26 Nov 2007
“Economics in Transition”: an evening in Totnes exploring the potential and future of the Totnes Pound.
On Sunday 17th November, an evening was held at the Seven Stars Hotel in Totnes to explore the past, present and future of the Totnes Pound. We were extremely lucky to have at the meeting Richard Douthwaite, Bernard Lietaer and David Boyle, who were all at Schumacher College for an economics think tank which we borrowed them from. The intention of the evening was to gather the ideas from the experts, from the community and from local traders about the Pound, about its successes and its weakenesses, in advance of the planning for a third phase early in the New Year.
The first speaker was **Noel Longhurst** of the TTT Totnes Pound group, who gave an overview of the scheme so far. He began by explaining that, as the New Economics Foundation have identified, every time money is spent with local businesses it is often then respent locally, an effect known as the ‘multiplier effect’. The Totnes Pound, Noel explained, has four principle aims;
1. to build local economic resilience and support the process of localisation
2. to raise questions about money and complementary currencies in the UK
3. to raise awareness about the Transition movement, peak oil and climate change
4. to act as an experiment.
The inspiration for the scheme came from a talk by Bernard Lietaer at Schumacher College, as well as from various existing local currency initiatives around the world. The two main ones are Berkshares in Massachusetts, which is used by 250 businesses, and the Chiemgaur in Germany, which has over 600 businesses involved and which is a mixture of cash notes and electronic trading. Noel confessed, however, to knowing less about this scheme as the website is all in German! He then showed the following film about Berkshares…
He described the phases thus far of the Totnes Pound. **Phase One** ran from March to May 2007, when 300 notes were gifted into circulation, with 18 businesses participating. **Phase Two** ran from July to December 2007, with 10,000 notes printed, 4 issuing points and over 60 businesses taking them. **Phase Three** is planned to start in January and is still being finalised.
The Totnes Pound could potentially provide income to the community in three ways. Firstly though ‘leakage’, that is notes being taken home by tourists and souvenir hunters. Secondly through earning interest on the money taken on the notes, and thirdly, potentially at least in a much bigger scheme, through allowing money to be invested in land, premises, carbon or in equity.
The group running the Totnes Pound are currently incorporating as an Industrial and Provident Society called ‘Totnes Currency’, and have just submitted a funding application for a fulltime co-ordinator, as so far the whole scheme has been driven by volunteers in their scarce spare time. He closed his presentation with a sneak preview of the new Totnes Pound, which I must say, was rather smart. Noel then invited each of the guest speakers to offer their thoughts.
**David Boyle of the New Economics Foundation.**
Why is the Totnes Pound important? It is important because most complementary currencies are cyclical. That is they arise as the conventional currency is in decline, and they decline when the conventional currency is strong. Many of the classic alternative currencies such as the Wara and Worgl arose in the depression in 1930s Germany, and LETS arose during a recession in Canada. The fact that the Totnes Pound is starting while the conventional money is still strong is very exciting.
Another reason it is important is that it values things that conventional currencies don’t value very much. Money isn’t really designed for use by ordinary people. Only 5% of it is actually used by us, the rest is speculated on international markets in a way that we have no control over or use for.
So, where next for the Totnes Pound? Firstly, the scheme might consider using it to raise currency for loans. Secondly it needs to remember not to get too technocratic. It must always allow people to use them in whatever way they can, so that it remains an exciting thing for people. At the end of the day the success or failure for the Totnes Pound will be due to the marketing. In Ithaca, the main reason for the success of the Ithaca Hours scheme was its founder Paul Glover, who spent his time going from shop to shop, seeing how they were doing, how they needed help spending them, and in effect, it worked because people trusted in him.
I live in Ireland, and when I began to look into alternative currencies, the economy was in decline, and most young people left and emigrated. When that happens, the communities decline, high unemployment ensues, it is a vicious cycle. How, I wondered, might one reverse this decline? At first I was interested in LETS schemes, which is, in effect, a straight copy of conventional money systems, where money, is lent into circulation. However, it is unbacked, and this is a fatal flaw in the system.
The Totnes Pound is a second generation community currency, and as such it has a better chance of working that LETS systems. It is based on lots of good thinking. It is worth remembering that two of the most prosperous communities in the UK have their own money, Jersey and Guernsey. When you visit either and put your card in an ATM you get the local money from the machines. Perhaps Totnes could model itself on these?! In Jersey and Guernsey, the money is backed by sterling, and when people exchange sterling for Jersey money, that sterling goes into the Government’s account and they can use it to invest, earn interest from and so on.
