Could the successful WIR Bank in Switzerland be used as a mutual credit model for the Network of Bay Area Worker Cooperatives or the US Federation of Worker Cooperatives?
The WIR Bank, formerly the Swiss Economic Circle (GER: Wirtschaftsring-Genossenschaft), or WIR, is an independent complementary currency system in Switzerland that serves small and medium-sized businesses. It exists only as a bookkeeping system, with no scrip, to facilitate transactions.
WIR was founded in 1934 by businessmen Werner Zimmermann and Paul Enz as a result of currency shortages after the stock market crash of 1929. Both Zimmermann and Enz had been influenced by German libertarian economist Silvio Gesell; however, the WIR Bank renounced Gesell's "free money" theory in 1952, opening the door to monetary interest.
"WIR" is both an abbreviation of Wirtschaftsring and the word for "we" in German, reminding participants that the economic circle is also a community. According to the cooperative's statutes, "Its purpose is to encourage participating members to put their buying power at each other's disposal and keep it circulating within their ranks, thereby providing members with additional sales volume."
Although WIR started with only 16 members, today it has grown to include 62,000 — among whom is traded approximately CHF 1.65 billion annually (as of 2004). The available money supply (currency code CHW) was 839 million equivalent Swiss francs (as of 2005).
The WIR bank is a not for profit bank. It serves the interest of the clients, not the bank itself. It is a very stable system, not prone to failure as the current banking system is. It remains fully operational even in times of general economic crisis. WIR may have contributed to the remarkable stability of the Swiss economy, as it dampens downturns in the business cycle.
(Selections from "Initial Results of WIR Research in Switzerland"
by Erick Hansch, November 1971)
In August, 1971, during a stay of several weeks in Switzerland, I had lengthy interviews with managing personnel of the WIR-Cooperative, both in the Zuerich and Basel offices, the latter being the headquarters of the Wirtschaftsring (meaning: Economic Ring, using the first three letters as acronym; also, the German word 'wir' means 'we').
WIR is a cooperative association of small to medium sized, independent Swiss businesses for the purpose of mobilizing their own credit potentialities, i.e., without using commercial banks as intermediaries, to facilitate business transactions within their own circle. This arrangement prevents, or at least inhibits, the outflow of capital and profits to the large chain stores, department stores, stock corporations, etc. WIR credit can be described as supplementary, low-cost credit, but has had also the fully intended result of increasing the business volume of their members. As a self-help measure, it appears to have been successful in large measure in protecting the small, independent businessman against the constantlyincreasing pressure from large, financially strong competitors.
The WIR Cooperative has been in existence and uninterrupted operation since 1934, when a small band of independent businessmen, joined together to form this 'internal credit' organization. Their motto was: 'Free exchange of goods and services, without exploitation of our fellowmen, and without government coercion.' In their minds, high interest charges were one of the more apprehensive aspects of exploitation, and they sought to avoid it.
Transactions among WIR participants are quite simple. To join as a participant, a businessperson need only declare his/her intention to accept WIR booking orders as partial or total payment in any transaction with other participants. The percentages of WIR accepted are listed in the classified directory. Regarding pricing, transactions in WIR are at par as transactions in Francs. Each participant has a set of booking order forms, similar to the conventional bank checks, with the imprint of name, address and account number. In making purchases from another participating member, the buyer will give to the seller such a booking order after having written in the amount for whatever the seller has obligated himself to accept. Many participants commonly accept 100% payment in WIR.
In contrast to regular bank checks, WIR booking orders are not transferable by endorsement, the main reason being that this would lead to avoidance of the 1% booking charge. The income from this charge is used to defray WIR-office administrative overhead expense.
Upon application of a businessperson to participate, a WIR-field representative will make a preliminary investigation as to reputation, character, business acumen, etc. The WIR Co-op subscribes to a credit bureau and obtains information on the applicant, which, with the field report, is submitted to an Admissions Committee of three members. When accepted, the new participant can accept WIR booking orders in payment, and send them in to the WIR head-office in Basel for credit to his/her WIR
account. He/she can then dispose of this credit similarly by making purchases from other participating members, either for business purposes, or for private use and consumption.
