Bill McNally and two colleagues from Transition Nelson came to the Green Drinks event on Jan. 18 — sponsored by the Sustainability Commission at the Rouge Gallery — to describe the Community Way local currency system and how it might be implemented in the Columbia Basin.
The idea, devised by economist Michael Linton, has its roots in the Local Exchange Trading System (LETS) which, McNally explained, was invented in the Comox Valley in 1983 and “is still alive in [parts of] Australia and New Zealand, but has died out in Canada.”
The Green Drinks event focused on Linton’s new local currency system called Community Way which was recently implemented in the Comox Valley. McNally reports it is going well, with 40 participating businesses, and now Transition Nelson would like to bring the system here.
First, McNally explained, businesses donate special “community way dollars” (CW$) to federally registered charitable organizations, getting a tax-deductible receipt. The CW$ can be thought of as “generic gift certificates for local businesses,” McNally said.
The charities then spend the CW$ at participating businesses, for example to hire local contractors.
“Any vendor who participates will be able to set what portion of their payment will be in community way dollars,” McNally added, the rest by regular dollars. Taxes are payed on the full amount of the sale just like normal money.
Charities can also spend CW$ on individuals within the community, for example to increase wages or reward volunteers.
An individual can get involved by exchanging regular dollars for CW$ with the charities, giving the charities national currency to support their causes. The individual can then spend the CW$ at participating businesses.
Businesses, in turn, spend the redeemed CW$ on other businesses, staff bonuses, and so forth.
“[Community Way] creates a pool of money that stays in the community,” McNally said. “It’s the beginning of a local credit exchange that over time will grow.”
“I’m going to give money to charity anyway, because I want to help,” McNally continued. “Wouldn’t it be nice if I could [do this] and also contribute to the local money supply that enhances the community and strengthens local trading connections?”
Local currency is known to bring many benefits, McNally continued. “You create a pool of money, a local money supply that stays here. If you increase the money supply, you increase the economic activity in the area.”
Local currency leads to more frequent transactions, McNally argued, because “[it] changes hands more rapidly than national currency. People are always a bit distrustful of it and eager to get rid of it!
“The key to making this system work is getting as broad a base bought in as possible, with as many goods and services,” he continued. “I don’t want to be stuck with useless dollars.”
On the other hand, a big reason people advocate for local currency is their distrust for the stability of the global system. “The current, modern economic system is predicated on endless growth,” McNally said, giving the following example:
If the government issues a bond to the central bank, say $100, then the central bank puts that $100 into circulation. In the meantime, the government owes the central bank interest on the bond, so there’s never enough money in the system to pay the interest. The system has to keep growing for the government to make those payments.
“Therefore,” he concluded, “it’s a highly volatile system that cannot lead to a steady state economy.
For more information, visit www.communityway.ca.
Stay tuned for the Sustainability Commission’s Nitty Gritty talk coming in February, running in alternate months with the Green Drinks series.