Catweazle wrote:Effectively it's putting a tax on imported goods, not sure that countries we are trying to negotiate trade deals with would be happy, they'd probably tax our exports to them.
It certainly makes imported and long-distance goods less competitive, yes. It is quite intentionally anti-globalisation. And it accepts that other countries may do the same making our exports less attractive. Although this only applies to goods which cannot be produced locally.
If the world is to become more sustainable, then this has to happen.
UndercoverElephant wrote:It is not a local currency. It would not fail like local currencies do, because the government will be dishing out.
I don't follow, 'because the government will be dishing out' is no guarantee against failure? Lots of government backed things are crap and fail.
,
Apart from the general possibility or likelihood of anything government run failing, I see another problem.
If this new "funny money" is to be issued centrally but is only valid for locally produced goods/services, how is use to be restricted ?
According to Hornborg, the answer is that this currency will be entirely electronic, and goods will have to be tagged with their point of origin. If the system was to use paper/coin money then this would be open to abuse, but in general the advantage of local production (so low transport costs) will make this sort of abuse rarely worthwhile.
Local to Penzance is rather different from local to Manchester.
And what about local, but still international ? From parts of the south coast, France is more "local" than is London.
To encourage such modifications of human behavior without resorting to totalitarian politics and
severe austerity measures, I offer the following general recommendation for a policy for sustainability
and justice: Each country establishes a complementary currency for local use only, which is distributed
to all its residents as a basic income. This outline of a policy proposal raises a long list of questions to
which only preliminary answers can be provided here. The specific ways in which these questions can be
answered represent options for calibrating the proposal with different kinds of constraints, whether
particular to different areas or of a more universal nature. The following attempt to provide preliminary
responses to some of these questions should thus be understood as preliminary and subject to meticulous
negotiation, monitoring, and modification:
1. What is a complementary currency? It is a form of money that can be used alongside regular
2. What is the fundamental goal of this proposal? The two most fundamental goals motivating this
proposal are to insulate local human subsistence and livelihood from the vicissitudes of national
and international economic cycles and financial speculation, and to provide tangible and attractive
incentives for people to live and consume more sustainably. It also seeks to provide authorities
with a means to employ social security expenditures to channel consumption in sustainable
directions and encourage economic diversity and community resilience at the local level.
Hornborg How to turn an ocean liner
Journal of Political Ecology Vol.24, 2017 628
3. Why should the state administrate the reform? The nation is currently the most encompassing
political entity capable of administrating an economic reform of this nature. Ideally it is also
subservient to the democratic decisions of its population. The current proposal is envisaged as an
option for European nations, but would seem equally advantageous for countries anywhere. If
successfully implemented within a particular nation or set of nations, the system can be expected
to be emulated by others. Whereas earlier experiments with alternative currencies have generally
been local, bottom-up initiatives, a state-supported program offers advantages for long-term
success. Rather than an informal, marginal movement connected to particular identities and
transient social networks, persisting only as long as the enthusiasm of its founders, the
complementary currency advocated here is formalized, efficacious, and lastingly fundamental to
everyone's economy.
4. How is local use defined and monitored? The complementary currency (CC) can only be used to
purchase goods and services that are produced within a given geographical radius of the point of
purchase. This radius can be defined in terms of kilometers of transport, and it can vary between
different nations and regions depending on circumstances. A fairly simple way of distinguishing
local from non-local commodities would be to label them according to transport distance, much as
is currently done regarding, for instance, organic production methods or "fair trade." Such
transport certification would of course imply different labelling in different locales.
5. How is the complementary currency distributed? A practical way of organizing distribution would
be to provide each citizen with a plastic card which is electronically charged each month with the
sum of CC allotted to him or her.
6. Who are included in the category of citizens? A monthly CC is provided to all inhabitants of a
nation who have received official residence permits.
7. What does basic income mean? Basic income is distributed without any requirements or duties to
be fulfilled by the recipients. The sum of CC paid to an individual each month can be determined
in relation to the currency's purchasing power and to the individual's age. The guiding principle
should be that the sum provided to each adult should be sufficient to enable basic existence, and
that the sum provided for each child should correspond to the additional household expenses it
represents.
