Monetary Plurality in Local, Regional
and Global Economies

The idea that each country should have one currency is so deeply rooted in people’s
minds that the possibility of multiple and concurrent currencies seems unthinkable.
Monetary systems contribute to problems of high unemployment and social distress during financial and economic crisis, so reforms to increase the responsiveness and flexibility of the monetary system can be part of the solution.
This book discusses ‘monetary plurality’, which is the circulation of several
currencies at the same time and space. It addresses how multiple currency circuits
work together and transform socio-economic systems, particularly by supporting
economies at the local level of regions and cities. The book shows that monetaryplurality has been ubiquitous throughout history and persists at present because
the existence of several currency circuits facilitates small-scale production andtrade in a way that no single currency can accomplish on its own.
Monetary plurality can improve resilience, access to livelihoods and economic
sustainability. At the same time, it introduces new risks in terms of economic
governance, so they need to be properly understood. It analyses experiences ofmonetary plurality in Europe, Japan, and North and South America, written byresearchers from East and West and from the global North and South. Repletewith case studies, this book will prove a valuable addition to any student or practitioner’s bookshelf.

Taylor and Francis

Not for distribution

Georgina M. Gómez is Senior Lecturer in Institutions and Local Development
at the International Institute of Social Studies of Erasmus University Rotterdam,
the Netherlands.

Financial History
Series edited by Farley Grubb and Anne L. Murphy

Reforming the World Monetary System
Fritz Machlup and the Bellagio Group
Carol M. Connell
Debt and Slavery in the Mediterranean and Atlantic Worlds
Edited by Gwyn Campbell and Alessandro Stanziani
Bonded Labour and Debt in the Indian Ocean World
Edited by Gwyn Campbell and Alessandro Stanziani

Taylor and Francis

The Globalization of Merchant Banking before 1850
The case of Huth & Co.
Manuel Llorca-Jaña

Not for distribution

Monetary Statecraft in Brazil
1808–2014
Kurt Mettenheim
Banking Modern America
Studies in regulatory history
Edited by Jesse Stiller

Money, Politics and Power
Banking and Public Finance in Wartime England, 1694–96
Richard A. Kleer
Regulation of the London Stock Exchange
Share Trading, Fraud and Reform 1914–1945
Chris Swinson
Monetary Plurality in Local, Regional and Global Economies
Edited by Georgina M. Gómez
For more information about this series, please visit www.routledge.com/series/
FINHISMonetary Plurality in
Local, Regional and Global
Economies
Edited by Georgina M. Gómez

Taylor and Francis

Not for distribution

First published 2019by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business 2019 selection and editorial matter, Georgina M. Gómez; individual
chapters, the contributors
The right of Georgina M. Gómez to be identified as the author of theeditorial material, and of the authors for their individual chapters, has beenasserted in accordance with sections 77 and 78 of the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced orutilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writingfrom the publishers.
Trademark notice: Product or corporate names may be trademarks orregistered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
A catalog record for this book has been requested

Taylor and Francis

ISBN: 978-1-138-28028-1 (hbk)
ISBN: 978-1-315-27223-8 (ebk)

Not for distribution

Typeset in Times New Roman
by Swales & Willis, Exeter, Devon, UK

To the memory of my father

Taylor and Francis

Not for distribution

Taylor and Francis

Not for distribution

Contents

List of figures
List of tables
List of contributors
Acknowledgements
1 The monetary system as an evolutionary construct

xi
xiv
xvi
xx
1

GEORGINA M. GÓMEZ

1.1 Introduction 1
1.2 Perspectives on the ontology of money 3
1.3 Modern money and monetary singularity 9
1.4 Contributions in this volume 12

Taylor and Francis

Not for distribution

2 Monetary plurality in economic theory18JÉRÔME BLANC, LUDOVIC DESMEDT, LAURENT LE MAUX,JAIME MARQUES-PEREIRA, PEPITA OULD-AHMED AND BRUNO THÉRET

2.1 Introduction 18
2.2 The New Monetary Economics: from a plurality ofmeans of payment to a plurality of units of account 20
2.3 Neo-Mengerian approaches to money: between
plurality and singularity of the unit of account 25
2.4 Integrating money into the general equilibrium theory 29
2.5 Chartalist, Keynesian and Marxist approaches to money 34
2.6. Conclusion: a typology of combinations ofmonetary singularity and plurality 41
3 Making sense of the plurality of money: a Polanyian attemptJÉRÔME BLANC

3.1 Introduction 48
3.2 Outline of a typology of money 50

48

viii

Contents
3.3 Polanyi’s instruments for thinking aboutmodern moneys 000
3.3 Forms of integration and money 55
3.4 Deepening the ideal types: sub-types and hybrids 59
3.5 Conclusion 63

4 How does monetary plurality work at the household level?
The division of labour among currencies in Argentina(1998–2005)

67

GEORGINA M. GÓMEZ

4.1 Introduction 67
4.2 Dealing with monetary plurality 69
4.3 Inflation and bimonetarism in Argentina 71
4.4 Structural adjustment and non-state monetarycircuits 73
4.5 Subnational state currency circuits in Argentina 75
4.6 Matching money and transactions 77
4.7 Conclusion 80
5 Monetary federalism as a concept and its empirical
underpinnings in Argentina’s monetary history

Taylor and Francis

84

BRUNO THÉRET

Not for distribution

5.1 Introduction 84
5.2 Principles and historicity of monetary federalism 86
5.3 The four waves of issuance of provincial CCs in
Argentina since 1890 93
5.4 Why such a historical recurrence? Argentinian fiscal
federalism and shortages of currency and credit at theprovincial level 102
5.5 Conclusion 108
6 Famine of cash: why have local monies remained
popular throughout human history?
AKINOBU KURODA

6.1 ‘Free banking system’ without banks 114
6.2 Currencies stagnate rather than circulate 115
6.3 Invisible agreements on local currencies 117
6.4 Credits substitute currencies locally 118
6.5 Commercial oligarchies monopolising currencies 120
6.6 Bond between money and society 120

114

Contents ix
7 The pervasiveness of monetary plurality in economiccrisis and wars

123

GEORGINA M. GÓMEZ AND WILKO VON PRITTWITZ UND GAFFRON

7.1 Currencies found and currencies made? 123
7.2 Historical emergencies and money 124
7.3 Emergency currencies after the World Wars 128
7.4 Depreciating currencies in Europe during the Depression 134
7.5 Stamp scrip in the USA during the Depression 140
7.6 Municipal emergency currencies in the Spanish Civil War 142
7.7 Conclusions 149
8 Birth, life and death of a provincial complementary
currency from Tucuman, Argentina (1985–2003)

153

BRUNO THÉRET

8.1 Introduction 153
8.2 Rebuilding the history of a long-lasting complementary
fiscal currency 154
8.3 How did the bocade face the volatility of monetary
policy and scarcity of legal tender? 161
8.4 Was the bocade actually useful and successful? 174
8.5 Conclusions 184

Taylor and Francis

Not for distribution

9 Community currency and sustainable development in hilly
and mountainous areas: a case study of forest
volunteer activities in Japan

188

YOSHIHISA MIYAZAKI AND KEN-ICHI KURITA

9.1 Introduction 188
9.2 Circumstance and issues of the hilly and mountainous
areas of Japan 189
9.3 The forest volunteer activities of Tosa-no-Mori Kyūentai 191
9.4 Perceptions and behaviour of the participants in
Kyūentai activities 195
9.5 Concluding remarks 199
10 Sustainable territorial development and monetary subsidiarity
MARIE FARE

10.1 Introduction 202
10.2 CCs’ potential with respect to the challenges oftransition to sustainability in contemporary societies 203

202

x

Contents
10.3 Activating monetary complementarity through monetarysubsidiarity 208
10.4 Implementing the principle of monetary subsidiarity
to promote sustainable territorial development 212
10.5 Conclusion 219

11 Relationship between people’s money consciousness
and circulation of community currency

224

SHIGETO KOBAYASHI, TAKASHI HASHIMOTO, KEN-ICHI KURITA
AND MAKOTO NISHIBE

11.1 Introduction 224
11.2 Micro-meso-macro loop and money consciousness 224
11.3 Roles of inner and outer institution in CC circulation 226
11.4 Our study 228
11.5 Results 230
11.6 Discussion 233
11.7 Conclusion 238
Appendix 239
12 Gaming simulation using electronic community
currencies: behavioural analysis of self-versuscommunity consciousness

Taylor and Francis

243

Not for distribution

MASAHIRO MIKAMI AND MAKOTO NISHIBE

12.1 Introduction 243
12.2 Method of the experiment 244
12.3 Experiment results, questionnaire results and implications 249
12.4 Conclusion 264
Appendix 267
13 For the policy maker: when and how is monetaryplurality an option?

275

GEORGINA M. GÓMEZ

13.1 Introduction 275
13.2 Monetary plurality: a black hole of habit? 275
13.3 Good currency versus bad currency 278
13.4 Modern version of good versus bad money 280
13.5 Institutional frameworks of monetary plurality 281
13.6 Design principles of monetary plurality 284
Index

290

Figures

4.1
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
7.1
7.2
7.3a
and
7.3b
7.4a
and
7.4b
7.5
7.6
7.7
7.8
7.9
7.10
7.11

Articulation between complementary monetary circuits
Exchange rates in peso of seven provincial monies
Argentinian consumer price index (1943 to 2008)
One example from Jujuy (1932)
The Salta’s bocade issued in 1984 in ‘peso argentino’
The publico of Jujuy issued in 1986
The publico of Catamarca issued in 1993
The cedern of Rio Negro issued in 1995
The crefi of San Juan issued in 1995
The quebracho of Chaco issued in 2001
The federal interprovincial quasi-money
The petrom issued in Mendoza in 2002
The san luis issued in 2002
Share of provincial autonomous revenues in
Tucuman total spending
Note of the siege of Lyon, France (16th century)
Note of the siege of Breda, the Netherlands (16th century)
Peseta silver certificate

70
91
93
95
96
97
98
99
99
100
101
102
103

Goldmark Freistaat Preussen 1,05 =1/dollar USA

130

Allied military bondMindanao Emergency Currency Board (USA)Military payment certificate‘Free money’ note with stamps
Free money in 1933
Providence stamp scrip
Catalonyan peseta

132
133
134
138
139
141
144

Taylor and Francis

Not for distribution

104
125
125
127

xii

List of figures

7.12
7.13
7.14
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
8.11
8.12
8.13
8.14
8.15
8.16
9.1
9.2
9.3
9.4
9.5
10.1
10.2
10.3
10.4
11.1
11.2
12.1

Pesetas of Gijon
Different pesetas, some censored
Emergency scrip with demurrage in Montoro, Spain
Evolution of the nominal value of the stock of bocades
Stock and circulation of bocades
The first bocade of Tucumán issued in 1985
Tucuman´s entrepreneurs supporting the bocade in 2001
Deflated stock and amount in circulation of bocades
issued between 1985 and 1991
The bocade in peso issued in 1992
Deflated net stock of bocades issued between
1992 and 2003
National transfers to provinces from January
2001 till July 2002
Tucuman bocades from January 1999 to May 2003
Interest rates (1994–2006): real, on deposit and on lending
Relative level of Tucuman and Buenos Aires CPI
Differences between the annual rates of variation of CPI
Stock of bocades related to provincial own resources
and total expenses
A comparison between Argentinian and Tucumani
real growth rates
Share of provincial debt interests in the total
provincial expenditures
Provincial debt burden, debt redemption and amountof bocades
Mori-ken
Circulation flow of MK
Frequency of forest volunteering and life satisfaction
Volunteering and necessity of reward
Usage frequency and community changes
The subsidiary modes of monetary articulations
The subsidiary mode of articulation of time-based
currencies: autonomy
Subsidiary mode of articulation of bio-regional
currencies: towards strong subsidiarity
Application of the principle of monetary subsidiarity
Micro-meso-macro loop
Flow of micro-meso-macro loop in the circulation
experiment of CC
Flows of Clark and Yen

Taylor and Francis

Not for distribution

146
147
148
154
155
157
158
162
167
169
172
173
176
178
178
179
181
183
184
193
194
196
197
199
211
213
217
218
225
237
245

List of figures xiii
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
12.11
12.12
12.13
12.14
12.15
12.16
12.17

The development of circulation velocity in Game I
The development of circulation velocity in Game II
The development of circulation velocity in Game III
The development of circulation velocity in Game IV
The development of circulation velocity in Game V
Experiment subjects’ behavioural objectives throughall the games
Ex-ante choices and ex-post senses of subjects’
behavioural priorities (Game I)
Ex-ante choices and ex-post senses of subjects’
behavioural priorities (Game II)
Ex-ante choices and ex-post senses of subjects’
behavioural priorities (Game III)
Ex-ante choices and ex-post senses of subjects’
behavioural priorities (Game IV)
Ex-ante choices and ex-post senses of subjects’
behavioural priorities (Game V)
Development of aggregate amounts in Game I
Development of aggregate amounts in Game II
Development of aggregate amounts in Game III
Development of aggregate amounts in Game IV
Development of aggregate amounts in Game V

Taylor and Francis

Not for distribution

251
252
252
252
252
258
259
259
259
259
260
267
268
268
269
269

Tables

1.1
2.1
2.2
3.1
4.1
4.2
5.1
6.1
6.2
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
9.1
9.2
9.3
11.1

What does monetary plurality and singularity mean?
Differentiation criteria
Range of configurations of singularity and plurality
Ideal types and real cases
Households: which money for what?
Small businesses and shops: which money for what?
Issuances of provincial quasi-monies between 1891
and 1933
Distribution of copper cash with era names from
Chinese excavation
Wastage rates of coins in the UK 1968 (percentages)
Growth and inflation between 1981 and 2006 in
Argentina and Tucuman
Issuances and redemptions of bocades under
austral standard
Issuances and redemptions of bocades under the
dollarised peso standard
Changes in the structure of the stock of Tucuman’s
public debt under the Bucci government
Issuances and redemptions of bocades under thenationalised peso standard
Average yearly growth rates of GNP–GPP and CPI
by periods: Argentina and Tucuman compared
Number of years Tucuman grows faster or slower thanArgentina as a whole
Tucuman stock of public debt (% of GPP)
Outline of Kyūentai’s activities
Profile of the respondents
Frequency of forest volunteering and community
perceptions
Occupational breakdown of the sample

Taylor and Francis

Not for distribution

10
19
42
63
78
79
94
115
116
163
164
168
170
174
180
182
183
194
196
197
229

List of tables xv
11.2
11.3
11.4
11.5
11.6
11.7
11.8
11.9
11.10
11.11
11.12
11.13
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10.1
12.10.2
12.10.3
12.10.4
12.10.5

Geographical distribution of the samples in thethree areas
Factor analysis of money consciousness (factor pattern
after Promax rotation)
Factor correlation, mean and deviation of subscale scores
Breakdown of factor correlation of subscale scores(CC participants and members of financial organisations)
ANOVA table of subscale scores for the three groups
ANOVA table of subscale scores in the three areas
Average scores for the questions on ‘currency diversity’
Average scores of the questions on ‘fairness’
Subscale scores on money consciousness before-andafter experiment
Understanding of CC before-and-after the experiment
Degree of understanding CC after the experiment
Subscale scores on understanding CC before-and-after
the experiment
Menu of goods and services provided
Changes in the conditions between the games
Information displayed in the games
The amounts and the circulation velocity during each game
Correlations between the premium rates and the amountof activities in each game
Correlations between the premium rate and the amountof activities across all games
Behavioural priorities chosen ex-ante by the subjects
Correlations between community priority and theamounts of activities in each gameThe correlations between community priority and theamounts of activities through all games
Agents’ balances and cumulative transactions at theend of Game I
Agents’ balances and cumulative transactions at theend of Game II
Agents’ balances and cumulative transactions at theend of Game III
Agents’ balances and cumulative transactions at theend of Game IV
Agents’ balances and cumulative transactions at theend of Game V

Taylor and Francis

Not for distribution

229
231
231
232
232
232
233
233
234
235
236
236
246
248
248
250
254
256
257
261
263
270
271
272
273
274

Contributors

Jérôme Blanc is a Professor of Economics at Sciences Po Lyon (France). His
works deal with money and the plurality of its forms and practices, mainly
analysed through socio-economic lenses and in the history of ideas. In 2015,
he co-founded RAMICS (Research Association on Monetary Innovation andCommunity and Complementary Currency Systems). He is a member of the
Editorial board of the International Journal of Community Currency Research(IJCCR). In addition, he has also written about social and solidarity economy
and the history of monetary ideas.
Ludovic Desmedt is Professor in Economics at the University of Burgundy anda member of the Laboratoire d’Economie de Dijon (LEDi). He is co-editorof the Revue d’histoire de la pensée économique. His research interests arefocused on the history of economic thought and the evolution of banking
practices. He has published several chapters and articles on these topics
and co-edited two collective books: Les pensées monétaires dans l’histoire(with J. Blanc, 2014) and Théories françaises de la monnaie (with P. Alary,J. Blanc and B. Théret, 2016).

Taylor and Francis

Not for distribution

Marie Fare is an Associate Professor in Economics at the University of Lyon,
France, and a researcher at the Triangle Laboratory (UMR 5206). Her research
focuses on monetary plurality and more particularly on social and complementary currencies, analysed in relation to sustainable territorial development (potentialities, impacts and prospects). She is the author of a thesis on‘Monetary conditions for sustainable local development: complementary
exchange systems for subsidiary currencies’, supported in 2011. She co-organised
the first ‘International Week of Social and Complementary Currencies’ inFebruary 2011 in Lyon. She authored the book Rethinking money, transforming territories, making society (ECLM, 2016).
Georgina M. Gómez is Associate Professor in Institutions and Local
Development at the International Institute of Social Studies of Erasmus
University Rotterdam. She obtained a PhD with distinction with a thesis on‘Community and complementary currency systems in Argentina’. She has
published and supervises doctoral candidates on monetary innovation, local

List of contributors xvii
economic development in Latin America, social and solidarity economy, andinstitutional and grassroots economics.
Takashi Hashimoto is a Professor in the School of Knowledge Science, Japan
Advanced Institute of Science and Technology. He received his PhD from the
Graduate School of Arts and Sciences, University of Tokyo. He studies the origin
and evolution of language, the dynamics of communication, and the formation anddesign of social institutions. He thinks that language and communication areat the core of human nature and that it is essential to design social institutions,
including CCs and monetary systems. He has published ‘Evolutionary linguistics and evolutionary economics’ (Evolutionary and Institutional Economics
Review, 3: 27, 2006).
Shigeto Kobayashi received his PhD in Knowledge Science from the Japan
Advanced Institute of Science and Technology in 2010. He was a visiting fellow at the Department of Economics and Finance, University of Torino, Italy,
in 2010. Since 2011, he has been an Assistant Professor at the Japan Advanced
Institute of Science and Technology. His research focuses on institutional
design in local communities. Two topics in his current research are the study ofcirculation mechanism of CCs using multi-agent simulation and gaming simulation, and the analysis and design of ‘third place’ where individual-oriented
people co-exist with social-oriented people.
Ken-ichi Kurita has a doctorate in Economics from the Hokkaido University,
Japan. He is now a part-time lecturer at Tokyo University Agriculture of Japan.
He teaches administrative law and local development. His research is mainlyon the community developments using CCs, municipal studies and regional
revitalisation.

Taylor and Francis

Not for distribution

Akinobu Kuroda is Professor of East Asian History in the Institute forAdvanced Studies on Asia at the University of Tokyo. His interests covercomparative studies of monetary history on East Asia, India, Africa andEurope, as well as specific studies of China’s monetary history. The concept of complementarity among monies which he has developed has been
influential in monetary study, economic history and anthropology. He
has argued that we can determine the characteristics of monetary system
according to two binary oppositions: cohesive or anonymous in the relationship between persons making transactions; and fixed or flexible in theconversion between the currency for local transactions and that of interregional settlements.
Laurent Le Maux is Professor in Economics at the University of Brest andresearcher at the University of Paris Saint-Denis, France. He is co-editor of
the Cahiers d’Economie Politique (Papers in Political Economy). Researchinterests include monetary and banking economics, central banking policy,
history of monetary analysis, and money and banking in history. On these topics, he has published in the Annales: Histoire Sciences Sociales, Cambridge

xviii

List of contributors

Journal of Economics, History of Political Economy, Journal of Economic
Surveys and Revue Economique.
Jaime Marques-Pereira is Professor in Economics at University of Picardie Jules
Verne and member of its Centre de Recherche sur l’Industrie, les Institutionset les Systèmes Economiques d’Amiens, France. His current research interests
are mainly focused on a policitical economy of monetary sovereignty and on
the variety of capitalisms in peripheral economies. His recent contributionsin these fields comprise several book chapters published in Latin America
or articles in Revue de la Régulation, Revue Tiers Monde and Economie etInstitutions.
Masahiro Mikami obtained his doctoral degree in economics in 2012 from
Hokkaido University, Japan. Since 2013, he has been Senior AssistantProfessor at the School of Business Administration, Meiji University, Japan.
His main publications include ‘Evolutionary aspects of Coasean economics’(Evolutionary and Institutional Economics Review, 8(1): 177–187, 2011)and ‘Evolutionary foundations of Coasean economics: transforming new
institutional economics into evolutionary economics’ (Erasmus Journal for
Philosophy and Economics, 6(1): 161–164, 2013).
Yoshihisa Miyazaki has a doctorate in Economics from Hokkaido University,
Japan. He is now an Assistant Professor of Liberal Arts at the National Instituteof Technology, Sendai College, Japan. His research interests include history of
economic thought on CCs and endogenous development in rural areas.

Taylor and Francis

Makoto Nishibe is a Professor in Evolutionary Economics at Hokkaido University,
Japan, with a doctoral degree in economics from University of Tokyo. He
is the Vice-President of the Japan Association for Evolutionary Economics
and an executive board member of the Research Association on Monetary
Innovation and Community and Complementary Currency Systems. His main
publications include The enigma of money (Springer, 2016), Community currency (in Japanese, Minerva shobo, 2013), ‘Globalisation: evolution of capitalistic market economy through “internalisation” of the market’ (Evolutionary
and Institutional Economics Review, 12(1), 2015) and ‘Community currencies as integrative communication media for evolutionist institutional design’(International Journal of Community Currency Research, 16(D), 2012).

Not for distribution

Pepita Ould-Ahmed is an economist, Research Fellow at the Institute of
Research for Development (IRD) and member of CESSMA at the Paris
Diderot University, France. She is co-editor of the Revue de la Régulation. She
specialises in monetary issues involved in development. More specific areasof interest include money issues in a political economy perspective, complementary currency systems, microcredit, rotating saving and credit associations,monetary exclusion and solidarity, and the discourses and practices of debt,
with a specific focus on Argentina, Morocco and Russia. She has publishedseven collections, two special issues and refereed journal articles. Recently,

List of contributors xix
she published with Michel Aglietta and Jean François Ponsot La monnaie.
Entre dettes et souveraineté (Paris, Odile Jacob, 2016) and An anthropologicaleconomy of debt with Bernard Hours (New York, Routledge, 2015).
Bruno Théret graduated in Engineering (Paris, 1970) and then received an MA
in Economics (Paris Panthéon Sorbonne, 1971), an MA in Sociology (Paris
Descartes, 1973) and a PhD in Economics (Paris Panthéon Sorbonne, 1990).
He is an associated member of the CEIM, University of Québec at Montréal(UQAM), the CEI, Colegio de Mexico, and Catedra UNESCO sobre lasmanifestaciones actuales de la cuestion social, Instituto Torcuato di Tella and
UNSAM, Buenos Aires. From 1972 to 1987 he worked at the Forecasting
Office of the French Economy and Finance Ministry. He has been a member of several editorial and advisory boards of economics, history, sociology
and political science journals. He has developed an institutional, historical,
comparative and interdisciplinary perspective on relationships between politics and economics, federalism, systems of social protection, financial andmonetary systems, and theories of the state and sovereignty. He has publishedmany books and articles in different languages. His last book, co-edited with
P. Alary, J. Blanc and L. Desmedt, is Théories françaises de la monnaie. Une
Anthologie (Paris, PUF, 2016), and he is preparing the edition of La monnaie
contre l’Etat? La souveraineté monétaire en question.
Wilko von Prittwitz und Gaffron has been Senior Lecturer in Business Studies
at the Universidad Nacional de Educación a Distancia in Madrid, Spain since2004. He received an MA degree from Emory University, Atlanta, USA and an
MBA from the International Business School CEREM of the Universidad Rey
Juan Carlos I, Spain. He specialises in Spanish local currencies and is a painterand expert on offset, aquatint and other etching techniques. In 2005 he createdwww.BilletesMunicipales.com, a systematised and unique online catalogue of
emergency and other rare currency notes. He researched ‘The social help andthe role of money: historical, symbolic and social value’ at Jaen University,
Spain. He is finishing his PhD on Sociology and Solidarity Economy at theAutonomous University of Madrid.

Taylor and Francis

Not for distribution

Acknowledgements

This book gathers together my thoughts about money and complementary
currencies from a period of almost two decades. As such, I kindly remember the
many persons that have been part of this journey. I especially wish to mention
Professor Emeritus Bert Helmsing, Professor Jérôme Blanc, Professor Akinobu
Kuroda and Rolf Schroeder, with whom I framed my thoughts in many engaging
and lengthy discussions across several scenarios in the world.
I am indeed grateful to the persons that have collaborated in this project andindebted to their patience because the book publication has taken longer thanit should have. I would mainly like to acknowledge the goodwill and positive
attitude of the contributors during the production of this book. Working withresearchers in three continents could have posed a challenge from the outset, andit was, instead, nothing but a pleasure. I am grateful to the work of the anonymous
reviewers that also contributed to this collective project.
I would like to acknowledge the funding of the International Institute ofSocial Studies of Erasmus University Rotterdam through its Innovation Fund2013. The grant allowed us to organise the 2nd International Conference on
Complementary and Community Currencies: Monies for Development. Someof the papers presented in that event were the basis for chapters included in thisvolume. A research grant won by Akinobu Kuroda at the University of Tokyo
made it possible to organise two other events on De-Teleologising the Historyof Money and Its Theory, held in Tokyo and Paris in 2014 and 2015, respectively. The series of events facilitated this book as well as the interaction of a
network of researchers on monetary plurality and complementary currencies.
The configuration of the network also supported the foundation of the Research
Association on Monetary Innovation and Complementary and Community
Currency Systems (RAMICS).
I especially thank the Civic Innovation Research Initiative, research programmeof the International Institute of Social Studies, for stepping in to cover some ofthe production costs of this book. The grant includes the English proofreadingand editing that Soumita Basu has performed with care and professionalism, as
always. I wish her good health and, as they say in India, many returns of the day.

Taylor and Francis

Not for distribution

Acknowledgements xxi
I am equally grateful to Paula Sánchez de la Blanca for her thorough and prolonged assistance in the preparation of this manuscript. She is a graduate who
makes us proud.
I am indebted to the Routledge team of editors for their patience in the completion of this book through so many obstacles and delays that would be too longto detail.
I most especially thank family, friends and colleagues that fed my will to seeit through.

Taylor and Francis

Not for distribution

Taylor and Francis

Not for distribution

1

The monetary system as anevolutionary construct
Georgina M. Gómez

1.1 Introduction
The history of money reflects a story of innovation of several millennia in which
agents and societies have experimented with a myriad of money-things and organisational models. A key feature of this long and creative construction relates tothe dichotomy between plural and singular money systems. Monetary plurality isdefined as the concurrent existence of more than one type of money in a particularspace, as opposed to monetary singularity, which addresses a monetary systemwith a unique type of money. The existence of monetary plurality may happen
at the local, regional or national level, while monetary singularity occurs in thesovereign space of a country or monetary union where a legitimate authority can
impose it. Money includes types of paper money as well as metal, commodities,
tokens, and electronic and virtual payment systems. This introduction will unpack
what we mean when say ‘more than one type of money’.
The issue has been debated for several centuries and it is far from settled.
While most people nowadays are used to thinking along one currency per country,
hundreds of agents and networks around the world are presently active in establishing parallel currencies at both the local and global levels. The latest arrival of
digital currencies and the contestations of monetary unions like the Eurozone arefurther evidence that the construction is ongoing. They are indications that we arestanding on another spot along the evolutionary path and that the organisation ofmoney continues to be in progress.
This book comes at a timely moment to understand why the issue of monetaryplurality versus singularity has not been settled. It aims to disclose how societies have dealt with the organisation of monetary systems along the tension of
one versus multiple moneys and what led to their institutional choices and outcomes. It represents a collection from the production of two partially overlapping
international research networks on monetary innovation, institutions and complementary currencies. These research groups met in the biennial conference on
Complementary Currency Systems at the International Institute of Social Studies
of Erasmus University Rotterdam and in two workshops on De-Teleologising theHistory of Money and Its Theory in Tokyo and Paris. One of the prominent characteristics of this book lies in collecting the views of researchers in Europe, Japanand Latin America, and their studies in three continents.

Taylor and Francis

Not for distribution

2

Georgina M. Gómez

The authors in this volume do not share a common view on monetary plurality
per se but share an interest in understanding money as an institution, a productof social, economic and political life that is still in the making. An institution
is defined as ‘a socially embedded system of rules’ and is characterised as thekind of social structure that matters most in the social realm (Hodgson, 2006: 2).
Institutions, like all social structures, indicate regularity. They are, however,special social structures because they also signal the socially acceptable actions
among several technically possible options. For instance, the institution of moneycomprises the unit of account that is acceptable to use as a standard of value tomeasure prices, savings, contracts, and debts. Other rules indicate the acceptableways to obtain, keep, use, and convert money to other units of account. Monetary
institutions also involve organisations that regulate money in the territory where
it is valid, who is allowed to make it, what it looks like, and what happens to thosethat alter its appearance or counterfeit it. In this line, money is the object thatbinds stable patterns of interaction among social, political and economic agentsfor the actions mentioned (Gómez, 2009).
In terms of institutionalisation, a single money system is relatively a newcomerin economic history, while monetary plurality is not. Monetary singularity became
normal with the consolidation of nation-states around the 19th century. From a
political point of view, states considered it a priority to assert their sovereignty intheir territory by unifying their money (Gilbert and Helleiner, 1999). It was not
before the late 1800s that central banks were concerned with issuing a national
currency and enforcing a monopoly on the issuance of money. In the case of GreatBritain, the 1820s were occupied with a debate between two main positions, theCurrency School and the Banking School (Ingham, 2004; Schwartz, 1989), which
discussed monetary singularity against allowing for several issuers and currencies. As a result of these debates, England and Wales started having one currency
in circulation issued by the central bank that enforced its monopoly over issuancedecisions through the Bank Charter Act of 1844. In practice, however, monetary
singularity was contested repeatedly. In the United States monetary plurality continued until later and it was only in 1907 that the Federal Reserve was given the‘mandate of providing a uniform and elastic currency’ (Bordo, 2007).
Fractional monetary plurality, in particular, continued to be salient in mostcountries until the present day. When it comes to small denomination money,
monetary singularity is normally contested even in advanced economies today. It
is known worldwide as the ‘problem of small change’ (Carothers, 1967) in reference to the small denomination coins and notes which cost more to be produced
than their actual face value. The scarcity of small change affects mainly everyday
transactions, especially low income buyers who spend a significant percentage of
their income in daily necessities (Baubeau, 2014). It was one of the reasons why
until a century ago there were moneys used by the rich and moneys used by thepoor (Cohen, 1999), with combinations in between. The scarcity of small changeeven delayed the adoption of money, because it led to exclusion of segments of the
population that could go by without money. They consumed their own production
or bartered. The differentiation of uses of money by social strata is an issue still

Taylor and Francis

Not for distribution

Monetary system as evolutionary construct 3
under scrutiny, as is their regional and local differentiation (see Gómez, Chapter 4;
Gómez and von Prittwitz, Chapter 7; Fare, Chapter 10, all this volume).
In conceptual terms, monetary theory has been mostly fragmented in explaining monetary singularity and plurality (see Blanc et al., Chapter 2, and Blanc,
Chapter 3, both this volume). There are several ways of organising money as
Nigel Dodd asserts in his 2014 book, The Social Life of Money. One of the ways
is to have one type of currency per sovereign country and bank notes issued by
the state, normally through the Central Bank. Other agents, namely banks, multiply the monetary base by giving loans according to legal regulations, so that avast majority of money used by the public is actually being created by the banks
through these credit expansion mechanisms. It is a model centred on the principleof scarcity; frugality in issuing money by banks and politicians is celebrated as a
virtue (Dodd, 2014).
However, that is not the only way to organise money and that is where monetaryplurality comes in, Dodd (ibid.) continues. Complementary currencies may be specifically designed to benefit groups that earn irregular or small amounts of money(see chapter by Kobayashi et al. in this volume) or to empower issuers by taking
back power from the central banks and private bankers, so that they can promotelocal economies and subnational finances, regenerate social ties, or encouragedesirable behaviour such as volunteering and environmental sustainability (seechapters by Miyazaki and Kurita in this volume). To pursue these goals, complementary currencies tend to follow the principle of abundance, and issue as muchmoney as needed to support the goals and the aspirations of the agents involved(see chapter by Fare in this volume). Monetary plurality, in general, has multipliedmarkedly in the last decades (Blanc, 2016). This book discusses monetary plurality
in connection to these goals and is conceived as a theoretical and practical toolkit
to explore the risks and potentials of monetary plurality.

Taylor and Francis

Not for distribution

1.2 Perspectives on the ontology of money
The distinction made by Dodd (2014) between the principles of scarcity and abundance in monetary systems reflect on an ontological issue. This subsection aims
at unpacking the meanings of monetary plurality and singularity. It will first discuss the perspectives on the origins and meanings of money to further develop
the distinctions between monetary systems with one or several types of money.
Considering the diversity of money and that its history is almost as long as thehuman capacity to calculate and write, there is no simple answer to basic questions such as what money is and how it started (Smithin, 2000). What money isand does also depends on the time and place that we pose the question. Such contextualisation does not mean that we are unable to define it. It is a note of cautionthat says that the ontology of money requires us to not focus on the money-things
but on the stable patterns of social interactions, in which agents measure value,
make payments, cancel debts and keep savings. Moreover, not all money has
performed these four primary functions at the same time or in the same ways (seechapters by Blanc et al., Gómez, and Kuroda in this volume).

4Georgina M. Gómez

Dodd’s distinction of the two main perspectives of money follows, in fact, anoriginal differentiation in Joseph Schumpeter’s book The Theory of Economic
Development (1961 [1934]). Schumpeter distinguished between a metallist andan anti-metallist conception of money. The metallist conception proposes that acommodity of intrinsic value emerged as preferred medium of exchange in barterbased markets. Metals and other goods considered to have intrinsic value had apredetermined limit fixed outside the economic system, so this conception builds
on the principle of scarcity. It is the dominant view in economic and policy circles, at least since Menger published On the Origin of Money (1892). Instead, theanti-metallist conception emphasises the social production of money as an institution (Bell, 2001; Ingham, 1996; Wray, 1998) and centres on money as a unit ofaccount that is created by credit relations (Ingham, 2004; Keynes, 1976 [1930];
Wray, 1998, 2004). Money created as debt-credit social relations is not limited
to a predetermined amount of a money-thing with intrinsic value but is endogenously fixed within the economic system. Its issuance has a limit, of course, but
the limit is posed by trust in the social rules and legitimate authority that regulates
and sustains the social institution of money. Michel Aglietta (2002), based on anarticle by Charles Goodhart (1998), further develops the distinction as a realist
versus an institutionalist approach, respectively. We will now take a closer look
into both positions and their relations to the perspectives on the origins and meanings of money.
The dominant view among economists is the commodity theory of money,
which has fed the realist or metallist positions. It argues that a single money system arose because several money-things competed with each other until the mostefficient one in terms of transaction costs eventually displaced the less efficientones (Menger, 1892). Money changers acted as points of interphase between the
single currency of one country and the single currency of other countries. The outcome of one country = one money is hence presented as the winning option after
a period of competition in plural money systems. It attracts and dominates policy
circles because, apart from becoming a credible explanation, it justifies a policy
option in their hands by securing the monopoly over the issuance of money.
From a historical point of view, there is a broad variety of objects that wereused as means of payment in different settings and periods in time, used apparently to facilitate trade. Anthropologists’ and historians’ studies of ‘primitivemonies’ include the cocoa beans of the Aztecs, the wampum of the North Eastern
Mexican Indians, the cowrie shells of the African West Coast, tea blocks in Upper
Asia and Siberia, dates in the Sivah-Oasis, wax cakes on the Amazon, cod fish inearly Iceland, ivory and glass coral in Portuguese Africa, small strips of cottonand sugar in British West Indies and tobacco in Maryland and Virginia, among
others in a very long list (Melitz, 1974). Primitive money, as it is often referred
to, was always local, the chosen commodity was contextual, and payments weresometimes effected only once from one person to another for a specific purpose.
Einzig (1966) underlined that whatever money-thing was used, its emergencemarked a transition from a self-sufficient economy to one based on production
for exchange, and later to general trade in markets with a large number of

Taylor and Francis

Not for distribution

Monetary system as evolutionary construct 5
participants. In societies where trade played a major role, a general equivalentoften developed spontaneously as means of payment.
According to this perspective, a certain commodity became acceptable as
money ‘when some alert people realised that they could benefit by holding greaterstocks of the most marketable commodities than they had immediate use for’(Glasner, 1989: 6). Thus, the chosen commodity became means of payment andoriginated money in an attempt to reduce the transaction costs of barter (Menger,1892), and solve the double coincidence of wants (Jevons, 2001 [1875]). Thismeans that when there are means of payment, the problem of finding an immediate direct buyer and seller for a certain good is solved and the transaction costs of
exchanging are minimised, hence making that commodity the most efficient channel to conduct trade. In this way, Melitz (1974: 77) defined money as ‘all goods
that are held in significant measure in order to economise on transaction costs inthe activity of trading a variety of other types of goods’.
Moreover, the chosen money-thing can be hoarded to make payments later,
so metals like copper, brass, gold and silver were preferred as common means of
exchange. Metals have the key characteristics of durability, divisibility and portability. They were eventually standardised into coins and later industrialised withthe appearance of the mint. Their value as means of payment was determined by
the amount of the precious metal that they contained and, later on, by the amountthat they represented. To economise on the use of metals and to avoid risky transportation, the amounts arose as a symbolic substitute for gold or silver (Wray,
1998). By then, the public had become used to the denominations of the various
coins and notes, and these are the origins of fiat money, according to the commodity theory of money. For Hicks, each step represented ‘ever more sophisticatedways of reducing transaction costs’ (Hicks, 1967), as societies evolved from local
tokens and stones to golden coins and then national bank notes to the most recent
form of digital cash. From this perspective, money is a creature of the market, an
efficient solution to facilitate exchange which is not related to any particular timeor place or historical sequence.
This theory has been criticised from both the analytical and empirical angles.
Among other arguments, some authors note that it is difficult to see how money
could have been unified across civilisations that barely communicated with eachother. Moreover, it is counterintuitive to think that this coinage could reduce
the transaction costs of bartering (Goodhart, 1998; Wray and Forstater, 2006).
Medieval coins were extremely varied in weight, denomination, alloy and fineness; they were chipped and adulterated in various ways, and sometimes they had
the same face value but different exchange value. For example, in MerovingianGaul there were 1200 currencies, most of them issued by private individuals(MacDonald, 1916 quoted in Wray, 1998). Besides, transaction costs could hardly
have been the driving force behind creating monetary singularity. There werecomplex civilisations, advanced in production and trade and with a few million
inhabitants like the Incas or the Phoenicians, that managed their economy without
any kind of money (Melitz, 1974). John Maynard Keynes, unlike Hicks, considered that commodity money might have functioned as a ‘convenient medium of

Taylor and Francis

Not for distribution

6

Georgina M. Gómez

exchange . . . but if this is all, we have scarcely emerged from a state of barter’(Keynes, 1976 [1930]: 3). There is more to the origins of money than the preference for a commodity. This explanation on the evolution from gold to scrip is notcredible, especially after the abandonment of the gold standard and the dissemination of electronic and digital money.
The alternative draws from sociology and heterodox economics as an institutional theory of money. This version does not dispute that specific commodities
have originated as a means of payment throughout history but rejects that thesewere self-organised choices that resulted from the inherent efficiency of thesemoney-things. Instead, Ingham argues that a monetary system is a set of institutions embedded in a society (1996, 2004, 2006). The construction of money
follows an evolutionary structuration process along the social, economic andpolitical needs, and possibilities that rose with impersonal exchange (Seyfang andPearson, 2000). When a community grows, it requires a standard and stable unitof account as reference of value (Aglietta, 2002). The money-thing was present
but its transition as unit of account was not spontaneous.
The institutionalist view has several strands because they emphasise different
aspects. One strand places the origin of money as credit money and argues thatit did not emerge out of barter but out of obligation to cancel debts with various
authorities, such as sovereigns or priests to whom religious payments had to bemade (Wray, 1998, 2004). These local, religious or community authorities would
create a unit of account when they proclaimed that they would accept certain
money-things at explicit values to cancel taxes and religious debts. While barter
was used for local and small trade, larger transactions such as dowries and interregional trade were conducted on the basis of credit (Innes, 1913).
The oldest archaeological findings of money are consistent with this perspective. The tallies were written promises to cancel debts; they were ‘sticks of squared
hazel wood, notched in a certain manner to indicate the amount of the purchase’found abundantly in old Mesopotamia (Wray, 1998: 40). They were already being
used 2000 years before the oldest known coins were minted (Ingham, 2001). They
were frequently transferable and negotiable so that clearing between several merchants holding tallies from the same creditor/debtor was possible. When coins
were developed, they were renovated versions of the tally: evidences of debt
(Wray, 1998) that could be transferred and written off against one another.
Indeed, the next important innovation in the evolution of money was thetechnique to expand personalised debt relations into anonymous credit moneythat could circulate and balance out against each other. When trade resumed in
the Mediterranean in medieval times, the equivalent of bankers arrived on thescene in northern Italy. These bankers exchanged local coins for those of other
cities. Gradually, rather than giving actual coins, they started giving bills ofcredit and they kept the gold in store. And then they started issuing more bills
than the actual coins they had in stock because they could balance the deposits
of one client with the payments of another and people were unwilling to carryphysical gold. Even if payments continued to be named for much longer, they
were transferable, so it was possible to balance them out among customers andTaylor and Francis

Not for distribution

Monetary system as evolutionary construct 7
bankers. Banks became clearing houses instead of creators of money ‘with thestroke of a pen’ (Glasner, 1989).
The networks of merchants and bankers met regularly to transfer and cancel debt and credits in several local currencies. A market for bills of exchange
emerged, when trade along and beyond Europe became active (Boyer-Xambeu etal., 1994). Bills eventually were detached from any direct relationship to actualcommodities and, rather, began to serve as autonomous media of exchange andmeans of payment. Eventually, credit became detached from both goods andpersons, transforming a deferred payment scrip system into money that could circulate anonymously. The value of these liabilities depended on the willingness ofpeople to hold them (Glasner, 1989), and they were specifically designed to scale
up credit instruments in larger networks of users (Kim, 2011).
John Maynard Keynes (1976 [1930]) argued that the transition to full transferability of bills of exchange was a major structural innovation in the evolution ofmoney: while barter is bilateral and local, transferable money makes it possible
to develop an extensive multilateral decentralised market around the world. This
was a plural money system, in which private credit-monies based on bills of credit
became integrated with metal coinage minted by kings and authorities at explicit
units of account. Monetary plurality hence incorporated public and private monies. Depersonalised, transferable promises of pay were thus woven into deep andcomplex layers of debt in which the trustworthiest notes were kept as base money
to back the rest of the system.
The monetary system continued to evolve when states themselves joined in
issuing promises to pay, accompanied with some pressure for their acceptance(Wray, 1998). The Bank of England in 1694 was the benchmark state institution
created to organise these layers of credit, although it was not until almost 150
years later that it started imposing the circulation of its own promises of payment to crowd out private golden coins in England and Wales (Ingham, 1999). In
the 19th century, states started centralising the monetary system under monopoly
control and outlawed third-party issuers and currencies, such that money becamea creature of the nation-state at the outset of modernity. The monopoly, however,is still incomplete and contested (see chapters by Théret, Blanc et al., and Kuroda
in this volume).
Schumpeter considered that the transformation of long-term debt and otherilliquid assets into short-term instruments or money with a set unit of account
was quintessence of capitalist monetary practice (Schumpeter, 1994 [1954]: 613).
Third-party debts are cancelled by other third-party debts, although this canbe done, at least initially, only within social networks in which there is either
minimum trust that credits will be honoured or built in institutions to penalise
an untrustworthy payer. It allowed for the expansion of the system and a number of other institutions appeared to support this monetary system. It produced
a qualitative transformation in credit-debt relations and in monetary production
to dematerialised or abstract money. As Ingham (1999: 80) reminds us, credit
money was not only a facilitator of exchange but a ‘transformative power’.
Monetary plurality is compatible with the credit-money approach and historically,

Taylor and Francis

Not for distribution

8

Georgina M. Gómez

several currencies coexisted. The poor, for instance, used mainly low denomination tokens, mostly privately issued and not easily convertible into the monies of
the wealthy (Gilbert and Helleiner, 1999). Money creation is decentralised andexpands with the establishment of every new credit-debt relationship.
This endogeneity of monetary creation was already understood by Keynes(1930) and is the foundation of post-Keynesian monetary theory. It is criticallyat odds with the commodity perspective of money. In The Philosophy of Money,
Georg Simmel (1982 [1900]) presented a view that resolves the tension between
the two perspectives, to some extent. Simmel argued that money is a norm in thesense of an abstract expression of a community that establishes social relationsof trade and sets shared mental structures. While trade creates social interaction,
money appears as an abstract object out of these interactions and subsequently
reinforces trade relations and trust on the unit of account. As it is an intersubjective abstraction to express value, money is based on trust in the community where
the units of account originate and which builds ‘communities of payments’. This
explanation leaves open the possibility of monetary plurality if various communities of payments coexist and trade across them is enabled by stable exchange
rates. However, there is still the question of how this happens.
Several authors (for example, Wray, 1998; Ingham, 2004; or Keynes, 1976
[1930]) underscore that the definition of the unit of account by the collective authority was key in the transition to monetary singularity. Tax collection
expressed an exchange rate at which different commodities would be accepted
for the obligations owed to the state. In times when there were countless typesof coins, the authority’s measurement was used to value the many forms of commodity money in circulation into a single unit of account. Acceptance by the statealso indicated a hierarchy between monies (Bell, 2001) and, in the long run, it
would steer the system towards the money accepted by the state. In other words,
the actions of the state established a preference for monetary singularity. Later on,
the state consolidated the central position of its money by the rule of law, coercion and force (Aglietta and Orlean, 2006), so the state wiped out other units ofaccount and currencies. Still, the principle of abundance was not ruled out; money
was primarily a unit of account, so other credit moneys could circulate and were
not limited to a fixed amount.
Another strand within the institutional perspective of money offers a different
view on the role of the state and monetary singularity. It argues that role of theauthority did not stop at choosing a specific money-thing and guaranteeing thevalue of the unit of account (Aglietta, 2002; Aglietta and Orlean, 2006; Goodhart,
1998) but includes creating a single acceptable money-thing. The state became
the monetary authority and imposed an abstract means of payment that served as
symbol of its sovereignty, its capacity to levy taxes and to indicate what currencies were legitimate across its territory (Goodhart, 2006). Once the state decided
to declare one type of money as the valuable money-thing (gold or whatever was
accepted as payment for taxes), others had to use it. Aglietta (2002: 50) characterises the centralisation process as ‘interlocking networks of networks with thecentral bank at their fulcrum’.

Taylor and Francis

Not for distribution

Monetary system as evolutionary construct 9
The state centralised the issuance of coins from bullion to standardised stamped
coins and later, fiat money. The theory hence receives the name of Cartalist
approach, from the Italian ‘carta’ for paper and was elaborated by Knapp (1973[1924]). It establishes a division of labour in which there are two types of social
actors in a centralised monetary system: those who make money (the state) andthe public that uses it (Ingham, 1996). In the 19th century, ‘the forging of national,
uniformed monetary systems was a central project undertaken by states across theworld’ (Gilbert and Helleiner, 1999: 4). As central and only issuer, the state could
easily decide on the limit of issuance. It could apply the principle of scarcity, consistent with its desire to affirm its control over the economy.
The origin of modern money was thus intimately related to the nation-state(Goodhart, 1998) and modernity. An important critique of the Chartalist approachargues that money existed as a social construction long before the nation-state
came, to impose the principle of control and scarcity into the system. In rigour, thistheory explains the completion of the modern money system based on monetary
singularity and it is not incompatible or separate from the credit-debt perspective
to the origin of money. There is a historical gap of a few thousand years before
the nation-state appeared in the long evolution of money. Several currencies wereused in distant trade long before there were official monetary systems, before
nation-states used it as a symbol of sovereignty and before rational authorities
collected taxes (Seyfang, 2001). However, in present times, modern money iscentred on the state which implies that the modern monetary system embeds themany limitations and failures of the states (see chapters by Théret in this volume).
Based on these perspectives on what money is and how it developed, we
can now unpack the meanings and origins of monetary plurality and singularity(Table 1.1).

Taylor and Francis

Not for distribution

1.3 Modern money and monetary singularity
The long and innovative process of organisation of the modern monetary system
converges on the principle that one country = one money. The role of the nationstate was critical, but it is not the only factor that supported the social constructionof modern money as, primarily, a creature of modernity. Aglietta (2002) identified three parallel processes that led to the institutionalisation of modern money,
defined as a depersonalised, dematerialised, abstract, transferable promise to pay(Smithin, 2000). The first force in the construction of modern money is a process
of abstraction and consequent separation from persons and physical money-things.
In the credit theory of money, credit-debt relations depended on the trustworthiness of the issuers. With the scaling up of the monetary system, money became
increasingly dematerialised and abstract, and separated from the issuers. Modernmoney is anonymous, depersonalised and abstract, hence the perfect foundation
for modern rationality, as Max Weber expressed it (1978). Abstract money iscompatible with monetary singularity as well as plurality. A second process in theconstruction of modern money is the social and political control over ‘monetary
spaces’ (Ingham, 2002). Monetary singularity implies that the state concentrates

10

Georgina M. Gómez

Table 1.1 What does monetary plurality and singularity mean?
PLURALITYSINGULARITY

Institutionalist approach
Anti-metallist tradition
Social production of money: credit relations
Creature of social interaction: issuedby collective authority to organisemeasurement of value (state, banks orother agents)
Ruled by principle of abundance
Frugality of issuer may be harmful
No physical collateral as intrinsic value
Value determined within the social,political and economic system (limitedby trust and authority)
Several means of payment perform different
functions complementing each otherMarginalised view in policy circles
Time and space simultaneity of morethan one currency seen as positive for
local development. Agents deal withcurrencies in the same time and space.
Normally small-scale circulation, locally orin social networks
Associated with primitive and traditionalsocieties

Realist approach
Metallist tradition
Technical production of scarce commodity
Creature of market trade: money solves
coincidence of wants and transaction
costs
Ruled by principle of scarcity
Frugality of issuer perceived as a virtue
Commodity of intrinsic value
Value determined exogenously (limited toavailability of commodity)
Several means of payment compete until
one is proven to be the most efficient
Dominant view in policy circles
Time and space simultaneity of morethan one currency seen as temporalanomaly. Money changers as points ofintersection between currencies
Large-scale, national circulation, within
and between countries
Associated with modernity

Taylor and Francis

Not for distribution

this control. The third dimension of modern monetary systems is its centralised
administration around the state and banks as key issuers, as opposed to the decentralised nature of credit relations and concurrent commodity currencies. Different
issuers require decentralised information about each other, which is not always asavailable or easy to get as when information is centralised.
The centralised information typical of monetary singularity systems only
reduces uncertainty if states or other central authorities function. In episodes of
war and severe distress, monetary singularity is suspended, like many other institutions (see Chapter 7 by Gómez and von Prittiwitz in this volume). The failuresof states beg us to ask why monetary singularity is so often seen as the superior,and often, the only option. There is a missing link in explaining monetary singularity and modern money as creatures of the state and which is rarely consideredin the analysis of money as an institution of modernity.
By definition, institutions are resistant to change and based on habit (Hodgson,
2006, 2007), which is critical in stabilising the system. Once economic agents
started using a certain unit of account and means of payment in their daily economic life, modern money became a ‘habit of thought’ (Veblen, 1899). We will

Monetary system as evolutionary construct 11
explore this concept further. Habits are submerged inventories of possibilities
to guide human behavior and they can be retrieved by an appropriate context.
Following Veblen, habits are defined as ‘a causal mechanism, not merely a set ofcorrelated events’ (Hodgson, 2004: 653), so reasoning and beliefs rely on habitsof thought with which agents interpret social life. In addition, a hidden and mostsalient characteristic of institutions is their capacity to shape agents’ aspirations.
As expressed by Hodgson: ‘Because institutions not only depend upon the activities of individuals but also constrain and mould them, this positive feedback gives
institutions even stronger self reinforcing and self perpetuating characteristics’(Hodgson, 2004: 656). Monetary singularity for several generations has been
the norm and has shaped the interpretations and understandings of what modernmoney is.
In short, the approach to modern money as an institution implies adopting the
non-rational elements of institutional thought and incorporating its habitual component in the analysis (see Kobayashi et al., Chapter 11, and Mikami and Nishibe,
Chapter 12 in this volume). Swanke (2004) follows this line in analysing the origins and meanings of money, and asserts that:[t]he people who started this habitualised behaviour pattern almost certainly
did not plan to create an institution. The institution is created when new people begin to interact with those who act in the habitualised way and the newcomers adopt the habitualised behaviour. The newcomers take the habituatedactions as objects that create an institution.
(Swanke, 2004: 87)

Taylor and Francis

Not for distribution

The current reappearance of a myriad of complementary currencies and modern
versions of monetary plurality (Blanc, 2012) do not happen in an institutional tabula rasa but face the challenge of standing against the habits of over a century ofexperience in which monetary singularity is apparently the rule (see Kobayashi etal., Chapter 11, and Mikami and Nishibe, Chapter 12, both this volume). Projectsof complementary currency hence proclaim a desire to repersonalise money andthe economy, decentralise its organisation, and reclaim control over a territory(see Gómez, Chapter 4; Kuroda, Chapter 6; Fare, Chapter 10; and Miyazaki andKurita, Chapter 9, all this volume). In addition, monetary plurality is endorsed by
the power of the nation-state, which is being challenged from a number of different angles by the apparent transition of the human race to postmodernity. It is nowonder that monetary plurality surges in periods of war, socioeconomic demiseand political affirmation of non-state agents (see Théret, Chapter 8, and Gómez
and von Prittwitz, Chapter 7, both this volume).
A key scholar in the old institutionalist tradition, Veblen (2006 [1914]: 6)
claimed in The Instinct of Workmanship that:[t]he higher the degree of intelligence and the larger the available body ofknowledge current in any given community, the more extensive and elaborate will be the logic of ways and means interposed between these impulses

12Georgina M. Gómez
and their realisation, and the more multifarious and complicated will be theapparatus of expedients and resources employed to compass those ends thatare instinctively worthwhile.

This book aims at increasing the available body of knowledge to understand thetension between monetary plurality and singularity with an aim to gain insight intheir implications. Thus, it presents a collection of current research on theories
and practices from several continents.

1.4 Contributions in this volume
Our first step in the journey to understand and make sense of monetary plurality
was to review how monetary theory understands the tension between plurality and singularity. In Chapter 2, Jérôme Blanc, Ludovic Desmedt, Laurent Le
Maux, Jaime Marques-Pereira, Pepita Ould-Ahmed and Bruno Théret review awide canvas of the literature on monetary theory. They organise monetary theories along two key criteria: money neutrality versus their significance in termsof their effects on the rest of the economic system, and plural versus singularmonetary systems. The study covers several views on monetary plurality fromthe New Monetary Economics to the Free Banking model, in addition to different approaches to monetary singularity from the point of view of Walrasian,Chartalist, post Keynesian and Marxist theories. The authors opt to focus theirresearch on the plurality of means of payment and units of account. They findthat theories allow for all sorts of combinations of plurality and singularity ofthese two elements. For example, there are configurations of a single unit ofaccount with several means of payment, or several issuers with one or more unitsof account. The spectrum of theories hence ranges from strong to weak singularity and from strong to weak plurality depending on the combinations of these two
criteria. Looking at the diversity of approaches on the tension between monetaryplurality and singularity indicates that the search for a theoretical framework to
account for monetary plurality would not come from economics alone.
Jérôme Blanc takes the challenge in Chapter 3 and adopts a multidisciplinary
approach to account for monetary plurality. The search for a theoretical framework leads to the instruments developed by Karl Polanyi, namely the distinction
between all-purpose money and special-purpose money. Moreover, Polanyi
proposed three or four forms of integration of economic activities into socioeconomic systems: exchange, redistribution, reciprocity and, depending on the stageof his analysis, a fourth one called communal sharing. The relation between these
institutionalised systems and monies resulted in a rich categorisation with threeideal types: public money, business money and associative money. The analysis
facilitates the understanding of real cases, including modern money and othercontemporary complementary currencies. At the same time, the framework suggests an inseparable relation between individual activity, monetary plurality andthe institutions that bring them together.

Taylor and Francis

Not for distribution

Monetary system as evolutionary construct 13
The same direction is followed in Chapter 4, where Gómez adopts a Polanyian
approach to the economy as instituted process. The chapter conceptualises currency circuits as stable social structures that connect a currency with specificproducts and categories of agents. Based on the case of Argentina, during thecrisis of 1998 to 2005, the author analyses how agents dealt with monetary plurality by matching each currency to the four functions of money: accountancy,
exchange, payments and savings. There were five different types of currencies
circulating at the same time at the national, regional and community level. The
research discloses that households and small businesses can deal with monetaryplurality by organising what currencies they use for what purpose, without converting one currency into another. What is more important, having different levelsof currencies facilitates access to goods and services for segments of the population that would not have had any money or ways to satisfy their needs at all, which
offsets the extra transaction costs involved. Monetary plurality enabled production and the use of skills that were idle, hence showing that several currencies
could do more than any one currency by itself.
Bruno Théret reaches a similar conclusion in Chapter 5, also based on theexperience with money in Argentina. The chapter develops the concept of monetary federalism with the methodology of grounded theory. That is, exploring
the recurrent episodes in which the provincial governments issued currency at
the subnational level between 1890 and 2003. Monetary federalism refers to a
specific design of monetary systems that accommodate the interests of subnational entities (states, provinces, landers, cantons) that share the decisions overthe monetary system. Théret aims at explaining why Argentina presents such astrong inclination towards monetary federalism and what the implications were.
Monetary federalism represents a middle way between the prevailing dichotomy
between fragmenting the international currency system and allowing for theappropriation of monetary policy in territories that share a single currency andalso show significant disparities in their geographic, social, economic and political systems. The author suggests that the experience of Argentina may inspire
solutions to monetary unions such as the Eurozone.
The reasons underpinning monetary plurality and the enabling conditions areeven broader than the alternative of monetary federalism, as suggested in Chapter 6.
The issuance of local currency depends on the preferences and social cohesion of
local groups, the roles of local elites and their regional self sufficiency. Akinobu
Kuroda adopts a historical perspective with empirical evidence of China andEurope to find out why local currencies have been recurrent despite political pressures towards monetary singularity. The author shows that a certain percentage
of currency tends to disappear as it circulates, so currency-dependent societies
recurrently suffer its shortages and fall into recession. This phenomenon is called‘famine of cash’ in China and causes economic stagnation at the local level. With
the aim of escaping such economic downturns, local actors create their own meansof exchange to conduct local trade and increase the stability of their local economies. A second pattern is the use of credit, and although at the local level there is

Taylor and Francis

Not for distribution

14

Georgina M. Gómez

high level of trust, there is also non-performance. That means this alternative ofcredit instead of local currency is equally problematic, although for different reasons. In a third path, when local elites concentrate a significant proportion of thelocal trade, they are also able to create local currency circuits. In that case, theywould issue tokens that cannot be exchanged for goods from outside the locality,
but which are conducive to keeping alive the trade for local necessities. The social
structure in each locality defines the transaction and currency solution to avoid
local economic crisis.
With evidence from several cases of crisis, Gómez and von Prittwitz in Chapter 7
substantiate that episodes of war and social, economic and political demise havebeen conducive to the creation of complementary currencies. The pattern has been
pervasive for several centuries and establishes a clear link between crisis andmonetary plurality, although the authors analyse in depth only the 20th century.
The chapter results from an unlikely collaboration between a numismatic and asocial scientist, in which the authors followed the money-things and scrip during countless hours of archival work. They study the emergency currencies ofthe postwar period in Europe, the hyperinflation, the Great Depression and the
Spanish Civil War. These were all periods during which unknown money wasbetter than no money at all for most of the local agents. The authors conclude thatthe emergence of complementary currencies during episodes of severe crisis is not
only designed as a temporary solution, but that they sometimes also express thedesire to take the crisis as windows of opportunity to pursue structural changes
and rebuild the world according to local possibilities and aspirations.
As a further illustration of that conclusion, in Chapter 8 Bruno Théret focuseson one specific case in which the governors, the local business elites and several
groups in the population converged on creating and sustaining a subnational currency. The chapter studies the complementary currency issued by the Argentinian
province of Tucuman between 1985 and 2003, called Bocade. It examines why it
was issued, how it functioned at its outset and how it evolved. Théret corroborates
that this experiment was not simply the result of a situation of emergency, as was
already hinted by Gómez and von Prittwitz, but had its political and symbolicalrationality. The case of Tucuman represents a structural effort to create a longerterm device to gain autonomy, strengthen the provincial fiscal accounts in thelong run, increase economic resilience and promote local economic development.
Under different conditions, complementary currencies in some areas in Japanare designed precisely to avoid serious crisis. Monetary plurality appears as an
instrument to promote local economic development and environmental sustainability in hilly and mountainous regions that critically depend on engaging volunteers.
With aging and shrinking populations in the hilly and mountainous areas in Japan,
a shortage of workers has resulted in degraded forests and threatened ecosystems.
In Chapter 9, Yoshihisa Miyazaki and Ken-ichi Kurita study how community
currencies affect forest and ecosystem sustainability, promote community involvement, and local economic development. They conduct a survey questionnaire ofvolunteers and non-volunteers and find that community currencies facilitate theregional circulation of labour of forest volunteers, local products and wood, andmoney, thereby supporting local economic development projects.

Taylor and Francis

Not for distribution

Monetary system as evolutionary construct 15
Marie Fare follows the thread of local economic development in Chapter 10,
from the perspective of sustainable territorial development and monetary subsidiarity. In view of the economic and environmental challenges that many
communities around the world are exposed to, community and complementary currencies appear as an option in the inventory to look into. Fare explores
the contributions and limitations of complementary currencies by looking into
empirical studies of the SOL Alpin in Grenoble, France, and the Accorderiein Quebec, Canada. The author discusses the use of complementary currencies from the principle of monetary subsidiarity. Each currency circulating incomplementary mode on a subnational scale is perceived as being developedand issued at the relevant level in relation to the socioeconomic and geographic
conditions. Fare concludes that, in the two cases she studied, monetary plurality
did not reach the necessary scale to have a significant impact on local economic
development. However, the complementary currencies had important effects forthe populations involved.
Chapter 11 delves deeper into institutional and evolutionary theory withevidence of several cases of monetary plurality. Shigeto Kobayashi, Takashi
Hashimoto, Ken-ichi Kurita and Makoto Nishibe conceive a theoretical framework to explain the micro-meso-macro connection between complementary
currencies and individuals’ understandings of monetary plurality. Only a few
community currencies have achieved high circulation and maintained a certain economic scale over a long period. They draw on conceptual tools of
behavioural psychology to show that users of complementary currencies place
more importance on monetary plurality and shared notions of fairness than theemployees of financial organisations. This characteristic was evident among
agents that had a deeper insight into complementary currencies. The authors
conclude that the individuals’ perceptions of monetary plurality are fundamental in creating and sustaining complementary currencies at the institutional ormeso level. In the opposite direction, the direct experience with complementary currencies improves individuals’ perceptions, indicating a feedback loop
between individual cognition at the micro level and institutional compliance at
the meso level.
Chapter 12 presents a game simulation developed in Japan that confirms thatcomplementary currencies change an individual’s dispositions and perceptions.
Using behavioural analysis of self-versus-community consciousness, Masahiro
Mikami and Makoto Nishibe design an experiment based on a mutual credit systemwith 18 agents. The authors simulate a centrally issued electronic complementary
currency to test in what ways its actual use affected the perceptions of the participants. They propose that participants’ cognition and behaviour would change
as they gained insight into the potential and pitfalls of complementary currencies. They examine the extent to which participants’ behaviour patterns changes
depending on the transaction costs of the currency, participants’ consciousness
about self and community, and the availability of aggregate information on thetransactions and activities within the community. They find that the most significant factor to support complementary currencies is whether participants prioritisecommunity over self-interest.

Taylor and Francis

Not for distribution

16

Georgina M. Gómez

References
Aglietta M. 2002. Whence and whither money? In: OECD, ed. The Future of Money. Paris:
OECD. 31–72.
Aglietta M and Orlean A. 2006. Money Between Violence and Trust. Moscow: Publishing
House HSE.
Baubeau, P. 2014. L’histoire de France en ‘vignettes’: deux siècles de circulation fiduciaire. Revue numismatique 6(171):631–653.
Bell S. 2001. The role of the state and the hierarchy of money. Cambridge Journal of
Economics 25(2):149–163.
Blanc J. 2012. Thirty years of community and complementary currencies: a review ofimpacts, potential and challenges. International Journal of Community Currency
Research 16(D):1–4.
Blanc, J. 2016. Unpacking monetary complementarity and competition: a conceptual
framework. Cambridge Journal of Economics 41(1):239–257.
Bordo M. 2007. A Brief History of Central Banks. Cleveland, OH: Federal Reserve Bankof Cleveland.
Boyer-Xambeu M-T, Deleplace MG and Gillard L. 1994. Private Money and Public
Currencies: The Sixteenth Century Challenge. London: Sharpe.
Carothers N. 1967. Fractional Money: A History of the Small Coins and Fractional Paper
Currency of the United States. New York: AM Kelley.
Cohen BJ. 1999. The new geography of money. In: Gilbert E and Helleiner E, eds. NationsStates and Money. The Past, Present and Future of National Currencies. New York andLondon: Routledge. 121–138.
Dodd N. 2014. The Social Life of Money. Princeton, NJ: Princeton University Press.
Einzig P. 1966. Primitive Money. London: Pergamon Press.
Gilbert E and Helleiner E, eds. 1999. Nation-States and Money. The Past, Present andFuture of National Currencies. London, New York: Routledge.
Glasner D. 1989. Free Banking and Monetary Reform. Cambridge, UK: Cambridge
University Press.
Gómez GM. 2009. Argentina’s Parallel Currency: The Economy of the Poor. London:
Pickering & Chatto.
Goodhart CAE. 1998. The two concepts of money: implications for the analysis of optimalcurrency areas. European Journal of Political Economy 14(3):407–432.
Goodhart CAE. 2006. Monetary and social relationships. In: Wray R and Forstater M, eds.
Money, Financial Instability and Stabilization Policy. Cheltenham, UK: Edward Elgar.
22–36.
Hicks J. 1967. Critical Essays in Monetary Theory. Oxford, UK: Clarendon Press.
Hodgson GM. 2004. Reclaiming habit for institutional economics. Journal of Economic
Psychology 25:651–660.
Hodgson GM. 2006. What are institutions? Journal of Economic Issues 40(1):1–25.
Hodgson GM. 2007. Institutions and individuals: interaction and evolution. Organization
Studies 28(1):95–111.
Ingham G. 1996. Critical survey: some recent changes in the relationship between economics and sociology. Cambridge Journal of Economics 20:243–275.
Ingham G. 1999. Capitalism, money and banking: a critique of recent historical sociology.
British Journal of Sociology 50(1):76–96.
Ingham G. 2001. Fundamentals of a theory of money: untangling Fine, Lapavitsas and
Zelizer. Economy and Society 30(3):304–323.

Taylor and Francis

Not for distribution

Monetary system as evolutionary construct 17
Ingham G. 2002. New monetary spaces? In: OECD, ed. The Future of Money. Paris:
OECD. 123–45.
Ingham G. 2004. The Nature of Money. Cambridge, UK: Polity Press.
Ingham, G. 2006. Further reflections on the ontology of money: responses to Lapavitsas
and Dodd. Economy and Society 35(2):259–278.
Innes AM. 1913. What is money? Banking Law Journal:377–408.
Jevons WS. 2001 [1875]. Money and the Mechanism of Exchange. London: Elibron Classics.
Keynes JM. 1976 [1930]. A Treatise on Money. New York: Harcourt, Brace and Co.
Kim J. 2011. How modern banking originated: The London goldsmith-bankers’ institutionalisation of trust. Business History 53(6):939–959.
Knapp GF. 1973 [1924]. The State Theory of Money. Clifton, NY: Augustus Kelley.
MacDonald G. 1916. The Evolution of Coinage. Cambridge, UK and New York: Cambridge
University Press and G.P. Putnam’s Sons.
Melitz J. 1974. Primitive and Modern Money. Reading, MA: Addison Wesley.
Menger K. 1892. On the origin of money. Economic Journal 2(6):239–255.
Schumpeter J. 1994 [1954]. History of Economic Analysis. London: Allen & Unwin.
Schumpeter JA. 1961 [1934]. The Theory of Economic Development: An Inquiry into Profits,
Capital, Credit, Interest, and the Business Cycle. New York: Oxford University Press.
Schwartz AJ. 1989. Banking school, currency school, free banking school. In: Eatwell J,
Milgate M and Newman P, eds. Money. London and Basingstoke, UK: Palgrave. 41–49.
Seyfang G. 2001. The euro, the pound and the shell in our pockets: rationales for complementary currencies in a global economy. New Political Economy 5(2):227–246.
Seyfang G and Pearson R. 2000. Time for change: international experience in community
currencies. Development 43(4):56–60.
Simmel G. 1982 [1900]. The Philosophy of Money. London: Routledge & Kegan Paul.
Smithin J, ed. 2000. What is Money? London: Routledge.
Swanke, T. 2004. Understanding the implications of money being a social convention. In:
R. Wray and M. Forstater, eds. Contemporary Post Keynesian Analysis. Cheltenham,
UK: Edward Elgar Publishing. 84–99.
Veblen, T. 2006 [1914]. The Instinct of Workmanship and the State of the Industrial Arts.
New York: Cosimo Classics.
Veblen T. 1899. The Theory of the Leisure Class. Champaign, IL: Project Gutenberg.
Weber M, ed. 1978. Selections in Translation. Cambridge, UK: Cambridge University Press.
Wray R. 1998. Understanding Modern Money: The Key to Full Employment and Price
Stability. Cheltenham, UK: Edward Elgar.
Wray R. 2004. The credit money and state money approaches. In: Wray R, ed. Credit andState Theories of Money: The Contributions of A. Mitchell Innes. Cheltenham, UK:
Edward Elgar. 79–98.
Wray R and Forstater M, eds. 2006. Money, Financial Instability and Stabilization Policy.
Cheltenham, UK: Edward Elgar.

