Sunday, January 6, 2013

Local Currency Supports Resilient Cities

by John Boik

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/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/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/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 afree PDF copy of "Creating Sustainable Societies" — can be found at

John Boik is the author of "Creating Sustainable Societies" and founder of the Principled Societies Project.

Share the vision. Support the Experiment. Make History.
The Principled Societies Project is a science-based effort to design and test pioneering monetary, finance, corporate, and e-democracy systems that improve well-being and speed the transition to a sustainable society. Its goal is to create fully functional, metro-scale pilot trials in which the impacts of new systems can be assessed.
Pilot trials will be implemented on a volunteer basis in willing host cities. Those individuals and businesses interested in participating will form a local membership club, similar to a benefit corporation. Club members will interact with the greater society through normal social, financial, economic, and political means, but some portion of their behavior will occur through the pilot systems. In this way, the pilot systems complement current systems.
The products of the Principled Societies Project are data, knowledge, and a suite of Internet-based software applications that acts as the IT infrastructure for the new monetary, finance, corporate, and e-democracy systems. The software will be offered to the public under an open-source license. Upon completion of a pilot trial, a local club would be free to change the code as desired.

Principled Societies Concept

The starting framework for new monetary, finance, corporate, and e-democracy systems is the Principled Societies concept, as described in Creating Sustainable Societies: The Rebirth of Democracy and Local Economies, by John Boik. Asynopsis and free PDF copy of the book are available on this website.
A Principled Society is a local volunteer-membership club that implements and tests new systems. The framework contains three interdependent elements:
  1. Token Exchange System. Tokens are a local electronic currency that act as an influx of money into a local economy. The volume and circulation rate of tokens are managed so as to maintain a steady purchasing power over time. Members receive tokens through their employer or through sales if they own a business, even a hobby business.  The token system generates interest-free loans for local businesses, as well as donations for local schools, nonprofits, and public services. Both loans and donations occur through a mandatory crowdfunding operation.
  2. Principled Business Model. A Principled Business is a for-profit corporation that retains the social mission, transparency, and accountability of a nonprofit. It is a community-centered business model that builds upon the B-Corporation and Yunus Social Business models. Principled Businesses are legally organized as socially responsible L3Cs, B-Corporations, or similar, but in addition must meet another set of criteria that ensures they will remain highly transparent, act consistent with their social mission, and maximize community benefit. Principled Businesses receive preference for the interest-free loans generated by the crowdfunding operation.
  3. Collaborative Governance System. A Principled Society makes its decisions, develops its rules, and sets its policy through the Collaborative Governance System. This is a form of direct democracy in which ultimate legislative authority is held by the membership. To maintain efficiency, councils handle day-to-day and non-controversial issues. Controversial ones are decided entirely by the membership through an efficient, secure, fair, and effective online process.
A fourth meta-component that intertwines the other three is a reputation system. In a Principled Society, reputation is a form of currency. Members can build their reputation by participating in governance activities, by assisting others, by making wise funding decisions, by building successful businesses, and in numerous other ways. The high degree of transparency present in the three core elements serves to inform the reputation system, and the reputation system builds community.