Santa Barbara has had its own currency twice in its history. The first from 1900 to around 1929 was simply an extension of the federal currency, the dollar, and was a convenience for the banking system. The second, launched in the late 1990s, was independent of the dollar, and promised to forge tighter community bonds, keep the precious fruits of our labors in circulation closer to home, and buffer Santa Barbara from the fluctuations and heartlessness designed into the very fiber of the U.S. dollar.
The initial response in the late ‘90s to what was called the Santa Barbara Hour was enthusiastic. A governing board formed quickly. The Fund for Santa Barbara anted up seed money. Newsletters, bumper stickers and educational forums blanketed the town. Bills were designed and printed. More than 300 participants signed on and the currency began to flow. A handful of businesses started accepting the currency, giving it the promise of becoming widely functional. The late Mayor Harriet Miller wrote an official letter in support, encouraging the currency’s use and adoption.
The currency came in like a wave, but receded quickly. In a few months, the currency that showed such great promise had all but disappeared. What happened was personal and local, but it was also national and even global. It was a story that many communities across the United States experienced in the late 1990s as they flirted with local currencies.
But, ask around town now about Santa Barbara’s local currency experiment and the answer is nearly always, “Never heard of it.” Then, after a healthy pause, “What’s a local currency?”
Water Under the Bridge
“I’m afraid the failure of the Santa Barbara Community Currency left a bad taste in the mouth of the people who might be willing to try it again,” said Jeff Nighman, a business owner and a student of local currencies, who would like to see local currencies get a new start here. “I wasn’t in town when the last experiment took place.”
For the two years from 1997 to 1999, the currency, known as Santa Barbara Hours, circulated among a small group of initiates. Such currencies were spreading quickly around the globe in the 1990s and promised to buffer local communities from the relentless tides of global economics. In fact, such currencies were designed to strengthen and enrich communities in direct opposition to the ebb and flow of the global economy.
“There were several hundred people involved,” said Bruce Bigenho (pronounced big-ain-yo), a musician, music producer and videographer who has lived in Santa Barbara for more than 30 years and was one of six founders of the city’s first true local currency.
“There was a newsletter, a monthly potluck.”
It started from disparate points and fused through one committed lightning rod of an individual.
“Bruce and I were talking to Elisabet Sahtouris,” recalled Mark Phillips, an engineer with Continental Wind Power and another of the currency’s founders. “She was giving the Al Gore talk (An Inconvenient Truth) well before Al Gore. And she was saying, ‘There’s this thing called Ithaca Hours. If you really want to do something for your community and not just talk about doing something, then this is the thing to do.’
“Then we get a call from Amory Starr saying she’s starting this thing up, and are we interested? We’d never met her.”
By the time Starr called Bigenho and Phillips, she was already under a full head of steam. In January 1997, Starr had sent off for the Ithaca Hours startup kit. Ithaca Hours is a local currency that was founded in Ithaca, N.Y., in 1991 by community activist Paul Glover. Six years in and the system was showing great promise. It was gaining widespread use, a rising circulation and adoption from businesses that provided real goods and services — food, shelter, clothing and health care. Hundreds of thousands of dollars in value were being cycled through the currency. All of it created and retained locally. (Ithaca Hours remains one of the strongest and best example of a homegrown local currency.)
The startup kit was Glover’s basic cookbook for developing a local currency, Hometown Money: How to Enrich Your Community With Local Currency. Starr reviewed it and at the first meeting, presented it to the group she had gathered.
“We didn’t want to reinvent the wheel,” Starr said.
The group agreed and became the Santa Barbara Currency committee. That initial meeting was attended by Starr, Bigenho, Phillips, Dinorah Molina and Tony Samara. They decided to meet weekly until they got the currency launched.
Starr was confident.
“These systems are easy to start,” Starr said. “When the organizing committee got to work in Santa Barbara, we were surprised by the level of positive response. The mechanics of getting it going are minimal, costs are low, and participants (ranging in age from 8 to 82) are enthusiastic. They come to meetings and even clean up afterward!
“Participants constantly testify to the sense of community that they gain in these experiences and how it gives them a sense of abundance.”
But people looking in from the outside were skeptical. Why did we need another currency? We had one already.