Taylor and Francis

Not for distribution

2

Monetary plurality in economic
theoryJérôme Blanc, Ludovic Desmedt, Laurent Le
Maux, Jaime Marques-Pereira, Pepita OuldAhmed and Bruno Théret

2.1 Introduction
Traditionally, economic analysis considers the circulation of multiple currencies
under the umbrella of international economics. It assumes that there is a single
currency within a country and, thus, excludes the idea that several currencies ormoneys might circulate within a national territory. Having several currencies
circulating alongside the one with international standing, all in the same country, would seem to indicate that something is wrong with the socio-economic
arrangements. Beyond such an interpretation, the spectre of the circulation of several moneys haunts contemporary monetary analysis and remains a problem formonetary theory. Ever since the 1970s, the monetary literature on private monetary systems or competitive payment arrangements has developed substantiallywhereas mainstream economics had until then taken the uniqueness of money
for granted. The purpose of this chapter is to investigate the relations between
monetary singularity (defined as the use of a single money or currency) and plurality (defined as the use of more than one money or currency) in the theoretical
literature. Any survey of the various theories, whether orthodox or heterodox,
static or dynamic, holistic or individualistic, will reveal the surprising amountof attention paid to the problem of monetary singularity and/or plurality. In themonetary literature, the issue may be raised directly or indirectly, may be seen
as a result of equilibria or disequilibria and may be interpreted either as a failingto be remedied or an objective to be achieved. Moreover, the reasoning involved
may be empirical or hypothetico-deductive, or it may be normative, saying whatshould be, rather than what is.
By presenting a ‘field and method map of monetary economics’, Arestis andMihailov (2011) combine monetary theory, monetary policy and public finance toprovide a useful panorama of current debates among monetary theorists. As theyargue, ‘seeing the big picture and various interrelationships often helps one tobetter focus on the specific problem in hand’ (ibid., p. 791). This chapter focuseson monetary singularity/plurality and its scope is limited to authors or research
programs addressing this subject. Monetary plurality may be defined as the useof multiple means of payment and/or units of account. Accordingly, in order tostudy the diversity of monetary analyses, we suggest a multi-dimensional patternof monetary plurality and we shall study the plurality of means of payment andTaylor and Francis

Not for distribution

Monetary plurality in economic theory 19
units of account. The geographical areas involved in each approach do not necessarily correspond to sovereign territories. They may be merely abstract spaces inwhich there are market relations among economic agents. The function of storeof value cannot be equated with the other two functions inasmuch as many potential instruments may preserve wealth without necessarily becoming money. We
envisage the different cases of monetary plurality or singularity based on thismulti-dimensional definition (Table 2.1).
The first axis of theorisation contrasts the analyses in terms of general equilibrium, on the one hand, and evolutionary dynamics, disequilibrium and regime
crises, on the other. The general equilibrium theories usually assume that moneyis neutral and even ‘super-neutral’ in the New Classical Economics (Lucas, 1972)
and the New Monetary Economics (Black, 1970; Fama, 1980). In contrast, theother theories see money as an evolutionary process influencing the system of
relative prices (Austrian tradition) or impacting the dynamics of production
and redistribution (Keynesian and Marxian tradition). So money is not neutral,either in neo-Mengerian and post-Keynesian approaches or neo-Chartalist andneo-Marxist approaches. The neo-classical synthesis and monetarism stand in anintermediate position: even though they come within the analytical framework ofgeneral equilibrium, they concede that money does matter in a market economy.
The distinction between neutrality and non-neutrality allows us to examine abroad spectrum of monetary theory, whether mainstream or not.
The second axis of theorisation contrasts singularity and plurality – evenif, as we shall see, a clear-cut opposition must be amended. Indeed, plurality
can encompass singularity and singularity can contain plurality. For instance,
although certain theories endeavour to promote forms of monetary plurality,
they are still under the influence of the idea that monetary singularity remains
the ultimate condition that guarantees the stability of the payment system and theeffectiveness of market transactions. The ‘plurality’ approaches are thus haunted
either by the need for a single unit of account (Free Banking Theory) or by theselection of a stable unit of account (New Monetary Economics). Symmetrically,the ‘singularity’ approaches are troubled by the idea of plurality, incorporating
it either positively (case of equilibria involving multiple currencies, in someTaylor and Francis

Not for distribution

Table 2.1 Differentiation criteria

General equilibrium
models: neutrality ofmoney
Disequilibrium or
evolutionary models:
non-neutrality of money

Approaches
giving precedence toplurality

Approaches
giving precedence tosingularity

New Monetary Economics(Section 2.2)

General equilibrium andmoney (Section 2.4)

Neo-Mengerianism(Section 2.3)

Money and economy
of production(Section 2.5)

20

Jérôme Blanc et al.

search models) or negatively (case of pathology involving the circulation of several currencies within a single sovereign territory, in some Chartalist, Marxist or
Institutionalist approaches).
With these two perspectives in mind (neutrality/non-neutrality and plurality/
singularity), this chapter examines the ‘plurality’ approaches: the strong and theweak plurality approaches, which remain troubled by the problem of singularity (Sections 2.2 and 2.3). Hence, it also studies the ‘singularity’ approaches:
the strong and the weak singularity approaches, which do not entirely dispel
the question of plurality (Sections 2.4 and 2.5). Accordingly, Section 2.2 deals
with the financial and radical plurality approach developed by New Monetary
Economics, which lies within the analytical framework of general equilibrium(Black-Fama-Hall model, Greenfield-Yeager system). Section 2.3 examines
the neo-Mengerian or evolutionary plurality approach, which lies outside theframework of general equilibrium (the Free Banking model, the Competitive
Private Fiat Money model). Section 2.4 focuses on the micro-foundation ofmonetary singularity approach within the general equilibrium framework (theoverlapping-generations, cash-in-advance, search-theoretic models and monetarism). Section 2.5 deals with the holistic singularity approach that reasonsin terms of disequilibrium and antagonistic processes, such as Chartalism,
post-Keynesianism and neo-Marxism. Section 2.6 concludes on the surprisingoscillation between the postulate of a single money and a logical constructionof the monetary plurality.
As we shall see, some approaches such as the New Monetary Economics,
Black-Fama-Hall model and Greenfield-Yeager system are governed by financial
economics, while most other approaches such as Free Banking, search models
of money, neo-Chartalism, post-Keynesianism and neo-Marxian analysis are
more specifically governed by monetary economics. So our survey will give rise
to a typology of the forms of monetary singularity and plurality, and the relations between them. Hence this will frame new readings of monetary analyses.
Moreover, we shall specifically focus on economic theories of money. Space here
is too short to explore socio-economic, sociological, anthropological and historical works on monetary plurality. Moreover, the related empirical observation,
methods of theorisation and analytical generalisation remain different to someextent from those prevailing in economics.

Taylor and Francis

Not for distribution

2.2 The New Monetary Economics: from a plurality of meansof payment to a plurality of units of accountIn line with neo-classical financial economics and the financialisation of the market
economy over the past forty years, the New Monetary Economics, a name coined
by Hall (1982), calls for complete deregulation of the financial intermediation andpayment system. As paradoxical as it may appear, the New Monetary Economics
argues for an economic system without money, which is, without non-interestbearing means of payment such as token money issued by the Treasury, monetarybase issued by the central banks or demand deposits issued by commercial banks.
Previously Black (1970) and later Fama (1980) and Hall (1981) had proposed aMonetary plurality in economic theory 21
payment system without base money seen as a non-interest-bearing government
asset. These contributions gained acceptance through the work of Greenfield andYeager (1983), Yeager (1983), Woolsey (1992), as well as Greenfield, Woolsey
and Yeager (1995). Greenfield and Yeager (1983) presented such an alternative
payment system based on financial markets as the ‘Black-Fama-Hall model’,even though McCallum (2010) deems the term ‘Greenfield-Yeager system’ more
appropriate. Moreover, Cowen and Kroszner (1987, 1994) have offered a historical perspective. So the New Monetary Economics comprises a rather broad arrayof notions that do not limit the question to one of competition between different
means of payment, but include the question of the plurality of units of account.
Yet whatever the payment system proposed, the main stumbling block with the
New Monetary Economics is the mode of stabilising the overall level of prices
and the way to anchor the unit of account.
The New Monetary Economics addresses two theoretical concerns stemmingfrom the attempt to separate the circulation of the means of payment and the determination of the unit of account. From an institutional point of view, the separationof the means of payment (real money) and the unit of account (imaginary money)
in models built by the proponents of the New Monetary Economics makes themdifferent from the neo-Mengerian approaches in general, and the Free Banking
school in particular (White, 1984a; O’Driscoll, 1985) (Section 2.3.2). Given thecontext of total financial market deregulation, the New Monetary Economics is
intrinsically associated with a wager on the efficiency of ‘monetary dualism’
defined as the separation of the medium of exchange from the medium of account.
According to Cowen and Kroszner (1987, p. 569–570), ‘money as we know it’,that is, the unique entity supporting all monetary functions, has become obsolete inasmuch as it constitutes an inefficient, sub-optimal and ‘fundamentallydisequilibrating force’ that should be dissolved by separating the functions ofaccounting and payment. Each function should be assigned to a specific support:‘The unit of account might be purely abstract or take a real commodity form’ andshould exist ‘separately from the media of payments’, which would ‘take the formof real assets claims’ (ibid.). The unit of account is defined in terms of a broadbasket of goods, which is supposed to reflect the overall level of prices.
On the other hand, from a methodological point of view, the New Monetary
Economics adopts an evolutionary approach close to neo-Mengerianism: theinvisible hand of competition, technological progress and financial market forces
are supposedly evolving towards an economy without money. Three stages offinancial evolution are thus distinguished: the early stage (barter), the intermediate stage (money), and the late stage (competitive payment systems without
money). ‘Although an intermediate stage of financial evolution uses a dominant medium of account, considerable multiplicity prevails in the early and latestages’ (Cowen and Kroszner, 1994, p. 38). The separation of the medium of
exchange from the medium of account is not merely an abstract notion but is thepossible outcome of the historical trend as a part of the evolution of finance. The
broad diversification of interest-bearing financial assets is increasingly likely tomake them ever more liquid, allowing them to be used as means of payment inlieu of money.

Taylor and Francis

Not for distribution

22

Jérôme Blanc et al.

The range of competing monetary systems proposed by the New Monetary
Economics stretches from weak plurality – limited to means of payment, to strong
plurality – extended to units of account. The Black-Fama-Hall model and theGreenfield-Yeager system do not upset the singularity of the unit of account(Section 2.2.2), while Hall (1997) implicitly, and Cowen and Kroszner (1994)
explicitly, contest it (Section 2.2.3). Despite the divergence between weak andstrong monetary plurality, all these approaches assume that money is neutral andthat it could definitively be neutralised by separating its functions.
2.2.1 Weak monetary plurality: competition in issuing meansof payment
Basically, the New Monetary Economics in general, and the Greenfield-Yeager
system in particular, advocate the institutional arrangement in which privatebanks supply financial and payment services simultaneously. Means of payment
are shares of money market mutual funds (more generally, shares of portfolios ofnegotiable securities held by banks) and their value fluctuates daily in the financial markets. Under such an institutional arrangement, banking would no longer
be about collecting current accounts and time deposits that are legally convertible
at a fixed price into currency issued by the Treasury or base money issued by
the central bank. Banking would henceforth supply shares of the assets portfolio
and interest-bearing ‘deposits’, which could be used as means of exchange andpayment. The absence of convertibility into base money, and the absence of basemoney itself, would lead to the end of central banking.
Due to the separation of the accounting and payment functions of money, theoverall value of the means of payment varies constantly with the value of the financial assets backing them. In addition, the unit of account can no longer be based on
the means of payment and has to be set in some other way, independently of thepayment system. The ensuing return to monetary dualism, on the one hand, leads
to a plurality of means of payment and, on the other hand, leaves the question ofdefining one or more units of account open. Initially, most proponents of the New
Monetary Economics in general, and the Greenfield-Yeager system in particular,
upheld the singularity of the unit of account. In this case, the market value of thecompeting means of payment is expressed in an abstract unit of account fixed outside the payment system – a numeraire (Greenfield and Yeager, 1983). This does
not necessarily imply that the unit value of the means of payment (for instance, thevalue of the shares of money mutual market fund) is variable: the value of eachshare can be exchanged at par with the unit of account and, in that case, the numberof shares vary from day to day with the value of the assets portfolio backing them.
In other words, competition among banks and among the means of payment theyissue does not affect the exchange rate of units of payment in terms of units ofaccount, but rather the level of returns on shares (which would depend on the quality of assets portfolio management and the level of management fees).
Greenfield and Yeager (1983, p. 308) are well aware that under the institutionalarrangement assumed by the New Monetary Economics, the absence of ‘base

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 23
money’ (the government-issued fiat money or the monetary stock of a particularcommodity) raises the crucial question of the settlement of inter-bank debts. In
their system, under the auspices of the clearinghouses, banks are supposed toagree on the financial assets that can be accepted as means of settlement of interbank debts. When there is indirect convertibility of the means of exchange into
the unit of account, the convertibility is guaranteed only for specific means ofredemption (such as gold or actively traded securities), which are used for interbank settlements. As noted by Scialom (1995), the search for a liquid inter-bankmeans of payment, implying a hierarchical dimension within the banking system,
contradicts the ‘overall project’ of the New Monetary Economics. Actually, twokinds of arrangements can be distinguished: one is the system built by Greenfieldand Yeager and the other is the Optimal Fiduciary Monetary System constructedby Hall. Yeager (1994, 1997, 1999) is rather sympathetic to the project in favourof competitive private fiat money (see Section 2.3.1). Hall (1981) mentions therole of the State defining the unit of account and monetary rules that automaticallystabilise the unit of account in terms of purchasing power. Moreover, Hall (1983)
sees as optimal an institutional arrangement by which the government issues
reserve certificates that function not only as a medium of account, but also as astore of value and a means of inter-bank settlement. Hall (1992) also comes closer
to the Free Banking system advocated by White (1984a, 1989) (see Section 2.3.2).
2.2.2 Stabilisation of the unit of account: the compensated dollar plan

Taylor and Francis

Despite their different preferences as to the optimal type of standard, the proponents of the New Monetary Economics share the same concern – stabilisation of
the purchasing power of the unit of account. This reveals the recognition of the
non-neutrality of money (Austrian aspect) combined with the objective of neutralising money as far as possible (neo-classical aspect). For the New Monetary
Economics, instability of the overall level of prices is the main obstacle to making competitive payment systems really practicable (Black, 1981; Fama, 1983;
Greenfield and Yeager, 1983; Sumner, 1990; Cowen and Kroszner, 1994). On
this question, Yeager (2010, p. 434) deems that ‘further thought is (still) needed’.
Many arrangements have been suggested to solve the problem.
For instance, Black (1978) first evoked fiat money backed internationallyagainst other national currencies within a ‘global monetarism’ before proposing (Black, 1981) a ‘flexible commodity money standard’ in the form of a ‘gold
standard with double feedback and near zero reserves’, something ‘almost identical to Fisher’s compensated dollar plan’ (Sumner, 1990, p. 115). Like Fama
(1980), Black (1981) envisages a simple system with commodity money used asa reference (a barrel of crude oil, a spaceship permit, etc). Fama (1983) considers
that a State-issued money would play only a marginal role and could continue tofunction as cash: it would be used only for retail trade payments and by people
who do not have access to the financial system. On the other hand, Fama (1983, p. 19)
holds that ‘either the monopoly fiduciary currency approach’ that he prefers, ‘or
the flexible commodity standards of Fisher (1920) and Black (1981) could be

Not for distribution

24

Jérôme Blanc et al.

used to control the price level’. Hence, Fama (1983) broadens the idea of Fisher’s(1920) compensated dollar plan and also refers to the Chilean monetary system,
which introduced an ‘imaginary’ unit of account (the Unidad de Fomento) in
1976, that was supposed to be stabilised in terms of purchasing power and linked
to the consumer price index expressed in pesos (the ‘real’ unit of account associated with the currency used for current transactions). The Chilean monetarysystem, it is argued, proved its stability during the financial crisis in 1981 andallegedly enabled the country to face dollarisation. For Hall (1997) and Shiller(2002), the Unidad de Fomento system was close to the compensated dollar plan
applied to the fiat money system.
Finally, Hall (1983, 1992, 1997) recommends a system of fiat money with adual unit of account: the nominal current account, based on the national currency
and used for short-term contracts and another unit of account with fixed purchasing power used for long-term contracts. In a way, the New Monetary Economics
in general, and Hall’s recommendations in particular, reveal the effective dualityof units of account in present day financial economies, even though they seem
highly normative.
2.2.3 Plurality extended to units of account
The major feature of the New Monetary Economics is not merely its stability but
also the singularity of the unit of account. To solve the problem of stability ofthe overall price level, the proponents of the New Monetary Economics are led
either to imagine systems that they themselves deem inoperative and/or unviable (Schnadt and Whittaker, 1993; Cowen and Kroszner, 1994) or to return togovernment monetary regulation. The New Monetary Economics is torn between
the plurality endogenously fulfilled by private issuers of means of payment, andthe singularity of the unit of account exogenously organised by the government.
Moreover, the viability of competing systems of payment, which theoreticallyno longer require base money, depends paradoxically on maintaining money that
does not bear interest and is based on a stabilised unit of account. Cowen and
Kroszner (1994, p. 100) thus conclude their comparative study of the different
monetary systems imagined within the New Monetary Economics by opining
that, ‘the scenario with financial assets (as medium of exchange) and currency(as medium of exchange and unit of account) is the most likely to evolve from aderegulation of today’s financial institutions’.
In fact, Cowen and Kroszner explicitly acknowledge the unsustainable
nature of the principle of a unique unit of account and endorse a strong plurality
approach. They do not hesitate to recommend a return to the Middle Ages during
which there was a proliferation of moneys of account and of payments, making anargument that new technologies of information and communication would subsequently make this possible. Even if Hall (1997) evokes the plurality of monetised
indexed units of account, Cowen and Kroszner (1994, pp. 38–39) are the only
declared proponents of the New Monetary Economics who stress that:

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 25[t]he possible proliferation and co-existence of different currencies of accountat advanced stages of financial evolution. (. . .) In an unregulated environment, the evolution of multiple media of account follows a path similar to
exchange media and settlement evolution. (. . .) Even if consumer convenience dictates a common medium of account for most retail transactions, we
still expect medium of account proliferation for large wholesale and financialtransactions.
So banks would competitively provide several units of account and each of themwould correspond to different baskets of commodities selected to represent thediffering costs of living of social groups or consumers.
The value of a bank account, for instance, can be linked to the value of a chosen medium of account (. . .). In effect, the depositor is a creditor of the bankand returns are denominated in terms of chosen accounting media. Accounts
linked to the value of regional or personal consumption baskets would giverise to multiple mediums of account in this context.
(ibid)
Cowen and Kroszner’s analysis of the plurality of the unit of account may be interpreted as a thought experiment attempting to enlighten the inconsistency of theplurality of the means of payment with a unique unit of account. Hayek had previously opened such a thought experiment in a different way (see Section 2.3.1).
Moreover, Cowen and Kroszner’s transposition of Mundell’s idea of an optimalmonetary zone, which is a justification for the unification of units of accountextended on ever broader scales, enables us to interpret their position as tending
towards such a unification in homogeneous monetary spaces, with only the spatial
or social scales being variable. Cowen and Kroszner do refer to regional and sectorial fractioning of optimal currency zones and, thereby, raise the whole problemof the fractioning of spheres of exchange.
So a two-fold question remains. First, how do markets set the exchange rates
between different moneys? Second, what is the cost of information in such a system? The routine solution suggested by Yeager (2010) consists of simply aligning
the unit of account with that used by government in its operations and fiscal policies. In line with the general equilibrium framework or the Austrian Free Banking
approach, the singularity of the unit of account in a given space is almost considered to be an inescapable economic requisite such that it makes transaction costs
and exchange rate risks lower than in a system with multiple units of account.

Taylor and Francis

Not for distribution

2.3 Neo-Mengerian approaches to money: between plurality
and singularity of the unit of accountEven if the New Monetary Economics (particularly in the works of Yeager,
Cowen and Kroszner) has been influenced by the Austrian school, it should be26

Jérôme Blanc et al.

clearly distinguished from the neo-Mengerian approaches which conceive payment systems with money and mainly suggest two kinds of payment systems.
One corresponds to the competitive model with private fiat moneys as developed by Klein and Hayek (Section 2.3.1) while the other corresponds to the Free
Banking tradition as renewed by Selgin and White (Section 2.3.2). These evolutionary approaches accept monetary plurality (in its strong and medium form
respectively) and rather reject the assumption that money is neutral.
2.3.1 Competitive private fiat money and denationalisation of money:
absolute plurality
Klein (1974, 1976) and Hayek (1978, 1979) develop the idea of monetary competition applied to instruments of payment and units of account. Hayek claimed to havereached exactly the same conclusion as Klein without any knowledge of his writings (Vaubel, 1986). The competitive fiat money model formulated by Klein andHayek can be distinguished from the New Monetary Economics by the fact thatit does not preclude money in general. On the other hand, it can be distinguishedfrom the Free Banking system, in which banks issue inside money convertible atpar and on demand into outside money (for instance, metallic money) selected by
the system of payment itself. The Klein-Hayek model amounts to transposing competition between currencies in the international context to competition between fiatmoneys within a national territory. The distinction between the different competitive fiat moneys also enables the Klein-Hayek model to avoid criticism based on
Gresham’s Law according to which bad money drives out good money. This principle initially applied to coinage of the same metal and involved two factors: (i) theclipping, wear-and-tear of coins, or debasement and (ii) the maintenance of fixed
legal parity between moneys. The Klein-Hayek model is different for two reasons:(i) banks issue competitive fiat money without intrinsic value, and (ii) there is a
flexible exchange rate between moneys. So flexible exchange rates, despite theirdrawbacks, are thus essential for the viability of the competitive fiat money modeland for the mechanism ensuring that stable money drives out depreciated money.
Under the competitive fiat money system each bank has its own distinguishingmark (the unit of account), which it uses to denominate its own money (the meansof payment). There is not a priori a common unit of account (as is the case under
the Free Banking or the central banking system) so that each money fluctuatesagainst the others. Agents are able to differentiate between moneys, thanks totheir fluctuating exchange rates and thus bear the exchange rate risk. They are free
to choose the money according to its stability in terms of purchasing power andbanks can rely on or even construct a price index to help agents monitor the stability of the money selected. The basic idea is that monetary regulation is determinedby the quantity of money put into circulation by the issuing bank; it is no longer
determined by the issuing bank’s ability to reimburse its issues on demand andat a fixed price into an outside money (the metallic money or base money). So,
Hayek (1978, p. 42) supposes that the issuing bank will announce its ‘intention toregulate the quantity of [its money] so as to keep [its] (precisely defined) purchasing power as nearly as possible constant’.

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 27
While the quantitative regulation of competitive fiat moneys constitutes themechanism determining their purchasing power and exchange rate, competition between banks sets an ‘effective limit’ to these issues (Hayek, 1978, p. 44;
Hayek 1979, p. 4). Monetary plurality is hence appreciated essentially from theviewpoint of competition and market discipline; money also draws its legitimacy
essentially from the stability of its purchasing power. In a competitive environment, an issuing bank can therefore decide whether or not to increase its money
supply. If its money appreciates, the bank can issue new means of payment and/or
buy rival moneys according to its consumers’ demands. If its money depreciates,
the supply of its money exceeding public demand, it stops roll-over credit and/or sells off its reserves of rival moneys. Thus, in formulating the competitive fiatmoney model, Hayek (1978, p. 55) feels that he has found a way of regulating andconstraining the banking system to offer only short-term loans:
In order to retain control over its outstanding circulation, (the issuing bank)will on the whole have to confine its lending to relatively short-time contracts
so that, by reducing or temporarily stopping new lending, current repaymentsof outstanding loans would bring about a rapid reduction of its total issue.
To designate the unit of account specific to each bank, Klein (1974) uses the term
‘trademark’ or ‘brand name’ and applies the concept of property rights to eachmonetary brand name, however only to banknotes. Similarly, Hayek (1979) uses
the term ‘distinctly named money’. Hence, counterfeiting would apply only tobanknotes and could be defined as the illegal printing of banknotes using not only
the name of the issuing bank, but also its unit of account. Thus, counterfeiting corresponds to an infringement of the issuing bank’s property rights. It corresponds
to an overissue not desired by the bank, leading to a depreciation of its money andloss of agents’ confidence, damaging its reputation and the value of its trademark.
This being said, Klein and Hayek take only the quantity of banknotes into accountand their analysis of the issuing bank’s trademark and property rights remains too
restrictive. Indeed, deposits should not be overlooked. The property rights should
be protected by banking laws and applied to private banknotes as well as deposits.
In this respect, the experiment of the Euro-dollar market gives us a better grasp of
the problems raised here and also of the difficulties implicit in the protection ofproperty rights to the monetary trademark. In other words, the monetary plurality
envisaged by Hayek appears far more difficult to put into operation than Hayek
himself supposes. The central banking system and even the Free Banking system
do not entail difficulties of this sort: the unit of account is unique and it is a public
good that issuing banks can use.

Taylor and Francis

Not for distribution

2.3.2 Free Banking as a return to monetary singularity
Unlike the competitive fiat money model, the Free Banking system corresponds
to a theoretical and historical tradition (White, 1984b; Selgin, 1988; Dowd, 1992;
Selgin and White, 1994). Banks are free to issue inside money in the form of banknotes and deposits that are convertible at a one-to-one ratio into outside money

28

Jérôme Blanc et al.

(metallic currency or even frozen fiat money). A recurrent misunderstanding of
the Free Banking system stems from the fact that convertible banknotes havealways been associated with inconvertible paper money. So, the Free Banking
system is often erroneously seen as a system in which moneys issued by banks
fluctuate in relation to one another (for instance in Baye, De Grauwe, and De
Vries, 1993). During the early days of the Free Banking system, banknotes could
actually be changed at a discount, especially if brokers organised the exchange ofbanknotes. The rate of discount depended on the costs of transport and authentication and also on the risk of bank default. The discount setting, however, did notlast. There is an incentive for banks themselves to organise a clearing system ofcompensations – initially bilateral, then multilateral – that enables them to reduceand finally to annul the rate of discount (Selgin and White, 1987). Then, the routine and mutual exchange at par of banknotes and checks within a clearing systemreinforces their acceptability among rival banks and the public.
The Free Banking system thus stands at the intersection of monetary singularity and banking plurality. The singularity of the unit of account is preserved,
for instance, when the State defines the country’s unit of account in terms of theweight of precious metal it contains. Then, the Mint coins specie (and competition between different mints is even envisaged to improve the quality of coins).
To some extent, the Free Banking system can be compared to the central banking system, inasmuch as there is a unique unit of account and as the banks issuedemand debts that are convertible into an ultimate money: specie in one case andcentral bank money in the other. The difference lies in the fact that under theFree Banking system (i) the ultimate money is outside the banking system andmonetary authorities, and (ii) the degree of bank regulation is limited. The Free
Banking theory entails neither abandoning the centralisation of money reserves
and inter-bank clearing operations nor abandoning a unique unit of account. It sets
up a high degree of deregulation of banking and tends towards an abolition of thelender of last resort so as to address moral hazard and reinforce market discipline.
Competition is thus limited to the different issuers of inside money, that is,demand debts issued by banks in the form of banknotes or deposits. The outsidemoney, which preserves the regulation of the system, is not strictly involved incompetition. This is the last component of monetary policy still retained, though
admittedly in atrophied form, by the Free Banking theory. Moreover, money isfirst and foremost treated as a commodity endowed with qualities that lend themselves to its use as money (Menger, 1892). If fiat money emerges and is accepted
at face value, according to the regression theorem, no matter how far one goesback in time, it must initially have been linked to the metallic currency by virtue of its convertibility (Mises, 1949). Conversely, Selgin (2003) investigates the
hypothesis of adaptive learning in order to show the transition from the metallic
standard to the fiat money standard – and the quantity of fiat money under theFree Banking system should hence be frozen.
To sum up, under the competitive payment system designed by the New
Monetary Economics, the unit of account is separated from the means of payment and agents bear the risks that burden assets. In the Klein-Hayek model of

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 29
competitive fiat money, agents bear exchange rate risks. Under the Free Banking
system, the unit of account is a public good and agents bear the liquidity risks
entailed in the issuing of demand debts. The Klein-Hayek model and, to someextent, the New Monetary Economics, would seem to be much more radical thanthe Free Banking system. Hayek’s normative construction is similar to the New
Monetary Economics as both propose a strong, if not radical, degree of plurality
while the Free Banking theory rather proposes a medium degree of plurality andis closer to the Mengerian methodological approach in considering the payment
system as an evolutionary process.

2.4 Integrating money into the general equilibrium theory
A vast swathe of economic theory deals with the conditions governing the integration of money into the framework of the general equilibrium theory that waspreviously developed without taking money into account. Trying to solve the omission of money raises two questions, especially with regard to fiat money which
is neither produced nor consumed. The first is the Hicks problem (Hicks, 1935):
why does an agent hold money in an economy in which there are liquid financial assets bearing interest? The second is the Hahn problem (Hahn, 1965): how
can fiat money have a positive value in exchange, when it has no intrinsic utility? In a Walrasian perspective, Patinkin (1956) opened up one line of reflexion
by making money part of the utility function of agents. The trouble with ‘monetary Walrasianism’ (Mehrling, 1998) is that it has never been possible to show
how money appears with a positive price. This problem inherent in monetary
Walrasianism leads the neo-classical paradigm to relax the assumption of the centralised economy à la Arrow-Debreu model. In this perspective, Ostroy and Starr(1974) open another line of reflexion by assuming a decentralised economy withno coordination process a priori. Hence, the entire research program has been
based not only on neutrality (money has no effect on relative prices), but also
on essentiality (money is essential in a decentralised economy). As we shall see,the overlapping-generations models focus almost exclusively on the function of
the reserve of value (Section 2.4.1), while the cash-in-advance model (Section
2.4.2) and the search-theoretic model (Section 2.4.3) focus on the function of
the medium of exchange. On the other hand, within the neo-classical paradigm,
monetarism and especially the Chicago plan propose a highly normative construction that emphasises the need for pure centralisation and strict monopolisation ofmoney issuance (Section 2.4.4).

Taylor and Francis

Not for distribution

2.4.1 The overlapping-generations models
Models of overlapping-generations are first and foremost analytical tools witha broad field of application since Samuelson’s (1958) seminal paper, which has
been completed by Diamond (1965) among others. Monetary theory is not themain topic of the overlapping-generations models and monetary theory does not
use them extensively. These theoretical models suppose an economy as being

30

Jérôme Blanc et al.

set up by two successive generations of agents, one young and active and theother older and inactive, over a non-finite series of periods. The tradable goods
are perishable from one period to the next, making it problematic to transfer
wealth from one generation to the next. Samuelson (1958) shows that without
money no trading of goods or transfer of wealth can take place. The generalcharacteristic of overlapping-generations models is that the general equilibrium
can be sub-optimal without money. Hence, money is seen as a ‘social contrivance’ or a ‘social compact’ (Samuelson, 1958, pp. 481–482), which enhances
the utility of all agents involved in trade. From the late 1970s some models havebeen calibrated specifically to integrate money into general equilibrium theory.
With the work of Wallace (1977) and Kareken and Wallace (1980), overlappinggenerations models deal with the money demand function in an economy withfrictions (and thus different from the economy supposed by the general equilibrium theory) so that the existence of money is also explained by its usefulness
as a ‘lubricant’.
In the overlapping-generations models, money can have a positive price if
the number of generations involved in trade is non-finite, that is, if there is nolast generation: what matters for the young agents is that money should still be
acceptable when they grow old; otherwise, they would not accept and demandmoney and its price would be nil. Compared with monetary Walrasianism, theoverlapping-generations models show that money has utility because exchange
cannot take place without money, and that it thus circulates at a positive price.
Money is used in trade as a tool for the inter-temporal allocation of resources
and it is first and foremost a perfect arrangement for conserving wealth throughits function of reserve of value. However, nothing is said about its role as a
medium of exchange, and even less about its use as a unit of account (not observable in these models apart from assumptions about the price level). The absenceof the medium of exchange function has consequently been strongly criticised(as shown in the special issue edited by Kareken and Wallace (1980), and in
McCallum’s (1983) comment). So the research program has converged toward
the search model of money since the late 1980s (see Section 2.4.3).
With regard to the question of plurality of means of payment, Wallace (1980)
examines the problem raised by the co-existence of fiat money and financial
assets with a positive yield and shows that fiat money has a positive price inan economy with financial assets if money has a particular utility of its own.
Wallace (1983) concludes that legal restrictions alone make perfect substitutiondifficult between financial assets for money. While the overlapping-generations
models endeavour to show the positive price of money, such a conclusion paradoxically opens the door of the legal-restriction theory of money and the New
Monetary Economics (seen in Section 2.2.1). Another way to grasp monetaryplurality may be found in Kareken and Wallace (1981) and Chang (1994),
who drop the hypothesis that residents of a given country seek to hold only thecountry’s currency. Their objective here is to explain phenomena of currency
substitution that were drawing increasing attention because of the high inflationin Latin America. They built a model with two fiat moneys in circulation in the

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 31
same country and with an internal exchange rate that could vary – a situationinterpreted as a laissez-faire regime.
In summary, the overlapping-generations models lead to envisaging monetaryplurality as the co-existence, within the same territory, of either a fiat moneyand financial assets held by agents and liable to be used as means of payment orseveral fiat moneys. In both cases, monetary plurality is conceived as competition
either between assets and moneys or between moneys, both being seen as mutually substitutable. As an extreme result, only legal restrictions prevent fiat moneyfrom disappearing.
2.4.2 Cash-in-advance models
Clower (1967, p. 5) attempts to establish the utility of money on its function asa medium of exchange, taking as a basic principle that ‘money buys goods andgoods buy money, but goods do not buy goods.’ Clower assumes that fiat money
is exogenous from the supply side and that there is a given cash-in-advance constraint from the demand side: in each period individual spending cannot exceed
the amount of money already held. The cash-in-advance constraint stems fromcosts of transactions of exchange with money being less costly than with barter
especially because of the durability, divisibility and portability of money. In general, cash-in-advance models maintain a distinction between financial assets andfiat money, and their reasoning assumes the circulation of a single money. Though
they make it possible to formulate a function of demand for money (Lucas andStokey, 1983), they do not however explain why exactly money exists (Duca and
Van Hoose, 2004). Thus, for Kiyotaki and Wright (1989, p. 928), they ‘have nohope of explaining endogenously either the nature of money or the developmentof monetary exchange’.
Despite these limits, monetary plurality can be envisioned within the cashin-advance models. For instance, Uribe (1997) refers to currency substitution
processes and Sturzenegger (1992) to the high inflation in Argentinian andBrazilian experiences. Considering an inflationary process and the ensuing formation of two ‘currency circuits’, Sturzenegger (1992, pp. 4, 23) studies the effects ofadapting agents’ behaviour to the dual circulation: one circulation concerns payments with the domestic currency, the other payments with an alternative ‘inflation
proof technology’ (namely, dollarisation, interest-bearing accounts, or alternative
money commodities). The co-existence of two forms of money depends on technological restrictions implying transaction costs, such as costs of changing moneyand of access to technology enabling agents to use forms of indexation. The sum ofthese costs prevents the national currency from being completely replaced by alternative means of payment. Monetary plurality is seen as a consequence of imperfect
substitutability of moneys related to costs of various transactions associated witheach of them. To sum up, the cash-in-advance model regards money as a medium
of exchange and envisions the substitution between several currencies, not justbetween barter and money. The cash-in-advance constraint remains exogenous andhas been challenged by the search models of money.

Taylor and Francis

Not for distribution

32

Jérôme Blanc et al.

2.4.3 Search models of money
Several developments in monetary theory have analysed the barter/money alternative from the perspective of both Menger’s problem of the emergence of money(Menger, 1892) and Jevons’ problem of the double coincidence of needs (Jevons,
1875). To address these problems within the neo-classical corpus, search models of money first assume a decentralised economy. Starting with the idea thatmedium of exchange rather than store of value is the main function of money, theyseek the endogenous causes of the selection of one money by agents, attempting
to go beyond the ad hoc cash-in-advance assumption of the existence of a meansof exchange (Kiyotaki and Wright, 1989). The search models assume that agentscan choose between two modes of transacting, namely, barter or money. Once all
the agents involved in trade have selected money, they must hold some before anytransaction can take place.
The model of Kiyotaki and Wright (1989) envisages two possible cases in adecentralised market economy that requires a means of exchange in order to realise random bilateral exchanges. The first case explores the possible emergence ofmoney on the basis of selection of one commodity amongst others, which rests
on a combination of properties of the goods in question and beliefs concerningthese properties. In the second case, fiat money is introduced and it finally contributes to increased well-being. On the other hand, Iwai (1988, 1996) formalises
the selection of money as a ‘bootstrap mechanism’ and attempts to solve the nondetermination of equilibrium (due to the absence of elements determining either
money equilibrium or barter equilibrium). It hypothesises a small group of agents
who begin to choose a medium of exchange and, once such an initial choice takes
place, the other agents soon follow it. The increasing returns stemming from theuse of the means of payment initially selected explain the generalisation of its use:
as a result, ‘money is money simply because it is used as money’ (Iwai, 1996, p.
452). The ‘speculation’ strategy among agents about what is used as money andthe ensuing monetary equilibrium thus entail absolute monetary singularity.
Most search models commonly deduce two kinds of equilibrium: one is equilibrium in a barter economy; the other is the equilibrium with money. Althoughmonetary plurality is not usually a subject these search models deal with, Kiyotaki
and Wright (1991, 1993) mention the possibility of accounting for the existenceof monetary equilibria involving several fiat moneys. Within the assumptions of
the plurality of fiat moneys, these authors present a model with two fiat moneys
and a real commodity. This model reveals the variable articulations between thesemeans of exchange according to their yield levels and their partial or universal
acceptability. It opens up the possibility of simultaneous circulation of two currencies, even if one dominates the other in terms of yields or acceptability.
Even so, monetary plurality does not constitute the main theoretical topic of thesearch models or the overlapping-generations models. Kocherlakota and Krueger(1999, p. 243) undermine this weakness: ‘Even the “deepest” models of international currencies do not give rise to a motivation for having different currencies’.
They construct a signalling model of individual preferences in commodities on

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 33
the basis of a random matching model in the territory of a country. Agents arepresumed to be sensitive to the national origin of the commodities in question but
this origin remains private information. Agents’ preference for one money overanother thus serves to reveal their preferences as regards commodities according
to their country of origin. Money here is a medium of information between supply
and demand. The model thus applies to multiple currencies (national and foreign
currency), with a fixed rate of exchange, between which the agents can choose
prior to the matching process. It is assumed that the agents have a preference for
their own country’s products but that the sellers are neither opposed to the use offoreign money nor are the buyers opposed to the purchase of a foreign commodity.
Kocherlakota and Krueger (1999, p. 243) then conclude that ‘multiple national currencies may play an essential role in achieving an optimal allocation of resources’.
In the neo-classical models presented here, money is treated as an asset without
intrinsic utility and does not bear interest. There are consequently two series ofpossible choices: one of them is between money and goods endowed with intrinsic utility; and the other is between money and interest-bearing assets. All in all,monetary singularity is rather absolute. Money facilitates trade and enhanceswell-being. Monetary plurality is presented as a range of options for agents withdifferent nationality and fiat money is used as means of payment. As the functionof unit of account is missing from the search models, it remains difficult, if not
impossible, to place this conception of plurality in our scale of configurations
running from weak to strong plurality. In addition, a noteworthy feature is theabsence of regulation and homogenisation of the different types of money throughthe guarantee of convertibility and parity supervised by an overseeing authority.

Taylor and Francis

Not for distribution

2.4.4 Monetarism

Monetarism fits into the neo-classical paradigm and is featured by the normative emphasis it places on monetary singularity. The particularity of the quantity
theory is not only its postulate of a proportional causality from the variation in
the exogenous money supply to the variation in the overall price level, but also its
application of this postulate to all forms of money, whether metallic currency, fiatmoney or convertible bank issues. The quantity theory thus sees the money question as that of a homogeneous mass of means of payment that agents consider tobe immediately available, an aggregate of means of payment to be measured andcontrolled. Furthermore, the homogeneous mass has no effect on real variables
and on the system of relative prices in the long term (and even in the short term) –this makes it neutral (or super-neutral). If money is neutral in theory, it should also
be neutral in practice. In addition, private institutions such as commercial banks
should not be authorised to produce any kind of money, hand-to-hand currency or
demand deposits. In Friedman’s (1959, p. 7) words, ‘The production of a fiduciary currency is, as it were, a technical monopoly’.
The stumbling block facing the quantity theory has always been the construction of the monetary aggregate, which is perpetually destabilised by the plurality

34

Jérôme Blanc et al.

of monetary practices. Moreover, the very action of the central bank in attempting
to control the aggregate leads to destabilisation of the aggregate itself. Amongthe quantity theorists, Allais (1975) concludes that in a credit system in which
commercial banks ‘create money’, the quantity of money is essentially a ‘subjective’ variable, depending on agents’ practices in spending and saving. This being
the case, what has to be done is to establish a regulatory framework applied tobanking and financial institutions so as to set up once and for all an ‘objective’
definition of the quantity of money, over which the authorities can then exercise
sovereign control. The reformulations of the idea of a government monopoly on
the issuing of money is found in the writings of Simons (1934) and Fisher (1935),
who formulated the Chicago plan. The principle of government monopoly of
the issuing of paper money and demand deposits was adopted by Soddy (1926),
Fisher (1935), Allais (1947, 1975) and Friedman (1959), and more recently by
Benes and Kumhof (2012) and Dyson, Hodgson and Jackson (2013).
From an institutional point of view, the idea of the Chicago plan is that government should exercise its sovereign rights in full to control money both as a unit ofaccount and means of payment. In other words, the unit of account is the monetarybrand name of the State, which should have the exclusive right to use it. Thanks
to these powers, the government can effectively pursue a policy aimed at securing complete control of the monetary aggregate and thus stabilise the purchasing
power of money. In a situation of laissez-faire, however, practices in the private
sphere, and particularly in that of banking, can lead to infringement of the government’s sovereign right. Banks that issue monetary signs are thus freely engaging
in what amounts to ‘counterfeiting’, which should be forbidden with respect toboth banknotes and bank deposits. Thus the Chicago plan requires banks to hold100% of their reserves, that is, to back all their demand liabilities by the central
bank money in reserve. Consequently, it deprives banks of all monetary initiative.
From both positive and normative points of view, the Chicago plan is no doubt
the most extreme assertion of monetary singularity within a sovereign territoryin which the State guarantees centralisation, monopolisation and control of the
supply of money. Monetary plurality is seen as counterfeiting, a violation of sovereign rights. Finally, of all approaches to money, that of the Chicago plan asserts
most forcefully the principle that money is State.

Taylor and Francis

Not for distribution

2.5 Chartalist, Keynesian and Marxist approaches to money
Most of the approaches described in this section are based on the monetary
theories of Marx or Keynes and share the theoretical principle that money isa sine qua non condition for an economy of production. According to Hein
(2004, pp. 8–9), ‘An understanding of money as socially accepted token ofvalue in Marx’s monetary theory of value is perfectly compatible with the postKeynesian view of a modern credit money system’. The theoretical frameworkthat goes from neo-Chartalist and post-Keynesian to contemporary Marxist
approaches shares the idea that monetary plurality is hardly conceivable otherthan as a pathology at worst, and as an expression of the difference of quality and acceptability of the means of payment at best. On the one hand, theseMonetary plurality in economic theory 35
theoretical views regarding monetary plurality as a problem to be faced arethen opposed to the New Monetary Economics that regards monetary plurality
as a solution, as an expression of competition between private issuers. On theother hand, they also show concern for the monetary impact of the pluralityof debts and financial derivatives and they are, to some extent, drawn towards
financial economics. Ultimately they endorse a strong singularity approach andconsider that far from being neutral, money is the institution echoing conflicts
and disequilibrium.
2.5.1 Chartalism: plurality as a symbol of ‘imperfect sovereignty’
For most neo-Chartalists and post-Keynesians, Knapp and Keynes respectively
provide the essential analytical components used to construct a coherent monetary
theory according to which the separation of the monetary from the real sphere isirrelevant. According to Knapp (1924), if the monetary singularity in a political
territory is a fact beyond doubt, in contrast, payments can be distinguished fromone another by taking into account the parties involved. While Keynes (1930, p. 4)
in his Treatise claims to be a follower of Knapp, he subsequently tends to neglect
the concept of State money and to focus above all on bank money and what heterms ‘financial circulation’. So, in the work after the Treatise and related to the‘finance motive’, Keynes (1936, 1937) focuses his analysis on the monetary economies of production (capitalist market economies).
Similarly, neo-Chartalistism and post-Keynesianism share many views but, as
Goodhart (2005, p. 817) points out, ‘not all Chartalists are post-Keynesians, andnot all post-Keynesians are necessarily Chartalists, though the overlap is admittedly large’. Whereas the neo-Chartalists focus on the creation of State money,
and particularly on the way in which monetary singularity is established withina territory, post-Keynesians are mainly interested in bank money and plurality of debts. Hence, neo-Chartalism endorses an absolute monetary singularity
approach, while post-Keynesianism examines weak plurality of debts inasmuch
as there are several banks. A stronger plurality may be conceived if both State
money and bank money are taken into account.
Lerner (1947) and, more recently, Wray (1998, 2003) have revived Knapp’sview of money as a creation of the State: ‘At the present time, in a normallywell-working economy, money is a creature of the State. Its general acceptability,
which is its all-important attribute, stands or falls by its acceptability by the State’(Lerner, 1947, p. 313). Fiat or State money is ‘the money used as the link between
the public and the private pay communities. It is the money that sits at the top of
the debt pyramid (or hierarchy), or the “definitive” and “valuta” money’ (Wray,
1998, p. 77). Neo-Chartalism rejects the use of the term money in its fullest sensewhen applied to any instrument of payment that is not official. Despite a multitudeof historical examples that weaken this position, it is asserted that the principle of‘One nation, one money’ is logically indisputable. Fiscal systems can rely on currencies other than the central money, but these are merely examples of imperfect
sovereignty given that ‘sovereignty can be defined as the ability to impose tax
liabilities’ (Wray, 2003, p. 90).

Taylor and Francis

Not for distribution

36

Jérôme Blanc et al.

2.5.2 Post-Keynesianism: monetary singularity and plurality of debts
The Radcliffe Report (1959), Kaldor (1960) and Rousseas (1960) all maintainedthat the money supply was ‘credit-driven’ (Niggle, 1991). In line with this research
program, Davidson (1978), Kaldor (1982) and Moore (1988) analyse the mechanisms of the demand for credit instead of reasoning in terms of the exogenous
stock of money. The money supply is perfectly elastic and endogenous to demand:in a credit economy the money supply is necessarily endogenous (Kaldor, 1982),
whereas Friedman and Lucas construct that money supply is exogenous in thesense that the central bank can fully determine the money supply (Minsky, 1986).
The post-Keynesians explain the endogenous nature of money creation, whichcharacterises modern economic systems:[m]oney ‘comes into existence along with debts’ – in other words, the supply of money is related to contracts and the debts they necessitate. Money
does not enter the system like manna from heaven – nor from the sky via
Friedman’s helicopter.
(Moore, 1988, p. 374)
There is general agreement among the post-Keynesians that (i) the banking system responds to demand by distributing loans, and (ii) its hierarchical organisation guarantees compensation and homogeneity of credit money. Though all
post-Keynesians share the hypothesis of the endogenous nature of money, it is notalways analysed in the same way when the curve linking money supply to interest
rate is flat and also when it gradually rises (Moore, 1988; Goodhart, 1989; Dow,
1996): the endogenous nature is complete for the ‘horizontalists’ (Kaldor, Moore,
Lavoie) and only partial for the ‘verticalists’ (Dow, Goodhart). In addition, within
the horizontalist view, two groups may be distinguished: the ‘Americans’ whotend to privilege the view that money is a stock and the ‘Europeans’ who see it asa flow that is required to finance spending (Wray, 2003).
As previously emphasised, monetary analysis in Keynes’s Treatise is ambivalent: Keynes views State money as ‘money proper’, but subsequently proceeds
as if only ‘bank money’ were worthy of interest. The distinction between the
two types of money determines the divergence between neo-Chartalists and postKeynesians. Post-Keynesian horizontalists consider that the State cannot be seenas the initiator of money creation (Mehrling, 2000; Gnos and Rochon, 2002),
while Wray (2003, p. 91) argues that money is driven by taxes given that the Stateis ‘the monopoly supplier of currency’ and that is more relevant to ‘consolidate
the central bank and the treasury, calling the conglomerate “the State”’. Assertingthat State money is exogenously imposed by the government in accordance witha fiscal logic, neo-Chartalists contradict the notion that modern banking money is
endogenously supplied in a capitalist economy. However, Bell (2001) overcomesthe contradiction and re-examines the different types of debt. In a modern banking system, debts are superimposed one upon the other and the ‘debt pyramid’ iscomposed of several states, differentiated by the degree of acceptability of the

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 37
instruments: households issue debts that are less liquid than those issued by enterprises, which in turn are less liquid than money issued by banks, which in turn isless liquid than the ultimate money issued by the State. There is thus a pluralityof debts and their homogenisation is ensured by the hierarchical nature of thebanking system.
In summary, the tricky articulation of private debts and public money, and thecomplex relationships between them determine the debate between neo-Chartalists
and post-Keynesians. The emergence of parallel instruments of payment is mentioned but it is mainly seen as a process of substitution taking place between
financial assets. Monetary plurality is related to the plurality of the sources andtimeframes of debts, and remains merely implicit. Basically, the banking practices fit into the singularity of the unit of account. In other words, neo-Chartalists
and post-Keynesians are not concerned by the deepening of an analysis of monetary plurality, except when it appears as a factor of the payment system crisis(for instance, the European crisis of the national public debts is related to thetax-drive-money and its relationship to financial distrust regarding the homogenisation of the territorial plurality of debts issued in euros).
2.5.3 Marx and beyond: the tension between singularity andplurality as pathology
The analyses start out from Marx’s conceptualisation of the social function ofmoney as a general equivalent, that is, the unit of account of the general formof value. Marx (1857 [1973], p. 191) defines trade as a social relationship thatis the foundation of the existence and role of money: ‘Money does not arise by
convention, any more than the state does’. The genesis of money stems from aprocess that excludes one commodity among others and hence provides social
measurement of their value. Though money is defined as the general equivalent
providing a common language, the forms it takes in circulation of goods are multiple. Money as a measure of values can have substitutes as an instrument of trade,such as banknotes or any other material assets used as a symbol of value to fulfil
its function (Marx, 1867 [2011]). It must, however, be present in its material or
metal form as the real equivalent of goods, or as a commodity money itself, inorder to fulfil its function as a reserve of value and means of payment and also
as universal equivalent. All monetary forms are backed by the general equivalent
which ensures the convertibility of credit money. Thus, in Marx’s analysis, there
is a priori no possibility of opposition between the plurality of means of payment
and the singularity of the unit of account because the functional forms of money
are all interdependent. Money is indeed a social recognition of the unit of accountthat is expressed in its function as a reserve of value, by means of which its social
power becomes the private power of individuals. Even so, the relation between
monetary singularity and plurality is obvious in recent studies, setting the theoretical model on the general equivalent against empirical observation of the pluralityof units of account among financial assets and more so among means of payment.

Taylor and Francis

Not for distribution

38

Jérôme Blanc et al.

Within the contemporary Marxist school, three types of analysis can be distinguished according to their mode of analysing the link between the existenceof a plurality of forms of money and the postulate of a unique measure of value.
Different approaches may be discerned. First, Bryan and Rafferty (2006, 2007),
based on the analysis of plurality of units of account characteristic of the globalised financial system, show that the singularity of general equivalent appears
merely as a contingent historical development and is currently confronted with themonetary aspects of financial derivatives. Second, Saad-Filho and Mollo (2002)
restate the anchoring of the general equivalent in the labour theory of value andinterpret the resultant plurality of units of account as a pathological fragmentation of the monetary system. Finally, Aglietta and Orléan (1982) also consider
the emergence of the plurality of units of account as a monetary pathology andmonetary fragmentation. Nonetheless, they depart from the Marxist concept ofmoney as the expression of the substantial value of commodities and redefine thegeneral equivalent as the result of ‘election’ of one money among several embryonic moneys reappearing in severe monetary crises (see Section 2.5.4).
Bryan and Rafferty (2007, p. 153) hypothesise that financial derivatives constitute a new form of global money not driven by state decree but by competitive
forces: ‘Their specific capacity as commodity money is to be self-transmutable,
for this is the basis of (competitive) commensuration. In this sense, they have auniversal as well as self-referential dimension’. This feature gives financial derivatives a monetary character: ‘Derivatives, through options and futures, establish
pricing relationships that “bind” the future to the present and one place to another.
(. . .) Derivatives, especially through swaps, establish pricing relationships thatreadily convert between (“commensurate”) different forms of asset’ (ibid., p. 140).
These empirical observations call for renewal of monetary theory so as to takeaccount of this monetary function that the dynamics of capitalism have conferredon financial derivatives. The attempt to theorise the function of commensurabilityof different types of capital, which is fulfilled by financial derivatives, implies
however a generic concept of money that encompasses the multiplicity of moneysof account. This, in turn, entails abandoning the principle of the singularity of ageneral equivalent of value.
If the historical evolution of the monetary abstraction previously goes frommetallic money to fiat money, the development of financial derivatives is anotherstep in such an evolution. For Bryan and Rafferty (2007, p. 152), they reveal anincrease in the degree of abstraction of the intrinsic value of the monetary material
compared with its exchange value: ‘Derivatives (. . .), being derived but separated
from the ownership of the underlying assets, are systematically abstracted from“particular commodities”. They have the attributes Marx saw as integral to theessence of money’. In other words, they constitute a new form of money by meansof which capital takes on the attributes of money, and money, the attributes ofcapital. Its new capacity for abstraction renders values commensurable over andabove the differences in space and time (synthesised concretely by differences ininterest rates between spot and forward exchange rates). In Bryan and Rafferty’s
conception of money, the singularity of the unit of account is merely historicallyTaylor and Francis

Not for distribution

Monetary plurality in economic theory 39
contingent. The competition between units of account for fixing capital value
characterises the new phase in the evolution of the money-capital relationship
implied by the derivatives’ innovations.
These recent revisions of the concept of general equivalent reveal the relation
between monetary singularity and plurality. Bryan and Rafferty (2007, p. 153)
show how the financial derivatives play the role of a ‘concrete universal equivalent form of monetary value’. Even so, as financial derivatives constitute a formof money whose stability is in question, their study explicitly does not take up thequestion of the future of financial derivatives. Anyhow, the idea of a new kindof general equivalent that would lead to plurality seems paradoxical. Such an
oxymoron hides the tension between monetary singularity and plurality. Also, therelationship between market and monetary expression of value as in Bryan andRafferty’s analysis appears to be symmetrically opposite to those postulated by
the Klein-Hayek model or the New Monetary Economics. However, the necessity
for a unique unit of account of value involves the intervention of the State (supposing that the financial derivatives are a contingent non-sustainable monetaryform) inasmuch as the social recognition of the unit constitutes a proper monetary
solution to the distributive conflict. Only Aglietta and Orléan’s analysis recognises this explicitly (see Section 2.5.4).
The influence of Marx’s definition of the general equivalent may be found in adifferent way in the work of Saad-Filho and Mollo (2002), who analyse hyperinflation in Latin America as an expression of a distributive conflict. High inflation
has been previously conceptualised as the result of an extra money issue, validating prices that are higher than exchange value (de Brunhoff, 1978; de Brunhoff
and Cartelier, 1979; De Vroey, 1984; Itoh and Lapavitzas, 1999). Saad-Filhoand Mollo show that mark-up price behaviour and anticipations are related tothe extra issue of quantity of money, which in turn is linked to the rise in baserates of interest entailed by the institutionalisation of the indexation of monetary
assets. The restrictive effect of the interest rate is neutralised by the monetaryswaps of compulsory reserves in Treasury bills, which enables banks to index
their interest rates on high current account holdings. The cumulative effect ofinflation entails the destruction of the functions of the national currency and thefunction of reserve value is ensured by an equivalent index in dollars. The index
in dollars is subsequently recognised as the unit of account for durable goods
and Treasury bills. The national currency ends up by losing its ability to fulfil its
function as a means of circulation, which undermines its social recognition as a
general equivalent. Distortions of relative prices impede the process of accumulation, and primarily the level of interest rates guaranteeing the liquidity of theinternal debt, to the detriment of investment, just as the international function of
the currency was being undermined.
This analysis follows Marx’s conception of money and also converges with
Aglietta and Orléan’s theory of rivalry about the ‘election’ of the unit of account.
Monetary authority can face competitive indexations so that the monetary crisis is more specifically a crisis of the singularity of unit of account. Although
this analysis of hyperinflation affirms the need for the singularity of the unit of

Taylor and Francis

Not for distribution

40

Jérôme Blanc et al.

account and the convertibility at par of the various means of payment, for Bryan
and Rafferty, on the contrary, this condition no longer holds with the development of derivatives. Starting with a revision of the Marxian concept of the generalequivalent, Aglietta and Orléan give a new view of the plurality of units of accountas a pathology, which remains a threat to contemporary monetary systems. The
singularity of the unit of account gives money, considered as an institution, its
sovereignty.
2.5.4 An institutionalist revision of Marx
Aglietta and Orléan (1982, 2002) reject the hypothesis that a substantial value
in terms of utility or labour exists prior to market relationships. The genesis ofmoney is the result of a mimetic rivalry among agents leading to intrinsic violence
within market relationships: the ‘election’ of a general equivalent corresponds tothe unanimously accepted symbol of wealth. The mimetic process selecting thesymbol of wealth and the measure of value is not seen as the result of trade or
exchange but rather as a construction of social cohesion. Money is then raised toa position of sovereignty within the market sphere. With the capitalist productionof commodities, the sovereignty of money takes the form of authority of the Mints
in a metallic regime or of the central bank in the modern payment system. The
central bank rests on the foundation of a hierarchical monetary system and brings
into play conflicting logics, either of centralisation by ensuring the convertibilityof debt commitments into the base money or of fractioning this convertibility on
financial markets. The predominance of one or the other of these logics formats
differing growth models by means of norms that regulate the development ofprivate assets, ‘by fostering the development of certain assets while forcibly constraining others’ (Aglietta and Orléan, 1982, p. 86). Unanimity about the unit ofaccount is not always assured and implies arbitration by the monetary authority
which can favour debtors, by opting for centralisation in applying an accommodating policy about the funding of private liabilities (debt-led system), or favour
creditors, allowing the fractioning of the payment system to take its course by
granting creditors direct control over the financial markets (finance-led system).
The plurality of issuers and the recognition of liquidity as the undisputed
representation of wealth are both crucial points as unanimity is not always guaranteed by the debt-led or finance-led system. The value of claims is potentially
under threat (and consequently the source of a possible monetary crisis) either by
inflation, when the predominant logic is that of centralisation, or by asphyxiating
debtors, when there is no longer an automatic guarantee inherent in the logic offractioning. The tension between monetary singularity and plurality is located atthe very heart of the conception of money that sees money as a mediator between
different types of debt. It is expressed in two particular forms – through banking
or finance – according to the type of hierarchy of the monetary initiative. Whenthe banking configuration is predominant, the tension is incorporated into financial innovations which make it possible to circumvent limitations of the power ofbanking institutions issuing liabilities convertible at par with the central money.

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 41
When the finance configuration is dominant, the tension comes out in the mimetic
logic and speculation process in financial markets, which leads to the sovereigndecision of the lender of last resort ensuring the liquidity of private assets and thesustainability of their evaluation. In both configurations, the singularity of theunit of account is essential and its social acceptance is not only a logical concern,
but also the result of political arbitration (which remains temporary) of the trialof strength between debtors and creditors and, more generally, between different
social classes.

2.6 Conclusion: a typology of combinations of monetary
singularity and plurality
From a multi-dimensional pattern of monetary plurality defined as the use ofdiverse means of payment and/or of units of account, this chapter has set out
to examine each theoretical approach in its appropriate analytical context. Our
examination of contemporary theories of money has revealed a variety of situations involving singularity and plurality so that a typology can be suggested.
Table 2.2 presents an overview of possible configurations associating units ofaccount and means of payment, positioning the economic theories in their treatment of monetary singularity and plurality. As the economic theory is constructedon the basis of the two functions of account and payment, monetary singularityand plurality should not be diametrically opposed and, in particular, a plurality ofmeans of payment is not incompatible with a unique unit of account.
Indeed, the present day national monetary systems articulate the link between
the singularity of the unit of account (the State establishes its sovereignty in themonetary realm by setting the unit of account used by public and private economic agents) and the plurality of means of payment (the State authorises not only
the issuing of external money by the central bank, but also the issuing of different
types of internal money by commercial banks). The plurality of means of payment is organised centrally through the convertibility at par of internal moneys inrelation to one another and into external money. The guarantee of convertibility is
so strong through the deposit insurance or the lender of last resort that economic
agents tend to see no difference between the forms of money concerned (the only
differences that may crop up between the several issuers concern the interest rates
at which they borrow funds in the money market). We call this canonical configuration weak plurality: the system is unified, homogenised and hierarchical but it isbuilt on a plurality of means of payment. On the other hand, when there is no suchguarantee of convertibility at par, premiums and discounts can be set by economic
agents in accordance with their perception of the risks involved and of the costof logistics. In the case of the Greenfield and Yeager model and that of the Free
Banking system, the plurality of means of payment is made commensurable byusing a common unit of account, which does not however involve all means of
payment being equivalent. Indeed, issuers do not enjoy the same degree of solvability and are not protected by any public agency such as deposit insurance or alender of last resort. We call this configuration medium plurality.

Taylor and Francis

Not for distribution

Unique

Means of payment

Section 2.5

Section 2.4

Section 2.3

Knapp, Lerner

Medium plurality

Free banking theory

Greenfield and Yeager

New monetary economics

Plurality: no guaranteeof convertibility at par

Monetary Walrasianism

Saad-Filho and Mollo

Kaldor, Minsky

Neo-Mengerians

Hall

Unregulated plurality

Strong plurality

Hierarchised plurality

Weak singularity

Aglietta andOrléanContemporary Marxism and institutionalism

Plurality as conceived byfinancial economics

Theories of money in general equilibrium

Chartalism and Post-Keynesianism

Chicago plan

Theories presented in the different sections
Section 2.2

Weak plurality

No plurality

Degree ofplurality

Not for distribution

Plurality: guarantee of
convertibility at par

UniqueStrong singularity

Unit of accountDegree of
singularity

From absolute singularity to absolute plurality

Table 2.2 Range of configurations of singularity and plurality

Taylor and Francis

Bryan and Rafferty

Hayek, Klein

Cowen andKrosznerCompetitive
plurality

No singularity

Monetary plurality in economic theory 43
There is thus a whole series of possible configurations. The gradation runs fromno plurality to strong plurality with weak and medium plurality in between. At one
extreme of the spectrum, no plurality corresponds to a system with a unique issuer
as designed by the Chicago plan or analysed by post-Walrasian models. At theother extreme, strong plurality corresponds to a system with several unregulated
issuers together with a plurality of units of account as imagined by Cowen andKrozsner. In between, there are intermediate forms with weak plurality (contemporary national monetary systems) and medium plurality (means of payment notguaranteed by convertibility at par into the unit of account).
Though singularity is not the exact inverse image of plurality, an additional
gradation should be used in order to take account of the strength of the singularity of the unit of account. The criterion here is the degree of unification of unitsof account. But such a degree also depends on the way in which the plurality ofmeans of payment is articulated with the unit of account and homogenised by thisrelationship. In economic analysis, the numéraire is unique in the model and postulated by the theorist. In monetary practice, the unit of account is unique in eachcontemporary national territory and defined by the sovereign power. So pluralityof units of account is by no means self-evident. The gradation runs from no singularity to strong singularity with weak singularity in between. At one extreme, thesingularity is nil when there is an unorganised set of competing units of accountas supposed by Hayek in his monetary denationalisation program. Almost at theother extreme, singularity is strong when plurality is confined to issuers of meansof payment or when there is only one. A weak form of singularity may cover thosetheories that conceive an organised or hierarchical plurality of units of account.

Taylor and Francis

Not for distribution

References

Aglietta, M. and Orléan, A. 1982. La violence de la monnaie. Paris: Presses Universitaires
de France.
Aglietta, M. and Orléan, A. 2002. La monnaie entre violence et confiance. Paris: Odile
Jacob.
Allais, M. 1947. Economie et intérêt. Paris, Imprimerie Nationale et Librairie desPublications Officielles.
Allais, M. 1975. ‘Le concept de monnaie, la création de monnaieet de pouvoird’achat parle mécanisme de crédit et ses implications’, in Essais en l’honneur de Jean Marchal,edited by P. Coulbois (106–145). Paris: Cujas.
Arestis, P. and Mihailov, A. 2011. ‘Classifying monetary economics: fields and methods
from past to future’, Journal of Economic Surveys 25(4): 769–800.
Baye, M. R., De Grauwe, P. and De Vries, C. G. 1993. ‘An oligopoly model of free banking: theory and tests’, De Economist 141(4): 497–514.
Bell, S. 2001. ‘The role of the state and the hierarchy of money’, Cambridge Journal of
Economics 25(2):149–163.
Benes, J. and Kumhof, M. 2012. ‘The Chicago Plan revisited’, International Monetary
Fund. Working Paper, No. 12/202.
Black, F. 1970. ‘Banking and the interest rates in a world without money’, Journal of Bank
Research 1(Autumn): 9–20.
Black, F. 1978. ‘Global monetarism in a world of national currencies’, Columbia Journalof World Business 51(Spring): 27–32.

44

Jérôme Blanc et al.

Black, F. 1981. ‘A gold standard with double feedback and near-zero reserves’, reprinted in
Business Cycles and Equilibrium, in F. Black (115–120). Oxford, UK: Basil Blackwell
Press, 1987.
Bryan, D. and Rafferty, M. 2006. Capitalism with Derivatives: A Political Economy ofFinancial Derivatives, Capital and Class. London: Palgrave.
Bryan, D. and Rafferty, M. 2007. ‘Financial derivatives and the theory of money’, Economy
and Society 36(1): 134–158.
Chang, R. 1994. ‘Endogenous currency substitution, inflationary finance, and welfare’,
Journal of Money, Credit and Banking 26(4): 903–916.
Clower, R. 1967. ‘A reconsideration of the microfoundations of monetary theory’, Western
Economic Journal 6(4): 1–8.
Cowen, T. and Kroszner, R. 1987. ‘The development of the New Monetary Economics’,
Journal of Political Economy 95(3): 567–590.
Cowen, T. and Kroszner, R. 1994. Explorations in the New Monetary Economics. Oxford,
UK: Blackwell.
Davidson, P. 1978. Money and the Real World, 2nd edition. London: Macmillan.
De Brunhoff, S. 1978. The State, Capital and Economic Policy. London: Pluto Press.
De Brunhoff, S. and Cartelier, J. 1979. ‘Une analyse marxiste de l’inflation’, in Les rapports d’argent, edited by de S. de Brunhoff (119–135). Grenoble, France: Presses
Universitaires de Grenoble.
De Vroey, M. 1984. ‘Inflation: a non-monetarist monetary interpretation’, Cambridge
Journal of Economics 8(4): 381–399.
Diamond, P. A. 1965. ‘National debt in a neoclassical growth model’, American Economic
Review 55(5): 1126–1150.
Dow, S. 1996. ‘Horizontalism: a critique’, Cambridge Journal of Economics 20(4):497–508.
Dowd, K. (ed.) 1992. The Experience of Free Banking. London: Routledge.
Duca, J. V. and Van Hoose, D. D. (2004) ‘Recent developments in understanding thedemand for money’, Journal of Economics and Business 56(4): 247–272.
Fama, E. F. 1980. ‘Banking in the theory of finance’, Journal of Monetary Economics
6(1): 39–57.
Fama, E. F. 1983. ‘Financial intermediation and price level control’, Journal of Monetary
Economics 12(1): 7–28.
Fisher, I. 1920. Stabilizing the Dollar. New York: Macmillan.
Fisher, I. 1935. 100% Money. New York: Adelphi Publications.
Friedman, M. 1959. A Program for Monetary Stability. New York: Fordham University
Press.
Gnos, C. and Rochon, L.-P. 2002. ‘Money creation and the State: a critical assessment ofChartalism’, International Journal of Political Economy 32(3): 41–57.
Goodhart, C. A. E. 1989. ‘Has Moore become too horizontal?’ Journal of Post Keynesian
Economics 12(1): 29–34.
Goodhart, C. A. E. 2005. ‘What is the essence of money?’ Cambridge Journal of Economics
29(5): 817–825.
Greenfield, R. L. and Yeager, L. B. 1983. ‘A laisser-faire approach to monetary stability’,
Journal of Money, Credit and Banking 15(3): 302–315.
Greenfield, R. L., Woolsey, W. W. and Yeager, L. B. 1995. ‘Is indirect convertibility
impossible? Comment’, Journal of Money, Credit and Banking 27(1): 293–297.
Hahn, F. M. 1965. ‘On some problems of proving the existence of an equilibrium in a monetary economy’, in The Theory of Interest Rates, edited by F. H. Hahn and F. Brechling(126–135). London: Macmillan.

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 45
Hall, R. E. 1981. ‘The government and the monetary unit’, NBER, Working Paper 159.
Hall, R. E. 1982. ‘Monetary trends in the United States and the United Kingdom: areview from the perspective of new developments in monetary economics’, Journal of
Economic Literature 20(4): 1552–1556.
Hall, R. E. 1983. ‘Optimal fiduciary monetary systems’, Journal of Monetary Economics
12(1): 33–50.
Hall, R. E. 1992. ‘A free-market policy to stabilise the purchasing power of the dollar’, inMoney in Crisis. The Federal Reserve, the Economy, and Monetary Reform, edited by
B. N. Siegel (303–321). Cambridge, MA: Harper and Row Pub.
Hall, R. E. 1997. ‘Irving Fisher’s self-stabilizing money’, American Economic Review
87(2): 436–438.
Hayek, F. 1978. Denationalisation of Money. The Argument Refined. London: IEA.
Hayek, F. 1979. ‘Toward a free market monetary system’, Journal of Libertarian Studies
3(1): 1–8.
Hein, E. 2004. ‘Money, credit and the interest rate in Marx’s economic. On the similarities
of Marx’s monetary analysis to post-Keynesian economics’, International Papers in
Political Economy 11(2): 1–43.
Hicks, J. 1935. ‘A suggestion for simplifying the theory of money’, Economica 2(5): 1–19.
Itoh, M. and Lapavitzas, C. 1999. Political Economy of Money and Finance. London:
Macmillan.
Iwai, K. 1988. ‘The evolution of money – A search-theoretic foundation of monetary economics’, CARESS Working Paper 88–03, University of Pennsylvania.
Iwai, K. 1996. ‘The boostrap theory of money: a search-theoretic foundation of monetary
economics’, Structural Change and Economic Dynamics 7(4): 451–477.
Jackson, A., Dyson, B. and Hodgson, G. 2013. The Positive Money Proposal. London,
PositiveMoney.
Jevons, W. S. 1875. Money and the Mechanism of Exchange. London: H. S. King.
Kaldor, N. 1960, ‘The Radcliffe report’, Review of Economics and Statistics 42(1): 14–19.
Kaldor, N. 1982. The Scourge of Monetarism. New York: Oxford University Press.
Kareken, J. and Wallace, N. (eds) 1980. Models of Monetary Economies. Minneapolis,
MN: Federal Reserve Bank of Minneapolis.
Kareken, J. and Wallace, N. 1981. ‘On the indeterminacy of equilibrium exchange rates’,
Quarterly Journal of Economics 96(2): 207–222.
Keynes, J. M. 1930. ‘A treatise on money: the pure theory of money’, in The Collected
Writings of John Maynard Keynes. London: MacMillan, 1971.
Keynes, J. M. 1936. ‘The general theory of employment, interest and money’, in The
Collected Writings of John Maynard Keynes, Vol. 7, edited by E. Johnson and D.
Moggridge. Cambridge, UK: Macmillan, 1973.
Keynes, J. M. 1937 ‘Alternative theories of the rate of interest’, Economic Journal 14:
201–215.
Kiyotaki, N. and Wright, R. 1989. ‘On money as a medium of exchange’, Journal of
Political Economy 97(4): 927–954.
Kiyotaki, N. and Wright, R. 1991. ‘A contribution to the pure theory of money’, Journal of
Economic Theory 53: 215–235.
Kiyotaki, N. and Wright, R. 1993. ‘A search-theoretic approach to monetary economics’,
American Economic Review 83(1): 63–77.
Klein, B. 1974. ‘The competitive supply of money’, Journal of Money, Credit and Banking
6(4): 423–453.
Klein, B. 1976. ‘Competing monies: a comment’, Journal of Money, Credit and Banking
8(4): 513–519.

