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Opting Out of Wall Street and Building Sustainable, Resilient Communities: Remaking Finance, Part III

(Photo: Dirk Klein / Flickr)
This article is the continuation of a series on remaking our financial system so that it serves and protects people instead of the “too big to fail or jail” banks, collectively called big finance. More and more people see that the current financial system rewards those who hoard their money and invest in risky or damaging ventures such as derivatives and other forms of speculation and are asking: how do we opt out of Wall Street now?
They do not want to be part of big finance practices that keep money out of the economy and place us all in danger of losing our bank deposits if an investment goes badly. Almost all Americans experience the predatory practices that have put the population in debt in order to meet basic needs for housing, education and health care.
This article points to steps you can take in your community now to escape this corrupt system. Previous articles looked at longer-term changes that require government action, such as public banks. In this article, we focus on communities taking action to create alternative currencies and ways they can be integrated into a financial system that connects people with each other, builds dignity and community, and reduces dependence on big finance.
On Clearing the FOG, we spoke with three people who are actively engaged in building alternative economies. Edgar Cahn, author of No More Throw-Away People: The Co-Production Imperative, is founder of the concept of time dollars. Paul Glover created the first local currency based on hours, or labor, in Ithaca, New York. Glover has written many books, including Hometown Money: How to Enrich Your Community with Local Currency. And Jeff Dicken directs Baltimore Green Currency, a local currency backed by federal dollars that has a larger social mission.
All three guests have a vision of a new type of economy that is based on the ideas that all people have talents that contribute to the greater society and that we are mutually interdependent. They see local currencies as a way to build local supply chains and new businesses and services that create sustainable and resilient communities by keeping money circulating in their communities. Local living economies will provide necessary protection when the next economic crash occurs.
Time Dollars Bridge the Two Economies
To fully understand the importance of time dollars, we must first recognize that there are two simultaneous economies: the market economy, in which money is exchanged to purchase goods and services and the non-market economy, which includes all of the activities within families, neighborhoods and communities, in which money is not exchanged. Both economies have a purpose and are necessary for a thriving and healthy society.
Normally, we only study and hear about the market economy. But the needs of a society cannot be met purely within a market economy. The market is based on scarcity: the less there is of something, the more valuable it is. And the market doesn’t value family, community and democracy, the things that are needed to create a society in which most of us would want to live. The non-market economy is not included in current economic measures like the Gross Domestic Product (GDP).
At the heart of the concept of time dollars is a restructuring of the operating system on which the economy is based into one that values the non-market economy equally with the market economy. Cahn states that the old operating system (the market economy) “used to work fairly well, but it was subsidized by labor exacted from the subordination of women, the exploitation of minorities, racism, and the exploitation of immigrants.” That system has been “bled dry,” so it is time to replace it with a system that restores and reinvigorates family, neighborhood and community.
Cahn developed the idea for time dollars when he was hospitalized. He was being cared for, but he was not in a position to give anything back and he did not like feeling useless. It was in the 1980s, during a recession with high unemployment and many unmet needs, and the thought occurred to him that others might not like feeling useless either. Most people don’t like receiving services without being able to give something in return.
The time dollar system restores dignity and connects people to each other. People identify for themselves what they have to give and what they need. And every person has something to give. It can be running errands, fixing things, providing companionship or services or teaching someone. People earn time dollars for the work they do, and they can use those to purchase the services they need. Time dollars place value on the unpaid work that is done in families and communities. They redefine what we value as work and recognize the value of every person.
A fundamental component of time banks is the idea of co-production, which includes social justice as an integral element. The market economy creates externalities for which it is often not held responsible. The obvious externalities are those due to environmental harm. The market economy also creates social externalities or harm to the non-market economy, to one’s ability to do the work that is necessary for family and community. Time dollars are a bridge between the two economies. And co-production means that individuals and communities must be enlisted as co-producers of the outcome and must have access to social infrastructure as well as physical infrastructure. Cahn summarizes, “If you care about justice, democracy and sustainability, you must enlist the community.”
Co-production is based on five core principles. First is that people of all ages have something to give that is real and that those gifts should be recorded and valued. Second, what is commonly called volunteering should be honored as work. Third is reciprocity, that we give help and receive help. Reciprocity creates the awareness that we need each other and develops a “pay it forward” mentality. Fourth is social capital, which means we must invest in ways to bring people together and embed them in a support group in order to have lasting results. And fifth is respect, that everyone’s voice is equal and that there must be ways to know when something is not working.
The time dollar system has evolved into an international movement of time banks in 37 countries. There are 300 time banks in the United States and they have handled millions of time dollars. One program in New York has logged 196,000 hours. Research shows that only 10 percent of participants regularly report their hours and only 25 percent report with some frequency, so the total amount of hours is much higher. The software that helps a community keep track of the time dollars and services, called Community Weaver, is open source and available for free on the Time Bank web site.
When Cahn first discussed the idea of time banks, he was discouraged from going forward for many reasons. There were concerns about the legality and taxation and the effect it would have on society. It is now clear that these concerns were unfounded and that time dollars are a success. They do make a difference in communities. People express trust and hope, and they learn good things about each other, even in places that have a reputation for being dangerous neighborhoods.
Community Currencies Connect
Another type of local monetary system is community or local currency. Local dollars are designed, created and printed and then are used in the community at places of business that agree to accept them. There is a long history of barter-exchanges, on which community currencies build. Paul Glover started the first local currency in the United States, called the Ithaca Hour, in 1991.

