8 Nov 2010
Ingredients of Transition: Strategies for Plugging the Leaks
Any STRATEGIC THINKING (5.10) and planning for STRATEGIC LOCAL INFRASTRUCTURE (5.5) must be focused around its role in strengthening and reinvigorating the local economy. Likewise, the financial resilience of the community needs to a central consideration in designing PRACTICAL MANIFESTATIONS (3.9), WORKING WITH LOCAL BUSINESSES (3.12) and promoting a culture of SOCIAL ENTREPRENEURSHIP (5.2).
(We are collecting and discussing these Transition ingredients on Transition Network’s website to keep all comments in one place. Please leave feedback and comments, suggestions for alternative pictures, anecdotes, stories and projects for this ingredient here).
Money, like other aspects of life, has become controlled by distant organisations who, as the recent economic turmoil has demonstrated, do not necessarily have our best interests at heart. As the New Economics Foundation put it, our economies have become like ‘leaky buckets’, money that should be staying and circulating locally being sucked out to distant corporations and shareholders. This all adds to our vulnerability in times of increasing uncertainty, rather than reducing it.
The Core Text
The New Economics Foundation (nef) first coined the concept of the ‘leaky bucket’. It is a simple enough concept (see right). We can visualise our local economy as being like a large bucket into which money flows from salaries, grants, pensions, and other sources, yet in most cases, much of that money pours straight back out again. Each time we pay our electricity bills to a distant company, we shop in a supermarket or chain shop, we invest in foreign banks because they are offering higher interest rates, we favour imported goods over local ones, our money goes pouring back out through the holes in the bucket, and its potential to make things happen, to generate economic activity and create employment at the local level, is lost. However, as nef point out, “every outflow of money is a potential enterprise opportunity”. If we are serious about seeing Transition as a powerful tool for local economic revitalisation, we need to develop strategies and models that support and strengthen local economies, rather than adding to the ongoing undermining of local economies which seems to be relentlessly gathering pace around us.
But what is so important about local businesses? Why put so much effort into supporting and instigating them? As nef put it:
“Local enterprises are more likely to employ local people, provide services to improve the local quality of life, spend money locally and so circulate wealth in the community, promote community cohesion and, by reducing transportation of goods from across communities, are likely to have a smaller environmental footprint”.
Another reason is what is known as the ‘multiplier effect’. This is the observation that supporting locally owned businesses results in more money cycling locally than is the case with supporting chain shops. Ward and Lewis examined the local economic benefits arising from local food networks, and found that £10 spent with a local grower circulated two and a half times locally, being worth £25 to the local economy, whereas the same money spent in a supermarket left the community much quicker, with a multiplier of just 1.4, being worth just £14. Transition initiatives look at plugging the leaks, and encouraging the multiplier effect in a range of ways:
As Peter North puts it in ‘Local Money’, “local currency models are still in their infancy, more like Wright’s biplane than a Boeing 747”. Transition groups have been experimenting with local currencies and have generated a very valuable body of experience and knowledge. The Transition experiments stand on the shoulders of, and have learned a great deal from, previous attempts at local currencies, such as Ithaca Hours and the currencies that emerged during the economic collapse in Argentina. The idea is straightforward. A printed currency that can only be spent in a given community by necessity can only circulate locally and is prevented from passing through the holes in our metaphorical leaky bucket.
The first experiment, the Totnes Pound, was first produced as a limited issue of 300 £1 notes accepted in 18 local shops. The second issue was made available at a 5% discount, so that 95p sterling bought 1 Totnes Pound, in effect a 5% subsidy for supporting local businesses. The current one is a straight one-for-one exchange, and is accepted in over 80 businesses. This inspired other places to develop more sophisticated schemes drawing on the learnings from Totnes.
The Lewes Pound was initially issued just as £1 notes, generating an unprecedented demand from currency collectors worldwide which meant that 3 days after launching, the first printing had sold out and notes were selling on Ebay for up to £50! The Lewes Pound was subsequently expanded to include a £5, £10 and a £21 note (well why not?), and I still consider them the most beautiful bank notes I have ever seen. It is accepted by over 150 traders and recently appointed a part-time project co-ordinator.
The London borough of Brixton then launched the Brixton Pound, an experiment focused on that one area of London. The faces on the notes were chosen through a ‘Vote for the Note’ poll, and featured figures with historic links to the area. Lambeth Council funded the design and printing of the notes, and the Council’s CEO told the launch “I want this to become the currency of choice for Brixton”.
The Stroud Pound was launched around the same time, a different model organised by Stroud Pound Co-operative to ensure real ownership and control by the community (although people who aren’t members can still use the currency, picking them up in change), and also required a small charge every 6 months in order for them to retain their value, as an incentive for their circulation. The Hawick Pound in Scotland was a smaller scheme that issued just a £1 note, which generated a lot of media coverage (as, indeed, have all of these schemes).
