never get to know the people next to you. Here the neighbors do things for one another. It gives a small-town feel.” After only three years, the community fabric already runs deep and goes way beyond what an economic analysis may show about people exchanging goods or services in another way. Neighbors keep abreast of local issues by e-mail, and computer-literate residents offer free Internet lessons to any neighbor wishing to join. Nikolai Vishnesky, 40, who started the e-mail system last year says, “Now folks can take technology that is usually used for global interaction and make it a local resource.”

Neighbors deter crime by patrolling the streets at night, publish a neighborhood Newsletter, take turns watching each other’s children at play groups, help housebound seniors, grow food on a community farm in Upper Marlboro, and greet new neighbors.

Martha Monroe, 38, believes, “We are unique because in most Washington suburban neighborhoods, people get home from their job in the city, watch television and go to bed.”

4. Curitiba: the Brazilian City which left the Third World30

In 1971, Jaime Lerner became mayor of Curitiba, the capital of the southeastern state of Paraná, Brazil. He was an architect by profession .

Quite typical for the region, the urban population had mushroomed from 120,000 people in 1942 to over a million when Jaime became mayor. By 1997, the population had reached 2.3 million. Again, quite typically, the majority of these people lived in “favelas,” the shanty towns made out of cardboard and corrugated metal.

One of Jaime Lerner’s first big headaches was garbage. The town garbage collection trucks could not even get into the favelas because there were no streets wide enough for them. As a consequence, the garbage just piled up, rodents got into it, and all kinds of diseases broke out. A mountain – sized mess.

Because they didn’t have the money to apply “normal” solutions, such as bulldozing the area and building streets, Lerner’s team invented another way. Large metallic bins were placed on the streets at the edge of the favelas. The bins had big labels on them which said: glass, paper, plastics, biodegradable material, and so on. They were also color coded for those who couldn’t read. Anyone who brought down a garbage bag full of presorted garbage was given a bus token. A school-based garbage collection program also supplied the poorer students with notebooks. Soon the neighborhoods were picked clean by tens of thousands of kids, who learned quickly to distinguish even different types of plastic. The parents use the tokens to take the bus downtown, where the jobs are.

What Jaime Lerner did, from my perspective, is invent Curitiba money. His bus tokens are a form of complementary currency. His program, “Garbage which is Not Garbage,” could just as well have been baptized, “Garbage which is Your Money.”31

Today, seventy percent of all Curitiba households participate in this process. The sixty-two poorer neighborhoods alone exchanged 11,000 tons of garbage for nearly a million bus tokens and 1,200 tons of food. In the past three years, more than 100 schools have traded 200 tons of garbage for 1.9 million notebooks. The paper recycling component alone saves the equivalent of 1,200 trees each day.

Let it be clear that Lerner’s team did not start off with the idea to create a complementary currency. What happened instead is that they used an integrated systems analysis for all the major issues at hand and spontaneously ended up creating a complementary currency to solve them.

Nor is the garbage cycle the only form of local money in Curitiba which has resulted from this approach. For instance, another system has been designed specifically to finance the restoration of historical buildings, create green areas, and social housing in a way that would not financially burden the municipality. It is called “sol criado” (literally, “created surface”) and works as follows.

Like most cities, Curitiba has a detailed zoning plan which specifies the number of floors that can be built in each zone. In Curitiba, however, there are two standards: the normal allowable standard and the maximum level. For instance, a hotel with a ground plan of 10,000 square meters is being built in an area where the normal allowable level is 10 floors and the maximum 15. If the hotel owner wants to build 15 floors he has to buy 50,000 square meters (5x 10,000 squ. Meters) in the sol criado market. The city itself only plays the role of an intermediary matching demand with supply in that market.

But where is the supply for these sol criado surfaces generated?

One source is historical buildings. For instance the Club Italiano owns a beautiful historic landmark building called the Garibaldi House. The property has a total ground surface of 25,000 square meters, but the place needed a serious restoration job. The Club did not have the money to restore the building. But because it is located in an area where up to 2 floors could theoretically be built, it sold 50,000 square meters (2 floors x 25,000 square meters) to the highest bidder, for instance, the hotel owner mentioned above. The proceeds belong to the Club to administer, but have to be used to restore the property. Therefore, the hotel owner ends up paying for restoring of the historic edifice to obtain the right to build the extra floors of the hotel, without financial intervention from the city.

