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The case for local currencies (Part Two)

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WASHINGTON - Ithaca Hours is a local currency issued in the Upstate New York town of that name. One Ithaca Hour is worth $10 in goods or services among the merchants and individuals who accept Ithaca Hours - that is, $10 in spending power for every Ithaca Hour. A number of denominations have been printed.

The Hours began in 1991, the brainchild of urban planner Paul Glover. In one of many national news pieces on the Hours phenomenon, Glover pointed out that he only set the table. The community came to the feast, so to speak, with its participation.

That participation made sense in an economically-declining region where skills and time were more plentiful than dollars. The local currency permitted barter by a third party: one party issues it, another party accepts it, but a third party - perhaps an entrepreneur who might never go into business if the only way to start was to invest capital in dollars - can barter services for as many Hours as others may spend for those services. They can sell their skills and services where they cannot work for dollars. (A reminder: they are not bargaining over the value of Ithaca Hours, which has been established - as legal tender in local law no less - as $10 worth of goods or services. They are bartering the goods and services - what goods does one party need that another can provide?)

In other words, that third party can offer services they might never offer otherwise, knowing that people may be willing to pay the local currency for the service offered - cutting and delivering firewood, let's say. Those same people may be willing to spend the local currency where they would not or could not spend dollars.

Local currencies don't make earning a living any easier, for labor must back the Ithaca Hour - that is its value. But the point is: it makes it possible to labor for profit where the dollar economy might not.

For example, a woman in the Ithaca region drives a delivery truck in return for Ithaca Hours, and spends them on piano lessons from another Hours participant. A bicycle shop in the town accepts them as payment for any kind of repair work. A day care provider accepts them as partial payment, keeping it partial because if too many people paid in Hours - the program would run out of services it could pay for in Hours. Many low-wage workers who cannot increase their dollar salary (employers only reluctantly pay overtime, and in the Ithaca economy raises were few and far between) can increase their earning power by offering services for Ithaca Hours.

But they must then have suitable ways to spend the Hours among participating merchants and other service providers. Thus it is the circulation of the local currency among participants that increases its value. Or referring again to Glover's phrase, circulation of the local currency is what makes for a feast.

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The Hours began as a luxury currency: something people would spend at movies, or in restaurants. This is because only the more well-off merchants felt they could afford to participate: they had plenty of greenbacks. The decision of more and more merchants to accept the currency for basic needs, especially food and rent, made all the difference. Crucial in this development was a farmer's market, where many of the merchants were accustomed to barter. That meant anyone accepting the Hours could get value in return for it, so that not only those with plenty of greenbacks could feel secure in participating. Eventually, it came to mean that participating merchants could profit more if they accepted Ithaca Hours.

Little more than five years after their introduction, $60,000 in Ithaca Hours had generated the equivalent of $6 million in transactions among some 2,000 participating merchants and service providers. To date, $105,000 in Ithaca Hours has been issued.

With success like that came many other considerations. Yellow pages of participants and places to spend the Hours, had to be printed and distributed. Notes had to be designed so as to foil counterfeiters drawn by the success of the currency. Damaged notes had to be repaired.

But the latter was a good thing, for damaged notes were notes that had passed through many hands - they had circulated. And that meant they had been the occasion for barter between people, who generally went away from the transaction feeling better about their fellow townspeople. In fact, the Hours generate many new relationships, and many of these are friendships.

Because firms outside the region, much less in Taiwan or Mexico, tend not to accept the local currency, the success of Ithaca Hours has also meant a measure of discipline in community reinvestment: participants had shopped at home, keeping the "money" local, growing the Main Street economy.

Ithaca Hours is the best-known of numerous local currencies in America. More information, including a "starter kit" for local currencies, can be found at www.ithacahours.com.

(Continued in Part Three)