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The case for local currencies (Part One)

WASHINGTON - It is legal to print money in the United States as long as it's in units of at least a dollar's worth of value, as long as the individuals who earn the local currency with their labor pay U.S. taxes on its value as computed in greenbacks, and as long as it is not counterfeiting the national currency.

In Indian country, it would be up to tribal governments to decide whether a tax had to be paid on a local currency circulated within reservation borders. Of course, one can readily imagine state attorneys general demanding tax revenue if non-Indians earned this "scrip" (as local currencies are often termed) on reservations. Tribes could take steps to prevent that by permitting only tribal members to earn the local currency, or by levying some form of taxation on all local currency earnings.

So much for the legal situation. Many other issues, non-legal but every bit as important, would have to be addressed before a local currency could circulate in Indian country. Above all, trust among the participants - those issuing the local currency, those accepting it as payment, and those earning it - would have to be firmly established. Lending circles, after all, have had limited success in America, in part because of distrust among circle members as to whether or not initial borrowers would pay back their loans, replenishing the circle funds for subsequent borrowers. This issue is as old as banking itself: who can you trust with other peoples' money?

But anyone who wanted to initiate a local currency within Indian country would at least know going in that many reservations meet the historical criteria for successful local currencies. These are as follows:

A group of people must exist who possess skills and services for hire. Preferably, more skills and services will exist than opportunities to offer them in exchange for fair value. The local currency then becomes that store of fair value, enabling participants to exchange their skill or service for another they lack. Paul Glover, founder of the "Ithaca Hours" currency and a counselor on local currency initiatives, called money "the missing link in getting good things to happen" in this scenario, as reported by Bennett Daviss, an author on the subject. (His 1997 "Alternative Dollars" article, published in the January/February Country Journal for that year, is one of several sources for the current series of occasional articles.) A local currency can supply an alternative source of money.

The national currency must be in short supply. Where dollars are plentiful, no one will be interested in a local currency because the essential functions of money (to store value, serve as a standard for reassuring value, and facilitate exchange of value) are already being fulfilled. When dollars become scarce, as on many reservations, interest in alternatives tends to perk up. In fact, local currencies had their hey-day during the Great Depression, when many communities survived by issuing local "scrip." For instance, in an example cited by Daviss, a Massachusetts newspaper in those years paid its workers in scrip the newspaper printed; the workers spent the scrip with participating local shopkeepers, who could exchange it for advertising at the newspaper. One of today's leading local currencies, the "Ithaca Hours," got its start in the Upstate New York university town it is named for - a town with twice the unemployment of the average municipality in the state when Ithaca Hours began to circulate, according to Daviss.

Community reinvestment must be a priority, as it has been increasingly for some 20 years in Indian country. As Daviss reports, local currencies can promote community reinvestment in conventional settings: "Local currency initiatives often begin as self-defense. ? a dollar traded at a locally-owned store is usually spent between six and 15 times before it leaves the community. The shopkeeper pays a clerk, pays his landlord and his doctor, and buys a newspaper ad, and each of the people and businesses he pays spends that dollar again in turn. 'From $1, you create another $5 to $14 in value within that community'? if the same dollar is spent at a national chain store, up to 80 cents of it leaves the community immediately - to pay executives' salaries at the chain's headquarters, to pay manufacturers and importers in faraway towns, to pay truckers who delivered the merchandise, and so on. 'The store pays its employees with the 20 cents that's left ? and because they have low incomes, they shop at chain discount stores, and there you lose the other 20 cents. But local currencies never leave the area, so the value they represent is a permanent addition to an area's economy.'" Of course, many tribal nations will be more concerned with border towns than with national chain stores, but still the point holds that local currencies may offer some alternative to border town-reliant reservation economies.

Many tribes may also find an expression of sovereignty in local currencies. And certainly, a local currency that caught on, even to the point of circulating between and among reservations, would be a very great expression of sovereignty.

But sovereignty talk? That is not an instinct that should be indulged when it comes to currencies. To initiate a local currency would take a core of people willing to "shoulder the effort" in the start-up phase, as Daviss states it. It would take a steady dedication to building trust with still others (at least 50 to 60 by one estimate) who would trade the currency among themselves and gradually expand its use, followed by an intensive educational effort designed to familiarize people with the virtues of a local currency and to win over skeptics, and finally a world of patience as one difficult issue after another comes around for consideration - starting for instance with the value that "backs" the scrip, much as governments or gold back conventional currencies. The value may be in dollars, hours of labor or indeed dentalium (as seems to have been the case among Northwest trading tribes in times past). But that value must be agreed upon, and that could mean a great deal of discussion, especially among tribes that may prefer traditional valuation systems to conventional Western measures of worth.

Daviss again, from his 1997 article: "Some groups that began planning local currency projects two years ago have yet to print their first dollar. Expertise must be found, participants recruited, studies done, marketing campaigns plotted, currency designed."

For all that, local currencies continue to thrive in the United States (as will be seen in future installments of this series). And then there's the Euro, a concept for an alternative currency that is only just beginning to gain strength as a pan-national exchange unit ? after 50 years of patient labor on the part of sovereign states.

(Continued in Part Two)