The present structure of the WIR Cooperative is such that of about 18,000 participants (in 1970) in the credit operation, only a comparatively small number (761) are active members of the cooperative with paid-in shares (Fr.802,000) and voting rights in the general assembly.
The form and amount of dues and their collection, as well as of the booking charges, were changed from time to time. At present, there is a one-time charge of 1% (the lowest for the entire period of existence) of all credit entries made to a WIR credit account. These charges are billed quarterly and are payable in cash, while the yearly dues of Fr.12.- are deducted in WIR from the account balances. There is no initiation fee.
Participants receive without additional charge the classified directory listing participating firms by articles, with geographical subdivision in each article. Participants also receive free a copy of the monthly magazine WIR-Pioneir (WIR Pioneer), which beside articles of general interest to business owners, carries a large amount of ads by participants. These ads in some cases list WIR-percentages higher than those in the directory as specials for certain months to attract business during an otherwise stagnant period.
New WIR are being created by any participant applying for additional credit over the amount already in his WIR credit account. Reasons for such applications may be the planned acquisition of more costly articles like furniture or large electrical appliances, also cars, or even houses.
A Credit Approval Committee must pass on these applications, and sufficient security must be available as collateral. The present management is of the opinion, based on past experience, that an optimum ratio of WIR-credit outstanding to total WIR turn-over should not vary substantially from a proportion of 1:3. There is at present a limitation put on paid-in capital of Fr.250.- per co-op member. Share capital now receives 12% interest p.a.
A few data will give a brief run-down of the organizational start of WIR and the rapid spread of the idea:
1. Founding of the WIR Cooperative on October 16, 1934, in Zuerich. The first group of cooperators consisted of 16 persons with a total paid-in cooperative capital of SFr. 42,000, average per person SFr.2625.
2. Already on November 1, the first issue of the WIR-News (WIR-Nachrichten) came out. Initiation fee was set at Fr.5.-. and the required minimum amount of a share of Fr. 25.- could immediately be used for credit transactions with other members.
3. In 1935, local WIR-groups were set up in Basel, Bern, Zuerich, Winterthur, Biel and Derendingen. That year also saw the first edition of the Classified Directory. During the 1st and 2nd of August, 1936, the first WIR-convention was held at the Vierwaldstaetter See.
4. 1939 to 1942 was a period of reorganization. As personal comments by WIR-personnel indicated, it was a critical time for the organization, and an appeal was made to the members to subscribe additional capital for the emergency. The prospects were dim, but additional capital was signed for about Fr.250,000, mostly from loyal members, and the organization pulled through.
5. There were 900 participants in 1945; transactions in WIR credit were Fr. 717,000. The number of participants stayed below 1000 until 1949 when it began to climb rapidly. The stagnation during the preceding years had to do with the shortage of goods during the war.
6. In 1958, there were between 11,000 and 12,000 participants, and transactions in WIR credit had climbed to Fr.53 million. (Estimating conservatively 40% WIR in all transactions as an average rate, the total turn-over in goods and services involving WIR would be over Fr.130 million.)
7. There were over 18,000 participants in 1970, and WIR credit transactions ran to over Fr. 180 million. Figuring about 50% WIR participation (as indicated by the president of the executive committee, Mr. F. Hubschmid, in the Business Report for that year), the total value of goods and services involved can be assumed at over Fr.360 million.
(Note that by 2007 when I visited WIR offices in Basel, the amount of WIR in yearly circulation had grown to 1.6 billion. The WIR Co-op is now functioning more like a bank. In addition to its WIR accounts, it accepts deposits in Swiss Francs. The dual currency capability has meant that it can offer credit partially in WIR at little or no cost, and partially in Francs at conventional interest rates, providing the convenience of one loan application for its members. WIR exchange began strictly as business to business transactions. For the past several years individuals have been encouraged to open deposit accounts in Francs at the bank and then convert deposits as needed to WIR for purposes of trading with WIR businesses. This has expanded the program, inviting in the consumer. Circulation of WIR continues to strengthen the independent businesses of Switzerland even during difficult economic times. (Susan Witt)