Charles Dickens, “It was the best of times, it was the worst of times.”
Euro notes and coins were launched on New Year’s Day 2002 with mildly euphoric expectations of a new era for Europe. The national currencies of twelve countries, which had been bound informally together for several decades; but they now ceased to be legal tender, being replaced by what is in effect federal state money like the dollar. In Argentina at the other end of the world, the peso crisis, which is linked to the dollar, provoked a proposal for a parallel currency, the argentino. This lasted no longer than Adolfo Rodriguez Saa, one of five presidents in less than two weeks, who announced it. Then the peso itself was issued at a new exchange rate again, this time at a dollar price 30 percent lower than before.
Both cases demonstrate the failure of national currencies; they involve coining new forms of money to remedy this. I reflect here on the inadequacy of national currencies; their eventual failure can and does open avenues for ordinary citizens to make their own currency and trading circuit through community currency systems, for example. My new book, The Memory Bank: Money in an Unequal World focuses on how the digital revolution could lead to impersonal monetary systems becoming rapidly more personally meaningful.[1] Economic transactions at a distance are already accessible through machines organizing huge quantities of detailed information about individuals than was possible until now.
Kublai Khan introduced paper money made from mulberry bark imprinted with his seal in 1260. Refusal to accept it carried the death penalty. An impressive public works program, including a new capital, was funded in this way. Foreign traders, however, preferred commodity money containing precious metals whose real asset value crossed political borders. Marco Polo recalls that Kublai Khan tried to pay him in bark currency, but he managed to get away with some real money and his life.
States today cannot prescribe their own money for all transactions. Central bank control over national currencies is overwhelmed by a lawless global money circuit,[2] prompting a move to the euro, dollar, pound and yen, as well as the failure of the peso which had already made that move. Currencies not absorbed by the euro, such as the Swedish kroner and the British pound, are part of this monetary experiment whether they like it or not.
Willem Wolters' piece on the euro (2002 [17.6]) prompted me to reflect on the options available apart from joining ever larger currency blocs. There is no limit to the development of community and complementary currencies at all levels from the local to the global being based on the democratic principle of subsidiarity.[3] What might money issued directly by and for the people in their multifarious associations look like?
The euro
On Friday, I was stopped outside the Banque de France by a platoon of soldiers, armed to the teeth, guarding a shipment of euros. An indomitable old lady——white hair, shades, big fur coat and sensible shoes—ignored them and kept on walking; they let her pass. The euro is protected by the combined armies of twelve states, I thought, but they can't stop a Parisian matriarch in her stride. The whole charade, guns guarding this stuff, our money, from us the people, was redeemed by one person confident enough in herself to call their bluff.
I live in what I like to think of as the Amsterdam-Brussels-Paris-Geneva-Milan corridor, a world of public order, fast trains and multilingual people. The French press this week celebrated a European unity more complete than any known since the Roman empire. The euro aims to become a United States of Europe; it offers the best example yet of limiting the excesses of national governments. The creditor class tried to slow the change down, of course: serving only their own customers, ATMs out of order, levying foreign transaction charges on euro cheques from other countries. But then the habit of supping copiously at the trough of national monopoly money dies hard.
The television news had shots of bemused but happy punters fingering their euros in supermarket queues. There was no economic analysis. The birth of the euro was a practical matter of handling change; but above all it was a political symbol -- apparently some people did not spend the starter kit but made a display with it on their living room table.
The economic implications of launching the euro have hardly been considered. The euro's management is likely to be less democratically accountable to the public even than its national precursors. The twelve central bank governors of the participating countries represent what is in effect a league of states. The euro may not be a national currency, but it does aim to be a federal state currency, like the dollar.
The essence of state money is that currency of little or no worth is offered to its people by their rulers in payment for real goods and services, as the sole legal means of exchange within the territory and with the obligation to pay taxes on all transactions using it. Central banks jealously guard the national monopoly, policing the banks who issue most of the money as credit and loans, restricting circulation of rival currencies to narrow spheres of exchange.