Other sources of supply for such “created surfaces” are green areas where trees are protected and the construction of social housing in other parts of the town.

Several of the more recent of the sixteen extensive nature parks, open to the public, have been completely financed in this way. The owner of a large plot of land obtained the right to develop one side of the street on the condition that the other side becomes a public park. The new housing has an extra value because it is located at walking distance from the park, the people of Curitiba have another park for their week-end strolls, and the township does not have to go into debt or raise taxes to obtain all of that. Everybody wins.

What is most interesting from our perspective is that this market for “created surfaces” is another type of specialized complementary currency, which enables Curitiba to obtain public goods for which other cities have to obtain traditional financing.

By now, this should sound familiar. Whenever a well-designed new currency system is implemented, something much bigger than the money and the economic activities it generates starts happening.

What began as a garbage and public health problem, has become a way to solve public transportation and unemployment difficulties in a uniquely innovative way. By creating the sol criado market system, significant public advantages are obtained at no cost to the city itself. The secret is not that this city or population has something unique, but that an integrated systems approach has created complementary currencies to tackle the problems at hand. The net result is a city where many things run against conventional wisdom (see box).

Curitiba: an Other Development Strategy

  • Public transportation is encouraged over individual car usage. This is accomplished by making the public transport better and more convenient than the private variety. For example, it is speedier because of an original speed-loading process: the bus tokens enable the users to enter into specially designed raised-tube bus stops; when the bus arrives, entire sections of both the bus and the unit open so that people can move in and out in large groups in a few seconds. No time is lost collecting money or tokens. Similarly, the special express lanes for public transport have made bus use the fastest and most convenient way to move around anywhere. A single fare of .65 R$ (about 50 US cents) enables someone to move over the entire system, regardless of distance covered. This includes any connections to feeder and inter-district public transport systems. The real proof is that this public transport system has become the preferred way. One out of four people using public transportation own cars, but prefer not to use them to get around town. Because of the efficiency of the public transport system, it has been possible to create several downtown pedestrian streets, including the Main Boulevard. These pedestrian streets are now used for local music, popular theater performances, and children’s art festivals. There are also arcades of shops and restaurants which stay open 24 hours per day and maintain the vitality of the downtown area, instead of the ghost-towns that characterize most city centers.
  • Conventional city planning claims that any city with more than 1 million inhabitants must have a subway system to avoid traffic congestion. Similarly, cities that generate more than 1,000 tons of solid waste per day need expensive mechanical garbage-separation plants. Curitiba has neither. And the investment needed for their public transport system costs only 5% of an equivalent underground system. The savings has allowed Curitiba to keep its fleet of buses among the newest in the world.
  • There is a Free University for the Environment offering practical short courses at no cost for homemakers, building superintendents, shopkeepers, and taxi-drivers. They are taught the environmental implications of their daily activities. The building is a breathtaking architectural landmark made mostly out of recycled telephone poles, in what is now an idyllic setting near a lake. The location used to be an abandoned industrial stone mine.
  • Curitiba is the only town in Brazil that now has a significantly lower pollution level than in the 1950’s; it also has a lower crime rate and a higher educational level than comparative Brazilian cities. It is the only city in Brazil that has actually turned down grants from the federal government, because they have solutions which involve less red tape.
  • A botanical garden has been planted on what was once the inner city dump, which now serves as a recreation and research center. In addition, there are currently 16 different nature parks around the city, based on different themes. As a consequence, Curitiba has 52 square meters of nature per inhabitant. The UN ideal standard is 48 square meters of green surface per city inhabitant, a level rarely, if ever, reached by cities in either the developed First or the Third World. Furthermore, all these nature parks are easily accessible from the transportation network, so that the ordinary people can – and do – fully take advantage of them.
  • Curitiba was recognized in 1992 by the United Nations as the model ecological town in the world. And Jaime Lerner has received international recognition for his initiatives. Some other cities have started to take notice. About 20 cities in Brazil have started to implement the integrated public transport system. Cape Town has copied several features of it. City planners from Buenos Aires, Santiago de Chile, Montreal, Paris, Prague, Mexico, and Lagos have been impressed by what they saw.

Perhaps the clearest political signal that all this works is that every time Jaime Lerner presented himself for election, he was reelected by a landslide. Today, he is Governor of the State of Paraná. A movement has started to draft him as next President of Brazil.

