Santa Cruz Goes Local 2, Who Is Next?

by Mira Luna
Oct 19, 2010

Modeling their currency project primarily after the Sonoma Go Local project, Santa Cruz’s New Earth Exchange is set to go. A presentation by Derek Huntington of Sonoma Go Local last week attracted 75 people interested in boosting and transforming their local economy.

Think Local First, a partnering organization, is laying the foundation for the project, by promoting buying local through “Shop Local Week”, a website promoting local businesses, and gift certificates donated by local banks and raffled off that must be spent at local businesses within 24 hours, turning over for a total of 30 days.

The next stage is a paper currency that acts as a reward coupon earned by shopping at member local businesses and redeemed only at other member businesses. Subsequently, the Santa Cruz project will import the Sonoma Go Local rewards card system, point of sale devices included. The rewards card allows businesses to set their reward rates or amounts individually. Here’s how it works. I go into buy a book from a member local business. I get a 10% rebate on a $10 book, equaling $1. I go to the local grocery store and buy my groceries, and $1 is automatically deducted from my bill. Whatever reward is left is automatically rolled over to the next transaction and then must be deducted. Though it is called a reward system, it can function just like a local currency, while simultaneously attracting US dollars to local businesses strapped for cash as well. The rewards points can also be used to pay employees who willingly enroll or as bonuses.

The next two steps are key: business to business credit clearing and local business investment mechanisms. Both of these allow local businesses access to resources they don’t have enough of in the conventional economy. Credit clearing allows businesses to barter amongst each other and get a better deal using their underutilized resources to get what they need and help out other businesses. Creating more local business capacity in which the currency can flow is at least as important as the currency itself. Credit clearing may also be used to distribute the burden of the rewards system more equitably, making sure one business doesn’t end up backing most of the rewards.

The investment structure dreamed up by Derek Huntington, though not entirely clear, would ideally move local money away from foreign investment and into local businesses where the results can be seen and felt and investments may actually be more secure. Part of this initiative aims to help start cooperative businesses (Sonoma Go Local is itself a coop of local businesses). Investment also helps support the development of import replacement businesses that can fill in missing pieces of the local supply chain, giving businesses useful options for spending their local currency and helping the currency flow without frustrating bottlenecks.

The program will be funded by individual and business memberships. Membership fees may be temporarily waived and paid back as people use the system, deducted from their accounts over time.

The pitch to businesses is that they will simply get more customers as consciousness is raised and rewards shift shopping behavior away from Amazon, Walmart and Safeway and into local business where it can circulate to support new jobs, expanded business capacity, taxes to support local government services, and so on. Studies indicate that money spent at local businesses create 3 times the wealth in the community that shopping at chain stores does. With the grand plan the Go Local project has dreamed up, this factor could increase significantly.

While the Sonoma still needs to prove that their plan will work, they are nonetheless very inspiring. I wish them luck and look forward to a Go Local craze.