The Currency Toolbox
Nighman, co-owner of the wholesale nursery Santa Barbara Natives Inc., earned a master’s degree in Complimentary Economics through the Hutchins School of Liberal Studies at Sonoma State University. He participated in the Sebastopol Economic Forum, which was designing and organizing a community currency, a currency that has yet to be launched.
Nighman believes the definition and function of a currency is rarely questioned or observed.
“Most people don’t know there’s anything else,” he said. “The financial air Americans breathe is the dollar. In Mexico, it’s the peso. In Europe, they have the euro.
“Even though no one seems to know about these currencies, there is a ton of material available.”
For the model of how Santa Barbara Currency went about it, Nighman points me to Glover’s work on the Ithaca Hour. But to understand the national currency and why you would want a local currency in the first place, he cites Bernard Lietaer and Thomas Greco.
Lietaer was one of the designers of the euro. In his development of the euro, Litaer came to understand more clearly the structural requirements behind national currencies. He traced those requirements back into the history of currency, wondering why the currencies had been designed the way they were, and whether there wasn’t a way that a currency could be modified or built that would provide a more sustainable and abundant economy.
Lietaer looked at currencies from the standpoint of what the designers of the currencies intended. They were fitting out a toolbox to build something specific. National currencies were all more or less cemented into their current forms during the mid- to late-1700s. What they were building at the time was the capital framework for the Industrial Revolution. Bankers may not have spoken about it in those terms then, but they knew what they needed.
What they needed was funding for massive, long-term development across multiple companies and across borders. They needed to be able to provide a string of companies a guarantee of funding for immense speculative ventures. The distance from design to raw materials, to assembly, to distribution and sales, and all the way out to a buyer, was simply impossible to traverse without a specialized financial tool. That tool was the national currency.
Lietaer identified four fundamental components that are shared by all national currencies.
The most obvious is that national currencies are national, or in the case of the euro, bounded geographically and politically. A national currency creates an economic unit of all the businesses and residents within those defined boundaries who have a shared and vested interest in the real and comparative value of the currency they use. It matters to every single one of them. The existence of competing currencies across the border creates an enforced us-versus-them dynamic. We’re all pulling for whatever our buck happens to be.
Second, a national currency is issued at the whim of the government. It is fiat. Which means the government mints the bills and coins we use in daily transactions. But physical cash is only a minute fraction of the money supply. While the government prints physical money, it actually does not create a single cent. It gives banks, through a legal contract, the ability to create money. They do this using the third structural requirement of a national currency, debt.
Debt is an IOU issued for currency that does not exist. When a bank approves a $1 million loan for you to buy a house, the bank is essentially saying, “We will credit your account $1 million because the house, the physical asset, is worth $1 million.” But that money does not yet exist. The moment the bank credits your account, the money is created. A teller issues you greenbacks or you whip out your ATM card and the cash goes into the money flow — buying a celebratory dinner on the town, paying the movers, and tanking up the college kids’ checking accounts. When a portion of that money goes to pay off an existing loan, and thus re-enters the banking system, it essentially disappears again. Currency experts call this the hole at the center. There is no “there” there.
Debt is ingenious. It allows banks to select the borrowers they will create money for by choosing those whom they believe will successfully compete economically. It also enables banks to control the flow of money to keep it relatively scarce and therefore valuable.
Federal banks extend the right to create debt (new currency) to private banks. When your local bank loans you money, it is creating the debt locally in the national currency.
In the early 20th century, Santa Barbara, like other cities, printed its own currency to provide cash flow so local loan recipients could withdraw from their accounts. The bills could be traded as dollars anywhere a dollar could be traded. National banks are extensions of, or stations on, the federal banking system, and as national cash flow became more fluid and the minting of physical currency was better distributed, locally minted currencies died out.
The last requirement for a national currency is the kicker. If you have a national currency, created by fiat through the generation of loans, how do you ensure that your system is competitive, growing and profitable?
You add interest.
Interest, like debt, is money that does not exist. Consider the impact on an average home loan. You just borrowed $1 million. Assuming 5 percent interest and a 30-year term, if you do not sell or refinance, you will pay the bank roughly double the original $1 million. The underlying assumption is that the economy will more than double in 30 years, and that you will successfully compete against other currency interests (for employment, investments, inheritances, etc.) for the physical funds (which do not yet exist) with which to repay the debt.