The Curitiba story demonstrates that there are political careers to be made in relation to complementary currency. Jaime Lerner’s success cannot be attributed simply to personal charisma or ethnic background. The proof is that not one but at least three political careers have already been launched on the strength of these ideas. The two mayors who succeeded Lerner – Rafael Greca and Cassio Inaguchi, each with quite different personalities and ethnic backgrounds – started as staff members in Jaime Lerner’s planning team. What is required for succeeding on this path is imagination and an ability to get things done.

Finally, the impact of the complementary systems is identifiable in economic terms. The average Curitibano makes about 3.3 times the country’s minimum salary, but his real total income is at least 30% higher than that (i.e., about 5 times the minimum salary.) This 30% difference is income directly derived in non-traditional monetary forms, such as the food for garbage systems. Another indication is that Curitiba has by far the most developed social support system in Brazil, and one of its most vibrant cultural and educational programs, and still doesn’t have a higher tax rate than the rest of the country.

Even at the traditional macro-economic statistical level there are clear indications that something unusual is going on in Curitiba. The Domestic Product of Curitiba increased between 1975 and 1995 by some 75% more than the entire state of Paraná, and 48% more than Brazil as a whole. Such difference in growth rate has remained valid in the recent past. Between 1993 and 1995, Curitiba’s Domestic Product grew 41% faster than the state of Paraná and 70% faster than Brazil’s.32

Curitiba’s success has attracted an internal immigration so that the Curitibano population grew faster than the state of Paraná or the country as a whole. Between 1980 and 1995, Curitiba’s Domestic Product per capita grew 45% faster than the state of Paraná or Brazil as a whole.33

Curitiba is a practical case study where 25 years of experience show that a whole system approach using both the traditional national currency and well – designed complementary currencies is beneficial to everybody, including people who are focused exclusively on the traditional economy denominated in national currencies. It enabled one Third World city to join First World living standards in one generation’s time.

5. Japanese Health-Care Currency

The Japanese population is the second fastest aging one of the entire world. There are already 800,000 retired people needing periodic help and another 1 million handicapped people, and the Japanese Ministry of Health forecasts a vast increase in these numbers for the foreseeable future.

In order to face this rapidly rising problem, the Japanese have implemented a new type of Health- Care Currency.34 In this system, the hours that a volunteer spends helping older or handicapped persons in their daily routines is credited to that volunteer’s “Time Account.” This Time Account is managed exactly as a savings account, except that the unit of account is hours of service instead of Yen. The Time Account Credits are available to complement normal health insurance programs.

Different values apply to different kinds of tasks. For instance, a meal served between 9 a.m. and 5 p.m. has a lower credit value than those served outside that time slot; household chores and shopping have a lower credit value than personal body care. This was the currency which was behind the vignette of “Mr. Yamada’s Retirement Plan” in Chapter 1.

These Health-Care Credits are guaranteed to be available to the volunteers themselves , or to someone else of their choice, within or outside of the family, whenever they may need similar help. Some private services ensure that if someone can provide help in Tokyo, the time credits become available to his or her parents anywhere else in the country. Many people just volunteer the work and hope they will never need it. Others not only volunteer, but also give their Time-credits away to people who they think need them. To them, it amounts to doubling their time. It works like a matching grant: for every credit hour of service, the amount of care provided to society is two hours.

Most significantly, this type of service is also preferred by the elderly themselves, because the caring quality of the service turns out to be higher than those obtained from Yen-paid social service workers. One of the names of this currency “Fureai Kippu” (“Caring Relationship Ticket”) spells out the agenda. It also provides a more comfortable emotional space for the elderly, who would otherwise be embarrassed to ask for free services.

The Japanese also report a significant increase in volunteer help, even by people who do not bother to open their own Time Accounts. The reason may be that with this system, all volunteers feel more acknowledged. This precedent should put to rest concerns that paying volunteers with complementary currency might inhibit those not getting paid from volunteering.

As of end 1998 there are over 300 municipal level health care time credit systems in Japan, mostly rum by private initiatives such as the Sawayaka Welfare Institute, or the “Wac Ac” (Wonderful Aging Club, Active Club) and the Japan Care System (a non-profit with some governmental funding).

In summary, the Japanese Health-Care Currency has proven both more cost effective and compassionate than the system which prevails in the West. As the US and Europe embark on an identical trend of an aging population, why not learn from the Japanese experience?