The legacy of the Maastricht negotiated treaty is that the economic destiny of over 300 million Europeans is now tied to the fortunes of a single currency whose management cannot possibly meet their varied needs and interests. The euro is in principle a throwback to the Bretton Woods era of fixed parity exchange rates, at least for the participating countries, and it does not take much imagination to figure out that the deflationary consequences for some parts of the European economy might be occasionally unpleasant.
The constituent governments of Euroland will come under pressure from their own people for more flexible instruments of economic management. The euro cannot do the job all by itself. National monopolies of money have in any case only been around since the 1850s. Now would be a good time to recognize the need for a variety of monetary instruments, for as many in fact as our communities.
The peso
Europe is stable and prosperous, as Argentina was once. Around 1900, Argentina had the sixth highest per capita national income in the world and was thought of as a potential rival to the United States. But today the monetary crisis there could lead to civil war. In the early 1990s, the peso was pegged to the dollar as a way of ending hyperinflation. This produced a measure of economic success for a while; but Argentina's ruling elite has a worldclass record for fiscal irresponsibility and it soon piled up $132 billion in national debt.
The peso was overvalued, trading in New York at three quarters of the official rate. Argentinians acquired debts in dollars and pesos were offloaded for dollars on street corners. Local products became uncompetitive and were replaced by imports, leading to stagflation[4] and a downward economic spiral. Liquidity, cash in circulation, became even more scarce than usual and provincial governments issued their own money as interest-bearing bonds.
The argentino was proposed as nationalization of these provincial currencies—not as bonds, but paper paying no interest. It was hoped that this measure would provide interim purchasing power while the government worked out how to devalue the peso without triggering hyperinflation. But who would buy money from this government? The idea was quickly dropped. And drastic devaluation could be postponed no longer.
Ordinary citizens floated their own 'social money' in the late 90s, forming an association, Red Global de Trueque Solidario (Global Solidarity Barter Network or RGTS), which issued 15 million currency units (creditos) and then split into a more money-minded organization, Red Global de Trueque, and another stressing egalitarian community, Red del Trueque Solidario. The RGTS credits are a single-issuer paper or digital money, like the national currencies that they aim to complement.
They are given away or bought cheaply as tokens of exchange within a closed circuit. These and provincial government experiments in local currency are a response to the rigidity of the fixed dollar exchange rate which squeezed the life out of the domestic economy, while profligate debt and capital flight made devaluation inevitable.
The member states of Euroland and the Argentinians are acutely aware of the inadequacies of national currencies. Both are taking extreme measures to address these; but whereas they have been forced upon Argentina, the Europeans have been proactive in anticipating them. Dollarization and an expanded eurozone, becoming members of larger currency blocs, are both ways of trying to cope with 'the markets', the global tide of virtual money which threatens to swamp the independence of national economies.
Community currencies
But, as Wolters rightly suggests, there are other ways of addressing the failures and inadequacies of national currencies. Community currencies are complementary to conventional money, being issued by voluntary associations constituted as networks in virtual reality. They have come a long way in the last two decades since Michael Linton invented LETS in British Columbia (Hart 2006). The idea of LETS is that any network can constitute itself as a trading community by nominating a currency and recording all transactions through a central register. The totality of transactions at any time sums to zero. The money is issued by members whenever any of them has a negative balance. They make a promise to honor such commitments in future.
Loss of individual members to the circuit does not impede the ability of the rest to trade, as it does when the supply from a single issuer dries up. The currency itself is simply a virtual measure. It has no commodity value, no price (interest), no reason to become scarce, nor to be hoarded.
Most LETS systems to date are unique, self-sufficient organizations providing a minor economic alternative without much prospect of replacing the role of conventional money and markets in our lives (Walters 2002). Recent developments, however, especially when using digital technology, have made community currencies faster, cheaper, and more effective means of carrying out normal commerce.