That example is for a conservative home loan. According to indexcreditcards.com, credit card annual interest rates are running an average of 16.7 percent in the United States. Combine all debt — corporate, home, consumer — and apply interest and it’s akin to forcing the economy to carry a massive weight while leaning 15 degrees ahead of center. The whole thing is designed to stumble forward at a healthy clip and to cast aside anyone who can’t keep up.
As Lietaer sums it up, the resulting national currency “encourages systematic competition, fuels the need for endless economic growth and concentrates wealth.” Great for states, industries and the capitalists who control them, but not so great for people.
Nighman puts it another way.
“In terms of a toolbox, national currencies are a hammer,” he said. “They are very good at one thing: building an endlessly growing industrial economy. What’s needed are other currencies that accomplish different goals in the community. They don’t replace the national currency, they compliment it. We need the equivalent of screwdrivers, wrenches and files.”
The Revolution of No Revolution
In looking at what a currency should do now, rather than at the start of the Industrial Revolution, Lietaer sought a currency model that could support what he calls “sustainable abundance.” Instead of creating such a currency from scratch, he looked at the various currency experiments that had taken place over recent history. During the Great Depression, a time when the dominant world currencies were not serving individuals well at all, Lietaer found that “literally thousands of communities started their own currency systems.”
Because the national currency had become so scarce in these places at these times, local communities created their own currencies to enable business and personal exchange to operate. They sought to resolve some apparently intractable problems.
The money supply shrank and slowed as the primary engine of growth, the extension of debt, was not functioning. (Remember, money is created when an account is credited by the bank through a loan.) Thus as money returned to banks as some loans were paid, and no new money was created, the supply dwindled. Fear caused institutions and individuals to hoard valuables and cash, further limiting the circulation of currency. Because businesses could not get loans and could not sell their goods, they laid people off. Not only did these people without work stop spending, they ceased contributing their intellect and labor to the community. Worse, they became public expenses at a time when the public coffers were strangled by losses in their tax base. If money were air, entire communities were asphyxiating.
One after another, taking the lead from neighboring communities, local currencies launched. These currencies were typically valued relative to the national currency, often created with a small deposit in the local bank against which the currency could be drawn, but once the currency was in existence it could be traded locally. An early example in Germany, the Wörgl scrip, issued to pay for public works projects, required a stamp within 30 days to keep it valid. Recipients had to either spend their scrip within 30 days or obtain a stamp on the scrip for 1 percent of the value, otherwise it would revert to the government.
The town started the experiment with a 20 percent unemployment rate and a high level of abject poverty. In the short period it was allowed to operate — the national government soon branded the experiment as unfug (craziness), communist and facist — only 5,500 schillings of the Wörgl scrip were ever outstanding, but because it had a 30-day window, and because it was local, each of these 5,500 schillings cycled an average of 416 times in the course of 13½ months. That’s 2.3 million schillings of productive value that was simply absent from the local economy in national currency. The 1 percent fee for validating the scrip month-to-month, a demurrage fee, was used to maintain a soup kitchen that fed 220 families.
Of the thousands of currencies created by 1935, only one survived, the Swiss WIR. The WIR came into existence in 1934 when a group of businesses starved for capital from their banks got together to talk about their problems. They soon realized the majority of the money they borrowed from the banks was to pay each other. They developed a currency tied to the Swiss franc, but created through mutual agreements between participating companies that began circulation immediately. As the system matured, businesses found it was a less expensive borrowing system to use, that it created a prescreened group of organizations to work with (trust was easier to extend), that small businesses could participate more easily, and that the system automatically became more useful at times when the Swiss franc was stressed, exactly those times when keeping currency within the country’s boundaries made the greatest sense.
It Takes Money To Make Money
Glover hammers on the necessity for a long-term, focused organizational effort. His No. 1 recommendation for launching a currency is to hire a full-time networker. That person’s role is to constantly promote, facilitate and troubleshoot circulation. He was that person in Ithaca for the first eight years of the currency’s existence.