6. Tlaloc

Tlaloc is the old Aztec raingod, important in the pre-hispanic pantheon. It is also the name of a street in a popular neighborhood of Colonia Tlaxpana in today’s Mexican capital city. This street is the home of a cooperative development center Promoción del Desarollo Popular A.C. which, since 1987 under the impulse of Arquitect Luis Lopezllera started its own currency system to whom the name Tlaloc was given. What is particularly interesting in the Tlaloc example is its mixing of high- tech and low-tech operation, given that it does not require access to a computer or even a telephone to operate effectively. But it has nevertheless its own website ( ), its own periodic publication (“La Otra Bolsa de Valores”), and even a whole range of other community services.

The Tlaloc is a mutual credit system where the currency is issued in the form of paper cheques. A number of trusted users have checkbooks and always issue the cheques in round amounts (e.g. 1, 2, 5, 10, 50). These cheques have a number of endorsement spaces in the back, so that the first recipient can endorse it for the next user, and so on. The cheques circulate as currency, and periodically, someone can bring in the cheque to the center when the last user is credited and the issuer is debited. In short, this system has the advantages of both being a mutual credit system and a paper currency. It requires only one personal computer in the system to keep the accounts. And it can circulate as paper currency without needing access even to a telephone to call in the transaction.

Other communities have started to emulate this model. For instance, the “compromisos” cheques circulate in a popular neighborhood of Toctiuco in Quito, Ecuador.

Complementary Currencies in the Information Age

Payment systems for complementary currencies at this point tend to function in parallel with the existing national currency. Although many transactions involve simultaneous payment by both types of currency, their execution will typically require two different interventions. I think that the way to the future will be the convenience of simultaneous transactions in both types of currency using the same media. This would automatically provide the same level of security for both payments, and cost about the same as setting up automatic payments in a single currency.

An Example of an Integrated Currency Design: Commonweal Inc. of Minneapolis

Joel Hodroff, founder of Commonweal, Inc. in Minneapolis, Minnesota has created what I suspect to be the first really integrated design formally integrating the national and the complementary currency systems.35 He also has obtained impressive endorsements from the business community (including presidents of several banks and of the largest shopping mall in the country), city and labor union leaders, a county board of commissioners, community activists, technology experts, and other opinion leaders.

The Commonweal Community Herocard system is consciously designed as a win-win proposition for all participants. Businesses gain new customers and improve their profitability. Non-profits attract more volunteers and stretch their dollars at little cost, and earn referral fees (“cause related marketing”) every time one of their members makes a purchase with Herocard (the initial system is a simple debit card, but the design is ideal for dual currency smartcards whenever merchants will be equipped with smartcard readers). And, perhaps most importantly, communities have a way to mobilize otherwise underutilized human and other resources to solve their local problems.

All the pieces of the puzzle, including the technologies, are currently available and have all been successfully market-tested separately. What is new is putting them all together in an integrated design.

The secret is a dual currency system, where the national currency and the complementary currency operate simultaneously.

Here is how it works.

The Concept

In the Minneapolis case, two currencies are utilized: the normal US$ and C$D. C$D is an acronym for Community Service Dollars. Its unit of account is 1 C$D = 1 US$, and one service hour is valued at 10 C$D.

There are also two complementary organizations in the Herocard system: one a for-profit business and the other a non-profit community economic development network. The former deals primarily with the business participants and makes its money as any credit card clearing business does, and the latter makes the C$D available to the non-profit community of the area.

The process of C$D creation starts in the business world. Practically all businesses have spare capacity in order to be able to deal with the high seasons or hours. This spare capacity is therefore lying idle most of the time: movie houses in matinees, even the most popular restaurants in the earlier hours, resort hotels during week-days. Most manufacturing processes similarly lend themselves to making a few extra runs whose marginal costs are only a fraction of the normal costs. For example, furniture makers or clothing manufacturers can produce at a low marginal cost extra items of a series, and often do so. Today, in most cases this extra capacity just lies idle. The more entrepreneurial businesses try to make something extra on it by off-loading the surplus items in barter or discount deals. This is already a very common business practice in many types of businesses from hotel rooms to two-for-one dining in restaurants, from textiles to sporting goods.

In Minneapolis, businesses have an additional option: joining the Commonweal Community HeroCard program and accepting C$Ds. (For example, a restaurant could decide to accept C$D for up to 50% of the bill for any customer before 7 PM instead of the usual two-for-one early dining discount. It could choose to accept only 40% in C$D after that hour. Or a movie house could accept up to 90% in C$D during matinees because their marginal dollar cost once they project a movie is, in fact, zero for additional customers as long as seats are available.)