Taylor and Francis

Not for distribution

46

Jérôme Blanc et al.

Knapp, G. F. 1924. The State Theory of Money. London: Macmillan.
Kocherlakota, N. and Krueger, T. 1999. ‘A signaling model of multiple currencies’, Review
of Economic Dynamics 2(1): 231–244.
Lerner, A. P. 1947. ‘Money as a creature of the state’, American Economic Review 37(2):312–317.
Lucas, R. E. 1972. ‘Expectations and the neutrality of money’, Journal of Economic
Theory 4(2): 103–124.
Lucas, R. E. and Stokey, N. L. 1983. ‘Optimal fiscal and monetary policy in an economy
without capital’, Journal of Monetary Economics 12(1): 55–93.
Marx, K. 1973 [1857]. Grundrisse – Foundations of the Critique of Political Economy.
London: Penguin Classics.
Marx, K. 2011 [1867]. Capital. A Critique of Political Economy (Volume 1). New York:
Dover Publications.
McCallum, B. T. 1983. ‘The role of overlapping-generations models in monetary economics’,
Carnegie-Rochester Conference Series on Public Policy 18: 9–44.
McCallum, B. T. 2010. ‘Issues concerning nonpecuniary yield of money’, Cato Journal30(3): 439–449.
Mehrling, P. 1998. ‘The money muddle: the transformation of American monetary thought,
1920–1970’, in From Interwar Pluralism to Postwar Neoclassicism, edited by M. S.
Morgan and M. Rutherford (293–306). Durham, NC: Duke University Press.
Mehrling, P. 2000. ‘Understanding Fisher Black’, Barnard College, Columbia University,
manuscript.
Menger, K. 1892. ‘On the origin of money’, Economic Journal 2(6): 239–255.
Minsky, H. P. 1986. Stabilizing an Unstable Economy. New Haven, CT: Yale University
Press.
Mises, L. 1949. Human Action. London: William Hodge.
Moore, B. J. 1988. Horizontalists and Verticalists: The Macro-economics of Credit Money.
Cambridge, UK: Cambridge University Press.
Niggle, C. J. 1991. ‘The endogenous money supply theory: an institutionalist appraisal’,
Journal of Economic Issues 25(1): 137–151.
O’Driscoll, G. P. 1985. ‘Money: Menger’s evolutionary theory’, Research Paper 8508,
Federal Reserve Bank of Dallas.
Ostroy, J. M. and Starr, R. M. 1974 ‘Money and the decentralisation of exchange’,
Econometrica 42(6): 1093–1113.
Patinkin, D. 1956. Money, Interest and Prices. Evanston, IL: Rown Peterson.
Radcliffe Report 1959. The Report of the Committee on the Working of the Monetary
System. London: Committee on the Working of the Monetary System.
Rousseas, S. W. 1960. ‘Velocity changes and the effectiveness of monetary policy’, Review
of Economics and Statistics 42(1): 27–36.
Saad-Filho, A. and Mollo, R. 2002. ‘Inflation and stabilisation in Brazil: a political economy analysis’, Review of Radical Political Economics 34(2): 109–135.
Samuelson, P. A. 1958. ‘An exact consumption-loan model of interest with or without thesocial contrivance of money’, Journal of Political Economy 66(6): 467–482.
Schnadt, N., and Whittaker, J. 1993. ‘Inflation-proof currency? The feasibility of variablecommodity standards’, Journal of Money, Credit, and Banking 25(2): 214–221.
Scialom, L. 1995. ‘Les modèles de paiementconcurrentiels. Éléments d’analyse critique’,Revue économique 46(1): 35–55.
Selgin, G. A. 1988. The Theory of Free Banking: Money Supply Under Competitive Note
Issue. Totowa, NJ: Rowman & Littlefield.

Taylor and Francis

Not for distribution

Monetary plurality in economic theory 47
Selgin, G. A. 2003. ‘Adaptive learning and the transition to fiat money’, Economic Journal
113(484): 147–165.
Selgin, G. A. and White, L. H. 1987. ‘The evolution of a free banking system’, Economic
Inquiry 25(3): 439–457.
Selgin, G. A. and White, L. H. 1994. ‘How would the invisible hand handle money?’
Journal of Economic Literature 32(4): 1718–1749.
Shiller, R. J. 2002. ‘Indexed units of account: theory and assessment of historical experience’, Indexation, Inflation and Monetary Policy, edited by F. Lefort andK. Schmidt-Hebbel (105–134). Santiago, Chile: Central Bank of Chile.
Simons, H. C. 1934. ‘A positive program for laisser-faire’, in Economic Policy for a Free
Society. Chicago, IL: University of Chicago Press, 1948.
Soddy F. 1926. Wealth, Virtual Wealth, and Debt. London: George Allen and Unwin.
Sturzenegger, F. N. 1992. ‘Inflation and social welfare in a model with endogenous financial adaptation’, UCLA Working Papers 658.
Sumner, S. 1990. ‘The forerunners of “New Monetary Economics”: proposals to stabilise
the unit of account: note’, Journal of Money, Credit and Banking 22(1): 109–118.
Uribe, M. 1997. ‘Hysteresis in a simple model of currency substitution’, Journal of
Monetary Economics 40(1): 185–202.
Vaubel, R. 1986. ‘Currency competition versus governmental money monopolies’, Cato
Journal 5(3): 927–942.
Wallace, N. 1977. ‘Why the Fed should consider holding M0 constant’, Federal Reserve
Bank of Minneapolis Quarterly Review 1(1): 2–10.
Wallace, N. 1980. ‘The overlapping generations model of fiat money’, in Models ofMonetary Economics, edited by J. Kareken and N. Wallace (49–82). Minneapolis, MN:
Federal Reserve Bank of Mineapolis.
Wallace, N. 1983. ‘A legal restrictions theory of the demand for ‘money’ and the role ofmonetary policy’, Federal Reserve Bank of Mineapolis Quaterly Review 7(1): 1–7.
White, L. H. 1984a. ‘Competitive payments systems and the unit of account’, American
Economic Review 74(4): 699–712.
White, L. H. 1984b. Free Banking in Britain: Theory, Experience and Debate, 1800–1845.
Cambridge, UK: Cambridge University Press.
White, L. H. 1989. Competition and Currency. New York: New York University Press.
Woolsey, W. W. 1992. ‘The search for macroeconomic stability: comment on Sumner’,
Cato Journal 12(2): 475–485.
Wray, R. 1998. Understanding Modern Money: The Key to Full Employment and Price
Stability. Cheltenham, UK: Edward Elgar.
Wray, R. 2003. ‘L’approche post-keynésienne de la monnaie’, in Théoriesmonétaires post
keynésiennes, edited by P. Piégay and L. P. Rochon (52–65). Paris: Economica.
Yeager, L. B. 1983. ‘Stable money and free-market currencies’, Cato Journal 3(1): 305–326.
Yeager, L. B. 1994. ‘Mises and Hayek on calculation and knowledge’, Review of Austrian
Economics 7(2): 93–109.
Yeager L. B. 1997. ‘Austrian economics, neoclassicism, and the market test’, Journal of
Economic Perspectives 11(4): 153–165.
Yeager L. B. 1999. ‘Should Austrians scorn general-equilibrium theory?’ Review ofAustrian Economics 11(1–2): 19–30.
Yeager, L. B. 2010. ‘Privatizing money’, Cato Journal 30(3): 417–438.

Taylor and Francis

Not for distribution

3

Making sense of the plurality ofmoney
A Polanyian attempt
Jérôme Blanc1

3.1 Introduction
This chapter aims at accounting for the dramatic plurality of money throughthe discussion of a conceptual framework built on Polanyian writings. Indeed,a multiplicity of moneys has emerged in the last 30 years that are not national
currencies. These moneys include systems set up by community groups, local
authorities or even by private businesses for their own interests. They come invarious shapes and sizes, ranging from electronic moneys on smart cards to systems for debt settlement by multilateral clearing arrangements via more or lesssophisticated notes or vouchers. The space in which they circulate extends fromsmall communal groups to politically borderless cyberspace. They are created tosecure customer loyalty, to revitalise an area’s economy, to give impetus to social
policies, to act as incentives to virtuous behaviour and for many other purposes.
Although the rapid emergence of these new schemes requires a theoreticalframework within which they can be accounted for, little has been done so far
to produce one. The only journal on forms of money characterised as ‘complementary currencies’ or ‘community currencies’, the International Journal ofCommunity Currency Research (IJCCR), has so far published monographs forthe most part, with a few exceptions like Blanc (2011) and Martignoni (2012) thatdeal with typologies. The multiplicity of money in its theoretical dimension isseldom addressed as such, aside from mainly Austrian approaches such as Hayek,
as well as New Monetary Economics or Free Banking, all of which consider competition as the standard interaction mode between moneys.2 Conversely, to speakof ‘complementary currencies’, as frequently done in studies on LETS (local
exchange and trading systems), local currencies, etc., does not contribute substantially to our understanding of the issue, because the concept of complementarity
is only one of the criteria for an in-depth analysis of relations among all forms ofmoney (on this matter, Blanc, 2017). Moreover, attempts to construct typologies
and proposals for naming moneys have generally proven to be disappointingly
incoherent or unsystematic, as if the subject of analysis itself were not amenable
to any stringent form of classification.
A major difficulty facing observers is the obsolescence of previously established typologies because of the pace of innovation and the removal of boundaries

Taylor and Francis

Not for distribution

Plurality of money: a Polanyian attempt 49
that previously seemed unlikely to be crossed. Since the 1980s, LETS and timebased schemes mixed social innovation with the principle of mutual credit
accounted with an internal currency. Offline softwares and then online platforms
were developed to provide the infrastructure of such schemes, like Cyclos or CES,
allowing the creation of new communities with their moneys in a simple way,
locally or remotely. Since the 1990s, the internet has thus made it possible tocreate communities that are not confined within any political borders. With different goals to those of LETS and time-based schemes, the metaverse Second Life
implemented its own money, the Linden dollar (Hueber, 2011). New forms of
local currencies have emerged in North America in the 1990s, followed by SouthAmerica and Europe in the 2000s. In the specific case of France, where the local
implementation of LETS from 1994 was barely considered monetary schemes by
their founders and users (Servet, ed. 1999), any fear of illegality seems to havevanished by the late 2000s. More than 40 local currencies were created between
2010 and 2016 which were also made convertible into euros. There was also
a surge in the number of projects in this domain. Again, in France, the possibilities of compiling various items of information and keeping simultaneous
but separate accounts on smart cards has been an important line of thought
for what has become SOL money (Fare, 2011). SOL was also a project thatbrought together the private sector (above all from the social and solidarity
economy organisations), local authorities and community groups around a number of objectives: retail trade, non-market services, welfare support and payment
for commitment to work among associations. With the spread of participatory
instruments of web 2.0, there has been a rise in initiatives promising to establish
reputational currencies – by which web users reward other deserving web users ina decentralised and voluntary way, or attention currencies – which reward those
who read e-mails, visit internet pages, etc. Eventually, in 2009 Bitcoin opened a
new phase in monetary experiences with blockchain technology, which allowed
keeping the memory of transactions and establishing confidence into the money
by way of a distributed ledger (Maurer, 2016). Hundreds of such crypto-currencies
flourished in the following years. A growing number of activist associations, corporate strategic-watch managers, developers and futurologists are taking up themonetary terminology that seemed to be confined formerly to bankers and monetary authorities. Banks themselves are increasingly considering the disruptive
capacity of these innovations while monetary authorities are trying to understandand regulate this wave. A whole array of technological, legal, political and ideological boundaries have thus been and are continuing to be pushed back, making
it difficult to construct any typology.
At the very least, a working definition of money must be given to provide
a basis on which to examine this plurality: in agreement with a range of institutionalist and socio-economic works, money here shall be considered to be an
institutionalised ‘principle’ for debt settlement, thus requiring its minting and its
use as a unit of account and a means of payment (Alary et al., 2016). The argument made here is that the instruments developed by Karl Polanyi are decisive forframing and thinking about this multi-dimensional and changing whole.

Taylor and Francis

Not for distribution

50

Jérôme Blanc

Section 3.2 briefly discusses the requirements for a relevant typology, followed by Polanyi’s distinction between all-purpose money and special-purposemoney. The proposed re-evaluation recognises modern forms of special-purposemoney, even if they do not relate to the same sociological and anthropological
functions as in exotic societies.3 Three ideal types of moneys are then outlined:public, business and associative moneys, depending on the nature of their issuer:
political entities, companies or associations. In Section 3.3, the conceptual
framework is deepened in order to add analytical complexity to the ideal types.
Polanyi’s discussion of the forms of economic integration brings out the major
criteria for understanding money systems in their complexity and hybridisation. In Section 3.4, the three ideal types are used in the light of this conceptual
framework so as to take into account a variety of cases within the contemporary
multiplicity of moneys.

3.2 Outline of a typology of money
3.2.1 Conditions for, and difficulties with, a relevant typology
Meaningful discussion on the classification of money among contemporary
economists often stops with exchange rate regimes, since national currencies pertain to State sovereignty while providing the essential vehicle for transactions asmeasured by the classical indicators of wealth production. This leads to focus oneither sovereign moneys or credit moneys, or both. When presented, new formsof money are often reduced to their most dramatic features, without any attempt
to conceive a general typology. Benjamin Cohen (2004), for example, builds a‘currency pyramid’ with seven categories of national currencies depending on
their autonomy and power, and dedicates the last chapter of his book, The Futureof Money, to ‘new frontiers’ in which he develops ‘local money’ and ‘electronicmoney’. Historical and anthropological work, when confronted with a different
viewpoint, can more readily relativise the obvious facts about modern moneys.
The scientific outlook does not only focus on the phenomena because of theirmagnitude, but also because of what their specific features signify. In the sameway, paying attention to the burgeoning of non-bank and non-State moneys sincethe 1980s does not involve addressing the large-scale phenomena (since for themost part they are still not quantitatively widespread) but in identifying schemes
whose features raise questions about the social representation of money today andeven about learned considerations on money. Examination of these moneys raises
the need for categorisation so that some things can be distinguished and others
put together. This is an especially active approach for scholars interested in the
dynamics of monetary innovation over the past 30 years and also for the actors
directly involved, who also need these insights.
Drawing on the attempts to categorise complementary and community currencies that have developed since the 1990s, one can keep a few requirements inmind (DeMeleunaere and Blanc, 2007). First of all, with respect to community
or complementary currencies, a distinction must be made between typology

Taylor and Francis

Not for distribution

Plurality of money: a Polanyian attempt 51
of items and typology of systems. The latter consists of identifying coherent
systems combining a series of elementary items. Secondly, a general typology
of monetary systems should be established prior to any specific typology ofcommunity or complementary currencies. Thirdly, the relevant typology must
be flexible enough to have scope for innovation through the development of
new systems.
In previous works, I have tried to go beyond items and focus on possible organisational choices in community or complementary currencies (Blanc, 2009a). This
led me to identify a set of five coherent schemes defined in terms of the compatibility of their organisational choices and their objectives. This attempt did not
result in the definition of any rigorous criteria for a general typology. Polanyi’s
approach seems to be a heuristic one as it enables us to move beyond these difficulties (Blanc, 2011, 2013).
It is a call for the construction of ideal types, in the way Weber uses the term
as an abstract, utopian and exemplary construction designed to bring together, insome coherent form, a set of features that are not necessarily observed as such in
the real world. These ideal types are then mobilised to make the real world more
intelligible and enable in-depth studies of variations, changes, contradictions andso on. That is the direction taken in this chapter, by connecting the ideal typewith the underlying projects of the monetary systems and with Polanyi’s forms
of integration.
A preliminary step, though, is to return to the distinction Karl Polanyi drew
between all-purpose money and special-purpose money (Polanyi, 1957, 1968,1977). This contributed greatly in challenging the idea that the distinguishingfeature of primitive or even archaic societies was their use of barter; on thecontrary, what supposedly characterised them was their use of special-purposemoney, in forms other than those found in modern societies.

Taylor and Francis

Not for distribution

3.2.2 All-purpose versus special-purpose money
To understand this, we have to return to the foundations of Polanyi’s approach: awork on the uses of money in the context of what he calls substantive conception of
economics, where the central feature is ‘the interchange with his natural and social
environment’ and where no assumptions are made about behaviours with respect
to individual choices and their rational character (Polanyi, 1957, p. 243). Polanyi
reasons on the basis of ‘quantifiable objects’ (Polanyi, 1957, p. 264), which may
be employed for three main uses: ‘payment use’, ‘standard or accounting use’ and‘exchange use’. Elsewhere, he also introduces the use of storing wealth, whichclearly does not rank as highly as the first three; his emphasis on this use is related
to his examination of the role of treasure in exotic societies (Polanyi, 1968, pp.
183–188 and 1977, p. 97 sq.; Servet, 1993).
On this basis, Polanyi makes an intuitively sharp distinction between moneys
in modern societies and what now appear as moneys of exotic societies, whichwere long considered to be forms outside of money. ‘Early money is [. . .] specialpurpose money. Different kinds of objects are employed in the different money

52

Jérôme Blanc

uses; moreover, the uses are instituted independently of one another’ (Polanyi,
1957, p. 266). All-purpose money is a feature of modern societies, where themarket dominates. In this case, the primary use of money, above its payment use(in the sense of settlement of taxes, rents and tributes) and its accounting use, isa means of exchange. This use ranks above the other two and gives rise to them
(Polanyi, 1957, p. 264).
Polanyi’s distinction, and more generally his entire analysis, has two major
points of interest that have been largely underscored: for one, they lead to a clear
distinction between money and the market; for another, they lead to a rejectionof the ‘barter fable’ (Servet, 1988) and even to an assertion of the universality ofmoney as an institution (Polanyi, 1977; Servet, 1993). In this, a sharp demarcationline is drawn between what are plainly very different forms of money.
Conversely, Polanyi’s conception does not lead us to break from some key
features of the classical conception of money: for one thing, the idea that money
takes on all the functions of money simultaneously (even if he thinks in terms ofuses rather than functions and does not consider a reserve use); and for anotherthe idea that money provides access to all available goods and services, with thecorollary principle that money is fungible.4 Consequently, it leads to the view thatmodern societies do not have any special-purpose money. The classical conception of money in modern societies remains largely free from criticism.
The observation of money uses, and more specifically of those ‘quantifiableobjects’ that are used as money, takes us beyond the scope that Polanyi imparts
to this distinction. It brings out the fragmentary character of money and no longer
its supposedly full or unified character: money is dispersed into an array of varied
instruments. Money is unitary as a system but fragmentary as an instrument. Asa system, Polanyi’s second proposition (that modern money assumes the threemoney uses of means of payment, instrument of exchange and unit of account) isa truism: it cannot be otherwise. However, in terms of monetary instruments, nosingle instrument of those that compose the ‘modern money’ system can claim
to cover all of the uses of money by itself: Polanyi’s second proposition seems
absurd in this respect.

Taylor and Francis

Not for distribution

3.2.3 Thinking about modern special-purpose moneys
There is a multiplicity of money instruments in modern societies, not just in crisis situations but also in economically, politically and financially stable societies(Blanc, 2000). This plurality is first of all the plural character of what is called
national currency. Far from being a perfectly homogenous and indistinguishable
set of instruments, national currency is made up of means of payment that differs
in terms of their issuers (a variable number of commercial banks issue scripturalmoney, while banknotes and coinage are generally issued by the central bank),
their possible uses (their use is not universal in the sense that none of these instruments alone can cover all possible money uses; only a combination of these meansof payment can provide access to everything that requires money), and their social
meanings (such as the social distinction in the use of certain top-end bank cards orPlurality of money: a Polanyian attempt 53
co-branded cards). This plurality of national currency, which is generally brushed
over, reveals itself in times of crisis (fractionated or centralised system as Aglietta
and Orléan, 2002 put it; Grahl, 2000; Théret, ed., 2007). It is the central bank thatnowadays makes a coherent whole by ensuring the mutual convertibility of these
forms of money and their convertibility into central money around a single unitof account.
The concept of plurality relates also to other monetary forms that we encounter,here again very vividly in crisis situations, but that can nevertheless be observedin quiet times too. Extensive research into money uses worldwide over the period
1988–1999 threw up a wide variety of units of account and means of payment usedby populations both in situations of crisis and in what were considered normal
situations in the industrialised world and in the global South (Blanc, 2000). A little
over 500 examples of practices relating to monetary instruments that were distinct
from the national currency were identified, revealing an astonishing diversity offorms of money. Upon first examination, some forms of money are designed as
all-purpose money such that there are no limits in principle on their validity, whileothers, on the contrary, can be viewed as special-purpose money because of thelimits imposed on their use (by law or by rules laid down by the issuer).
The upshot of this line of thought is that modern money is not all one and thesame, even if its plural character is the subject of attempts to homogenise andunify it that are probably unprecedented in history. Moreover, modern money
brings together schemes that differ considerably in their logic and their termsof validity.
First of all, modern societies have special-purpose moneys. To understandthem, it can be posited that the validity of moneys is modulated by five criteria:
temporal (the time horizon for use of an instrument), territorial (spatial limitsof its use), economic (the range of things paid or accounted for by the instrument, which does not presuppose any market transaction), social (the group ofpeople using the instrument) and legal (the regulatory restrictions on use of the
instrument, which potentially cross-cut the previous four criteria but also extend
beyond them, for example by setting limits to the use of coins or banknotes aslegal tender). Any instrument has a monetary quality to a degree that is dependent on these restrictions. The special purpose of Polanyi’s exotic moneys may be
re-interpreted here by a combination of criteria of economic and social validity,
since they define who can use the money and what for. The modern equivalentof exotic special-purpose moneys is not necessarily related to community reproduction but rather to the organisation of procedures for accounting and payment
in a circuit combining an identified group of users and a set of things coveredby the money use. This is the way in which we can understand schemes such ascommunity or complementary currencies or vouchers such as meal tickets. The
possible restrictions in terms of time horizon, territorial area and regulation are
not enough to define these modern special-purpose moneys by themselves, butthey do modulate their uses.
Secondly, as a consequence, it seems that the monetary quality of an instrument is not related so much to the universality of its use as to the socialisation

Taylor and Francis

Not for distribution

54

Jérôme Blancof the practices of accounting or payment conducted by means of it within agiven social group. There is no single money that has a universal or unlimited
character. However, there are a host of instruments whose monetary quality isconstrained by various boundaries on their validity. This leads to a reformulation of Polanyi’s idea of all-purpose money: money of the kind that relates tomonetary instruments which can be used for payment or accounting of a large
number of things (but not all), among the commensurable things of a society(of which an important part is also alienable). Only the combined use of these
instruments affords access to the largest possible number of economic operations
and to the largest possible number of potential users. Moreover, modern societies confine money to uses within certain moral boundaries, although these may
change, whether they are market uses or not. Historical debates on slavery andslave trade (leading to their formal prohibition), as well as contemporary debateson implementing markets for organs, display cases of contested moral limits onmoney uses. The bounds of all-purpose money are very broad but are not indefinite. As Warnier (2018) emphasises when discussing Annette Weiner, somegoods are inalienable and cannot move other than through non-monetary andnon-horizontal forms of transmission: ‘whatever is too valuable to be sacrificed
in a transaction without causing a scandal: ancestors, a name, family heirlooms,
a native land, convictions, gods possibly’; for Godelier, ‘religion and whateveris sacred’; but ‘one might just as well say “whatever is sovereign” or even “life”’(Warnier, 2018).
Thirdly, the co-existence of more than one monetary instrument appears to
be normal and lasting, even in modern and politically, economically, financiallyand monetarily stable societies – unless one begins with a political definition of
normality that excludes this type of practice de facto. This conclusion relates to
two foundational assumptions that break away from common opinion about thegeneral fungibility of moneys in modern societies. First, an epistemological, if
not an ontological, distinction must be made between political sovereignty andmonetary sovereignty. In addition, the scope must be broadened by including a setof money uses (that is, uses which articulate accounting and payment) that cannot
be channelled through the usual money instruments.

Taylor and Francis

Not for distribution

3.2.4 Three ideal types of moneys: public, business and associative
On this basis, initially and starting first from an idea of the multiplicity of issuersof moneys today and of their rationales, three major ideal types can be developed:
public money, business money and associative money. We start with a short presentation of these ideal types before detailing the argument in Sections 3.3 and 3.4.
The type ‘public money’ relates to the logic of authority and sovereignty via
a fiscal circuit in which the treasury historically has pride of place. Public money
comes from political entities with rationales of political control. Sovereign domination makes it possible to capture resources, in the form of seigniorage and,more importantly, of tax collection as far as this public money is required for tax
payment. Being the product of sovereign power, public money is all-purpose, in a

Plurality of money: a Polanyian attempt 55
sense close to Polanyi’s ideal: a money that can be used for all things commensurable and alienable in a society delimited by geographical space.
The type ‘business money’ relates to the logic of resource seeking by business organisations. Currency issuance and management are the ways they capture
resources. Resources may be obtained in various methods: seigniorage, interest
rate on credit, levies on transactions or orientation of transactions to their benefit.
Business money can be all-purpose or special-purpose, depending on the boundaries defined by their convertibility rules and, thus, the spheres of users and theuses they give access to.
The type ‘associative money’ relates to the construction of schemes by groupsof people who voluntarily associate for the purpose of collective utility. The
focus is put on the particular way these moneys are designed and implemented:
the association is considered here as a general way of assembling people aroundcommon projects, distinct from resource-seeking motives of business money or
instituted political control of public money. Consequently, associative money may
be special-purpose money such that its validity can be limited, as a matter of principle, to a very specific set of actors and, above all, goods and services.

3.3 Forms of integration and money
Applied to modern societies, the distinction between all-purpose and specialpurpose money is translated into a continuum of situations in which the restriction of validity in social and economic spaces brings about a qualitative leap. It isnevertheless Polanyi’s analysis of the forms of economic integration that provides
the main keys for deepening our typology of moneys.
Polanyi distinguishes several ‘principles of behavior’ which, resting upon
‘institutional patterns’ (Polanyi, 1944, pp. 49–51), he calls ‘forms of integration’in Trade and Market. These forms are ‘instituted processes’ that confer ‘unity andstability’ on economic processes (Polanyi, 1957, p. 250; see also Polanyi, 1977,
p. 39). These forms ‘thus designate the institutionalized movements throughwhich the elements of the economic process – from material resources and labour
to transportation, storage, and distribution of goods – are connected’ (Polanyi,
1977, p. 39). The ‘main’ forms are reciprocity, redistribution and exchange.
Providing a critical re-reading of Polanyi’s forms of integration and their actual
use by scholars, Servet (2013) establishes that one should not focus on Polanyi’s
approach as related to circulation alone. Polanyi indeed analyses instituted principles that ensure ‘production and distribution’. This is a condition for refusing a
dichotomous approach separating money from so-called real activities. It is also
an argument for considering a fourth principle that Polanyi was apt to overlook
after 1944: householding.
Each of these terms should be clarified so as to bring them closer to the questionof money. When Polanyi addressed money and economic integration together, hebegan by rejecting the catallactic definition of money whereby ‘all money uses are
dependent upon the existence of markets’ (Polanyi, 1957, p. 264). He then settled
for examining the close relationship of each of the three uses identified (payment,

Taylor and Francis

Not for distribution

56

Jérôme Blanc

account and exchange) with three societies (primitive, archaic and modern respectively), each dominated by a specific form of integration that did not, however,exclude any articulation with other forms (reciprocity, redistribution and exchange
respectively) (Polanyi, 1957, p. 264–266).
3.3.1 Exchange
Exchange ‘refers here to vice-versa movements taking place as between “hands”
under a market system’ (Polanyi, 1957, p. 250 – emphasis added); it is ‘the mutual
appropriative movement of goods between hands’ (ibid., p. 266). Exchange may
be organised through a self-regulating system of markets, that is, ‘an economy
directed by market prices and nothing but market prices’, market prices being
self-regulated prices (Polanyi, 1944, p. 45). But exchange may also relate to
non-market forms. Thus trade is a kind of exchange that is long-distance and notnecessarily market-based. In the case of what he calls ‘administered trade’, it ispolitically regulated and ‘prices’ are actually fixed equivalents existing before
the exchange.
Beyond Polanyi’s characterisation of market and trade, the important thing
here is that exchange and market must be distinguished in the substantive economy Polanyi constructs: not all exchanges stem from price-forming markets, thatis, markets where prices, which are flexible by definition, arise from the confrontation of supply and demand in such a way that their quantities balance out.
This point enables us to understand that some monetary systems are built
around the will to promote forms of exchange that stand at varying degrees fromself-regulating market. This is the case of some private special-purpose monetaryarrangements within the national monetary system that fall into the ‘businessmoney’ ideal type previously outlined. They are now designed to activate a customer relationship, that is, lasting exchange relations based on loyalty among
partners (Blanc, 2009b), which breaks from the anonymity, theoretical equality
and lack of memory that characterise the market transaction. Likewise, the idea
of fair trade relates to a form of exchange in which prices and the terms of transaction result from a redefinition of market conditions passed through the screenof commutative justice. This redefinition ranges from a blunt rejection of market
terms to a problematic involvement in market order. Many cases of ‘associative
money’ also promote a kind of fair trade within local territories, for example
with the promotion of community-based agriculture and short commercial circuits(Blanc and Fare, 2016).

Taylor and Francis

Not for distribution

3.3.2 Redistribution
Redistribution ‘designates appropriational movements toward a center and out
of it again’ (Polanyi, 1957, p. 250). It is ‘apt to integrate groups at all levels andall degrees of permanence from the state itself to units of a transitory character’(ibid., p. 254). It refers to ‘collecting and redistributing from a center’ (Polanyi,
1977, p. 41).

Plurality of money: a Polanyian attempt 57
The necessary centrality may be interpreted as the outcome or institutionalisation of political power over the group, which may be reflected by not only a formof protection, but also of domination. In this way, collection and redistribution
may be associated with a form of ‘unreleasable debt’ that recurring payments
may only appease, contrary to debts arising from exchange that are released by
the transfer of money (Commons, 1990; for a widened view of unreleasable debt,
see Saiag, 2014). Redistribution relates especially to the structuring and control
of a territory by a politically legitimated institution: from the central or federated
State to the lowest tiers of public authority. The important point here is the idea ofpolitical control to which individuals and groups are subjected and that requires
mandatory payments towards the centre and is reflected by payments out. The
exercise by the State of this movement of collection and redistribution is just one
specific instance that is historically and politically situated. Eventually, allowance
must also be made for non-State or non-public organisations such as foundations,which exert a form of power over their beneficiaries by establishing vertical formsof circulation of wealth through redistribution.
‘Public money’ that has been outlined above is historically linked to sovereign domination. It is based on the same institutional pattern as redistribution
because of the centrality of the sovereign power. Collecting and redistributing
behave as tools for political control over the territory and its population. Money
issuance may be a major vector for such movements, as with metallic currencies
whose issuance require first the collection of precious metals by the Mints, andwhose issues, after a period of circulation, flow back to the sovereign power
through tax collection.

Taylor and Francis

Not for distribution

3.3.3 Reciprocity

Reciprocity ‘denotes movements between correlative points of symmetricalgroupings’ (Polanyi, 1957, p. 250). These are flows among symmetrically ordered
individuals or social groups, around the three-way obligations to give, receive andreturn. Polanyi includes the idea that[k]inship, neighbourhood, or totem belong to the more permanent and comprehensive groupings; within their compass voluntary and semi-voluntary
associations of a military, vocational, religious or social character create situations in which . . . there would form symmetrical groupings the members ofwhich practice some sort of mutuality.
(ibid., p. 253)
Reciprocity is marked by the indefinite time of reciprocal actions (unlike
exchange) and by the capacity to construct reciprocal actions involving morethan two individuals or groups: reciprocity is then multilateral. It should benoticed then, contrary to the argument generally employed by theoreticians ofsolidarity-based economy, that reciprocity cannot be reduced to a non-monetary
exchange; apart from the reasons above, primitive moneys, as contemplated by

58

Jérôme Blanc

Polanyi, circulate precisely according to the principle of reciprocity. In this context, money may be a vehicle for community reproduction by being at the heartof reciprocal circulations.5
It is not possible to link reciprocity to only one of the three ideal types ofmoney outlined. However, reciprocity is at the core of a specific mode of debt
settlement, which is sometimes called ‘mutual credit’. Mutual credit systems rely
on closed groups of actors whose transactions are recorded and settled in accounts
without prior monetary issuance: they are credit-clearing systems. Mutual credit
requires precise symmetry between the (ever-evolving) groups of debtors andcreditors. Public, business and associative moneys may be built on this principle,
as shown respectively by Keynes’ Bancor project (public money at an international level), so-called ‘barter’ systems (business money), LETS and time banks(associative money), as will be seen later. In a reciprocity-based money system,
money is defined and legitimised within a community, which the circulation ofmoney circumscribes, identifies, binds and reproduces in constructing standings
within the community that are equal but in which differences are also recognised.
3.3.4 Communal sharing
In The Great Transformation, Polanyi also contemplates the principle of householding. It consists of ‘producing and storing for the satisfaction of the wants of themembers of the group’ in a self-sufficient manner, and for a group whose nature
may be ‘the patriarchal family, locality as with the village settlement, or politicalpower as with the seigneurial manor’; and whose ‘internal organization’ can bedespotic as well as democratic (Polanyi, 1944, p. 56). It is not the place here to present the debates that took place after Polanyi’s own renunciation of the specificity
of householding (1957). However, drawing on Hillenkamp’s (2013) critical reassessment of householding, on Servet’s (2013) advocacy for separating ‘sharing’
from ‘gifting’ within reciprocity, we propose here reconsideration of this fourthprinciple as ‘communal sharing’, as named by Fiske (1992). ‘Communal sharing’
would then refer to more open and evolving groups than households (as Polanyi’s
definition already suggests). It would be characterised by sharing activities by giving access to members of the community, and by the possible voluntary nature ofbelonging to this community. It is important to stress that the action of sharing does
not necessarily lead to debt relations (contrary to reciprocity).
The blockchain technology takes communal sharing to monetary relations,similarly to mutual credit with reciprocity. The blockchain is ‘the database thatmakes the Bitcoin system run . . . a digital ledger that exists on all nodes in the
Bitcoin network or the network of a similarly structured digital currency system’(Maurer, 2016). Being distributed throughout the network of users, the information on transactions becomes trustworthy without the requirement of a third party.
The blockchain must be considered a technology whose first major historical use
was that of Bitcoin, but that can be applied to different sorts of moneys. As such,the blockchain may be used for public, business and associative moneys as well. It
has then the capacity to place a degree of communal sharing, through peer-to-peer
relations, at the heart of any sort of money systems.

Taylor and Francis

Not for distribution

Plurality of money: a Polanyian attempt 59

3.4 Deepening the ideal types: sub-types and hybrids
The four forms of integration as considered after Polanyi thus lead to deepening
the typology initially built in Section 3.2 on the simple criterion of issuers. We
will now confront the four forms of integration with real cases and, accordingly,
identify hybrids.
3.4.1 State and sub-State public money
At first, one should refine the ‘public money’ ideal type by making a distinction
between ‘State money’ and ‘sub-State money’. They do not differ in terms of theform of integration they activate as a priority (redistribution through centrality),
but in terms of the relationship to sovereignty and territory and to the issuer.
State public money is related to the highest sovereignty, whereas sub-State publicmoney, typically that of a federated State, is related to a possible level of powerdelegation to create money.
In the case of co-existence of State money and several sub-State moneys(such as the moneys of the Argentinian provinces in 1984–2003, see Théret andZanabria, 2007, and Théret in this volume), monetary space is united through theunit of account, which remains defined by the highest sovereign level (that of thesovereign authority, like the Argentine nación); and the sub-State moneys’ validity is limited to the corresponding territory. Another difference, consequently, isthat State public money is defined by what it is measured in: it is measured against
other State public moneys, thus making it a currency, whereas the sub-State moneys are measured against that currency, being subordinate to it.

Taylor and Francis

Not for distribution

3.4.2 Contemporary ordinary money as a hybrid of public money andbusiness money

While early modern monetary systems were mostly built around all-purpose State
public money (metallic money being issued by Mints out of any debt relationship),from the 17th and 18th centuries a new form of money developed with banks as
issuers. This credit-based money was at first special-purpose, since it circulated
within a small network of important users. It was essentially related to market
activities. Its development allowed a financial and monetary revolution that enabled the financing of the burgeoning industrial activities. The issuance of smaller
denominations and the extension of its use made them all-purpose. Controversial at
the beginning, the credit money issued by banks later became mainstream.
The combination of public money and this business money issued by banks
produced the money of industrial societies. It mixes sovereignty and market resource-capture motives. Thus, behind the deceptively generic term of‘national currency’ are diverse agents through whom a public good (money)is essentially created and managed by private agents for their own self-interest(commercial banks).
Since the 1980s, the role of treasuries in creating money has admittedly beenabolished for the benefit of independent central banks in several western countries, which is what Théret (2011) calls ‘monetary repression’. The fiscal circuit

60

Jérôme Blancof money is nonetheless a reality in many countries and remains a potentiality in those countries where it has been abolished. In the latter case, the central
bank alone issues public money in the form of manual currency (coin and notes)
through interest-bearing credit. Beyond the principle of redistribution, publicmoney, which is all-purpose, is also to be used in market transactions as well asreciprocity relations and communal sharing. It therefore connects the fiscal circuit(where there is one) with other circuits, and public policies often promote suchconnections, for example, by offering tax deductions on donations.
3.4.3 Various cases of business money, depending on their convertibility
At least two major sub-types of business money can be distinguished, dependingon the ability to convert them. A generalised and unconditional convertibility turnthem all-purpose, while constraints over their convertibility turn them specialpurpose, by raising boundaries that define specific spheres of circulation. This
allows separating bank moneys from other sorts of business moneys when confronting this typology with contemporary cases.
Convertible business money is issued by banking organisations. It is intended
to circulate among the many actors in the market sphere. Market exchange istherefore the form of integration allowing resources to be captured. This capture
is achieved by the quantity of the monetary issue, interest rate on credits at thesource of money creation and the various management costs charged to customers
by banks. Commercial banks serve their customers using their own bank money
which can be converted into any other bank money or external money, that is, theordinary money as presented above. In contemporary banking systems, a publicguarantee ensures formal parity among bank moneys subjected to the State publicmoney, so much so that the conversion from one to the other is transparent (butpotentially costly for customers, depending on various factors like the fees charged
on withdrawals at ATMs). The success and the continuation of horizontal market
exchange driven by bank money are therefore subject to the redistribution principle,
a dependency that is forgotten in times of growth and even of periodic downturn,but becomes obvious when systemic banking crises occur, as illustrated by theinternational banking crisis that began in 2007. Convertible business moneys are
all-purpose as the scope of their use covers different spheres since it irrigates notjust the market sphere, but also the sphere of redistribution through taxation andborrowing, as well as the spheres of reciprocity and communal sharing.
Other forms of business money are built on the principle of inconvertibility,
which formally defines a closed circuit and makes money special-purpose.
So-called ‘barter’ companies act as clearing houses for the reciprocal credits and debts of their customers, who are themselves firms. When debts andcredits are accounted in a specific unit of account and when lines of credit areprovided by the ‘barter’ company in this money, the scheme is built as inconvertible business money (e.g. Stodder, 1998 and Young, 2012). The capture ofresources for the benefit of the ‘barter’ company is not in contradiction withthe principle of horizontal solidarity among member firms. The latter obtain
non-negligible financial advantages from their membership such as cash-flow

Taylor and Francis

Not for distribution

Plurality of money: a Polanyian attempt 61
savings and, often, lower interest rates. In the case of the cooperative Swissbank WIR, emphasis is on the small and medium sized member firms whose
belonging to a community is most directly expressed in the name of the bankand the money (WIR means ‘we’ in German). This organic market solidarity
through market transactions is based on the mutual credit principle which, aspresented earlier, conveys reciprocal relationships.
While ‘barter’ companies manage the horizontal transactions of their customers, other inconvertible business moneys circulate vertically and are issued by andfor the direct benefit of the issuing centre. This centre exerts a form of dominationthat can mask various strategies. This is special-purpose money since it is confined to a user group defined by its subordinate relation to the organiser and which
accedes in this way to a given set of goods and services. This capture reverses
the redistribution logic as it assumes that resources are injected and then pumped
out. An example is the colonial companies, mining companies or large landowners notably in Latin America that paid their employees with tokens that could be
used only in their own warehouses or in affiliated shops (Rulau, 2000). A second,
contemporary example is the implementation of customer loyalty schemes. They
distribute benefits to their loyal customers in the form of internal purchase points
that can be accumulated but cannot be converted into other forms of money. This
purchasing power cannot be used unless it is converted into goods provided by theissuing firm. Customer transactions are thus directed entirely by the organising
firm, without any decentralised transactions, and the firm captures the purchasing
power through their conversion into goods.

Taylor and Francis

Not for distribution

3.4.4 Associative moneys outside market determination

What makes the type ‘associative money’ specific is the association of persons
around the takeover of money as a possible tool for an active and empowered
community. Nothing is said on the nature of this community (does it exist prior
to the introduction of this money?), nor on the nature of the association (whatform does it take?). Moreover, associative money can be built with or without
connections with the authorities; it may or may not be convertible into and evencommensurable with ordinary money; it may or may not be used along with
it. Eventually, contrary to bank money, there is no such thing as a generalised
and unconditional convertibility at par. This is why the major distinctive feature between associative moneys is the way their value is defined rather thantheir convertibility. Three cases may thus be distinguished: when the value of theassociative money is defined by market exchanges; when it is fixed to the publicmoney; and when it is defined independently.
The value of the contemporary cases of associative money that spread out after
1983 with LETS, time banks and local currencies, and which led to the creationof the IJCCR in 1997 are not defined by any direct market process. They are often
characterised as local, complementary or community currencies. However, as
stated above, ‘complementarity’ is a very misleading term since it may be falsely
considered as the opposite of competition (Blanc, 2017), and since ‘complementary currencies’ have sometimes been used indiscriminately to refer to sub-State

62

Jérôme Blanc

money (like the Argentinian provincial currencies), to business money (like theWIR) as well as to associative money (like local currencies).
In any case, these contemporary associative moneys highlight either reciprocity or exchange as the promoted form of integration, and sometimes combineboth. The transactional space is marked by a strong identity structured byvalues manifested in charters, articles of association or internal rules and regulations. The purpose of solidarity within the community may lead to earmarking
resources for funding community projects: in this way, the principle of communal sharing is made concrete through a monetary scheme that conveys different
forms of integration.
From this general presentation, it is possible to discuss the way in which thevalue of associative moneys is defined when it is not market-based.
What are generally called community currencies in English (monnaie sociale
in French and moneda comunitaria or moneda social in Spanish) mostly activate the principle of reciprocity in a closed system without convertibility andsometimes even without commensurability with public money by setting up asystem of reciprocal exchange marked apart by the use of a money, distancing
its conditions for circulating from those of market exchange. Time banks are
typically community currencies, being established by associations in accordancewith rules they lay down themselves. They can be used for swapping services
among members of the community, with the view to build social cohesion via theprinciple of time-accounting regardless of the services provided (Seyfang, 2004).
Moreover, as seen above, the principle of mutual credit conveys reciprocal relations. Eventually, a fair part of time banking schemes are supported (if not set up)
by local authorities and by non-profit organisations such as foundations, whichmakes them interesting hybrids: associative monetary schemes that promote reciprocity and whose resources are of redistributive nature.
LETS-type systems are much more ambiguous since some of them establish aunit of account at par with the national currency, include professional providers
and authorise the simultaneous use of both currencies, so as to let the professional
providers pay for their related taxes and for their inputs with ordinary money.
Yet there is no convertibility between them. In such cases, that can be foundespecially in Anglo-Saxon countries, LETS systems combine the reciprocity conveyed by mutual credit systems with various forms of exchange in which themarket is fully present.
Contrary to them, local currency schemes like the Brazilian Palmas, the various
German ‘regios’, the local currencies of ‘transition towns’ in the United Kingdom
or the ‘monnaies locales complémentaires’ in France, do not rely on mutual credit
but on paper (and sometimes digital) money issuance, based on the conversionof inflowing ordinary money. Local currencies have economic objectives in thesense of stimulating a specific set of activities for the production and provisionof goods and services by actors who are collectively organised to this end. The
promoted form of exchange is therefore a professional one and the local currency is not only commensurable with public money but is also convertible intoit (though outflows may entail costs). Conversely, their relationship with market

Taylor and Francis

Not for distribution

Plurality of money: a Polanyian attempt 63
rules may be complex, since they select the professional users, depending on the
moral values attendant upon the creation of this money. While they are a kind of
associative monetary scheme, they also rely on the local community and should
strengthen social cohesion, and also require funding that can be provided by local
governments and various partners.
3.4.5 New libertarian associative moneys: market value and data
communal sharing
Bitcoin was created as an associative money of a libertarian nature. It is basedon the blockchain technology which has been said to be applicable elsewhere.
As a specific currency, Bitcoin emerged from a voluntary gathering of geeks
around a new kind of project: the peer-to-peer form of association. There isno business or political authority that issues Bitcoins (though many businesses
developed around Bitcoin and created an ecosystem specific to it) since the
Bitcoin creation (called ‘mining’) is distributed throughout the network of miners, in proportion to their computational power – which gives rise to major
inequalities. However, whereas the peer-to-peer blockchain technology (andthus a form of communal data sharing) is at the heart of mining and payment
processes, Bitcoin is anchored in market relations. Above all, its value is neither
completely autonomous and non-commensurable with other moneys, nor fixed
to any specific money. Its value changes permanently, depending on market
balances between supply and demand.

Taylor and Francis

Not for distribution

3.5 Conclusion

The analysis thus provides three ideal types and seven sub-types, as summarised inTable 3.1. Money as we use it ordinarily is a combination of two sub-types: State
Table 3.1 Ideal types and real cases
Ideal types

Subtypes

Cases

Publicmoney

Sub-State public money

Argentinian provincial currencies(1984–2003)
National currencies Contemporary
ordinary money
Bank money
WIR, Sardex; tokens of colonial
landowners; purchase points ofloyalty schemes
BitcoinBusinessmoney

Associativemoney

State public money
Convertible business money
Inconvertible business money

Market-value associative
moneysFixed-value associative money
Non-commensurable
associative money

Local currencies (e.g. Chiemgauer),
Anglo-Saxon LETS
Time banks and some LETS-typesystems

64

Jérôme Blanc

public money and convertible business money, thus combining redistribution (aspolitical control exerted from centrality and permanently re-affirmed by taxation)and market exchange (bank money being issued as market relation between banks
and borrowers, and ordinarily used for market exchange). But the contemporary
plurality of money goes far beyond this ordinary gathering of market and redistribution conveyed by all-purpose money. It also implies special-purpose money,
as well as reciprocity and communal sharing, in a series of other moneys whose
nature may be public, business or even associative.

Notes
1 This chapter is an extension and refinement of earlier work on Karl Polanyi’s contribution to the conceptions of money and to a typology of ‘complementary currencies’(Blanc, 2006, 2009a, 2009b, 2011, 2013). I am grateful to the many commentators on
preliminary versions, especially Marie Fare, James Stodder and Georgina Gómez, andto Isabelle Hillenkamp, Jean-Louis Laville and Jean-Michel Servet for their thoughtprovoking observations.
2 For a critical review of economic theory on the plurality of moneys, see Chapter 2 byBlanc et al., this volume.
3 In this text, ‘modern money’ shall mean money in modern societies, that is, societies
where a market principle of circulation of wealth dominates, as opposed to ‘exotic societies’, meaning ancient, archaic or primitive societies.
4 Fungibility appears as an element for defining money within a substantive approach.
Polanyi characterises the quantifiable objects that constitute money as ‘fungibles’(Polanyi, 1977, p. 102). For primitive and archaic societies, it must be understood that
this consubstantial fungibility of money is confined to a given class of quantifiableobjects whose uses are compartmentalised and are not all purpose.
5 For a critical analysis of the idea of reciprocity, especially in the way it is often likened
to the Maussian gift, see Servet (2007, 2013).

Taylor and Francis

Not for distribution

References

Aglietta, M and Orléan, A. 2002. La monnaie entre violence et confiance. Paris: Odile
Jacob.
Alary, P, Blanc, J, Desmedt, L and Théret, B. eds. 2016. Théories françaises de la monnaie: une anthologie. Paris: PUF.
Blanc, J. 2000. Les monnaies parallèles: unité et diversité du fait monétaire. 1 vol.
Logiques économiques. Paris: L’Harmattan.
Blanc, J. 2006. ‘Karl Polanyi et les monnaies modernes: un réexamen’. In Contributions
à une sociologie des conduites économiques, edited by Gilles Lazuech and Pascale
Moulévrier, 51–66. Paris: L’Harmattan.
Blanc, J. 2009a. ‘Contraintes et choix organisationnels dans les dispositifs de monnaiessociales’. Annals of Public and Cooperative Economics 80 (4): 547–77.
Blanc, J. 2009b. ‘Usages de L’argent et Pratiques Monétaires’. In Traité de sociologie écono­mique, edited by Philippe Steiner and François Vatin, 649–88. Quadrige. Paris: PUF.
Blanc, J. 2011. ‘Classifying “CCs”: community, complementary and local currencies’ types
and generations’. International Journal of Community Currency Research 15 (D): 4–10.
Blanc, J. 2013. ‘Penser la pluralité des monnaies à partir de Polanyi: un essai de typologie’. In Socioéconomie et démocratie: l’actualité de Karl Polanyi, edited by Isabelle
Hillenkamp and Jean-Louis Laville, 241–69. Toulouse, France: Érès.

Plurality of money: a Polanyian attempt 65
Blanc, J. 2017. ‘Unpacking monetary complementarity and competition: a conceptual
framework’. Cambridge Journal of Economics 41 (1): 239–57.
Blanc, J and Fare, M. 2016. ‘Turning values concrete: the role and ways of business selection in local currency schemes’. Review of Social Economy 74 (3): 298–319.
Cohen, B J. 2004. The future of money. Princeton, NJ: Princeton University Press.
Commons, J R. 1990. Institutional economics: its place in political economy. 2 vols. New
Brunswick, NJ: Transaction Publishers.
DeMeleunaere, S and Blanc, J. 2007. ‘Systems – mechanisms’. In Social Money Workshop.
Facilitation Committee Report, 2006–2007, edited by Stephen DeMeleunaere. Paris:
Fondation pour le Progrès de l’homme.
Fare, M. 2011. ‘The SOL: a complementary currency for the social economy and sustainable development’. International Journal of Community Currency Research 15:
D57–60.
Fiske, A P. 1992. ‘The four elementary forms of sociality: framework for a unified theoryof social relations’. Psychological Review 99 (4): 689–723.
Grahl, J. 2000. ‘Money as sovereignty: the economics of Michel Aglietta’. New Political
Economy 5 (2): 291–316.
Hillenkamp, I. 2013. ‘Le principe de householding aujourd’hui. discussion théoriqueet approche empirique par l’économie populaire’. In Socioéconomie et Démocratie:
l’actualité de Karl Polanyi, edited by Isabelle Hillenkamp and Jean Louis Laville,
215–39. Toulouse, France: Erès.
Hueber, O. 2011. ‘Innovation in virtual social networks: the widespread of new electronic currencies and the emergence of a new category of entrepreneurs’. International
Journal of Transitions and Innovation Systems 1 (2): 163–74.
Martignoni, J. 2012. ‘A new approach to a typology of complementary currencies’,
International Journal of Community Currency Research 16: A1–17.
Maurer, B. 2016. ‘Re-risking in realtime. on possible futures for finance after the blockchain’. Behemoth: A Journal on Civilisation 9 (2): 82–96.
Polanyi, K. 1944. The great transformation: the political and economic origins of our time.
Boston, MA: Beacon Press.
Polanyi, K. 1957. ‘The economy as instituted process’. In Trade and market in the early empires.
Economies in history and theory, edited by Karl Polanyi, Conrad M. Arensberg, and Harry
W. Pearson, 243–70. New York, London: The Free Press, Collier-Macmillan Ltd.
Polanyi, K. 1968. Primitive, archaic, and modern economies: essays. Edited by George
Dalton. Garden City, NY: Anchor Books.
Polanyi, K. 1977. The livelihood of man, Edited by Harry W. Pearson. New York, San
Francisco, London: Academic Press.
Rulau, R. 2000. Latin American tokens: an illustrated, priced catalog of the unofficial
coinage of Latin America – used in plantation, mine, mill, and dock – from 1700 to the20th century. Iola, WI: Krause Publications.
Saiag, H. 2014. ‘Towards a neo-Polanyian approach to money: integrating the concept of
debt’. Economy and Society 43 (4): 559–81.
Servet, J M. 1988. ‘La monnaie contre l’état ou la fable du troc’. In Droit et monnaie.
États et espace monétaire transnational, edited by Philippe Kahn, 14: 49–62. Cahier
Du Credimi. Paris: Litec.
Servet, J M. 1993. ‘L’institution monétaire de la société selon Karl Polanyi’. Revue
Économique 44 (6): 1127–50.
Servet, J M. ed. 1999. Une économie sans argent: les systèmes d’échange local. 1 vol.
Paris: Seuil.

Taylor and Francis

Not for distribution

66

Jérôme Blanc

Servet, J M. 2007. ‘Le principe de réciprocité chez Karl Polanyi, contribution à une définition de l’économie solidaire’. Revue Tiers Monde 190 (2): 255–73.
Servet, J M. 2013. ‘Le principe de réciprocité. un concept Polanyien pour comprendre etconstruire l’économie solidaire’. In Socioéconomie et démocratie: l’actualité de Karl
Polanyi, edited by Isabelle Hillenkamp and Jean Louis Laville, 187–213. Toulouse,
France: Erès.
Seyfang, G. 2004. ‘Time banks: rewarding community self-help in the inner city?’
Community Development Journal 39 (1): 62–71.
Stodder, J. 1998. ‘Corporate barter and economic stabilisation’. International Journal ofCommunity Currency Research 2: 1–11.
Théret, B and Zanabria, M. 2007. ‘Sur la pluralité des monnaies publiques dans les fédérations. Une approche de ses conditions de viabilité à partir de l’expérience Argentine
récente’. Economie et Institutions 10–11: 9–66.
Théret, B. ed. 2007. La monnaie dévoilée par ses crises. Paris: Éditions de l’École deshautes études en sciences sociales.
Théret, B. 2011. ‘Du keynésianisme au libertarianisme. La place de la monnaie dans lestransformations du savoir économique autorisé’. Revue de la régulation. Capitalisme,
institutions, pouvoirs 10.
Warnier, J P. 2018. ‘Biens aliénables, biens inaliénables et dette de vie. Autour de Annette
Weiner’. In La souveraineté monétaire et la souveraineté politique en idées et en
pratiques: identité, concurrence, hiérarchie, corrélation? edited by Marie Cuillerai andBruno Théret. Forthcoming.
Young, M. 2012. ‘A two-marketplace and two-currency system: a view on business-tobusiness barter exchange’. International Journal of Community Currency Research 16:
D146–55.

Taylor and Francis

Not for distribution

4

How does monetary plurality work at
the household level?
The division of labour among currencies inArgentina (1998–2005)
Georgina M. Gómez

4.1 Introduction
The concept of monetary plurality addresses the existence of more than one kindof money in a territory, which implies that there are separate monetary spheres.
Each monetary sphere is defined by one currency that binds uses of money withagents. The keywords in the definition are ‘uses of money’ and this chapter
approaches monetary plurality from the point of view of the agents and the uses
they make of various moneys. For simplicity, monetary uses are grouped into thefour main functions that money performs: definition of value for accountancy
purposes, intermediation of exchanges, payments for debts and credits, and storage of wealth for later use.
The definition of monetary plurality in the previous paragraph assumes thateach currency can perform some of the four monetary functions. All combinations are possible, so agents may use one currency to cancel payments, forexample, and another currency to reserve value. It is also possible that two
or more currencies can perform any one function, so agents could indistinctly
choose a currency to buy product A and another currency to buy product A.
Another possible combination is using one currency to buy a product from one
vendor and another currency to buy the same product from another vendor,
which makes sense if vendors are also the issuers of the paper money at hand.
There is ample historical evidence of episodes of monetary plurality in which
all of these combinations of currencies, products and agents have occurred (forexample, Engdahl and Ögren, 2008; Kuroda, 2007; Wolters, 2008; as well as
Kuroda, Chapter 6, this volume).
Combinations of currencies, products and agents are diverse but tend to benotably stable. Based on research of the 18th to early 20th centuries in China
and India, Kuroda underlines the characteristics of that stability, and uses theterm ‘currency circuit’ to address the steady ‘coupling of a particular money
and a particular trade’ and which are concurrent in time and space but operateautonomously from each other and only occasionally with stable exchange rates(Kuroda, 2008a, p. 21). The concept of currency circuit facilitates a discussion
on the organisation of monetary plurality in stable relations of trade and money.
The stability of the combinations that constitute currency circuits is consistent

Taylor and Francis

Not for distribution

68

Georgina M. Gómezwith the Polanyian view of the economy as an instituted process (Polanyi, 1992).
Institutions structure, organise and sustain economic processes so that they
become stable. Monetary plurality is one of such processes and the agents thatparticipate in each circuit are stable as the combinations of currency and trade.
An examination of the ways in which agents use money under conditions ofmonetary plurality is still pending, probably out of the absence of current viable
examples to conduct such a study. This chapter seeks to understand the ways
agents combine currencies to use them for accountancy, exchange, payments andsavings. In what ways do agents choose which currencies to use for what purposes? Alternatively, agents may incur extra costs to exchange the currency they
have for another currency they need or prefer. Unless currency circuits are completely autonomous, any two currency circuits intersect each other at points suchas money changers who will use an exchange rate to pass from one currency tothe other. These are points of intersection between any two currency circuits andthey are also structured by institutions like exchange rates and exchange costs.
Under what conditions do agents change currencies to pass from one currency
circuit to another?
The proposition in this chapter is that monetary plurality can exist without
exchange institutions that bridge currency circuits as long as a stable divisionof labour between currencies emerges. In other words, categories of agents
design and sustain specific combinations of currencies and trade without incurring additional exchange costs to pass from one currency circuit to another. The
implication is that monetary plurality need not be significantly costlier than asingle money system. The final question that guides this chapter is, in what ways
do currency circuits become institutionalised as stable relations binding agents,
currencies and trade.
This study is based on the case of Argentina between 1998 and 2005, when economic agents dealt with several currencies to make their payments. The researchsought to establish which currencies were used by agents for what purposes andon what grounds these choices were made. Data was collected on the monetary
practices of households and small businesses that participated in the community
currency circuit, the Redes de Trueque, because these households would also use
national and provincial currencies. The opposite does not stand: some households
used only national currency, namely households where the breadwinners had formal and well-paid jobs. The use of private currencies such as business vouchers
was restricted to a minority of households with formal jobs, so they were excluded
from the analysis. The data used in this research belongs to a larger and ongoing
research project on the Redes de Trueque that includes participant observation
and a survey of 386 households with a semi-structured questionnaire which wasadministered face to face in marketplaces where the participants had goods onsale. The initiators of the Redes de Trueque were interviewed repeatedly in orderto reconstruct the evolution of the scheme based on oral history. Extensive interviews were conducted also with various experts and academic researchers. A desk
study of other research and journalistic reports on the topic is ongoing.

Taylor and Francis

Not for distribution

Monetary plurality at the household level 69

4.2 Dealing with monetary plurality
Periods of monetary plurality have been ubiquitous throughout history in boththe Eastern and Western hemispheres. This is hardly news (see Gómez and vonPrittwitz, Chapter 7, and Kuroda, Chapter 6, this volume). However, patterns
or the ways in which agents have combined currencies for different purposes
is not a well-researched aspect of monetary plurality. The assumption behind
this is, perhaps, that agents would change the currencies they had at hand for a‘better’ currency, and not as the result of institutionalised practices. The belief
that there is a clear hierarchy among currencies veils the significance of binding
them to agents and uses in stable relations. This has also limited the analysis ofcurrency circuits.
One of the few attempts to look into the organisation of monetary plurality is
an article by Jerome Blanc (2016), ‘Unpacking monetary complementarity andcompetition: a conceptual framework’. The study offers mainly a theoretical conceptualisation of how several currencies relate to each other. Currencies stand in
relations of competition or complementarity with other currencies.Depending onwhether they can be used to price goods interchangeably, they can be converted
into one another by means of exchange rate, they can be used together, and they
can be used in the same or similar monetary spheres. The different combinations of these four dimensions allow for more possibilities than simply statingthat monies compete or complement each other. Blanc’s work does not centre on
the choices or uses decided by agents in contexts of monetary plurality but how
currencies stand in relation to one another, leaving agents and dynamics out of theanalysis. With a static approach, Blanc argues that currencies can be substitutes(only one currency can be used at a time in a given territory), simultaneous (several currencies can be used at a time in a given territory but conversion may add
costs), supplements (one currency does what another currency does not, so several
currencies are needed at a time in a given territory to cover all the possible uses ofmoney) or autonomous (they are independent in time and territories). A graphic
interpretation of these relations is shown in Figure 4.1. In this way, Blanc (2016)
contributes an analysis of monetary plurality that admits several relations between
currencies, and while some currencies compete with each other, other currencies
complement one another. The question is whether one currency will end up dominating a territory and push all others to disappear. Blanc hints that the answer is
no, as long as there is no Polanyian all-purpose money that can perform all thefunctions, always and everywhere. In other words, as long as currencies complement each other, monetary plurality would expand the universe of production andexchange from a substantive economy approach.
Kuroda (2008a, 2008b) asserted that no money does all the functions that economic agents need it to perform. His views emphasise supplementarity and add
that, in most cases, monetary plurality was not incidental but conducive to thefunctioning of the economy. Kuroda argues specifically that, ‘one money could
do what another money could not, and vice versa. In other words, an assortmentof monies could do what any single money could not, and supply what the market

Taylor and Francis

Not for distribution

70

Georgina M. Gómez

Monetary circuit 1

Monetary Circuit 2

Simultaneous moneys(eg, bank notes and coins)

Monetary circuit 1
Monetary Circuit 2
Monetary circuit 1
Monetary Circuit 2

Supplementary moneys (eg, layering in big
and small expenses)
Autonomous moneys with possibility of
conversion between them.

Figure 4.1 Articulation between complementary monetary circuits
Source: Own interpretation of Blanc (2016).

required’ (Kuroda, 2008b, p. 7). The implication of this reasoning is that in contexts of monetary plurality, a division of labour among currencies must exist.
Agents hence use one currency for one purpose and another currency for anotherpurpose. The institutionalisation of currency circuits reflects on particular properties of each currency to function in the medium term, so that some agents give it
and other agents accept it in exchange for goods or other currencies.
Kuroda’s notion of currency circuits emphasises the stability that binds agents,
uses and products. Stability is the key characteristic of institutionalised economic
processes. Hodgson’s (2006, p. 2) established definition of institutions conceptualises them as ‘systems of established and prevalent social rules that structuresocial interaction’. These dispositions refer to socially accepted courses of action
for various situations. According to Hodgson’s account (Hodgson, 2003; Hodgson
and Knudsen, 2004), institutions are formed in processes of reconstitutive upwardcausation, by which agents’ repeated actions structure new institutions that become
stable and achieve ontological existence at a social level. Under conditions ofmonetary plurality, institutions indicate that for each purpose of trade, savingsand payments, there is a particular currency that is acceptable in the local context.
The notion that economic interactions among agents are structured extends to therepeated and preferred use of a specific currency per vendor or product.
The second aspect of the organisation of monetary plurality in distinctive andstable currency circuits regards their articulation. If currencies partially share
spaces, as Blanc suggested, then there must be points of intersection linking thevarious currency circuits such as legal regulations, exchange rates, exchangebanks, money changers, and other institutions that structure the interaction of
agents across currency circuits (Boyer-Xambeu, Deleplace and Gillard, 1994;
Kuroda, 2007). In the next section we will explore how monetary plurality wasorganised in distinct but concurrent circuits in the Argentine case and the ways inwhich division of labour emerged.

Taylor and Francis

Not for distribution

Monetary plurality at the household level 71

4.3 Inflation and bimonetarism in Argentina
In contrast to most countries, in Argentina the concept of money is seen as a social
construction that governments mould to their policy objectives. A broad menu offailed anti-inflationary policies had been tried since 1930s, including four changes
in the national currency that scrapped digits and sought to add credibility to policy
efforts to curb average two-digit inflation rates. There were other equally desperate efforts to control monetary supply. For instance, in the winter of 1962, thegovernment paid civil servants their wages in bonds instead of official money.
The fiscal accounts were then seriously distressed, and the government wanted to
avoid the inflationary effects of issuing money to cover its deficit (Cortes Conde,2005). These bonds were accepted by most shops and firms, and public servants spent them as soon as they could. Later, in the 1980s, provincial money
was issued in two provinces that could not pay wages to their public employees
and printed small amounts of provincial bonds to cover the expense. They were
accepted reluctantly in their territories and the holders spent them as quickly as
possible (Schvarzer and Finkelstein, 2003). Shopkeepers referred to provincial
money as ‘hot bread’, a reference to the desire to get rid of it quickly. Banks andthe entire financial system were also affected. For instance, in 1989 bank deposits
were confiscated and exchanged for government bonds. The tradition of inflation,
coupled with monetary and financial manipulation, generated the curious understanding that what is socially accepted as money has been as much a matter ofsocial judgement as of political decision.
Argentines rarely regard their national money as an untouchable institutionthat the state commits to ensure. A long-term search for a harder currency gradually led agents to adopt the US dollar as a second currency. Initially, it was only areserve of value, but the dollar was gradually institutionalised as unit of accountfor pricing most goods and services, and to use as means of payment. In the second
stage, the dollar was used to express the prices of larger goods such as houses andcars, and to stabilise the value of contracts. In the third stage, the dollar was alsopreferred as means of payment to buy those larger goods and services. The inflationary problem kept aggravating and reached a peak with three hyperinflations
between May 1989 and the end of 1990, a period of less than two years. It thenbecame common practice to pay for all goods and services in pesos calculated at
the hourly advertised exchange rate of the price in dollars. It was the fourth stage
in which the dollar became means of payment accepted by most private actors.
After three hyperinflations, the top policy priority in 1990 was to ‘reconstruct’ the institutions regulating the relationship between the population andmoney, the monetary system, and monetary-defined property rights (Cavallo,
1999). Domingo Cavallo, the Economy Minister, contested the monetarist viewthat the source of inflation was the quantity of money in an economy and wasinstead inspired by Friedrich Hayek (1976) in the view that it was the quality ofmoney that determined agents’ monetary preferences. Cavallo (1999) describes
the monetarist theory of inflation as incomplete because it does not pay attention

Taylor and Francis

Not for distribution

72

Georgina M. Gómez

to the institutional aspects of money. Full dollarisation at the macro level was
discussed within policy circles but the idea did not gain ground because it wasseen as politically inviable (Fanelli and Heymann, 2002). Instead, the government opted for a consolidation of the two-currency monetary system captured in
the Convertibility Plan.
In March 1991, the Congress approved a law transforming the Central Bank
into a currency board, pegging the Argentine currency to the US dollar at a rate ofone to one and allowing all transactions to be performed in any currency of choice(Fernandez and Schumacher, 1998). The law forbade indexation in contracts but
protected the option of denominating prices in dollars. This also applied to bankdeposits over any term. It gave the Central Bank autonomy and specified the levelof foreign currency reserves it would have to maintain, while it determined that
the Central Bank would no longer act as lender of last resort to the banking system(no other institution was designated for that function). In practice, this ensured
that money would be issued endogenously in alignment with inflows of foreign
currency. In January 1992, the national currency would be the peso, at par withthe dollar. It was a shortcut for the recovery of the institution of money, and the
combined M3 increased to 20 percent of GDP by 1994 (Fanelli and Heymann,
2002). Convertibility allowed agents to choose, at any point in their economic
activity, which currency they wanted to use for what purposes. Instead of fighting it, the Convertibility Plan built upon the practice of monetary plurality andachieved what no other stabilisation plan could in the past in Argentina: inflation
disappeared for a decade and the credibility of the peso was restored.
The Convertibility Plan formalised a monetary system composed of two currency circuits with significant overlap, which was termed bimonetarism. The
origin is to be found in the long-term experience with inflation and the failureof indexation to adjust quantities properly: price indexes tell a story of past
price increases while the exchange rate reflects the increases currently goingon (Heymann, 2000). The substitution of a bad currency (peso) for a good currency (dollar) was termed ‘reverse Gresham’s Law’ in Argentina (Guidotti andRodríguez, 1992). When inflation started rising, agents would flee to good currencies such as the dollar to protect the value of their payments, goods for sale andsavings. Uncertainty over the future purchasing values in pesos prevented agentsfrom seeing the peso as the ‘natural’ unit of account and would only have good
currencies in circulation. The ‘natural’ unit of account then became the currency
that could effectively guarantee purchasing power in the future (the dollar).
Back to the articulation of currency circuits, this section has shown that inflation created the conditions for a second currency circuit to emerge, which wascomplementary to the official Argentine currency and centred on the use of the US
dollar for specific types of payments and savings. The formalisation of this dualmonetary system came with the Convertibility Plan, which extended the scope ofthe second currency circuit to bank deposits and tax payments. The relationshipbetween the two currencies evolved into one of simultaneous complementarity, in
Blanc’s typology, because any payment could be made with the combination ofpesos and dollars, in the same manner as coins and bank notes can be combined.

Taylor and Francis

Not for distribution

Monetary plurality at the household level 73
However, the two currencies could not be used for all the same purposes and there
were conversion costs between the currencies.

