Complementary Currency Systems and their Ability to Support Economic and Social Changes

Abstract

Complementary Currency Systems (CCS) are accounting systems that define local monetary spaces created by non-bank actors to pay for exchange of goods and services inside a trading network. This article aims to investigate the capability of complementary currency systems to foster social and economic changes. The authors use an analysis of the literature to examine the nature and diversity of CCS in terms of objectives, forms, modes of governance, and degrees of connection with political authorities and economic structures. They also assess the potential of CCS to support local economies based on social and environmental values, working to combat economic vulnerability and social exclusion, and examine how CCS challenge the conventional perception of money. The article ends by summarizing the challenges facing CCS, inquiring into the potential problems and benefits that a change of this sort could entail.The authors wish to warmly thank the anonymous referees for their comments, which have enriched and significantly improved the quality and content of this text.

The Potential for Community and Complementary Currencies (CCs) to Enhance Human Aspects of Economic Exchange

“…Similarly, most CCs seem to have a positive impact in terms of social sustainability and in the achievement of social goals (Michel & Hudon, 2015;Seyfang & Longhurst, 2013). Fare and Ahmed (2017) also find that CCs provide some support for local economies and make a limited contribution to environmental sustainability (for example, promotion of sustainable consumption, or smaller carbon footprints). Most CCs (notably in Brazil, Argentina, and Japan) have been successful in combating social exclusion by fostering solidarity and mutual aid among individuals, and promoting "social uses" of money.…”

“…As discussed in Section 3, scale limitations prevent CCs from being as effective as they might, and Fare and Ahmed (2017) point out that CCs would be better able to achieve their social goals if they could attract more users, and if more goods and service providers were to accept them for payment purposes. For this to happen, CCs would need institutional recognition from public authorities and banks, which could either come in the form of financial support, or as official validation by governmental authorities.…”

“…While it is hard to provide an accurate list of all such systems, it seems that some 3,500 to 4,500 CCs have been recorded (since the 1980s) in around 50 countries (Fare & Ahmed, 2017). Most of these contemporary CCs have been organized either by groups of individuals/practitioners, or by NGOs (such as grassroots initiatives), and in some cases, by local governmental authorities 2 .…”

“…Despite the prospective benefits of CCs, such potential is not without limits. For example, Fare and Ahmed (2017) The Potential for Community and Complementary Currencies...…”

“…Specifically, WIR money is negatively correlated with GDP, and thus makes up for the lack of ordinary currency given that use of the system strongly tracks Swiss unemployment trends. Even if CCs' small scale stops them from being as effective as one might hope, Fare and Ahmed (2017) point out that any endogenous beneficial effects of CCs on the local economies are important for given individuals, such as those in poor households (who are able to launch micro-enterprises and/or diversify their sources of income) and for small businesses (which may be able to get interest-free loans in the local currency). For instance, participants in the Argentine barter markets were able to supplement their formal incomes to cover their daily needs with goods and services from the barter networks, reserving their formal money to pay taxes and bills (Pearson, 2003).…”