The C$Ds are issued to non-profit organizations who provide services to the community,and who pay their volunteers with them.

One important feature of the Minneapolis approach is that after a C$D has been redeemed in a business, it disappears (in this aspect C$Ds are similar to frequent-flyer miles or discount coupons). New C$D are then issued to reward new community service. This limits the problems that can arise in decisions of quantities of money to be issued, given that they automatically self-destruct after each use.

Advantages of the Dual-Currency Approach

This design enables people who have more time and less money to fully participate in the economy (as with Time-Dollars). It is also very effective marketing , because it increases new customer traffic and loyalty without having to cannibalize their normal dollar-based clients.

It is really a win-win for the entire community, as shown for each type of stakeholder.

For participating businesses:

From the participating businesses’ viewpoint, there is one significant advantage even beyond the ones already mentioned: customer loyalty and the label of good “community supporter’.Businesses get clients they would not get without this system, and they still make a dollar profit on each transaction. (because the dollar component should always more than cover the marginal dollar costs, including taxes.)

Finally, there is an improvement in the neighborhoods where services are provided that otherwise would not occur, which is good for business overall.

For Non-profit Organizations

They are also among the big winners in this new game. They can increase their volunteer activities. The community involvement in the selection and allocation of C$D also gives the more active non- profits wider recognition.

For Member participants

Members who participate have an easier way to blend their two life-styles together. Those who choose to do so can have their jobs and their work Their work contributions are more acknowledged than before, and the general improvements in the quality of their community also benefit them.

For the unemployed and economically disadvantaged

This system enables people to turn time into money. Economically disadvantaged people can therefore more fully participate in the economic system, as they are typically those who have more time than money to spend. It also provides them with a second career chance in the non-profit world which would otherwise not exist The discreet nature of the payment system (nobody but themselves has to know whether they are paying in dollars or C$D) also ensures more dignity than food stamps or social security checks. It is also free of the hassles of these bureaucratic programs.

For the Rest of the Community

Even the people who do not participate at all in any part of the system derive a significant benefit from this approach. If the Commonweal program did not exist, a number of functions in their community would either not happen at all or would have to be subsidized by their taxes.

What the Commonweal system offers is to mobilize otherwise unused resources in the community to solve problems that need solving. It does this using the market system every step of the way without taxes.

As of 1998, the Commonweal system is in its pilot phase in the Lyndale neighborhood of Minneapolis. Besides the non-profit sector, the Mall of the Americas and other mainstream businesses are involved, including National City Bank which provides the accounting system and statements in C$Ds.. Its design is a pragmatic win/win example of complementary currency which formally integrates into a single payment system the competitive and cooperative economic loops. They are an example of the Integral Economy that will be defined in detail in Chapter 9. It shows that it is possible to mobilize unused resources (both the spare capacity of businesses and the time and skills of ordinary people) to solve our community issues, with direct tangible benefits for both the competitive and the cooperative economies.

Internet Money for Virtual Communities

One of the most intriguing and encouraging aspects of Internet developments has been the upwelling of “virtual communities” compellingly documented in Howard Rheingold’s “Virtual Communities: Homesteading on the Electronic Frontier36

Community has become such a scarce resource in our societies that the appearance of a new way to create it is indeed remarkable.

Virtual Communities versus a Monopoly of National Currencies on the Net

However the process by which this miracle has occurred is too often not fully understood. Even some of the people who created virtual communities have not always been aware that the secret of their success relates to the fact that they had created a gift economy on the Net. “I’ll help you today, and someone else will help me if needed some other day” has been the common pattern in the spaces wherever successful virtual communities have sprung up. In short, it is one more application of the principles underlying communities as described at the beginning of this chapter. Virtual communities today are ‘communities’ only because social bonds have sprouted up around a ‘gift economy’ of an open information exchange. Recently the business world has also discovered the importance of this phenomenon.37

However, there seems to be little awareness either in business or on the Net that unless some precautions are taken in the way this is done, it may kill the proverbial goose that lays the golden eggs, and virtual communities will simply disappear as have most traditional “primitive” communities operating on the basis of “gift economies.” Just as traditional communities have unwittingly suffered from the competition-inducing process built in to our ‘normal’ national currencies , communities on the Net similarly may be torn apart if the new payment systems developed for the Internet rely exclusively on these types of currencies.

