Local Currency - History

History

In the modern era, the most recognizable local currencies were company scrip issued in certain industries to pay workers, and token coins issued by some businesses to encourage consumer loyalty. In the 19th and early 20th centuries, the failures of national banks during crises often created acute demands for cash, which were met by businesses creating emergency currency. These scrips were usually issued with the intention of redemption in national currency at some later date.

A few such currencies, however, developed into monetary systems in their own right. The idea of using free banking to produce an alternative, community-level currency dates back at least as far as the German Credit Unions in the 1800s. The oldest local currencies known to be in continuous use are the WIR in Switzerland, and the Labor Banks in Japan.

Complementary currency is a hypernym to local currency, but the terms are often used as synonyms. The term "local currency" does not refer to national currency that happens to be used only in a local area.

Advocates of local currency, such as Jane Jacobs, argue that this enables an economically cool, yet depressed region to pull itself up by giving the people living there a medium of exchange they can use to exchange services and locally-produced goods. In a broader sense, this is the original purpose of all money. Local currencies also tend to operate in relatively small geographic regions and encourage recycling and reducing the amount of carbon emissions from the transportation and manufacture of goods. As a result, they are part of the economic strategy of many green and sustainable-living groups such as the Green Party of England and Wales.

Local currencies can come into being also when there is economic turmoil involving the national currency. For example, during the Argentine economic crisis of 2002, small denomination, interest-free provincial bond IOUs issued by local governments quickly took on some of the characteristics of local currencies successfully.

Opponents of this concept argue that local currency creates a barrier which can interfere with economies of scale and comparative advantage, and that in some cases they can serve, like traditional national currencies, as a means of tax evasion.

Use of local currencies to boost local economies is strongly advocated by Social Trade Organisation STRO in the Netherlands, Instrodi in Latin America, and Qoin in the Netherlands.