8. Why would people want to use their CC rather than regular money? As the sum of CC provided
each month would correspond to purchases representing a claim on his or her regular budget, the
basic income would liberate a part of each person's regular income and thus amount to substantial
purchasing power, albeit restricted only to local purchases. The basic income in CC would reduce
a person's dependence on wage labor and the risks currently associated with unemployment. It
would encourage social cooperation and a vitalization of community.
9. Why would businesses want to accept payment in CC? Business entrepreneurs can be expected to
respond rapidly to the radically expanded demand for local products and services, which would
provide opportunities for a diverse range of local niche markets. Whether they receive all or only
a part of their income in the form of CC, they can choose to use some of it to purchase tax-free
local labor or other inputs, and to request to have some of it converted by the authorities to regular
currency (see next point).
10. How is conversion of CC into regular currency organized? Entrepreneurs would be granted the
right to convert some of their CC into regular currency at exchange rates set by the authorities.
The exchange rate between the two currencies can be calibrated so as to compensate the
authorities for loss of tax revenue and to balance the in- and outflows of CC to the state. The rate
would thus amount to a tool for determining the extent to which the CC is recirculated in the local
economy, or returned to the state. This is important in order to avoid inflation in the CC sector.
11. Would there be interest on sums of CC owned or loaned? There would be no interest accruing on
a sum of CC, whether a surplus accumulating in an account or a loan extended.
12. How would saving and loaning of CC be organized? The formal granting of credit in CC would
be managed by state authorities and follow the principle of full reserve banking, so that quantities
of CC loaned would never exceed the quantities saved by the population as a whole.
13. Would the circulation of CC be subjected to taxation? No.
Hornborg How to turn an ocean liner
Journal of Political Ecology Vol.24, 2017 629
14. Why would authorities want to encourage tax-free local economies? Given the beneficial social
and ecological consequences of this reform, it is assumed that nation states will represent the
general interests of their electorates and thus promote it. Particularly in a situation with rising
fiscal deficits, unemployment, health care, and social security expenditures, the proposed reform
would alleviate financial pressure on governments. It would also reduce the rising costs of
transport infrastructure, environmental protection, carbon offsetting, and climate change
adaptation. In short, the rising costs and diminishing returns on current strategies for economic
growth can be expected to encourage politicians to consider proposals such as this, as a means of
avoiding escalating debt or even bankruptcy.
15. How would the state's expenditures in CC be financed? As suggested above, much of these
expenditures would be balanced by the reduced costs for social security, health care, transport
infrastructure, environmental protection, carbon offsetting, and climate change adaptation. As
these savings may take time to materialize, however, states can choose to make a proportion of
their social security payments (pensions, unemployment insurance, family allowance, etc.) in the
form of CC. As between a third and half of some nations' annual budgets are committed to social
security, this represents a significant option for financing the reform, requiring no corresponding
tax levies.
16. What are the differences between this CC and the many experiments with local currencies? This
proposal should not be confused with the notion, or with the practical operation, of local
currencies, as it does not imply different currencies in different locales but one national,
complementary currency for local use. Nor is it locally initiated and promoted in opposition to the
regular currency, but centrally endorsed and administrated as an accepted complement to it. Most
importantly, the alternative currency can only be used to purchase products and services
originating from within a given geographical range, a restriction which is not implemented in
experiments with Local Exchange Trading Systems (LETS). Finally, the CC is provided as a basic
income to all residents of a nation, rather than only earned in proportion to the extent to which a
person has made him- or herself useful in the local economy.
17. What would the ecological benefits be? The reform would radically reduce the demand for long-
distance transport, the production of greenhouse gas emissions, consumption of energy and
materials, and losses of foodstuffs through overproduction, storage, and transport. It would
increase recycling of nutrients and packaging materials, which means decreasing leakage of
nutrients and less garbage. It would reduce agricultural intensification, increase biodiversity, and
decrease ecological degradation and vulnerability.
18. What would the societal benefits be? The reform would increase local cooperation, decrease
social marginalization and addiction problems, provide more physical exercise, improve psycho-
social and physical health, and increase food security and general community resilience. It would
decrease the number of traffic accidents, provide fresher and healthier food with less
preservatives, and improved contact between producers and consumers.