The Santa Barbara Community Currency committee could not create that position given local funding options, but they had a committed leader in Starr. They also had deep volunteer commitments and they believed they could acquire funding to help pay at least some of the organizational costs.
They developed a grant application to The Fund for Santa Barbara in March 1997. When they heard back from the community foundation later in the grant review cycle, they got a nice surprise.
“They asked for something like $800,” recalled Geoff Green, executive director of The Fund for Santa Barbara. “The grant-making committee (the GMC) looked at what they were doing and wanted to give them more. That’s rare. It happens, but it’s rare.”
The grant, awarded in June 1997, was more than double the group’s original request. “The GMC really wanted them to be successful,” Green said.
Bigenho, who was on The Fund’s board at the time, sat out during the discussions on the Santa Barbara Community Currency to avoid any conflict of interest.
“The Fund was great to work with,” he said. “They don’t just give you money and then wash their hands. They check in, ‘How are things going?’ ‘What do you need?’”
Over the next several months, the committee set about getting the new currency designed and printed, developing a newsletter, translating everything it published into Spanish, working out the tax status of the organization, and promoting the upcoming launch of the currency.
In October 1997, just nine months after forming the organizing committee, Santa Barbara Hours made its debut.
To use the new currency, you joined the organization, although once the Hours were in circulation anyone could choose to accept and use them. When you joined you received four Santa Barbara Hours to spend. Every eight months, members received another two Hours.
The committee frenetically promoted the currency. What you could spend Santa Barbara Hours on was limited to what members — they were called participants — offered for sale. In the next few months the committee was able to build the participant list to more than 300 individuals offering more than 700 goods and services, and increase the currency flow to more than 1,500 Hours.
The initial list of available goods and services ran to the marginal. You could obtain massages, biofeedback services, vegan advice, and crying assistance. You could buy an hour of “democratic revolution” or learn about “industrial hemp.” But there were many other skills and services offered, including architectural drawing, tutoring in a host of subjects, childcare, yard work and gardening, computer maintenance and office work, and lessons in Spanish, French, German, Italian, Japanese, English, Olde English and Esperanto.
Goods were rare. There were used books, yarn, firewood, custom T-shirts and meditation stones. Only a handful of participants offered food. You could get avocados in season, organic lemons and brown turkey figs, homemade pies and “fantastic homemade salsa.” Only one farmer offered “organic produce at the Farmers Market.”
The committee knew the lack of food, shelter and other usable goods was a weakness in the early stages of the currency system they wished to build. Aware that mostly services would be made available, and that their user base might be viewed as marginal, the committee clarified in its promotional brochure that “Once we have a strong currency backed by many local skills, we expect that local businesses will also participate.” They knew, the bigger the margin, the closer you get to the center.
For the local currency to thrive, Starr and company had to widen those early adopter margins and begin to attract the bricks-and-mortar business community.
One strategy they followed was to gain the approval of city government. In July 1998, with participation growing and circulation up, they convinced Miller, the then mayor, to write an official letter on behalf of the group.
“Businesses and services offered by local residents contribute greatly to the sense of community we cherish in Santa Barbara,” she wrote. “The Community Currency Project is an effective way to promote the concept of community-based living. I encourage local businesses and community members to support each other with Santa Barbara Hours, our own local-money system.”
Miller got the community message loud and clear. What was missing from her statement were the economic benefits to individuals and businesses. If the committee could not break down the wall with the mayor, how were they going to break it down with the local businesses that were crucial to the survival of the currency?
Mi Hora, Su Hora
By the 1990s when Glover was dusting off the old models for Ithaca, N.Y., the WIR was cycling 2.5 billion WIR francs through Switzerland’s economy. The WIR is a national complementary currency, insulated from world currencies and built largely for business-to-business uses. The Wörgl was a currency created by a far-seeing mayor of a community to invest in the town and its residents. In both cases, the currency was valued against the national currency.
The determining value of national currencies for centuries has been precious metals. Very early on money was its own value. Golden coins were literally worth their weight in gold, and in fact, still are. Eventually, and quite recently, the dollar was freed from the gold standard and is now worth itself, a value determined at any given instant by the forex global exchange market.