Smart cards registering transactions in up to fifteen currencies, linked to businesses and nonprofit organizations as well as individuals, allow these circuits to become integrated into the market economy. National domain name systems and multiple currency clearing platforms open the way for the banks to handle LETS business. None has done so yet since they fear their oligopoly being undermined by bottom up economic forces.
Community currencies also offer one solution to the problem of electronic micropayments, a possibility now being explored with the European Commission. Japanese large corporations participate with grassroots democratic organizations in LETS experiments. A collaborative project of software engineering and social innovation is maturing to the point where talk of a revolution in money is not just the deluded hype of amateur enthusiasts.
The desperate attempts of Argentinians to maintain a market economy in the absence of liquidity evokes nothing so much as the Social Credit movement in North America during the Great Depression. The result then was that citizens, the provincial governments and nation-states all experimented with new currencies. Today, in Europe, North America and Japan, where the economic climate is generally not yet so dire, the community currency movement is picking up momentum.[5] So far, LETS systems and others like them offer a limited economic opportunity, complementary to the conventional economy. A combination of improved technology and economic failure might be the stimulus they need to gain wider acceptance.[6]
Eastern European countries joining the euro later, with its single centralized exchange rate, may find themselves in a bind like the dollar/peso arrangement.[7] The same could happen with Europe's diversified regions and, unlike in the states of the US, there are national bureaucracies keen to measure these effects. This in turn should lead us to explore a variety of social mechanisms for organizing money, rather than rely on just one.
Ironically, by suppressing their national currencies, some EU countries may encourage the formation of parallel exchange circuits, employing virtual deutschmarks or francs as community currencies. We have already seen that Argentinians have started creating their own money at several levels of society. Willem Wolters (2002) suggests that community currencies are a topic of intrinsic interest to anthropologists; I agree. They point to a fundamental reassessment of the conditions for economic democracy contained in relations between states, people and money.[8]
Radical change today hinges on the digital revolution. But the forms of money are only superficially technical: notes, coins, cheques, plastic, digits. The most important forms are social and, after several thousand years of only two kinds (commodity money and state money in various combinations), it takes some effort to embrace another, people's money. Willem Wolters' essay drew our attention to the growing separation between society and landed power. I have suggested that embracing community currencies as a complement to national or federal money would enable us to take fuller advantage of that potential.
The euro involves only a limited break with the territorial principle. Its logic is still that of a central bank monopoly within an expanded territory. There are other democratic possibilities. We can make our own money rather than pay for the privilege of receiving it from our rulers. Europeans may not yet be reduced to the desperate measures of the Argentinians, but we too have some way to go before we can afford to rest content with the money forms at our disposal.
[1] See also ‘Money and markets after capitalism: A new humanism for world society’ and ‘Europe in the current world crisis’ (both 2023).
[2] Daily foreign exchange transactions now exceed $6 trillion.
[3] Decisions on general and specific issues should be taken at the lowest effective level.
[4] High unemployment and inflation together, variables that were until then thought to be inversely related.
[5] I wrote this short essay while working with Michael Linton and Ernie Yacub for two years on a book about community currencies based on international sources which was not realised. One reason was coordinating our efforts; but whereas they saw ccs (‘us’) as conceptually opposed to top-down political economy, I see money as a fluid educational means of integrating people’s experience of the widest and most intimate forms of association (Hart 2000, 2023a). The world market, local retail and economic institutions at all levels of society run on money, which operates like time as universal numbers rather than words in need of translation. I see democratic capitalism and new social forms of money as the most effective way of forming an emergent world society fit for all humanity.
[6] Like most paired opposites, open and closed social forms need to be combined pragmatically with moving historical content, not conceived as antagonistic closed versus open economies (Hart 2006, 2023b).
[7] See Chevalier (19 ) for how Bulgarians coped with privatisation of collective economies (‘the free I.e. criminal) market without much or any money then
[8] But see Note 7, especially The Memory Bank; Money in an Unequal World, a book in 8 parts.