Ithaca hours are worth one hour of work or ten federal dollars. They come in denominations down to one-eighth hour. At the time they were introduced, they immediately doubled the minimum wage, although some professionals charge more than one Ithaca Hour for an hour of work. They are accepted by 500 businesses within a 20 mile range around Ithaca, New York.

Ithaca Hours are a form of time currency that is backed by both time, or labor, and federal dollars. Some local currencies are backed by only federal dollars, such as the BNote in Baltimore. BNotes are exchanged for federal dollars at a rate of 11 BNotes for ten federal dollars and are then used at hundreds of local businesses which accept them. Thus, an immediate benefit to BNote users is a 10 percent discount on purchases.
Perhaps the most important benefit of local currencies is that they keep money circulating within a community, which has a multiplier effect. Instead of dollars being spent at a store and then being immediately siphoned off to whatever outside corporation owns that store, BNotes stay in the community. Local businesses are more likely to buy the goods and services they need from other local suppliers or businesses.
A study done by Local First of Grand Rapids, Michigan, showed that a 10 percent shift in spending away from chain stores to local businesses “would generate an annual economic impact of nearly $200 million and create 1,300 jobs with over $70 million in payroll.” Local currencies are a tool to teach people in the community to use more local independent businesses, which strengthens the community. But they are more than a tool, because local currencies teach that money is really a temporary way to store value between transactions and that a community can decide collectively how they want to handle that storage.
Glover explains that “Ithaca hours connect, while dollars control.” Federal dollars are based on debt and an extractive economy. When federal dollars are used, fees and interest go to big finance. Local dollars connect people to local businesses and connect local businesses to each other, thereby building community and the local economy.
The success of local currencies depends on how much they are used in the community and the number and diversity of businesses that accept them. As Glover describes in A Recipe for Successful Community Currency, there must be networkers in the community who recruit businesses, connect them to local suppliers and services, and teach people how to use the dollars and troubleshoot when problems arise. Local currencies are like other cooperative institutions in that they take constant attention to function well.
Building Sustainable and Resilient Communities
Local currencies provide a vehicle to conduct our lives outside of big finance and to strengthen our communities. But the amount of actual economic impact is constrained by the amount of goods and services that can be sourced and produced locally. This is called the Law of Local Currencies: “The degree of economic activity accounted for by a local currency cannot exceed the degree of sufficiency of the community in which it is used.”
In order to really opt out of Wall Street, local currencies must stimulate greater local supply chains and be tied into a bigger system of finance. So part of the work of local currencies is to assess what goods and services are purchased or needed in the community and make funds and space available to create those goods and services through independent businesses or worker-owned cooperatives. The goal is to meet more of the communities needs at the local level – that is, to build local, sustainable communities.
The ideal local economy would also have closed feedback loops, meaning that the resources needed to create something were produced locally and the waste from the production and use of that something was recycled in a useful way. This is how a community creates sustainability and resilience in the case of an economic crisis.
Local currencies can be used to provide funds to create new businesses and support existing businesses through no-interest micro-credit loans. Glover was able to do that with Ithaca Dollars. Loans without interest were made in amounts of up to $30,000. And Dicken envisions using the federal dollars that are collected through their exchange for BNotes to back a rotating system of credit. In these situations, rather than creating monetary interest, the real interest earned from small loans is the communal interest generated by making the community a better place.
Ultimately, there may be ways to connect communities in a region through local currencies to build more diverse and resilient supply chains. And Glover envisions ways to build a currency backed by labor that can be used nationwide to replace currency based on extraction. In Local Dollars, Local Sense, author Michael Shuman also describes creating regional investment institutions or local stock markets that provide a way to build community and individual wealth outside of Wall Street.

Solidarity Economy

As more people realize that the current debt-based extraction economy serves the interests of big finance at a cost to people and the planet, support for alternative economies is growing. Around the world, the new economy is called a solidarity economy because it is based on cooperation rather than competition. The new economy replenishes and creates abundance rather than destroying and encouraging scarcity.
Money is a concept, a way to store value. It is up to us to decide what we value and how we choose to store it. We can create systems that reduce our dependence on American empire and stop fueling exploitation and wars for resources. We can create systems that value each person and are based on values that rebuild communities, justice, trust and democracy. We can create systems that involve participation by everyone and guarantee that basic needs are met in a way that restores dignity. The need for these systems is great. The opportunity to make them a reality is here.

You can listen to Alternative Currencies and Economies with Jeff Dicken, Paul Glover, and Edgar Cahn on Clearing the FOG Radio.

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