4.4 Structural adjustment and non-state monetary circuits
The formalisation of a bimonetary system was only one of the components of theConvertibility Plan. Monetary reform was implemented together with one of themost ambitious and swift privatisation programmes in Latin America, involving
almost all state-owned enterprises, public utilities, the pension system, and muchof the healthcare and banking sectors (Kosacoff, 1993). Markets were opened to
trade, the regulations on foreign investment were relaxed, and several other sectors were deregulated. The structural reforms triggered a significant growth rateof eight percent a year from 1990 to 1994. GDP increased by 27 percent between
1991 and 1994 but with a marked heterogeneity between sectors: while the industrial GDP hardly grew, services bloomed and with it, part of the middle class(Kosacoff and Heymann, 2000). At the same time, regional economies based on
agriculture and small enterprises were particularly hit.
In 1995, a major economic crisis hit the ‘modernised; Argentina of the
Neoliberal experiment. It caused major disruptions in the balance of payments
and the peg of the peso to the dollar almost collapsed but was saved at the costof a recession that skimmed five percent off the national product in 1995. The
financial crisis also introduced many Argentines to the traumatic novelty of nothaving a job. The unemployment rate had stayed around 5 percent in the 1980s
but it was rising due to the changes in the industrial sector, the retreat of the state,
and privatisations. In 1995, Argentina had a record unemployment rate of 18.8
percent and the term ‘hyper-unemployment’ was coined. Real wages in 1995 fell
to 68 percent of its 1986 level and 62 percent of its 1975 level. The social costs ofthe structural reforms were beginning to be reported by the media, which revealed
pools of poverty that had never been seen before. The crisis induced a momentof awareness. It was then that the public realised that the institutions regulating
economic activity and the relationships between the private sector, the state andcivil society had changed permanently.
On the upside, part of the Argentine society bloomed with the opening of markets, and the arrival of a myriad of transnational corporations in the service sector
was then introduced to a private type of money. These were vouchers issued byprivate businesses and sold to employers, who gave them to their workers as partof or in addition to their wages. These vouchers allowed employees to buy meals
in restaurants and, later on, food in supermarkets and oil in most gas stations.
They were not considered part of the salary according to the labour laws, so they
became a cheaper option for employers to reward their workers with than regularmoney. Private vouchers hence overlapped with pesos for purchasing those basic
necessities, but rarely overlapped with dollars. There was no segment of the market for which it was the main money.
On the downside, poverty grew dramatically. Argentina had been used topockets of poverty for decades, but what was striking in the 1990s was that the

Taylor and Francis

Not for distribution

74

Georgina M. Gómez

poverty extended to a larger segment of the population and was much more visible. An early study of the social consequences of the structural reforms coined
the term ‘new poor’ to describe households that had recently fallen under thepoverty line in a country where about 70 percent of the population had declareditself as middle class (Minujin, 1993). They were shopkeepers, public servants,
skilled workers, graduates, blue collar workers, bank clerks, teachers and small
firm owners. Many of the sectors in which the middle class worked were targetsof the reform policies and were thus overwhelmed by their disenfranchisement.
Scholars define the new poor as those whose situation depends on their previous
status, educational attainment, availability of savings, and assets, such as theirhouse, personal capabilities and social network (Lvovich, 2000; Minujin, 1993;
Minujin and Kessler, 1995; Murmis and Feldman, 1993). Their structural basic
needs were covered, but with the drastic reduction in their income, they could nolonger afford their lifestyle. Their network of contacts was crucial in delaying thedecline, but they no longer felt a sense of belonging with them. They understood
the world differently from the structural poor and were demanding of society andthe state. They were the poor with a voice.
Collective actors set to reorganise social life independently from the state,
ensuring representation through new channels and promoting alternative income
generation schemes. Among these were the Redes de Trueque, the brainchild of
two grassroots groups that organised a local exchange network where participants
would buy and sell goods and services from each other by using a money they
had created themselves. They were launched at a local level with 25 memberson 1 May 1995, but their replication in other locations was extremely fast. The
initial success and the potential of the scheme to alleviate the economic problems of the disenfranchised middle class neighbours made them ‘want to spreadit everywhere’ (Interview with national leader in Bernal, Buenos Aires, on 4
August 2004). In the beginning, each local exchange centre had its own surrogate currency, which was not convertible to pesos outside it, but after a while
the currencies were accepted in other centres. Eventually, a number of systems
of complementary currencies emerged at the local, regional and national levels
with abstract means of payment, depersonalised, dematerialised, and transferable
money created by civil society organisations. The créditos was the only currency
that circulated in the Redes de Trueque, although some accepted a combination ofpesos to cover raw materials and inputs.
It was clear from the start that the Trueque had a strong gender bias and at
least 70 percent of the participants were women. As observed by other researchers(González Bombal, Leoni and Luzzi, 2002; Parysow and Bogani, 2002), middle
class women were the most affected by the slide into poverty, as it deprived themof access to the public spaces they were used to visiting, and they quickly accepted
the proposal of the Trueque. Used to unpaid work, women were the first to understand that the Trueque offered satisfaction of needs without the mediation ofregular money. The Trueque linked directly to the reproduction of life: it ‘fills the
fridge, paints the home, gets you a plumber to fix the pipes’, one participant said
(Interview with RT participant, Billinghurst, Buenos Aires, 9 November 2004).

Taylor and Francis

Not for distribution

Monetary plurality at the household level 75
At first sight, it seems to be a major innovation for a civil society group to print
its own money, but in Argentina, it was not. The creation of the crédito, the namethe community currency was usually referred to as, represents a small innovation on the institutionalised practice in Argentina of using several currencies atthe same time. For decades, the country had a bimonetary system in which both
pesos and dollars circulated together. The créditos were added as a new currency
created by a grassroots organisation to circulate within its social network. They
were just an extra option in a list of means of payment at hand. The creation of acurrency parallel to the official one would have been illegal or bluntly rejected inother countries, but in the Argentine case, it was within the acceptable responses.
People were used to living with two or three currencies, so why not four or five?
As Swanke (2004) expresses it, once the institution is in place, the actors simply
forget how it was created and adopt it for their use.
In terms of monetary circuits, the Trueque added a currency and with it, a newstable relation was born between specific community currencies, their participants(agents willing to trade their goods and services for créditos), and their products.
Most products on sale proceeded from the resale of stocks such as second-handgoods or bought within the formal currency circuit in pesos, or home production
with small scale technologies). The community currencies were a supplementary currency circuit because they were used for additional products or trade thatwould not have had any value in pesos or would not have occurred if everyone
had a strong preference for pesos.

Taylor and Francis

4.5 Subnational state currency circuits in Argentina

Not for distribution

The moment of truth for Argentina’s neoliberal development model came at theend of the 1990s. Community currencies were well established and growing by
the time the country suffered a new and more severe crisis. In 1999, the GDP
dropped by 3.4 percent and the recession was met with more deregulation andstructural reforms. A new government, formed by the opposition party, took
office in December 1999 with its entire campaign based on reassuring the publicthat it would maintain the peso’s peg to the dollar and continue implementing
the Convertibility Plan. Unfortunately, it was able to do little to spur economic
growth and one of its first measures was to raise taxes to correct the fiscal deficit.
Tax increases delivered the Argentine economy directly into a recessionary trapwith higher budget deficits and further cuts in government spending (Harman,
2002). It was the beginning of the longest and deepest productive retraction in
Argentine history. The economic demise of four years skimmed 20 percent of theGDP between 1998 and 2002 (Gerchunoff and Llach, 2005).
The fiscal cuts applied to the provinces, some of which historically had highpublic employment, and protests started there (Pastor Jr and Wise, 1999). The
combination of provincial deficits and the refusal of the central government
brought several subnational governments to the brink of default on their debt andin arrears with suppliers. The province of Buenos Aires was the first one to issue
an Emergency Provincial Bond to avoid a general default on its payments, and76

Georgina M. Gómez

soon used them to partially cover the payments of wages. The experience was
successful to increase the liquidity and reactivate the depressed local economy ofthe province, which encouraged other provinces to replicate the issuing of theirown subnational currencies.
Argentine provinces had already issued subnational bills in the 1980s andsome provinces had never stopped using them, such as Tucuman (see chaptersby Théret in this volume). The 2001 generation of subnational currencies was
slightly different because they were meant to circulate as almost compulsory debt.
The bills created a provincial unit of account in which their value was denominated. At the same time, they served as a reserve of value because they paid aninterest when they matured, and as means of payment to cancel debts with suppliers and utility companies in their territories. They also circulated as a medium of
exchange because public servants used them to buy from shops and supermarkets,for example, which in turn used them to pay local taxes and their workers’ wages,
among other costs.
The provincial bills were generically called ‘quasi-currencies’ and were
institutionalised already by the end of 2001 (Schvarzer and Finkelstein, 2003).
According to Alvarez et al. (2011), the issuance of subnational currencies reacheda peak in September 2002, when they represented 51.32 percent of the monetarybase. Alvarez et al. (2011) consider subnational currencies as an ‘unheard of’measure because the provincial bonds formed locally restricted monetary circuitsof a scale that exceeded the value of the transfers from national tax revenues. The
reason behind these proportions was related to the severity of the crisis: there was
not enough national currency to perform the basic functions of money as mediaof exchange and means of payment. Some accounts, hence, consider that the provincial currencies had clear reactivating effects in the local economies (Schvarzer
and Finkelstein, 2003; Théret and Zanabria, 2009), because they activated production and trade that would otherwise have remained idle with the available
national money.
At the same time, provincial currencies were restricted to the provincial territories, so agents that needed to make payments outside the province would haveto convert them to pesos or dollars. Many economic agents would hence try tospend their quasi-currencies to cancel taxes first, wages second, other costs third,
and what was left was converted to pesos or dollars. A supermarket manager
noted that:

Taylor and Francis

Not for distribution[a]ll in all, we noticed that a very large proportion of our costs are local.
Moreover, when we realised the provincial currency was not circulating fastenough, we would stop accepting it. But there was not much choice because
customers did not always have anything else to pay with.
(Interview with Supermarket Manager in San Martin,
Buenos Aires, 4 December 2004)
As their circulation became more common, provincial currencies established a
new stable relation between themselves, agents and products. The products wereMonetary plurality at the household level 77
those that were produced and consumed locally, which explains why local currencies are seen by some authors as having supported economic recovery in the
middle of the economic demise. The agents were initially public servants andpublic sector suppliers, but later it was any business that had them as clients andmanaged to make payments with provincial currencies. They were a supplementary currency circuit, in Blanc’s typology, because they sustained the local economy throughout the crisis, keeping workers in waged employment and businesses
afloat that, perhaps, otherwise would not have been possible.

4.6 Matching money and transactions
By the turn of the millennium, many Argentine households were using up to
five currencies – pesos, US dollars, provincial quasi-currencies, private vouchers and créditos. The phenomenon fits Kuroda’s (2008a) analysis, that different
currencies fulfil the four main functions of money to different degrees, in different spaces and for different groups of agents. Each type of money did somethingthat the others did not, so it took several currencies together to satisfy the various
needs to pay for all the transactions that a household or small business needed.
In line with Blanc’s (2016) definition of complementarity, dollars and pesos
circulated together and could be combined at the same time, so they were complementary instead of competitive. For savings and larger payments like capital
goods and housing, the dollar was the preferred currency. The peso was the only
currency used to pay taxes and debts with the state. Basic necessities could bebought with private vouchers or pesos in supermarkets and regular shops, with
provincial currencies if the recipients could recirculate them to other agents or
pay their taxes, with community currency if they were obtained in the Redesde Trueque or with a combination of créditos and pesos when the exchanges
were made with small shops that accepted créditos. So, under conditions of monetary plurality, different currencies circulated in different spaces where different
agents participated.
If currencies are arranged in a hierarchy based on the level of stability perceived by the public, dollars would be at the top because they were also used as
reserve of value, which was a function that many community currency créditos
would perform poorly. While dollars are issued by the government of the largest
economy in the world, the créditos were issued by local civil society organisations without any real or legal guarantee. In the middle, the pesos were issued by
the Argentine government and protected by the constitution, regardless of how
contested the state was at that time. The provincial notes were printed by subnational governments and could also claim legality by the provincial constitutions
and were backed up by the transfers of the central to the provincial governments.
The private vouchers were distributed by large transnational corporations and had
a validity of less than one year, a period during which the issuers were considered
reliable. However, the hierarchy of money in terms of its reliability was not an
issue for the vast majority of Argentines that did not have the choice to compare
currencies and decide which one they wanted to use. Any currency was better

Taylor and Francis

Not for distribution

78

Georgina M. Gómez

than no currency at all, so the place of each currency in a hierarchy of money wassecondary to their availability for different agents. For the poor and unemployed
who could only generate income in complementary currencies, the reliability ofthe dollar as the hardest currency was of no significance.
The fieldwork surveyed households and small businesses that participated in
the Redes de Trueque in order to obtain a full range of uses of the different monies available. A summary of what exchange each household would use to pay
for what goods and services is shown in Table 4.1. The ideal currency to use as
reserve of value was the dollar, which was also the hardest to obtain, but thatfunction was not perceived as crucial because most of the households interviewed
did not save any income at all. That means that a vast number of households did
not save and barely had access to dollars, so they did not belong to the dollar currency circuit.
In contrast, community currencies were the money that poor households could
access the easiest. Although créditos sustained the smallest currency circuit interms of geographic and temporal scope, because they were limited to one or asmall number of exchange centres, they were also the easiest to obtain. In addition, users’ preference for them was related to their consumption needs. A verylarge percentage of the daily necessities of low-income households could be met
in créditos. So, they participated strongly in the circuits of the community currencies. These circuits were hence inclusive of segments of the population that,in their absence, would have remained excluded from the economic activities of
production and trade.

Taylor and Francis

Not for distribution

Table 4.1 Households: which money for what?

1
2
3
4

5
6

7

8
9

Monetary circuits

Dollars

Pesos

Savings
Taxes
Public services (electricity,water, transportation)
Large purchases (houses,
cars, electronics,
machines)
PetrolOther non-food purchases(clothes, shoes, toys,
school articles)
Personal services (healthcare, home maintenance,
personal care)
Every day food necessities
Inter-household informal
trade

√

√
√
√

Treasury/
provincial

Privatevouchers

Créditos√ Local tax√ Locally

√

√

√
√

√
√

√ Locally√ Locally√√ some√ Locally√ some√ some√ Locally√√√ (in RT)√ (in RT)√√ (in RT)√ (in RT)

Monetary plurality at the household level 79
Households assessed the various currencies based on the entire flow of money
and contrasted the use of the various currencies with their own accessibility tothem and compared the suitability of currencies to their needs and expenses. The
articulation of each currency to the other types of money would have been significant if households could choose in which currency circuits they wanted toparticipate, but that was not the case. The dimension of accessibility to various
currencies in conditions of monetary plurality is a key factor for assessing thequality of money.
The Argentine experience provides evidence to Kuroda’s analysis that noneof the monies available in Argentina was capable of satisfying all the needs ofthe households. Each one of them was acceptable towards paying for goods andservices that other currencies could not, although there were clear overlaps. Even
the money with the widest acceptance, the dollar, was not valid for paying taxes
and other transfers to the public sector, and payments in dollars for small expenses
faced problems of conversion of the change that had to be given back. There wasno small change in dollars, so fractionary money was always in currencies otherthan the dollar.
A similar analysis for small shops and businesses is shown in Table 4.2. Likewith households, saving was not a concern that many of these shops could attend
to in the middle of a severe crisis.
Monetary plurality in Argentina was not a matter of choice but a response to a
deep crisis that undermined economic activity and the legitimacy of the state andmonetary institutions at the same time. Different actors then created means of payment for different groups of agents and for different purposes. The outcome wasa fragmented market with various types of currency circuits and groups of agents.

Taylor and Francis

Not for distribution

Table 4.2 Small businesses and shops: which money for what?

1
2
3
4
5
6
7
8

9

Monetary circuits

Dollars

Pesos

Savings
Taxes and rent
Public services (electricity,water, transportation)
Large purchases (houses,
cars, electronics, machines)
PetrolWages
Suppliers
Daily business services(cleaning, small
maintenance)
Sale of leftover, second classor expired stocks

√
some

√
√
√

√

√

√

√
√
√

Treasury/
provincial

Privatevouchers

Créditos√ Locally√ Locally√ Locally√ Locally√ Locally√√√ (in RT)√ (in RT)√

80

Georgina M. Gómez

At the same time, it was a larger market than what the use of only one type ofcurrency could have sustained, had monetary plurality not existed. Especially forthe groups of the population who had problems of access to money, the existenceof complementary currencies supported their survival. A large number of households and small businesses were able to get by during the worst crisis in Argentine
history precisely because they had access to various currencies which allowed
them to participate in several monetary circuits at the same time. Monetary plurality therefore implied that households and small businesses had to find the best
match between currency and purpose.

4.7 Conclusion
This chapter seeks to understand in what ways agents combine currencies to usethem for accountancy, exchange, payments and savings. Moreover, it traces theorigin and reasons behind the institutionalisation of currency circuits as stable
relations that bind agents, currencies and trade. Following Blanc’s argumentation beyond the competition approach to money (2016), the Argentine casesuggests that competition is only evident when money is assessed in terms of
all its four functions together (definition of value for accountancy purposes,intermediation of exchanges, payments of debts and credits, and storage ofwealth for later use). When these four functions are looked at one by one, it
becomes evident that agents chose different currencies for different uses. A
further breakdown of these four functions shows that a division of labour arose
as stable combinations of purposes and social strata of the agents, as shown in
Tables 4.1 and 4.2.
Agents become included in the currency circuits that are more accessible tothem. So, while agents of higher socioeconomic conditions may have a choice
in which currency they use for what purpose, agents of lower economic strata do
not have such a choice. Currency circuits do not only represent pairs of trade andcurrencies, as theorised by Kuroda (2007, 2008a, 2008b) but trios of trade, currencies, and the social strata of the agents that receive and spend a specific currency.
Agents of higher socioeconomic strata actually have a choice on which currency
they want to use within a hierarchy. There is a logical preference for the type ofmoney that does all or most of the four basic functions of money, including thedenomination of savings or large investments (reserve of value). For social strata
that do not save, money becomes primarily means of payment and medium of
exchange for daily necessities, and these households use the currency they canobtain through the easiest way – or perhaps the only way – in currency circuitsthat rank lower in the monetary hierarchy. In other words, money is layered alongsocial lines which dominate the inclusion in currency circuits.
Lower currency circuits relate the closest to everyday consumption needs. For
households that use most or all of their income in daily necessities, complementary
currencies are adequate to sustain their survival. These currencies procure most of
the goods and services in their household consumption baskets. For households
that consume other goods, the inclusion of a currency of lower level represents a

Taylor and Francis

Not for distribution

Monetary plurality at the household level 81
loss of welfare. Instead, households that consume mostly basic necessities (items
6 to 9 in Table 4.1) use lower level currencies.
The account of monetary plurality presented in this chapter supports Kuroda’s
reasoning (ibid.) that the coexistence of currency circuits enables more trade andmore production than would have otherwise been possible with only one currency.
Moreover, the analysis of the evidence suggests that monetary plurality can havea positive effect in terms of social inclusion, because lower level users can haveaccess to income generation and make payments in a lower level currency. Clearly,
their choice is restricted to goods produced and traded in these lower level circuits,
but the alternative is not having any money at all and, consequently, no chances ofaccessing those goods or any others. While the regular economic system excludes thelower socioeconomic strata of the society, lower level currency circuits appear as a‘better-than-nothing’ option to sustain life during a deep economic demise. If complementary currencies had been forbidden, it would have been damaging for the poor.
We reached a similar conclusion in Gómez and Von Prittwitz, Chapter 7, this volume.
The emergence of a division of labour among currencies adds another dimension to the statement that currency circuits supplement each other within arelationship of complementarity, as argued by Blanc (2016). Simultaneous complementarity is about choosing to use a harder currency as reserve of value, while
supplementarity relates to need. It appears as a defense mechanism against exclusion that enables different conditions of inclusion. It suggests that passing fromone currency circuit to another is not only costly, but also generally unnecessary.
Households participate in several currency circuits at the same time and combineeach currency with a particular purpose, meaning that they make payments in thesame currency in which they obtain their income. In other words, circuits intersect
within the households and shops that use them, and do not exchange one for theother. The users can and will avoid incurring extra costs to move between currencies. They do not convert currencies to buy a specific good but match the currency
in their hands with the goods on offer in that currency.
The conclusions presented here are using a circular argument: different level
currencies emerge because they include users that can access them and use themto procure most of the goods and services in their household baskets. The morethese agents use supplementary currencies, the more these currencies sustain theirlives, so agents use them more. Circular argumentations like this resonate withmost accounts of institutionalisation and structuration processes. The concept ofreconstitutive upward causation (Hodgson 2003; Hodgson and Knudsen 2004)
argues that repetitive usage and convenience can reconcile agents with options
that were new for them at an earlier point, so that they reproduce actions andsupport their dissemination to other agents. Currency circuits follow a pattern of
emergence, usage, and dissemination around an episode of economic crisis. They
present the institutionalisation of links between the users of a currency, the purpose, and access to it. Institutionalisation suggests that the rules of inclusion andengagement in each currency circuit are clear, as well as their limits and potentials. This may be relevant for the subsequent stability of the currency circuits andtheir reemergence in other periods of crisis.

Taylor and Francis

Not for distribution

82

Georgina M. Gómez

References
Alvarez C, Manes M, Paredes P and Ivani C. 2011. El acceso al crédito de los gobiernos subnacionales. El caso de las provincias y municipios de la República Argentina.
Jornadas Internacionales de Finanzas Públicas, Facultad de Ciencias Económicas,
Universidad Nacional de Córdoba. Córdoba, Argentina.
Blanc J. 2016. Unpacking monetary complementarity and competition: a conceptual
framework. Cambridge Journal of Economics 41(1):239–257.
Boyer-Xambeu MT, Deleplace MG and Gillard L. 1994. Private money and public currencies: the sixteenth century challenge. London: Sharpe.
Cavallo D. 1999. ‘The quality of money’. Document prepared for the Award Ceremonyof the Doctorate Honoris Causa University of Paris 1-Pantheon Sorbonne, publishedin ASAP (Asociación Argentina de Presupuesto y Administración Financiera Pública)
No. 33, Buenos Aires, junio 1999 and Économie Internationale – La revue du CEPII,
La qualité de la monnaie, 80, 4, Trimestre, Paris.
Cortes Conde R. 2005. La economía política de la Argentina en el siglo XX. Buenos Aires:
Edhasa.
Engdahl T and Ögren AO. 2008. Multiple paper monies in Sweden 1789–1903: substitution or complementarity? Financial History Review 15(1):73–91.
Fanelli JM and Heymann D. 2002. Dilemas monetarios en Argentina. Desarrollo
Económico (Buenos Aires) 42(165):3–24.
Fernandez RB and Schumacher L. 1998. The Argentine banking panic after the ‘Tequila’shock: did ‘convertibility’ help or hurt? In: Rehman SS, ed. Financial crisis management in regional blocs. Dordrecht, Netherlands: Springer. 183–208.
Gerchunoff G and Llach L. 2005. El ciclo de la ilusión y el desencanto; un siglo de políticas económicas argentinas. Buenos Aires: Ariel.
González Bombal I., Leoni F. and Luzzi M. 2002. Nuevas redes sociales: los clubes detrueque. Conference Proceedings: Respuestas de la Sociedad Civil a la Emergencia
Social: Brasil y Argentina Comparten Experiencias, Facultade de Economia,
Administração e Contabilidade, University of São Paulo, Brasil, November 4. Buenos
Aires: CEDES–UNGS.
Guidotti P and Rodríguez C. 1992. Dollarization in Latin America: Gresham’s Law inreverse? IMF Staff Papers 239:518–544.
Harman C. 2002. Argentina: rebellion at the sharp end of the world crisis. International
Socialism 94:3–48.
Hayek FA. 1976. Denationalization of money. London: Institute of Economic Affairs.
Heymann D. 2000. Políticas de reforma y comportamiento macroeconómico. In: Kosacoff
B and Heymann D, eds. La Argentina de los noventa. Desempeño económico en uncontexto de reformas. Buenos Aires: EUDEBA and CEPAL Naciones Unidas.
Hodgson G. 2003. The hidden persuaders: institutions and individuals in economic theory.
Cambridge Journal of Economics 27:159–175.
Hodgson G. 2006. What are institutions? Journal of Economic Issues 40(1):1–25.
Hodgson G and Knudsen T. 2004. The complex evolution of a simple traffic convention: the functions and implications of habit. Journal of Economic Behavior andOrganization 54(1):19–47.
Kosacoff B. 1993. El desafío de la competitividad. Buenos Aires: CEPAL-Alianza.
Kosacoff B and Heymann D. 2000. La Argentina de los noventa. Buenos Aires: EUDEBA
and CEPAL Naciones Unidas.

Taylor and Francis

Not for distribution

Monetary plurality at the household level 83
Kuroda A. 2007. The Maria Theresa dollar in the early twentieth-century Red Sea region:
a complementary interface between multiple markets. Financial History Review
14(1):89–110.
Kuroda A. 2008a. Concurrent but non-integrable currency circuits: complementary relationships among monies in modern China and other regions. Financial History Review
15(1):17–36.
Kuroda A. 2008b. What is the complementarity among monies? An introductory note.
Financial History Review 15(1):7–15.
Lvovich, D. 2000. Colgados De la soga. La experiencia del tránsito desde la clase media
a la nueva pobreza en la ciudad de Buenos Aires. In M. Svampa ed. Desde Abajo. La
Transformación De Las Identidades Sociales. Buenos Aires: UNGS and Biblos. 51–80.
Minujin A, ed. 1993. Cuesta abajo. Los nuevos pobres: efectos de la crisis en la sociedad
argentina. 2nd ed. Buenos Aires: Losada and Unicef.
Minujín, A. and Kessler G. 1995. La nueva pobreza en Argentina. Buenos Aires: Planeta.
Murmis, M. and Feldman S. 1993. La heterogeneidad social de las pobrezas. In A. Minujin
ed. Cuesta Abajo. Los Nuevos Pobres: Efectos De La Crisis En La Sociedad Argentina.
Buenos Aires: Losada and UNICEF. 45–92.
Parysow, J. and Bogani E. 2002. Perspectivas de desarrollo económico y social paralas mujeres pobres y empobrecidas en los clubes del trueque. Estudio De Caso: La
Bernalesa. Seminario Las Caras de la Pobreza. Buenos Aires: Universidad Católica
Argentina. 215–230.
Pastor Jr M and Wise C. 1999. Stabilization and its discontents: Argentina’s economic
restructuring in the 1990s. World Development 27(3):477–503.
Polanyi K. 1992. The economy as instituted process. In: Granovetter M and Swedberg R,
eds. The Sociology of Economic Life. Boulder, CO: Westview Press. 29–52.
Schvarzer J and Finkelstein H. 2003. Análisis – Bonos, cuasi monedas y política económica.
Revista Realidad Económica, IADE, Buenos Aires. 193.
Swanke T. 2004. Understanding the implications of money being a social convention. In:
Wray R and Forstater M, eds. Contemporary Post Keynesian Analysis. Cheltenham,
UK: Edward Elgar Publishing. 84–99.
Théret B and Zanabria M. 2009. On the viability of monetary complementarity in federations: the case of fiscal provincial monies in 2001–2003 Argentina’s crisis. XV World
Economic History Congress. Utrecht, The Netherlands.
Wolters W. 2008. Heavy and light money in the Netherlands Indies and the Dutch
Republic: dilemmas of monetary management with unit of account systems. Financial
History Review 15:37–53.

Taylor and Francis

Not for distribution

5

Monetary federalism as a concept
and its empirical underpinnings inArgentina’s monetary history
Bruno Théret1‘Monetary federalism’, unlike fiscal federalism, is still a theory in its embryonicstage and this is undoubtedly due to the fact that there is no substantial difference
between the monetary organisations of existing federal and non-federal states. . . .
But asking whether federalism can make an original contribution in the monetary
field is no longer an idle question. The struggle to provide Europe with a common
currency requires that at least the federalists are capable of reflecting on these
topics without being hidebound by the monetary organisation model that has characterised centralised national states.
(Jozzo 1985, 185 and 201).

Taylor and Francis

5.1 Introduction

This chapter develops the concept of monetary federalism by drawing from boththeory and history. The theory includes the concept of federalism in philosophicaland political thought, while the history mainly concerns monetary experiments inArgentina. The chapter is divided into three sections. The first section presents
the general principles and several historical underpinnings of the application offederalism to monetary systems. The second section presents one of the clearest historical manifestations of monetary federalism, namely the recurrent waves
of issuances of provincial fiscal complementary currencies (CC) in Argentina
between 1890 and 2003. The third section looks at why this country has exhibited such a noteworthy case of monetary federalism, even if a repressed one. In
conclusion, we suggest an Argentinian scenario of monetary federalism for the
eurozone that would allow a breakthrough in the monetary crisis of the European
Union without falling into the deadlocks of either the present generalised austerity
policies, or breakdown of the monetary union.
While it is common to speak of political federalism and fiscal federalism, andless frequently of economic federalism, the expression ‘monetary federalism’ isextremely rare. Google searches in English and French lead to fewer than ten
occurrences of it, and show that, like ‘federalism’ and ‘federalist’, its usage has
contradictory meanings. While in the tradition of the Federalist Papers, to be afederalist is to be partisan of the federal State, politicians and economists equate

Not for distribution

Monetary federalism as a concept 85
monetary federalism with a single money managed by a Federal Central Bank
(Wyplosz 1999; Grégoriadis 2007). Thus, it concerns neither an organisational
structure nor a specific institutional regime of distribution of monetary powers
within a federation.
On the contrary, according to a philosophical view of federalism, to bea federalist is to respect the federal principle of balancing unity and plurality,
and monetary federalism refers to a specific design of monetary systems whereinterests of federated entities (states, provinces, landers, cantons) are taken into
account, and where the sharing of monetary competencies is stressed upon (Jozzo
1985; Théret and Zanabria 2007; Arnsperger 2011; Théret and Kalinowski 2012;
Saiag 2013). The concept of monetary federalism developed in this chapter
belongs to this second stream of thought within which monetary plurality is recognised as empirical evidence and theorised as more efficient and resilient thanmonetary singularity.
The current crisis of the euro is an outcome of a single monetary policy foreconomically and culturally diverse heterogeneous territories and prompts us torethink such a monetary policy and its theoretical underpinnings. Many historical experiments of monetary plurality, especially in political contexts of federal
polities, indicate that we should not think of money as singular or plural, but
as simultaneously singular and plural. That is, we should not consider monetaryplurality as an expression of competition between monies but of complementarity
among them (Kuroda 2008a, 2008b). In fact, in our view, the concept of monetaryfederalism, as a form of federalism complementing fiscal and political federalism, is a theoretical way to design this complementarity among monies caused by
locality. It refers to territoriality as an extrinsic dimension of money.
However, monetary federalism cannot be reduced to this territorial dimension
for two reasons. Firstly, like political federalism in general, monetary federalism
has both territorial and functional dimensions: it balances political relations among
territorial interests (due to the spatial division of a country into different tiers ofgovernment), as well as ‘functional’ interests (entrenched in the social divisionof labour). It regulates the interactions between both types of societal relations(Sbragia 1993). Secondly, monetary federalism also refers to the intrinsic federal
structure of modern (capitalist-statist) money which combines singularity (of thesystem-unit of account) and plurality (of the means of payment).
Eventually, a hypothesis of institutional complementarity considers thatthe principles of organisation of a monetary system have to fit, in one way or
another, with those of the political organisation of the society within which themonetary system functions. Therefore, if the intrinsic federal structure of modern money does not appear clearly in the monetary institutions of most of theexisting federations, it means that monetary federalism is politically repressed.
As empirical evidence from many federations shows, such repression can causemonetary and/or political instabilities that may destroy the federation either by
splitting it into many independent states, or by transforming it into a unitarystate through violence.

Taylor and Francis

Not for distribution

86

Bruno Théret

Therefore, it is fact that federated public powers issue fiscal tender CCs circulating at parity with the federal legal tender currency used as the unit of accountwhich can be conceptualised as ‘monetary federalism’. But, why should we conceptualise recurrent social facts, if not to transform them from particular cases
into more general categories that are useful to widen our understanding of collective action. Thus, our interest in the concept of monetary federalism resides
in its capacity to design an issue to the current European Union’s political andeconomic crisis in line with the original purposes of the Union.
From this perspective, even if innovative federal monetary experiments havebeen overlooked because most economists and politicians view them only as
emergency devices, not susceptible to produce efficient and permanent institutions, they must be considered as crucial material of scientific knowledge. They
are indeed part of the ‘buried knowledges’ praised by Michel Foucault, and whose
failure to survive was not the outcome of their economic inefficiency, but of political defeats of the social forces that were promoting them. We have to uncoverthese experiments not only for the beauty of scientific work aiming at historical
truth, but also as genuine and original social innovations enlightening the designof new federal political and monetary institutional arrangements. Let’s keep inmind that purely fiat paper currencies were considered only as an emergency formof money and discredited as counterfeit money by mainstream economists andpoliticians until the 1930s when they became the standard form of money.

Taylor and Francis

5.2 Principles and historicity of monetary federalism

Not for distribution

Federalism is a political set of normative principles whose purpose is to accommodate unity within diversity, without sacrificing one or the other. Thus, it is no
surprise that, albeit non-pluralist views on money can prevail even there, social
scientists may find empirical evidence of monetary plurality and complementarity
in federal polities. In mainstream economics and political science where rational
choice theory dominates, federalism is conceived as a ‘market-preserving’ device,and no attention is paid to principles of human action other than competition(Weingast 1995; McKinnon 1997). But this view does not fit with the empirical evidence of many federations whose purpose is mainly ‘peace-keeping’, andwhich are based on cooperation and complementarity more than economic competition between the different territorial tiers of the government (Théret 2015).
Then, if federalism refers to an institutional way of combining unity and diversity without destroying either, it is possible to consider that its general principles
apply to the modern capitalist-statist money. In most federations this federalist
structure of money, with its territorial and functional dimensions, is not recognised and is not reported by ‘normal’ scientific knowledge, but it nonethelesssurfaces recurrently in critical periods and can be studied. I will draw on new
empirical evidence from three cases: the United States in the ten years separating
the Acts of Confederation and the Federal Constitution, again the United States in
the 1930s, and Argentina in the 1990s. We argue that the issuance of a plurality ofmunicipal and provincial fiscal CCs is not a simple outcome of emergency conditions, but is a structural manifestation of monetary federalism.

Monetary federalism as a concept 87
5.2.1 From political federalism to monetary federalism
Federalism can be defined as a way to shape a political order on the basis ofa hierarchy of values and not of a hierarchy of powers (with concentration of
power at the top), as usual in a unitary State (Théret 1999, 2002, 2004, 2015).
The federal tier of government is not more powerful than the federated governments, for it does not have the monopoly over political competencies. In thedomains where they are sovereign, federated entities are superior in power to thefederal government, but the latter is in charge of competencies which are greaterin value because they form the federation as a whole, for instance by ensuring
internal peace between member-states, and acting on their behalf in the external
world. Therefore, in a federal polity, there is an overlapping hierarchy of powers
and no sovereign power in the strict classical meaning of the word. Sovereignty
becomes the attribute of an authority separated from any executive power, andwhose decisions are enforceable only if federal and federated powers recognise it
as a sovereign authority to whom they submit themselves; if not, the federation is
on the way towards dissolution. This authority, whose might is purely symbolic,is a third party placed in the position of sovereignty above any political power,
either federal or federated. It usually takes the material and institutional formsof a constitutional text and special judicial power – the Supreme or Constitutional
Court – which has the necessary authority to settle the conflicts of powers between
or within the tiers of governments of a federative political order.
Now this general structure of federalism as a hierarchy of values also makes
sense for the monetary order of the modern state-and-market societies where
economy is differentiated from the political, the religious and the domestic orders.
Decreeing the system and unit of account and maintaining its uniqueness are competencies of the federal tier, as notably stated by Hawtrey (Currency and Credit,
1919, cited in Commons 1934, 472 and 477) or Keynes (A Treatise on Money,
1930, cited by Ingham 2004, and Wray 2014, 15). They are of greater social value
than the powers to issue and circulate means of payments. The latter powers canbe shared, decentralised and even decentered. In order to allow monetary transactions, they are usually distributed to different agents and organisations acting atdifferent territorial scales and with different purposes. Monies of payment –currencies – circulate in multiple spheres of transactions and users’ networks(public or private, market or non-market, small or large, local, regional or
national); they take different material forms, are not a priori ‘all purpose money’,and most often have to be ‘earmarked’ to be accepted in transactions (Zelizer
1994; Blanc 2006). For them to form a payment community despite the fact thatthey cannot be unified, they must be federated, allowing them to circulate in more
extended and impersonal networks as well as across a priori heterogeneous transaction spheres by the mediation of a common federal unit of account.
Therefore, in a society symbolised by a common system and unit of account,the power to issue monies of payment can be distributed functionally and territorially among different issuers (banks, private companies, States, cities, LETS
(local exchange trading systems), associations, etc.) without necessarily beinga danger for the unity and cohesion of the society. On the contrary, the competence of issuing instruments of debt settlement appears to structurally pertain to

Taylor and Francis

Not for distribution

88

Bruno Théretthe domain of decentralised or federated economic and political powers. But for
unification to be effective without centralisation the various means of payment
have to be denominated at least in a common unit of account (or convertible ata stable value) and the parity between units of payment and the unit of accounthas to be maintained.
As for the third party that would represent the federal sovereign monetary
authority, it can be neither the federal power that decrees and maintains the unit
and the system of account, nor the federated powers that issue means of payment.
History shows that the true sovereign in monetary matters is the People who are
the users of money and who decide the future of any money, imaginary or real, in
accepting or refusing its use in the internal multi-lateral transactions (Wennerlind2011). The People can delegate its authority through a monetary constitution to an
institution independent of the monetary powers (public and private) and give it thepower of interpreting this constitution in order to settle conflicts between issuersof currencies, and to maintain the commonality of the system and unit of account.
From this perspective, such a monetary authority should not be confused withany central bank which is not independent from issuers of currencies, and is, mostoften than not, only a police and executive power, part of the federal tier of government. Central banks have powers that have to be legitimised, which meansthat they a priori are deprived of the ethical authority residing in the values andsocial norms constituting a population of money users as a social whole. In orderto legitimise their monetary policies, central banks need an ethical backing in thevalues sustaining the political community, either unitary or federal. Surely, theFederal Reserve Board of the US Federal Reserve Bank System, in its design atleast, is the closest institution of such an ideal-type monetary authority. Its presence could explain why in the US, despite the tremendous monetary power of its
private financial industry, monetary repression of non-commercial bank issuancesof monies is presently one of the weakest in the world.
Why does this intrinsic federal structure of modern money not appear clearlyin the monetary institutions of most of the existing federations? Why are complementarities between monetary and political institutions not realised or, at least,
taken into consideration by social sciences? Why are the relationships between
the political organisation of a society and the organisation of its monetary system
so little investigated and taken into account, even when falling into deep crisis?
There is no room in this chapter to answer such questions, answers which would
involve an examination of the strong links existing between standard monetary
theories prevailing in a historical period, and monetary institutions and policies(Théret 2011). Let’s focus on monetary experiments which unveil the effective
presence of federalist monetary arrangements in some federations.

Taylor and Francis

Not for distribution

5.2.2 Emergency monies or repressed monetary federalism
In general, and even in federations, the importance taken in various historicalperiods by federated states’ issuances of ‘quasi-monies’ under the form of tax
anticipation scrips and small denomination bonds or warrants is under-investigated.

Monetary federalism as a concept 89
Nevertheless, three cases are well documented: the United States during the colonial and postcolonial periods before the Philadelphia Convention (Ferguson 1969,
1983; Schweitzer 1989; Grubb 2003, 2005, 2012), the United States during the crisis of the 1930s (Elvins 2010; Gatch 2012), and Argentina during the convertibility
crisis of the dollarised peso from 2001 to 2003 (Argañaraz et al. 2003; Chelala
2003; DNCP 2003; Licari et al. 2003; Schvarzer and Finkelstein 2003; Feliz 2004;
Sbatella 2004; Colliac 2005; Douthwaite 2005; Théret and Zanabria 2007). In theUSA, the usual practice of issuance of IOUs in order to finance their unbalanced
budget by some US federated States, like California, cannot be considered as amonetary practice since these IOUs do not circulate as paper money. In Argentina,
to the contrary, issuances of quasi-monies were not the only seen in 2001–2003 buthave been recurrent since the fall of the last military dictatorship in 1984.
Nevertheless, issuances of provincial fiscal paper monies in Argentina in theform of tax anticipation scrips (generally called bonds or letters of debt settlement), are noticed by economists only in times of intense social stress and politicalcrises, and, most of the time, these quasi-monies are considered exclusively as
emergency monies and not further investigated. This supposed emergency character is nothing but the outcome of a normative prejudice regarding what constitutesa ‘normal’ state of monetary order, which implies that the federal State (or an
independent central monetary power) has to be fully sovereign in public monetary
matters, even if the polity is officially organised in accordance with federalist
principles (Helleiner 2003). So provincial States’ currencies are mostly visible
to official actors only during periods of emergency, and, as soon as crises are
overcome, they are outlawed and/or forgotten. When they appear to be significant
for the macroeconomy, they are eliminated or redeemed by the central power insearch of ‘return to normality’.
Consequently, they are thought to be politically unacceptable and the empirical evidence that under certain conditions they have been (and therefore could be)
successful in resolving the issues of balancing public finance and promoting local
economic development is not taken into account and integrated into monetary
theory. Thus, what Loren Gatch writes about the US municipal tax anticipation
scrips of the 1930s, holds for the provincial monies of Argentina:

Taylor and Francis

Not for distribution

If the money-sovereignty nexus is constitutive of ‘monetary space’, then theimplied lessons of the historical experience with tax anticipation scrip will
come from answers to political questions about the powers and autonomy oflocal governments, and not to economic questions about the putative benefitsof local currencies . . . For us to take cognizance of the significance of local
currency, and to revive public consciousness of its potential in our present day,requires us to appreciate those historical moments when local currency, despite
its success, disappeared as an expression of local power. (. . .) From the broader
perspective of American monetary history, the proliferation of local currencies
during the 1930s appears as an anomalous development in the progressive centralisation of monetary power and authority in Washington D.C.
(Gatch 2012, 33).

90

Bruno Théret

Farley Grubb (2003, 2005, 2012), following Lester (1970 [1939]), Ferguson(1956, 1983) and Schweitzer (1989), draws similar conclusions in his works onfiscal monies of the North American Colonies and then States after the ‘Articles
of Confederation’. Monetary systems backed by public tax paying powers havenot been recurrently outlawed because they are economically inefficient but
because their supporters have been regularly defeated in the political arena bycoalitions between (and sometimes merging of) private financial interests andpolitically dominant ruling classes (Beard 1913; Ferguson 1969; Holton 2005).
In fact, economic arguments legitimising the political devaluation of tax backed
monies in favour of private fractional reserve credit money issued by commercial
banks are, as stated by Richard Lester, nothing more than ‘economic theology’
that we need to overcome:‘Above all, today we need some of the intelligent scepticism that our colonial
forefathers had towards the financial dogma of the day. They did not hesitate to challenge the existing economic theology or to engage in intelligent
experimentation’(Lester 1939–1970, 307).
Economic theology indeed is not limited to the United States; it is also reigningin Argentina as an internal report of the Argentinian Ministry of Economy and
Finance (DNCP, 2003) testifies. This report referred to the 2003 federal redemption of the provincial quasi-monies issued by about 16 provinces in the period
1999–2002 and admitted that complementarity between public monies – national
and provincial – was perfectly viable, since they had distinct spatial spheres ofcirculation. Nevertheless, the authors considered that it was not ‘optimal’, since
optimality required the union of the monetary power in order to resolve the two
problems of monetary plurality: externality and uncertainty. But this reference
to optimality is purely theological; it is sustained neither by general empiricalevidence (Financial History Review 2008) nor by evidence in this particular case.
For, if provincial monies expanded in 2001, as we shall see below, it was in fact
because the federal monetary policy had produced strong negative externalities
and increased uncertainty to the point of destroying confidence and trust in thewhole monetary system, and therefore, the credibility of the centralised monetary power. Moreover, provincial monies had produced positive externalities andreduced uncertainty when they were successfully managed, as has been the case inmany provinces and for the largest amount of money issued (Greco 2001; Théret
and Zanabria 2007, 2009).
In this context, the issuance by the province of Tucuman of quasi-money called
bocade that lasted over 17 years (1985–2003) is important. Although it concernsa small North Western peripheral province of Argentina, this ‘experiment’ proves
two main things: that provincial tax anticipation small denomination bonds are notnecessarily of an emergency nature, and that they do not compete with national
money but are complementary to it.
The Tucuman CC has been ironically called ‘funny tucuman dollar’ by the
Financial Times (Pilling 1996), maintaining the view that provincial currencies

Taylor and Francis

Not for distribution

Monetary federalism as a concept 91
were only answers to crises. In a ‘normal’ state of affairs the Argentinian monetary system shows long-term unresolved contradictions that render it structurally
unstable. That would mean that the Argentinian ‘standard state’ of centralisation and commodification of money issuance is not an optimal steady state.
Moreover, unlike the cases of late-comers in provincial CCs issuances such as
Buenos Aires (patacon) and Entre Rios (federal), it is possible to assume thatthe 2001 crisis of the convertibility regime had not given life but death to the
Tucuman currency. The federal government and most of provincial governments
themselves, under the pressure of the IMF, took advantage of the failure of someof these CCs, due to over-issuance and of the common view of their emergency
character, to redeem them all together and to re-centralise the whole system in
Buenos Aires. Thus, it is more accurate to say that during the convertible peso’s
crisis (2001–2003), the Tucuman bocade which was circulating as a CC for 16
years had been constrained to become a substitute to the peso that was scarce atthe national and provincial levels. Therefore, it was over-issued and lost a partof the trust put in it due to growing difficulties to ensure its convertibility at parwith the national legal tender that was in short supply. That did not imply thatthe bocade was condemned to disappear. As shown in Chapter 8 in this volume, it had already successfully overcome the confrontation of deep crises of
the national monetary system, notably hyper-inflation. Moreover, if the bocade’s
exchange rate in pesos deteriorated in the market during the crisis, it neverthelesswas maintained under control, as shown in Figure 5.1 where the bocade appears
as good money as the lecor, issued by the province of Cordoba, usually considered a successful experiment (Luzzi 2012).

Taylor and Francis

Not for distribution

Figure 5.1 Exchange rates in peso of seven provincial monies
Source: BCRA, 2003.

92

Bruno Théret

Finally, if the bocade disappeared in 2003, it was not an outcome of its endogenous economic functioning, but because it did not benefit anymore from thebenign neglect of the central and international financial powers, and became, withthe whole set of ‘quasi-monies’, a stake in the negotiation between the federal
Government and the IMF which was now pre-occupied by them:
Quasi-money issuance by provincial governments in 2002 amounted to Arg$
3.2 billion . . . and should be compensated by orderly financing as provided
in the 2002 bilateral agreements. The main drawbacks of quasi-monies are:they erode the ability of the central bank to conduct monetary policy . . .
they complicate the commitment to fiscal management and do not alter thebudget constraint; they contribute to the growth of the informal economy andto tax evasion . . . they have an adverse effect on inter-provincial trade . . .
[since] they generate important trade diversion flows, promoting regional
inefficiencies and tend to regionalise provincial economies at the expense of
efficiency-enhancing nationwide integration.
(IMF 2003, 34)
Issuance of provincial quasi-monies can be an efficient response to provincial
structural problems of shortage of national currency and credit money, which
are the outcomes of centralised fiscal and monetary federal institutions and policies. It also clearly shows that provincial CCs are not competing and driving thenational legal tender out of circulation as a media of payment; they complement
them within the limits of the provincial economic spaces where they are accepted
as means of redemption of taxes and as such they are a clear expression of an
efficient monetary federalism. If a surplus of national legal tender currency isobserved in the local economy, the provincial money, whose use in transactions
is spatially confined, would return to the provincial treasury and be destroyed orstored in its coffers.
Another interesting feature of the Tucuman bocade, which explains its longevity, has been its resilience in a period of monetary instability at the national
level (Figure 5.2). It was firstly conceived and issued immediately after the endof the military dictatorship (1976–1983), and at the same time as the new national
money called austral, created in 1985 to reduce the high inflation bequeathed by
the military power. This new national money was prey to hyper-inflation and was
replaced in 1992 by another money – the convertible peso – issued under a regimeof currency board (strict convertibility at par with the US dollar). This time, the
new regime led to a deep recession, and finally to a general political and social
crisis in 2001 that ended with a large devaluation of the peso and a new regime of‘pesification’ (de-dollarisation) at the beginning of 2002. Remarkably, the bocade
muddled through this very volatile period with success. In the words of its founding father, Renzo Cirnigliaro, until 2002 the bocade had proven to be ‘difficult
to kill’. During the 17 years it lived, it had been strongly supported by ‘the local
businessmen (who) recognised that it allowed them to work peacefully’, and had‘resisted’ hyper-inflation, convertibility, adjustments of the IMF and the Federal
Government, counterfeiting, over-issuing, and even the:Taylor and Francis

Not for distribution

Monetary federalism as a concept 93

Figure 5.2 Argentinian consumer price index (1943 to 2008)
Source: Vitelli, 1986.

Taylor and Francis[a]ttack that changed a credit without interest from the people into a credit athigh rates from the banks and the markets. And finally, it twisted the governments’ arms, since after 16 years of critics towards provincial monies, it had
to issue a younger sister of them, the lecop.
(Cirnigliaro 2004, 125)

Not for distribution

This resilience at the provincial level compared with the recurrent monetary chaosat the national level is paradoxical. On one side, the bocade found its viability andefficiency upon strict convertibility with the national money. On the other side,
it was an autonomous device since it had a peripheral character vis-à-vis the central monetary system to which it could freely adapt. Its autonomy was therefore
independence within inter-dependence, a good definition for complementarity.
Since independence within inter-dependence is also at the core of the concept offederalism, it justifies tackling complementarity caused by locality in terms ofmonetary federalism.
Let’s now examine this point more precisely by adopting a long run perspective
and recalling the importance, recurrence and causes of provincial fiscal monies
issuance in the history of Argentina as an independent federal Republic.

5.3 The four waves of issuance of provincial CCs in Argentina
since 1890
Since the origin of Argentina as an independent country in 1810, monetary plurality, tax-based money and problems of convertibility of paper money have marked

94

Bruno Théretits history (Grinfeld 1910; Bordo and Vegh 2002; Irigoin 2000, 2003). Even after
the definitive foundation of the Federation in 1861, there have been issuances ofprovincial monies. In a previous paper we mentioned traces of provincial emissions in 1876, 1881, 1883 and 1885 (Theret and Zanabria 2007, 22), and more
recently, we found numismatic traces of provincial paper money issued by theprovince of Buenos Aires in 1867 and 1869. Since the end of the 1880s to date, we
can distinguish four waves of provincial issuances of quasi-monies.2
5.3.1 The first ‘peso moneda nacional wave’ (1890–1933)
The first wave took place in the golden age of the Argentinian agro-export-led
growth and its crisis, between 1890 (the year of establishment of a currencyboard in order to ensure the convertibility of the national paper money) and
1933. We will call it the ‘peso moneda nacional’ wave with seven provinces
mainly of the North Western and the Western parts of the country issuing tax
backed quasi-monies more or less sporadically (Table 5.1). Further researchwould likely divide this wave in two periods, before and since the first world
war, as convertibility with gold was suspended in 1914 (restored only between
1927 and 1929) (Bordo and Vegh 2002). Nonetheless, this wave holds its unityfrom the fact that issuances of provincial monies were made on the same peso(m$n) standard.
As displayed in Table 5.1, the North Western provinces (Jujuy, Salta andTucuman) were more active (Figure 5.3). These provinces were also at the forefront in the second and third waves. But between 1934 and 1984, 50 years ofmilitary and/or authoritarian rule, and import-substitution-led growth regime
associated with a central bank (created in 1935) ‘absolutely centralised’ (Olivera
1992), we find no trace of any issuance of provincial money other than one ofcertificates of debt settlement by the province of Tucuman in 1965–1966, whichwere not anonymous and looked as transferable checks.

Taylor and Francis

Not for distribution

Table 5.1 Issuances of provincial quasi-monies between 1891 and 1933
Unit of accountpeso moneda nacional m$n (1881–1969)

Provinces concerned
Corrientes
Jujuy
Mendoza
Salta
San JuanSanta Fé
Santiago del Estero
TucumanYears of issue of provincial monies
1891
1903 – 1905 – 1928 – 1932
1892 – 1908
1891 – 1916 – 1921 – 1927 – 1932 – 1933
1894 – 1896 – 1899 – 1909 – 1923 (4% interest)
1890
1891
1900 – 1915 – 1917

Monetary federalism as a concept 95

Taylor and Francis

Not for distribution
Figure 5.3 One example from Jujuy (1932)

5.3.2 The second ‘austral wave’ (1984–1991)
Only around the end of the last military dictatorship in 1984 were there newissuances in four North Western provinces, starting with Salta in 1984, La
Rioja and Tucuman in 1985, and Jujuy in 1986. In the World Bank Report of1990 on Provincial Government Finance, five (including Catamarca) and not
four provinces are named issuing money in this period (World Bank 1990, 77).
Oppenheimer (1985) and Cirnigliaro (2004, 126) also mention Catamarca as oneof the North Western provinces having a possible monetary regional space where
quasi-monies from every province could have circulated at par. But we havefound no numismatic traces of issuance in Catamarca before 1993.

96

Bruno ThéretThis second wave that lasted until 1991 will be called the ‘austral wave’ since
it coincides with the replacement of the peso in 1985 by the austral in which thequasi-monies were convertible at par, thanks to the institution of currency boards
managed by the public banks of each province. Only the first issue of the bocadeof Salta preceded the ‘austral plan’ and was initially denominated in peso argentino (1000 $A = 1 austral), and the first bills had to be surcharged by a stamp tocirculate on the basis of the austral standard (Figure 5.4).
The monies issued during these years, called bocade in Salta, Tucuman and
La Rioja, and titulo publico al portador, usually called publico in Jujuy (andCatamarca in 1993) (Figure 5.5), were very similar in the four provinces. They
followed the Salta model, especially the Tucuman bond which was originally acopy of the Salta one (Del Rey and Orive 1986; Cerro 1988).
This speaks of a particularly resilient North Western sub-type of Argentinian
provincial bonds. The first striking difference is that bocades, as well as publicos,
were the only quasi-monies emerging and maintaining themselves in the austral
period of high and then hyper-inflation. Another peculiarity is that while patacones, lecors, cecacors, federales, and other more recent bonds bore interest, the1980s generation of bonds were non-interest-bearing assets although, at least in
the case of Tucuman, an interest rate was considered in their legal origin but was

Taylor and Francis

Not for distribution

Figure 5.4 The Salta’s bocade issued in 1984 in ‘peso argentino’Monetary federalism as a concept 97

Taylor and Francis

Not for distribution

Figure 5.5 The publico of Jujuy issued in 1986

never implemented. Like the federal lecop issued in 2001, they were pure fiscal
tender currencies anchored in the national money. It is no coincidence that theseNorth Western provinces represent the older part of Argentina where provincial
belonging is an important part of individual identity. It reveals the outstanding
political nature of the region’s CCs: financial market incentives for building trustand confidence in them were excluded since the beginning. These incentives were
to be found in lotteries, a traditional fiscal instrument of states.
Finally, another possible important specificity of these CCs is the political factthat their convertibility at par, which was not easy to maintain especially in timeof high inflation, was de facto and sometimes explicitly defended by the local
business community even when the local political ruling classes were in a hurry
to come back to ‘normality’.
5.3.3 The third ‘dollarised peso wave’ (1992–2000) and the fourth:‘convertibility crisis and de-dollarised peso wave’ (2001–2003)
After the ‘convertibility plan’ by which the country moved out of hyper-inflationin 1992, it is usually considered that there were no more quasi-monies issued by

98

Bruno Théretprovincial governments. Researchers and the general public only remember the
successful issue of the cecor by the government of the Cordoba province in 1995
and link it to the ‘Tequila’ crisis. However, while Salta stopped its issuance ofprovincial money, Tucuman (continuously), Jujuy (with an interruption between
1992 and 1995), and La Rioja (with an interruption between 1997 and 2001) carried on issuing bocade or publico throughout the decade.
Moreover, other provinces entered the game: Catamarca in 1993 (Figure 5.6);
Cordoba (lecor), Formosa (boncafor), Mendoza (petrobono/petrom), Rio Negro(cedern) (Figure 5.7), and San Juan (crefi/huarpes) (Figure 5.8) in 1995, Missiones(cemis) in 1996, and Corrientes (cecacor) in 1999. Thus 11 provinces had alreadystarted to issue small denomination bonds in convertible peso before 2001 and thegreat crisis of the national currency board regime. Thus, it is necessary to distinguish between a third wave of provincial issuance between 1992 and 2000 and afourth wave starting in 2001.
We name the third wave of 11 provinces, forgotten by both the scientific andjournalistic literature, the ‘dollarised peso’ wave. The fourth and last wave starting in 2001 concerns four more provinces that were new-comers in the movement:
Buenos Aires (with the patacon), Chaco (with the quebracho) (Figure 5.9) and
Entre Rios (with the federal) in 2001, and San Luis (with the sanluis) in 2002.

Taylor and Francis

Not for distribution

Figure 5.6 The publico of Catamarca issued in 1993

Taylor and Francis

Figure 5.7 The cedern of Rio Negro issued in 1995

Not for distribution

Figure 5.8 The crefi of San Juan issued in 1995

100

Bruno Théret

Taylor and Francis

Not for distribution

Figure 5.9 The quebracho of Chaco issued in 2001

We name this last wave (2001–2003) the ‘convertibility crisis and de-dollarised
peso’ wave.
As provinces of the ‘dollarised peso’ wave continued to issue monies until
2003, the period of the so-called convertibility crisis (2001–2003), comprising 15
provinces (over 23 of the whole Argentina), included the largest. Some sources(for instance Licari et al. 2003; Douthwaite 2005) also mention two other provinces of Patagonia with cuasimonedas in 2003: Chubut (petrobono) and Tierradel Fuego (letras). Thus, if these emissions were to be dated from 1995 as forthe petrobono of Rio Negro, it would push the number of provinces belonging to
the third and fourth waves to 13 and 6 provinces respectively, 17 provinces being
monetarily active in 2002–2003 (Jujuy did not issue its own money during the lastwave but used patacones from Buenos Aires with which it was possible to pay
federal taxes).
To these provincial monies, we must still add at least one municipality belonging to the province of Santiago del Estero and five from the province of Cordoba
that have issued quasi-monies, four of them in the convertible peso wave (1995),
and one in 2005.

Monetary federalism as a concept 101
Eventually, in 2001 the federal government itself started to issue a large amountof quasi-money, called lecop (Figure 5.10). The lecop was inter-provincial money(not convertible to dollars) that was put into circulation through the system offederal fiscal transfers to provinces and municipalities and was a legal tender for
payment of federal taxes.
The total issuance of provincial and inter-provincial small denomination bonds
in 2002 was nearly 50% of the monetary base (Douthwaite 2005; Théret andZanabria 2007, 28). That year the central bank used a new enlarged concept ofthe monetary base to include them (BCRA 2002, 39). But standing back from thisshort period of open crisis and taking into account the previous waves, provincial
issuances of tax anticipation small denomination currencies cannot be reduced tothis episode.
Another important characteristic of these monetary experiments is their diversity. There have been a wide variety of devices associated with the diversity ofpolitical and economic situations in the provinces. Some provinces mobilised
local currency boards to keep their CCs at parity (Cordoba, Entre Rios, Tucuman),
while others did not. Some benefited from larger tax base than others (especiallywhen the CCs could be used in payment of national taxes and were circulating in
the equalisation transfers circuit like the patacon of Buenos Aires). Some could

Taylor and Francis

Not for distribution

Figure 5.10 The federal interprovincial quasi-money

102

Bruno Théretuse special public resources to back their bonds (oil royalties in Mendoza, Chubut
and Rio Negro) (Figure 5.11), and one (the san luis, issued at the end of 2002) was
indexed to a basket of five national currencies (Argentinian peso, Brazilian real,
Chilean peso, US dollar and the euro) (Boletín Oficial 2002).
Political strategies for building trust, confidence and credibility were also idiosyncratic. Some succeeded and some failed (Théret and Zanabria 2007 and 2009;
Figure 5.12). Few things are known in detail on most of these experiments since
historians were not interested in recording these histories until now. Nevertheless,we have sufficient data to understand and explain why issuances of provincial
small denomination bonds have been so recurrent in Argentina.

5.4 Why such a historical recurrence? Argentinian fiscal
federalism and shortages of currency and credit at theprovincial level
In our view, this historical recurrence can be explained by the specific federalist
structure of the Argentinian political and fiscal systems. Three elements of thisstructure must be outlined: first, the form of fiscal federalism; second, the monetary regime; and, third, the constitutional regime.

Taylor and Francis

Not for distribution

Figure 5.11 The petrom issued in Mendoza in 2002

Monetary federalism as a concept 103

Taylor and Francis

Not for distribution

Figure 5.12 The san luis issued in 2002

5.4.1 Fiscal federalism and currency shortage
As it has been recognised by the World Bank, ‘understanding the transfers fromthe national to the provincial governments is key to understanding provincial
finance in Argentina’ (World Bank 1990, vol. 1, 13). The country is characterised
by strong dependence of provincial budgets on federal transfers coupled with alarge federal discretion in the distribution of funds.
Argentinian provinces, with the exception of the Autonomous City of Buenos
Aires (the national), depend hugely on federal transfers, with variations acrosstime and space. The federal government collects around 85% of all taxes (including social contributions), while spending is decentralised (the provincial andmunicipal levels are responsible for around 45% of public expenses). The large
and wealthiest provinces of Buenos Aires, Santa Fé, Cordoba and Mendoza areless dependent (their own revenues representing around 30–35% of their total
revenues) than the poorer and peripheral ones (for instance, autonomous revenues are worth less than 20% in the North Western provinces of Jujuy, Salta, andTucuman, and 10% in Catamarca and La Rioja) (Saiegh and Tommasi 2000, 69).

104

Bruno ThéretThis large vertical deficit in the tax primary distribution is structural; it has existed
since the outset of the Republic, for Buenos Aires has always benefited from a monopoly on customs duties that were the main source of the tax revenues backing its fiatmoney issuances (Irigoin 2003). These duties are still outside the revenue-sharing
scheme. Moreover, as illustrated in Figure 5.13 for Tucuman, the vertical deficit has
been reinforced in the 1970s and 1980s by unilateral devolutions of social expenses
without transfers of the corresponding revenues, a policy initiated by the last military
dictatorship but carried on until 1993 (Eaton 2001; Falletti 2010; Théret 2015).
In most federations federal tax transfers are of three kinds: general revenue
sharing, earmarked transfers and purely discretionary grants. In Argentina theboundaries between these categories are blurred. Even when rules of automatic
revenue sharing and/or earmarking are fixed, these are either renegotiated or
bypassed through bilateral negotiations between the federal President and provincial governors. Before the updated institutionalisation of revenue-sharing in
the Act of Co-participacion of 1988, bypassing federal rules was dominant; afterwards, these rules were renegotiated (Bonvecchi 2005).
For these reasons, provinces suffer great instability and uncertainty concerning
the true amount of federal money that they are going to receive annually, monthly
or daily. Permanent discussions about the effective amounts of federal engagements are coupled with federal discretion related to the agenda of payments, sincefund distribution is often conditioned to political support to the President’s initiatives in Congress (Bernadou 2009). This uncertainty increases when the federal
government is itself prey to a fiscal crisis.

Taylor and Francis

Not for distribution

Figure 5.13 Share of provincial autonomous revenues in Tucuman total spending
Sources: Yanez et al ii (2000), Macian de Barbieri et al ii (1990 and 2002).

Monetary federalism as a concept 105
Moreover, money shortage is a daily problem for provinces since transfer payments tend to feed provincial treasuries at irregular pace. In fact, federal transfersand devolution of public expenses to provinces are often the primary objects ofbudget cuts. The Argentinian economy knows a high degree of volatility andstrong dependence vis-à-vis external shocks, so federal and then provincial fiscal
crises are expected to recur and always feared. It is no surprise to see paymentsof wages to public employees and/or debts vis-à-vis small suppliers delayed bymonths in Argentina. It is also not surprising to see these waiting periods correlatewith social unrest and emergency situations where provincial governments haveto borrow money from banks and/or financial markets, in order to finance current expenses. The dependence of provincial governments on federal resources
explains that their public debt is primarily a floating debt funded at high cost.
5.4.2 ‘Absolute centralisation’ of the monetary system, shortage andhigh cost of credit
Another element in the conundrum of provincial public finance is the shortage
and correlated high cost of credit for poor, peripheral or impoverished provinces.
Their economic dependence towards the federal government is not limited to fiscal transfers, but is extended to federal monetary policy. The monetary policy is
hyper-centralised, and the monetary regime is managed exclusively in relation to
the exchange rate regime and macro-economic stability, so the economic interestsof the peripheral provinces are not taken into account. This exogenous constraint
on provincial finance and local economic development varies and depends on thetype of management of monetary policy and the institutional design of the financial system. In the austral period, provinces were assisted by a provincial publicbank through which they could have access to short-term credit that these banks
could rediscount at the central bank. Through this kind of financing, governments
were transferring their structural problem of liquidity to their banks, and theconsolidated accounts of the provincial public sector were not improved. So thedevice only allowed for a better short-term smoothing of public debt payments.
In the dollarised peso period, the central bank (BCRA) was transformed into akind of currency board and forbidden to issue credit money. Moreover, after 1995,
most of the provincial banks were privatised and not inclined anymore to directly
finance provincial deficits at low cost, and hard budget constraints were put inplace. Provinces had to go to more costly financial markets and, for that, could
not do anything apart from backing their loans on their revenue-sharing resources.
Provincial debt burden thus climbed faster than ever, and their capacity to pay forcurrent expenses declined. This occurred in Tucuman between 1996 and 1999
when the governor wanted to get rid of the bocade (see Chapter 8).
Shortage and high cost of credit also have a second impact on provincial
finance, one related to the difficulty of funding local economic development and,
consequently, the enlargement of the provincial tax base. Julio Olivera (1992)
links this problem to the ‘absolute centralisation’ of the BCRA in Argentina. For
Olivera, an economist internationally known for the distinction between active

Taylor and Francis

Not for distribution

106

Bruno Théretand passive money, on the ‘active’ side of monetary supply, the ‘monetary basemultiplier’ changes according to the provinces because the growth of the monetarybase is unequally distributed among them, an inequality reinforced by the diversity of the economic situations of the provinces. Thus, depending on a province’s
situation of unemployment or full employment, growth of the monetary supply
would stimulate either production or inflation. Moreover, depending on the presence or absence of regional, active and wide monetary and financial markets, themechanisms of monetary transmission will either stimulate the productive economy or be limited to the financial sector. On the ‘passive’ side of the monetarydemand stimulated by changes in prices and wages, Olivera argues that there isalso, even if employment rates are equal, a regional differentiation of the capacity of monetary institutions to respond to demand if they are spatially unequallydistributed. Therefore, ‘a rational monetary policy must take into account regional
differences’, and ‘the best way to do so is to decentralise the Central Bank’, giventhat ‘the optimal degree of decentralisation of the Central Bank is not the samefor all countries and depends on the size of the territory, of the regional diversity,of the financial organisation, and of the types of monetary policies implemented(Olivera, 1992, 9).
After examination of different actual types of central banks, Olivera statesthat the Argentinian one ‘functions as a totally centralised organism’ despite
its federal juridical statute that should constrain it to take a decentralised form
(ibid., 14). Thus, instead of its ‘absolute centralisation’ that is at odds withthe federal constitution of the country, the BCRA should be administratively
decentralised, according to ‘the size of the country and the magnitude of its
inter-regional differences’ (ibid.).
From this analysis, it can be deducted that Argentinian peripheral provinces
are structurally confronted by monetary policies and geographical distribution ofmonetary institutions that do not fit their economic needs and the stabilisationof their public finance. We better understand why local business groups havebeen generally supportive of ‘currency finance’ (Ferguson 1956) that provincial
governments in great shortage of national currency and credit have regularly
relied on.

Taylor and Francis

Not for distribution

5.4.3 States of political emergency and provincial states’ initiative toissue local currencies
There is a broad set of factors that compose the structural conundrum that is susceptible to develop in a vicious circle of cumulative and unsustainable provincial
indebtedness and bankruptcy, and that motivate the issuance of tax anticipation bonds of small denominations circulating as paper money. These factors
include the shortage of national money from above, shortage of market moneyfrom below, public expenses composed of inelastic social expenses (education,
health, security), uncertainty and discretion of the federal delivery of tax transfers,
autonomous tax revenues difficult to expand due to weak domestic markets andproduction deprived of an adequate access to credit money and investment.

Monetary federalism as a concept 107
How do provincial governments issue paper money despite perceptions that it
is forbidden by the federal constitution (Gallo 1988)? Why do such paper monies persist during long periods without decisions of the federal Supreme Courtor modifications of the constitution? Even federal syndicates designated by thefederal executive to substitute temporarily failing or corrupt governors did not stopthese monetary experiments of provincial state money when they were in office(Théret and Zanabria 2007). The usual answer to these questions is that it wastolerated because it concerned small amounts of money. This argument can makesense to economists and international monetary authorities like IMF and WorldBank (World Bank 1990, 77–78; 1996, i, 2, 8, 11) but does not fit with the fact thatthe federal state was actively participating in the issuances at the provincial level
and at the national level during the crisis of the dollarised peso: it doesn’t explain
why the quasi-money lecop was issued by the federal Finance Minister, Domingo
Cavallo, initiator of the 1992 convertibility plan and back in office in 2001 after
having urged the governor of the province of Buenos Aires to issue the patacon.
Thus, it seems more accurate to take into consideration three other arguments.
Firstly, as soon as it was supported by the provincial legislative and juridical(Supreme Court) powers, the power of the provincial executives to infringe upona federal constitution that required the authorisation of the national Congress toissue money was legitimised by the character of emergency and urgency of thesituations in which the quasi-monies emerged.
Secondly, the constitution contemplates only two forms of money, coins andpaper banknotes. Direct printing by the Treasury of paper money backed by taxes
is not explicitly considered. Thus, the interpretation of provincial currencies asmoney that is not legally legitimate is not as straight forward as it seems a priori.
The third argument assumes that the federal behaviour of benign neglect or
active complicity can be understood more easily if we take into account thatthe provincial quasi-monies are not in competition with the national money but
complementary to it. As soon as we consider that provincial issuances of small
denomination bonds do not ‘restrict’ the circulation of federal currency but rather
complement it in politically delimited spaces, they can be perceived positively byfederal executives whose monetary policy is therefore not threatened but rather
improved. That’s precisely what occurred when ‘the money supply in pesos
dropped from $15,056 million to $10,960 million during 2001’, and ‘the total
issue of quasi currencies, $2,900 million, replaced over half the loss of the money
supply in the latter part of the year’ (Douthwaite 2005, 21).
The situation is different with issuances of credit money by provincial states
through their banks that may be partly re-discounted at the central bank. In thatcase, the money issued is of the same nature as federal money and may circulate
in the whole territory of the federation. Generally, there is confusion between bothforms of money, but the federal tolerance of provincial scrips seems to express
that federal politicians are conscious of the difference between the two instruments. The federal attitude means that the bocade, publico, federal, patacon andother provincial scrips were testimony of a need for monetary plurality and complementarity due to the overlapping geographical tiers of public payments circuits.

