Currencies and Capitalism

Someone recently asked me if alternative currencies are compatible with capitalism. I know this questions stews in others’ minds as the currency movement is territory unknown for most and support spans the political spectrum from libertarian to socialist to capitalist to anarchist, though few fascists are interested, as a diversity of currencies or even just one more creates greater economic freedom.

To even attempt this question, we would have to agree on what capitalism is. I have heard very little agreement on a definition, and there is much confusion especially from people I would consider capitalists. I think there are a few core components to capitalism, but often many more aspects and consequences are included in a definition of this amorphous beast some might call a religion. According to Wikipedia, the expert on popular consciousness, “There is no consensus on capitalism, nor how it should be used as an analytical category.” It also recognizes, “…however there is little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism.”

Some of its ramifications seem to be a cultural emphasis on maximizing individual wealth accumulation through exploitation (i.e. profit off labor and natural resources), individual self-reliance (i.e. not relying on others or the state for social welfare), privatization of once shared/common resources, labor specialization and competition.

The US dollar supports capitalism to some degree in that it is a produced in a monopoly by a centralized monetary system that is controlled by corporate banks and a capitalist leaning federal government. The Federal Reserve produces $USD at a rate which creates artificial scarcity thereby supporting the function of competitive markets. It permits saving, investment and speculation in its design which facilitates wealth accumulation and it enables world-wide competitive markets and huge profits (especially off exploited labor and resources in the developing world).

Then there is the question, “what is an alternative currency?” There are many different kinds of currencies and some, like the Liberty Dollar (an alternative silver coin now being legally questioned), seem to mimic the dollar in many aspects. And then there are currencies like time dollars which function quite differently.

Timebank currency, often called time dollars, are relatively abundant in that they are only scarce when people perceive they don’t have time to provide service. If you have time and services that are valuable, there will be no limit to your earning capability. Time dollars can be saved but not invested to make more time dollars or speculated on, and if you go into debt someone else isn’t making money off your debt. Time dollars are usually egalitarian, valuing everyone’s time equally-one hour for one hour- making it difficult to extract profit from someone’s labor. The aim of time dollars is to help out your community and for your community to help you as well, moving away from fearful individual self-reliance towards community-based mutual aid, yet moving towards self empowerment in learning and practicing new skills. In this sense it leans away from labor specialization, in particular because you don’t make any more time dollars per hour if you become an advanced specialist in a lucrative field valued higher in the competitive labor market. However, if you are offering services on a timebank, of course you can own your means of production, including capital, with which you use to provide a service, but lots more capital won’t necessarily make you more time dollars. You might get more jobs if you are more efficient because of better equipment, but if you work faster, you get less time dollars per job. There is certainly a market involved. Members view profiles, skills, offers, and requests and then make hour bids, but there is less of a cut-throat competitive feel to get the most credits for your hour or to pay the least credits for the service you receive. These features are fairly standard for most kinds of mutual credit systems, although websites like Dibspace can encourage a competitive market attitude.

What about Ithaca Hours, Berkshares, and Cheimgauers (local paper currencies)? Ithaca Hours is a paper currency based time as the unit of account, with a limited geographic usage area. People who trade in Ithaca hours are encouraged, but not forced to pay people equally (one paper hour for one hour of work or its rough equivalent in goods based on a set hourly wage that does not change over time) when it seems fair, thereby supporting an egalitarian, noninflationary living wage. Berkshares are paper hours distributed in the Berkshire region of Massachusetts, equivalent to $USD, and can be bought with and redeemed for $USD. Cheimgauers are similar to Berkshares, but expire and so must be renewed with a stamp to be valid. This is a form of negative interest or “demurrage”, which discourages wealth accumulation and encourages circulation.

These three currency models are completely compatible with private ownership of the means of production, prices and wages, and creation of goods and services for profit in a market. None of these, however, can acquire interest. The money backing Berkshares in a bank can build interest, which can go to community projects, small business loans, or Berkshares administrative overhead funding, but users of Berkshares cannot accumulate interest in an account or investment. Ithaca Hours discourage making profit off others’ labor by encouraging equal pay for equal time. Cheimgauers make wealth accumulation nearly impossible with negative interest and create a sense that circulation of wealth through the entire community is what creates community and individual health and security.

In these systems there is less need for competition, because the currency can be made as abundant as needed (with an eye on not creating too much so as to create inflation) to provide a means of exchange for abundantly available goods and services. This encourages people to expand their repertoire of skills and services. Local currencies encourage local trading, and when more of our trades are local, we get to know each other and trust each other. Most of these local currency projects, because they emphasize community self-sufficiency over individual financial security, they help move our consciousness from the “me” to the “we”. In this sense, they have a strong socialist feel. But they support individual freedom and autonomy to a large extent, which attracts anarchists and libertarians, because there is a greater range of ways to earn your living and choose your own work life path without a boss. They also are not permitted, with some new exceptions, in national or international trade. International trade has made capitalism, exploitation, grossly unequal wealth accumulation, and cut-throat competition explode. However with a local currency, there is only so much you can accumulate in a small town. The whole world is a different story. When trade is beyond our experiential borders, we have little knowledge of or control over how that trade is conducted and whether or not its features and consequences involve the worst kinds of capitalism.

So in many senses, local currencies are compatible with elements of capitalism, but communities can create rules that discourage negative features and consequences of capitalism. We can even create socialist-leaning local currencies, like in Venezuela. The point is that the community decides and not a small elite group of bankers and corrupt government officials that want to funnel all of the poor and middle class’ currency into their accounts. How wonderful it would be if communities created their own currencies that supported their highest values, like: community, care, cooperation, sustainability, equality, democracy, and abundance rather than just profit for the few.