In “Buy Local—With Town Currency“, BusinessWeek’s Jeffrey Gangemi writes on a local currency called “BerkShares” used in smalltown Great Barrington, Massachusets.
The program works like this: Shoppers visit one of 10 branches of four participating local banks and convert their cash into BerkShares scrip. For every 90 cents, they receive one BerkShare note, that is accepted at some 280 participating area businesses…”
The BerkShares program aims to help keep money in the local economy rather than encouraging trade with other locales. But Gangemi claims BerkShares are “…also honored at about 250 other businesses throughout the Southern Berkshires region that aren’t officially registered.”
This reminds me of Jane Jacob’s Cities and the Wealth of Nations, which I just reread. Jacobs felt strongly that if individual cities still had their own local currencies they could trade much more efficiently with other parts of the world, because the local exchange rate would automatically manage the prices of their local goods and services relative to outside prices. Instead we have national currencies, which don’t generally do a great job helping individual cities, since national exchange rates account poorly for locale-specific costs, availability of capital, supplies of jobs and labor, market demand, and so on. (Think about how Halifax, Toronto and Calgary, for instance: these three very different cities are slaved to a single currency and exchange rate governing their import/export trade. Contrast that to Hong Kong, where the coupling between local reality and exchange rates is tight.)
Perhaps someday we’ll come full circle to city currencies again. It’s fun to ponder, especially as the internet makes it possible for new currency-like instruments such as eBay’s PayPal and Second Life’s Linden Dollars to emerge.