Taylor and Francis

Not for distribution

108

Bruno Théret

5.5 Conclusion
The Argentinian experiences of monetary federalism related above display acomplementarity between a federal legal tender and provincial scrip. Richard
Douthwaite, in his report for the Club of Rome in 2005, already had the intuition
that these experiments were a source of inspiration in tackling the issue of thecurrent eurozone crisis, since they point out a way towards a monetary systemthat would overcome this crisis without falling into the deadlocks of either thepresent generalised austerity policies or breakdown of the monetary union (Théret
and Kalinowski 2012; Théret 2013a, 2013b; Théret, Coutrot and Kalinowski 2015).
Such a federal monetary system should combine an all-purpose federal currency
and unit of account – the current euro, circulating across the whole European
Union and abroad – and the member-states-issued CCs backed by their own
fiscal resources and denominated in euros as the federal unit of account andexclusive legal tender.
Monetary federalism is thus designing a way out of the prevailing dichotomic debate between carrying on with a single monetary policy combined withfiscal austerity policies or coming back to single national monies combinedwith competitive devaluations, both like-minded ‘single currency’. Promoting
monetary federalism in the EU, inspired by the most recent Argentinian experiences, and also by the successful tax anticipation scrips of the US cities at thestart of the 1930s, as well as by the currency finance of the American colonies
and confederated states, would allow the preservation of the euro as a common
currency and unit of account without depriving member states of issuing fiscal CCs circulating within their borders and maintained at par with the euro. It
would be both a logical and historically founded way of ‘reinventing monies in
Europe’ (Dodd 2005).
A truly federal monetary system would be efficient and resilient, if national
governments can build trust and confidence in their CCs. This is shown in Chapter
8 where we come back with more details of the case of the Tucuman bocade. By
examining precisely how it functioned and evolved, we demonstrate that this CC
has been useful and successful at both reducing the province’s public debt andpushing its economic growth contra-cyclically without creating structural inflation and/or the CC’s depreciation. Moreover, this outcome was obtained despite
unfavourable fiscal conditions to sustain the CC’s parity vis-à-vis federal money
which was either unstable or extremely rigid. Thus, if plunged by its creditors
into a desperate austerity policy that is supposed to reduce its public debt but isin fact increasing it, an EU member-state would engage in a Tucuman type ofstrategy. It would have easier conditions than Tucuman to succeed, since it would
have the full control of its fiscal policy and would suffer a softened convertibility
constraint on the CC. Moreover, to give legitimacy to what could be a unilateralinnovation for improving the living conditions of its population, the member-state
could mobilise the principles of subsidiarity and variable geometry which are stillat the core of the EU constitution.

Taylor and Francis

Not for distribution

Monetary federalism as a concept 109

Notes
1 This research was developed in the framework of international programmes on complementarity among monies (2009–2013). The author thanks Akinobu Kuroda (Universityof Tokyo) for the strong incentives that resulted from his invitation to participate in these
programmes. He thanks also Miguel Zanabria (National University of Quilmes) and José
Alberto Sbatella (National University of La Plata) for having introduced him in 2001 to
the Argentinian field of territorial CCs, and for further collaborations between 2001 and2009. Thanks also to participants in the two International Workshops De-teleologising
History of Money and its Theory in Ecole Normale Supérieure, Paris, December
2010, and University of Tokyo, February 2012, and Conferences at University of Paris
Pantheon-Sorbonne, July 2012, Yale University, September 2012, City University of
London, February 2013, and Erasmus University, The Hague, June 2013, where previous drafts of this chapter were presented.
2 The main source may contain some mistakes and is incomplete. Other numismaticand economic sources are Del Rey and Orive 1986; Greco 2001 (quoting José
Reissig 1990, ‘Bonds that brought a boom’, New Economics 20, Winter); Schvarzer
and Finkelstein 2003; Colantonio 2010. For complementary sources, see Théret
and Zanabria 2007, and Chapter 8 of this book. National and provincial newspapers
have also been consulted and interviews made in the City of Buenos Aires, theprovinces of Buenos Aires, Entre Rios, Cordoba, Mendoza and Tucuman from 2001
to 2013.

References
Argañaraz, N., Capello, M. and Garzon, J. 2003. ‘Cuasi-monedas provinciales: un análisis de su existencla y actual rescate’. Documentos de Trabajo, Serie Politica Fiscal.
Cordoba, Argentina: IERAL, Fundação Mediteranea, June.
Arnsperger, C. 2011. ‘Monetary federalism and the recovery of Swiss sovereignty:
enhancing Switzerland’s financial autonomy through a cantonal system of complementary currencies’. Paper presented at the ECSA-Switzerland Conference, ‘Aspekteder
Souveränitätinden Beziehungender Schweizzur Europäischen Union’, Basel,
Switzerland, December 9.
BCRA. 2002. Boletin monetario y financiero. Edicion anual. Buenos Aires: Banco Central
de la Republica Argentina.
BCRA. 2003. Informe monetario mensual. Buenos Aires: Banco Central de la Republica
Argentina. Febrero.
Beard, C. A. 1913–1921. An Economic Interpretation of the Constitution of the UnitedStates. New York: MacMillan.
Bernadou, V. 2009. ‘Nestor Kirchner: du président ‘sans pouvoirs’ au ‘chef hégémonique’,Critique internationale 43: 89–107.
Blanc, J. 2006. ‘Karl Polanyi et les monnaies modernes: un réexamen’. In Contributions
à une sociologie des conduites économiques, edited by Gilles Lazuech and Pascale
Moulévrier, 51–66. Paris: L’Harmattan.
Boletín Oficial (9 de Octubre de 2002), Autorizase al poder ejecutivo la emisión de títulos
convertibles al portador en la provincia de San Luis. www.saij.gob.ar/legislacion/leysan_luis-5338-autorizase_al_poder_ejecutivo.htm
Bonvecchi, A. 2005. ‘Les aspects politiques du fédéralisme budgétaire argentin à l’aune
des négociations fiscales fédérales’, Problèmes d’Amérique latine 56: 129–152.

Taylor and Francis

Not for distribution

110

Bruno Théret

Bordo, M., and Vegh, C. 2002. ‘What if Alexander Hamilton had been Argentinian? A
comparison of the early monetary experiences of Argentina and the United States’,
Journal of Monetary Economics 49(3): 459–494.
Cerro, E. R. 1988. ‘Estudio Financiero del bono emitido por el Gobierno de la Provincia
de Tucuman’, in Anales de la Asociacion de Economia Politica, XXIII Reunion Anual,
La Plata.
Chelala, S. 2003. ‘La utilizacion de terceras monedas. El caso argentino’. April 9. www.
nodo50.org/cubasigloXXI/congreso/chelala_10abr03.pdf
Cirnigliaro, R. 2004. Tucuman – Argentina. El festin de los caranchos. San Miguel deTucuman, Argentina: Editorial Kerigma.
Colantonio, E. 2010. Bonos de emergencia de Argentina. 1985–2002. Buenos Aires:
Eduardo Colantonio Editor.
Colliac, S. 2005. ‘Monnaies parallèles provinciales et fédéralisme budgétaire en Argentine’,
Revue d’économie financière 81(4): 251–269.
Commons, J. R. 1934. Institutional Economics. New York: MacMillan.
Del Rey, E. C. and Orive, G. A. 1986. ‘Los bonos de cancelacion de deudas de la provincia
de Salta’. Published in 1989 in Finanzas Publicas y Desarollo Regional – Ensayos
en Honor de Horacio N. Miñana, edited by Luis Di Marco. Cordoba, Argentina:
Universidad Nacional de Córdoba, Dirección General de Publicaciones.
DNCP (Direccion Nacional de Coordination con las Provincias) – Grupo Deuda. 2003.
Cuasimonedas. Buenos Aires: Ministerio de Economia y Finanzas.
Dodd, N. 2005. ‘Reinventing monies in Europe’, Economy and Society 34(4): 558–583.
Douthwaite, R. 2005. ‘Why Europe needs regional currencies’. Report to the Club ofRome, March. www.feasta.org/documents/.../Austria_intro_cut.pdf.
Eaton, K. 2001. ‘Decentralisation and liberalisation: the history of revenue sharing inArgentina, 1934–1999’, Journal of Latin American Studies 33(1): 1–28.
Elvins, S. 2010. ‘Scrip, stores, and cash-strapped cities’, Journal of Historical Research inMarketing 2(1): 86–107.
Falletti, T. 2010. Decentralization and Subnational Politics in Latin America. New York:
Cambridge UP.
Feliz, M. 2004. ‘Teoria y practica de la pluralidad monetaria. Algunos elementos para elanalisis de la experiencia argentina reciente’, Economia, Teoria y Practica 21: 107–133.
Ferguson, E. J. 1956. ‘Currency finance: an interpretation of colonial monetary practices’,
The William and Mary Quaterly 10(2): 153–180.
Ferguson, E. J. 1969. ‘The nationalists of 1781–1783 and the economic interpretation of
the constitution’, The Journal of American History 56(2): 241–261.
Ferguson, E. J. 1983. ‘Political economy, public liberty, and the formation of the constitution’, The William and Mary Quaterly 40(3): 389–412.
Financial History Review. 2008. Special Issue on Complementarity among monies. 15(1):
7–91.
Gallo, R. 1988. ‘Serios problemas legales con las monedas norteñas.’ La Prensa, April 19.
Gatch, L. 2012. ‘Tax anticipation scrip as a form of local currency in the USA during the
1930s’, International Journal of Community Currency Research 16: 22–35.
Greco, T. H., Jr. 2001. Money. Understanding and Creating Alternatives to Legal Tender.
White River, VT: Chelsea Green Publishing Company.
Grégoriadis, N. 2007. ‘Un modèle simple de fédéralisme monétaire.’ Document du LEO,
January. Université d’Orléan.
Grinfeld, I. 1910. ‘Monetary experiences of the Argentine Republic’, Political Science
Quarterly 25(1): 103–122.

Taylor and Francis

Not for distribution

Monetary federalism as a concept 111
Grubb, F. 2003. ‘Creating the U.S. dollar currency union, 1748–1811: a quest for monetarystability or a usurpation of state sovereignty for personal gain?’ American Economic
Review 93(5): 1778–1798.
Grubb, F. 2005. ‘The U.S. Constitution and monetary powers: an analysis of the 1787 constitutional convention and how a constitutional transformation of the nation’s monetarysystem emerged’, NBER Working Paper 11783. www.nber.org/papers/w11783.pdf
Grubb, F. 2012. ‘Is paper money just paper money? Experimentation and local variationin the fiat paper monies issued by the colonial governments of British North America,
1690–1775’, NBER Working Paper 17997. www.nber.org/papers/w17997.pdf
Helleiner, E. 2003. The Making of National Money. Territorial Currencies in Historical
Perspective. Ithaca, NY: Cornell University Press.
Holton, W. 2005. ‘Did democray cause the depression that led to the Constitution?’ Journalof American History 92(2): 442–469.
IMF. 2003. ‘Argentina: 2002 Article IV consultation – staff report; staff supplement; public
information notice on the executive board discussion; and statement by the authorities
of Argentina’, IMF Country Report 03/226. Washington, DC: IMF.
Ingham, G. K. 2004. The Nature of Money. Cambridge, UK: Polity Press.
Irigoin, M. A. 2000. ‘Inconvertible paper money, inflation and economic performance inearly nineteenth century Argentina’, Journal of Latin American Studies 32: 333–359.
Irigoin, M. A. 2003. ‘La fabricacion de moneda en Buenos Aires y Potosi y la transformacion de la economia colonial en el Rio de la Plata (1820 y 1860)’. In La desintegracionde la economia colonial. Comercio y moneda en el interior del espacio colonial.
(1800–1860), edited by M. A. Irigoin and Roberto Schmit, 57–92. Buenos Aires:
Editorial Biblos.
Jozzo, A. 1985. ‘Towards a federal European economy: pre-federal monetary union’, The
Federalist 37(3): 195–201.
Kuroda, A. 2008a. ‘What is the complementarity among monies? An introductory note’,
Financial History Review 15(1): 7–15.
Kuroda, A. 2008b. ‘Concurrent but non-integrable currency circuits: complementary relationships among monies in modern China and other regions’, Financial History Review
15(1): 17–36.
Lester, R. A. 1970 [1939]. Monetary Experiments. Early American and Recent
Scandinavian. New York: Augustus M. Kelley Publishers.
Licari, J. M., Calgagno, J. C., Oviedo, J. M. and Pellegrini, S. 2003. ‘Cuasimonedas provinciales. Medición absoluta y comparada’, Documento del Observatorio de la Economia.
Cordoba, Argentina: Universidad Nacional de Córdoba.
Luzzi, M. 2012. La monnaie en question. Pratiques et conflits à propos de l’argent lors dela crise de 2001 en Argentine, PhD. diss., Paris: Ecole des Hautes études en sciences
sociales.
McKinnon, R. I. 1997. ‘Monetary regimes, government borrowing constraints, and marketpreserving federalism: implications for EMU’. In The Nation State in a Global /Information Era: Policy Challenges, edited by T. J. Courchene, 101–142. Kingston,
ON: Queen’s University.
Olivera, J. 1992. ‘Banca central, federalismo economico y constitucion monetaria’,
Opening Keynote Speech, XXVI Reunion Anual de la Asociacion Argentina deEconomia Politica, 6 de noviembre 1991. Published in Nuevas Respuestas, Revista dela Universidad Catolica de Santiago del Estero Junio 7–17.
Oppenheimer, A. 1985. ‘Cash-starved argentine provinces turning out their own money’,
The Charlotte Observer November 28.

Taylor and Francis

Not for distribution

112

Bruno Théret

Pilling, D. 1996. ‘Funny money fills argentine pockets’, Financial Times February 13.
Saiag, H. 2013. ‘Le trueque argentin ou la question du fédéralisme monétaire (1995–2002)’,
Revue Française de Socio-Économie 12 (2): 69–89.
Saiegh, S. and Tommasi, M. 2000. ‘Le labyrinthe fiscal de l’Argentine et la théorie descoûts de trasnaction en politique’, Problèmes d’Amérique latine 37: 63–90.
Sbatella, J. A. 2004. ‘Crisis fiscal y rol de moneda. La experiencia argentina de la década
de 1990’. In La economia argentina y su crisis (1976–2001): visiones institucionalistas
y regulacionistas, edited by Robert Boyer et Julio Neffa, 507–17. Buenos Aires: CeilPiette – Miño y Davila.
Sbragia, A. M. 1993. ‘The European community: a balancing act’, Publius 23: 23–38.
Schvarzer, J. and Finkelstein, H. 2003. ‘Bonos, cuasi monedas y política económica’,
Realidad Económica 193: 79–95.
Schweitzer, M. M. 1989. ‘State-issued currency and the ratification of the U.S. Constitution’,
Journal of Economic History 49(2): 311–322.
Théret, B. 1999. ‘Federalism and regionalism: a comparative analysis of the regulationof economic tensions between regions by intergovernmental transfers programs in
Canada and the USA’, International Journal of Urban and Regional Research 23(3):479–512.
Théret, B. 2002. Protection sociale et Fédéralisme. L’Europe dans le miroir de l’Amériquedu Nord. Brusells, Belgium and Montreal, QC: PIE – Peter Lang and PUM.
Théret, B. 2004. ‘Del principio federal a una tipologia de las federaciones: algunas propuestas’, Foro Internacional 175: 29–65.
Théret, B. 2011. ‘Du keynésianisme au libertarianisme. La place de la monnaie dans lestransformations du savoir économique autorisé’, Revue de la regulation [online], 10,second semester. http://regulation.revues.org/9529.
Théret, B. 2013a. ‘Salida del dilema de la crisis de la eurozona: una respuesta en terminosde federalismo monetario’. In Capitalismos volatiles, trabajadores precarios. Crisis
financiera global y cuestion social, edited by Guillermo Perez-Sosto, 203–250. Buenos
Aires: Instituto di Tella.
Théret, B. 2013b. ‘Dettes et crise de confiance dans l’euro: analyse et voies possibles desortie par le haut’, Revue française de socio-économie 12: 91–124.
Théret, B. 2015. ‘La Diversidad de los Federalismos en América Latina: Argentina, Brasil,
Mexico’. In Variedades de Capitalismo en América. Los casos de Mexico, Brasil,
Argentina y Chile, edited by I. Bizberg, 147–281. Mexico City: Ediciones del Colegiode Mexico.
Théret, B., Coutrot, T. and Kalinowski, W. 2015. ‘The Euro-Drachma, a monetary lifeline
for Greece’, March 16, www.veblen-institute.org/The-Euro-Drachma-a-MonetaryLifeline-for-Greece.html.
Théret, B. and Kalinowski, W. 2012. ‘The Euro as common money, not a single currency.
A plea for a European monetary federalism’. Notes of the Veblen Institute for Economic
Reforms September. Paris: Fondation pour le Progrès de l’Homme.
Théret, B. and Zanabria, M. 2007. ‘Sur la pluralité des monnaies publiques dans les fédérations. Une approche de ses conditions de viabilité à partir de l’expérience argentine
récente’, Economie et Institutions 10–11: 9–65.
Théret, B. and Zanabria, M. 2009. ‘On the viability of monetary complementarity in federations: the case of fiscal provincial monies in 2001–2003 Argentina’s crisis’. Paper
presented at the XVth World Economic History Congress. Utrecht, Netherlands:
August 3–7.

Taylor and Francis

Not for distribution

Monetary federalism as a concept 113
Vitelli, G. 1986. Cuarenta años de inflacion en la Argentina: 1945–1985. Buenos Aires:
Editorial Legasa.
Weingast, B. 1995. ‘The economic role of political institutions: market-preserving federalism and economic development’, The Journal of Law, Economics, and Organisations
11(1): 1–31.
Wennerlind, C. 2011. Casualties of Credit. The English Financial Revolution, 1620–1720.
Cambridge, MA: Harvard University Press.
World Bank. 1990. ‘Argentina. Provincial government finance study, Latin America andthe Caribbean region. Country Department IV’. Report 8176-AR, 2 vol. Washington,
DC: World Bank.
World Bank. 1996. ‘Argentina. Finanzas Provinciales: Temas sobre Federalismo Fiscal’.
Informe del Departamento I 15437. Washington, DC: Oficina Regional de America
Latina y el Caribe.
Wray, L. R. 2014. ‘From the state theory of money to modern money theory: an alternative
to economic orthodoxy’, Working Paper No. 792, Levy Economics Institute of Bard
College.
Wyplosz, C. 1999. ‘Towards a more perfect EMU’. CEPR Discussion Paper No. 2252.
London: CEPR, October.
Zelizer, V. 1994. The Social Meaning of Money. Princeton, NJ: Princeton University Press.

Taylor and Francis

Not for distribution

6

Famine of cash
Why have local monies remained popularthroughout human history?
Akinobu Kuroda

6.1 ‘Free banking system’ without banks
Throughout human history currency shortages have frequently hampered local
transactions. Unable to wait for authorities to resolve these shortages, those inneed of currency often did not hesitate to generate local payment devices by themselves (see chapter by Gómez and von Prittwitz in this volume). Although thesemakeshift forms of currency may look mysterious to those accustomed to the ideathat money should be backed by either authority or its material contents, these
forms of payment proved useful in their localities.
In 1929, Xianrendu, in Laohekou County, Hubei—a town in the middle
reaches of the Yangtze River—suffered a serious currency shortage. Soon after,
notes issued by 36 different shops began to circulate in the town, even though
the area comprised only around 300 households. The stores that issued the notes
included 13 grocers, nine grain dealers, two seed oil mills, two medicine dealers,
three liquor shops, two tea houses, a wholesale trader, a tofu shop, a rice cakeshop, a silver dealer and a butcher (Chen X., 2012, p.116). It seems that all kindsof shops in the town issued their own notes, and that the issuers included noproper financiers. In other words, any type of shop functioned or could function
as an issuer of currency.
Xianrendu was not an isolated case. In 1936, native notes issued by 13 shops
were in circulation in a rural town in Julu County, Hebei, which had around 400
households. Of the 26 shops in the town, 13—including an inn, grocer, grain
dealer and wheat cake shop—issued their own notes. At first only merchants withrelatively large assets, such as grain dealers, issued currency notes. However,given the profitability of note issuance, many small-scale merchants soon followed. Even a wheat cake baker, with assets of just 200 yuan, issued notes whose
value amounted to 500 yuan (Chen T., 1936).
Most locally issued notes signified that they could be converted into metal currencies. However, contemporary observers have commented that when a bearer
requested the conversion, the issuer simply exchanged the note for another one
issued by a different shop. In some cases, the issuers would only convert notes
into coins on the days of the Five-Day market (which was held every five days).
On other days, they would exchange one note for another at the demand of thebearer. Whether the issuers observed the rule or not, the convertibility of the notes
was actually rather limited (Dai and Chen, 2011).

Taylor and Francis

Not for distribution

Famine of cash 115
Why did people accept local currency despite its limited convertibility? To
answer this question it is important to consider the regional situation. Notes available in one five-day market were rarely accepted at other markets. In the case of
the unnamed town in Julu County mentioned above, the reporter estimated thetotal value of native notes to lie somewhere between 8000 and 9000 yuan (Chen T.,
1937). If we assume that 400 households likely used 100 yuan in cash each year,
native notes totalling 8000 yuan must have circulated through the town five times.
The estimated 100 yuan in household expenditure was slightly more than the 83
yuan income of the average peasant household in a village in Taigu County,
Shanxi Province (Wu, 1935), but less than half the average household income ofa village in Hengshan County, Hunan Province (Wang, 1937). Therefore, the issuance of 8000 yuan in notes does not appear to have been excessive. An accountof the situation in Julu County, published in a contemporary journal, indicatesthat even these locally issued notes could not meet the area’s currency demand.
Banknotes were also in circulation, but they only accounted for 50 percent ofcirculating currencies. The remaining 50 percent was made up of locally issued
notes. Although it was difficult to tell forged notes from genuine ones and despite
their limited convertibility, these notes helped sustain exchange within the region.
Currency shortages forced locals in early 20th-century China to accept inconvertible notes, even those suspected of being forged. Insufficient currency supplies
frequently caused transactions in the marketplace to decline, a situation Chinese
traditionally called qianhuang: the famine of cash. The question then arises as towhy serious cash shortages occurred so frequently.

Taylor and Francis

Not for distribution

6.2 Currencies stagnate rather than circulate

Table 6.1 shows the distribution of copper coins of different eras excavated fromtwo places in China. Both hoards of coins appear to have been buried around 1270,
but the majority of coins date from the 11th century. Although a large amount of
paper money, some silver ingots and silk functioned as currency during the Song
Table 6.1 Distribution of copper cash with era names from Chinese excavation
Last year of period
618
907
960
1004
1054
1101
1126
1201
1260
Total
Latest era
Source: Miyake, 2005, pp.104–105.

Yankeshan
27
866
12
472
2,706
7,156
2,018
212
—
13,4691131–63

Wenqiaoyidui
—
57
3
32
213
277
95
45
4
726
1260–65

116 Akinobu Kuroda
Dynasty (960–1279), copper coins were used for daily transactions. The contentsof excavated currency hoards reveal that coin transactions in late 13th-century
China involved coins issued two centuries earlier.
The size of the hoard found at Yankeshan is large enough for us to assume thatits contents were intentional savings, while the size of the hoard at Wenqiaoyidui
is so small that we may consider it a cluster of stray coins rather than savings.
In both cases, regardless of the size of the hoard or whether it represented savings, the era names are distributed in almost the same proportion. Besides thepropensity of holders to save, this indicates the possibility of a currency tending
towards stagnation.
With regard to this point, an investigation of coins collected from bankbranches across the UK in 1968 provides some important information. Before theintroduction of decimal denominations in 1971, the Royal Mint, in cooperation
with major banks such as Barclays, surveyed how many coins of each denomination crossed the counters of banks in one day and tallied the distribution of thedates of issuance of those coins. This allowed the Mint to gauge how many coinsshould be supplied under the new denomination system. Since the Mint had dataon the quantities of minted coins of each denomination for each year, they could
estimate how long a coin had circulated outside the banks. The assumption wasthat the older the coin, the less likely it would be returned from the holders to thebank but the question remained: to what extent?
The survey revealed that aside from those coins disposed of due to physicaldamage (which accounted for just 0.1 percent of the total), two out of every 100
coins failed to reach the bank counters every year. In other words, those coins
became ‘economically inactive’. This meant that half of all coins minted in agiven period would disappear from circulation within 33 years. The wastage rateof coins varied by denomination, as Table 6.2 shows that nearly 4 out of every
100 ‘half pence coins’ went missing annually. This rate was far higher than thatof larger denominations (De Glanville, 1970). An investigation of coins sampledfrom bank branches across the USA in 1962 showed similar results. The average waste rate was 2 percent; however, the wastage rate of the 10 cent coin, thesmallest denomination in the sample investigation, was the highest among all
denominations (Patterson, 1972).

Taylor and Francis

Not for distribution

Table 6.2 Wastage rates of coins in the UK 1968 (percentages)
Half d coins (half pence coins)

3.7

1d
3d
6d
1/2/2/6 d

2.2
1.7
2.1
0.4
1.2
0.9

Source: Public Record Office, Kew, Mint 20/3965.

Famine of cash 117
People are not likely to save cheap, bulky coins as assets; we can therefore
assume that nobody held such coins for any particular purpose. In other words,
though some coins are intentionally hoarded, a large amount of coins also becomesinactive unintentionally.
The wastage rates mentioned above were determined by tallying coins passing
over the bank counters. Banking systems work to collect currencies once distributed among numerous end users. Even in the UK and the USA, which had theworld’s most dense banking systems in the 1960s, 2 out of every 100 coins disappeared from circulation every year. It is quite easy to imagine what happened tothe circulation of currencies before the establishment of banking systems. Large
portions of currency must have been taken out of circulation every year, remaining in the hands of end users.
During the Great Depression in the 1930s, John Hicks sought to understand why
people would keep currency that gave no return when they could instead purchasebonds that earned interest (Hicks, 1935). Since he only considered the intentionalsaving of currency, he overlooked that currency sometimes unintentionally goes outof circulation. Mainstream social sciences have been blind to the stagnant nature ofcurrency. Currency is easy to distribute but difficult to gather on demand; this is theflip side of currency ‘acceptability’—its capacity to anonymously circulate.

6.3 Invisible agreements on local currencies

Taylor and Francis

Besides the locally issued notes mentioned above, the regional organisation ofcurrency supplies has occurred in various forms. In 1606, Quanzhou, the largest
port city in Southern China, faced a famine due to poor harvest and the increased
circulation of illegal coinages. In order to stabilise the local market, the city’smagistrate tried to set a maximum price for grains to make it easier for locals to
buy them. He also prohibited the use of unofficial coins. Though his actions may
seem appropriate from a modern viewpoint, to his contemporaries he appeared tobe blind to reality. The traders at the port protested against the price controls andthe prohibition of private coinage and went on strike, causing the market to close.
Those in opposition to the magistrate’s rules insisted that price control discouraged maritime traders from importing grains and that the private coins would
disappear as soon as they became unnecessary. The magistrate lifted the regulations, which encouraged traders to import larger amounts of grains, causing
market prices to decrease to a normal level, whereupon private coins disappeared(Chen,, n.d.). This process indicates that increasing the amount of privately madecoins allowed prices to raise high enough to absorb grains from other regions.
When facing famine, in addition to securing actual food supplies, it is also important to avoid disturbing food distribution. In the case of Quanzhou, the local
market generated sufficient liquidity to import grains from outside the city. The
magistrate failed to notice that the system worked locally and also could not distinguish stability from formality.
China is not the only example of such locally organised currencies: societies
already dependent on modern banking systems, such as the US, have seen similar

Not for distribution

118 Akinobu Kuroda
occurrences. On December 7, 1931, the only bank in Tenino, Washington State,
the Tenino Citizen Bank, closed its teller, paralysing the town’s entire business sector. This was not an isolated case: In the last quarter of that year, 1,055
banks across the USA suspended their services against the backdrop of the Great
Depression. However, the emergency measure adopted by the Tenino Chamberof Commerce to counteract the bank’s closure was an uncommon one. It issued
certificates in an amount equivalent to 25 percent of the bank’s total deposit
value. These certificates had a face value of 25 cents and were printed on wooden
tablets. This wooden money went into circulation, though only within the town.
Needless to say, its function as a currency ended once the formal currency system
was revived (Preston, 1933).
The Chamber of Commerce took the initiative in the case of Tenino and theacceptance of wooden currency was not backed by any regulations. There wastherefore still a possibility that the bank deposits would become non-performing
debts. Thus, it was neither official support nor the intrinsic value of the tablets, but a loose agreement among locals that sustained the acceptability of thewooden currency.
Such informal agreements have emerged around the world in various forms
throughout history. Local economies have often encountered problems with small
denomination currencies in particular, rather than currency in general, due to theformer’s tendency to experience shortages. Since the majority of exchanges in thelocal market places are wage-goods-level transactions, small denomination currencies have naturally been in greater demand.
Some native notes in early 20th-century China were printed with a description of the background of issuance. For example, a note with a face value of 100
wen issued in 1916 by a shop at Junxian, Hubei Province, featured the following
description on the back: ‘Copper coins recently disappeared and silver subsidiaries were in short supply. Subsequently, trade stagnated and traders have sufferedlosses. Thus, we issue these small notes to circulate in the market in order tofacilitate the supply of small change. (Shi, 2002, p.503)
Heterogeneous demand and rigid supply have often caused small currencies tocirculate independently from the currencies flowing beyond local marketplaces,
as have occurred across the world, such as in late medieval Europe (Spufford,
1999) and the Red Sea region in the early 20th century (Kuroda, 2007).

Taylor and Francis

Not for distribution

6.4 Credits substitute currencies locallyIf a currency tends to be stagnant in nature and people consequently suffershortages, then it follows that people would seek another device with which
to mediate exchanges. History shows that people have indeed sought out suchdevices. For example, in early modern England a large number of litigation
records in local courts of law offer snapshots of the kinds of social devices thatwere used in transactions.
Litigation records in local market towns and manors show how the ordinary
person strongly depends on credit transactions in daily life. Most credit took theFamine of cash 119
form of unsecured small debts and consisted mostly of sales credit, wages, rent,
taxes and other payments. Some of these transactions might have been recorded
in an account book, a diary, or on a loose slip of paper, but most transactions wereundoubtedly only agreed upon orally. Usually ordinary people had debts of lessthan £1. In other words, credit transactions were used frequently enough to rendercash transactions rare. Indeed, in contrast with credit which depends on named
relationship, coins were used for small transactions between strangers as well
(Muldrew, 1998, p.101).
It cannot have been mere coincidence that most lawsuits were brought by people against members of their own community, in both urban and rural settings.
When a villager made an agreement to sell his produce at a local marketplace, hetended to call upon some member of his village community to witness the agreement (Moore, 1981, p.288), a phenomenon that indicates the importance of thecommunity in credit transactions.
The number of suits brought to local courts appears to have peaked in the latter
half of the 17th century. In the town of Kings Lynn, each household filed suits
nearly three times a year on average. However, it seems to have been the relation
between credit and community, rather than a fear of punishment, that effectively
led locals to honour their debts. A person had to avoid any conduct that might
disconnect them from the community (Everitt, 1967, p.567).
We have no data on the proportion of credit to cash transactions among
ordinary people, but anecdotal evidence gives the impression that the usage ofcurrency was very rare. In this sense, the inheritance system of England, which
required people to leave an inventory of their possessions, provides us with clear
information about their assets. Notably, credit in various forms (such as bonds,
bills obligatory and book credit) was predominant, and, in contrast, only modest
amounts appear in inventories. According to Kerridge, who mainly studied inventories from Liverpool, ‘in the period 1538–1660 the ratio of coins to debts bybond, bill of obligatory and book was on average 1 to 9’ (Kerridge, 1988, p.98).
A sample of inventories of London merchants and the trading elite shows that theratio of trade credit, loans, and other investments to cash was 15 to 1 (Muldrew,
1998, p.100).
Of course, the ratio between credit and cash varied by class, occupation andgeographical location. The cases mentioned above mainly reflect the patternsof urban merchants. In addition, forms of assets do not always correspond toforms of settlement. Nevertheless, it is safe to say that in early modern Englandtransactions depended heavily on credit supported by communal trust. Named
connections, instead of anonymous relationships, supported transactions in earlymodern England.
Early modern Japan was similar to England in several regards, including thedisappearance of local markets; an increasing dependence on named credit (orindependence from currency) in transactions and the accumulation of assets; anda general preference for repeating transactions with trusted customers as opposed
to one-time transactions with strangers. These features stand in stark contrast to
the situation in China (Kuroda, 2013).

Taylor and Francis

Not for distribution

120 Akinobu Kuroda

6.5 Commercial oligarchies monopolising currencies
There are other ways to reduce the local circulation of currencies than making
mutual credit. Cotton plantations in 19th-century Louisiana, USA, present a clear
example. The shops in the cotton plantations, which were mostly run by plantation owners, bought raw cotton from share-croppers in exchange for necessities
such as dry goods and clothes. Unlike share-cropping practices in the Netherlands,
which allowed peasants to sell their products to other merchants, share-croppers
in US plantations had no other choice but to make deals with the plantation shops.
In order to reduce their debt to the plantation shops, share-croppers paid not onlyin cotton, but also in other products such as corn. The shop owners would often
issue tokens but these could not be easily redeemed for cash. Some tokens could
only be used for particular goods sold in the shops, such as bread, meat or flour(Lurvink, 2014). Though most transactions involved cash payments, there wasalmost none of the currency circulation that might have enabled share-croppers tohave more options and choose more freely.
Plantation owners or merchants running the plantation shops, on the other
hand, conducted their business via distant exchange through currencies that wereavailable for settling long-distance trade. In the case of China outlined above,long-distance trade used silver, while local exchanges depended on native notes orcopper coinages. With a fluctuating exchange ratio reflecting variations in supply
and demand, inter-regional and local currencies functioned in a complementary
relationship (Kuroda, 2008). In the case of the Louisiana plantations, there was no
autonomous currency circulation within the district mentioned.
Agricultural labourers hired on a temporary basis by plantations seemed to be
inclined to engage more deeply in monetary transactions than share-croppers, since
the labourers were paid in cash monthly or annually, instead of being awarded in
kind after the harvest, as was the case for share-croppers. However, the receipt of
remuneration in the form of cash does not always mean that the labourer has significant spending possibilities. In the sugar plantations of the Island of Negro in
the Philippines, sought after commodities such as liquor, clothes and tobacco were
provided only by certain agents who were in close relationship with plantation owners. Labourers used to spend their wages soon after payday. In addition, gambling
places owned by plantation owners often baited labourers to immediately spend theirremaining salaries (Echaúz, 1978). Thus, under such an inside-market structure, agricultural labourers had little possibility to choose where to buy commodities. Money
served as a unit of account, but no negotiation existed between sellers and buyers.
The Island of Negro appeared to have no circulation of tokens like in Louisiana, but
the structures of exchange in both regions do bear some resemblances.

Taylor and Francis

Not for distribution

6.6 Bond between money and society
It is easy for the issuer of currencies to widely distribute them, but difficult toassemble them on demand and subsequently unable to keep their issuances.
That is why people often made currencies locally to meet demand adequately.
However, making a local currency is not the only solution to chronic liquidity

Famine of cash 121
shortages. There are two other solutions: one is to defer payments on a basis ofmutual trust among inhabitants, another is for oligarchies to monopolise local
exchanges. These two patterns usually need no currency and money serves only
as a unit of account.
Importantly, sharing a condition of no oligarchical dominance, the first twosolutions—issuing currencies and making mutual credits—can replace each other(Kuroda, 2013). As commercial activities increase, a community has to choose
whether to increase the issuance of currency or to strengthen mutual credit, which
depends on cohesive relationships. The former device is tangible, while the latter isintangible. The tangible way enables locals to make anonymous transactions, while
the intangible method hinges on limited access among well-acquainted or trusted
customers. Currency-oriented trade can increase the degree of freedom in choosing
who to enter into a relationship with in subsequent transactions but often suffersfrom currency stagnation. Credit-oriented trade can avoid difficulties caused bycurrency shortages, but often suffers from accumulating non-performance.
A subsequent story of local money movement in contemporary Buenos Airesinterestingly showed that there was clearly a boundary between the stage of keeping
records among a small number of the well-acquainted and another stage of issuingtangible devices for circulation among a large number of participants (Gomez, 2009).
A preference for one-time transactions (currency transaction) or for subsequenttransactions (credit transaction) indicates whether people emphasise freedom orcertainty. However, in both cases of local currency and mutual credit there is no
oligarchy monopolising local exchanges like we saw in the previous section. In
this sense, the development of exchanges among proximate inhabitants depended
on the degree of freedom of those carrying out transactions. Wherever oligarchies
dominate transactions there is little space for people to create a currency or amutual credit system. Thus, two institutional variables determine what kind ofmonetary system a society forms, and these respond to what extent people can
independently exchange and to what extent people prefer freedom over certainty,
It is crucial to note that transaction methods depend on social relationships. We
should avoid being trapped in a dichotomy between money and society, a mistake
made by a number of egalitarian movements in history.

Taylor and Francis

Not for distribution

References
Chen, M. n.d. ‘Quannan Zazhi’, in Siku quanshu cunmu congshu, shi, vol. 247, Jinan,
China: Jilushushe, p.859.
Chen, T. 1936. ‘Xiangjuriji (Diary during Rural Stay)’, in Zhongguo nongcun miaoxie(Descriptions of Chinese Villages).
Chen, T. 1937. ‘Shixingfabihou de Julunongcun (JuluVillages after the Monetary Reform)’,
Dongfang Zazhi (Eastern Magazine), pp.33–36.
Chen, X. 2012. Minguo xiaoquwei liutong huobi yanjiu (Study of small regional currencies
in the Republican China), Beijing: Zhongguo shehui kexue chubanshe.
Dai, J. and Chen, X. 2011. ‘20 shiji 20, 30 niandai beifang nongcun qianpiao fanlan de kaocha (Study of excessive circulation of native notes in the 1920–30s northern villages)’,
Zhonguo Jingjishi Lundan (China’s Economic History Forum).

122 Akinobu Kuroda
De Glanville, R. G. 1970. ‘The numbers of coins in circulation in the United Kingdom’,Studies in Official Statistics, Research Series 2.
Echaúz, R. 1978. Sketches of the island of Negros, translated and annotated by Donn V.
Hart; with an historical introduction by John A. Larkin, Athens, OH: Ohio University
Center for International Studies.
Everitt, 1967. ‘The marketing of agricultural produce’ in Thirsk, J. (ed.) The Agrarian
History of England and Wales, vol. 4, Cambridge, UK: Cambridge University Press,
pp.466–592.
Gomez, G. M. 2009. Argentina’s Parallel Currency: The Economy of the Poor, London:
Pickering & Chatto.
Hicks, J. R. 1935. ‘A suggestion for simplifying the theory of money’, Economica New
Series, 5.
Kerridge, E. 1988. Trade and Banking in Early Modern England, Manchester, UK:
Manchester University Press.
Kuroda, A. 2007. ‘The Maria Theresa Dollar in the early twentieth-century Red Sea region:
a complementary interface between multiple markets’, Financial History Review 14(1),89–110.
Kuroda, A. 2008. ‘What is the complementarity among monies? An introductory note’,
Financial History Review 15(1), 7–15.
Kuroda, A. 2013. ‘Anonymous currencies or named debts? Comparison of currencies,
local credits and units of account between China, Japan and England in the pre-industrial
era’, Socio Economic Review 11(1), 57–80.
Lurvink, K. 2014. ‘Strapped for cash: non-cash payments on Louisiana cotton plantations,
1865–1908’, Tijdschriftvoor Sociale en Economische Geschiedenis 11(4), 123–152.
Miyake, T. 2005. Chugoku no umerareta senka (Chinese copper cashes earthed), Tokyo:
Doseisha.
Moore. 1981.‘Medieval English fairs: evidence from Winchester and St. Ives’, in Raftis, J. A.
(ed.) Pathways to Medieval Peasants, Toronto, ON: Pontifical Institute of Medieval
Studies, pp.283–299.
Muldrew, C. 1998. The Economy of Obligation, London: Macmillan.
Patterson, C. C. 1972. ‘Silver stocks and losses in ancient and medieval times’, Economic
History Review 2, 25–2.
Preston, H. H. 1933. ‘The wooden money of Tenino’, Quarterly Journal of Economics,
47(2), 343–348.
Shi, C. 2002. Mingguo difang qianpiao tulu (catalogue of local copper coin notes in
Republican China), Beijing: Zhonguashuju.
Spufford, P. 1999. ‘Local coins, foreign coins in late medieval europe: summing up’, inTravaini, L. ed. Local Coins, Foreign Coins: Italy and Europe 11th-15th Centuries,
Milan, Italy: Estratto.
Wang, D. 1937. ‘Hengshanxian Shiguxiang shehui gaikuang diaocha (entire survey of the
Shiguxiang village, Hengshan county)’ in Li Wenhai ed. Minguo shiqi shehui diaocha congbian 2bian xiangcunshehuiquan (Collection of social investigation in the
Republican China, second series, volume for rural society), Fuzhou, China: Fujian
jiaoyuchubanshe, 2009.
Wu, S. 1935. ‘Taiguxian Guanjiabaocun diaocha baogao (Report of the investigation of the
Guanjiabao village, Taigucounty)’ in Li Wenhai ed. Minguo shiqi shehui diaocha congbian 2bian xiangcunshehuiquan (Collection of social investigation in the Republican
China, second series, volume for rural society), Fuzhou, China: Fujian jiaoyuchubanshe, 2009.

Taylor and Francis

Not for distribution

7

The pervasiveness of monetaryplurality in economic crisis and wars
Georgina M. Gómez and Wilko von Prittwitz
und Gaffron

7.1 Currencies found and currencies made?
During periods of economic, social and political demise, empirical evidenceshows a recurrent pattern of monetary plurality. Of course, not every crisis in thehistory of human kind has triggered the diversification of means of payment, but
the link between chaotic socio-economic contexts and monetary plurality needs
further scrutiny around the question of who creates means of payment and how aparticular thing becomes acceptable as money. What is the relationship between
money and crisis? To what extent is this connection indissoluble?
This chapter explores the relationship between contexts of socio-economic
demise and the experimentation with monetary plurality. Our motivation behindthese questions relates to the incredible diversity of means of payment, the actorsthat launch them, and the ways in which they started and ended. The currencies
are probably as varied as the crisis that embedded these episodes of monetaryplurality. We propose that the emergence of means of payment during episodesof severe crisis cannot be understood only as devices to solve temporary emergencies. Instead, we contend that they sometimes represent attempts to re-build
the world and introduce changes that could live beyond the crisis, in line withthe aspirations and ideals for a different future. While the emergence of meansof payment, most of the time at the local level, is mostly the consequence ofsevere distress, some of them have also represented attempts to re-organise political, social and economic life in a different direction (Cohen, 1999; Gilbert andHelleiner, 1999). The chaotic socio-economic backgrounds hence provide a ‘window of opportunity’ in a political sense (Kingdon, 2003) for experiments that
propose longer time-horizons.
We review a handful of cases in which the proliferation of complementary
currencies emerged bottom upwards in contexts of severe distress. This chapter
results from the collaboration with a numismatic that spent hundreds of hours
doing archival work and analysing the artistic and symbolical features of currency.
Moreover, it represents an effort to approach money from the material reality ofcurrencies, as objects that structured the interactions of humans in chaotic periods
even when their entire worlds seemed unstructured. We seek to connect the physical objects, namely local notes and means of payment, with the contexts in which
they were issued and the agents that may have used them.

Taylor and Francis

Not for distribution

124

Georgina M. Gómez et al.

We present monetary plurality as a temporary but ubiquitous solution in thecontext of war, hyperinflation and depression. In other cases, however, the context supported the experimentation with alternative monetary conceptions and had
longer time-horizons. We depart from the basic principle that unknown money
was better than no money at all, which meant that socio-economic demise supported the exceptional dissemination of monetary innovations that in normal
circumstances would attract just a faithful few. The need for means of payment
triggered social experimentation with currencies at the local level and, mostimportantly, expanded their public acceptance and circulation. Some historicalcurrency circuits reviewed in this chapter were extremely vulnerable in terms of
their legality and acceptability, while others evolved within institutional sophistication and lasted in time.

7.2 Historical emergencies and money
The historical experience of the last century offers a broad variety of periods
in which local or complementary currencies were used, normally in situationsof economic collapse or financial scarcity (Schuldt, 1997; Greco, 2001; Kuroda,2007). Complementary currencies are created contingently by communities in aneffort to facilitate exchange and income generation based on local identity. Their
purpose is normally not to disconnect from the national monetary system, but
to complement it, adjust it or adapt it (Boyer-Xambeu et al., 1994; Leyshon andThrift, 1996; Ingham, 2002, 2004). A severe disruption of the national monetarysystem, however, disputes the notions of mere adaptation and complementation
because in such cases actors may become bolder and dare into deep re-inventionof money to re-establish a chain of payments or to protect local identity, or a
combination of both.
Across history, we find a myriad of episodes in which emergency situations
have created windows of opportunity to pursue adaptation and invention at thesame time. Critical contexts seem to have weakened the limits between what isstrictly allowed or tolerated by nation states and their sovereign monetary systems,
which have sometimes allowed complementary currencies to emerge (Greco,
2001; Blanc, 2012). Economic agents turned to more reliable, more accessible ormore abundant monies, whether foreign, privately issued or local.
The tradition of monetary plurality has a long history, as evidenced by plentyof examples in which monetary plurality raised or resurged in episodes of severecrisis that provided these windows of opportunities. In Medieval Europe, ‘siege
certificates’ (Pick, 1978: 41) are one of the oldest surviving samples of ‘emergency money’ in modern Europe and were issued by town hall councils in Europe
as needed (for example, Figures 7.1 and 7.2). During the siege of cities, metallic
money supply was often impossible to sustain, so the local authorities along withmunicipal authorities of the city administration and, more frequently, the respective military commanders would issue siege certificates. Spanish siege certificates
circulated as currency during the siege of the Spanish fortress of Granada’s
Alhambra by the Moors in 1483, for example. In 1574, Leyden (currently Leiden,

Taylor and Francis

Not for distribution

The pervasiveness of monetary plurality 125
the Netherlands) was besieged by the Spaniards, and coins were stamped on cardboard (the covers of Catholic Church books) instead of precious metal, which was
unavailable, and thereby creating complementary paper ‘siege money’ embeddedin the political sentiment of the event.

Taylor and Francis

Not for distribution

Figure 7.1 Note of the siege of Lyon, France (16th century)

Figure 7.2 Note of the siege of Breda, the Netherlands (16th century)

126

Georgina M. Gómez et al.

Other examples of complementary currencies issued during conflicts otherthan sieges were in Spain by the Catalan villains during the war of the reapers(1640–1652), or the ‘Billets de confiance’ issued in France (1791–1793) during
the French Revolution. There are also some surviving examples of notes issued
during the French–German War of 1879–1871, Russian pieces printed on leather in
Dorpat (1814, 1818 and 1831) and emergency money (Notgeld) issued in Austria(1848–49 and 1859 to 1869), Poland (1848–49 and 1860–1865), and Germany(for instance, in Kaiserslauten in 1870–71). Italy (1866–1875) had such large
amounts of emergency currencies that, according to Pick (1978), ‘they are notcompletely catalogued’. They also existed in the Americas, for example in Brazil(1895–1896), where the communal and private emergency issues were meant toalleviate the shortage of small change. Pick (1978) maintains that there were up to
500 different Brazilian types of emergency currencies, some with positive interest rates. During the civil war in the United States, the Southern States issued theso-called ‘Broken Bank Bills’ (1861–1865), which were emergency currencies
used in times of socio-economic demise. The issuance of complementary currencies in emergency situations was quite common and Pick’s work (1978) shows us
a myriad of similar examples of currencies during wars and other catastrophes.
With the development of the capitalist system, monetary transactions became
more widespread and paper money became more important, so gradually more
central banks were set up around the world. Central banks were one of the strongest institutions to pursue the unification of currencies per country in the 20th
century. However, monetary plurality did not end with the dissemination of central
banks. In times of economic demise, cash often became scarce and the amounts
and varieties of emergency currencies continued to grow, as evidenced by theFirst and the Second World Wars. In the First one, we can not only find large
amounts of emergency currencies in Germany (1914–1923), Austria (1914–1921), butalso in smaller amounts during the civil war in Mexico (1913–1915). Pick (1978)
has documented approximately 120 Dutch emergency notes from the First World
War that may have inspired other countries to issue small amounts of emergency
money, including Finland, Luxembourg, Italy, Montenegro, Rumania, Sweden,
Turkey and Hungary. During the Second World War, emergency currencies werestrictly forbidden in all occupied territories by the German troops, and only someextremely rare Dutch, Norwegian, Polish and Yugoslavian notes can be found(Pick, 1978).
Emergency currencies were mostly fiat or paper money with no backup,
although some issuers were able to obtain metals and minted coins as collateral.
They were not only issued in domestic, foreign or historical currency (for example Peseta Silver Certificates (Figure 7.3), Gold Mark, Gold Dollar) but also asa claim for local goods such as grain, sugar, wood and other products dependingon the region in which they were issued. In addition, materials such as porcelain, cardboard, leather, pressed carbon, wood, velvet or linen were used as more
durable substitutes than paper. In 1923, for example, the newly built aluminium
mills in Teningen and Singen (Germany) issued emergency stamps from printed
aluminium foil (Pick, 1978). It would be too long to detail all complementary

Taylor and Francis

Not for distribution

The pervasiveness of monetary plurality 127
currencies that circulated during emergencies and research on many of theseexperiences is still pending. The examples given so far suffice to substantiate thatwhen societies face crisis and war, emergency currencies have been ubiquitousand often more trusted than official money managed elsewhere by authorities thatappeared too remote and aloof from the alarming daily realities on the ground.
Historical complementary currencies were used in extreme emergency situations as means of payment and mediums of exchange, and sometimes as units ofaccount. Other materials were used as reserve of value because metals and otherreliable currencies were kept for hoarding and, hence, disappeared from the system.
In all the cases of social and economic emergencies described in this chapter, theTaylor and Francis

Not for distribution

Figure 7.3a and 7.3b (continued)

128

Georgina M. Gómez et al.

(continued)

Taylor and Francis

Not for distribution
Figure 7.3a and 7.3b Peseta silver certificate

mechanism of allocating the different functions of money to different currencies
is recurrent, and confirms that the four inseparable functions that define money, atleast in theory, have been repeatedly separated in practice.

7.3 Emergency currencies after the World Wars
The two World Wars in the 20th century provided the crisis context for emergency monetary plurality. The terms emergency currencies, emergency script,
crisis money, Notgeld (currency of need in German), municipal notes, emergency

The pervasiveness of monetary plurality 129
script, military and obsidional coins and paper money (in besieged locations)denote that these are temporary currencies that circulate during a social, political and economic demise. In general, emergency currencies take the functions ofnational currencies temporarily.
After the First World War, several localities and private issuers in Germany,
Switzerland and Austria coined emergency currencies to ameliorate the effectsof the economic crisis caused by the conflict and hyperinflation, although they
were never formally authorised by the government or the national banks. During
the conflict, the central empires had issued great amounts of paper money without collateral in bullion to cover the costs of the war, which was a cause of
the hyperinflation. Municipal authorities decided to promote bartering in small
localities to facilitate trade, and some gradually issued vouchers that could be
used as means of payment. They had a fixed face value in regular money andthey were meant to replace within their localities the hyperinflationary national
notes that were not performing the function as means of payment. The local
alternative notes became known as Notgeld and circulated in low amounts within
restricted geographical areas. Most of the metals normally used for minting, suchas silver, bronze and copper, were required in the war effort, so coins were missing. Moreover, people kept these metals as reserve of value, which aggravatedtheir availability for currency.
While some emergency currencies were simple papers that circulated as smallmeans of payment, other notes had colourful and elaborate designs in an effort toincrease the appeal and acceptability of these currencies. Some included expiry
dates, details of the territory in which they were valid or the types of payments
for which they were acceptable, such as public utilities. The emergency currencies were guaranteed by the local governments or the local savings banks, so theircirculation was restricted to the city where they were issued. Many of these notes,
in fact, bear the warning that they are only valid within the limits of the district
and for transactions with the local government.
The post-war economic demise severely affected businesses. Several retailers
and industries also issued their own emergency currencies that circulated as internal means of payment within a particular sector or client network. The notes wereguaranteed by their own capital funds, in a context in which regular money was
scarce and lost value rapidly due to hyperinflation (Diessner, 2012). Commercial
banks issued low denomination notes, too.
As hyperinflation in Germany worsened, an unthinkable proliferation of complementary currencies followed. Although such currencies were tolerated, they
were not formally authorised by the central banks. They circulated because thepublic accepted them in practice despite their lack of formal legality (for example,
Figure 7.4). The papers multiplied not only in number but in purpose and coverage as well. The denominations of the emergency currency notes increased andpassed the hundred, thousand, million and eventually billion marks. At the sametime, the quality of the scrip paper decreased in order to save on its production
costs. In the beginning of 1923, hyperinflation in Germany was out of control
and some emergency notes abandoned the mark as unit of account. They were

Taylor and Francis

Not for distribution

130

Georgina M. Gómez et al.

denominated instead in specific goods such as a certain amount of wheat, barley,
wood, sugar, or coal; these were called Wertbeständige in German, which translates as ‘fix value notes’.
The emergency currencies were generally conceived as surrogates for the
regular money for a temporary period. Towards the end of 1923, inflation was
curbed and a new national currency was introduced, so the usage of emergency currencies was gradually abandoned or the public stopped accepting

Taylor and Francis

Not for distribution

Figure 7.4a and 7.4b Goldmark Freistaat Preussen 1.05 = 1/dollar USA

The pervasiveness of monetary plurality 131
them. Diessner (2012) estimated that emergency currencies were definitely
withdrawn by 1924. Notgeld was associated with hunger and calamity, andthese notes were not popular among the general public. Eventually they wereleft as toys for children to play with because they had no real value. Others
were burnt by the thousands, as colourful but worthless paper. Notgeld was
precisely what its literal translation indicates: the money of an emergency situation. It appeared in a vacuum of monetary regulation in which local agentsresorted to extraordinary measures to support their daily livelihoods and the
local economy, until the economic and social system could recover. Today,
however, Notgeld has gained both commercial and academic interest, since
the demand for local paper money has increased enormously not only by collectors and for academic research, but also by curators who purchase them formuseums worldwide.
Notgeld could, of course, also be military money, for example, the sadly famousConcentration Camp Notes (Lagergeld), and the post First and Second World War
banknotes. Pick (1978) mentions issues in Germany, France, Japan and Austria,
for example, those of the Allied forces in Germany (Aliierte Militärbehörde
1945–1948), which were put into circulation by the allied military authorities ofthe occupied territories for the civil populations (Figure 7.5). They were made by
the USA in collaboration with private printing houses like Forbes Boston and the
Bureau of Engraving and Printing.
The 20th century offers an enormous amount of complementary emergency
currencies and other vast amounts of forms of money such as International
Military Payment Certificates, Obsidional and Military Banknotes, Banker´sDrafts, Liberty Bonds, Exchequers in the UK or US Treasury Bonds, and theSchatzanweisungen (in German), known also as War Bonds (Kriegsanleihen),which still have to be classified. As in Germany, emergency currencies were prohibited in countries like Holland by the occupying troops; Pick (1978) mentions
around 500 different Dutch currencies, which ‘were withdrawn and are extremelyrare today’. We can find similar amounts of emergency currencies in Norway
issued from April to October 1940, as well as in Poland and Yugoslavia. The merchants in Denmark avoided the prohibition issuing notes called ‘Frimaerkepenge
which were small printed cartons’, according to Pick (ibid.). A stamp had to beadhered just like on the so-called Spanish ‘Sello Moneda’ (1936–1939). Miró
Agulló (2008) classifies 114 different Spanish currencies.
Apart from these emergency currencies, there were other international papermonies issued and it may be difficult to clearly determine which of these could
be considered emergency currencies. Pick (1978) also notes that after 1911 a vast
amount of banknotes of communal and military origin circulated in China. Afterthe war was declared by Japan, Americans were forced to leave the Philippines
and as often happens in times of war, they took with them large amounts of cash,
so the population was forced to issue emergency currencies to maintain all payment transactions (Figure 7.6). Following a quote by Pick (1978), we have founda rare catalogue by Neil Shafer (1974), ‘Philippine emergency and guerrilla currency of World War II’, in which Shafer stated that,

Taylor and Francis

Not for distribution

Taylor and Francis

Figure 7.5 Allied military bondNot for distribution

The pervasiveness of monetary plurality 133[a]s a result of the war, in 1941 currency from the United States for thePhilippines has basically disappeared. The Philippines was a U.S. territorial possession. In dire need for a circulating currency, Philippines President
Quezon decided the establishment of emergency currency boards in theprovinces to print notes, with most of the currency being produced while thePhilippines was under Japanese occupation. These notes served as tangible
symbols of resistance and eventual victory. They were really necessary as
a currency and most were legally issued by the currency boards. Yet, there
were perils in circulating the notes, as the Japanese sometimes tortured andkilled those caught with such notes in their possession.
After the Second World War from 1945–1955, and as a consequence of political as well as economic developments, many more countries issued emergency
currencies. Pick (1978) mentions Indonesia, Israel, Italy and Hungary. The
banknotes of Italian Banks from 1975–1976 (Assegni Circolari and Assegni
Bancarie) still circulate today and show that even in current times emergency
currencies circulate.

Taylor and Francis

Not for distribution

Figure 7.6 Mindanao Emergency Currency Board (USA)134

Georgina M. Gómez et al.

Figure 7.7 Military payment certificate

Other forms of military and emergency currencies and coupons are still usedworldwide in the military camps of deployed armies (Figure 7.7). Private companies supply paper money and local people are recruited for labour, for example,
Bosnians working in the PX in EUFOR (European Union Force) military camps
in Bosnia-Herzegovina. In our research, we have found military payment certificates, phone cards, credit products, as well as gift cards, food coupons and web
based exchange. Perhaps the most famous of them is the military star exchange
and clearance outlet, where we can also find petrol, tobacco and alcohol among
other army and air force products, food coupons and exchange services for theUnited States Department of Defence organisation, that operates the retail storesat U.S. Army and U.S. Air Force bases and posts all over the world.

Taylor and Francis

Not for distribution

7.4 Depreciating currencies in Europe during the Depression
During the inter-war period, the emergency situation lasted longer than the term‘emergency’ would suggest. The German government eventually managed toget hyperinflation under control in 1923 and withdrew most of the local emergency currencies, but the Great Depression hit the country a few years later andthe economy collapsed again in the 1930s. The ideas of the Argentine-German
economist Silvio Gesell attracted the attention of a number of intellectuals as
they searched for alternative explanations and solutions to the extraordinary economic demise. In relation to monetary innovation, in a posthumously publishedbook, Gesell (1958) developed the principle that money should be exposed todepreciation to discourage hoarding and what he considered non-productive generation of income.
The concept of money that loses its value through time has been known in
French as demurrage, in German as Schwund- or Schrumpfgeld and in English

The pervasiveness of monetary plurality 135
as shrinking or depreciating money. The application of a negative interest rate,as Keynes (1976 [1930]) later called it, represented a penalty on its hoarding. In
other words, if people decided to retain the currency instead of using it for subsequent payments, they would suffer a loss of value equal to a negative interest rateand eventually the complete loss of its value on the date announced on the scrip
itself. The intention behind the principle of shrinking money is to increase its circulation velocity to feed the chain of payments of goods and services, in order tostimulate production and exchange in the local economy. The idea of depreciating
money was that the currency runs to the next transaction. This type of money is at
odds with saving but during the Depression the priority of economic agents was to
be enable consumption and, as a result, production and employment. Gesell conceived depreciation of money as a means to discourage its hoarding outside thecircular flow of goods and services. He was convinced that one of the main causesof economic crises was the withdrawal of money from the economic circuit due
to speculation or what John Maynard Keynes would later refer to the problemof ‘liquidity preference’. Gesell believed that people would be pressed to spend
shrinking money as means of payment because if they hoarded it, they would haveto pay for its depreciation.
The French economist Pierre-Joseph Proudhon (1840) made a somewhat different argument a few decades earlier. Proudhon objected that products like meat,fish or fruit perish in time, while currency does not. The difference in perishability between food and money, Proudhon argued, gave money holders an ‘unfair’advantage over producers of food, and this difference led to exploitation because
producers may have been obliged to reduce the prices of their perishable goods inorder to obtain money that maintained its value through time.
Fisher (1934) attributed the concept of shrinking money to Gesell and investigated its early experimentation around the time Gesell died in 1936. Two friendsof his, Hans Timm and Helmut Rödiger, decided to implement the system in
Erfurt, Germany, in October 1929 and launched the Wära Exchange Society, aname that combines the German word for ‘commodity’ (ware) and ‘durable’ or‘resistant’, also used as ‘unit of value’ (Währung). The Wära Exchange Society
expanded across the country and after a while it had offices in all the main cities including Berlin, Bonn, Hamburg, and Cologne. The society issued vouchers
to be used as means of payment among the members of the exchange group(Tauschgesellschaft) and the currency included the names of its directors, Timmand Rödiger, as responsible signatories of the notes (Lindman, 2011). At the back,the vouchers had a table with 24 spaces where users were required to stick a stamp
at the beginning of each fortnight. Keeping the scrip at the end of the fortnight
meant having to add a stamp, so hoarding it worked as a penalty on the personthat prevented the voucher from ‘running to the next transaction’, and at the sametime it worked as an incentive to keep money demand at the minimum. Stamps
costed 0.5 percent of the value of the voucher, so the notes would depreciate
at a rate of 12 percent a year. If members failed to pay the stamp, the vouchers
were simply not accepted in exchange for goods and services. The Wära vouchers
were redeemable for Reichsmarks at any time, but with a charge of 2 percent of

Taylor and Francis

Not for distribution

136

Georgina M. Gómez et al.

the value. This implied that the group had to keep a permanent reserve fund of
Reichsmarks to face claims, but it increased the stability of the vouchers.
By 1931 the Wära vouchers were accepted in about a thousand shops and small
businesses across the county. Members included, for example, dairy producers,
bakeries, print shops, barbers, small restaurants and shops selling furniture, flowers, books and bikes. Joining the society may not have been their first choice, butthey were persuaded by the scarcity of the national money. They gradually formed
an economic circuit in which money would flow along the circuit rapidly, including workers that received the vouchers as partial payment for their work. Whilethe notes served the purpose of facilitating local production and trade, the Wära
notes were never endorsed by the Central Bank of Germany, like it had happened
before with the post-war local emergency currencies.
The experiment with the Wära got significant public attention in relation to theeconomic recovery of Schwanenkirchen, a small town in Bayern (Schuldt, 1997).
A mining engineer bought the local bankrupt coal mine in an auction and found it
impossible to raise the working capital to set it to work again. He then contacted
the Wära Society which lent him 50,000 units of complementary currency. The
engineer hired 60 workers willing to accept the complementary currency for up to
90 percent of their wages. Local shops were reluctant at first to accept the rather
unknown currency but eventually they consented because they were severely
affected by the recession at the time – local money was better than no money atall, they reasoned. Their suppliers and producers accepted them too, and eventually the vouchers circulated back to the engineer and coal mine owner in exchange
for coal. The circuit was hence completed. All members tried to buy goods with
the Wära as quickly as possible in order to avoid paying the stamp for the scrip.
Werner Onken (1983: 68, quoted in Schuldt, 1997: 36) described Schwanenkirchen
as an ‘island of prosperity in the Bavarian woods’. The monetary innovation anda full account of the Wära appeared in several national newspapers. The ideaof shrinking money was not well known at that time and few people actually
understood it well. It ran contrary to the deflationary policies that the government implemented to curb hyperinflation (Cohrssen, 1932). Irving Fisher claimed
that 20,000 Wära circulated in Germany between 1930 and 1931 and 2.5 million members used them, which the author considered rather exaggerated (Fisher,
1934: 22). However, not everyone was so positive about the Wära and in October
1931, the Central Bank prohibited the issuance and circulation of any means of
payment that were not official, on the argument that these complementary currencies would cause inflation. In accordance with the new regulation, the Wära scrip
stopped circulating immediately, the coal mine closed and Schwanenkirchen fellback into recession.
Experimentation with money, however, did not end with the prohibition of theGerman Central Bank. The Depression did not end and other villages were readyto design similar bottom-up monetary institutions in an attempt to recover theirlocal economies. The owner of the coal mine in Schwanenkirchen had a fluent
correspondence with a friend in Austria, who became the major of the village of
Wörgl, Austria, and started another experiment with a complementary currency.
In 1932, the mayor of the Austrian town of Wörgl, Michael Unterguggenberger,

Taylor and Francis

Not for distribution

The pervasiveness of monetary plurality 137
was inspired by the Wära and decided to use it in a modified way: a public works
programme funded by complementary currency. Unterguggenberger observedthat with the Depression, local unemployment was soaring and the municipality
was almost bankrupt and heavily indebted to a bank in Innsbruck. With the support of the constituency and the local council, the major of Wörgl launched a planof public works that was financed with the complementary currency issued by the
local government.
The currency, circulated as scrip and a stamp of 1 percent of the value of thevoucher, had to be paid at the beginning of each month (Figure 7.8). The aim of
the stamp was to encourage users to spend them rapidly instead of storing them,following the idea of the circular flow. The Wörgl money was also redeemable forthe official schillings at a discount of 2 percent. Public servants received half of
their wages in complementary currency which was later increased to 75 percent.
Shops and local firms accepted it because they believed it increased their turnover (von Muralt, 1934) and the city government also received them as payment
for local taxes. Businesses were naturally not thrilled at the prospect of losing
1 percent of their income at the end of the month or 2 percent if they wanted toredeem it for official money, but the emergency money was better than facing theDepression. Von Muralt (1934: 51) reports that businesses were appreciative of
the scheme in the context they were facing in 1932.
With the plan, the financial situation of the local government in Wörgl recovered significantly as income generation through taxation increased with thedepreciation of the currency, and the payment of arrears was allowed with thecomplementary currency because the inhabitants became eager to get rid of it by
paying taxes. Unemployment fell at the same time as it was increasing in the restof Austria; more inhabitants accepted getting part of their wages in complementary currency. Their labour was used to improve local infrastructure, such as the
sewage system.
The notes carried a 1932 Wörgl ‘manifesto’ written on the back, significantly
titled ‘An Alle’ (to all, in German). The translation of the text in the notes reads
as follows,

Taylor and Francis

Not for distribution

Slowly circulating money has caused unprecedented needs among millions
of workers around the world. The end of the economy has begun. It is time toact with determination and prevent wreckage, so the economy can be saved
and humanity can avoid brutal conflicts and wars. Humanity lives on theexchange of goods and services. Sluggishness in the circulation of money
hinders such trade, causing millions of persons of working age to lose theirjobs and their livelihoods. Circulation must be re-established to safeguard thelivelihood of humanity. That is the aim of the currency of the market town ofWörgl. It reduces need, supports work and gives bread!’(Punctuation marks in original; translation by the authors.)
Several towns in the region around Wörgl, such as Kirchbichel, imitated theexperiment or expressed their intentions to follow (Figure 7.9; Schwarz, 2006).
The complementary currencies of Wörgl and Kirchbichel were accepted on equal

Figure 7.8 ‘Free money’ note with stamps

Taylor and Francis

Not for distribution

The pervasiveness of monetary plurality 139
terms in both towns, with the aim of increasing the economic impact. The schemes
attracted considerable international interest, including from Irving Fisher, as will
be explained in the next section. There were many objections to the replication of
the scheme across Tyrol and a number of issues to reflect on, such as the increasein risk for retailers accepting the stamp scrip for their sales while having to pay
for supplies in regular currency. The scheme also met strong opposition from theCentral Bank of Austria, which feared that it would lose control over the nationalmonetary system if complementary currencies grew. The bank subsequently prohibited the issuance and circulation of any currency in Austria, other than its own.
The kind of monetary innovation of the Wära Society across Germany andthe Wörgl in Austria speaks of different intentions and aspirations to those thatsustained the Notgeld or emergency money after the post First World War period.
While the Notgeld appeared as an extraordinary and temporary measure in thecontext of demise of the socio-economic system after a major war, the experiments with shrinking money stem from a desire to implement and further develop
the theoretical elaborations of Gesell and a number of idealists that believed inreforming the monetary and economic system by practicing them. In these lastcases, the social actors implemented a scheme at the collective local level thatentailed a process of joint reflection and setting of rules within their networks or
localities (Offe and Heinze, 1992). Examples of these include the decisions on theamount of interest towards depreciation, the ways to communicate them to outsiders, the agreements on the percentages of the wages that would be accepted, andso on. In that sense, the shrinking money experiments are expressions of efforts
to institutionalise solutions at the local level that involve a large number of

Taylor and Francis

Not for distribution

Figure 7.9 Free money in 1933

140

Georgina M. Gómez et al.

agreements, negotiations, rules and mechanisms to enforce them. It seems
the aim was to reform the monetary system beyond the duration of the crisis,
although that context was used as a window of political opportunity (Tarrow,
1998; Kingdon, 2003) to test these alternative currencies.