As the Net becomes home to the growing number of commercial enterprises, those who value the Net as community space may want to take some precautions lest virtual communities meet the same fate as almost all the gift economies that preceded them.

The Net: an Ideal Yin Space for Economic Symbiosis

It so happens that some characteristics of the Net may make it an ideal space where the community- supporting currencies could happily thrive next to the traditional national currencies, enabling a new symbiosis between both approaches.

Because Internet offers unlimited ‘space’ and transcends natural and cultural boundaries, the electronic marketplace need not be limited to one exclusive currency system. Virtual space is indeed what Taoists would call a “Yin” space: self-organizing, uncontrollable, infinitely expandable, the original meaning of Self-Organizing Chaos. It therefore provides an ideal space for the coexistence and integration of different economic paradigms, precisely because of its flexibility and non- exclusiveness. In physical space, if Big Business buys up Fifth Avenue in New York, there is no room for alternative systems to even be present, not to speak of flourishing. The Net in contrast always can expand to accept another parallel system without detracting anything from each other.

Internet itself would be enriched by such a variety. . Indeed, a ‘free market’ of different kinds of currency systems may benefit all of them. Furthermore, new synergies between virtual communities and local communities would become possible, improving the quality of life of the participating Netizens.

Desirable Characteristics of Internet Currencies

I propose that the following five characteristics would be desirable for Internet currencies for use by virtual communities:

  • efficient and secure in an electronic payment system;
  • convertible into local expenses (i.e. answering the key question: how can I use credits earned on the Net to pay for my food and daily needs?);
  • non-national (one key characteristic of the Net is its lack of national boundaries; while national currencies are specifically designed to foster national consciousness. Why should a German buying a product offered by an Indian company on the Net have to pay in Deutsche Mark, Dollars or Rupees?
  • self-regulating on the Net itself;
  • supporting the creation of community.

None of the currencies and payment systems currently offered on the Net meet all these requirements. Specifically, payment systems using the existing national currencies clearly meet the first two characteristics but none of the others.

A Solution: An Complementary Currency Clearing House on the Net?

Of course, all these characteristics are met by complementary currencies (particularly the Mutual Credit Currencies), except that they are currently not available for trading on the Net.

The only additional step needed to create the Internet currency meeting our specifications is to have an automatic electronic clearing house for such complementary currency systems, clearing house which could operate on the Net itself. Such a Complementary Currency Clearing House would enable in practice is that someone in Manchester, UK, for instance, could ‘earn’ credits by providing a service on the Internet, and exchange them for use in her local LETS system. Conversely, the credits earned in Manchester’s local economy would be more valuable by becoming exchangeable for goods and services on the Internet. “Think globally, act locally” would gain some added pragmatic reality in this approach.

Note that I do not claim that no national currencies should be used on the Net, or that community currencies of the type described above could or should replace the national currencies. But I do claim that time is ripe to ensure that community is not squashed by ignorance of the power of currency to shape our relationships.

An Alternative: Integrated Payment Services?

A different approach would be available for any commercial venture that would want to gain a competitive advantage by designing high quality mixed payment systems. There is an advantage to be gained by those that will design open payment systems. They would define their strategic function as transferring value on the Net independently on what type of currency is involved. There is already demand for mixed payments on the Net: for example a payment for a purchase of Cendant merchandise partially payable in dollars and partially in NetMarket currency, Cendant’s own corporate scrip (see Chapter 4). There will be demand for services that will enable someone to send an e-mail invitation and attach some frequent flyer miles to purchase an airline ticket. Similarly, one could just as well make a mixed payment in national currency and complementary currency (the same service that Commonweal is supplying in Minneapolis, but here it would be on the Net instead of in a downtown shopping mall).

Just like some local banks have been able to attract additional customers because they have been willing to deal with their complementary currency accounting (as in Ithaca or in Minneapolis), we should expect some enterprising Internet payment system service to provide the extra quality of secure, instantaneous payment service in a mix of different currencies used by their clients.

Some Questions

1- Can virtual communities agree on any currency system other than the commercially driven national currencies?

I believe that the explosive expansion of the cybereconomy is an important positive development. However, I also suspect that burgeoning virtual communities – perhaps the most interesting social phenomenon on the Net – will soon self-destruct if they become colonized by a monopoly of national currency systems. It would be a sad paradox to see the leading edge communities go the same way as most gift economies of traditional “primitive” societies have been in the past. If it is true that virtual communities are a substantial business opportunity, it would also be important for business itself that the way to develop that opportunity does not kill it.

