Compensating With Soft Currencies

From Credit Suisse
Hannes Hug, Journalist
28.09.2010

Slum dwellers in Brazil collect trash and exchange it for food, bus tickets or school books. Japanese students look after the elderly and are compensated with credits that can be saved up for their own retirement. Alternative currencies such as time or forms of barter address issues that money – as a hard currency – cannot resolve. This makes “soft currencies” a logical supplement to dollar, yen and franc.

Carefully raked gravel paths encircle an enchanting koi carp pond. A flock of barn swallows sweeps past, twittering melodiously. Surrounded by carefully pruned tea plants and bonsai trees, Ryuichi Kawai is sitting in the middle of his beloved garden, an oasis that is the pride and joy of this 92-year-old Japanese man. Mr. Kawai lives alone and has no children. In Europe, this sprightly pensioner would by now probably be an inmate of a retirement home rather than the proud owner of such a garden paradise. But not so in Japan. Over here, older people can rely on the support of volunteer helpers thanks to the “Fureai Kippu,” which translates as “caring relationship ticket” and allows the elderly to live in their traditional environment for much longer than would otherwise be the case.

23-year-old Tosho Agato is a student. He lives in the same neighborhood as Mr. Kawai, and provides him with several hours of assistance every week. As well as looking after the prized garden, Agato drops off the old man’s evening meal and helps him with his daily bathing ritual. This takes up two hours of the student’s time every day. These hours are credited to him on his own “Fureai Kippu” account. Tosho Agato can now either transfer his saved hourly credits to his own parents one day or use them for his own retirement.

A Third of Japan’s Population Soon Over 65
Even today, 15 percent of all Japanese are already over 65 years old. In just under 40 years this proportion will rise to one in three. As in most European countries, life expectancy is on the rise in the Land of the Rising Sun – the average age is advancing relentlessly. Although the Japanese ideal of a large family spanning several generations is still commonly found, the trend toward the small family is nonetheless irreversible. Just like in Europe, this means a growing number of people who will require part-time care or assistance in leading an independent life, but also a falling number of people capable of providing these services. This may be either because potential helpers are themselves struggling to maintain their standard of living and thereby preserve the overall “cash flow” of society, or because living together in an extended family or clan is no longer an option.

Insurers probably provide the most essential care services, but none of these companies would trot out the concept of time as a key sales argument. It is precisely to this area of tension between wish and reality that retired lawyer Tsutomu Hotta dedicates himself. Fifteen years ago, Hotta founded the Sawayaka Foundation that acted as the driving force behind the “Fureai Kippu” concept. There are now around 100 local agencies in Japan that work with this alternative care currency. They offer what professional carers can only offer to a limited extent: having time, being there, listening.

The idea of an alternative care currency is a smart one, on the one hand because older people age at different rates and do not need to call on the assistance of a care institution at the same time – an important factor from an economic perspective – and on the other because these people can spend the autumn of their lives independently and in the dignity of their habitual environment, even if they do not have the funds for accommodation suited to the elderly. Another additional positive is that the “Fureai Kippu” brings people from different generations together, strengthens the feeling of community, and sensitizes people to the relationship between giving and taking, as well as to the notion of exchange – the heart of all trading relationships between one person and another.

From Shells to Coins
When viewed in the sense of a national currency, money is a relatively new phenomenon. It was only in the late 19th century, as part of the drive to create modern nations, that currencies designed to underpin the character and identity of the nation in question were invented. Money in the sense of a unit of measurement – to express the ratio of value between the giving and receiving of services or goods – has been around much longer, however, and was employed around 3,500 years ago by the Chinese. Here the currencies in question were cowry shells, pearls, or stones.

It was not until 1,000 years later that King Croesus invented money in the form of coins. The one-time ruler of Lydia in Asia Minor, which is broadly where modern Turkey is today, ordered gold obtained from the River Pactolus to be minted into coins and had them embossed with his seal of a bull and a lion. The aim of Croesus was to demonstrate his wealth and make the appropriate impression on other rulers. Since time immemorial, therefore, the power associated with money has resided not only in the quantity of money available, but also in its appearance and design. At the same time as Croesus was minting his coins, the ancient Egyptians were introducing the first dual currency system. Long-distance trading relationships were maintained with gold and other precious metals. Local transactions, by contrast, were effected with wheat. The logic behind the system is clear: Wheat is ultimately perishable and therefore unsuited to long shipping voyages, whereas gold never loses its value. Moreover, local trade was also enhanced with a further innovation. To increase the “shelf life” of wheat it was stored in cool containers. Proof of ownership was demonstrated by clay shards. These shards acted as a proxy for wheat as a local currency. The interrelation between gold and shards (or wheat) illustrates just how appealing the idea of a supplementary currency can be.