7.5 Stamp scrip in the USA during the Depression
The American economist, Irving Fisher, knew of the experiment in Wörgl andactually asked one of his collaborators in Geneva to visit the town and gather
information on the scheme at the site (von Muralt, 1934). Irving Fisher referredto those first experiences as ‘stamp scrip’ because currency notes were stamped
and each stamp reduced its value as time went by (Fisher, 1933; Fisher, 1934).
Gatch (2009) claims that the use of stamping for savings was relatively familiar toAmericans and offers the examples of the Liberty Bond subscriptions in the FirstWorld War and savings cards.
Stamp scrip was first introduced in the USA by a Dutch follower of Gesell,Charles Zylstra, in the small town of Hawarden, Iowa. Due to the Depression andthe decrease of means of payment, the general public preferred to keep the currency they could access as reserve of value. The result was the scarcity of meansof payment to support the exchange of daily necessities. With the support of thelocal chamber of commerce, Zylstra convinced the city council of Hawarden toissue complementary currency to finance public works in October of 1932. The
model of complementary currency chosen was that of stamp scrip with depreciation, applied through a stamp per transaction. Each time a one-dollar-voucher wasused, the buyer had to stick a stamp of three cents as a kind of ‘sales tax’. The
stamps were on sale in the city hall and the revenues of their sale constituted areserve fund in dollars with which the issuers guaranteed the convertibility of thelocal currency into the official national dollars. Each voucher could be used up to
36 times after which the last user could claim one dollar in official money. The
remaining eight cents financed the administrative costs of the scheme.
The experience in Hawarden was described in an article in the New York Herald
Tribune titled, ‘Stamped Money called success in Iowa Town’, published on 15
January, 1933 (cited in Schuldt, 1997: 46). According to that source, businesses
saw an increase of 50 percent in their revenues, which was partly explained by thefact that the smallest note was of one dollar, so clients could not buy anything ofa lower value and preferred to increase their consumption instead of keeping thecurrency. The currency was used to partially cover the labour to build a local road.
At that time, Fisher had a young German assistant, Hans Cohrssen, who
had written about the Wära, and together they worked on the implementationand dissemination of the stamp scrip (Fisher, 1933). Fisher visited Hawarden
shortly after the experiment began and his endorsement attracted the attentionof other cities across the country (Gatch, 2009: 129). The Hawarden experiment
was later imitated by other cities across several states. The maximum amount of
exchanges and the value of the stamps varied, as did their taxation. The issuers
were not always the local governments but also local chambers of commerce

Taylor and Francis

Not for distribution

The pervasiveness of monetary plurality 141(as in Evanston, Illinois) and churches (as in Sioux City). A renowned case was
the Larkin & Co. in Buffalo, New York, a retail store chain that issued 36,000
dollars of Larkin Merchandise bonds. It used the vouchers to partially pay thewages to its employees and accepted them in any of its stores. Other businesses
and clients gradually started to accept them too. When the shortage of regulardollars eased, Larkin slowly withdrew the scrip from circulation. The original
36,000 dollars circulated back as payments worth 250,000 dollars of extra sales.
Fisher criticised the Hawarden depreciation mechanism based on transactions
instead of one based on the course of time on the grounds that it missed the goalof discouraging the storage of money: ‘It costs three cents to transfer the scrip
instead of costing three cents not to transfer it’ (Fisher, 1934: 31). He also warned
that using a stamp each time the note changed hands invited opportunistic behaviour because there was no way to check that the stamp was either bought or stuck
as required. Fisher hence advised against the stamp mechanisms of depreciating
the currency per transaction and favoured the dated system. He concluded that,‘from a correspondence with four or five hundred communities in every state of
the Union, and from other sources of information, I gather that there is now a definite turn toward the Wörgl or dated type of Stamp Scrimp’ (1934: 41).
Whether these critiques proved problematic in practice or were Fisher’s own
elaboration is unknown. Still, stamp scrip became widespread across the country,
as Fisher’s correspondence seemed to suggest (for example, Figure 7.10). Other
sources estimated that one million people, almost 1 percent of the U.S. population
at that time, depended on the 200 to 400 self-help and barter groups that existed
in the United States from 1930–1936. Eventually, Fisher (1934: 163) proposed, inreference to regular money, aTaylor and Francis

Not for distribution[n]ation-wide application of Stamp Scrip – still in quantities as small, proportionately to the size of the nation, as it is in the localities now using it; and still
to function only as an emergency supply – substituting for other circulation
which has deserted – withdrawing when the deserter returns to service.

Figure 7.10 Providence stamp scrip

142

Georgina M. Gómez et al.

As in post-war and hyperinflationary Germany, the United States also witnessed
an unthinkable proliferation of complementary currencies during the Great
Depression.
Initially, the U.S. government did not take measures for or against stamp scrip,
probably believing that stamp scrip was a creature of the crisis that would fade as
employment recovered. Gatch (2009) further reports a wide number of practicalproblems that undermined the reality in which stamp scrip was supposed to work,
such as shirking in the use of stamps, slow circulation, and refusals to accept thecurrency. Some sources state that no fewer than half a million families were active
in 600 organisations by the end of 1938, but were replaced as co-operatives andcompanies settled payments among private individuals using accounts in ‘points’or ‘certificates’ as means of payment, instead of scrip, because those mechanisms apparently worked better. Moreover, in March 1933, President Franklin
Roosevelt banned further scrip issue on the grounds that the national government
was losing control of the monetary system. The subsequent abandonment of thegolden standard gave the country the opportunity to implement a monetary policythat would further support economic recovery. Fisher stopped promoting the idea
after 1934, Zylstra moved away from Hawarden, and only Cohrssen continued to
advocate Gesell’s idea of demurrage.
Stamp scrips, in general, came to be seen as an instrument of economic rehabilitation, creatures of an emergency situation with minimal chances of surviving in better
times. In the short run, they helped their members survive the Great Depression but
did not constitute a durable solution because they did not support an autonomous
flow of currency to support a circuit of exchange. The stamp scrip was dependent
on regular money to afford many supplies and was plagued with problems of low
managerial capacity and poor accountancy in the exchange systems. In addition,
there is no indication that any of its proponents actually conceived of shrinking
currencies as part of a trajectory to restructure economic relations after the crisis.
That is, as an institution beyond the contingency of a temporary economic demise.
As Fisher presented it, complementary currencies were an appropriate mechanism
to support livelihoods and incomes in specific circumstances and ‘until the deserter
comes back to service’, in reference to regular money.

Taylor and Francis

Not for distribution

7.6 Municipal emergency currencies in the Spanish Civil War
Spain had an enormous diversity and amount of local notes and currencies of
all types and functions during the Civil War (Graeber, 1978). Moreover, before
the war started each Spanish town hall had its own currency or was planning tohave a local complementary currency. In general, they are barely studied andmany hours of archival work fed partial publications (von Prittwitz, 2014) thatallowed us to identify monetary forms as varied as currencies with negativeinterest rates, vouchers issued specifically for social aid, refugees and victims of
the heavy bombardments, Catalonian co-operative notes, military money, commercial money and obsidional currencies of many kinds around the time of the
Spanish Civil War.

The pervasiveness of monetary plurality 143
Paper money was virtually unknown in Spain until the middle of the 1800s
and the first note issued by the Bank of Spain appeared in 1874. It was meant asa reserve of value, so its denomination of 25 pesetas was high in relation to theprices of common necessities. Daily transactions were traded with metallic coinsof smaller values. During the first decades of the 20th century, the denominations of the notes decreased to amounts required for their daily use as medium of
exchange (Tortella Casares, 2008). The use of paper money of smaller denominations expanded slowly and was not yet completely widespread when the Spanish
crown fell in 1931. In the politically unstable months before the beginning of
the Spanish Civil War in 1936, Spanish metal coins gradually disappeared fromcirculation because they were kept in hoards as reserve of value in anticipation ofworse times. Gresham’s law was verified and the ‘good’ currency stopped circulating. They re-appeared very slowly, and the notes and coins issued by Alfonso
XII were still circulating, at the end of the war in 1939.
In a nutshell, the war was unleashed after the partial failure of a coup on July
17 and 18, 1936. The parties that faced the conflict were denominated republican,
on one side, and rebellious or national, on the other. The republican side was led
by the Spanish Popular Front based out of the Government of Spain that waselected democratically before Franco took over the government. It is estimatedthat Franco’s armed forces were composed during the war by almost one million
men, including the Falanges, an extreme nationalist political group influenced
by Italian fascism. The Falanges issued a manifesto of 27 points repudiating the
republican constitution, party politics, capitalism, Marxism and clericalism, andproclaiming the necessity for a national-corporatist state, strong government andmilitary, and Spanish Imperialist expansion. On the opposite side was the Popular
Front. In the background of a Soviet policy shift in the mid-1930s, European
Communist parties joined Socialist, liberal, and moderate parties in popular fronts
against Fascism. In Spain, the Popular Front was an electoral coalition formed in
January, 1936 by the main parties of the Spanish Left. On 16 February, 1936 thePopular Front managed to win the last elections during the Second Republic andwas followed by a coup that would lead to the Spanish Civil War. A coalitionof working-class and middle social strata united for the defence of the democratic government against the forced Franquist government. The war was driven
by social, political, religious and military considerations that eventually caused
an unprecedented economic collapse. It ended on 1 April, 1939 when Francisco
Franco declared his victory and established a dictatorship that lasted until his
death in 1975.
As it occurred during other episodes of economic demise, the Civil War in
Spain enabled the proliferation of local complementary currencies or ‘municipal
notes’. During the conflict there were two ‘official’ currencies as complements tothe traditional Spanish peseta: the republican and the national peseta, even though
only the republican peseta could claim officialdom since it was the currency ofthe democratically elected government during the Second Spanish Republic. For
example, there were a total of six different types of notes of five and ten pesetas,
issued by the Bank of Spain in Burgos, the Bank of Spain in Madrid, vouchers

Taylor and Francis

Not for distribution

144

Georgina M. Gómez et al.

of its subsidiaries in Gijon, Santander and Bilbao, and treasury bills launchedby the Catalonian and Asturian governments that claimed economic independence during the conflict (Figures 7.11 and 7.12) (Turró, 1982; López and Lluch,1983). The Bank of Spain was officially resettled in Burgos in September 1936,
after a period in which its subsidiaries opened and operated under the commandsof the various groups that ruled the country (Sánchez Asiaín, 2013). It started
issuing paper money again but the gold and silver reserves, if there were any left,
were kept in vaults in Madrid, so the newly issued currency lacked collateral.
Moreover, the Bank of Spain in Burgos over-stamped notes issued before the

Taylor and Francis

Not for distribution

Figure 7.11 Catalonyan peseta

The pervasiveness of monetary plurality 145
conflict, in order to reassure that those bills were valid as means of payment. In
reality, only silver and other metal coins were accepted across the entire country
during the war, but the public tried to keep metal coins as reserve of value, which
subsequently dried out the system of means of payment.
Municipal notes appeared around 1936 and had a relatively stable value,
although they were temporary, local, and restricted to specific areas and uses.
Approximately 2,000 localities issued about 20,000 notes of various denominations and duration. There are currencies issued by municipal authorities that could
still claim legitimacy during the conflict, along with others issued by the fighting
armies, rural co-operatives, and local businesses, which were intended mainly toenable the trade of food and agricultural products during the conflict. Some of thecity councils were aware that they were introducing a new monetary form andsearched for a new name for their currency. Their concern with socio-economic
aspects of money was so great that they avoided the words ‘money’, ‘banknote’ ordenominations of the units of account such as the peseta. They introduced denominations like degrees and units. Other municipal currencies avoided religious
connotations and issued notes that eradicated the existing religious symbolism.
The Popular Front also created a number of complementary currencies fordifferent purposes, mainly in defence of their local municipal finances and socialeconomy organisations. In many cases these currency notes and coins carried themotto of the republic: peace and work. The currencies related the value of labour
to products, wages and other payments made with them within the territories ofthe municipalities and in mandatory admission for all transactions. Social aid forrefugees, the unemployed and the poor contributed to palliate the negative effectsof the war. Some banknotes were coined for the sole reason of helping refugees
and the civil populations, while other banknotes were made specifically for thevictims of bombardments. As the war lasted longer than initially expected, it originated a great variety of complementary currencies during the period (1936–1939),
and their exact origins are difficult to establish. It was not always clear to whichof the two governments each currency corresponded. Although they all bore thenominal value of the ‘Spanish peseta’ some would be labelled with added stamps
or superscripts of the nationalists or the republican parties respectively. Eacharmy considered that the currencies issued by the adversary were the ‘money ofthe enemy’, and its use would be punished even with death.
Small change to pay for daily necessities was equally scarce, as it had been inGermany during the post First World War period, so vouchers kept multiplying
and were circulated at the same time as the municipal currencies. The vouchersthat were issued as small denomination currency were called ‘fractionary’ in relation to other notes (Carothers, 1930). The list of issuers included the many groups
that participated in the conflict, such as communists, socialists, trade union fighters, anarchists, republicans, fascists and the international brigades. These vouchers
were sometimes handwritten papers given by a local bakery. There were also
handwritten notes stating that a fighting group in either army received a product,
usually food, on a certain date and place and promised to pay back the appropriate amount at the end of the conflict. These also circulated as means of payment.

Taylor and Francis

Not for distribution

146

Georgina M. Gómez et al.

Figure 7.12 Pesetas of Gijon

Some notes even skipped mentioning the value, which was basically unknown inthe middle of the conflict, and mentioned only the date when the goods changed
hands, the recipient and the products given, in the assumption that these would
be redeemed at whatever prices resulted for those products when the war ended.
The name of the issuer and the organisation he or she served was also mentioned,
which gave the vouchers some legality. Many of the notes subsequently circulated
as currency within the area, reflecting the fact that any means of payment wasperceived as better than none at all, and that complementary currencies could be
handwritten small papers, made in situ and accepted in trade in the demise of theentire political, economic and social system (Figure 7.13).
In the proliferation of notes, there were some depreciating currencies as well.
The notes of the Constitutional City of Montoro were perhaps the first depreciating money in Spain (Figure 7.14). In August 1936, the local council printed aseries of bills of five pesetas with a depreciation table on the back in which thevalue of the bill was decreasing weekly. A bill was worth five pesetas on 24th
August, for example, but 4.50 on 2nd November. After twelve weeks, the bill
was partially redeemable only in the town hall. The municipality paid civil servants their wages with this shrinking currency and workers tried to spend them
immediately to pay for their immediate needs, or deposited them in local banks
as soon as possible. A monthly wage for a municipal employee was about 20
pesetas, so a note of five pesetas represented a significant amount of money fora municipal employee in 1936. After seven days the currency would start losing
value, so the instrument was aimed at speeding circulation and cash deposits inthe banks, which were subsequently able to offer credit for production. It was
not possible to establish a direct link between the Spanish shrinking currencies
and Gesell’s ideas, but considering the large number of anarchists and brigadists

Taylor and Francis

Not for distribution

Figure 7.13 Different pesetas, some censored

Taylor and Francis

Not for distribution

148

Georgina M. Gómez et al.

from Germany fighting in Spain, it is possible that the Spanish municipal banknotes could have been inspired by the German experiences. It is possible that thecouncil of Montoro would have heard of the cases of Wära and Wörgl and aimed
at promoting local trade and production using a similar mechanism. This typeof monetary experimentation also took place in other locations in Spain, such as
the Andalusian villages of Porcuna and others ruled by the Popular Front in theprovince of Córdoba, where depreciating municipal currencies were introduced
in 1936 and 1937.

Taylor and Francis

Not for distribution

Figure 7.14 Emergency scrip with demurrage in Montoro, Spain

The pervasiveness of monetary plurality 149
It is impossible to verify how many notes were issued and on what date they
stopped circulating but a large collection is available on our website1 and in Von
Prittwitz (2014), Schwundgeld Español. The proliferation of municipal currencies
followed the multiplication of individual and municipal responses to the ineffectiveness of the monetary authorities to alleviate the shortage of means of payment
during the war, the fact that the population would keep gold and silver coins as
reserve of value, and of course the war propaganda of numerous political fractions.
At the end of the conflict, Franco’s government decreed that all the municipal currencies issued by the winning national army could be exchanged at the Bank of
Spain for the new Spanish currency (Order 5, Decree 27, August, 1938 publishedon 17 September, 1938). The republican money was confiscated and repudiated,and municipal coins and local banknotes were repudiated. Franco’s government
created a new version of the peseta, the ‘Peseta of the Spanish State’, that circulated between 1937 and 1975. However, many complementary currencies
continued to circulate among the population as medium of exchange in periods
after the Spanish Civil War (1939–1949) and later after the Second World War(1945–1955), even if they were prohibited. Some notes were kept in secret and arestill found today among collectors.
Many Spanish complementary currencies are unknown, perhaps due to themilitarist oppression that followed in Spain for almost 40 years and its severe
control of institutional and municipal authorities. The Second Republic basicallyclosed the window of political opportunity that sustained monetary experimentation with the Popular Front and around the period of the conflict. Before the
Civil War there were a large number of municipalities that reclaimed their rightto issue money that related its value to labour and the reproduction of labour.
Those complementary currencies derived from local aspirations to restructure thesocio-economic system and to gain independence from the central bank and othermonetary authorities. In comparison, the proliferation of municipal complementary currencies during the war sprang from the need to provide means of payment
to distressed local economies, although even in those circumstances some groups
and municipalities continued the monetary experimentation and issued depreciating currencies, for instance.

Taylor and Francis

Not for distribution

7.7 Conclusions
The post First World War period in the German speaking countries in the 1920s,
the Depression in Central Europe and in the United States in the 1930s, and the
Spanish Civil War in the late 1930s, have severe social and economic crisis incommon. While sharply different in terms of causes, geography, duration andother characteristics, all four were episodes in which institutions broke down. The
social structures that regulated how agents interacted with each other collapsed,
together with the notions of what was socially acceptable and what was not. The
money institutions were not an exception, as they ceased to be and do what was
expected of them. So, who made money? The variety of places and actors thatstarted complementary currency systems are as broad as the crises that embedded

150

Georgina M. Gómez et al.

them and the aims they pursued. We tend to find that the agents in the field, suchas municipal governments, citizens’ organisations and business associations, venture into issuing complementary currencies to resolve immediate emergencies.
First and foremost, complementary currencies appeared as devices to resolve
the needs for money in the local economies. In all four cases, there was evidence of hoarding metal bullion and other currencies perceived as more reliable.
The retention of money as reserve of value quickly affected the availability ofmeans of payment to perform trade. Stringent monetary policies to curb inflationand the need to use the metals for the war effort further dried the circulation ofmoney. Demand rose significantly for small denomination notes that were mostcommonly used in daily transactions and by low income segments of the population. The function of money as means of payment hence collapsed, and the
local solution of complementary currencies emerged as punctual, small scale andtemporary for daily transactions. Complementary currencies apparently emerge
first to fill in the gaps left by the regular monetary system in terms of smaller
denomination notes, implying that local complementary currency systems are
essentially low-denomination currencies. However, this proposition would
require further research.
The sequence in these cases suggests that the four key functions of money do
not necessarily fail at the same time. The function of unit of account apparently
collapsed last, and complementary currencies indicated their value in the established unit of account (marks, pesetas, dollars, etc.). Only in the most extreme
cases of the Spanish Civil War did some of notes refer to essential goods and notinclude a fixed value in a monetary unit of account; the local goods that sustained
the reproduction of labour or the labour born to obtain the voucher were used
as unit of account to value those notes. The sequence in which monetary plurality emerged and replaced the functions of money suggests that the role as unitof account is the ultimate or most essential function of money. In a discussion
on John Maynard Keynes’ Treatise of Money (1976 [1930]), Geoffrey Ingham(2004) identifies the unit of account as the primary and most basic function. In thecases referred to in this chapter, the replacement of an official unit of account for a
local unit of account rarely happened. When it did, and if the monetary authorities
had some capacity to react, the replacement of the unit of account at the local level
was interpreted as a serious contestation to monetary sovereignty. At the sametime, the issuers of the local currencies conceived their new units of account as
the foundations to build a different socio-economic system that would free themfrom the central monetary authority.
While the widespread dissemination of complementary currencies can be seenas the result of the chaos that prevailed during hyperinflation and war, their origins were bottom-up efforts to recover economic order, or at least some sense of
normality. The creation of local money centres on organising exchanges and canbe analysed as an attempt to re-configure institutions to sustain circulation andproduction when these are interrupted (Pacione, 1999). Agents identify the needfor tools of economic organisation and engage in the creation of institutions –monetary forms – that would perform that role. The background of chaos supports

Taylor and Francis

Not for distribution

The pervasiveness of monetary plurality 151
the emergence and acceptance of complementary currencies among groups thatwould normally not be open to such experimentation because weak money isperceived as a superior solution than no money. In political terms, the demiseprovided a window of opportunity to experiment and promote the restructuring of the social and economic system, although to different extents in the fourcases. Experimentation with money has the political connotation of challenging
the prevalent economic system that regular money serves. In post-war Germany
and Austria, depreciating currencies were tied to Gesell’s anarchist ideas aboutthe ‘natural order’ in which money should be exposed to loss of value like in thecase of agricultural products. In the case of the Spanish Civil War, the dissemination of political ideas of autonomy by the Popular Front was even more evident.
It later translated into a competition between the two armies for the issuanceof currencies such as currencies of the fascist and currencies of the communist
armies, which defined the ‘enemy’s currencies’ depending on the point of viewof the users. Emergency notes are of great importance for local economies toclimb out of social, political and economic demise. Like other issues in contexts
of war and demise, who makes money becomes an area of contestation, because
it denotes who enables economic life by organising exchanges and also who
provides social order.

Note

Taylor and Francis

1 www.billetesmunicipales.com

Not for distribution

References

Blanc, J. 2012. ‘Thirty Years of Community and Complementary Currencies: a Review
of Impacts, Potential and Challenges’, International Journal Of Community Currency
Research, 16, 1–4.
Boyer-Xambeu, M. T., Deleplace, M. G. and Gillard, L. 1994. Private Money and Public
Currencies: The Sixteenth Century Challenge, London: Sharpe.
Carothers, N. 1930. Fractional Money, New York: John Wiley & Sons, 1–90.
Cohen, B. K. 1999. ‘The New Geography of Money’, in E. Gilbert and E. Helleiner eds,
Nation-States and Money. The Past, Present and Future of National Currencies,
London, New York: Routledge, 121–138.
Cohrssen, H. 1932. ‘Wara’, The New Republic, 10th August.
Diessner, H. J. 2012. Deutsches Notgeld 1914–1924. Berlin: Gietl.
Fisher, I. 1933. Stamp Scrip, New York: Adelphi Co.
Fisher, I. 1934. Mastering The Crisis – With Additional Chapters On Stamp Script, London:
Kimble And Bradford.
Gatch, L. 2009 ‘A Professor and a Paper Panacea: Irving Fisher and The Stamp Scrip
Movement of 1932–1934’, Paper Money, March-April, 125–142.
Gesell, S. 1958 The Natural Economic Order, London: Peter Owen, 6.
Gilbert, E. and Helleiner, E., eds. 1999. Nation-States and Money. The Past, Present andFuture of National Currencies, London, New York: Routledge.
Graeber, K. 1978. Paper Money of the 20th Century, V. 3. Local Paper Money Issued
During the Spanish Civil War. International Bank Note Society.

152

Georgina M. Gómez et al.

Greco, T. 2001. Money: Understanding and Creating Alternatives to Legal Tender, WhiteRiver Junction, VT: Chelsea Green.
Ingham, G. 2002. ‘New Monetary Spaces?’ In OECD ed. The Future of Money. Paris:
OECD.
Ingham, G. 2004. The Nature of Money, Cambridge, UK: Polity Press.
Keynes, J. M. 1976 [1930]. A Treatise on Money, New York: Harcourt, Brace and Co.
Kingdon, J. W. 2003. Agendas, Alternatives, and Public Policies, New York: Longman
Classics.
Kuroda, A. 2007. ‘The Maria Theresa Dollar in the Early Twentieth-Century Red Sea
Region: A Complementary Interface Between Multiple Markets’, Financial History
Review, 14, 89–110.
Leyshon, A. and Thrift, N. 1996. Money/Space, London: Routledge.
Lindman, K. 2011. Schwundgeld In Deutschland. Freigeld-Freiland-Frei Wirtschaft
1916–1952. Gifhorn, Germany: Kolme-k Verlag.
López, I. and Lluch, A. 1983. Les Monedes De Les Cooperatives Catalanes 1850–1950.
Departamento De Cultura De La Generalitat De Catalunya.
Miró Agulló, J. B. 2008. El sello moneda de la República, Alcoi. Scribd.
Offe, C. and Heinze, G. 1992. Beyond Employment: Time, Work and the Informal Economy,
Cambridge, UK: Polity Press, 1–124.
Pacione, M. 1999. ‘The Other Side of the Coin: Local Currency as a Response to the
Globalisation of Capital’, Debates and Reviews, Regional Studies, 33: 1, 63–72.
Pick, A. 1978. Papiergeld Lexikon. Ed. Mosaik, Munich, Germany: Verlagsgruppe
Bertelsmann.
Proudhon, P. 1840. Qu’est-Ce Que La Propriété? Ed. Poche. Paris: Marcel Rivière.
Sánchez Asiaín, J. 2013. La Financiación De La Guerra Civil Española. Ed. Crítics.
Barcelona: Crítica.
Schuldt, J. 1997 Dineros Alternativos: Para El Desarrollo Local, Lima: Universidad Del
Pacífico.
Schwarz, F. 2006. Das Experiment von Wörgle. Ein Weg Aus Der Wirtschaftskrise,
Madrid: Synergia Verlag.
Shafer, N. 1974. Philippine Emergency and Guerrilla Currency of World War II, with
Special Support of Maurice M. Gould. Racine, WI: Western Pub. Co.
Tarrow, S. 1998. Power in Movement: Social Movements and Contentious Politics,
Cambridge, UK: Cambridge University Press.
Tortella Casares, T. 2008. ‘El Billete Español En La Edad Contemporánea, Mucho Más Que
Un Medio De Pago’, VII Jornadas Científicas Sobre Documentación Contemporánea
1868–2008. Madrid: Banco De España, 332–368.
Turró, I. and Martínez, A. 1982. ‘El Paper Moneda Català 1936–1939 1982’; ‘El Paper
Moneda Al País Valencià 1936–1939 1995’; ‘El Paper Moneda Catalá 1936–1939
1987’; ‘El Paper Moneda Catalá A La Franja De Ponent 1936–1939’. Editorial Afers.
Von Muralt, A. 1934. ‘The Woergl Experiment with Depreciating Money’, Annals of
Public and Cooperative Economics, 10, 48–57.
Von Prittwitz, W. 2014. Schwundgeld Español. AENP, Asociación Española De
Numismáticos Profesionales.

Taylor and Francis

Not for distribution

8Birth, life and death of a provincial
complementary currency from
Tucuman, Argentina (1985–2003)
Bruno Théret1

8.1 Introduction
This chapter discusses the complementary currency (CC), bocade, issued by theArgentinian province of Tucuman between 1985 and 2003. We shall first examine
when, where and why this currency was issued, how it functioned initially andhow it evolved. After this we shall give an evaluation of the bocade’s economic
efficiency and political viability. The questions we will tackle are: Has the bocade
been useful and successful? Has its value maintained parity with the national unitof account? Did it favour growth at the provincial level? Did it reduce the provincial debt?
This CC is of interest for several reasons. First, it has been the longest lastingof the Argentinian provincial CCs of the third and fourth waves of issuances presented in Chapter 5. Second, a significant amount of money has been issued via
this CC. Tucuman in 2002 was the fifth province in terms of amount of money
issued, after Buenos Aires, Cordoba, Entre Rios and Corrientes (Schvarzer and
Finkelstein 2003). Third, the bocade has left detailed quantitative traces allowing
a scrutiny of its economic and financial impact, thanks notably to the presenceof a numismatic association in the province which was concerned with the notes(Beckmann 1985, 2001, 2002, 2003; Hernandez Meson 2002). The fourth reason
is that it was possible to get access to good quality oral and written documentation, notably a book of political memories of the founding father of the CC(Cirnigliaro 2004), as well as good parliamentary archives and a provincial newspaper (La Gaceta) covering day to day adventures of the bocade. Eventually,
the heuristic interest of the Tucuman CC was outstanding since it is a provinceof small economic and demographic size that has played an important historic
politico-symbolic role in Argentina. It has always been on the forefront of provincial paper money issuance. Tucuman is at the heart of the peripheral region of
North West Argentina (NOA) where issuances of provincial money have been
directly linked to regionalist and federalist stakes. This experiment, therefore, has
not been completely conditioned by the provincial economic situation. The factthat it survived various economic and political crises on the federal level testifies
that it was not completely conditioned by external factors either. For all thesereasons the Tucuman bocade has been an exemplary manifestation of monetaryfederalism, and it is important to underpin this point.

Taylor and Francis

Not for distribution

154

Bruno Théret

8.2 Rebuilding the history of a long-lasting complementary
fiscal currency
The bocade was issued for the first time in August 1985 for an amount of 10 million australes and it was totally redeemed in August 2003, after no less than 40
issues (26 in australes, and 14 in pesos).
Figures 8.1 and 8.2 give an overview of the amounts issued in nominal anddeflated constant values.2 Due to the estimation method, real circulation is probably between the two curves in Figure 8.2.3
8.2.1 Why was it issued?
The bocade was not different from other provincial tax-backed monies issued
in response to local shortages of credit and currency. The Tucuman bocade is atypical example of currency finance, yet it is important to stress on two points.
First, money shortage can result from not only a deflationist regime, as was theconvertibility regime of the 1990s, but also from a high inflation regime as was
the austral regime in the 1980s. Second, the political and symbolical dimensionsof the emergence of the bocade seem important, as it is regarded as an instrumentof autonomy of a province belonging to the North-West Region of Argentina.
This dimension, combined with the fact that it has been significantly supported by
the Tucuman business class, could explain its lasting character.
When it was implemented, the first purpose of the bocade was to stabilise
political and social conflicts, notably between the government and civil servants(the local police was engaged in social unrest). It gave the provincial government

Taylor and Francis

Not for distribution

Figure 8.1 Evolution of the nominal value of the stock of bocades
Sources: Beckmann (1985, 2001, 2002, 2003); Cerro (1988, 2002); Cano et al. (1993); Hernandez
Meson (2002); Licari et al. (2003); Direccion de estadistica de Tucuman (2006, 2007, 2008, 2009).

Life and death of a complementary currency

155

Figure 8.2 Stock and circulation of bocades
Sources: Beckmann (1985, 2001, 2002, 2003); Cerro (1988, 2002); Cano et al. (1993); Hernandez
Meson (2002); Licari et al. (2003).

Taylor and Francis

Not for distributionmeans to immediately pay public employees their wages which had been delayedby several months. The purpose of the bocade was also to improve the publicfinances of the province by reducing the public debt and its heavy burden on thebudget. Rienzo Cirnigliaro, the Minister of Finance in charge of the implementation of the bocade, explains that:
We had found an empty coffer, one month and a half of wages’ debts, anticipated payments of revenue-sharing transfers, and moreover, late paymentsof wages with till 25 days of delay. There was a fall in federal transfers andprovincial taxes to be levied and interests on the debts contracted.
From August 1985, salaries were paid entirely, and the process of indebtedness due to belated payments of wages was stopped. The total debt wascompletely settled the 24th of December 1985. In five months we succeededin paying the equivalent of six and a half months of public wages, in a criticaland hard financial context. Till now the Bank of the Province of Tucumanwas helping financially the State, some months by advances of 80% of thetotal spending for salaries. At the end of 1985, the balance of the account of
the Province at the bank began to be positive.
(Cirnigliaro 2004, 116–117)

156

Bruno Théret

The fact that ‘the bocade was an excellent device for financing the fiscal deficit
and avoid financial costs’ (Cerro 1988, 335) was also recognised by two economic
studies. Cerro (1988) computed that in the period from August 1985 to September
1987, the difference between the cost of issuing and supporting the bocade andalternative modes of financing, either through the Provincial Bank and the regulated discount rates of the central bank (BCRA) or through the financial market,
was huge: the monthly cost was USD53.546 on one side, USD849.891 on theother, corresponding respectively to real interest rates of 0.83% against 7.25%(La Gaceta 23/11/1988).
A later study also concludes that the cost of issues of the austral bocade has
been low (about 4.5% for each issuance) and that the net financial benefit for theprovincial treasury – seignoriage and inflationary tax – was for the whole set ofissuances between 1985 and 1991 of around three (in 1992) or four (in 1985)
months of budgetary income (Cano et al. 1993, 11, 16, 19). The two studies conclude that ‘from a theoretical point of view, with the issuance of bocades, thegovernment has the possibility to get benefits and moreover to improve positively
the welfare of the society’ (ibid., 19). Nevertheless, they consider that the experiment affected this welfare negatively since the government was not able to backthe bocade at any moment in austral. This point will be discussed later.
The purpose of reducing the currency shortage was explicitly stated by
Cirnigliaro, but he does not see the bocade as a simple currency, but rather ‘an
instrument of short-term credit’, ‘a loan from the People to the State, with aninterest rate nil’ (Cirnigliaro 2004, 123).
Eventually the bocade, for Cirnigliaro, was an ‘instrument of provincial emancipation’ from the outstanding invasive power of the central government or still ‘afinancial instrument of a monetary nature, but of a federal character’ (ibid., 126).
Cirnigliaro is, thus, not far from regarding the CC as a symbolic manifestationof monetary federalism. For him, it was a potential instrument of re-negotiation
and adaptation of the federal monetary constitution, in order to take into accountthe detrimental effects on peripheral provinces of a centralised monetary policy.
In this perspective, he recalls in his book that during his office as Minister of
Economy, he had talks with his colleagues from the surrounding provinces ofJujuy, Salta, Catamarca and Santiago del Estero about a possible regionalisationof their respective bonds in order to guarantee their circulation at par in the whole
NOA – a project in which the Banco de la Provincia de Tucuman would have possibly operated as a clearing house (ibid.). This project did not go further, but it wascoherent and in line with the fact that Tucuman and La Rioja in 1985, as well as
Jujuy in 1986, had implemented the same type of bonds as Salta, the first province
to renew the issue of provincial currencies (Chapter 5).
These political and symbolic dimensions of the bocade that Cirnigliaro underlines are not the normative product of his imagination. They were shared by the
Peronist Governor of the province, Riera, who had hired him as minister andsigned the federalist sentence on the banner of the first series of bocade notes(Figure 8.3).
The federalist feelings of the Tucuman government echoed in the political probocade attitude of the provincial business community. In the display advertisement

Taylor and Francis

Not for distribution

Life and death of a complementary currency

157

Taylor and Francis

Not for distribution

Figure 8.3 The first bocade of Tucumán issued in 1985

presented in Figure 8.4, this attitude is clearly asserted. This poster, publishedon the 20 November 2001, stresses the importance of the ‘Tucuman Money’as a means of keeping alive provincial payments and trust. The significance ofthe bocade was appropriated by the business community, organised around theTucuman Economic Federation (FET). Convertibility of the bocade in peso wasthreatened by huge national restrictions on the peso supply. Thus, the bocade wasstill strongly supported by local economic interests in 2001 not only as an economic instrument, but also as a representation of their mutual inter-dependencies
and of their belonging to a territorial community of local development.
Nevertheless, Cirnigliaro was ambivalent, like the local business class supporting the bocade (La Tarde 17/02/1988; La Gaceta 03/03/1988). For instance, there
is a paradox in Cirnigliaro’s understanding of the status and future of the bocade.
On one side, he considers it as a ‘federal call’ because its ‘highest virtue’ was tobe ‘an instrument of defence of the decision-making powers or sovereignty of theprovincial states’ (Cirnigliaro 2004, 125), that is, a way ‘to reorganise the Nation’in order to tackle the fact that ‘legally we are organised as a federal country, but infact we constitute a unitary country’ (ibid., 126). He also, however, speaks of it asa ‘transitional instrument’ (ibid., 122), and of the possibility and even the necessity to redeem it as soon as the provincial public finances were in order:

158

Bruno Théret

Taylor and Francis

Not for distribution

Figure 8.4 Tucuman’s entrepreneurs supporting the bocade in 2001

If the governments that followed us would have stabilised public finances as
we have done it, in rationalising public spending, in making efficient social
spending, in increasing public investment and transforming the State into a
promoter of economic development, the subnational bonds would not have
had any motive to carry on during 18 years.
(ibid., 126–127)

Life and death of a complementary currency

159

But the politico-symbolic dimensions of the bocade seem to require its permanence, even if provincial finances are in order, once the structural reliance of provincial finances on federal financial and monetary policies are taken into account.
Thus, the initiator of the CC balances between an instrumental and unitary viewof money and a more sociological and pluralist one.
8.2.2 How did the bocade function at its outset and stabilise?
The bocade was issued and regulated by a legislative Act that shows how simple
and short (only three pages were necessary in the original form) the juridical work
to institute it was. Only eight articles of the Act 5728 (24/07/1985, Honorable
Legislatura de Tucuman) concern the issue of the bocade and its regulation:
Article 1 mainly defines the amount of issues authorised by the legislative
power. It stipulates an important rule of possible adjustment of this amountby indexation on a local price index.
Article 2 announces that the bocade is issued to the bearer, and that they havea limited life span fixed by law.
Article 3 stipulates that it is state money, a medium of payment of debts,
issued by the provincial treasury and rationed by the whole set of local State
organisations who can use it also for intrastate transactions. It specifies thatthe redeeming power of the bocade is equal to its nominal value. It defines
the use and holding of bocade as based on free acceptance, not on legal tender, and details that the CCs are accepted for taxes and other payments to the
public sector.

Taylor and Francis

Not for distribution

Article 4 states that the bocade is convertible at par with legal tender or federal money and exchangeable at the Bank of the Province instituted as a local
currency board, leaving the definition of the methods of actual exchange(periods, places and schedule) to decrees of the executive power.
Article 5 defines a possible use of the bocade for legal guarantees anddeposits.
Article 6 is relative to the possibility for bocades to pay interests during thefirst three months of its circulation (which has not been actualised).
Article 7 authorises the Executive to create lotteries and define the modes of
their functioning.
Article 8 suggests to municipalities to adopt similar norms concerning articles 3 and 5 of the Act.
Thus, it is defined a non-legal tender, tax anticipation scrip, a temporary bond ofredemption of debts denominated in the federal unit of account, and a CC convertible into the legal tender currency at par, until its date of nullity and under specificconditions fixed by the provincial government.

160

Bruno ThéretThis definition does not tell us how, beyond the apparent simplicity in legallydefining it, this currency and its regime of convertibility concretely functioned at
its outset in 1985 and adapted to changes in the economic and political environment. Before coming to that, we must specify that the bocade, under the formof notes of distinct small denominations (from 0.10 to 10 australes in the firstissues), was introduced into the economic circuit through wages and payments ofproviders of the public sector.
It then came back into the public coffers through two main channels. The firstchannel was through payments of provincial taxes and other public fees. It wasmost comfortable for the province, since it did not imply any change of bocade
for australes, but it was narrow because the autonomous revenue of the province
in proportion to its total public spending was only 20%. To enlarge this channel,
it would have been necessary to increase autonomous revenues, a difficult task.
The second channel was through exchange in australes at the Provincial Bank.
It was the most important to ensure the bocade’s credibility and a testimony ofcirculation without discount in the market sphere. The aim was then to minimise
the return of bocade to the treasury coffers. For this, lotteries were preferred to
payments of interest and occurred weekly, and on exceptional occasions entailed
four or five draws of the last numerals of the series’ number on the notes. The
People’s Provincial Savings Bank was in charge of these lotteries and delivered
weekly premiums of 20 times the value of the winning notes or, for exceptionaldraws, large cars or even houses.
The main means to extend use of the bocade in market exchanges waspeople’strust in the institution ensuring the parity between the bocade and thelegal tender. Effective convertibility into the austral legal tender cash in a reasonable lapse of time was another means to extend its use, especially for payments
outside of the province.
The Banco de la Provincia de Tucuman, as the financial agent of the provincial
treasury, was playing the role of such currency board. People could change their
bocades at its branches and counters, in the People’s Provincial Savings Bank,and also with a small discount in some other banks. There were, however, restrictions: the exchange was open only on working days during the 10 days between
the 18th and the 28th of each month. These restrictions allowed the bocade tofunction as a pure short-term credit instrument, since even if all the bocades incirculation were presented for change every month, the device gave time to theprovincial treasury, during the period of closure of the change, to collect australes
and so avoid liquidity problems. This credit was almost free, so the province wasable to reduce its floating debt.
Another effect was to allow the government to pay the monthly wages of public employees on time, and not late as had become usual. Thus, the bocade wasalso an instrument of social peace-keeping.
But it was financially much more interesting for the provincial government,
as well as for the business community in some regards, that the bocade remainedin circulation in the markets without being redeemed in austral every month.
Only under these conditions could it be a device for reducing monetary and credit

Taylor and Francis

Not for distribution

Life and death of a complementary currency

161

shortage and stimulating the local economy. Moreover, the fact that it stayed incirculation was proof of its credibility.
According to Cirnigliaro,
The first month was the hardest (September 1985). The 18th of the month,a true avalanche occurred at the bank. We had 9 million of australes in cash
for sustaining the change. The first day it was of nearly 7.5 million australes, while around one million were changed the second day. Afterwards,
there were practically no exchanges. We paid that month the wages in time,
and worked in order to gather the 10 million of australes we needed for the
next change. This time, on the first day, the amount of exchanges has beenless than 50% of our liquid assets at the Provincial Bank. In the subsequentmonths, at the end of the period of exchange at the Bank, the amount ofbocades applying for change represented 70% of the total issued. It was aclear signal that the people had acquired the trust necessary for a short-term
credit instrument functioning as a currency. The public held it, to the pointthat its acceptance was increasing.
(Cirnigliaro 2004, 122–123)
Cerro (1988, 326–327) gives a similar description of the functioning of the bocade
in its first two years and recognises that ‘the Tucuman community was supporting, holding, and using the bocades’.
Nevertheless, both Cerro and Cirnigliaro agree on the bocade being mismanaged. According to Cirnigliaro (2004, 124), it was used ‘as an inexhaustible
resource to finance (government’s) unbalances’. As for Cerro:

Taylor and Francis

Not for distribution

The bocades were not accompanied by policies aimed at building credibility,
supporting and trust. Lotteries were not promoted and were soon cancelled,
the maximum amount of authorised issuance was not respected, and theexchange in australes was always risky for bocade’s holders.
(Cerro 1988, 333–334)
Neither of them is an objective observer. As we shall see, Cirnigliaro, a politician,extends the success of his own administration to all the ‘federalist’ years of the
Riera government, and Cerro, an economist writing in a year when the bocade
was suffering its first ‘small crisis’ (La Gaceta 06/02/1988), was projecting thesituation of 1988 retrospectively on the two years of Cirnigliaro’s administration.
But to arrive at this interpretation, that is, to appreciate more objectively what has
been the effective state of affairs, more issues need to be analysed.

8.3 How did the bocade face the volatility of monetary policy
and scarcity of legal tender?
Starting from a general description of the different periods of its life, we shall
examine the successive national crises the bocade muddled through (1987–1988,

162

Bruno Théret

1990–1991, 1995–1996, 2001–2003). We first divide the bocade’s life into threestages, concurrently with the national currencies of austral, dollarised peso andnationalised peso. Then we divide the first and second periods into sub-periods,
while the third period is entirely one of crisis ending with the final redemptionof the bocade and its extinction. Through such historical analysis, our aim is tounderstand how the same provincial CC has been able to function in the framework of monetary regimes as different as those of the austral, the dollarised andthe nationalised pesos.
8.3.1 The austral bocade (1985–1991)
In the ‘austral period’, from 1985 to 1991, the bocade was denominated in australes, the national unit of account and means of payments that was created inJune 1985 by the ‘austral plan’. From August 1985 till June 1987, the bocade was
successfully implemented and managed by R. Cirnigliaro who, with a moderateissue and benefiting from relatively decent national economic circumstances in1986 (Table 8.1), achieved its good acceptance by the population as well as the
support of the local business class.
Later on, money and credit shortages led to an over-issuing of bocade at theend of 1987, and then to a crisis of its convertibility at the start of 1988 (Table 8.2;
Figure 8.5). This happened as the national macroeconomy was again deteriorating
and the national monetary policy, through the Plan Primavera, was trying unsuccessfully to tackle a climbing inflation that would end in hyper-inflation in 1989.
The crisis was initiated by issuances starting in July 1987 after the departureof Cirnigliaro from the Ministry of Finance, issuances that greatly overcame
the amount necessary to compensate inflation. His follower, Apaza, made fiveissuances between July and November 1987 that cannot be considered as simple adjustments to inflation and replacement of bocades out of circulation. The
crisis of credibility of the bocade linked to its loss of convertibility started on
23 September when Apaza suspended the redemption of bocades in what was
the usual period for that operation. The new governor, elected in December
1987, inherited this situation. In the first months of 1988, with fiscal revenues
and federal transfers reduced by the recession (−3%), the government could
not ensure the convertibility of bocades, now representing quite a large part ofmoney in circulation.
Responsibilities were shared: the over-issuance resulted from a growing
stagflation combined with the tightening of an already restrictive federal monetary policy, the provincial government was facing the quasi total closure of the
discount window at the Central Bank of the Provincial Bank, which was simultaneously excluded by the BCRA from clearing (La Gaceta 06/02/1988). Unable
to rediscount its credits, the Provincial Bank was lacking liquidity in australes.
Consequently, the institutional device ensuring the convertibility of the bocade
was momentarily interrupted, so credibility and confidence in the bocade wereat stake. The market discount rate for changing bocade into australes increased
strongly, reaching around 20% (La Tarde 30/10/1987).

Taylor and Francis

Not for distribution

Alperovitch

MirandaBussi

ArraozOrtegaDomatoRiera

Governor

Source: Guttierez et al. 2000a, 2000b.

1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

Year
TucumanArgentina

−7.0%
−5.8%
2.6%
2.2%
−4.6%
5.8%
1.8%
−3.0%
−7.2%
−2.5%
9.1%
7.9%
8.2%
5.8%
−2.8%
5.5%
8.1%
3.9%
−3.4%
−0.8%
−4.4%
−10.9%
8.8%
9.00%
9.2%
8.7%

Growth rate PBG

Growth rate PIB

Table 8.1 Growth and inflation between 1981 and 2006 in Argentina and Tucuman

Taylor and Francis

−5.7%
1.8%
4.9%
1.6%
−7.1%
2.1%
3.4%
0.9%
−15.2%
0.3%
10.5%
2.5%
6.1%
4.4%
2.5%
1.0%
7.7%
5.5%
−3.8%
1.5%
−0.2%
−8.0%
6.1%
8.9%
10.8%
10.4%

Not for distribution
131.3
209.7
433.7
688.0
385.0
81.9
174.8
387.7
4923.61343.9
84.0
17.5
7.4
3.9
1.6
0.1
0.3
0.7
−1.8
−0.7
−1.5
41.0
3.7
6.1
12.3
9.8

130.9
211.6
443.2
718.5
345.8
78.6
184.7
391.6
5325.2
960.0
75.2
18.4
8.9
5.1
5.0
0.6
−1.5
−0.2
−2.3
−1.3
−0.5
49.4
1.0
6.5
12.0
11.3

104.5
164.8
343.8
626.7
672.2
90.1
131.3
343.0
3079.52314.0
171.7
24.9
10.6
4.2
3.4
0.2
0.5
0.9
−1.2
−0.9
−1.1
25.9
13.4
4.4
9.6
8.8

100.6
167.6
362.1
629.9
620.1
100.6
133.2
350.3
3037.1
1939.2
146.2
22.8
12.1
5.5
5.9
1.9
−0.8
−0.4
−2.1
−1.4
−0.8
31.4
15.3
2.8
9.6
12.1

TucumanArgentina

Argentina

TucumanGrowth rate CPI % (yearlymean/yearly mean(t−1))

Growth rate CPI % (dec/dec(t−1))

Julio Araoz (interventor)

José Domato

1983/84
1985

Fernardo Riera

1991

1990

1989

1988

1987

1986

Year

GovernorAugustNovember
June
NovemberJanuary
March
April
May
July
AugustNovember
December
March
October
December
March
April
May
September
OctoberNovemberFebruaryMay
July
September
OctoberNovember
DecemberJanuaryMonth

Not for distribution

26th issuance

7th, 8th and 9th issuances
10th and 11th issuances
12th issuance
Destruction (-)
Destruction (-)
Destruction (-)
13th issuance
14th issuance
15th issuance
16th and 17th issuances
18th issuance
Destruction (-)
19th issuance
20th issuance
21st issuance
22nd issuance23rd issuance
24th issuance
25th issuance

6th issuance

1st issuance
2nd issuance
3rd issuance
4th issuance
5th issuanceIssuances

Table 8.2 Issuances and redemptions of bocades under austral standard

Taylor and Francis
24/3

2704/3505/31135/31562/3
1951/32101/32781/3

307/3 or 27779/3
504/3
850/3
1111/3 1349/3
1989/31148–1733–1885/3
2404/3 and 2944/3
475/3

766/3

12827/3
23885/3
1126/32808/3
98/3

Decree100,000,000,000

10,000,000
188,000
721,000
3,500,000
1,975,000
3,500,000
800,000
1,100,000
43,000,000
27,000,000
50,000,000
21,784,000
5,400,000
1,200,000
50,000,000
100,000,000
76,100,000
170,000,000
1,000,000,000
7,700,000
1,000,000,000
5,000,000,000
10,000,000,000
10,000,000,000
10,000,000,000
10,000,000,000
50,000,000,000

Amount issued

10,000,000
10,188,000
10,909,000
14,409,000
16,384,000
19,884,000
20,684,000
21,784,000
64,784,000
91,784,000
141,784,000
120,000,000
114,600,000
113,400,000
163,400,000
263,400,000
339,500,000
509,500,000
1,509,500,000
1,501,800,000
2,501,800,000
7,501,800,000
17,501,800,000
27,501,800,000
37,501,800,000
47,501,800,000
97,501,800,000
97,501,800,000
197,501,800,000

Nominal stocks
and bonds

Life and death of a complementary currency

165

Figure 8.5 Deflated stock and amount in circulation of bocades issued between 1985
and 1991

Taylor and Francis

Not for distribution

We can now bring together the evaluations of the period by Cerro and Cirnigliaro,
considering that both suffer from symmetrical memory lapses concerning the Riera
period: Cirnigliaro forgets to speak of the over issuances of his surrogate in the
Riera government, while Cerro forgets to speak of the careful policy of Cirnigliaro.
This crisis did not drive the experiment to an end, thanks to two innovations.
First, in order to uphold the circulation of bocades and reduce the pressure on
convertibility, a massive substitution of notes of 50 australes by small notes of
1 and 5 australes was operated (La Tarde 05/10/1987). Second, a new structural
device for the management of convertibility was implemented at the initiative of
the FET, the main business organisation of the province. From 17 February 1988
onwards, the convertibility of the bocade was managed in the new frame of theso-called ‘Operatoria – FET’ (La Gaceta 09/02/1988, 17/02/1988, 03/03/1988;
La Tarde 17/02/1988).
This reform of the convertibility regime was negotiated between the government, business groups, the Provincial Bank and the regional leadership of the
CGT (the Peronist Trade Union association). Holders were permitted to deposit
their bocades any time to special accounts in the Provincial Bank. As soon as
they were deposited, these bonds were usable at once by the treasury; meanwhile
holders had to wait five working days before the treasury redeemed them daily in
australes to cheque or time deposit accounts from 5% per working day up to 100%of the amount initially deposited.

166

Bruno Théret

The crisis was, however, not immediately resolved and lasted about twomonths more, since soon after the institutionalisation the government restrained
the scope of the device to 20% of the total amount of bocade issued. But with time
passing, and exploding hyper-inflation rapidly diminishing the value of the stockof bocade (Figure 8.5), the ‘Operatoria FET’ became the new central institutional
device for ensuring the convertibility of the bocade until 2003 (with some modifications in 1995, 2001 and 2002).
Indeed, this new regime of convertibility opened up a period for the austral
bocade which lasted until the end of 1991 and saw a quick and massive devaluation of the stock of bocade in circulation (Figure 8.5). The Primavera Plan was
not able to stop the dynamics of hyper-stagflation (hyper-inflation combined witha strong recession which reinforced it) that developed at that time. From the endof 1988, new massive issuances of bocade were made to maintain the purchasing power of the total bocades in circulation (Table 8.2). Though until inflation
reduced at the end of 1990, these issuances only slowed the speed of depreciationof the stock. In 1991, inflation was contained, and a strong recovery occurred(Table 8.1) with an appreciation of the stock of bocades. In the first term of 1991
the purchasing power of this stock came back to the value of the first issuancein August 1985 (Figure 8.5). Then we observe a new and slower depreciation
till November 1991, the date of the forecasted redemption of the entire stock of
bocade and its replacement by new ones denominated in dollarised pesos.

Taylor and Francis

8.3.2 The dollarised peso bocade (1992–2001)

As already mentioned, the bocade did not disappear with the change from austral to the new dollarised peso at the federal level. After an extension of two
years (until November 1993) in the redemption date of the last series of austral
bocades, new issuances were made of bocades denominated in pesos, one peso
being equivalent to 10,000 australes and immediately convertible at par with one
US dollar. Thus, a new period in the life of the bocade started, the ‘dollarised peso
period’, lasting from January 1992 to January 2002.
When the austral was destroyed by the hyper-inflationist process, the bocade
tightly linked to it could have also disappeared, like in Salta. All the more so,since the circulating bocades were to lose their legal value at the end of November
1991. But the governor, contested inside his own Peronist Party, was replaced in
January 1991 for the last year of his mandate by a federal ‘interventor’, Araoz,
who declared that the bocade should carry on.
Thus, the dollarisation of the peso did not kill the Tucuman bocade. A rebirth
Act – Act 6299 which simply modifies Article 2 of the Act 5728 of 1985 modified
by the Act 5866 of 1987 – was prepared by the federal interventor and voted inby the legislative power of the province in October 1991. It authorised the issueof bocades in the new national money which was to be put into circulation at thestart of 1992 (Figure 8.6). This Act allowed for new issuances of bocade, withoutchanging their forms and the modalities of their conversion in pesos, considering that they were ‘presently well accepted in the market’ and only needed to beadapted ‘to the new conditions established at the national level’.

Not for distribution

Taylor and Francis

Not for distribution

Figure 8.6 The bocade in peso issued in 1992

As shown in Figure 8.7, the monetary regime of the new bocade may be divided
into four sub-periods that do not fit exactly with the timing of the three successive
administrations of governors Ortega, Bussi and Miranda.
The first sub-period was one of transition and conversion from the austral to thepeso bocade, with few new issuances. It lasted till the Tequila crisis at the end of
1994 under Ortega’s government. Then in 1995, this crisis was the first challenge
to the dollarised peso regime. The Tucuman government reacted to the monetary
shortage by increasing strongly the amount of bocade in circulation (to be redeemedin 1999), thus avoiding recession: provincial GGP grew by 2.5% in 1995, meanwhile national GDP decreased by 2.8%, and for 1995 and 1996, total growth rates
were 2.7% and 3.5% for Argentina and Tucuman respectively (see Table 8.1).
In this Tequila sub-period from January 1995 to December 1996, the massive
increase in the stock of bocade from 30 to 80 million pesos (Table 8.3) did notthreaten its credibility and convertibility at par into pesos. In fact, the financial
and economic crises were more federal than provincial and the bocade did not
suffer any discount vis-à-vis the peso. The North-American economist Harberger,
who was observing on the spot and modelling the economy of the province at
the moment, claimed in December 1996: ‘Bocades circulate as if they were real

2001

Julio Miranda
2000

Antonio Bussi
1996
1997
1998
1999

January
December

1991
Ramon Ortega
1992
1993
1994
1995

November
DecemberFebruaryMay
January
April
November
December

Sept. Oct.

February
April
December
July
April

Month

Year and Governor

35th issue
36th issue
37th issue
38th issue
Destruction
Destruction

32nd issuance
33rd issue
Destruction
34th issuance2767/3750/3
7/3
1091/3

20/3
266/3
212/3
1918/3948/3

1274/33522/31176/32295/327th issuance
28th issuance
29th issuance
30th issuance
31st issuance
Destruction

24/3

DecreeNot for distribution

26th issuanceIssuance

Table 8.3 Issuances and redemptions of bocades under the dollarised peso standard

Taylor and Francis
30,000,000
12,000,000
12,000,000
400,000−400,000−11,000,000

30,000,000
15,000,000−45,000,000
10,000,000

15,000,000−50,000,000

1 Peso = 10,000 Australes
20,256,000
10,000,000
20,000,000
30,000,000

Australes: 100 million

Amounts issued or redeemed

45,256,000
55,000,000
55,000,000
85,000,000
97,000,000
109,000,000
109,400,000
109,000,000
98,000,000

197,501,800,000
197,501,800,000
19,750,180
20,256,000
30,256,000
50,256,000
80,256,000
80,256,000
95,256,000
45,256,000
45,256,000
45,256,000

Nominal stock of bonds

Life and death of a complementary currency

169

Figure 8.7 Deflated net stock of bocades issued between 1992 and 2003

money and are generally accepted at par within the province (though they are soldwith discount outside). We do not observe any significant discount in the local
market’ (Harberger 1996, 154).
Newspaper articles also inform that the bocade was well accepted in local markets in 1995 (Heredia 1995). ‘There is no problem with the circulation of bocades
because the Bank of Tucuman redeems them as usual, in accordance to the law’
(La Gaceta 24/11/1995). Only one article (La Gaceta 12/11/1995) suggests that thediscount rates were ‘between 1 and 10%’ and that ‘the situation became complicated in the last months as a result of doubts about the acceptance of the bocade forsome payments’. In fact, the journalist describes a well organised and costless system. Despite ‘Banco Nacion and branches of national private banks’ not receiving
bocades, at least three private and municipal banks ‘implemented the immediate
exchange in peso with a commission of 3%’, or ‘created custodian accounts fordeposits in bocades’. Moreover, the Bank of Tucuman, beside the official system
of Operatoria FET, received deposits of 50% in bocades that were ‘credited inpeso in 72 hours with a rebate of 1% for interest’, and ‘redeemed also the bocadesof other banks, with a commission of 2% on the total amount’. Thus, rather thana situation of crises with large speculation this article shows a good integration of
the bocade in the local economy. Another virtue is that convertibility of the bocade
was a permanent constraint on the credibility of the provincial government, even if
the bocade was well received in the local market. Lastly, it gives an evaluation of
the costs of transaction of the bocade in the markets at around 3%.
Bussi’s government followed the current path during its first year of administration (1996), but from December 1996, after the recovery from the Tequila crisis, heopened up a third period aiming at redeeming the entire stock of bocade and taking
it out of circulation (Salvador 1997). Hence, this sub-period represents the first open
political crisis of the bocade, questioning its existence through its replacement by amassive appeal to more costly public debt (Act 6796 enacted 02/12/1996).

Taylor and Francis

Not for distribution

170

Bruno ThéretThus, 50 million bocade, nearly half the total stock, were withdrawn from circulation and destroyed in April 1997 (Table 8.3; Figures 8.8 and 8.9). Bocades
were a short-term, non-interest-bearing credit from local citizens and were
replaced by long-term (10 years) costly public debts contracted on financial
markets. Eurobonds were first issued on the international market in 1997 and represented 64% and 61% of the total of public bonds in 1998 and 1999 respectively,that is around 35% of the total public debt in 1998 (Yañez et al. 2000, table 8.12).
In 1999, their share declined (26% of the whole debt), but this was compensatedfor by loans from the World Bank. The interest rates were either 9.45%, or the
Libor floating rate (around 6% at this time).
Table 8.4 shows the depth and speed of the change in the structure of Tucuman’s
public debt in these years, as well as the two main features of the change: floating debt is replaced by long-term public bonds on financial markets and national(government and banks) debt is replaced by international debt (from financial
markets and the World Bank). It is also in this period that privatisation of theprovincial bank took place (May 1996) and the new bank, Banco del TucumanSA, acted as the exclusive financial agent for the provincial treasury (Clarke andCull 1999).
Governor Bussi’s attempt to get rid of the bocade fell short. In 1999, a new
financial crisis occurred in East Asia, Russia and Brazil, depriving Latin Americancountries of external financing. The Argentinian monetary base was fully dependent on inflows of foreign capital under the convertibility regime, so a four-year
long recession followed. Bussi was not able to find new funding and, as national
government and banking funds shrunk, he had to return to the bocade. He issued
45 million bocades to redeem those whose redemption was due and added a net
issuance of 10 million before leaving office (Act 6969 enacted on 29/11/1999).
The first two years of governor Miranda’s government (2000 and 2001) form
the last sub-period of the life of the dollarised bocade. As the recession deepened,

Taylor and Francis

Not for distribution

Table 8.4 Changes in the structure of the stock of Tucuman’s public debt under the Bucci
government
Types of borrowing (%)

1996

1997

1998

1 National government
2 Banco Provincia
3 Floating debt
4 Consolidated debt
(1+2+3+4)
5 Banking and financial institutions
6 Issuances of public bonds(5+6)
7 International financial institutions(5+6+7)
Total stock (millions of current $)

  6
  6
26
  1
39
32
18
50
11
61
931

5
2
23
2
32
5
54
59
10
69
1,001

3
2
17
1
23
9
51
60
16
76
1,047

Source: Yañez et al. 2000, cuadro 10 and anexo estadistico.

Life and death of a complementary currency

171

provoking the defeat of the Justicialist Party at the presidential federal election of
1999, the new provincial government, an alliance between Peronists and Radicals(UCR), carried on enlarging the quantity of circulating bocade. Legal authorisations for the issuance of 42 million in 2000 and 12 million more in January 2001
pushed the total stock up to 109 million, which is nearly twice the amount inJanuary 2000 (Table 8.3; Figure 8.7). Nevertheless, the entire stock was not even
immediately printed. In July 2001, it was estimated that only 70 million bocades
were effectively circulating of a stock of around 79 million, an amount lower
than the threshold of 80 million. This was considered by local prominent economist, Victor Elias, as a limit not to exceed to avoid risking the credibility of the
bocade (La Gaceta 11/07/2001). In September, there were still only 77 million
bocades circulating and 10 million kept in reserve (La Gaceta 07/09/2001) but inNovember their amount reached $98 million (La Gaceta 16/11/2001; Beckmann
2002, 3). With the recession, the only way for the province not to go bankrupt
was to issue more bocades. The expected difficulties of maintaining the convertibility of bocade at par with pesos, while increasing their amount in circulation,
drove the provincial government to implement different measures at the end of
July 2001.
Firstly, in parallel to the Operatoria FET, fixed term deposits in bocade(between 90 and 180 days) were introduced for large holders. By depositing
bocades at the Banco del Tucuman, these holders could immediately receive
cheques endorsable ir usable to pay provincial taxes. On completing their terms,
holders of the deferred cheques yielded an interest of maximum 12%, and bocades
were changed in peso at par (La Gaceta 24/07/2001). Moreover, account holders
were exempt of the stamp provincial tax. Due to the potential cost of the device,
the government was willing to keep it under control by not fixing its different
parameters like the minimum amount of deposit in the time accounts ($5000 at theoutset), their duration in function of the province’s available resources in pesos,
and the minimum amount for the deferred cheques (of $500 at the outset) (LaGaceta 11/07/2001). By July, 25 million bocades were still, however, estimatedto be waiting for conversion to national pesos, that is, 36% of the circulation and
32% of the stock (La Gaceta 29/07/2001).
In the second semester of 2001 the crisis of the national convertibility regime
was worsening, and the federal government was reducing transfers. Pesos were
becoming scarcer at the provincial level (Figure 8.8). Therefore, as seen in
Chapter 5, a new wave of provincial quasi-monies spread throughout the wholecountry and even the national government issued its own CC, the lecop, in orderto pay a large share of its transfers to provinces. In Tucuman, it mainly entailed
immediate difficulties in the functioning of Operatoria FET (Cirnigliaro 2004,
268). Meanwhile, one of the largest monetary, economic, financial, political andsocial crises that Argentina has ever known was about to burst and the provincial
government reacted with three measures.
On 15 November 15, the government abruptly increased the term for redeeming bocades to pesos from 35 to 60 days through the Operatoria FET (La Gaceta
15/11/2001). The outcome was that the market discount rate of the bocade,which had started to climb slightly above 4% in October (4.5%), jumped

Taylor and Francis

Not for distribution

172

Bruno Théret

Figure 8.8 National transfers to provinces from January 2001 till July 2002
Source: Universidad Catolica Argentina (2002).

immediately to 7% in December (Figure 8.9) as soon as a preliminary discussion of extending this term to 45 days had been held (La Gaceta 15/11/2001).
The measure, taken without any concertation, provoked a ‘crack’ since banks
refused to receive bocades, and in the loan sharks’ offices, the bocades were
exchanged at a 10% discount. Nevertheless, ‘entrepreneurs supported it cautiously, asking only for some adjustments and flexibility of application’ (LaGaceta 16/11/2001, and Figure 8.4).
In December a decree instituted the ‘Operatoria Paralela’, allowing some companies holding deposits of more than 40,000 pesos to obtain lecops without the standard‘Operatoria FET’ delay (Beckmann 2002, 2). Thus, ‘between the 10th of December
2001 and the 8th of April 2002, the government changed $41 million in lecops toseven “privileged” firms’ (Cirnigliaro 2004, 267–268). In December, confidence inthe bocade was also weakened by suspicions about the issuance of counterfeited $20
notes in September (La Gaceta 07/09/2001); 11 million in bocades suspected of thisforgery were destroyed. A legislative Act was also passed, stating that public andprivate firms delivering public services had to receive bocades and/or lecops at theirnominal values without restrictions (Act 7171, enacted 13/12/2001). Ultimately, thedelay of the Operatoria FET was reduced in January 2002 to 56 days (a return to thestandard term of 35 days occurred in June 2002).
These measures may explain why until October 2001 the discount rate of the
bocade stayed at 4% (or less), despite significant increases in the stock of bocades
in 2000 and January 2001. On the contrary, the increases in December 2001 andMarch 2002 impacted immediately and cumulatively the discount rate till May
2002 (Figure 8.9). Due to massive social unrest, December 2001 was the culmination point of the crisis of the peso convertibility regime, which was abandoned on
11 January 2002. Then a new period was opened, the last in the life of the bocade.

Taylor and Francis

Not for distribution

Life and death of a complementary currency

173

Taylor and Francis

Figure 8.9 Tucuman bocades from January 1999 to May 2003
Source: BCRA 2003.

Not for distribution

8.3.3 The nationalised peso bocade (2002–2003)

In January 2002, the currency board regime was broken down and Argentina
returned to a nationalised peso and a so-called ‘pesification’ of debts. In 2002
Argentina was hit by an annual fall in the national GNP of about 11% and a strong
devaluation of the peso against the dollar (Table 8.3), accompanied by widespreadsocial unrest, political instability, poverty exceeding 50% of the population anddeeply negative redistribution of wealth caused by the ‘pesification’ (Luzzi 2012).
In Tucuman, the crisis was also deep and multidimensional, with an 8% fall in
GDP and a 49.4% (Dec/Dec) inflation rate. Unlike the hyper-inflation crisis of
1989–1991, it brought about a crisis of confidence and shook the credibility ofthe bocade; its market discount rate reached 14% against the peso, a rate neverobserved before.
As shown in Table 8.5, the Miranda government proceeded between
January and March 2002 to make large issuances of 20 and 50 million bocades
respectively, which multiplied its nominal stock by 1.77 times, increasing
the difficulties in securing its nominal value and convertibility at par. Theseissuances were justified by the state of emergency inherited from the Bussi
government.

174

Bruno Théret

Table 8.5 Issuances and redemptions of bocades under the nationalised peso standard
Year

Month

Issuances

2001
2002

DecemberJanuary
March
June
June
July
AugustDestruction
39th issuance
40th issuance
Destruction
Final
Redemption

2003

Decree10/3
350/3
Rescate federal(155,000,000)
destruction

Amount issued
or redeemed

Nominal stockof bonds−11,000,000
20,000,000
55,000,000−4,000,000−102,000,000−53,000,000
12,000,000

98,000,000
118,000,000
173,000,000
169,000,000
67,000,000
14,000,000
2,000,000

Official convertibility of the bocade was paralysed during most of the year.
The debt in bocades waiting for conversion in the various forms of Operatoria
FET amounted to 70 million at the end of September 2002 (La Gaceta
23/09/2003). Therefore, the exchange of bocades in cash was possible only ata fairly high discount rate. In daily trade the acceptance of bocades declined or
its value was discounted.
The situation improved only in June, when the discount rate started to decrease
slowly to a more sustainable level of 7.2% in 2003 (Figure 8.9). Yet from October
2002, federal transfers increased and an agreement with the IMF committed thenational government to get rid of the provincial CCs. The bocade was now on theway to being killed, a death programmed for May 2003. So, the bocade ultimately
did not survive the violent crisis of the currency board regime and its various consequences, but it was not because the device was inefficient and flawed in itself,
as proven by its long-standing resilience and support by local entrepreneurs. The
crisis of the peso bocade in 2002–2003 was very similar to that of 1987–1988 of
the austral bocade. The bocade could have survived this crisis had it not been on
the radar screen of the IMF.
As its founder recalls, ‘The bocade disappeared at the expense of high provincial fiscal costs, at the requirement of the IMF to redeem these monies because
they were ruining the business of the external and eternal debt’ (Cirnigliaro
2004, 264).

Taylor and Francis

Not for distribution

8.4 Was the bocade actually useful and successful?
The bocade was a successful device in the sense that it lasted in the long run
and was supported by the provincial markets. We also noticed that at the time ofmonetary crises affecting the federal unit of account and legal tender, it had been
mobilised efficiently, despite the weak autonomous tax capacity of the Province
on which it was backed, and its correlative dependance on federal fiscal transfers,
as an anti-cyclical device and a shock absorber, allowing the province to grow at
a higher rate than the national economy. Eventually, we saw that the Tucuman CC
regime was able to change through institutional innovations in order to maintain

Life and death of a complementary currency

175

the convertibility of the bocade and therefore, its characteristics of a CC. These
conclusions are not based on an extensive quantitative assessment, making themlikely to be unacceptable by many economists. This section aims at substantiating
our positive assessment.
Usually two indicators allow an evaluation of the quality of a monetary policy:
the exchange rate of the national currency into an outside money considered as astable standard of value, and the purchasing power measured by a consumer priceindex. In the case of regional monies that is also what has been used, for instance,
by Grubb (2008 and 2012) in his studies of the monetary experiments in currency
finance in the British colonies which became the United States of America. These
indicators are important to appreciate the viability or the resilience of money. But,
if we do not assume that money is neutral but impacts growth and debt regimes,
the quality of a monetary regime cannot be reduced to the stability of these prices
of money. Local fiscal CC are issued with a special purpose, to stimulate the local
economy, including non-market production, and reduce the public debt. Their
efficiency resides at this level. Therefore, to assess the viability and the efficiencyof the Tucuman CC, we have to look into four dimensions.
One, was the bocade convertible at par into australes or pesos in the long run?
Two, did the bocade add local inflation to the national one? Three, did the growthof the Tucuman Gross Provincial Product (GPP) improve while bocades were
circulating? Four, did it reduce the provincial public debt?
Unfortunately, it is very difficult to answer these questions in a truly scientific
way for three reasons. Firstly, provincial data is scarce and often not fully reliable.
Secondly, it is impossible to use a contrafactual methodology to evaluate what
the specific impact of the bocade on either inflation or growth would have been.
Thirdly, many variables, exogenous and endogenous, other than the presence of a
fiscal CC, impact the evolution of the quantitative indicators we need in order toanswer the above four questions in a reliable way. A comparative approach basedon studies of other provinces, those with or without the implementation of a fiscal
CC, would be necessary for this. Since there are no such studies, the following
evaluation must be seen as the first attempt to sift through the existing data.

Taylor and Francis

Not for distribution

8.4.1 Was the bocade at par with the austral and peso?
The discount rate on the local financial market of the bocade vis-à-vis the legal
tender is surely a good indicator of its level of acceptance by the public and,theoretically, it is an observable variable. Unfortunately, we lack systematic dataon this rate, especially for the austral period. Our guess, drawn from fragmented
information in newspapers (La Tarde, La Gaceta, La Nacion, etc.), interviews
and literature, is that the parity of the bocade with the austral as well as thedollarised peso was effectively maintained in the long run, which explains its
resilience. As seen earlier, the discount rate of the bocade deteriorated and overtook the usual transaction costs only in 1988 and 2002–2003. These two crisesof convertibility were caused by temporary over-issuance in stagflation contexts
associated with stringent federal monetary policies. The discount functioned as a

176

Bruno Théretself-regulatory force in 1988 as well as 2002–2003, even if in the last case external actors blocked self-regulatory mechanisms. During the pesification crisis,
despite an unfavourable position as a poorer and less autonomous province than,for instance, Buenos Aires and Cordoba, the bocade did not depreciate as muchas other CCs.
The bocade suffered exchange costs of between 1 to 10% in the informal
economy, and probably around 3 to 4% in the private banking sector, as documented in 1995–1996. Whatever the exchange cost, it ought not to be taken as anindicator of depreciation of the bocade vis-à-vis the national all-purpose and allprovince money. Present shopkeepers incur in transaction costs when they receive
payments via different credit or payment cards. This fee is mainly a liquidity discount rate that all credit instruments suffer. Moreover, in the context of growing
hyper-inflation in 1987–1989, a discount rate of 10% was less than the officiallyregulated Central Bank discount rate (Cerro 1988). The same is observed in the
period 2001–2003 (Figure 8.10).
Many sources confirm that the public and businesses in Tucuman ‘trusted the
bocade as a financial device’ (Salvador 1997), despite the discount to exchange
the bocade into legal tender. As long as the bocade was backed by provincial
taxes and convertibility at par, as guaranteed by the Operatoria FET, and with reasonable delay, the bocade was trusted. Thus, given the capacity of the Tucumangovernment supported by the local business community, the bocade’s credibility
could have been restored by adjusting its process of conversion at par and to
reduce its market discount rate without having to redeem it in 2003.