Whether it is valued against gold or a concept called the dollar, the value is in the money itself. You can store money away. People will pay you for storing it in their investment instruments. You can accumulate it. You can lend it. It flows easily, but it just as easily eddies and pools. Because it contains the value of itself separate from the goods and services you trade it for, the quantity of it required to obtain something can fluctuate wildly.
What Glover wanted to achieve was something on a more human scale. He chose a model that detached the value of local currency from the national currency and traded in what were called hours.
Valuing transactions in hours is something anyone can do. Two people can agree between themselves that a half-hour massage is worth an hour in the garden. If they were the sole participants, a simple barter could arise. But this severely limits any individual’s buying power to only those things they can trade directly for with other individuals.
If, at the time of the massage, that hour of value could be represented by a denomination or bill and transferred to the masseur, and the masseur could spend the bill later on with a gardener who didn’t need a massage, you would have an effective local currency.
The Hours model raises the question of parity among participants. Could someone provide “CEO skills” and, as in the national currency, charge 1,000 or 10,000 hours, while the person who taught their children or tilled their gardens could only charge 1 hour for their services? Clearly, if someone had CEO skills and valued them, they would probably not participate in such an exchange. But among those who did participate, the question of parity had to be addressed.
The Santa Barbara Currency Committee attempted to tackle the issue in its June 1998 newsletter, Love My Tender.
“Coming from a perspective of valuing all people, pay equity suggests that all kinds of work should be valued equally,” the committee said. “Users of SB Hours (could) sell their services at a rate of 1 SB Hour per hour of work, regardless of their normal dollar rate.”
But, the newsletter article goes on to clarify that there is no set valuation. Any transaction in Santa Barbara Hours (as in any currency, really) is an agreement between the participants. Someone may feel their goods or services have an inherently greater cost and want to charge more. The maximum the committee recommended was five Hours to any one Hour. In other words, an attorney might charge five Santa Barbara Hours for a one-hour consultation. But those same Hours might be valued differently in another transaction. For example, the attorney might charge one Hour to someone whose services they feel are on a par with their own, such as a therapist.
Even so, the hour as a basis best serves individuals exchanging services. Goods are harder to value, and to get businesses on board, a straightforward and standardized dollar-to-hours conversion is usually required; they need to know what an Hour is worth relative to the things they sell. Several months in, as the Hour picked up steam, the Santa Barbara Committee established an exchange rate. One Santa Barbara Hour was worth $12.
With 1,500 hours circulating, a home-grown economic system responsible for sustaining $18,000 in local goods and services had been developed. If you factor in the circulation — the number of times an average Hour changed hands — that number multiplies. Santa Barbara Hours had no means of tracking circulation so any number is a guess, and most Hours probably saw little or no circulation. But over the 18 months of existence, it is fair to estimate that somewhere between $10,000 and $250,000 in goods and services were exchanged.
Making Money
Glover’s second top recommendation for making a local currency viable is to design something credible as the means of exchange — the physical bills.
“Make it look both majestic and cheerful, to reflect your community’s best spirit,” he advises. “Feature the most widely respected monuments of nature, buildings and people. Use as many colors as you can afford, then add an anti-counterfeit device.”
The Santa Barbara Currency Committee turned to local artists and local events and places for their inspiration. Bills were issued in denominations of ¼, ½ and 1 Hours. The ¼ Hour bill with artwork by Ken Korten, depicted Santa Barbara’s Farmers Market, a critical target pool of participating businesses. The bill was green, and like the other denominations, Spanish on one side and English on the other. The ½ Hour bill with artwork by Benjamin Bottoms and Richard McLaughlin depicted the Solstice Parade. The 1 Hour denomination showed the Wilcox property which at that time was going through a shaky acquisition process as a public park and later renamed the Douglas Family Preserve. This was drawn by Karen Monson. The anti-counterfeit device was a serial number stamped on each bill.
The bills were essentially worthless outside Santa Barbara. But this was one of the design features; most wealth in the national currency accumulates elsewhere.
“When you shop at a Costco, within 24 hours, 94 percent of your money is out of town,” Phillips explained. “Even at a Mom-and-Pop store in town, 60 percent is gone in 24 hours. They have to buy supplies. But with local currency, 100 percent stays in town. Going to Costco is just pumping money straight out of Santa Barbara.”
