Local Currency Supports Resilient Cities

by John Boik

Source: Oliver Rich

From the torn-up boardwalk of Atlantic City to New York's water-logged subway system, cities are paying the price of Hurricane Sandy in dollars and disrupted lives.

With more extreme weather expected in the years ahead, the question of cost becomes more acute. Who will write the checks for repairs necessitated by wind, floods and droughts? And who will pay for measures to reduce greenhouse gas emissions, build dikes and levies, and sequester the greenhouse gases already in the atmosphere?

The federal government is debating whether to pick up the tab for Sandy, and its response has been slow. As destructive storms become more common, federal assistance could become more difficult to obtain. The focus in Washington is on deficits and belt-tightening, not expanded relief programs.

As the saying goes, necessity is the mother of invention. If urban areas must bear increasingly heavy economic burdens, the solutions may come from an unexpected source: the cities themselves.

Empowering Cities

In the face of economic hardship, local currencies are springing up in cities from Bristol to Boston and beyond. These currency systems, if developed fully, could prove vital in empowering cities to respond to climate change and meet ongoing needs.

At their core, most complementary currencies amount to "buy local" programs that encourage residents to purchase goods and services within their own communities. It's a great way to support small businesses, especially independently owned ones. They are akin to "coupons" purchased with official currency and redeemable for goods in participating stores.

But a currency program can be expanded into a full-fledged local monetary and financial system that creates new currency without debt and drives responsible growth. Such a system could help urban areas manage the costs — especially local labor costs — associated with climate change action.

Building Resilience

A fully realized local currency system would help strengthen communities against climate-related disasters.

In our highly interconnected world, cities are dependent on products and services from far away places. In the United States, nearly half of domestic fruits, nuts and vegetables come from California, and more than half of all bank assets are held by just five companies. At the international level, one company in China produces more than half of all mobile phone batteries.

Global trade networks — industrial, financial, agricultural, energy, transportation, retail — have obvious advantages, but are also vulnerable to severe disruptions. Storms, droughts and floods in one region can create intense problems in local economies across the globe.

In a warming world, the key to building secure urban economies is resilience. Local currencies offer a promising tool; by supporting small and medium-sized businesses and expanding local supply chains, they can foster diversity and self-sufficiency — the essential components of resilience.

Well-designed monetary and financial systems at the local level carry many potential benefits. More currency enters circulation (without need for the federal government to print money), more spending stays in the community, tax revenues increase, and urban problems such as poverty and environmental damage can be addressed locally. To top it off, it's already legal; no new laws have to be passed.

A Blueprint

The Token Exchange System is a local monetary and financial plan based on electronic currency (tokens) issued through a membership-based community benefit corporation. Members receive tokens as a portion of their wages, or from sales if they own a business. Employees might also receive raises paid in tokens. Members use a percentage of incoming tokens to provide interest-free loans to local businesses and donations to local schools, nonprofits and public services. Each member decides which businesses and groups he or she will fund.

The system is transparent and democratically controlled. It does not replace conventional financial institutions, but serves as a helpful partner. As with all local currencies, participation is completely voluntary.

The Principled Societies Project is developing the Token Exchange System as part of a comprehensive strategy explained in the recently published book "Creating Sustainable Societies: The Rebirth of Democracy and Local Economies." The next step is to create computer models that simulate the flow of tokens and dollars in a virtual local economy. These models will help explore potential scenarios and refine the system.

More information on the Token Exchange System and the Principled Societies Project — including a free PDF copy of "Creating Sustainable Societies" — can be found at PrincipledSocietiesProject.org.

John Boik is the author of "Creating Sustainable Societies," and founder of the Principled Societies Project. You can find the other stops on his current virtual book tour at Shareable (Jan. 7, 2013) and Sustainablog (Jan. 14, 2013).

+ share


  1. Hi John,

    Most excellent article! I've also been attracted to marketing the power of local currency in terms of fostering resilience to environmental (and other) disasters, and am happy to see others already making the case publicly.

    I've just downloaded the PDF and will be reviewing it this afternoon, but in the meantime, given the overlap I see in our efforts and my fairly recent relocation to Ithaca, NY, I think it's safe to say we should connect more!

    One question though, what sort of design examples have you on the governance end of things? I've been rather enamored with www.Mindmixer.com as a potential ally in the community engagement arena, but I'd love to hear your thoughts on that in particular.

    Looking forward to hearing more!


  2. Hello Scott:
    Thanks for the comment, and I too am glad to hear that others are seeing the connection between local currencies and resilience. I suspect that in coming years, resilience will become an increasingly charged buzzword.

    I'm glad to hear that you downloaded the free PDF version, rather than purchasing the book. I'm all for book purchases, and profits from the book help the project, but for the next few weeks the PDF version is more up-to-date. I just made some major revisions.

    If you live in Ithaca, you have the opportunity to participate in one of the oldest (and one of the most interesting, in my opinion) U.S. local currency programs, the Ithaca Hour. Paul Glover is a pioneer. You might see some similarities, and many differences, between the two programs.