2.- Most existing community currency groups are already active on the Net, but there are obviously many Internet participants who do not have a complementary currency operating in their area at this point . This is particularly true because the most active Internet country – the US – has also proportionally fewer community currency systems operational until now. However, I expect that during the next recession in the US, the number of complementary currency systems will take off in this country as they did elsewhere when unemployment crept up. The decentralization of the Federal welfare system also will propel specific systems (such as Time Dollars) into higher gear.

The strategic question is therefore: can an alliance be forged between Netizens and complementary currency activists?


“A true community is inclusive, and its greatest enemy is exclusivity.
Groups who exclude others because of religious, ethnic or more subtle differences are not

Foundation for Community Encouragement

One wish that a vast majority of people can agree upon is to re-build community. All the above examples confirm that implementing complementary currencies can significantly help in reaching that goal. I do not claim them to be a panacea, but they definitely have proven that they enrich our social toolkit to face issues raised by our Time Compacting Machine.

Another Way than Welfare?

Sometimes when confronted with this novel way to solve social problems, some people think it is just another new form of welfare. This is really a carry-over from the single-currency environments. and is not valid for complementary currency systems.

Welfare is a system that intervenes in the market system to transfer resources from the rich to the poor. This is typically done by taxing the rich in order to provide an income to the poor.

Complementary currencies are, therefore, not a new form of welfare. They use the market system every step of the way. It is voluntary for everyone; it does not require taxes or government subsidies, and – once started – becomes a completely self-funding mechanism to address many social problems.

Complementary currencies could someday replace welfare systems, or make some of them unnecessary, but are not a form of welfare themselves.