Taylor and Francis

Not for distribution

Figure 8.10 Interest rates (1994–2006): real, on deposit and on lending

Life and death of a complementary currency

177

8.4.2 Did the bocade accelerate local inflation?
For Thomas Greco, an early observer of monetary plurality in Argentina, theanswer to this question is a logical ‘No’. Inflation is the depreciation of legal
tender, while the depreciation of a CC against legal tender takes the form of anincreased discount rate. ‘For this reason, a regional or provincial currency cannot
cause inflation’ (Greco 2001, 81). Inflation appears as a complex phenomenon, if
we do not endorse the quantitative theory of money. A properly issued, not debased
provincial CC may participate in local inflation by enlarging the provincial monetary base. Likewise, if a CC increases the velocity of the circulation of money,
it can affect the local prices. Moreover, inflation is not equally distributed in timeand space. Thus, the current monetarist discourse on the inflationist character offiscal CC must also be addressed empirically. Do the theoretically higher transaction costs of monetary plurality really explain the higher price level in Tucuman,
compared to the national level (La Gaceta 13/10/2001; Cerro 2002, 19)?
The local evolution of the purchasing power of the national unit of account is acomplementary indicator of this efficiency. The problem with provincial CCs likethe bocade is that inflation or deflation may be massively imported, which makes
it difficult to isolate the imported inflation from the local one, possibly linked to
local issuance.
For Tucuman, we can compare historical monthly series for the Consumer
Price Index for Gran Tucuman (the capital and its agglomeration) with the equivalent series for Gran Buenos Aires, which is generally taken as representative of
the consumer price level for all of Argentina. Both indexes are built on the same
methodological bases, so we could ceteris paribus attribute differences between
the two to the bocade.
Figure 8.11 displays the ratio of the two consumer price indexes (CPI), base100 for both in 1985. We observe that inflation rates in Tucuman and Buenos
Aires are generally close but always differ. Prices in Tucuman are lower thanthose in Buenos Aires after 1991, unlike ever before. Thus, the convertibility plan
has had a huge impact on the hierarchy between the two price levels. Moreover,
the ratio shows fluctuation margins of about 5%. It is difficult to observe any
impact of the bocade on the Tucuman price level. During the bocade’s lifetime,
we find years when prices increased faster in Tucuman than in Buenos Aires, butalso years when it was the opposite. We observe the same type of fluctuations inperiods without the bocade. In fact, as shown in Figure 8.12 which displays thedifference between the two indexes, the number of years in which price increases
are higher in Tucuman is similar to the number of years when the opposite is true.
Therefore, it is not possible to conclude a specific structural inflationist effect of
the bocade on the price level in Tucuman.
However, it is necessary to consider short-term factors in Tucuman as wellas in Buenos Aires that could explain the fluctuations in price indexes in both
places. In Figure 8.11, the evidence is not only that deflation introduced by thenational convertibility plan has been stronger in Tucuman than in Buenos Aires,but also that the relative price level in Tucuman compared to Buenos Aires

Taylor and Francis

Not for distribution

178

Bruno Théret

Figure 8.11 Relative level of Tucuman and Buenos Aires CPI

has increased during the three national crises of 1987–1988, 1995–1996, and
2002–2003. During these crises, the stock of bocades grew a lot and reachedaround half the value of the province’s own resources and about 10% of its total
expenditure (Figure 8.13).
As in two of these crises, the increase, coupled with the increasing discount ratesof the bocade, ran contrary to Greco’s theoretical reasoning that over-issuance ofa CC only affects its discount rate in the market. But the evidence is also thatthese short-term periods of local overinflation are followed by periods of decreasein the relative price index, which means that the bocade was not inflation prone

Taylor and Francis

Not for distribution

Figure 8.12 Differences between the annual rates of variation of CPI

Life and death of a complementary currency

179

Figure 8.13 Stock of bocades related to provincial own resources and total expenses

per se. Moreover, the fact that the local response to the Tequila crisis was more
inflation prone than in Buenos Aires, but did not threaten the confidence, credibility
and trust in the local money, points out that inflation per se is not necessarily acriterion for inefficiency of a monetary policy. As Table 8.6 shows, either witha complementary provincial money (1985–2003) or without it (1980–1984 and2004–2006), under a threshold more inflation means more growth through time aswell as through space.

Taylor and Francis

Not for distribution

8.4.3 Did it improve provincial economic growth?
During the Tequila crisis, enlarging the bocade’s circulation appeared successful
for countering the credit crunch and curving the recession (Table 8.1). Similarly,
from 1999 to 2002, the cumulated fall of GDP was 19.5% for all of Argentina,
while it was only −13.5% for Tucuman’s GPP. If we take only the last three
years of the dollarised peso, 1999–2001, the data shows −8.6% and −2.5% forArgentina and Tucuman respectively. If we focus on the Miranda government’s
first two years (2000–2001), when there were still no tensions regarding the credibility of the bocade, we obtain −5.2% for Argentina and +1.3% for Tucuman.
Thus, it seems that, at least for the dollarised peso period, the CC improved theprovincial economic situation significantly in crucial times.
But Table 8.6 also exhibits periods with the circulating bocade when economic
growth in the province was weaker than for the whole country. Thus, if we wantto identify the conditions of a positive, nil or negative impact of the bocade on
growth, we have to explain this impact in a more systematic way, despite thelimitations in the availability and quality of data, for instance data relative to0.62%−0.71%−0.53
0.9%−7.42%
10.5%
2.72%
2.11%
4.33%
1.75%
6.60%
−0.83%
2.0%
5.64%−0.95%
10.03%−2.00%−0.09%
1.00%−3.0%−4.85%
9.1%

2.80%
2.16%
7.30%
1.35%
6.00%
−2.87%
0.9%

4.96%−1.05%
8.97%

TucumanArgentine

More inflation and more growthLess inflation and less growthLess inflation and more growthMore inflation and less growth

Peso moneda nacional
1981–1984
Austral
1985–1991
1985–1987
1988
1988–1990
1991
Dolarised Peso
1992–2001
1992–2003
1992–1994
1995–1996
1997–1998
1999–2001
1995–2001
Dedollarised Peso
2002–2006
2002–2003
2004–2006

GPP growth rate

GNP growth rate
Tucuman

Buenos Aires

Not for distribution
12.6
22.4
6.1

2.8
6.0
9.6
0.9
0.5
−1.3
−0.2

1054.4213.9
387.7
3133.8
84.0

365.7

16.0
25.2
9.9

3.2
6.9
10.8
2.8
−0.9
−1.4
0.0

1051.6203.0
391.6
3142.675.2

376.0

Dec (T)/Dec(t−1)

CPI

Table 8.6 Average yearly growth rates of GNP–GPP and CPI by periods: Argentina and Tucuman compared

Taylor and Francis
12.4
19.7
7.6

4.2
6.7
13.2
1.8
0.7
−1.1
0.3

971.7
297.9
343.0
2696.8
171.7

310.0

Buenos Aires

CPI

14.2
23.4
8.2

903.8
284.6
350.3
2488.1
146.2
1.0
4.3
7.5
13.5
3.9
−0.6
−1.4
0.3

315.1

TucumanYear.M.(t)/Year.M.(t−1)

Life and death of a complementary currency

181

Tucuman’s GPP and the fact that a contrafactual or comparative method is out ofreach. Besides, a contrafactual or comparative method is unviable.
In spite of these limitations, the data comparing growth rates of Argentina
and Tucuman allow for a first assessment of the impact of the bocade. In Figure
8.14 we see not only the volatility of the Argentinian macro-economy, but also
important annual differences between the growth rate of Tucuman’s GPP and thenational GNP. As annual differences are either positive or negative, the differences in the medium and the long run are smaller, as shown in Table 8.6. Between
1981 and 2006 we count 14 years in which Tucuman grew faster than the national
average, 8 slower and 4 at the same rhythm. With bocade the count is nine faster,eight slower, and two similar, a more balanced oscillation (Table 8.7).

Taylor and Francis

Not for distribution

Figure 8.14 A comparison between Argentinian and Tucumani real growth rates
Source: Direccion de estadistica de Tucuman (2006, 2007, 2008, 2009).

182

Bruno Théret

Table 8.7 Number of years Tucuman grows faster or slower than Argentina as a whole
Periods

PositivedifferenceNo
difference

Negativedifference

1981–2006
Periods without bocade:1981–1984
2004–2006
Periods with bocade: 1985–2003
Austral bocade 1985–1991
Peso bocade 1992–2003

14
5
3
2
9
4
5

4
2
1
1
2
0
2

8
0
0
0
8
3
5

This could mean that the bocade was a factor of a stronger integration of
the economy of Tucuman into the national economy, something that Table 8.6
suggests also: average growth rates in Tucuman and the whole of Argentina arecloser during the bocade period (all the more in the dollarised peso period) thanin other periods when, on average, Tucuman grows faster. It also suggests that,on average, bocades were not an incentive to local growth.
However, qualitative information and the strong support that the Tucumanbusiness class gave to the bocade invite further analysis. Figure 8.14 shows thatgrowth rates in Tucuman were higher when the issuance of bocades was stimulated by a context of deep crisis at the national level. They were also higher andreached significant levels as a fraction of public spending and fiscal resources(Figure 8.13). In these periods, the provincial government was maximising its
capacity to issue bocades by pushing to the limit its constraint of convertibility
at par. To the contrary, in more normal years the constraint of convertibility wasworking as a straitjacket, especially because provincial resources backing the CC
were structurally limited in a province with a weak tax base. So, we can assume
that to have a positive impact on growth, the issuance of a fiscal CC must reacha minimum threshold and must stay under a maximum threshold to maintain its
convertibility without market depreciation. This finding is consistent with otherresearch (Gómez and Dini 2016).

Taylor and Francis

Not for distribution

8.4.4 Did it reduce the provincial debt?
The fourth question concerns provincial debt. Was the bocade an efficient device
to reduce it? Here the answer is clearly yes, since the bocade provided muchcheaper credit than bank loans and public securities. In the 1980s, bocades allowed
the Tucuman provincial government to considerably reduce the cost of its floatingdebt and avoid the snowball effect which might occur in case of its consolidation.
In the 1990s, Table 8.8 and Figures 8.15 and 8.16 show that in the second halfof the decade high interest rates and an economy in recession were favourable
to snowball effects and accumulation of public debt. Bussi’s policy of massive

Life and death of a complementary currency

183

Table 8.8 Tucuman stock of public debt (% of GPP)
1993

1994

1995

1996

1997

1998

1999

2000

2001

5.5

9.7

11.5

15.1

15.6

14.7

16.2

18.8

22.9

Source: Macian de Barbieri (2002), table 1.

public debt contracting, combined with a strong cut in the stock and circulationof bocades, were the cause of a strong increase in the stock and the burden of the
Tucuman public debt (Yañez et al. 2000, 18–19). As costly 10-year term publicbonds replaced a significant part of the bocades, these were not able to play thecontra-cyclical role which they had during the Tequila crisis.
Moreover, in 2002, the major part of this debt contracted under the form of
eurobonds was considerably increased by the strong devaluation of the peso visà-vis the dollar. Thus, Bussi public indebtedness pushed the deterioration of theprovincial public finances in the following years, with payment of interests reaching 40% of provincial public spending (La Gaceta 07/09/2002) (Figure 8.15).
This was what pushed the Miranda government in 2002 to issue more bocades
than it was possible to back by federal legal tender (pesos and lecops) (La Gaceta
26/10/2002).
The capacity of quasi-monies to reduce provincial ‘sovereign’ debt is still displayed in this period, albeit in a negative way. A look at the 1988 and 1993 peaksof the debt burden in Figure 8.16 shows that these peaks occur in periods when
there is a relative decrease in circulation of the bocade, which suggests the substitutability between allegedly inflationist quasi-money and public debt.

Taylor and Francis

Not for distribution

Figure 8.15 Share of provincial debt interests in the total provincial expenditures
Source: Macian de Barbieri (2002).

184

Bruno Théret

Figure 8.16 Provincial debt burden, debt redemption and amount of bocades

8.5 Conclusions

Taylor and Francis

Compared to more well-known examples of provincial CCs such as the patacon,
which emerged during the monetary crisis of 2001–2003, from a political pointof view the Tucuman experiment was important for its permanence. It was not
an emergency device and it shows that provincial CCs, under the form of tax
anticipation scrips, are not only second best temporary innovations but can also
be sustainable and resilient instruments addressing structural problems in federal
political orders. The bocade was a fiscal CC coherent with the long-term structureof the Argentinian federation, where peripheral provinces are submitted to central
policies that do not fit their needs, and have to compensate for the drawbacksof political and fiscal federalisms. Therefore, it is an innovation that is precious
for conceiving new, credible and resilient forms of monetary systems adapted toactual political orders of a federal type that do not conform necessarily to perfectly coherent philosophical models of federalism.
From an economic point of view, quantitative data, though fragmented andsometimes precarious, confirm that despite bad pre-conditions for its success andthe weak fiscal autonomy of the province, the bocade was a successful institutionthat lasted and delivered what it promised: it allowed the province to deliver public
services while reducing the public debt. Under specific conditions, it stimulated the
local economy without being inherently inflationist and/or depreciated. Moreover,being complementary and contra-cyclical, the bocade has been a factor of stabilisation. It was able to transform large national crises into smaller provincial crises: it
reduced the consequences of national monetary turbulences at the local level.

Not for distribution

Life and death of a complementary currency

185

Political resilience and economic efficiency are not inherent virtues to any CC.
They depend on the fulfilment of several conditions. Resilience supposes a capacity of the provincial government to build confidence, credibility and trust in thelocal money, a capacity to forge social commitments, to regulate social and territorial conflicts, and to mobilise historical regional identities as well as to put inaction politicians and civil servants (Théret and Zanabria 2007). The long-run
resilience, through evolution of the Operatoria FET, illustrates the existence ofsuch capacity in Tucuman. Efficiency in reducing the public debt and stimulating
the local economy also supposes conditions more or less hard to fulfil. As we haveseen, the impact of the bocade on provincial growth seems to have been limited intime (1995–1996 and 2000–2001), and this limitation was likely the outcome ofa ‘hard convertibility constraint’ combined with a weak autonomous tax capacityof the province.
As suggested by L. Gatch (2012, 22–23) in relation to the tax anticipation
scrips issued by US cities in the 1930s, the level of a CC circulation must be
maintained between two thresholds, a minimum under which there is no local
effect on growth, and a maximum above which the CC is no longer sustainable.
Thus, to be perfectly efficient is to be able to reduce public debt without inflationand promote a local economy less dependent on external fluctuations. Federal
monetary policy with a local fiscal CC hence requires a minimum mastery of its
tax base by the local public power.

Notes

Taylor and Francis

1 The author warmly thanks Alexandre Roig and Miguel Zanabria, the former among
other things for alerting him to the Tucuman bocade as a long-run monetary experiment,
the latter for nice and fruitful discussions, and for his crucial help in collecting data andbuilding the field research. The author thanks also Guillermo Perez-Sosto and the Casade la Provincia de Tucuman in Buenos Aires for recurrent support to the field research in
San Miguel de Tucuman, as well as all his informants from Tucuman – political actors,
civil servants, economists and others – who have helped him to rebuild this tentative
history of the bocade.
2 The sources for the data are Beckmann (1985, 2001, 2002, 2003), Cerro (1988, 2002),
Cano et al. (1993), Hernandez Meson (2002), Licari et al. (2003).
3 As only a part of the entire stock of bocade was circulating, we estimated the part in circulation from Cerro (1988) for the period 09/1985–09/1987 and by extrapolation for theperiod 10/1987–11/1991 (using the means ratio on the period covered by Cerro: 60%).
Fragments of information in newspapers were also helpful to fix this ratio at 60%. For
the period of the dollarised peso bocade we applied this ratio of 60%, which is supported
by information from the Central Bank (BCRA 2002, 43). It is likely to be a minimum
rate, especially in periods of national monetary shortage, as during 2001–2003.

Not for distribution

References
BCRA. 2002. Boletin monetario y financiero. Edicion anual. Buenos Aires: Banco Central
de la Republica Argentina.
BCRA. 2003. Informe monetario mensual. Buenos Aires: Banco Central de la Republica
Argentina. Febrero.

186

Bruno Théret

Beckmann, G. A. 1985, 2001, 2002, 2003. Boletin 1, 2, 3, 4 et 5, San Miguel de Tucuman,
Argentina: Centro Numismatico de Tucuman.
Cano, S. C., Druck, P. and Flaja, J. L. 1993. ‘Una evaluacion economica de los ‘bonosde cancelacion de deudas’. El caso de Tucuman’, La Economia del Tucuman 9. San
Miguel del Tucuman, Argentina: Fundacion del Tucuman.
Cerro, A. M. 2002. ‘De la Anarquia Monetaria al Crecimiento’, Indicadores economicos ysociales 1: 11, 18–19, 31–32. Universidad Nacional de Tucuman.
Cerro, E. R. 1988. ‘Estudio Financiero del bono emitido por el Gobierno de la Provincia
de Tucuman’. In Anales de la Asociacion de Economia Politica XXIII Reunion Anual.
La Plata.
Cirnigliaro, R. 2004. Tucuman– Argentina. El festin de los caranchos, San Miguel deTucuman, Argentina: Editorial Kerigma.
Clarke, G. R. G. and Cull, R. 1999. ‘Provincial bank privatization in Argentina: the why,
the how, and the so what’, Policy Research Working Paper 2159, Washington, D.C.:
World Bank.
Direccion de estadistica de Tucuman 2006, 2007, 2008, 2009. ‘Evolucion del Producto Bruto
Geografico de la Provincia de Tucuman’, Informe PBG 2005, 2006, 2007 and 2008.
Gatch, L. 2012. ‘Tax anticipation scrip as a form of local currency in the USA during the
1930s’, International Journal of Community Currency Research 16: 22–35.
Gómez, G. M. and Dini, P. 2016. ‘Making sense of a crank case: monetary diversity inArgentina (1999–2003)’, Cambridge Journal of Economics 40.5: 1421–37.
Greco, T. H., Jr. 2001. Money. Understanding and Creating Alternatives to Legal Tender.
White River, VT: Chelsea Green Publishing Company.
Grubb, F. 2008. ‘Testing for the economic impact of the U.S. Constitution: purchasing
power parity across the colonies versus across the States, 1748–1811’, NBER Working
Paper 13836. www.nber.org/papers/w13836
Grubb, F. 2012. ‘Is paper money just paper money? Experimentation and local variationin the fiat paper monies issued by the colonial governments of British North America,
1690–1775’, NBER Working Paper 17997. www.nber.org/papers/w17997.pdf
Guttierez, J. I., Cerisola, J. A., Yañez, D. E, Lopez Cleip de Sosa, A. and Amoroso de Maza,
M. T. 2000a. ‘Exportaciones y Desarollo Economico Regional. Tucuman (1983–1999)’,
Informe Estadistico 20. Universidad Nacional de Tucuman. November.
Guttierez, J. I., Cerisola, J. A., Yañez, D. E. and Rollan, P. 2000b. ‘Nivel de Actividad
y Ocupacion. Tucuman (1990–1999)’, Informe Estadistico 23, Serie Investigaciones.
Universidad Nacional de Tucuman. November.
Harberger, A. C. 1996. ‘Una vision de la economia de Tucuman’. In La economia deTucuman, edited by V. Elias, 147–192, San Miguel de Tucuman, Argentina: Fundacionde Tucuman.
Heredia, R. 1995. ‘Donde reciben los bonos’. La Gaceta July 27.
Hernandez Meson, A. 2002. Bonos de cancelacion de deudas de la Provincia de Tucuman.
Catalogacion General. San Miguel de Tucuman, Argentina: Centro Numismatico de
Tucuman.
Honorable Legislatura de Tucuman. Digesto Juridico. Acts between 29/07/1985 and04/02/2003. www.hlt.gov.ar/digest_main.html.
La Gaceta. 1984–2003. Articles about the bocade. San Miguel de Tucuman, Argentina.
La Tarde. 1984–2003. Various articles about the bocade. Buenos Aires.
Licari, J. M., Calgagno, J. C., Oviedo, J. M. and Pellegrini, S. 2003. ‘Cuasimonedas provinciales. Medición absoluta y comparada’. Documento del Observatorio de la Economia.
Universidad Nacional de Córdoba.

Taylor and Francis

Not for distribution

Life and death of a complementary currency

187

Luzzi, M. 2012. La monnaie en question. Pratiques et conflits à propos de l’argent lors dela crise de 2001 en Argentine, PhD. diss., Paris: Ecole des Hautes études en sciences
sociales.
Macian de Barbieri, L. A. 2002. ‘Diez años en las Finanzas Publicas de la Provincia deTucuman, Presupuesto, Gastos y Rendimentos, 1992–2001’, Documento de trabajo.
San Miguel del Tucuman, Argentina: Fundacion del Tucuman. Agosto.
Salvador, D. 1997. ‘Panorama Tucumano. Adios a los bonos. El rescate no admite improvisaciones’, La Gaceta January 9.
Schvarzer, J. and Finkelstein, H. 2003. ‘Bonos, cuasi monedas y política económica’,
Realidad Económica 193: 79–95.
Théret, B. and Zanabria, M. 2007. ‘Sur la pluralité des monnaies publiques dans les fédérations. Une approche de ses conditions de viabilitéà partir de l’expérience argentine
récente’, Economie et Institutions 10–11: 9–65.
Universidad Catolica Argentina. 2002. Informe semanal de coyuntura economica 7,
August 14.
Yañez, D. E., Cerisola, J. A, Guttierez, J. I., Kreisel de Ruiz, L. and Lopez de Corbalan,
F. M. 2000. ‘Analisis de las Finanzas del Sector Publico de Tucuman. 1977–1999)’.
Informe Estadistico 21, Noviembre. San Miguel de Tucuman, Argentina: Universidad
Nacional de Tucuman.

Taylor and Francis

Not for distribution

9Community currency and sustainable
development in hilly and mountainousareas
A case study of forest volunteer activities
in Japan
Yoshihisa Miyazaki and Ken-ichi Kurita1

9.1 Introduction
Since the Great East Japan Earthquake of 11 March 2011 and the resulting
Fukushima Daiichi nuclear disaster, the Japanese have become more interested
in self-sufficient local energy. Many local governments have focused on the diffusion and development of renewable energy – such as solar, wind and biomassenergy – as well as the formation of intra-regional economic circulation. Suchefforts were possible only because of a sharp decline in nuclear power dependence and regeneration of sustainable local communities in accordance with theliving environment of local residents. Community designs, thus, focus on intraregional economic development and social ties, while taking advantage of natural
resources. The increase in activity at the local community level can generate amultitude of benefits, such as an increase in employment opportunities and nonresident population. In addition, community currencies (CCs) have attracted
attention as a tool to support community development projects (CDPs) at the
local level. Some places have redistributed revenue from natural energy electricity sales as CCs or have distributed CCs to reward environmental conservation
activities. In this way, there is an increase in the momentum of CC circulation
among local and intra-regional residents.
However, there has not been sufficient research into the role of CCs and theirimpacts on CDPs. This study aims to clarify the characteristics of intra-regional
circulation systems using CCs. We use a case study on forest volunteering activities to analyse the perceptions and behaviour of both volunteers and CC users.
Studying people’s perceptions regarding life satisfaction and reward mentality isimportant because different mentalities have different effects on the sustainabilityof CC circulation. Based on these findings, we discuss CC’s role in CDPs that use
forest resources as well as the problems and prospects that accompany sustainablelocal community development.
The subject of our study is the non-profit organisationTosa-no-Mori Kyūentai(hereinafter referred to as Kyūentai) based in Kochi Prefecture and the CC issued
by Kyūentai called ‘Mori-ken’ (hereinafter referred to as MK). Our analysis of

Taylor and Francis

Not for distribution

Community currency sustainable development 189
the CC system consists of interview results and other primary or secondary datain order to assess forest volunteers’ perceptions. From 24–26 August 2011, wepolled Kyūentai, local shopkeepers and a local bank. We distributed the questionnaire to forest volunteers and local residents between 27 August and 24 October
2011. At that time, we adopted the snowball sampling approach, which is a
research method where study subjects recruit future subjects from among theirpersonal acquaintances. The questionnaire has 54 questions on three topics: community living, volunteering activities and community currency. We received 49
responses from 176 people (response rate: 28%. The attributes of the respondents
are indicated in an endnote). In addition, data were analysed using SPSS 21.0.
Based on these findings, this study attempts to provide a multi-dimensional evaluation of MK circulation, and of the perceptions and behaviour of volunteers andCC users.
The case study analysis proceeds as follows. In Section 9.2, we summarise
the current situation, issues and solutions of the hilly and mountainous areas, andalso review previous relevant research. Based on the summary, we describe why
CCs are needed for sustainable development of these areas. In Section 9.3, we
account for Kyūentai’s activities and the CC circulation scheme based on previous research and existing literature. We also clarify the significance and featuresof CCs according to our survey findings. The impact on local residents and theeffects of introducing CCs cannot be understood merely by observing CC systems. Therefore, using the findings of our questionnaire survey, we analyse theforest volunteers’ perceptions and behaviour in Section 9.4. Lastly, Section 9.5
offers a summary of the results and concluding remarks.

Taylor and Francis

Not for distribution

9.2 Circumstances and issues of the hilly and mountainous
areas of JapanA ‘hilly and mountainous area’, which is the focus of this study, includes flatlands
comparatively far from urban areas and inter-mountain zones; in addition, thepercentage of forest area and the gradient ratio of land are both high. In Japan,
hilly and mountainous areas constitute approximately 65% of the total land area
and about 13.6% of the population resides there. These areas constitute about
80% of Japan’s forest and approximately 43% of them are used for cultivation,
having relatively abundant natural resources compared to other areas (Ministry ofAgriculture Rural Development Bureau 2009, p.1). Since Japan’s forests accountfor such a huge percentage of the land, sustainable development in hilly andmountainous areas is a highly important subject in Japan.
Previous research shows three perspectives on the value of hilly and mountainous areas (Niigata Prefecture Nagaoka City 2006; Teranishi, Yamakawa, Fujitaniand Fujii 2010; Ohnishi, Odagiri, Nakamura, Ando, and Fujiyama 2011). First,
the natural resource based industries rely on land, forests, water and minerals of
the hilly and mountainous areas. Therefore, areas abundant in natural resources

190

Yoshihisa Miyazaki and Ken-ichi Kurita

are crucial to agriculture and forestry. Second, these areas not only produce crops
and wood, but also conserve land, protect source water and preserve the naturalenvironment (Science Council of Japan 2001). Third, these areas promote the coexistence of humans and nature. Beyond their specific value, they provide natural
resources to urban communities. Therefore, it is important for Japan to sustain themultiple values of its hilly and mountainous areas, which consist of the provisionof local foods and natural resources, conservation or reproduction of natural environment and diversity of local culture and tradition.
As these areas face challenges, significant effort and funding are required tosustain them. In particular, the areas’ aging demographics and depopulation mean
there are fewer forestry workers and volunteers to contribute to forest management, resulting in a decline in forests and community degradation. Under current
conditions, the multi-functionality of the hilly and mountainous forest is not being
sufficiently managed, resulting in grave impacts on the global environment withregard to CO2. In addition, it is increasingly difficult to sustain the lives of local
residents and community functions. Some researchers have coined the phrase‘marginal hamlet’ (Ohno 2005), which refers to local societies where ‘hollowing
out of population, land, and hamlet’ refers to the process they have undergone(Odagiri 2009 and Odagiri 2012). Thus, people are turning toward sustainable
CDPs to resolve these issues.
As local residents proceed with the sustainable CDPs, they are obliged towork on problem solving initiatives and alter the flow of human resources, natural resources and money. In particular, they need to think about how they candiscover the potential of local resources in order to foster and use them. In thisregard, a community needs sufficient funding or money flow to manage humanand natural resources in the sub-region. However, owing to the stagnation ofmoney flows, local economies and communities are quite challenged. Therefore,businesses and/or communication must be revitalised and new intra-regional circulation systems built for linking human resources, natural resources and money.
For example, ‘the intra-regional reinvestment power’ as advocated by Okada(2005) has great potential as a policy for changing intra-regional money flow.
It should be noted that CCs have the potential for new intra-regional circulation. Community currencies are defined as a supplement to conventional money
not only for exchange, but also for expression of gratitude for volunteering activities, mutual aid or regional contributions within a community. By combining
economic and social transactions, community agents create new relationships
among local residents and alter perceptions regarding such actions. Considered
an intra-regional circulation medium, CCs may promote the circulation of humanresources, natural resources, money and information.
In Japan, CCs are distributed as a reward for volunteering and environmental conservation activities and can be used for shopping in local stores (Kurita,
Miyazaki and Nishibe 2013). Through the use of CCs by CDPs, local residents
show their preference for revitalising shopping districts and supporting volunteering activities. However, it is very difficult to design sustainable intra-regional
circulation systems and many areas face challenges in terms of CC circulation

Taylor and Francis

Not for distribution

Community currency sustainable development 191
flows. In Japan, the first CCs could only be used in volunteering activities related
to social welfare and mutual aid (for example, Fureaikippu, Eco-money, etc.).
As Nishibe (2006a) has pointed out, this type of CC is strongly dependent on thecommunity and presents its challenges such as shortage of CC circulation flow orcommunity participation. Subsequently, CC coupons have also appeared which
could be used in commercial transactions but as Yamazaki (2013) pointed out,
this type of CC flows mostly into commercial transactions and may not lead torebuilding relationships in the community. Under these circumstances, our casestudy, Kyūentai, has been active for more than ten years promoting the sustainableintra-regional circulation model it designed using CCs in the hilly and mountainous areas of Japan.
As previously mentioned, Kyūentai considers the role that CCs play in achieving sustainable CDPs. This study focuses particularly on how CCs are positioned
within CDPs, how intra-regional circulation is designed and how the introductionof CCs changes the perceptions and behaviour of participants in CDPs such as forest volunteers and CC users. By looking at the existing state of these aspects, we
can discuss how CDPs use CCs for sustainable development of hilly and mountainous areas and the sustainability of intra-regional circulation systems. In thenext section, we provide an overview of Kyūentai’s activities and clarify the significance of intra-regional circulation systems that use forest resources and CCs.

9.3 The forest volunteer activities of Tosa-no-Mori Kyūentai

Taylor and Francis

9.3.1 Background on the establishment of Kyūentai

Not for distribution

The Kochi Prefecture land area (710,000 km2) is covered with lush forests: thegreatest forest coverage (approximately 84%) in Japan. In all, 57% of privately
owned artificial plantations require thinning. However, due to the aging of private forest owners, it is very difficult to sustain forest management. In order tocorrectly use lumber resources and sustain the multi-functional role of the forest (such as preservation of national land, water resources, natural environment,
public health, prevention of global warming) and supply of forest products, woodlands must be continuously managed in an appropriate way (Forest Development
and Environment Department 2012, p.1). Despite the abundant natural resources,
tertiary sector industry, such as retail and service, is the backbone of the Kochi
Prefecture economy. Just 12.7% of all available employees work in this sector.
As a result, forest management is neglected. In order to solve this problem, many
forest volunteer associations have been established and even the former governorof the Kochi Prefecture has said that volunteers are needed to solve the problems
resulting from an emigrating workforce. Thanks to this declaration, the Prefecture
staff was able to establish forest volunteer associations. One such association,
Kyūentai, was approved as a non-profit organisation in 2003. It had 64 memberson 1 April 2013, and its main purpose is to support forest management practices.
The members of Kyūentai have extensive knowledge and experience
because they draw on the expertise of professional foresters and the local

192

Yoshihisa Miyazaki and Ken-ichi Kurita

residents. In addition, supporting members such as local shops, agricultural
farms and fruit gardens also assist the organisation. Kyūentai collaborates
with forest volunteer associations in Kochi, private firms (Shikoku Bank,
Ltd, Mitsui & Co., Ltd, ToTo, etc.), local governments (Ino Town, Niyodo
Town, Kochi City, Kochi Prefecture, etc.) and other organisations (National
Land Afforestation Promotion Organisation and the New Energy and Industrial
Technology Development Organisation). It supports a wide range of activities
such as offering technical guidance, financial support and knowledge. Thus,
local governments, private firms and NPOs take on forest projects based on thecooperation of labour in Kochi.
9.3.2 An outline of Kyūentai’s activities
Kyūentai seeks to manage natural resources properly and to make the community
liveable. Its three main activities are: (i) maintaining and conserving the forest,(ii) training volunteers and promoting environmental education, and (iii) managing the forest. In these activities, Kyūentai seeks bottom-up public participation,
partly through the aforementioned educational programs and partly throughrenewing traditions, such as self-cutting and small-scale forestry, thus striving torestore forests and rural areas.
Forest volunteers build strip roads, thin trees and carry the thinned wood.
These activities are not only major tasks of the traditional forest industry, but
are now also regarded as having multi-functional purposes including protecting
watersheds, biodiversity, traditional culture, etc. The Tosa-no-Mori model, which
is at the core of the organisation’s activities, has three aspects. First, forest volunteers work cooperatively toward forestry preservation, helping forest owners, whovery often comprise single-person or aged households. Volunteers effectively thin
the forest and carry the wood using light cables and other tools. In addition, thethinned wood is classified as for sale in the market. What cannot be sold is used as
firewood, chips and pellets. After necessary expenses are covered, the profit fromthe sales is distributed among forest owners and volunteers using money or CCs.
Second, people with little or no experience can learn about the significanceand methods of forest activities through research, symposiums and green tourism.
Kyūentai aims to spread knowledge and skills through training and environmental
education. In the past, conventional forestry has been entirely left to specialised
workers, such as those in the forestry business or forestry cooperatives. However,non-specialised individuals such as volunteers, supporting businesses and so on
now participate in these activities. Kyūentai removes the entry barriers to forestry, thus augmenting the workforce available for maintaining the woodlands. It
promotes interaction between volunteers and outside participants through eventsand visits. The organisation also undertakes projects such as running forest volunteer associations in other prefectures and offers technical support to newly
established groups.
Third, Kyūentai has constructed a regional self-sufficient energy system for creating sustainable energy using local resources, such as the lumber from thinning.

Taylor and Francis

Not for distribution

Community currency sustainable development 193
Through the effective use of local resources, the environmental burden can belessened. As a part of this system, Kyūentai established the Tosa-no-Mori Firewood
Club in November 2010. In this club, volunteers cut thinned wood to a practical size for household use in stoves or bathtubs. Kyūentai uses these activities tosupport the reconstruction of regions affected by the Tohoku earthquake and thetsunami of 11 March 2011.
In sum, Kyūentai’s approach to forest maintenance is of great significancebut their measures are not sufficient to ensure the sustainability and regenerationof hilly and mountainous areas. Therefore, we should note the existence of MK,
which is given in return for forest volunteering activities and which links humanresources, natural resources and money donated by some local organisations or
volunteers, and aids in the sustainable development of hilly and mountainous
areas. In the next section, we describe the intra-regional circulation system thatuses MK.
9.3.3 Various circulation schemes of the Mori-ken
The key to the success of Kyūentai’s activities is a paper type CC known as MK.
The design is shown in Figure 9.1. Kyūentai gives MK to volunteers as an expression of gratitude. It consists of coupons given to people who have taken part in
activities to maintain the forest (either by donating labour or money). MK rewards
both direct and indirect participation that supports Kyūentai’s activities. These
coupons are designed to encourage cooperation in the revitalisation of hilly andmountainous areas.
The following is an overview of the specific MK circulation scheme (Figure 9.2),
which is issued mainly on the basis of funds received as investments and donations from individual members and companies. Giving CC as a token of gratitude
for volunteering carries the expectation that it will promote the exchange of local
goods and intra-regional economic development. Kyūentai issues them freely

Taylor and Francis

Not for distribution

Figure 9.1 Mori-ken

194

Yoshihisa Miyazaki and Ken-ichi Kurita

䛆Funding䛇

People, Firm,
Bank

Donation
Gratitude䛆Issue䛇Tosa-no-Mori
Kyūentai
Gratitude

䛆Redemption䛇
䛆Circulation䛇

Forestvolunteers

Mori-kenn

Local
productss

Local shop

Money

Kochi
Shizen Mura

Mori-ken

Local shop

Ref undMoney

RefundMoney

Figure 9.2 Circulation flow of MK

within the limits of these received funds. On an average, 2,500 to 3,000 coupons
are distributed every year, with 3,286 coupons issued in 2009 and 2,703 in 2010
(Table 9.1). The unit of MK is ‘mori’ and users can not only express gratitude,
but also exchange one mori for a local product (made and sold in the activity area)
priced at or under 1,000 JPY.
There are three ways to obtain MKs: (i) taking part in the forest maintenanceof Kyūentai, (ii) taking part in preparing firewood with the Firewood Club, and(iii) funding Kyūentai. MK serves as a proof that people have participated asforest volunteers. In addition, special MKs (coloured MKs), which are issued tothose who take part in special activities, can be used at specific gas stations. Forest
volunteers can exchange MKs for local products multiple times until the executive office pays them off. Therefore, MKs can be used in transactions among local
shops, possibly helping the revitalisation of economic activities of the area, justlike CC coupons.

Taylor and Francis

Not for distribution

Table 9.1 Outline of Kyūentai’s activities
Year

2009

2010

Activities

RegularmeetingSpecialactivities

RegularmeetingSpecialactivities

Number of times
Number of participations
Number of issued MK

  12
373
3286

236
1933

  12
180
2703

189
2268

Source: NPO Tosa-no-Mori Kyūentai ‘Financial Statement’.

Community currency sustainable development 195
Ultimately, supporting shops will give MK back to Kochi Shizen Mura(a voluntary association for the adjustment of MKs) or the MK fund and they
will receive the same amount of JPY in return. By using MK, users can support
local shops, promote local product exchange and reduce the outflow of money
to areas outside the region. For example, when a volunteer exchanges MK for a
local product that costs 700 JPY, the sellers will receive 700 JPY from the Kochi
Shizen Mura when MK is returned. MKs will be given back to Kyūentai throughthe MK fund. Subsequently, 1,000 JPY per MK will devolve from Kyūentai to
the MK fund. As a result, the difference between 1,000 JPY and the price of thelocal product is kept as a donation to the MK fund, which can be used for issuing
new MKs.
Thus, MK is slightly different from CCs or local coupons (gift certificates)
and it is recognised as an exchange coupon for local products. This type of CC
supports many activities in hilly and mountainous areas through multiple circulation flows. Kyūentai circulates MKs as a way of thanking forest volunteers or
the companies, banks and others who support it. Then, the participants exchange
their MKs for local products or put them toward local consumption. Kyūentai hastaken over the knowledge and skills of the traditional forest industry through thesepractices. Moreover, it has sustained forest conservation activities, thanks to theinteraction and cooperation within and outside the area and has encouraged intraregional circulation by involving local stores. This circulation is important for theregeneration of hilly and mountainous areas. At the same time, the CC has acted
as a medium to connect humans, materials and money.

Taylor and Francis

Not for distribution

9.4 Perceptions and behaviour of the participants in
Kyūentai activities

9.4.1 Participants’ perceptions of forest volunteering activities
In order to analyse the perceptions of forest volunteers (Table 9.2), we looked
at life satisfaction, community perceptions and reward perceptions. To assess
the status of the forest volunteers, we presented the following question: ‘Did
you participate in volunteering work?’ Individuals answered this question on a
five-point scale (5: monthly; 4: once every couple of months; 3: once or twicea year; 2: once a year; 1: never). Overall, 66.7% of the participants were thendivided into two groups consisting of those who volunteered frequently or rarely(monthly and less than monthly), and those who never volunteered. In the firstgroup, 45.8% volunteered frequently, 20.9% rarely and the second group consisted of 33.3% who never volunteered. Life satisfaction was measured with asingle item question on an 11-point scale: ‘How satisfied are you with your life,
all things considered?’ Responses ranged on a scale from 0, completely dissatisfied to 10, completely satisfied.
Figure 9.3 presents the correlation between the frequency of volunteering andlife satisfaction. The descriptive statistics show a positive relationship between
the two factors. On an average, people who never volunteer reported the lowest life

196

Yoshihisa Miyazaki and Ken-ichi Kurita

Table 9.2 Profile of the respondents
Items

N (ratio)Sex(N=47)
Age(N=44)
Occupation(N=42)

Male
Female39 years and below
40 years and over
Agriculture workers
Self-employed
Local government employees
Company workers
Unemployment
Others
Hilly and mountainous areas
Urban areas
Other areas

Place of residence(N=46)

35 (74.5%)
12 (25.5%)
8 (19.9%)36 (6.2%)
4 (9.5%)6 (14.3%)
9 (21.4%)
5 (11.9%)
8 (19.0%)
10 (23.3%)
17 (37%)20 (43.5%)
9 (19.6%)

satisfaction scores (mean of 5.8 points), whereas people who volunteer frequently
or rarely reported high scores (7.0 points, or 1.2 points higher). The difference issizeable and highly significant statistically. This analysis is consistent with thatby Meier and Stutzer (2008).
Next, we determined the differences in community perception among volunteer
activists. Community perception was captured by the following question: ‘Whatis your perception of your community?’ Seven responses were possible: 1) A tie
exists in the community; 2) Cooperation exists among organisations; 3) Local
residents aid each other; 4) Affection exists in the community; 5) It is necessary
to activate people; 6) I would like to continue to live in this community; and
7) I would like to contribute something. The responses were rated on a scale of
1 (low) to 5 (high). Table 9.3 presents the correlation between forest volunteeringand community perception. On an average, people who volunteered frequently

Taylor and Francis

Not for distribution

7.5

life satisfaction

7.0

7.0

6.5

5.8

6.0
5.5
5.0
frequently and rarely

never

Frequency of volunteering

Figure 9.3 Frequency of forest volunteering and life satisfaction (p-value=.054*)

Community currency sustainable development 197
Table 9.3 Frequency of forest volunteering and community perceptions

1 A tie exists among people in thecommunity
2 Cooperation exists amongorganisations
3 Local residents aid each other
4 Affection exists in the community
5 It is necessary to activate thecommunity
6 I would like to continue to live inthis community
7 I would like to contributesomething.
N

Frequently
and rarely

Never

Difference

p-value

3.81

3.57

0.24

.503

3.23

3.43

−0.2

.541

3.68
4.16
3.94

3.43
3.57
3.93

0.25
0.59
0.01

.495
.095*
.983

3.97

3.71

0.26

.487

4.26

3.57

0.69

.008**

31

14

Note: **p-value<.0.5; *p-value<.10, two-tailed test.

or rarely reported high scores on responses 4 and 7, which concern community
affection and the wish to contribute. The mean for community perceptions of
those who never volunteered was 3.57 points for responses 4 and 7. For those who
volunteered frequently or rarely, the mean for response 4 was 4.16 points (0.59
points higher) and 4.26 points for response 7 (0.69 points higher). The differences
are sizeable and statistically highly significant. Thus, forest volunteers have highlevels of positive community perceptions and involvement.
Finally, we considered the relation between volunteering and reward perceptions. This relation was captured by the question ‘Do you need a reward forregular or forest volunteering?’ Figure 9.4 shows the descriptive statistics. Of
those questioned, 46.9% felt that regular volunteering required a reward and67.7% felt that forest volunteering also required rewarding. In contrast, 21.9%

Taylor and Francis

Not for distribution

67.7%

Forest volunteering

19.4%

12.9%
Yes, I need.
Neither
No, I need n’t.

46.9%

General volunteering

0%

10%

20%

30%

31.3%

40%

50%

60%

Figure 9.4 Volunteering and necessity of reward

21.9%

70%

80%

90%

100%

198

Yoshihisa Miyazaki and Ken-ichi Kurita

did not believe that the former activity should be rewarded while only 12.9% for
the latter activity. Thus, the perceived necessity of reward differed according
to the type of volunteering. The time and labour required for forest volunteering are both greater than those for regular volunteering. Therefore, those who
engaged in forest volunteering were seen as needing some sort of reward. For
this reason, we argue that volunteers need special skills and knowledge todevelop the forest.
9.4.2 Perceptions of the Mori-ken User
How do forest volunteers feel about MK? Most respondents answered, ‘I would
like to participate in forest volunteering more and obtain MKs’. The second mostfrequent response was, ‘I would like to exchange many goods and services for
MKs’. In contrast, only one person answered, ‘Obtaining and using MKs is troublesome, honestly’. Other research indicates that people have negative impressionsof CCs (Nishibe 2006b, p.29). In our study, forest volunteers freely accepted MK.
Although it is not necessary to compare these findings, it is important to know if
CCs circulate smoothly.
We also obtained MK user responses to the question, ‘Did you feel a change
after MK was introduced into the community?’ The impact was that 45.2% of
people answered either, ‘Yes, I feel a big change’, or, ‘Yes, I feel a little change’;
and only 16.1% reported, ‘No, I feel little change’, or, ‘No, I do not feel any
change at all’. The results show that many people feel that something has changed.
However, we couldn’t understand the contents of change because we didn’t
include a question that would provide us with this information. We interpret thisfinding to indicate that MK support to forest volunteers enhances participation
motivation and revitalises some activities, such as natural environmental conservation and regional economic development. Consequently, MK does affect the
local community.
Is there a difference between usage frequency and perceptions? People who
use MK frequently may have a positive view of its community impact. Therefore,
we separated the regular user group (almost every day, several times a week and a
few times a month) from the irregular user group (a few times a year or never) andverified the difference in perceptions. Figure 9.5 presents the mean of the difference between usage frequency and perceptions of community change. The regularuser group has high scores compared with those of the irregular user group. As aresult, it appears that the more people use MK, the more they realise change in thelocal community. In other words, people attain close ties with the local community by regularly using MK in local shops. We can infer, thus, that people realisechange in their local community.
MK has been widely accepted by recipients and because it has not created anegative image of the local community, it is seen as an appropriate reward forforest volunteers. Furthermore, many people are aware of a change in the local
community following the introduction of MK. In particular, people who use MKs
regularly realise this change. The key to regeneration and sustainable developmentof hilly and mountainous areas is the amount of MK used in the local community.

Taylor and Francis

Not for distribution

Community currency sustainable development 199
3.9

3.73

Changes in community

3.7
3.5
3.3
3.1

2.94

2.9
2.7
2.5
regular user group
irregular user group
Usage frequency

Figure 9.5 Usage frequency and community changes(p-value=.024*)*p-value<.05, two-tailed test

9.5 Concluding remarks

Taylor and Francis

Thus far, our findings can be summarised with two general conclusions. The firstis regarding the importance of the activities of Kyūetntai and the significance ofMK. Traditional forestry and forest conservation have focused on how to achieve
efficiency in tree thinning and timber production. However, using CCs in hilly
and mountainous areas can provide local residents with an opportunity to focus
not only on forests, but also on the entire local community. It gives a chance toconsider the intra-regional economy and social connections. In that sense, CCs
hold great significance. From this research, we have shown that Kyūentai’s forest
volunteer activities and the circulation of MK mutually promote forest maintenance and community development. One of the outcomes of this research is thediscovery of the possibilities of an intra-regional economic system that uses natural resources and CCs.
The second aspect that we have clarified refers to forest volunteers’ and CC
users’ perceptions and behaviour. From an analysis of the questionnaire survey, we have shown three things: (i) forest volunteers have a high degree oflife satisfaction; (ii) forest volunteers have a stronger degree of attachment tothe community and are more willing to make a contribution to the community
than non-volunteers; and (iii) depending on the type of volunteering activities, theneed for reward is different. We were unable to clarify the primary factors behindthese features in this research. However, as evidenced by previous research, there
are differences in perceptions and behaviour between proactive volunteers or CC
users and those who are not. Therefore, it is just as conceivable that there is acausal relationship between the degree of perception towards the community,
degree of life satisfaction, view of rewards and CC circulation.

Not for distribution

200

Yoshihisa Miyazaki and Ken-ichi Kurita

The findings show that we need to overcome a variety of challenges to conduct
further research. As we could not collect a sufficient number of questionnaires,the research sample was small. Therefore, we were unable to analyse the differences in perceptions and behaviour between MK users and non-users. In addition,
we could not clarify a causal connection between CC circulation and people’s
perceptions and behaviour.
Furthermore, while we examined the intra-regional economic system andpeople’s perceptions and behaviour separately, we now require a new researchmethod that would combine these two perspectives. Finally, we should highlightthe interaction between the micro perceptions and behaviour of individuals andthe macro performance of regional revitalisation. Moreover, there is room forresearch into other areas and CC systems.

Note
1 This study is part of the Award for CCIJ-8th Subsidized Project at the Consumer
Co-operative Institute of Japan. This chapter is based on Miyazaki (2011) and Miyazaki
and Kurita (2012). We would like to thank the Consumer Co-operative Institute of Japanfor the grant that allowed us to conduct this CC research. For our field research, wewish to thank the NPO Tosa-no-Mori Kyūentai, local shops and a local bank. Masayuki
Yoshida, Associate Professor at the Joetsu University of Education, gave us a chance
to do this study. We received polite opinions and kind advice from Masahiro Mikami,
Senior Assistant Professor at the School of Business Administration, Meiji University.
We wish to express our thanks to everyone.

Taylor and Francis

References

Not for distribution

Forest Development and Environment Department, 2012. Forestry, and Wood Industry.
Kochi Prefecture, Japan.
Kurita, K., Miyazaki, M. and Nishibe, M. 2013. ‘CC Coupon Circulation and Shopkeepers’
Behaviour: A Case Study of the City of Musashino, Tokyo, Japan’, International
Journal of Community Currency Research, 16, 136–145.
Meier, S and Stutzer, A. 2008. ‘Is Volunteering Rewarding in Itself?’ Economica 75:
39–59.
Ministry of Agriculture Rural Development Bureau, Direct Payments for Hilly andMountainous Areas. 2009. Final Report. Japan: Ministry of Agriculture, Forestry, andFisheries.
Miyazaki, Y. 2011 ‘The Vitalization of Hilly and Mountainous Areas and Community
Currency – Focusing on the Activities of Non-Profit-Organization Tosa-no-Mori
Kyūentai in the Town of Ino Kochi’, A Study of Regional Vitalization 2: 177–184.
Miyazaki, Y. and Kurita, K. 2012. ‘A Study on the Way to Utilize Community Currency
Toward the Vitalization of Hilly and Mountainous Areas’, Consumer Co-operative
Institute of Japan Research Awards collected paper 8: 92–111.
Nagaoka City. 2006. Hilly and Mountainous Area Community Development Promotion
Report by a Collaboration of Various Organizations in the Disaster Area, National land
policy emergent survey 2005.
Nishibe, M. 2006a. ‘Chiiki Tuka no Seisakushiso’, Shinka Keizaigaku Ronsyu 10:
337–346.

Community currency sustainable development 201
Nishibe, M. ed. 2006b. A Report on the Experimental Circulation Project of Tomamaecho’s Community Currency, Tomamae-cho Society of Commerce and Industry.
Odagiri, T. 2009. Rural Regeneration. Tokyo: Iwanami booklet.
Odagiri, T. 2012. ‘Rural Regeneration in Japan’, Centre for Rural Economy Research
Report, University of Newcastle upon Tyne, UK: Centre for Rural Economy.
Ohnishi, T., Odagiri, T., Takamura, R., Ando, H. and Fujiyama, H. 2011. Consent in This!
Hamlet Regeneration. Tokyo: Gyosei.
Ohno, A. 2005. Introduction to Environmental Sociology on Mountain Areas. Tokyo:
Nosangyoosonbunka-kyokai.
Okada, T. 2005. Introduction to Economics for Regional Regeneration. Tokyo: Jititai
Kenkyusha.
Science Council of Japan. 2001. Evaluation of Multifunctionality of Forest and Agriculture
Related to the Global Environment and Human Life.
Teranishi, S. Yamakawa, T., Fujitani, T. and Fujii, K. 2010. ‘Natural Resource-Based
Economies and Rural Sustainability’, Journal of Rural Planning 29 no.1: 29–35.
Yamazaki, S. 2013. Community Currency as a Tool of Regional Revitalization. Osaka,
Japan: Osaka Municipal University Press.
URLs (All accessed June 14, 2013)
Tosa-no-Mori Kyūentai: http://mori100s.exblog.jp/.
Digi-Mori.com: www.digi-mori.com/.
ShimantoTsusin: http://kawauso100.exblog.jp/.
Satoyama’s Bar: http://washinosat.exblog.jp/.
Ministry of Agriculture, Forestry, and Fisheries: www.maff.go.jp/.

Taylor and Francis

Not for distribution

10 Sustainable territorial development
and monetary subsidiarity
Marie Fare10.1 Introduction
Since 1992, the local dimension of sustainable development has featured in the different versions of Agenda 21 calling for local governments to implement projects
based on the principles of sustainable development using participatory process(Report of the United Nations Conference on Environment and Development,
1992). Such actions are materialised, for example, in development of public
transport, building of energy-saving homes, inclusion of social and environmental criteria in government procurement, education on sustainable development,
advances in environmentally friendly means of transport, etc. Alongside this,citizens’ initiatives seek to address the issues of sustainable development througheconomic and social changes at local level. ‘Transition Towns’ (Hopkins, 2008)
implement concrete initiatives to meet the challenges of climate change and peakoil by improving the resilience of local communities. Resilience is an area’s
capacity to cope with and respond to outside shocks. The concept was popularised
by Rob Hopkins (2008) and is widely used by the Transition Towns movement as
a basis for its actions (Folke et al., 2002; Olsson, 2003; Walker et al., 2004). Partof these emerging local initiatives involves complementary or community currencies (CCs) since they try to provide a local basis for socio-economic activities bydeveloping social interactions among members through the activation of various
forms of proximity. The territorial optic of sustainable development underscores
the capacity of local actors to impel a dynamic endogenous sustainable development as part of a bottom-up approach.
These currencies are intended to provide the requisite framework for developing
the exchange of services, goods or knowledge. These frameworks are organisedby and for communities through an ad hoc currency scheme, for which accounts
can be maintained and settlements made using an internal currency (Blanc, 2006).
From this perspective, money is understood as a fundamental social institutionof any society, not just the markets (Aglietta and Orléan, 1982, 1995 and 1998;
Blanc, 2000; Théret, 2007).
The approach taken here is a crosswise one, that is, instead of using the standard three-way (economic, social and environmental) division of sustainable
development, the three shall be interwoven so that the potential of the various
CC schemes can be studied in terms of sustainable development around three

Taylor and Francis

Not for distribution

Sustainable territorial development 203
analytical criteria: territorialisation of activities, stimulation of exchange andtransformation of practices and social representations. Money seldom figures
among the transition tools or projects for economic reform that can promote moresustainable development. In what circumstances can CCs advance the transition
towards sustainable territorial development? It is assumed that this implies determining the conditions of their insertion in territorial projects and their articulation
with other tools and mechanisms of transition, on the one hand, and their scale ofaction and the way they are established on the other hand. In this article we willconcentrate on the second point which will lead us to develop a monetary scheme
grounded in monetary subsidiarity. In this perspective, each currency circulating
as a complementary currency on an infra-national scale involves a monetary use
and level of circulation that are socio-economically and geographically defined,
or in other words, a spatio-socio-economic sphere of use. Subsidiary currencies
attempt to democratically implement a special-purpose currency at each relevant
level and at the best decision-making level at which to achieve the objectives
ascribed to them.
First, we develop the three potentials of CCs which we have identified withrespect to the challenges of sustainable territorial development and the findingsof empirical surveys conducted using a socio-economic approach (part 1). Then
we show that deploying these currencies might activate their monetary complementarity by mobilising the principle of monetary subsidiarity (part 2). Finally
we propose a subsidiary monetary scheme for increasing the capacity of CCs topromote the transition towards sustainable territorial development by focusing on
two territorial scales of action: the local (urban districts or rural localities) and thebioregional scales (part 3).

Taylor and Francis

Not for distribution

10.2 CCs’ potential with respect to the challenges of transition
to sustainability in contemporary societies
In order to evaluate the potential and the impact of CC schemes, we have constructed a framework for evaluation combining sustainable development andterritorial economies. This evaluative framework, which is constructed from fieldsurveys of the SOL and the Accorderie schemes, covers three potentialities of
CCs with respect to the challenges of sustainable territorial development: territorialisation of economic, social and political activities; stimulation of exchange;
and transformation of social practices and representations (Fare, 2011). These
three potentialities are developed next and then we present the main results of theempirical surveys conducted.
10.2.1 The territorial challenges of CCs
Territorialisation of activities
By creating a community based on the use of the currency, some CCs schemes
trigger spatial and socio-economic proximities (Pecqueur and Zimmermann,

204Marie Fare

2004; Bouba-Olga and Grossetti, 2008), which generate cooperation processes.
In these cases, the networking of actors via a bottom-up approach promotes
the emergence of a community of solidarity potentially able to generate a programming process for sustainable territorial development. Indeed, the monetary
design, selected through collective decision making, depends on the development jointly defined and adopted by the community to meet the identified needs.
In this regard, the territorialisation of activities is a process that stems from theactive construction by the territory’s actors.
Furthermore, when CCs facilitate social inclusion, via the active participationof their members and the implementation of participatory practices, they help
to promote governance that is both collective and territorial. By affecting learning and strengthening citizenship, they are thought to contribute to developing
the appropriation of the territory by citizens. The positive externalities involve
promoting the development of territorial governance based on a common project:sustainable territorial development. The CCs schemes are thereby thought to lay
the foundations for territorial governance, renewed by the existence of a ‘spillover effect’ (Colletis et al., 2005) of the systems towards territories through thecontributions they make to territorial dynamics.
Finally, as their use is confined to a space for circulation, CCs promote theterritorialisation of economic activities and therefore endogenous territorial development. The use of CCs is geographically limited, increasing consumption inside
the neighbourhood and therefore circulates at the local level, creating resourcesin the community.

Taylor and Francis

Not for distribution

Stimulation of exchange

The second objective of CCs regarding sustainable territorial development is tostimulate exchange. The territorialisation of activities should mechanically leadto more dynamic exchange within the CC scheme. Restricting the use of internalmoney to territorial level, internal exchange should increase in volume and so
generate increased internal activity by multiplier effect. However, the outcome is
not necessarily an overall increase in exchange, since internal exchange may simply substitute for external exchange. Various factors that stimulate exchange canbe identified. First of all, stimulation varies with the scope of the scheme, which
is dependent on the diversity of the stakeholders in the scheme and also on thediversity of transactions. Indeed, the more actors there are in the scheme and themore varied they are, the more likely it is that there will be a high and strong levelof exchange. There are size effects (minimum and maximum) and effects from thediversity of actors, which depend on the type of scheme.
Secondly, the implementation of mechanisms to promote monetary circulation(automatic open access to credit or solidarity microcredit) or discouraging asset
money (demurrage) is intended to stimulate local exchange. Credit allocated forthe creation of local activities allows local circuits to be created. Exchange canalso be stimulated by reinforcing social inclusion by proposing additional meansof solvency to individuals through microcredit or mutual credit.

Sustainable territorial development 205
Transformation of practices, lifestyles and social representations
The third potentiality of CCs in terms of sustainable development relates to thechange in practices, lifestyles and social representations. The creation of a CC issaid to bring about new practices by transforming values and representations aswell as orienting lifestyles and forms of consumption and production in a moresustainable direction. These practices, in this context, supposedly become vehiclesof transformation or even of complete breaks with the growth model. Sustainable
development requires changes in both daily practices and social representations.
The Brundtland Report emphasises the need for ‘changes in attitudes, in social
values, and in aspirations’ (WCED, 1987).
By de-constructing social representations, by heightening awareness of the challenges of sustainable development, and by setting up new socio-economic relations
and new consumer practices, CCs might have a direct impact on the emergence of aform of ecological citizenship. Here we shall question their capacity to bring about
the emergence of a new paradigm of sustainable development and therefore theircapacity to affect broader changes through innovative solutions.
10.2.2 Findings of empirical studies of the Accorderie and the SOL
Alpin schemes
In the late 1990s in Quebec, two organisations, the Caisse d’économie solidaire
Desjardins and the Fondation St-Roch de Québec, began thinking about the fightagainst poverty and exclusion, leading to the creation of the Accorderie5 in theautumn of 2001. The Accorderie combines a time-based system of exchange inservices, a social lending scheme and a centralised buying organisation (Fare,
2009–2010). It is intended to forge ties within the community and to allow people
on low incomes to better their socio-economic lot by promoting new forms ofsocial cohesion. It has opted for scriptural mutual credit money. Each participantor Accordeur has a ‘time account’ to keep track of outgoings (services received)
and income (services rendered). The aggregate balance of all accounts is always
zero. The currency does not exist before exchange but it is consubstantial with it.
The SOL was tried out from 2005 onwards in three regions of France (Ile deFrance, Nord-Pas-de-Calais and Bretagne) broken down into experimental areas
and then in five regions (by adding Alsace and Rhône-Alpes). The experimental
version of the SOL (Blanc and Fare, 2012) has three aspects: the eco SOL, time
SOL and dedicated SOL. The eco SOL is similar to standard loyalty card systems
but is aimed at organisations that share ecological and social values with respect
to sustainable development. ‘Consum-actors’ collect SOL on their electronic
cards when they make purchases in shops that have joined the SOL circuit orwhen they engage in collective or responsible actions. These points are then used
for future purchases from the same outlets, which accept SOL in full or part payment of their goods or services. The two lesser developed aspects of SOL in thearea of experiment are time (SOL is designed essentially to develop and enhancethe exchange of time among participants) and dedicated SOL (which is the SOL

Taylor and Francis

Not for distribution

206

Marie Fare

distributed by local authorities, work committees, local social action centres
called Centres Communaux d’Action Sociale, CCAS, or any other organisationas part of social policies aligned with the SOL project objectives). The SOL studied in the 2010–2011 survey is in the area of Grenoble, known as the SOL Alpin.
Since 2011, the SOL has grown in scope with the development of what might becharacterised as a ‘neo-SOL’ scheme (Blanc and Fare, 2016), the earliest example of which is the SOL Violette developed in Toulouse after a long preparatory
participatory process initiated by the city council and non-profit organisations.
Territorialisation of activities, stimulation of exchange, transformation ofsocial practices and representations: these three dimensions also contain the seedsof a project for social change. CCs bring together local actors and invite users to
own economic, social, political and environmental issues. The subject of study
was constructed first of all by collecting empirical data. This major empiricalinput is essential to an understanding of social reality in a socio-economic perspective. The choices imply taking a comprehensive approach by starting fromobservable monetary practices and by using empirical evidence to formulate andenhance theoretical concepts. The empirical corpus is made of practical observations, a documentary study, semi-directed interviews of the actors involved andquestionnaire results. Our surveys (Fare, 2011; 2012) reveal that the Accorderie
has created a local community based on reciprocity and giving, with the use of acommon currency as its medium. The working rules of the group (charter, codeof ethics) allow exchange regulation. Individual behaviour should be adapted tothe established guiding principles; the economy is submitted to reciprocity. In thisway, a gift does not necessarily mean an absence of interest, on condition that it
does not conflict with the collective, the community (Mauss, 1993). Solidarity
development represents the most popular reason to join the Accorderie (94.8% ofinterviewees) while 93.5% of people believed that it provides an alternative to thenotion of profit. Hence, the Accorderie would allow strengthening local solidarities by building a socio-economic solidarity network.
This community fights against exclusion and poverty by providing additional
means of solvency for its members, not just through access to mutual and freecredit but also through interdependent credit. Indeed, 41.8% of interviewees
used to pay someone in order to obtain the service before joining the Accorderie.
Thanks to the Accorderie, they save money (for 81.1% of interviewees) and gain
purchasing power (69.5% obtain services that they couldn’t afford to buy). It is alocus for integration and socialisation but also for personal value enhancement.
The Accorderie also promotes more sustainable ways of life and ‘ecologicalcitizenship’ by promoting the sharing of goods and sustainable consumption. In
this way, 88% of interviewed people consider that the Accorderie encourages
recycling and sharing of goods and 87.9% believe that the Accorderie guides tomore sustainable consumption and production modes. If 86.7% of those interviewed believe that the Accorderie enhances a more environment respectfulsociety, it is thanks to the fact that it organises awareness raising events aroundsocial or environmental topics (screening of films on MGO, environment, food,currency, etc; workshops on responsible consumption, recycling, compost, seed

Taylor and Francis

Not for distribution

Sustainable territorial development 207
production, etc). 62.1% of Accordeurs consider that the Accorderie has given
them access to higher quality nutrition and 74.2% believe that they consume in
the most environmentally respectful way or consume less (56.6%). It transformssocial representations by enhancing individual skills through the introduction ofegalitarian principles, which makes the principle of intra-generational and intergenerational equity at the core of sustainable development easier to understand.
First, the Accorderie accounting in hours allows the instauration of new practices
by changing conventional economy rules. This allows the development of ethicalvalues such as equality and solidarity as well as the reconsideration of the valueof work and wealth.
The Accorderie provides visibility to activities and competences not accounted
for by conventional economy such as household activities or voluntary work. It
imposes a strict equality principle, that is, an hour equals an hour independent of the activity or social status of the person. This is a fundamental value ofthe Accorderie which has a totally inflexible position on the negotiation of currency value. This principle, aiming to recognise the social contribution capacities
of everyone, is generally well seen by members of the Accorderie. In this way
96.4% of interviewed people consider that the Accorderie recognises everyone’s
capacities; 91.9% say that it fosters other values such as equality and solidarity;
79.6% think that it values competences and knowhow, which are ignored by thereal economy.
The SOL Alpin has potential with respect to the territorialisation of activities, the stimulation of commerce and the transformation of practices, but its
limited scope is a considerable handicap. Although it has promoted sustainableconsumption by rewarding consumers for going to shops which abide by sustainable criteria, it has failed to extend beyond niche actors who were already awareof the issues of sustainable development and social economy, therefore failing toincrease trade within its sphere. Furthermore, 60.8% of interviewed SOL members consider that their exchanges within the network have substituted a purchaseto a national or international enterprise. Hence, there would be a clear effect ofre-orientation towards the local economy. 92.5% believe that they contribute to
the re-localisation of economy thanks to SOL while 92.3% say that SOL enhances
short chains. If these effects, in terms of perception, seem to meaningfully affectlocalised exchanges, the weakness of SOL exchanges limits their scope notably
due to the lack of partner structures. Consequently, there has been seen to be anabsence of any dynamic collective appropriation and a genuinely interdependentcommunity. It was more of a market instrument where the commitment was materialised in individual consumption. The act of buying embodies the engagement.
In fact, 89.9% of SOL members view themselves as consumer-actors (‘consomacteur’ in French). They do not see themselves necessarily as partners of the
SOL network construction, but their engagement is essentially framed by theirconsumption. From a quantitative point of view, almost half of the interviewees(45.6%) use their SOL card to buy only a few times during the year and 27.8%
never. Two explanations seem to be behind this weak use. Firstly, some people join the network due to cognitive proximity (affinity) and then because of

Taylor and Francis

Not for distribution

208

Marie Faredifferent reasons, which can be linked to a geographic distance to businesses in
the network, they will rarely or never use their card. Secondly, the lack of supply inside the network seems to be an important explanation for the weakness in
exchange. In fact, the SOL Alpin counts 620 SOL active members (i.e. possessing an active card) for 1000 distributed cards and 22 suppliers. For the 91.7% of
those interviewed, the product range is too limited and 98.9% wish that the network develops. This is confirmed by the amount of exchanges in SOL of which
76.6% are lower than 100 euros a year and 58.5% lower than 30 euros a year.
Total expenses in SOL are insignificant. One way to boost its impact would beto develop the dedicated SOL and time SOL aspects so as to facilitate relations
among members, to foster a greater diversity of stakeholders and to develop its
collective dimensions (governance, community, etc).
The deconstruction of representation is rooted first in better visibility of SSE
and sustainable development practices. Indeed, the items aiming to change representations and global society are the best motivation to join the network: 92.5%
of members interviewed think that SOL enhances another vision of development,
90.9% consider that it puts into practice an ideal based on values different fromthe capitalist market economy and 81.8% believe SOL is a label for the SSE andsustainable development. For businesses, this should help them to gain client loyalty. Nevertheless, this loyalty effect remains marginal given the few number ofstructures and members as well as the lack of legibility of the SOL. The SOL has
probably suffered from a lack of local appropriation related to centralised governance in the experimental phase and the lack of diversity of organisations has
failed to help members make a habit of using the card. It did, however, highlightalternative economic options and positively impact social representations. The
new perspectives opened up by the introduction of the SOL Violette in Toulousewith the development of a paper SOL (voucher), a far higher number of service
providers and local participatory governance of the SOL heralds a new dynamic
which would be worth evaluating in the coming years.
Through the analysis of the different examples of CCs and their potentialities,
we think they can be tools for sustainable development provided that the relevant
conditions for their implementation and scale of action are determined. The diversity of schemes makes it possible to think about the possible complementarity ofcurrencies so as to satisfy the objectives of sustainable territorial development.
They seem to contain the seeds of societal change by proposing to re-think the
economic system bottom-up.