    Except for a brief reply, I will hold off on responding to the governance question until you have looked at that chapter in the book. There are many groups working on new forms of governance. You have named one. Numerous others are listed on Metagovernment.org. And I have an interest in direct democracy as practiced in ancient Athens.

    I do want to make clear that the governance proposal in the book is aimed at corporate governance (specifically, of Principled Societies), rather than city, county, state, or federal governance. If it is proved to be an efficient and popular way to make corporate decisions, however, some of the ideas might be picked up by government units and other groups, such as clubs, schools, etc.

    If any questions come up while reading the book, let me know. I'm happy to offer my thoughts.


    1. Great stuff! I've been in touch with Paul, who has since moved down to Philadelphia (as you may know) and I'm presently in contact with the HOURS board and a local food coop regarding a network check-up I'll be doing in the next couple of weeks. I think it'd be wonderful if we could have Ithaca targeted as an early adopter of the PS platform given its fertility in the wake of the HOURS activity. That's certainly one of the largest factors that attracted me here last year!

      How can we connect more on that front?

  3. Hi Scott:
    I am happy to speak with any group that has an interest in the proposal. Once you get settled in Ithaca, drop me a note. My address is on the Principled Societies Project website. You can always send a tweet to @JohnBoik too.

    As mentioned in the article, the next step in developing the PS concept is to create computer models of token and dollar flow in a virtual local economy. I will soon be searching for funding for this phase, and I expect the work itself to take about a year. Once that is done, the path forward for creating the code and implementing the first pilot trial will be made more clear.

    Please do stay in touch, and let me know of your experiences in Ithaca.


  4. this sounds like it would actually work. i would definitely like to learn more about the experience of other cities who have tried local currencies. wonderful idea to let participants decide how their contributions are allocated.

  5. Thanks.

    Local currencies have been in the news lately. I have collected a number of articles at http://www.scoop.it/t/new-economy-1. You might find some of these quite interesting.

    To me, the novel crowdfunding mechanism in the proposal is a way to bring greater democracy to budgetary decisions, and it builds community. Everyone has an impact on which businesses get funded and which schools, nonprofits, and public services receive support. It allows a community to exercise self-responsibility, and to be engaged in creating the kind of urban area it wants.

  6. My book Hometown Money explains step by step how to start and maintain a community currency system. Based on my experience creating Ithaca HOURS. http://www.paulglover.org/currencybook.html

  7. Hi Paul:
    Wonderful to hear from you. I encourage folks to take a look at your writings too, listed at http://www.paulglover.org/hourarchives.html. For those unfamiliar, Paul started the Ithaca Hours project back in 1991.

    You can read more at Paul's website, at the Ithaca Hours website (http://www.ithacahours.org/), and at the Wikipedia article (http://en.wikipedia.org/wiki/Ithaca_Hours).

  8. I wonder if political mobilization to apply direct pressure on government leaders is too readily dismissed in the video. Wouldn't some degree be necessary to get something like this established? I think the blueprint is very sensible and worth pursuing, but there may be vested interests out there who could lobby effectively against it. How might grassroots activism factor in?

  9. Hi Sally.
    Great questions. My understanding of current law is that the PS proposal is fully legal. Not only would no new legislation be needed to get it started, it might be difficult to pass laws that would prohibit it. There are already numerous local currency systems in place in the US, and they are popular. Further, there are a number of currency-like systems in place, like frequent flyer miles, that are also popular.

    Having said that, your point is still well taken. It would be wise for the project to have public pressure ready to go, if needed. And as well it would be wise to have supporters in Congress. Further, in the larger context of social change, it is critical that the multitude of local, state, and national activism efforts continue and expand. The PS project is just one out of many hundreds of projects that could help improve our world in some way.

    Lastly, I believe that as the world gets smaller through better communications technology, and as we come to understand our shared goals and the interrelationships between social, environmental, economic, financial, and political problems, a common vision is starting to emerge of greater cooperation, greater equality, greater transparency, greater sustainability, and greater good. The human race is capable of so much more. All efforts that move toward that future are valuable.

  10. Hi Europe calling!
    Thanks for article which was excellent. I am a director of the Bristol Pound (details at www.bristolpound.org). Bristol is greater urban area of about 1m people. Our currency (which has physical notes and a digital currency) has been going about 18 months and issued about £500k. We are a 100% fiat backed currency so no-risk. Non profit and volunteer heavy. We have big plans going forward; this year all local taxes will be able to be be paid in £B as well as local transportation and electricity.
    Having built trust and profile with our 1500 members, we are currently looking at 'stage 2' projects including the Bank of Bristol (to lend start-up funds to young entrepreneurs in £B); Buying Groups in disadvantaged urban areas to pay basic fruit and veg in £B and mutual credit circles to enable free credit to SMEs.
    very willing to share info etc.

    Best regards


Note: Only a member of this blog may post a comment.