19. What would the long-term consequences be for the economy? The reform would no doubt
generate radical transformations of the economy, as is precisely the intention. There would be a
significant shift of dominance from transnational corporations founded on financial speculation
and trade in industrially produced foodstuffs, fuels, and other internationally transported goods to
locally diverse producers and services geared to sustainable livelihoods. This would be a
democratic consequence of consumer power, rather than of legislation. Through a relatively
simple transformation of the conditions for market rationality, governments can encourage new
and more sustainable patterns of consumer behavior. In contrast to much of the drastic and often
traumatic economic change of the past two centuries, these changes would be democratic and
sustainable and would improve local and national resilience.
20. Why should society want to encourage people to refrain from formal employment? It is
increasingly recognized that full or high employment cannot be a goal in itself, particularly if it
implies escalating environmental degradation and energy and material throughput. Well-founded
calls are thus currently made for degrowth, i.e. a reduction in the rate of production of goods and
services that are conventionally quantified by economists as constitutive of GDP. Whether formal
unemployment is the result of financial decline, technological development, or intentional policy
for sustainability, no modern nation can be expected to leave its citizens economically
Hornborg How to turn an ocean liner
Journal of Political Ecology Vol.24, 2017 630
unsupported. To subsist on basic income is undoubtedly more edifying than receiving
unemployment insurance; the CC system encourages useful community cooperation and creative
activities rather than destructive behavior that may damage a person's health.
21. Why should people receive an income without working? As observed above, modern nations will
provide for their citizens whether they are formally employed or not. The incentive to find
employment should ideally not be propelled only by economic imperatives, but more by the desire
to maintain a given identity and to contribute creatively to society. Personal liberty would be
enhanced by a reform which makes it possible for people to choose to spend (some of) their time
on creative activities that are not remunerated on the formal market, and to accept the tradeoff
implied by a somewhat lower economic standard. People can also be expected to devote a greater
proportion of their time to community cooperation, earning additional CC, which means that they
will contribute more to society – and experience less marginalization – than the currently
unemployed.
22. Would savings in CC be inheritable? No.
23. How would transport distances of products and services be controlled? It is reasonable to expect
the authorities to establish a special agency for monitoring and controlling transport distances. It
seems unlikely that entrepreneurs would attempt to cheat the system by presenting distantly
produced goods as locally produced, as we can expect income in regular currency generally to be
preferable to income in CC. Such attempts would also entail transport costs which should make
the cargo less competitive in relation to genuinely local produce, suggesting that the logic of local
market mechanisms would by and large obviate the problem.
24. How would differences in local conditions (such as climate, soils, and urbanism) be dealt with?
It is unavoidable that there would be significant variation between different locales in terms of the
conditions for producing different kinds of goods. This means that relative local prices in CC for a
given product can be expected to vary from place to place. This may in turn mean that
consumption patterns will vary somewhat between locales, which is predictable and not
necessarily a problem. Generally speaking, a localization of resource flows can be expected to
result in a more diverse pattern of calibration to local resource endowments, as in premodern
contexts. The proposed system allows for considerable flexibility in terms of the geographical
definition of what is categorized as local, depending on such conditions. In a fertile agricultural
region, the radius for local produce may be defined, for instance, as 20 km, whereas in a less
fertile or urban area, it may be 50 km. People living in urban centers are faced with a particular
challenge. The reform would encourage an increased production of foodstuffs within and in the
vicinity of urban areas, which in the long run may also affect urban planning. People might also
choose to move to the countryside, where the range of subsistence goods that can be purchased
with CC will tend to be greater. In the long run, the reform can be expected to encourage a better
fit between the distribution of resources (such as agricultural land) and demography. This is fully
in line with the intention of reducing long-distance transports of necessities.
25. What would the consequences be if people converted resources from one currency sphere into
products or services sold in another? It seems unfeasible to monitor and regulate the use of
distant imports (such as machinery and fuels) in producing produce for local markets, but as
production for local markets is remunerated in CC, this should constitute a disincentive to invest
regular money in such production processes. Production for local consumption can thus be
expected to rely mostly – and increasingly – on local labor and other resource inputs.