Riding on the growth of the Santa Barbara Hours in participants and circulation over the course of almost a year, the committee returned to The Fund for Santa Barbara for a fresh infusion of national currency with which to launch the local currency.
All the Reasons Why
When the committee applied to The Fund for additional monies in September 1998, the applicants included a review of the preceding year in their packet.
“The ultimate, long-term yardstick by which the SB Hours can be evaluated will be the extent to which real sundry day-to-day needs can and will be met by using Santa Barbara’s local currency,” the application stated.
The committee looked to Ithaca in all things, and especially in regard to this measure of success because in Ithaca, “there are individuals who can meet all of their basic needs (shelter, food, clothing, etc.) via local currency.”
“SB Hours already has had in its user base people who sell organic produce and organic cotton clothing,” the statement said. “As the idea catches on in the community, the utilitarian promise of local currency will undoubtedly become fulfilled.”
On first read, it seems that the “has had” is a typo. But it is probably not. Being the sole vendors of goods like organic produce and organic cotton clothing within a closed economic system would make your products very popular. You would accumulate a lot of Santa Barbara Hours. But how do you spend them? You may be providing food, something everyone wants, but you can only buy massages and Spanish lessons. You’re holding out for other providers, a food coop, a medical or dental clinic, someone selling shoes. The early adopter businesses can get hit hard.
Perhaps the group’s natural affiliations were killing them. One observer termed the committee and participants “transitory and marginal. They were graduate students and the people you would expect to jump on something like this — the usual suspects.”
The packet also identified “fiscal sustainability” as one of the stumbling blocks the committee faced. As with the WIR and the Wörgl, it takes money to make money. The committee had already begun soliciting donations. Other means of gaining hard currency to offset the goods and services that businesses were not willing to provide for Santa Barbara Hours included selling discounted Santa Barbara Hours, selling display ads in the newsletter, holding garage sales, selling bumper stickers, and completing grant applications to other funding organizations.
Another round of funding was awarded by The Fund for Santa Barbara, but the demise of the Santa Barbara Hour came quickly after that. Starr, the key founder and organizer was leaving to accept a position as a sociology professor at Colorado State University. Her vision and dedication had attracted and held the group together. She is clearly, even at the distance of the Internet, a controversial and convincing leader.
Author of Naming the Enemy: Anti-Corporate Social Movements Confront Globalization, Starr receives wildly mixed student reviews on RateYourProfessor.com. She is described as a “leftest (sic) radical. she provides one view. hers.” And, “she is completey (sic) crazy.” Other students see her as wholly inspiring. “A really great professor. I knew her when she was a graduate student at U.C. Santa Barbara. I’ve never forgotten her.” And, “Take a Starr class ASAP!! She is an amazing professor.” If you’re interested, syllabi for several of her courses are available at Trabal.org.
In an e-mail, she recounted the demise of the Santa Barbara Hour as being caused by a number of factors. The inability to “build value to the currency by getting a diverse set of goods and services offered,” a lack of time to do the outreach, “complaints that some participants did not return phone calls,” the loss of some transactions as people took their exchanges offline and bartered directly, and the overhead of maintaining a completely bilingual institution were all elements. But perhaps most tellingly, Starr writes that she was “really good at huge amounts of office work, including the really huge task of formatting the database for publication. I think that after I left no one was really interested in doing all that work.”
Phillips does not disagree.
“Amory Starr was the firebrand that was keeping this alive,” he said. “She was the spark. When she left it was the beginning of the end. The rest of us were just doing it part time. We’d been going a year and a half at that point and it was starting to wear.”
Glover, consulting with the Santa Barbara Hours group and many others around the country at the time, replied to the question of why so many had failed.
“The main reason Ithaca’s HOURS grew huge while so many other community currencies faded is that we had a full-time networker for the first eight years,” he explained. “That was me. Constantly promoting, troubleshooting, and facilitating circulation. Particular effort was made to bring staple goods and services into the system — food, housing, clothing, health care.”
Still others believe that the currency was more a victim of the times.
“You Need Troubled Times”
Nighman, talking about the Sebastopol Economic Forum project he worked on in graduate school at Sonoma State, said the reason that program has not been rolled out is that the times are not bad enough.
