LETTER FROM BRITAIN
In Britain, Tough Times Spawn Alternative Currencies
Sunday, September 27, 2009
LONDON -- Throughout Britain, people are hanging on to their hard-earned pounds, scrimping and saving as they ride out the recession.
But in a few communities, people are taking a different tack: printing their own money and spending it. No, the queen's image on the iconic British pound isn't being counterfeited. Instead, some communities are producing their own scrips -- some of the latest have painter Vincent van Gogh's face on them -- which can be used much like cash at participating businesses.
The latest community to do so is Brixton, the second area in Britain this month that introduced its own currency. With an initial run of 40,000 notes in various denominations, it is the most ambitious project here of its kind so far.
Sometimes called Britain's Harlem, the Brixton is a multiethnic area in south London with a large African Caribbean population and a vibrant atmosphere. The kind of mind-set seen in this bustling and close-knit community is crucial for any local currency plan to work, say economists, adding that like any other form of exchange, the success of the Brixton pound will hinge on the continued confidence and willingness among people to use it.
The first Brixton pound entered into circulation last week when Christopher Wellbelove, mayor of Lambeth, the borough that encompasses Brixton, waved a sepia-toned one-pound note in the air at a town hall meeting where it was unveiled and used it to buy a box of tomatoes. (He got a good deal, said many at the scene.)
"It's a modern-day IOU," said Bruce Weber, a London Business School professor who teaches a course on alternative currencies.
History offers many examples of people developing alternative currencies in tough times. After the financial meltdown in Argentina in 2001, for instance, bartering clubs sprung up nationwide. When Germany was hit by hyperinflation in the early 1920s, many towns issued special money that was not recognized as legal tender but was widely accepted by businesses.
People can buy Brixton pounds with standard British currency -- a pound for a pound -- at a half-dozen local outlets. The incentive for consumers, beyond an altruistic desire to support local businesses, is that many restaurants and stores will offer a 10 percent discount to people using the currency. Those businesses, in turn, hope to build customer loyalty. They will make change for purchases using the Brixton currency to continue its circulation, though customers can insist on standard British money if they wish.
"It can stimulate the local economy," Weber said. "It gets done in tightknit communities where people feel they have a shared stake in things. It's a response to recession conditions. . . . If we issue a certain kind of currency amongst ourselves, maybe it keeps someone to do grocery shopping within the community."
Brixton pounds were launched by Transition Network, an environmental group that promotes low-carbon living and believes that by promoting local businesses people will travel less and reduce impact on the environment. Inspired by the BerkShares currency launched in western Massachusetts three years ago, Transition Network also has helped launch currencies in the town of Stroud this month and in Totnes and Lewes earlier.
The British are usually embarrassed to discuss money. But in Brixton, cash is the talk of the town, with residents curious to know which businesses will accept the new currency (participants include a local grocer, a pharmacy and a belly-dance instructor) and which ones will not (a popular movie theater and cafe.)
Ossie Bash-Taqi, 44, who is accepting the notes at his catering company, said he has more faith in the Brixton pound than he does in its official counterpart.
"In a community like this, if you break the chain, you'd have a lot of angry people. We all know each other, and you can't hide behind an empty bank counter," he said.
There is no law against using alternative currencies, be they pieces of paper or beaver pelts or seashells, as long as they are not passed off as official money. Tax authorities also have no problem with the currencies as merchants continue to account for all of their trade.
"There is still some apprehension," said Tim Nichols, project manager for the Brixton pound. "But there's also a lot of buzz, and we're hopeful it will strengthen the local economy."
Nichols said it cost about $16,000 to have the Brixton pounds printed and to pay for the public information campaign. Most of that was donated by local businesses. The notes bear pictures of significant Brixton residents, including van Gogh, who is said to have lived there in his early 20s, as well as watermarks and security measures that the organizers hope will prevent counterfeiting.
Any effect on the greater economy will be "probably nil," said Nick Mayhew, an expert on the history of currencies at Oxford University. The upshot of alternative currencies, he said, is mostly increased community spirit.
"It's a constant reminder to shop in Brixton," said Leon Rothera, 28, owner of a local restaurant called Honest Foods, the first business to sign up for the new currency. "But let's see what happens when the novelty wears off."