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Chapter 26: SHARE Micro Loans and Deli Dollars
A project of the Schumacher Center for New Economics | The Autobiography of Bob Swann
In 1982 the Schumacher Society, under the direction of Susan, organized a local study group out of which grew a microlending program called SHARE ( Self-Help Association for a Regional Economy). This simple nonprofit lending program has, as intended, laid the groundwork for issuing a local currency in the Great Barrington region. To date we have had no defaults on any of the loans ($300 maximum). We've written a great deal about this program, most of which is included in our pamphlet, Local Currencies—Catalysts for Sustainable Economics.
While SHARE was laying the groundwork for a local currency in Great Barrington, a surprising development thrust the idea of a local currency into the national spotlight. It was what we called the "Deli dollar" approach. Susan had suggested to a local delicatessen owner, Frank Tortoriello, that instead of borrowing from SHARE he issue his own money (local currency or "scrip"), sell it to his customers at a 10 percent discount, and then redeem it for food six months later when nine dollars of scrip would buy ten dollars worth of food.
Frank raised $5000 in no time; five other businesses subsequently picked up on the idea and did the same thing. This story caught the eye of a reporter from the Washington Post who happened to be in Great Barrington. His story appeared on the front page of the Post. The result was a number of TV, radio, and newspaper reports and a radio interview with Susan, followed by a flood of phone calls and letters to the Schumacher Society.
One of these calls was from Paul Glover, who heard the radio interview while recuperating from a back injury. After his back improved, Paul went to work enlisting subscribers, and when over fifty individuals and businesses agreed to accept Ithaca Hours as currency, he printed them. As a result of the publicity Ithaca Hours has received, over fifty groups across the country are now organized and printing local currency modeled after the Hours. (Paul sends out a handbook for organizing a local currency for $25).
There are several things I want to point out about Paul's system:
- 1) He is using a time measure for value (One Hour equals ten U. S. dollars). Theoretically the exchange rate of dollars to Hours will change if dollars devalue in the future—or increase in value, if anyone can imagine such a thing.
2) There is no commodity redemption for Ithaca Hours. The question is, "Is there any need for backing (or redemption) for locally issued money?"
3) A demurrage tax is not included. Bernard Leitauer, a former banker with the Belgian Central Bank who has written extensively on the subject of alternative monetary systems, believes that unless the demurrage-tax principle is incorporated into a local currency, it will not meet its potential.
Nevertheless, Ithaca Hours has issued the equivalence of over $50,000 and has over one thousand cooperating members. Paul says that on a yearly basis Ithaca Hours accounts for one to two million dollars of exchange value for businesses and individuals in Ithaca.
The Schumacher Society deserves credit for inspiring Paul Glover to print Ithaca Hours as a local currency intended for hand-to-hand use. We had been promoting the idea of a local currency for some time. In 1981 I wrote a pamphlet, The Need for Local Currency, and we discussed the idea in all of our Schumacher Seminars. In 1988 I delivered a Schumacher Lecture on the subject. Paul Glover had unsuccessfully attempted to start a Local Economic Trading System or LETS (launched in Vancouver, British Columbia, by Michael Linton) in Ithaca, using a computer to record trades. He was thinking about trying again when he heard Susan talking on the radio about local businesses issuing their own currency. She started Paul thinking about how to initiate a paper currency.
In my paper, "Building a Community Banking System," I suggested how a paper currency would work. I no longer believe that strictly local currency needs redemption in any form. The experience of Paul Glover and others around the country is demonstrating that trust is enough to keep a local currency moving and valuable. This does not mean, however, that a redemption system is not needed at the national or global level. All of Borsodi's and others' arguments are valid at this level. In fact, even with every effort to "buy local" or "trade local" as Schumacher suggests, a relatively small percentage of the average person's trading will be local—and will continue to be for some time.
I also suggested in my paper that it might be possible to use energy (in the form of electricity) as the redemption "commodity." What needs to be added is that the possibility of using electricity is increased by any of the "new energy" sources. Because some of these devices—referred to as "space energy"— draw energy/electricity from the air, they will almost certainly replace the limited sources of oil and coal. Thus, not only will renewable energy be available anywhere in the world but nonpolluting sources as well. Redemption will not be a problem because equal access to energy will be available to everyone.
©2001 Robert Swann