“You need troubled times to make a local currency work,” he said.
Scores of local currencies were launched in the late 1990s. Most failed. By 1998, the U.S. economy was in a steep ascent. National unemployment was at 4.3 percent, the lowest in nearly four decades. In retrospect, 1998 was the front side of the dot.com bubble. The NASDAQ, where much of the high-tech speculation of the era took place, hit 1,500 in 1998. By March 2000, it would hit 5,000, a run-up of more than 330 percent in a matter of two years.
“Yeah, it was good times,” Phillips said. “People weren’t in a harsh condition.”
By March 2003, the NASDAQ was below 1,300. But by then, of the hundred or so local currencies that launched later in the ‘90s in the United States, more than 60 were listed as defunct. Santa Barbara’s was one of these. But Starr, Bigenho and Phillips all echoed that no matter the outcome, the currency was a success.
“We were all regular folks,” Phillips recalled. “We weren’t economists.”
Yet they created and operated an alternate currency successfully. Starr wrote that her “goal for getting involved was ... to teach people that the economy belongs to them, not to bankers and experts.” That goal, she felt, had been achieved.
Everyone agreed that the forging of community was the most important and satisfying result.
“What people are hungry for is a sense of community,” Phillips said.
While traditional currencies enforce and encourage the ability to deal with strangers for all our needs, local currencies require face-to-face exchanges.
“That was the really rich part of the (Santa Barbara) currency,” he said. “The pot-lucks, the transactions between individuals ... everyone knew each other.”
Drawing Boards
Benjamin Cohen, Louis G. Lancaster Professor of International Political Economy at UCSB, and author of a dozen books on currency-related matters, was largely unaware of the Santa Barbara experiment while it was under way. Local currencies remain peripheral to his studies and he doesn’t see local currencies as “creating a revolution in the money system as we know it.”
But he does see a place for them in much the way Starr, Phillips and Bigenho experienced.
“Local currencies have the capacity to build a sense of community and engagement,” he said. “They help protect the economic welfare of a local community. You’re buying and selling from each other rather than from anonymous corporations.
“A local currency tends to encourage activities that are environmentally friendly such as supporting local organic farmers. (Such transactions) decrease the need for obtaining food from over long distances.”
But, “given the difficulty of getting a local currency up and running,” and the fact that such currencies “require a critical mass” of partipants who are “persuaded it will be useful,” Cohen feels the stakes are higher than what the Santa Barbara organizing committee was prepared for, and he does not expect a new local currency in the area to arise easily or soon.
“I don’t think the time is right (in Santa Barbara) for another local currency,” Phillips agreed. But if he were to do it again, “I would try a hybrid LETS-Hours model.”
LETS, Local Exchange Trading Systems, tie themselves to a national currency rather than to time. It makes it easier to value the LETS units. The system is simple. Users have accounts. An agreement between two individuals credits the provider’s account, debits the receiver’s. Currency can also be issued by the organizing body. Initiating flow is easy. There is automatically enough.
LETS is taking off in Australia where more than 100 systems have been successfully launched in recent years. Argentina, following an economic crash in the early 2000s, forged hundreds of LETS out of sheer desperation. According to Phillips, the systems successfully stabilized the economy and have substantively increased quality of life across the country.
Another model that has arisen is the Slow Money model articulated by Woody Tasch. The Santa Barbara Permaculture Network sponsored a talk by Tasch at Victoria Hall a year ago March. Slow Money focuses not on local currencies, but on rewiring our current investment strategies with national currencies. Tasch argues for investing capital in companies closer to home, and in companies that are responsible citizens, dealing fairly with their employees, aligning themselves with organic principles, and reducing their carbon footprints — companies managing for the long-term health of a corporate entity and the planet at the same time. The Fund for Santa Barbara provided some funding for Santa Barbara Permaculture to bring Tasch to town.
(While outside the scope of this article, American Riviera Bank, 1033 Anacapa St., currently is advertising that it only invests locally, thereby slowing your money down by keeping it closer to home.)
Or could the failure of Santa Barbara Hours be in their initial conception? Did they try to do too much at once?
