Movement Profile
More and more communities are developing and using complementary currencies, a form of monetary exchange other than official tenders such as the euro and US dollar. Complementary currencies empower local communities by increasing economic self-sufficiency and financial autonomy. Here, two leading experiences are profiled: the Chiemgauer in Germany and the WIRBank in Switzerland.
Chiemgauer (Bavaria, Germany)
Chiemgauer is a complementary currency used in the German counties of Rosenheim and Traunstein. Created in January 2003 as an extracurricular initiative by a Waldorf school, this project links consumers, local businesses, and social and environmental projects as follows:
- Consumers, upon becoming Chiemgauer members, exchange €100 for 100 Chiemgauer bills. When they shop at local businesses, 3% of the money they spend goes to a project they select to support – such as Greenpeace, a non-profit organization that works on ecological issues, a Waldorf school, a band or a kindergarten.
- Local businesses attract consumers by accepting Chiemgauer. They either can spend it at other local businesses or exchange it for euros, paying a 5% exchange fee (and thus getting only €95 for 100 Chiemgauers). This encourages spending at other local businesses, thus focusing purchasing power within the community.
- The Chiemgauer administration gets €100 by selling 100 Chiemgauer to consumers. It reserves €95 for reimbursement, donates €3 to the selected project and spends the last €2 to cover operational costs (such as pamphlets and office overhead).
At the end of 2012, a full 2,573 consumers, 633 local businesses and 248 projects had joined the system, with nearly 600,000 Chiemgauers in the system and an annual turnover of about 6,450,000. Its multiplier effect (the number of times transactions are done in Chiemgauer before being redeemed into euro) stands at 3.46, and its circulation is 2.78 times faster than the euro’s. Because the bill expires after three months, it is necessary to buy a stamp with 2% of the bill’s value to revalidate it. This method, called “demurrage”, is used to set up an interest-free money system and avoid money-hoarding.
WIRBank (Switzerland)
WIRBank, a cooperative bank founded in 1934 during the Great Depression, is the oldest complementary currency system in Europe. It is used by thousands of small and middle-sized enterprises as well as freelancers all over Switzerland. It is the central bank of a complementary currency called WIR (“we” in German), equivalent to the Swiss Franc but not convertible. As of the end of 2011, about 881 million WIR were given as credits; the annual turnover is about 1.5 billion WIR. Similar to Chiemgauer, WIRBank stimulates transactions between member businesses and freelancers and keeps the purchasing power within this economic circle.
As the central bank, WIRBank can provide cheaper loans to its member businesses. A commercial bank earns money at the margins, for example by paying a 2% interest rate on deposits and then lending to borrowers at 5%. WIRBank, by contrast, needs no savings accounts as it can create WIR by itself. This allows the bank to lend money at an interest rate of 3%, providing more-attractive loans for members without diminishing its own margin.
An intriguing study explains WIRBank’s complementarity in the Swiss economy: in 2000, James Stodder found that the WIR had a counter-cyclical effect on the economy, stabilising the credit supply during downturns and thus providing resilience when used with the Swiss franc. Such a benefit makes complementary currencies a valuable way to insulate communities from the worst effects of economic recession and events like Europe’s current economic crisis.
Complementary currencies can help civil society weather economic crisis
These experiences illustrate two main benefits to a community that introduces a complementary currency. First, by introducing their own local currency, communities can increase their self-sufficient capacity. More money is spent to buy locally produced goods and services, and the outflow of capital is reduced, keeping more money within the community. Christian Gelleri, Chiemgauer’s founder, sees complementary currencies having the potential to help weather the current crisis and has proposed introducing a similar system in other countries.
Second, complementary currencies increase financial autonomy. Both Chiemgauer and WIR are controlled by civil-society organisations that can give loans by themselves without being dependent on the global financial market. This allows local businesses to borrow money even during financial downturns, as local banks continue to lend.
Other relevant experiences in Europe
There are more interesting examples of these currencies in Europe, such as SOL-Violette (Toulouse, France), TEM (Volos, Greece), RES (Belgium and Catalonia, Spain), Bristol Pound (Bristol, United Kingdom) and Sardex (Sardinia, Italy). Complementary currencies work better when introduced in broader areas, such as a county and region, and their link to legal tender (such as Chiemgauer) is quite useful in connecting consumers with local businesses. You can learn more about complementary currencies by visiting complementarycurrency.org or reading the book “Local Money” by Peter North.
Tags: Movement Profile