As money essentially represents nothing more than the agreement of a society to use a designated object as a means of exchange, it does not necessarily need to take the form of a coin or a note. Money therefore expresses a relationship between people. It has a “normative” character and thereby shapes our culture. Money in the form of paper or metal may be what regulates modern global trade, and the expression “hard currency” further underpins this notion. But how is it possible to regulate phenomena that result from the fact that man – and all his doings – cannot be reduced to supply and demand alone? Bernard A. Lietaer, former consultant to the Belgian central bank and one of the figures responsible for the introduction of the ECU (the forerunner of the euro), is convinced that the future challenges confronting mankind – such as demographic change, increasingly scarce resources and the changeover to a multipolar world – will have to be addressed by a model with a more sustainable basis than one regulated by the traditional flows of funds alone. Lietaer speaks of “yin and yang” currencies in this context. The yang currencies denote the standard national currencies, with the dollar as lead currency. The yin currency represents the concept of exchange, which contains a social component and regulates our coexistence as a “soft” currency. For a good example of how a “yin” currency can help socially disadvantaged people with no prospects participate in an affluent economy, one needs look no further than the experiment of Curitiba.

Curitiba – The Fourth Dimension of Recycling
Curitiba is the seventh largest city in Brazil. This metropolis is located in the south of the country, and today occupies third place in the league table of the 15 greenest cities of the world. The person who should be given most of the credit for this state of affairs is the former mayor of Curitiba, Jaime Lerner. Over the course of three legislative periods, the last coming at the beginning of the 1990s, Lerner tackled the problem of waste disposal in the slums or “favelas” – in addition to pushing through sustainable urban planning programs in architecture, infrastructure, and education. As in all developing countries, much of the rural population of Brazil migrates to the country’s cities in search of work. In this respect, Curitiba and its current population of some 3.5 million residents is no exception. As a consequence of this migration process, “favelas” proliferate on the edges of the metropolis, consisting of ramshackle dwellings thrown up in no apparent order and with no architectural logic.

In these chaotically organized favelas, Jaime Lerner found himself confronted with the problem of garbage mountains building up – waste that posed a serious threat to the health of slum dwellers who were in any case living in desperate poverty. Garbage trucks simply weren’t capable of negotiating the erratic paths of these favelas, and the money required to tear the huts down and build new streets simply wasn’t there. And so Mayor Lerner thought up a simple but ingenious solution: Containers of different colors were set up at the edge of the settlements to help sort out the different types of garbage. Anyone bringing a bag with correctly sorted rubbish was rewarded with a bus ticket. These tickets in turn could be exchanged for schoolbooks or groceries. Soon enough, thousands of children were busy collecting garbage so as to exchange it for bus tickets, thereby keeping their living environment clean.

Complementary Currency Strengthens Self-Confidence
Within the space of one year, 11,000 tons of refuse were exchanged for one million bus tickets and 1,200 tons of food. Today the average income in Curitiba is around three times as high as in the rest of Brazil. The “Curitiba solution” illustrates how people without money can become economically active through the creation of a local currency and thereby improve their living situation. Indeed, many people have for the first time become participants in this urban microeconomy rather than the recipients of alms. Viewed in this light, the creation of a complementary currency means more than just latching on to the regular money regime or establishing a well-meaning charity project – it actually creates genuine prospects and strengthens the self-confidence of the favela residents who stand quite literally at the fringes of society.

Complementary currencies bring new perspectives to regions that are structurally weak and ensure that locally created value does not move away. Alternative currency systems are springing up in any number of different guises. Some of them are characterized by ideology, others have a more pragmatic stamp. But in all cases they act as a supplement to the regular flow of money, attempt to improve troubling social problems, and offer people who cannot participate in the regular money-go-round an alternative currency.