Table of Contents










  1. Desmonde, William H. Magic, Myth and Money (New York: The Free Press, 1962) pg. 25
  2. Bennet, William: Index of Leading Cultural Indicators ( New York: Touchstone Book, 1994)
  3. Source: National Center for Health Statistics. The largest proportional increase is among the well-educated, affluent white upper class (see US Department of Commerce, Bureau of the Census, Current Population Reports, Population Characteristics, Series P-20 No. 470 “ Fertility of American Women: 1992)
  4. Statistics from the National Center for Health Statistics. The real numbers are worse because of the social stigma attached to suicide; many of them tend to be reported as accidents. See Zigler,`Edward Children, Developmental and Social Issues (1988). Also Hollinger, P.C. “Adolescent Suicide: an epidemiological study of recent trends” American Journal of Psychiatry(1978)
  5. Source Forbes as quoted by Netview (Global Business Network News) Volume 7, Number 1 (Winter 1996)pg. 16. According to Wilhelm Reich, Secretary of Labor of the Clinton Administration, 68% of all high school graduates expect to be worse off than their parents at similar ages. Democratic Leadership Council (Washington DC, November 22, 1994)
  6. Source for SAT scores: The College Board. Statistic on literary and other basic skills: Children’s Defense Fund, 1993. Source for weapon carrying statistic: survey by US Department of Education, cited by Mary Jordan “Summit searches for Cease-fire in violence enveloping children” The Washington Post July 22, 1993.
  7. Time June 29, 1998 pg 25
  8. FBI statistics. Violent crime is defined as murders, rapes, robberies and aggravated assaults. Lifetime Likelihood of Victimization statistic by US Department of Justice, Bureau of Justice Statistics, May 1988.
  9. Ibid. US Department of Justice, Bureau of Justice Statistics.
  10. Bruce, Judith Families in Focus (New York, Population Council Publications, 1995) also reviewed in an article by Tamar Lewin “The decay of families is global, study says” New York Times (May 31, 1995, pg. A5)
  11. Source: “The family: home sweet home” The Economist September 9th 1995, pg. 26
  12. Schaef, Anne Wilson Native Wisdom for White Minds: Daily Reflections Inspired by the Native Peoples of the World (New York: One World Balantine Books, 1995) January 6 reflection. Italics in orginal text
  13. Bennet, William Index of Leading Cultural Indicators (New York: Touchstone, 1994).
  14. The anthropological literature on communities and the “gift economies” that underlies them is vast. The best works on the topic of gift economies are the classic by Mauss, Marcel “Essai sur le Don: Forme et raison de l’échange dans les sociétés archaiques” in L’Année Sociologique I (1923-24) pgs. 30-186; and in English Hyde, Lewis The Gift: Imagination and the Erotic Life of Property. New York: Vintage Books 1983 (3d edition). See also Levi-Strauss, Claude. The Elementary structures of Kinship translated by James Bell et al. (Boston: Beacon Press, 1969)
  15. “Venerable Beads” in Discover: The World of Science (October 1998) pg 26-28.
  16. Bhikku, Thanissaro: “The Economy of Gifts: An American monk looks at the traditional Buddhist economy” Tricycle: The Buddhist Review (Winter 1996) pg. 56. Italics added.
  17. Marshall, Lorna. “Sharing, Talking, and Giving: Relief of Social Tensions Among the !Kung Bushmen” in Africa (Journal of the International African Institute) 31, number 3 (July 1961) pg. 231-249
  18. Raymond Firth needed a complex whole-page diagram to explain this twenty-four step process in his “Marriage Gifts among the Tikopia” in Primitive Polynesian Economy (London, 1939).
  19. Malinowski, Bronislaw. Argonauts of the Western Pacific. London: George Routledge & Sons, 1922
  20. Barnett, H. G. “The nature of Potlatch” in American Anthropologist Volume 40, number 3 (July-September 1938): pg. 349-358.
  21. Hagstrom, Warren O. The Scientific Community New York: Basic Books, 1965 pg. 22
  22. Wilber, Ken Sex, Ecology, Spirituality: The Spirit of Evolution (Boston & London: Shambala, 1995).
  23. Interview with Prof. Kind published in the Boston Globe November 3, 1980. Pg. 19
  24. Survey performed in 1995 by Paul Ray of American Lives Inc., the main survey of value changes in America.
  25. The Multinational Monitor April ’89
  26. US News and World Report December 30, 1996 pg 72.
  27. Robert Wood Johnson Foundation: Service Credit Banking Project Site Summaries (University of Maryland Centre of Aging, 1990).
  28. The Boston Globe (July 20, 1997) pg 1. “Barter network affords welfare recipients some purchasing power” by Robert George.
  29. Article by Lina Fina in The Washington Post (Thursday, February 1, 1996)
  30. Various sources, including a dozen first – hand interviews with local officials during a field trip to Curitiba in 1996-97. Some information about Curitiba’s development strategy has also been published in English; see Rabinovitch, Jonas “Curitiba: Toward sustainable urban development in Environment and Urbanization Vol. 4, no 2 pages 62-73; October 1992; and Rabinovitch, Jonas and Leitman Josef “Urban Planning in Curitiba” in Scientific American March 1996 pg. 46-53
  31. Over the more recent years a good part of the token distribution has been taken over by the private sector; 50 tokens are given per month by the corporations to their employees. In parallel, the component of fresh fruits and vegetables in exchange for garbage has increased. Also for the holiday seasons, Panetone’s and other festive ethnic foods are supplied in exchange of “garbage money”.
  32. The 1993-95 data is derived from Indústria, Comércio e Turismo Gestão Rafael Creca (December 1996) The respective growth rates are 8.6% per annum for Curitiba, 6% for the State of Parana and 5% for Brazil
  33. The respective per capita growth rates between 1980 and 1995 is 277% for Curitiba, 190% for Parana and 192% for Brazil Statistics from Informaciones Socioeconomicas, issued by the Prefeitura da Cidade Curitiba,(1996) compared with the Brazilian data bases of SACEN, IPARDES and SICT/ICPI.
  34. Source: A l’ecoute du Japon (Brussels: Information bulletin of the Japanese Mission to the European Union) July 3, 1995 pg. 7-8.
  35. Sources include personal conversations; the Commonweal, Inc. Business Plan (July 18,1998); Hodroff, Joel: Creating Jobs in a Decade of Downsizing: Introducing the Commonweal Currency Exchange Network ( March 17,1995); Morris, David Institute for Self Reliance: Memorandum on C$D (Washington, DC, 1995); Commonweal, Inc. (POBox 16299 Minneapolis MN55416) Building Positive Futures for Youth and Communities (Minneapolis, Spring 1998).
  36. Rheingold, Howard: Virtual Communities: Homesteading on the Electronic Frontier (New York: Harper Perennial, 1993). ; Also see Jones, Steve ed. Cybersociety (Thousand Oaks, CA: Sage Publishers, 1995) and Jones, Steve ed. Virtual Culture Cybersociety (Thousand Oaks, CA: Sage Publishers, 1997)
  37. Business Week: (May 5, 97 pg. 80).

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