If the Totnes Pound were sufficiently successful, it could generate a lot of money on reserve that could be lent to local businesses. It would be like a local development fund, generating, in effect, something for nothing. One of the things that is most interesting about the Totnes Pound is that it is starting while we are at the top of the market. When we go over the top and into a downturn, it will be hectic, so to put it in place now is not just a valuable asset to Totnes, but also a model for towns across the UK.
The Totnes Pound is not just a Totnes story, it is part of a huge international movement. In the early ‘90s when I started to get interested in this, there were only 200 such experiments in the world, now there are 5000. In 1984 there were only 2! Something is clearly going on, but what? It has in part to do with a need for people to take more control of their own destiny. Globalisation has had some benefits, but it has gone too far. There is no role for the human anymore. The general purpose of money should be to link unmet needs with unused resources. Conventional money doesn’t do this. We need to make that link, and in a way that we can control.
We are observing currencies, including the Totnes Pound, which are based on the ‘Wright Brothers Aeronautics’ principle, that is the theory of how the Wright Brothers flew was discovered 20 years after they actually did it. The same applies with the Totnes Pound, it is a miracle that it flies, but the key point is that flying is possible at all. The currency itself is not the objective, rather it is the means to create a different community than would otherwise be the case. Many have failed, the runway is littered with crashed prototype aircraft! Every time one crashes, we can learn and do a bit better. Pioneering can have good and bad aspects.
In the US we have a joke. “How can you tell who are the pioneers?” “They are the ones with the arrows in their backs”. It can be exciting, but it requires the generation of creativity. One issue that the Totnes Pound will need to address is the management of the sinks. These are the shops that end up with too many notes in the till. It will require a lot of work, but the biggest job that will help the scheme to be successful will be to help these businesses find local suppliers who will take Totnes Pounds. If they can spend them on local suppliers you will be creating a complete cycle. They will need help with this though, who can supply eggs and so on. This is the creative part, and something the Totnes Pound team will need to focus on. This will strengthen the case for using local goods and will be a key element of its success.
**Some thoughts from the ensuing discussion.**
The point was raised from the audience that a very useful link could be made with Community Supported Agriculture schemes, where the Totnes Pound could be used to pay in advance for produce. In response to a question about whether such currencies should be backed or now, Richard Douthwaite responded “ all money is based on confidence, and a 1:1 backing would give that. At the moment it is backed because people know they can at least get 95p for it. This is essential in the start up phase, but it will need to move to a point where no-one ever considers cashing in the notes because any local shop will accept it. A crucial measure of success for the scheme will be how many are redeemed. Every note redeemed should be seen as a failure, that links with suppliers have not been built properly. If people have enough confidence in them then perhaps they eventually won’t need backing!”
Another question looked at whether or not the new Totnes Pounds should stick with the 5% rate, or do away with it altogether. Bernard Lietaer’s thoughts were as follows;
For a business to pay 5% for the kind of customer loyalty the Totnes Pound can generate is very cheap./ One would usually pay far more. The problem with the 5% is that it creates the need for the scheme to help businesses spend it so they can push them up the supply chain. Local producers are key to this. You need the equivalent of Paul Glover on his bike!
David Boyle added that the advantage that TTT has is that it puts the currency in a context, it puts the problems of peak oil and climate change higher up the agenda. Credibility is key, you want it accepted everywhere.
The next question was “where would you see the Totnes Pound being in 5 years time?”
**David Boyle.** In Ithaca, the place is one of few towns in the area that still has a town centre, with thriving local stores. As technology advances, there will be more pressure to make the Totnes Pound virtual and put it one a smart card. Most shops nowadays have the technology to be able to accept this. The beauty of local currencies is that people spend them on things they wouldn’t necessarily spend conventional money on. It will be key to get the Council and the local paper involved.
**Richard Douthwaite.** It would be good in the future to consider tying it into energy. I understand that Totnes already has an ESCO. In 5 years time it might have taken over the grid! It could have connected a combined heat and power plant, and have formed with the principle of getting all the energy used locally from local resources. This can then be sold back to the grid for a good price. When we get the other side of peak oil, people who are producing energy will be able to sell that energy, in effect they will become the bankers. Perhaps by then value will be denominated in KwH rather than sterling. An ESCO could pre-sell power, inviting people to pay for their electricity or heat in advance.
We should, in 5 years time, be able to run these kinds of currency while thinking like bankers. LETS in the early days was run by radicals, but perhaps we will know that our currencies have succeeded when they are run by the kind of people who are attracted to banking and who we only want to speak to occasionally!
**Richard Douthwaite.** We need to acknowledge that at the moment only 3% of transactions are done in cash. At some point these currencies will need to go electronic. Cash is only a small percentage of trading, and the trend away from it will continue. It is too soon for smart cards though, I’d recommend you stick with the paper currency and then in 4 or 5 years jump to a currency which is traded using mobile phones.