Reflecting on the Transition local currency schemes set up this far, Peter North argues that they appear to work well among ‘green’ and ‘lifestyle’ businesses where alternative minded customers are happy to accept them in their change. For Molly Scott Cato, one of the originators of the Stroud Pound, “making people believe that change is possible is the first step towards change. Local currencies do that like nothing else”. As North also notes, all of the Transition currencies launched thus far focus on consumption, none have yet cracked influencing local production of local goods for local consumption.
Transition currencies, he argues, need to start “moving from being a means of circulation between existing local businesses to tools for building greater local resilience by stimulating new local production”. For Cato, while so far local currencies haven’t been proven to stimulate local production, they are “a fantastic educational tool because they demonstrate this weakness with local supply (and therefore lack of resilience) so clearly”. For her, the next step is for local currencies to be run in partnership with local food production systems.
This idea of backing local currencies with something tangible, such as food or Shann Turnbull’s idea of energy backed currencies, such as ‘Kilowatt Dollars’, could prove important in the evolution of these currencies. Another important consideration is the fact that so few people regularly use cash in their daily transactions as we increasingly favour cards and electronic transfers of money (which, it could be argued, is in itself a form of exchange which affords a community less control over its affairs than a printed currency does). Transition Network and nef are looking to develop an electronic currency system, initially to be piloted in Bristol and in Lambeth in London, which may offer another interesting way forward.
Time Banks are another useful tool, especially among socially excluded communities. With Time Banks, everyone’s time is worth the same, whatever the nature of the work they are doing. It encourages people to help each other out, and to then be able to draw down return favours when they need them. It can take place between individuals or between organisations or agencies. It is a straightforward system to run, and can be a very useful tool for working with more disadvantaged communities.
North describes LETS (Local Exchange Trading Systems) as being “really just a network of people who agree to share their skills with each other by means of a local currency that they have created and agree to use”. In effect, members list the skills that they are happy to offer, and also the services they would like to avail of, and these are compiled into a directory. Members are then encouraged to trade with each other, LETS units exchanging hands, either as cheques or electronically. One more recent experimental evolution of LETS is the Lewes SwopShop, which allows members to trade goods and services between each other online.
One of the key ways to plug leaks is to focus on procurement, that is, where local organisations source their food, services and so on. Hospitals and local authorities are among the organisations with the largest procurement potential, who, if they were to focus on local goods and services, could have a huge economic impact. The UK public sector spends £1.8bn a year on meals, around 7% of the entire UK catering market. Strictly speaking, through EU legislation, they are not allowed to specify local produce is deemed ‘anti-competitive’. However, there are ways around this, many of which can be justified under broader environmental policies, such as designing into tenders clauses which specify:
- Fresh ingredients (tends to promote locality as a quality feature
- Demanding food in season
- Favourable service criteria, i.e. fresh food, minimal packaging, and organic food.
Transition initiatives could work with their local schools or hospitals to help them with their procurement decisions. The Soil Association’s ‘Food For Life’ programme can be very helpful with this. As Kevin Morgan and Adrian Morley point out, procurement, if done well, is about the stimulation of demand for local produce and services, but what is also needed is the developing of the supply to meet that demand. If done skilfully, good procurement can be a vital driver of local economic regeneration.
Creating new financial institutions is another step which some Transition initiatives might find attractive. Credit Unions are easier to set up than new community banks, for which the regulations in the UK are very onerous. Where local banks (6 municipal banks still exist in Scotland) or Credit Unions still exist, supporting them is a key element of plugging the economic leaks of your community. There is plenty of scope for the creation of new models once the basic principle of maximising the number of local transactions is understood.
Develop projects and strategies which link goods and services and which encourage the local cycling of money. The infrastructure and exchange mechanisms need to be put into place which enable people to live more local lives and strengthen their local economies. These could be local currencies, Time Banks, Credit Unions or a range of other strategies. Ensure that they are seen as being colourful, fun, accessible and have a high degree of ‘money-ness’ (that is, they feel like money, or feel familiar to people…).
Connections to Smaller Patterns
Any process that your Transition initiative initiates in order to plug the leaks will need to be underpinned by some form of AWARENESS RAISING (2.9), so that people understand why you are doing it. It will also stand on the shoulders of your BUILDING STRATEGIC PARTNERSHIPS (2.12), and will probably require FORMING A CORE TEAM (2.1) independent of the Transition initiative’s other groups. These initiatives benefit greatly from the inclusion of ARTS AND CREATIVITY (2.8) and the skilful management of VOLUNTEERS (3.2). These projects generally need to be able to fund themselves, so FINANCING YOUR WORK (3.3) will be an important consideration. The launch of any such initiative is a great excuse for CELEBRATING (3.4) and for TRANSITION CAKES (2.15)!
 Ward, B, Lewis, J. (2002) The Money Trail. New Economics Foundation, London.
 For a detailed overview see North, P. (2010) Local Money: how to make it happen in your community. Transition Books.
 Department for Environment, Food and Rural Affairs (2008) English Organic Action Plan Steering Group (OAPSG) Strategic Paper on Public Procurement. http://www.sustainweb.org/pdf2/org-238.pdf
 Morgan, K, Morley, A. (2002) Relocalising the Food Chain: the role of creative public procurement. The Regeneration Institute, Cardiff University.
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