A Bigger Toolbox
Nighman had the unique experience of working on two vastly different complimentary currencies at once. The Sebastopol Economic Forum is a project to create a city-wide, government-sponsored, business-oriented local currency.
“It’s a beta project,” he said. Which means a great deal of organizational structure and political will are required to launch it.
“The political will can appear in times like these when cities are looking at layoffs and furloughs of their employees,” he said. “If the system is ready, if there are businesses in line to accept the currency, and if people can pay a portion of their city services and taxes with the currency, then the city could potentially negotiate staff pay cuts, say 10 or 15 percent, and replace it with a bonus paid in the local currency.”
Such systems, more similar to the Wörgl than to Hours models, promise a deeper, more widely accepted buffer against fluctuations in the national currency.
But Nighman also created the Sonoma Time Bank as his graduate thesis. Time banks, less ambitious and more straightforward than Ithaca Hours, are a simple, online hours bank built on Edgar Cahn’s models.
“Time banks are extremely easy to start and maintain,” he explained. “They are strictly time based. You can trade goods, but not as part of the exchange. An hour of gardening could include a basket of vegetables. An hour of baking could include a couple loaves of bread — as long as the ingredients were already paid for with the national currency.”
The reason goods are outside the system is because of sales tax. Taxes were never tackled by Santa Barbara Hours, and for the most part the federal and state tax agencies ignore such currencies. But if the currency had increased substantively in size, because they were seeking to trade goods, sooner or later the demand to value the currency against the dollar and pay taxes in dollars for transactions in Hours would have arisen.
Another reason time banking is legally tax-free is because parity is an absolute requirement. An hour equals an hour equals an hour, whether you are teaching Spanish, babysitting, walking dogs or offering legal advice.
Nighman believes the Santa Barbara Currency experiment may have suffered from trying to invent the Swiss Army knife for Santa Barbara. By attempting to cover goods and allow for disparity among hour valuations, they were setting their expectations too high.
“If Santa Barbara Hours were (started as) a time bank,” he said, “they might still be functioning.”
Time banks are typically run with a simple accounting software available from Cahn’s Time Banks Web site. The organization, like Ithaca, has a startup kit. The systems are designed to match unmet needs with un- or under-used resources.
“These systems are great for bringing older people back into productive relationships, and making it possible for young people to participate,” Nighman said.
For each hour you spend doing something for someone, you earn a Time Dollar. You can then spend your Time Dollar on having someone do something for you.
“We paid our teachers to teach,” Nighman said of the program he set up at Sonoma. “I was chopping wood, giving landscaping advice.”
More than 20 students and teachers participated in a lightweight but very effective “networked barter” system.
“Ten or 15 time banks could be running effectively in a community the size of Santa Barbara.” Nighman said. “Then, when the time is right, when the city is facing budget cuts and furloughs, citizens are facing a loss of services and buying power, nonprofits are struggling to raise money and attract volunteers, and businesses are facing a drain of consumer spending, then, without shutting down the time banks, those people and the experience they have with these systems, will help you leapfrog to a city-wide system.”
In Us We Trust
Can a new currency effort find a foothold in Santa Barbara?
“There’s always interest in another local currency,” said Green, who through The Fund for Santa Barbara has helped provide seed funding for scores of progressive, grassroots organizations over the last decade. “It’s one of the fundamental things a community can do to improve the quality of life.”
“It all comes down to trust,” Nighman agreed. “They print ‘In God We Trust’ on the national currency to try to make us trust it.”
In the same regard, with local complimentary currencies, participation by individuals, businesses, nonprofit organizations and governmental agencies will only happen when there is trust in the rationale behind the system, and the systems’ stability, longevity and leadership.
But trust is easier to extend when there is need.
“The national currency is in dire straits,” Nighman said. “The last bubble could have kept growing for a while, except that oil hit $150 a barrel.”
The endless growth mechanism in the national currency ran aground on the restraints of a natural and limited resource.
“The time is really ripe to look at these tools again,” he said. “We could really use them.”
— Noozhawk contributor David Petry is a local historian, photographer and author of The Best Last Place: A History of Santa Barbara Cemetery. Click here to read his blog, Decomposing Santa Barbara, which focuses on aspects of Santa Barbara history that are disappearing.
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