Taylor and Francis

Not for distribution

10.3 Activating monetary complementarity through monetarysubsidiarity
The findings of empirical studies and the review of literature underscore the needto understand a multiple monetary scheme given that CCs each promote one ormore objectives and do not come into play at the same level (various degrees
of local scales). It is possible to achieve specific objectives set by stakeholders through mobilising appropriate organisational choices and monetary forms

Sustainable territorial development 209(Blanc, 2009b). We propose leads in terms of monetary plurality and even monetary subsidiarity (Fare, 2011). This section therefore seeks to be prospective andwill try to determine the currency arrangement capable of serving the transition
towards a new paradigm, that of sustainable territorial development.
While beginning with an approach addressing monetary complementarity
developed by Blanc (2008; 2009a), we shall try to go beyond it to pave the way
for an approach in terms of monetary subsidiarity (Fare, 2011) by which the scaleof implementation and the objectives assigned to CCs can be brought together.
In orthodox approaches, money is a generalised means of payment. Supposedly
money is homogeneous. It does not have individual signs for distinguishing
between two assets in the same money which are therefore taken to be perfectlyinterchangeable. Now, monetary practices invalidate this assumption on thestrength of two qualitative criteria: i) the differentiation among monetary assets
and ii) their convertibility (Blanc, 2008 and 2009a).
The qualitative dimensions of money underscore the absence of a purely fungible character of money. Monetary assets are not perfectly undifferentiated orconvertible and so they are not fully fungible (Blanc, 2008). They cannot be
depicted exclusively through quantitative criteria; their qualitative characteristics must be taken into account. These cover three dimensions (Blanc, 2008): themonetary form of the various monetary instruments that can be used as meansof payment (metallic coins, paper money or electronic forms of money), thesymbolic universe of which they are part and which rests on a set of values andnorms illustrating membership of the payment community and conveying socioeconomic earmarking that guides its uses (means of subjective differentiation
rooted in cognitive factors and moral standards).
The observation of daily practices in the real world invites us to, therefore,
temper the fungible character of money. For example, Zelizer (2005 [1994])
emphasises the compartmentalisation and assignment of income by the ‘housewife’ (school money, rent money, coal money, funeral insurance money, etc) andthe conflicts that may arise within households over these different attributions.
Individuals mark money psychologically or materially by assigning it through theuse of envelopes (see also Weber, 2006 and 2009) or boxes to specific expenditure. Moreover, the existence of the varied forms and moneys such as CCs further
underscores the non-fungible character of money.
This absence of pure fungibility (absence of pure convertibility and principle of differentiation of monetary assets) suggests the necessary articulation
between moneys which presupposes a conversion process precisely because
they are not wholly fungible. Blanc uses four criteria to determine the forms ofmonetary articulation: i) commensurability (the possibility of obtaining a common evaluation between two moneys from a given rate), ii) convertibility (orthe transformation of the money’s characteristics so that all its qualities (or partof them) are transformed symbolic universe or monetary form), iii) co-use (orthe simultaneous use of means of payment of different forms or sorts), and iv)
coincidence of spheres of uses (various money assets are usable in the samesocio-economic spheres). These different qualitative and quantitative criteria

Taylor and Francis

Not for distribution

210Marie Fareprovide an understanding of the modes of articulation between moneys. Blanc(2009c) identified four ideal types of articulation among moneys: competition, simultaneousness, supplementarity and autonomy. The last three forms ofarticulation characterise the principle of monetary complementarity and make itpossible to go beyond the traditional approach to monetary competition. They
underscore the diversity of uses (Zelizer, 2005 [1994]) and diversity of monetary
forms by emphasising the qualities of money. It is because the postulate of fully
fungible money is not observed that monetary plurality co-exists and the competitive mode of articulation is not exclusive. To go further in determining themonetary conditions of sustainable territorial development, we wish to mark out
an approach in terms of monetary subsidiarity.
The aim is ultimately to propose a subsidiary monetary scheme that is appropriate for the various levels of economic and social organisations. This makes it
possible to couple the approach of monetary complementarity with a territorial
approach defining relevant levels of action that results from the capacity of eachlevel to come up with suitable solutions. In other words, the principle of subsidiarity enables us to activate possible complementarities for a specific purpose. That
purpose here is sustainable territorial development. In this way, subsidiary moneys
are rolled out at the lowest relevant level for them to make an optimal impact.
The principle of monetary subsidiarity proposes that currencie should fulfil
objectives or uses that are not fulfilled by the official currency, at least in a relevant
way. They perform in a complementary mode rather than as monetary competition.
However, this complementarity is framed as subsidiarity, that is, every subsidiary currency comes from a deployment level dependent on the objectives definedby the monetary community. Every territorial level or scale is characterised by agovernance space as well. Sustainable development normatively includes a subsidiarity principle to the extent that it is developed in a participative frameworkat the lowest possible level. It is up to local governments, socio-economic actors
and citizens to ‘execute democratically and at the appropriate levels [. . .] integral
policies allowing a sustainable development’ (Theys, 2002, p. 9). Subsidiarity currencies are part of this framework since they aim to execute in a democratic way
a specific currency, in every level and at the best decision-making level in orderto achieve the given objectives that respond to sustainable development issues.
Subsidiarity currencies do not conflict with the official currency given that they
imply different uses at different scales mediated by different qualitative signifiers.
They are deployed in socio-economic spaces separated and differentiated. This
principle of monetary or economic subsidiarity comes from the premise that every
scale of action needs to respond to an identified sustainable development objective
by using its own resources and means. Monetary subsidiarity is then characterisedby the execution of devices at the lowest appropriate level, that is, where results
are optimal according to the wished objectives.
The aim is ultimately to propose a subsidiary monetary arrangement appropriate for the different levels of economic and social organisations. This allows
the combination of an approach of complementary currency to a territorial one
that delimits the levels of appropriate action and, as a result, also limits the

Taylor and Francis

Not for distribution

Sustainable territorial development 211
capacity of every level to create adequate solutions. In other words, the principleof subsidiarity allows us to activate the possible complementarities for a specificaim, which here is local sustainable development. In that way, subsidiarity currencies are deployed at the lowest pertinent level enabling the achievement of
optimal results.
If we take up the modes of articulation defined by Blanc (2010), CCs have allof the characteristics of complementarity (supplementarity and/or autonomy and/or simultaneousness) and of subsidiarity as they seek to meet needs identified attheir level of action through stakeholder rationale depending on the objectives
pursued while being adapted to the context. This might however be termed weaksubsidiarity (Figure 10.1). From the perspective of strong monetary subsidiarity,
currencies would not have characteristics of either simultaneousness or supplementarity, that is, neither would their usages be joint nor their spheres of use
overlap. Their monetary qualities would also greatly limit their convertibility. In
other words, each currency circulating on an infra-national scale in complementary mode would circulate at a relevant level which is defined socio-economicallyand territorially (or within a sphere of socio-economic and territorial use) andwould be characterised by a stakeholder and democratic mode of governancedeveloped on the scale on which the currency was deployed. Each territorial scalecorresponds with a specific monetary use but with possibilities for conversion,
except for the autonomous mode. In the context of transition to sustainable territorial development, the principle of subsidiarity means giving precedence to theuse of the corresponding currency, wherever possible on each territorial scale.

Taylor and Francis

Not for distribution
Commensurability

Coincidenceof spheres ofuses

Convertibility

Co-useWeak subsidiarity

Autonomy

Area of strong subsidiarity

Figure 10.1 The subsidiary modes of monetary articulations

212

Marie Fare

The arrows in the diagram show what the subsidiary currencies should tend
towards, that is, the transition from weak to strong subsidiarity which is intended
to increase the autonomy of each scheme. The tips of the diamond indicate themaximum degree for the four criteria, tending towards an absence in the centre(e.g. the absence of commensurability is in the centre of the diamond and fullcommensurability at the tip).

10.4 Implementing the principle of monetary subsidiarity topromote sustainable territorial development
It can be observed from empirical studies that the objectives of stimulationexchanges and territorialising activities remain limited by the scope of schemes
and that each scheme promotes one or more aspects of sustainable territorial
development. Although CCs can therefore be tools for sustainable territorial
development, the challenge is to determine the relevant conditions for their establishment, acceptability and scale of action. Since these schemes are varied, likethe challenges of sustainable territorial development, it underscores the need fora plural monetary arrangement. A single type of currency cannot meet these different objectives, which is a sound argument for implementing the principle ofmonetary subsidiarity (Fare, 2011). Monetary subsidiarity characterises a complementary currency scheme in which a specific currency is deployed within
a single socio-economic and territorial sphere of use on each relevant scale ofaction. The aim is ultimately to push the principle of complementarity to the limit
by determining a single scale of deployment for each type of currency in the context of renewed local governance and to foster sustainable territorial development.
Adopting an approach through the prism of plurality and monetary subsidiarity invites one to imagine a multi-tiered monetary system mixing various CC
schemes. We have already emphasised that CC schemes pursue multiple objectives and that each of them can make a positive contribution to the challenges ofsustainable territorial development. We shall specify for each scheme the relevant
geographical level and the sphere of socio-economic use where it can be deployed,
and the objectives pursued. Two levels shall be of particular interest because theycorrespond to territorialised infra-national scales. First we shall address the highly
localised level at which time currencies might be deployed and then the regional
level at which a local currency might circulate.

Taylor and Francis

Not for distribution

10.4.1 In urban districts or rural localities
In urban district or rural locality CCs like LETS or time banks might be deployed.
The aim of these schemes is to strengthen social ties and to develop exchange
among inhabitants so as to reinforce social cohesion and inclusion. We shall characterise these currencies in this section as time currencies since they are based ontime as a unit of exchange.
They derive from the autonomy mode of articulation in the sense that they areneither commensurable (hence not convertible) nor usable in other socio-economic

Sustainable territorial development 213
spheres. They are not articulated with any other currency, whether subsidiary or thenational currency (cf. Figure 10.2).
As a locus of socialisation, they can activate social cohesion through the creation of a network of mutual aid and inclusion in local life. They forge relations
among members of a community by promoting equity and solidarity. Being basedon the concept of symmetry (Polanyi, 1983 [1944]), reciprocity places individuals in a position of interdependence and complementarity, both with respect toeach other and the environment. This develops the feeling of belonging to a social
unit. These schemes promote social and economic inclusion of all members of thecommunity by enhancing skills all around. The implemented egalitarian principles develop the feeling of social justice leading to a better grasp of the principle
of intra and inter-generational equity which is at the heart of sustainable development (Jany-Catrice, 2011, p. 63).
This emphasis on other economic rationales such as social inclusiveness andreciprocity signals that human behaviour cannot be reduced to the maximisationof individual interest. The establishment of sustainable exchange relations among
members means that those relations can be extended over time. The interpersonal relations foster the establishment of relations of solidarity and reciprocity
in return. Moreover, the implementation of monetary and institutional schemes
keeps out exchange in terms of purely market relations. These schemes have toseek to create a specific ‘symbolic universe’ established on social and environmental ethics to escape from the purely market rationale (or commodification).
Thus the services exchanged in this context sometimes extend beyond the market
rationale (especially for personal services) and move into the rationale of decommodification, that is, ‘the transition from market exchange to a generalisedsocial exchange which includes various forms of monetary and non-monetarytransactions, including symbolic transactions’ (Perret, 2011, p. 216). This alteration of logic of ‘need satisfaction’ is essential in decoupling improved well-being

Taylor and Francis

Not for distribution
Commensurability

Coincidence of
spheres of uses

Convertibility

Co-useFigure 10.2 The subsidiary mode of articulation of time-based currencies: autonomy

214Marie Fareand consumption (Max-Neef, 1992), which impacts social representations. It ispart of assessing the labour value and enhancing of non-labour activities.
Money is a social bond (Aglietta et al., 1998; Théret, 2007), and tends to beunderstood in western societies as ‘money that separates’ rather than ‘money thatjoins’. Here the establishment of sustainable exchange relationships is a vehicleof social cohesion. Exchange is inserted into human relations or logic of ‘esteem’of the other rather than of market prices (Servet, ed, 1999). Services rendered cannot readily be dissociated from the personal relations that the exchangers create.
Next, these schemes make it possible to develop property sharing which canlimit material individual consumption by enhancing the pooling of resources and‘the invention of new co-operative social relations’ (Gleizes, 2011, p. 81) while
contributing to ‘disconnecting well-being from material abundance’ (Perret,
2011, p. 215). This may involve tool sharing, car-pooling, loans of cultural property, and so on. This limits not just material output, but also waste. A sharing
economy is developing and it is more important to have use of property thanto own it. This mutualisation is embodied by the creation of collective services
which can be offered within the scheme: central purchasing possibly coupled withgrocery, library, laundrette, car rental, digital service area and so on. Access toall of these collective services can be had in exchange for hours or time. These
collective services seek to meet both individual and collective needs by moving
away from a rationale of market consumption. Some of the principles can be seenin the Accorderie.
Moreover, time-based schemes are suitable for certain matters associated withretirement and support for the elderly. First of all they promote inter-generational
equity by developing relations of solidarity among members of a community as
a vehicle of social cohesion. They can be used in supporting the elderly which isone of the major societal concerns for the ageing western societies. This support
emphasises once again the interdependence of people and the need to rebuild interand intra-generational bonds.
Next, people of working age may find a way of capitalising their resources inthis type of scheme. Anyone can store up hours to be used at a later date, especially when they are older and their input no longer covers their needs. Someelderly members of the Accorderie indicated that they were short of hours to beable to secure all of the services they needed, such as home help or help with shopping trips, moving house, home decorating or DIY. A time-based scheme would
make it possible to accumulate and store time credits without suffering from thespeculation that goes on in the financial markets and without inflation. The credit
accumulated would correspond strictly to the hours they had put in. One conditionis essential: there must be sufficient community members offering a supply ofservices that can meet demand. Lastly, these schemes provide free and automaticaccess to credit, providing additional solvency for members as well as promotingsocial and economic integration of actors while enhancing social cohesion.
This conception of exchange and rationales operating in these schemes can beused to counter individualism and promote new values at the heart of sustainable
development, especially solidarity and equality through the recognition of each

Taylor and Francis

Not for distribution

Sustainable territorial development 215
and every member. The reciprocity promoted through these schemes highlightinterdependence among individuals which is a vehicle of equity. Re-assessing
the value of labour and the nature of work, measuring wealth differently, meeting needs through other means than market integration, generating well-being
on something other than ‘having’ through ‘being’, ‘doing’ or ‘interacting’ (MaxNeef, 1992) are ways to transform social representations which can lead tosustainable development. The ultimate aim is to create ‘new relational rationales
which produce non-market social bonding’ (Arnsperger, 2010, p. 11). This develops relations among people who have a sense of a common interest and leads tothe moral obligation of not doing disservice to others and to the environment.
Such experiences in cooperation must have positive repercussions fostering
civic involvement in the challenges of sustainable territorial development. This
strengthening of citizenship can lead to a renewal of different forms of public
action and governance and build the foundation of local participation. CCs involve‘civic governance’ which is ‘initiated and taken forward by non-institutional players’ (Petrella and Richez-Battesti, 2010, p. 66). Activating bonds of solidarity andproximity can develop relational proximity and create a public space of proximity,
which itself must facilitate learning of the different forms of citizenship, giventhat citizenship is multidimensional (economic, social, political and cultural)(Fotopoulos, 2002). This public space of proximity favours interaction among
members inducing ‘collective creativity’ (Laville, 2011). In this way, learning
through the establishment of specific, participative and democratic rules withinthese schemes may create a positive ‘spill-over effect’ (Colletis et al., 2005, p. 16)
throughout the locality.

Taylor and Francis

Not for distribution

10.4.2 The bio-regional level

At the regional level, the objective is to promote endogenous sustainable development based on the resources and potential at that level. Development is aprocess of ‘revelation of resources of all kinds’ (Courlet, 2008, p. 11) knowingthat these resources may be latent, hidden and/or to be constructed (Gumuchianand Pecqueur, 2007). This scale may be clarified by the concept of the bio-region(Berg and Dasmann, 1977; Sale, 1985; Aberley, 1999; McGinnis, 1999), ecoregion (Bailly, 2005a; 2005b) and ‘bio-anthropo-region’ (Arnsperger, 2010).
The term ‘bio-anthropo-region’ denotes a space that is mid-way between what
in France are regional and departmental administrative levels and is suitable fortaking into consideration the natural characteristics of the area while ensuring
the satisfaction of the local needs of the population. To determine the relevant
size of this space, geographical surveys are required to study monetary circuits,
the food sovereignty index, local dependence on outside resources, potential for
intra-territorial exchange, means to develop these features and the local ecological footprint. This territorial review will highlight the degree of dependence ofthe territory on outside resources and energy. This will also provide a clearercollective understanding of the challenges in the purpose of building collective
solutions through a participatory approach.

216

Marie Fare

The objective is to construct an economy of proximities (Pecqueur andZimmermann, 2004) which is resilient and able to meet the needs of the local populations, that is, ultimately ‘an ecosytem endowed with an effective agro-immunity
apparatus, reforming its forces within its regional space’ (Bailly, 2005b, p. 15). Its
principles can be found at the heart of ‘Transition Towns’ (Ryan-Collins, 2011).
This regional level can be used to apprehend, at the meso-economic level, a complex socio-economic system where places of production and consumption need
to be ‘re-associated’.
Constructing this bio-anthropo-regional territory is part of a progressive
approach and process:Development is by its nature a gradual process arising from the establishment and structuring of partial subsystems [. . .]. In this process, the territory
can play a major part. It is the meeting point between development actors. It
is also the place where forms of cooperation among firms, individuals andactivities are deliberately or spontaneously organised. Ultimately, it is thejunction between market forms and forms of social regulation.
(Courlet, 2007, p. 44)
On this scale, the aim is to develop a currency to foster territorial sustainable
development associated with a charter of responsibility with selection criteria for
professionals in the exchange network, incentivising individuals and businesses
to produce and consume in a more sustainable manner while promoting the territorialisation and stimulation of exchange and activities (Blanc and Fare, 2016).
The involvement of government through the introduction of assigned money
might promote access to sustainable consumption for all. Here we find certain
operating principles of third or fourth generation currencies like the SOL (in its
operating principles, even if we have discussed its limitations above), Brazilian
community development banks or local currencies of Transition Towns orGerman Regiogeld.
Regional money circulates in the territorial sphere among the socio-economic
actors of the area. Its use is reserved to this spatio-economic sphere. It is commensurable but its convertibility is limited by its monetary qualities which makeit special-purpose money (Figure 10.3). It is nonetheless convertible into anotherregional or national currency on certain conditions. In a perspective of strong
subsidiarity and with regard to the challenges of transition towards sustainable
territorial development, the objective is to reinforce the territory’s autonomy tocreate a sphere of spatio-socio-economic use overlapping, as little as possible,
with that of the national currency through the construction of a meaningful symbolic universe.
A regional currency must be based on ‘multi-lateral or stakeholder governance’, which implies ‘a variety of public and private players involved in designingand implementing local public policies’ and which allows ‘the co-construction of
the general interest based on the range of interests present’ (Petrella and RichezBattesti, 2010, p. 56–60). This joint construction must be performed within a

Taylor and Francis

Not for distribution

Sustainable territorial development 217
Commensurability

Coincidence of
spheres of uses

Convertibility

Co-useFigure 10.3 Subsidiary mode of articulation of bio-regional currencies: towards strong
subsidiarity

geographical area of deliberation so as to determine ‘the framework and institutional arrangement for decision making about the form of territorial development
through public debate, public action and more specifically through public policy
making’ (Demoustier and Richez-Battesti, 2010, p. 8). The creation of a regional
currency must arise from these various partnerships without being disconnectedfrom the appropriation of money by citizens. From ‘these situated modes of coordination of the players among themselves’ (Pecqueur, 2009, p. 60), there mustarise the pursuit of a territorial project reconciling individual interests and being
shaped by a common interest – sustainable territorial development, through theimplementation of a collective tool – a regional currency. This ‘theory of territorial economics’ can be used to integrate ‘the specific features of places and the tiesof the players not just among themselves but with their geographical environment’(Pecqueur, 2009, p. 61). The challenge is to develop a process of territorialisation
centred on sustainable development.
The introduction of this type of currency would make it possible to create local
exchange circuits and hence territorialise activities and study interactions among
the different actors at regional levels. An absence of diversity observed throughinsufficient monetary circulation or the lack of outlets in internal currency should
lead to decisions being taken about certain sectors and/or business locations in
the area. The study of interactions and monetary circulation schemes will make itpossible to highlight (or not) shortcomings at regional levels, say related to procurement for businesses, and then develop them especially through social lending.
Money can thus be used as a tool for tracing circuits of consumption and production that can lead to a territorial appraisal.

Taylor and Francis

Not for distribution

218

Marie FareThis scale of action can be used to adopt a global approach in terms of complex
socio-economic systems, mainly with respect to the system of production andconsumption which should be rearranged geographically. A regional currency
can be used to create ‘supply chains for production, exchange and consumption’(Calame, 2009) locally to promote the resilience of territories. A regional currency limits the leakage of wealth from the region and results in the constructionof economic circuits through supply chains which compete to foster regional
development through multiplier effect. Territorialisation makes it possible toweave market and non-market connections among the local actors and to establish
lasting relationships (Colletis and Rychen, 2004). It is therefore decisive to obtaina diversity of actors to meet supply and demand. The businesses involved in thescheme must be able to find significant outlets, especially professionally, so as tomove the internal currency obtained through exchange with private individuals;
raw material suppliers must not be overlooked. Sometimes it appears necessary
to develop new strategies for commercialisation and procurement in the area ofcirculation, especially through the creation of new activities in the area by mobilising all of the available and sometimes unused resources.
It is a matter of constructing a supply chain with production and consumption circuits through the ‘combination of a close-knit institutional tie between key
actors of different types, both private and public, and different standings, including players from the non-profit and cooperative realms’ (Colletis et al., 2005,
p. 13) from which to obtain as autonomous an area as possible with an objective of resilience around the use of an internal currency. The fabric of territorial
economic life will be reinforced by the use of bio-regional currency for bringing
together all of these flows.
Figure 10.4 summarises the levels of action in terms of the use of each currency. We reconcile monetary complementarity and monetary subsidiarity
in terms of the objective of sustainable territorial development and of varying
degrees of local intervention. However, this monetary arrangement is only viable
if subsidiary currencies are deployed on different scales of action. Our focus on

Taylor and Francis

Not for distribution

National
scale (off icial
currency)

Highlylocalised level(time-based
currency)
Regional scale(regional currency)

Possible conversions

Figure 10.4 Application of the principle of monetary subsidiarity

Sustainable territorial development 219
local dimension should not mask the interdependence among different scales andalso within those scales: local, national and international (Galtung, 1986; Dally
and Cobb, 1989; Nijkamp et al., 1991). It should also not preclude one from thinking about their complementarity on different scales.

10.5 Conclusion
The results we have obtained from field surveys of the SOL and the Accorderie
have enabled us to discuss both the potential of CCs and the limits upon them inthree dimensions: territorialisation of activities, stimulation of exchange and thetransformation of practices, ways of life and social representations. CCs may
be tools for sustainable territorial development, provided that one can determine the relevant conditions for establishing them and their scale of action. The
diversity of schemes makes it possible to think of possible complementarity
between these currencies so as to satisfy the objectives of sustainable territorial
development.
Starting from these lessons, we have proposed a monetary scheme which seems
best able to support sustainable territorial development. This scheme is based on
the principle of monetary subsidiarity which characterises the implementation ofschemes at the lowest relevant level, that is, where their effects seem to be optimal
given the objectives. Subsidiary currencies thus seek to democratically implementa specific currency at each relevant level as well as the best decision-making level
for achieving the objectives assigned to them with the perspective of answering
the challenges of sustainable territorial development. The principle of subsidiarity
then makes it possible to activate potential monetary complementarities. In thissense, each currency circulating in complementary mode on the infra-national
scale specifically has a defined socio-economic and territorial monetary use and alevel of circulation, or in other words a spatio-socio-economic sphere of use. Eachterritorial level at which money is deployed is also characterised by stakeholder
and democratic governance exercised at the lowest relevant level.
In this way, time-based currencies might be developed at highly localised levels (districts, localities). They make it possible to activate social ties and develop
a rationale of social inclusiveness and reciprocity as well as to contribute to thede-commodification of needs by highlighting alternative means of meeting needs
other than through material consumption. Time-based currencies promote mutual
help, reciprocity and solidarity and they help to change social representations.
Regionally, one might see the development of a currency of the same name, making it possible to territorialise and stimulate exchange by promoting networking
among firms in a supply chain rationale on the basis of needs expressed at the
local level. The development of a currency scheme of this kind thus presents realpotential in the face of the challenges of sustainable development. The implementation and the principles guiding all of these schemes should be part of renewed,
democratic and civic governance.
The implementation of subsidiary currencies may bring about the emergenceof bottom-up development. By connecting up the actors in the area, it could

Taylor and Francis

Not for distribution

220Marie Fareactivate forms of proximity and make it possible to synergise them around acommon objective. Nonetheless, one should not ignore the questions of time
related to the process of monetary mobilisation and appropriation. As a lever forchange, currencies can neither impose themselves nor their uses be decreed but
they are constructed in partnership with many actors in an area, that is, ultimately
in the context of renewed stakeholder governance. This new form of governance is part of active participation by citizens and all socio-economic and public
actors in the area at the heart of the process of defining a territorial project forsustainable development.
The role of government in this process needs to be discussed (see Blanc andFare, 2013). Locally the authorities may promote and support the deployment ofthese schemes as part of a rationale of subsidiarity and they may actively participate
in schemes by accepting and using the currencies as means of payment. Nationally,
it is urgent to provide them with a clear legal framework to bring them out of thegrey area and facilitate intervention by different players. Thinking along these lines
is under way in Latin America, especially in Brazil, and might lead to an integrated
monetary organisation based on monetary subsidiarity (Fare et al., 2015).
Lastly, we do not claim that the implementation of subsidiary currencies is the
exclusive remedy, or a sufficient one, to lead to sustainable territorial development
but rather that subsidiary currencies might be part of a whole raft of structuraland global reforms. For example, based on the development of a local appraisal
and mapping of exchanges, subsidiary currencies can be dove-tailed with local
planning and development schemes so as to fit in with an overall programme
for transition. It might be relevant to include a monetary policy within territorial
policies so as to enhance the autonomy, self-sustainability and resilience of local
areas. It is therefore a question of studying the conditions of their insertion in
territorial projects and their articulation with other tools and mechanisms of transition (Fare, 2016). This, however, cannot be separated from more comprehensive
thinking about the relevant size of areas, their autonomy and their democratic
functioning, thus highlighting the need for local and fiscal reform.
More generally, CCs are recent schemes compared to the length of time needed
for monetary appropriation. Appraisals must still be made, especially of thoseschemes that are moving towards a relevant size and visible socio-economic
impact such as the Chiemgauer or the community development bank of Fortaleza.
In this sense, our framework of analysis might be applied to these schemes tovalidate or invalidate our findings.

Taylor and Francis

Not for distribution

References
Aberley, D. 1999. ‘Interpreting bioregionalism. A story from many voices’. In: Mcginnis,
M. V. (ed.) Bioregionalism. London: Routledge.
Aglietta, M., Andreau, J., Anspach, M., Birouste, J., Cartelier, J., Coppet, D. de, Malamoud,C., Orléan, A., Servet, J.-M., Théret, B. and Thiveaud, J.-M. 1998. ‘Introduction collective’. In: Aglietta, M. and Orléan, A. (eds) La monnaie souveraine. Paris: Odile Jacob,
pp. 9–31.

Sustainable territorial development 221
Aglietta, M. and Orléan, A. 1982. La violence de la monnaie. Paris: PUF.
Aglietta, M. and Orléan, A. (eds) 1995. Souveraineté, légitimité et confiance. Paris: AEF/
CREA.
Aglietta, M. and Orléan, A. (eds) 1998. La monnaie souveraine. Paris: Odile Jacob.
Arnsperger, C. 2010. ‘Transition écologique et transition économique: quels fondements
pour la pensée? Quelle stâches pour l’action?’ www.philosophie-management.com/
docs/2010/Arnsperger-1.TRANSITION.12.02.2010.pdf.
Bailly, E. 2005a. ‘L’écorégion’, Actes des Assises du Limousin, ENSIL, Limoges,
Ecorégionalité et souveraineté alimentaire. www.docplayer.fr/32947932-Actes-des1ieres-assises-du-limousin.html.
Bailly, E. 2005b. ‘Vers une demarche écorégionale. . . Le concept de l’écorégion’ ou‘comment restaurer le système immunitaire des régions’, Rapport de l’étude pour intelligence verte.
Berg, P. and Dasmann, R. 1977. ‘Reinhabiting California’, The Ecologist, 10 (7): 399–401.
Blanc, J, 2000. Les monnaies parallèles. Unité et diversité du fait monétaire. Paris:
L’Harmattan.
Blanc, J. 2006. ‘Introduction générale. Les monnaiessociales: un outil et seslimites’. In:
Blanc, J. (ed.) Exclusion et liens financiers: monnaies sociales, rapport 2005–2006.
Paris: Economica.
Blanc, J. 2008. ‘Fongibilités et cloisonnements de la monnaie’. In: Baumann, E., Bazin,
L., Ould-Ahmed, P., Phélinas, P., Selim, M. and Sobel, R. (eds) L’argent des anthropologues, la monnaie des économistes. Paris: L’Harmattan.
Blanc J. 2009a. ‘Usages de l’argent et pratiquesmonétaires’. In: Steiner, P. and Vatin, F.
(eds) Traité de sociologie économique. Paris: PUF (Quadrige).
Blanc, J. 2009b. ‘Contraintes et choix organisationnels dans les dispositifs de monnaiessociales’, Annals of Public and Cooperative Economics, 80 (4): 547–577.
Blanc, J. 2009c. ‘Beyond the competition approach to money: a conceptual framework
applied to the early modern France’, Asymmetric Monies: Revisiting Global Monetary
History from the Viewpoints of Complementarity and Viscosity, University of Tokyo
Symposium, March.
Blanc, J. 2010. ‘Converting money. On articulation modes of money’. In: Ponsotet, J.-F.
and Rochon, L.-P. (eds) What is the Nature of Money? A Pluridisciplinary Approach.
Chelthenham, UK: Edward Elgar.
Blanc, J. and Fare, M. 2012. ‘Les monnaies sociales en tant que dispositifs innovants: uneévaluation’, Innovations, Cahiers d’économie de l’innovation, 2 (38): 67–84.
Blanc, J. and Fare, M. 2013. ‘Understanding the role of governments and administrationsin the implementation of community and complementary currencies’, Annals of Public
and Cooperative Economics, 84 (1): 63–81.
Blanc, J. and Fare, M. 2016. ‘Turning values concrete: the role and ways of business selection in local currency schemes’, Review of Social Economy, 74 (3): 298–319.
Bouba-Olga, O. and Grossetti, M. 2008. ‘Socio-économie de proximité’, Revue d’Économie
Régionale et Urbaine, 3: 311–328.
Calame, P. 2009. Essai sur l’oeconomie. Paris: Ed. Charles Léopold Meyer.
Colletis, G., Gianfaldoni, P. and Richez-Battesti, N. 2005. ‘Economie sociale et solidaire,
territoires et gouvernance’, RECMA – Revue internationale de l’économie sociale, 296:
8–25.
Colletis, G. and Rychen, F. 2004. ‘Entreprises et territoires: proximités et développement
local’. In: Pecqueur, B. and Zimmermann, J.-B. (eds) Economie de proximités. Paris:
Lavoisier.

Taylor and Francis

Not for distribution

222

Marie Fare

Courlet, C. 2007. ‘Du développement économique situé’. In: Gumuchian, H. and Pecqueur,B. (eds), La resource territoriale. Paris: Économica et Anthropos.
Courlet, C. 2008. L’économie territoriale, Grenoble, France: PUG.
Daly, H. E. and Cobb, J. B. 1994 [1989]. For the Common Good. Redirecting the Economy
toward Community, the Environment, and a Sustainable Future. Boston, MA: Beacon
Press.
Demoustier, D. and Richez-Battesti. N. 2010. ‘Introduction. Les organisations del’Économiesociale et solidaire: gouvernance, régulation et territoire’, Géographie,
Économie, Société, 12 (1): 5–14.
Fare, M. 2009–2010. ‘L’Accorderie (Québec): un dispositif de monnaie sociale singulier?’
Économie et Solidarités, 40 (1–2): 2–16.
Fare, M. 2011. Les conditions monétaires d’un développement local soutenable: dessystems d’échange complémentaire aux monnaies subsidiaires, Thèse de doctorat ensciences économiques, Université Lumière Lyon 2, Lyon.
Fare, M. 2012. ‘Les apports de deux dispositifs de monnaies sociales, le SOL et l’Accorderie,
au regard des enjeux du développement local soutenable’, RECMA – Revue internationale de l’économie sociale, 324: 53–69.
Fare, M. 2016. Repenser la monnaie, transformer les territoires, faire société. Paris:
Editions Charles Léopold Mayer.
Fare, M., Meyer, C. and de Freitas, C. 2015. ‘Community currencies in Brazilian community development banks: the symbolic meaning of the Palmas currency’, International
Journal of Community Currency Research, 19 (D): 6–17.
Folke, C., Carpenter, S., Elmqvist, T., Gunderson, L., Holling, C. S. and Walker, B. 2002.
‘Resilience and sustainable development: building adaptative capacity in a world oftransformations’, Ambio, 31 (5): 437–440.
Fotopoulos, T. 2002 [1997]. Vers une démocratie générale, une démocratie directe,économique, écologique et sociale. Paris: Seuil.
Galtung, J. 1986. ‘Towards a new economics: on the theory and practice of self-reliance’.
In Ekins P. (ed.) The Living Economy: A New Economics in the Making. London and
New York: Routledge.
Gleizes, J. 2011. ‘La croissance verte est-elle possible?’ In: Coutrot, T., Flacher, D. and
Méda, D. (eds) Les chemins de la transition, pour en finir avec cevieux monde. Paris:
Editions Utopia.
Gumuchian, H. and Pecqueur, B. (eds) 2007. La resource territoriale. Paris: Économica
et Anthropos.
Hopkins, R. 2008. The Transition Handbook: From Oil Dependency to Local Resilience.
Dartington, UK: Green Books.
Jany-Catrice, F. 2011. ‘Nouveaux indicateurs et nouvelles pratiques sociales’. In: Coutrot,
T., Flacher, D. and Méda, D. (eds) Les chemins de la transition, pour en finir avec
cevieux monde. Paris: Editions Utopia.
Laville, J.-L. 2011. Agir à gauche, l’économie sociale et solidaire. Paris: Desclée de
Brouwer.
Mauss, M. 1993 [1950]. Sociologie et anthropologie. Paris: PUF.
Max-Neef, A. 1992. ‘Development and human needs’. In: Ekins, P. and Max-Neef, M. A.
(eds) Real-Life Economics: Understanding Wealth Creation. London: Routledge.
Mcginnis, M. V. (ed.) 1999. Bioregionalism. London: Routledge.
Nijkamp, P., Laschuit, P. and Soeteman, F. 1991. ‘Sustainable development in a regional
system’, Serie Research Memoranda from VU University Amsterdam, Faculty of
Economics, Business Administration and Econometrics, no. 93.

Taylor and Francis

Not for distribution

Sustainable territorial development 223
Olsson, P. 2003. Building Capacity for Resilience in Social-Ecological Systems. Doctoral
Dissertation, Department of Systems Ecology, Stockholm University.
Pecqueur, B. 2000. Le développement local. Pour uneéconomie des territoires. Paris: La
Découverte et Syros (2nd edition).
Pecqueur, B. 2009. ‘De l’exténuation à la sublimation: la notion de territoire est-elle encore
utile?’ Géographie, économie, société, 11 (1): 55–62.
Pecqueur, B. and Zimmermann, J.-B., (eds) 2004. Economie de proximités. Paris: HermèsLavoisier.
Perret, B. 2011. Pour une raison écologique. Paris: Flammarion.
Petrella, F. and Richez-Battesti, N. 2010. ‘Gouvernance et proximité: des formes de participation et de cooperation renouvelées? Une observation sur l’accueil des jeunes enfants
en France’, Géographie, Économie, Société, 12 (1): 53–70.
Polanyi, K. 1983 [1944]. La grande transformation. Aux origins politiques et économiquesde notre temps. Paris: Gallimard.
Ryan-Collins, J. 2011. ‘Building local resilience: the emergence of the UK Transition
Currencies’, International Journal of Community Currency Research, 15 (Special
issue): 61–67.
Sale, K. 1985. Dwellers in the Land: The Bioregional Vision. San Francisco, CA: Sierra
Club Books.
Servet, J.-M. (ed.) 1999. Une économie sans argent. Les systems d’échange local. Paris:
Seuil.
Théret, B. (ed.) 2007. La monnaie dé voilée par ses crises. Crises monétaires d’hier etd’aujour d’hui. Paris: Editions de l’EHESS.
Theys, J. 2002. ‘L’approche territoriale du ‘développement durable’, condition d’une priseen compte de sa dimension sociale’, Développement durable et territoires. Dossier 1.
Approches territoriales du Développement Durable.
Walker, B., Hollinger, C. S., Carpenter, S. R. and Kinzig, A. 2004. ‘Resilience, adaptability
and transformability in social-ecological systems’, Ecology and Society, 9 (2): article 5.
Weber, F. 2006. ‘Séparation des scenes sociales et pratiques ordinaires du calcul. À larecherche des raisonnements indigènes’. In: Coquery, N., Menant, F. and Weber, F.
(eds) Ecrire, compter, mesurer, vol. 2.
Weber, F. 2009. ‘Le calcul économique ordinaire’. In: Steiner, P. and Vatin, F. (eds) Traitéde sociologie économique. Paris: PUF.
World Commission for Environment and Development (WCED). 1987. Our Common
Future. Oxford, UK: Oxford University Press.
Zelizer, V. 2005 [1994]. The Social Meaning of Money. Princeton, NJ: Princeton University
Press.

Taylor and Francis

Not for distribution

11 Relationship between people’s money
consciousness and circulation ofcommunity currency
Shigeto Kobayashi, Takashi Hashimoto,Ken-ichi Kurita and Makoto Nishibe
11.1 Introduction
Complementary Currencies (CCs) are institutions at the social level (outer institutions) that can only exist and function when inner institutions (people’s money
consciousness) act as their individual foundations. Inner institutions support CCs
by spreading their acceptance to a significant number of individuals and organisations at the micro level. When CCs grow in membership, every participant has
more choice of types and volumes of goods and services within the CC system.
At the macro level we observe a certain economic order or pattern, which relies
on a shared money consciousness at the meso level and individual transactions as
underpinnings at the micro level. In turn, the emerging institutional order at thesocial level affects individual cognition, decision and behaviour through money
consciousness. This chapter aims at clarifying how money consciousness as aninternal institution sustains CC systems as external institutions.
Section 11.2 provides the details and methodology of the study. Two results of
the questionnaire survey analysis are explained in Section 11.3: (i) the differenceof money consciousness between community currency participants and financialorganisation participants, and (ii) the difference of money consciousness in various currency systems. Section 11.4 discusses these differences from the viewpointof the micro-meso-macro loop in the circulation of community currencies.

Taylor and Francis

Not for distribution

11.2 Micro-meso-macro loop and money consciousness
Only a few CCs have successfully stayed in high circulation and maintained acertain economic scale over a long period, although there have been 3,418 local
projects for community currencies in 23 countries across six continents (Seyfang
and Longhurst, 2013). We postulate two types of rules, external and internal. The
external rules are exemplified by laws, norms and codes; the internal rules include
cognitive frames, awareness and habits. Institutions are formed by socially common rules shared by many individuals in a group or society. We call sharedexternal and internal rules outer and inner institutions respectively.1 Inner institutions are important underpinning structures or foundations of outer institutions incurrency systems.

Money consciousness and community currency 225
Systematic design for circulating CCs as shared external rules, even if predetermined, do not necessarily function well. People’s shared awareness and values
regarding money should also be considered for CCs to be beneficial and meaningful. We assume that people’s money consciousness must actually exist, forming
not only standards for decision making in a given currency system, but also value
judgments for multiple alternatives or complementary currency systems.
We consider that the evolution (i.e. emergence, growth, change and extinction)of social institutions including CCs are described by interacting loops among the
micro, meso and macro levels (Figure 11.1). The micro level consists of individual cognition, decision and behaviour that are based on internal rules and are
constrained by external rules. The macro level comprises performance, order andpattern shown in a social consequence as a collection of individual cognition,
decision and behaviour on the micro level.
Both outer and inner institutions are supposed to lie at the meso level, between
the micro and macro levels, constantly mediating interactions between the twolevels. They are maintained, differentiated and dissolved depending on the variable distribution of individual cognition, decision and behaviour on the microlevel. The outer and inner institutions indicate an emergent property which enables the possible ways to restrict or constrain an individual’s cognition, decisionand behaviour on the micro level. They do not, however, necessarily determine
performance, order or pattern shown in social consequences on the macro level.

Taylor and Francis

Not for distribution

Figure 11.1 Micro-meso-macro loop

226

Shigeto Kobayashi et al.

Furthermore, certain performances, orders and patterns of social consequenceson the macro level affect both currency systems as the outer institutions andmoney consciousness as the inner institutions, that is, shared awareness and values of the outer institutions on the meso level.
Three different types of mutually determining loops exist: (i) between the
micro and macro level, (ii) between the micro and meso level, and (iii) between
the meso and macro level. We call such multi-levelled bi-directional interactions
the ‘micro-meso-macro loop’ as a whole (Nishibe, 2012).
Outer and inner institutions form another loop to strengthen each other throughinteractions between the micro individuals and the meso institutions. When a particular value consciousness is common in a society, it is an institution. Althoughpeople’s consciousness involving their awareness and values is neither an explicit
law nor a norm, it governs people’s thoughts and behaviour. Therefore, value consciousness is thought to belong to the meso level indirectly, mutually influencing
the external rules at the meso level and consequences at the macro level, whichgovern the cognition and behaviour of the micro actors. This complex interactionof the micro-meso-macro loop is schematically shown in Figure 11.1. As long as
individuals follow the outer and inner institutions on the meso level, they are eachfree to possess different internal rules, such as their own routines and habits, atthe micro level.

11.3 Roles of inner and outer institution in CC circulation

Taylor and Francis

CCs as outer institutions can work well only if supported by inner institutions, as
people’s money consciousness can admit and encourage the CCs so that they are
accepted by a significant number of individuals and organisations at the microlevel. Then, participating individuals and organisations can buy or sell more types
as well as volumes of goods and services by using the CC. Certain economic
performance, order and pattern emerge as social consequences at the macro level
through such accepted CC and shared money consciousness at the meso levelfrom a series of individual transactions at the micro level. The emerging social
consequence affects individual cognition, decision and behaviour through money
consciousness, a standard value for decision making in a currency system. If theintroduction of a CC leads to positive social consequences, such as the creationof mutual aid networks or the revitalisation of the local economy, people use
CC more frequently and change their money consciousness so as to appreciatecurrency diversity.2 In this study, we aim to clarify how money consciousness
internally sustains the workings of CC systems.
In a society, nation states, laws, currencies and markets co-exist simultaneouslywith other institutions. These institutions form competitive and/or complementary
relationships as a result of interactions among people. They also change theirrange and scale of influence and operations. A system where several institutions
co-exist, develop or disappear through interactions among institutions is called an‘institutional ecosystem’ (Hashimoto and Nishibe, 2005, 2017). Traditional viewsof institutions have often focused on external rules in an attempt to understandNot for distribution

Money consciousness and community currency 227
institutions, which has led to ignoring the existence and roles of internal rules.
However, as previously stated, understanding the interactional dynamics between
external and internal rules within the conceptualisation of the micro-meso-macro
loop is critical. Many external rules (e.g. laws and regulations) and internal rules(e.g. customs, practices and values) are shared among a relatively large part ofsociety. In an institutional ecosystem, the relative frequency of people’s value
consciousness produces diversity at the institutional level. The two types of institutions, which interact within and between each type, mutually support and inducechanges in each other.
Formation of CCs must be based on a variety of values and norms. In reference to the Argentine case, Kobayashi et al. (2010) explained that the currency
system can be considered an institutional ecosystem. In 2001, the Argentine peso
collapsed because the government defaulted. As a result, people’s value consciousness regarding the credit of the currency system rapidly changed. A great
shortage in the Argentine national currency peso resulted in three large shifts inrelation to different currencies:
••
••
••

Argentine peso → US dollar (the key currency);
Argentine peso → Patacón or LECOP (bonds issued by the central or provincial governments); andArgentine peso → Crédito (a community currency issued by the Redes deTrueque, such as the Red Global de Trueque (RGT)

Taylor and Francis

After the default on the Argentine debt, alternative currencies to the Argentine
peso developed for several years. Four different currencies (global key, national,
bond, and community currencies) circulated in Argentina concurrently. Once anecosystem of mutually complementary currencies had developed, the network
externalities of the single currency system did not work, and the transaction costs
increased as a result of using different currencies in the same market. Such asituation in which multiple currencies co-existed cannot be explained using theconcepts of economic rationality such as convenience and efficiency. Assumingthat a currency system reflects people’s diverse values, the concept of consciousness is more appropriate.
In actual societies, institutional diversity corresponding to value consciousness
diversity does not always exist. Kobayashi et al. (2010) proposed the following
three reasons for the lack of such a variety of social institutions:Not for distribution••••

a society is locked in dominant economic efficiency, although most people
are aware of the diversity of value consciousness;most people are not entirely conscious of the diversity of their own values;
and, there is no diversity of values.

Thus, establishing a social institution implies that a particular value consciousness is shared by most of the people and is taken for granted in the society. In
understanding the institutional formation and change, we should consider the228

Shigeto Kobayashi et al.

relationships among the micro and macro levels as well as shared value consciousness at the meso level; it is not enough to analyse the relationships between
the micro individual values and economic consequences at the macro level. We
need to consider the latter relationship when we review sustainability and theevolution of CC systems.

11.4 Our study
We investigated the correlations between the circulation of a community currency
and the money consciousness among participants of the community currency. We
developed a new questionnaire on people’s attitudes toward money and used it
in areas where community currencies were introduced. Existing money attitude
scales were developed to mainly examine people’s attitudes toward the intended
use of money (Yamauchi and Templer, 1982; Furnham, 1984). Our questionnaire
consisted of 27 questions and asked broad and latent value consciousness questions, such as criteria for selecting an institution from multiple currency systems,
purposes and current status of issuing, steering and distributing currency, and uses
for money (questionnaire in Appendix). Our questionnaire was scored using a fivepoint Likert scale. We conducted the questionnaire survey in Japan, Argentina,
Canada, Brazil and Italy by snowball sampling method and over 500 people
responded. Survey questionnaires that were conducted outside Japan were translated from Japanese into Spanish, English, Portuguese and Italian, respectively.
We tested two hypotheses:

Taylor and Francis

Not for distribution

There is a difference in money consciousness between participants in CCs
and non-participants.
There is a correlation between citizens’ money consciousness and the circulation status of a CC.
11.4.1 Survey respondents
To test the first hypothesis, we investigated the correlations between social activities and money consciousness in participants of CCs and members of financialorganisations. We focused on these two types of people because the participantsof a CC belong to a reciprocal community where they develop collaborative relationships. In contrast, members of financial organisations belong to communities
that pursue daily interests in a competitive environment.
The questionnaire surveys in Argentina and Canada were conducted in
December 2006 while the survey in Japan was conducted from April 2007 to
March 2008 using a paper-based or web-based questionnaire. In our survey 76.9%
of community currency participants were in Buenos Aires, Argentina. They wereusers or operators of ‘crédito’, the community currency in Buenos Aires. Almost
all financial organisation members were Japanese and worked at a domestic commercial bank or a foreign security firm.3 Characteristics of the sample are reported

Money consciousness and community currency 229
in Table 11.1. In the group of ‘workers’ we selected non-students and citizens
who were not active in either CCs or financial organisations. Non-participants
worked in different companies. Further in the analysis, we treated ‘workers’ andstudents, as one group called ‘others’.
To test the second hypothesis, we examined the difference of money consciousness in various currency systems in the three countries of Japan, Brazil and
Italy. Table 11.2 shows the survey respondents per research area. The first group
included citizens in the Musashino-chuo area, Tokyo, Japan (n = 85), where thecommunity currency ‘Mu-chu’ was issued as a social experiment.4 This community currency was mainly used for compensating paid volunteers. The area is a
wealthy quarter in Japan and the average income of the citizens is approximately$50,000. The ‘Mu-chu’ circulation experiment was conducted for nine months
from July 2008 to March 2009 and the questionnaire survey was applied twice tothe same people, before and after the circulation experiment.
The second group included users and operators of Banco Palmas5 in Palmeira,
Fortaleza, Brazil (n = 32). We collected data in February 2011 in face to faceinterviews. Banco Palmas operates a microcredit system through its community
currency ‘Palma’, which has been used to purchase commodities in Palmeira.
The third group comprised people who lived in Turin or Milan, Italy (n = 28).
Paper-based questionnaires were distributed to them in October 2011. Italy is a
euro zone nation, and the respondents were not familiar with community currencies. The samples in the two tests were independent.

Taylor and Francis

Table 11.1 Occupational breakdown of the sample
Group

Not for distribution
Sex

Working people
CC participants
Members of financial organisations
Undergraduate students
Graduate students
Sum

Male

FemaleNo response

17
18
12
34
22
103

11
7
14
5
12
49

0
1
1
0
0
2

Sum

28
26
27
39
34
154

Table 11.2 Geographical distribution of the samples in the three areas
Area

Musashino-chuo
Palmeira
North Italy
Sum

Sex

Sum

Male

FemaleNo response

15
13
10
38

67
18
16
101

3
1
2
6

85
32
28
145

230

Shigeto Kobayashi et al.

11.5 Results
11.5.1 CC participants versus financial organisations’ professionals
A factor analysis was performed on the 27 question items (variables). The screeplot suggested a three-factor solution, included 18 items and explained 45.5%of the variance in the data with eigenvalues greater than 1.0 and factor loadings
greater than 0.35. A three-factor solution was attempted using Promax rotation.
The first factor had an eigenvalue of 3.72, accounting for 23.2% of the variance and consisting of eight items. The second factor had an eigenvalue of 1.91,
accounting for 12.0% of the variance and comprising seven items. The third factor
had an eigenvalue of 1.75, accounting for 10.9% of the variance and consistingof three items.
The factor pattern after the Promax rotation is reported in Table 11.3. Items
with a high loading on the first, second and third factors represent people’s
demand for diversity of money, equitable distribution of money and pursuit ofmoney, respectively. The three factors were currency diversity (F1), fairness (F2)and profit orientation (F3). A reliability analysis was conducted to test the reliability and internal consistency of each factor. The results showed that the Alphacoefficients of F1 and F2 were 0.80 and 0.67, respectively. This is well above theminimum value of 0.50 which is considered an acceptable indication of reliability
for basic research. However, the Alpha coefficient of F3 was 0.47, which indicated low internal consistency.
Table 11.4 shows the correlation among the three factors. The results indicated a significant correlation between only F1 and F2 (r=.30, p< .01). Table 11.5
indicates the correlation among the three subscale scores with CC and financialorganisation participants. The scores of the CC participants indicated a significant inverse correlation between F1 and F2 (r=−.53, p< .01), whereas those of
the members of the financial organisations showed a significant direct correlation between F1 and F2 (r=.40, p< .05). That means that participants of the CC
considered currency diversity and profit orientation to be opposites, whereas themembers of financial organisations thought currency diversity and profit orientation were closely related. Both apparently see little connection between currency
diversity and fairness.
We classified the samples into three groups based on affiliation (participantsof the CC, members of financial organisations and others). An analysis of variance (ANOVA) was conducted for the dependent variables (the scores of the threefactors). The number of CC participants, members of financial organisations andothers were 26, 27 and 101 respectively. Table 11.6 presents significant differencesin currency diversity and fairness among the three groups (F (2, 150) = 22.49,
p <.01;F (2, 150) = 34.23, p <.01). Differences in the scores of the three factors were
determined using Tukey’s test because the ANOVA was significant. Significant
differences between all groups in currency diversity and fairness were identified.
Table 11.6 shows that the participants of community currency tended to place
more importance on currency diversity than the members of financial organisations did. Furthermore, the former were likely to consider that government andTaylor and Francis

Not for distribution

Money consciousness and community currency 231
Table 11.3 Factor analysis of money consciousness (factor pattern after Promax rotation)22) Do you think it is good that we have different moneys
from national currencies to live with?
4) Do you think it is good that money can be created or issued
freely by people?
25) Do you think it is good that money can be issued or
created not only by the central bank or commercial banks,
but also by people or communities?
23) Do you think it is good for money to be single?
8) Do you think it is good that money can be issued or created
not only by the central bank or commercial banks, but also
by the government?
11) Do you think it is good that money can be something thatmutually connects people?
17) Do you think it is good that we can choose favourite onesout of different moneys?
2) Do you think it is natural for money to be interest-bearing?
10) Do you think the government should provide every adultbeyond a certain age with basic income for their minimum
standard of living?
19) Do you think it is good that we accommodate each otherwith money?
13) Do you think moneylenders should not be in suchfinancial institutions as commercial banks, but the
government?
18) Do you think money should not concentrate in a tiny
fraction of people, but disperse among them?
27) Do you think it is good for money to be able to bepassable at any place and area?
21) Do you think it is good for money to be stable in its value?
20) Do you think it is good to lend your friend your money
when they are in a financial need?
7) Do you think it’s good for the money to be able to buy
anything you want?
12) Do you think it is good that money can be created or
issued for the purpose of profit?
15) Do you think it is better to earn more money?

Fl

F2

F3

.72

−.05

.04

.71

.11

.00

.67

.12

−.11

−.64
.54

.40
.14

.14
.14

.51

.02

.26

.48

.17

.20

−.40
.14

−.17
.60

.24
−.05

.15

.53

.02

Taylor and Francis
.49

−.17

Not for distribution

.10

.05

.47

−.22

−.05

.45

.43

−.21
−.03

.42
.39

.01
−.06

.07

−.15

.63

.26

−.19

.48

−.03

.00

.42

Table 11.4 Factor correlation, mean and deviation of subscale scores

Currency diversity
Fairness
Profit orientaion

Currency
diversity

Fairness

Profitorientation

Mean

SD

—

.30**
—

−.02
−.09
—

2.78
3.47
2.91

.83
.69
.90

232

Shigeto Kobayashi et al.

Table 11.5 Breakdown of factor correlation of subscale scores (CC participants andmembers of financial organisations)
Currency diversity, fairness, profit orientation
CC participants (n = 26)
Currency diversity
Fairness
Profit orientaion

—

−.08
—

−.53**−.31—

Members of financial organisations (n = 27)
—
.02
.40*
—
−.15
—

Currency diversity
Fairness
Profit orientaion** p<.01 * p<.05

Table 11.6 ANOVA table of subscale scores for the three groups

Currency diversity
Fairness
Profit orientaion
Mean(SD)

CC
Participants

Members of financialorganisations

Othersp - value

3.41 (1.15)
4.28 (.45)
2,72 (1.14)

2.14 (.50)
3.06 (.58)
2.80 (.82)

2.76 (.57)
3.37 (.60)
2.98 (.84)

.00
.00
.33

Taylor and Francis

Not for distribution

peers should ensure stable livelihoods for poor people as they had high fairness
value. These three groups did not seem to place value on profit orientation because
each average subscale score of profit orientation was less than the average of 3.0.
11.5.2 Differences in money consciousness among currency systems
An ANOVA was conducted using three factors as dependent variables found fromthe previous analysis (Table 11.7). The results showed significant differences inall factors and in the three areas where we conducted research.
Table 11.8 indicates the average scores of items belonging to currency diversity per study area. As the first question, ‘Do you think it is good to have a single
Table 11.7 ANOVA table of subscale scores in the three areas

Currency diversity
Fairness
Profit orientaion
Mean (SD)Musashino-chuo

Palmeira

North Italyp - value

2.53 (.54)
3.10 (.55)
2.41 (.72)

3.26 (.55)
3.91 (.60)
3.45 (1.03)

2.65 (.63)
3.86 (.58)
2.45 (.98)

.00
.00
.00

Money consciousness and community currency 233
Table 11.8 Average scores for the questions on ‘currency diversity’

Do you think it is good for money
to be single?
Do you think it is good thatmoney can be issued or created
not only by the central bank orcommercial banks, but also bypeople or communities?
Do you think it is good that wehave different moneys fromnational currencies to live with?
Do you think it is good that we
can choose favourite ones outof different moneys?

Musashino-chuo

Palmeira

North Italy

3.26

2.78

4.11

2.14

4.00

1.89

2.76

3.38

2.29

2.3

3.28

2.61

Musashino-chuo

Palmeira

North Italy

3.39

4.09

4.46

Table 11.9 Average scores of the questions on ‘fairness’

Do you think the government
should provide welfare
payment for poverty class?
Do you think money should notconcentrate in a tiny fractionof people, but disperse

Taylor and Francis
3.42

4.41

4.61

Not for distribution

money?’, is an inverse question for currency diversity, a higher score in this question item means that currency diversity is less appreciated. Most citizens in theMusashino-chuo area did not want to use a currency other than the Yen because
scores in this category, except for first question, were lower than 3.0. The question items on denationalisation of money scored higher in Palmeira than in otherareas. Conversely, people in Northern Italy did not appreciate currency issuanceby community organisations and approved of a single currency in the area.
Table 11.9 shows the average scores of the group of questions on fairness, perstudy area. Most mean scores on fairness were higher than 3.0 in the three areas
and the fairness scores in Palmeira were higher than those in both the Musashinochuo area and Northern Italy. Palmeira had a high fairness score mainly because
Banco Palmas had conducted a microcredit programme using CC in order todevelop a solidarity economy.

11.6 Discussion
The results supported our hypotheses that currency diversity was appreciatedby people engaging in activities related to the management of CC (Table 11.6),

234

Shigeto Kobayashi et al.

whereas citizens of areas where CCs were introduced did not necessarily appreciate such currency diversity (Tables 11.7 and 11.8). We believe that the degreeof currency diversity may differ based on people’s concerns with CCs. The
understanding of CC is key to enhancing currency diversity. If a CC circulates
effectively in an area or if citizens have better understanding of CC, it is possiblethat people’s consciousness regarding currency diversity is improved. The understanding of CC then helps to circulate it effectively. To confirm this hypothesis,
we must establish a causal relationship between citizens’ money consciousness
and the circulation status of CC.
11.6.1 Change of people’s money consciousness through CC
circulation experiment
How does money consciousness change by introducing a new currency system?
To examine the effect of money consciousness at the meso level on an individual’s cognition at the micro level, we conducted a questionnaire survey before andafter a CC circulation experiment in the Musashino-chuo area in Tokyo, Japan.
Differences in the scores of the three factors before and after the experiment were
tested using paired t-tests (Table 11.10). Differences having p <0.05 were considered not significant in all cases: currency diversity (t (73) = −6.51, n.s.: notsignificant), fairness (t (73) = −0.34, n.s.), and profit orientation (t (75) = 1.07,n.s.). We could not confirm significant differences in money consciousness before
or after the circulation experiment.
We then sought to determine the relationship between money consciousness and the understanding of CC. People’s money consciousness may change
if they understand the purpose and basic philosophy of CC. Table 11.11 shows
the degree of citizens’ understanding of CC before and after the experiment. To
examine the change in understanding of CC, the statistical difference was determined using McNemar’s test (χ2 (5) = 22.60, p <.001). Citizens’ understandingof CC increased after the experiment. Many people answered ‘I have heard aboutcommunity currency, but I have little understanding of it’ before the experiment,
but after the experiment they changed their response to ‘I understand a little aboutcommunity currency’ or ‘I understand community currency well’. In total, 85% of
respondents answered ‘I understand a little’ or ‘I understand well’ after the experiment (Table 11.12). The results indicate that the degree of understanding of CC
was improved and many respondents understood CC well through the experiment.

Taylor and Francis

Not for distribution

Table 11.10 Subscale scores on money consciousness before-and-after experiment
Before-experiment

Currency diversity
Fairness
Profit orientation

After-experiment

Mean

SD

Mean

SD

t - value

2.53
3.10
2.41

.54
.55
.72

2.58
3.10
2.32

.55
.57
.67

−6.51
−0.34
1.07

Not for distribution

n=84

Degree of understanding about
CC before the experiment
I do not understand CC at all.
I have heard of CC, but I do
not understand it.
I understand CC a little.
I understand CC well.

I have heard of CC, but I do
not understand it well.
3
4

5
0

I do not understandCC at all.
1
0

0
0

Degree of understanding about CC after the experiment

Table 11.11 Understanding of CC before-and-after the experiment

Taylor and Francis
30
1

I understandCC a little.
3
14

13
8

I understandCC well.
02.00

p – value

McNemar test

236

Shigeto Kobayashi et al.

The respondents were grouped into ‘not improved’ and ‘improved’ according
to their understanding of CC before and after the experiment (Table 11.11). The
former, inside the solid line in Table 11.11, represents people whose answers
were unchanged before and after the experiment (n = 43). The latter, indicatedinside the dashed line boxes, shows people who improved their understanding ofCC through the experiment (n = 35).6 There were significant differences between
the two groups.
We focused on further analysing these differences. Table 11.13 shows changes
in the subscale scores of the two groups across the three factors. The scores forfairness and profit orientation did not differ significantly between the two groups.
However, the score of the improved group for currency diversity was significantly
higher than the not improved one (t (31) = −2.01, p <.1).

Table 11.12 Degree of understanding CC after the experimentDistribution of degree of understanding about CC after
the experiment
I do notI have heard I understand I understand χ2
punderstand of CC, but I
CC a little. CC well.
(df=3) – value
CC at all. understand it.
Frequency
1(1%)(proportion)

12(14%)

49(58%)

23(27%)

59.71* 0.00

Taylor and Francis

n=85* p<.001

Not for distribution

Table 11.13 Subscale scores on understanding CC before-and-after the experiment

Currency
diversity

Fairness

Profitorientaion*p<.1

Degree ofunderstanding
about CC

Beforeexperiment

Afterexperiment

Deviation

p-value

Mean

Mean

Not improved group(n = 37)
Improved group(n = 31)
Not improved group(n = 37)
Improved group(n = 32)
Not improved group(n = 37)
Improved group(n = 33)

2.68

2.6

−0.08

.37

2.34

2.56

0.22

.05*

3.18

3.18

0

1.00

2.9

2.92

0.02

.78

2.36

2.36

0

1.00

2.42

2.29

−0.13

.30

Money consciousness and community currency 237
11.6.2 Flow of the micro-meso-macro loop in the circulation test of CC
We apply the flow of the micro-meso-macro loop discussed in the theoreticalsection to the results of our investigations (Figure 11.2). The introduction of
CC at the meso level ([1] in Figure 11.2) improved the understanding of CC at
the micro level ([2] in Figure 11.2). This change strengthened the tendency toapprove of currency diversity by recognising the significance and implicationsof CC ([3] in Figure 11.2). Thus far, the process has been proven by our investigation (Table 11.13). Once currency diversity is accepted, the consciousnessof currency diversity may be transmitted in a society ([4] in Figure 11.2). Theinteractions [3] and [4] may act as a positive feedback loop between the meso
and micro levels, causing shared consciousness and encouraging reviews of theCC system ([5] in Figure 11.2). Moreover, actions from the micro or meso levels
to the macro level may occur. If we observe these flows, we can show that the
micro-meso-macro loop functions in socio-economic regions.
We think that the micro-meso-macro loop framework is useful in designinga CC system that includes changes in people’s consciousness, although only the
relationship between the micro and meso levels is shown in Figure 11.2 due to thelack of investigation on how the introduction of CC affects the macro level (e.g.
economic revitalisation). The usefulness comes from the fact that the framework
makes it possible to consider the types of effects that the introduction of CC has oneach level in the community. In fact, the analysis, based on the framework about
several instances of CC, brought about the claim that increasing citizens’ understanding of CC is critical in maintaining its circulation. In order for the framework
to be more efficient, circulation experiments with longer periods and large-scale
investigation should be conducted to clarify how CC affects the macro level.

Taylor and Francis

Not for distribution

Figure 11.2 Flow of micro-meso-macro loop in the circulation experiment of CC

238

Shigeto Kobayashi et al.

11.7 Conclusion
In this study, we considered how shared money consciousness at the meso level
affects the micro or macro levels and how it changes through the use of CC basedon the micro-meso-macro loop. By analysing responses to questionnaires onmoney consciousness in the areas of Japan, Brazil and Italy, we positively prove
our two hypotheses: (i) there is a difference in money consciousness between participants of community currency and others, and (ii) there is a correlation between
citizens’ money consciousness and the circulation status of CC.
First, the operators and users of CCs tended to place more importance on currency
diversity and fairness than others (currency diversity: 3.41 vs. 2.76; fairness: 4.28 vs.
3.37). Their money consciousness was in significant contrast to that of members offinancial organisations who placed less significance on currency diversity and fairness than ‘others ’(currency diversity: 2.14 vs. 2.76; fairness: 3.06 vs. 3.37).
Second, the users of a CC with a high circulation (e.g. Palmas) had higher
currency diversity and fairness than those (e.g. Japan) using one with a low circulation (currency diversity: 3.26 vs. 2.53; fairness: 3.91 vs. 3.01). Thus, theintroduction of CC at the meso level enhanced the currency diversity and fairnessof users at the micro level according to CC circulation status.
In an experiment of community currency circulation conducted in theMusashino-chuo area of Japan, no significant differences were found in the threefactors before and after the circulation experiment. However, the users with abetter understanding of community currency placed a high value on currency
diversity, indicating that implementing activities to enhance citizens’ understanding of community currency may develop their tolerance for currency diversity.
By analysing shared money consciousness regarding the three factors, we conclude that participants in CCs with high circulation have money consciousness
characteristics of higher currency diversity and fairness, unlike participants incommunity currencies with low circulation. We also claim that the micro-mesomacro loop framework is a useful thinking tool for analysing the effects of social
institutions on individual’s behaviour and social consequences.
Our next task is to offer suggestions on the introduction and promotion of CC
from cognitive aspects such as users’ money consciousness and levels of understanding of CC.

Taylor and Francis

Not for distribution

Notes
1 The concepts of outer and inner institutions correspond respectively to views of institutions by Commons (1924) and Veblen (1899).
2 For more detailed explanation on how people’s reflection on their own community andmoney consciousness affect the effectiveness of CCs, see Kusago and Nishibe (2017).
3 We cannot completely eliminate the influence caused by cultural differences in this survey because there is a difference in nationality between participants of CC and membersof financial organization in this survey.
4 For further details on ‘Mu-chu’, refer to Kurita et al. (2012).
5 For further details on ‘Banco Palmas’, refer to Jayo et al. (2009).
6 The number of samples in Tables 11.11 and 11.13 differs because respondents who did
not answer all the questions on money consciousness were removed from the analysis in
Table 11.13.

Money consciousness and community currency 239

References
Commons, J. R. 1924. Legal Foundations of Capitalism. New York: The Macmillan
Company.
Furnham, A. 1984. ‘Many Sides of the Coin: The Psychology of Money Usage’, Personality
and Individual Differences 5, no. 5: 501–509.
Hashimoto, T. and M. Nishibe. 2005. ‘Rule Ecology Dynamics for Studying Dynamical
and Interactional Nature of Social Institutions’, in Proceedings of the 10th International
Symposium on Artificial Life and Robotics, CD-ROM.
Hashimoto, T. and M. Nishibe. 2017. ‘Theoretical model of institutional ecosystems andits economic implications’, Evolutionary and Institutional Economics Review 14,
no. 1: 1–27.
Jayo, M., M. Pozzebon and E. H. Diniz. 2009. ‘Microcredit and Innovative Local
Development in Fortaleza, Brazil: The Case of Banco Palmas’, Canadian Journal of
Regional Science 16, no. 1: 115.
Kobayashi, S.,* M. Nishibe,* K. Kurita. and T. Hashimoto. 2010. ‘Difference of Money
Consciousness by Social Activities: Community Currency Participants VS Financial
Organization Participants’, (in Japanese) Chuo Business Review 17: 73–91. (*equal
contribution)
Kurita, K., Y. Miyazaki. and M. Nishibe. 2012. ‘CC Coupon Circulation and Shopkeepers’
Behavior: A Case Study of the City of Musashino, Tokyo, Japan’, International Journalof Community Currency Research 16: 136–145.
Kusago, T.* and M. Nishibe.* 2017. ‘Community Dock: A New Policy Approach for
Altering Institutions’, in this volume. (*equal contribution)
Nishibe, M. 2012. ‘Community Currencies as Integrative Communication Media for
Evolutionist Institutional Design’, International Journal of Community Currency
Research 16.D: 36rn8.
Seyfang, G. and N. Longhurst. 2013. ‘Growing Green Money? Mapping Community
Currencies for Sustainable Development’, Ecological Economics 86: 65–77.
Veblen, T. 1899. The Theory of the Leisure Class: An Economic Study in the Evolution of
Institutions. New York: Macmillan.
Yamauchi, K. T. and D. J. Templer. 1982. ‘The Development of a Money Attitude Scale’,
Journal of Personality Assessment 46, no. 5: 522–528.

Taylor and Francis

Not for distribution

AppendixPlease answer the following questions by choosing and circling one of the five
options intuitively without thinking too much or taking too long (within 20 seconds).
The questions should be answered in the same order as presented below.
1) Do you think the government should provide welfare payment for the poverty
class?
a) Strongly agree, b) Weakly agree, c) Neutral,e) Strongly disagreed) Weakly disagree,

2) Do you think it is natural for money to be interest-bearing?
a) Strongly agree, b) Weakly agree, c) Neutral,e) Strongly disagreed) Weakly disagree,

240

Shigeto Kobayashi et al.

3) Do you think it is good that we have free time even without a lot of money?
a) Strongly agree,b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

4) Do you think it is good that money can be created or issued freely by people?
a) Strongly agree,b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

5) Do you think it is good for money to be created or issued by a credible groupor organisation?
a) Strongly agree,b) Weakly agree, c) Neutral, d) Weakly disagree,e) Strongly disagree
6) Do you think money is not as important as health?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

7) Do you think it’s good for money to be able to buy anything you want?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

Taylor and Francis

Not for distribution8) Do you think it is good that money can be issued or created not only by thecentral bank or commercial banks, but also by the government?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

9) Do you think money can’t buy love and friendship?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,10) Do you think the government should provide every adult beyond a certain age
with basic income for their minimum standard of living?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,11) Do you think it is good that money can be something that mutually connects
people?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

Money consciousness and community currency 241
12) Do you think it is good that money can be created or issued for the purpose ofprofit?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,13) Do you think moneylenders should not be in such financial institutions ascommercial banks, but the government?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

14) Do you think we do not need extra money while we can get along?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,15) Do you think it is better to earn increasingly more money?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,16) Do you think it is good to do volunteer work or make donations without compensation?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

Taylor and Francis

Not for distribution17) Do you think it is good that we can choose favourite ones out of different
moneys?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,18) Do you think money should not concentrate in a tiny fraction of people,
disperse among all?
a) Strongly agree, b) Weakly agree,e) Strongly disagree

butc) Neutral, d) Weakly disagree,19) Do you think it is good that we accommodate each other with money?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,20) Do you think it is good to lend money to your friend when they are in a financial need?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,242

Shigeto Kobayashi et al.

21) Do you think it is good for money to be stable in its value?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,22) Do you think it is good that we have different moneys other than national
currency to live with?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,23) Do you think it is good to have single money?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,24) Do you think it is good that we have special money for paying for volunteer
work?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,25) Do you think it is good that money can be issued or created not only by thecentral bank or commercial banks, but also by people or communities?

Taylor and Francisa) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,

Not for distribution

26) Do you think money transactions should be anonymous?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,27) Do you think it is good for money to be transferrable at any place and area?
a) Strongly agree, b) Weakly agree,e) Strongly disagreec) Neutral, d) Weakly disagree,12 Gaming simulation using electronic
community currencies
Behavioural analysis of self-versuscommunity consciousness
Masahiro Mikami and Makoto Nishibe
12.1 Introduction
In terms of their issuance and circulation, traditional community currencies (CCs)are classified into three types: paper money CCs (centrally issued, physically circulating), draft CCs (dispersedly issued, physically circulating) and account CCs(dispersedly issued, mutually paid) (Nishibe 2002, 36–43).1 Recent ICT advancements have not only made these three types of CCs electronic, but also facilitateda fourth type, namely centrally issued, mutually paid CCs.2 For example, CCs
that use media such as smartcards are centrally issued but owned by each user ina decentralised way. However, owing to existing networking technology and networking devices and lines, it is now possible to make payments through mutual
value transfers on remote servers.3 Although such payment technology is typically used for business-to-consumer commercial transactions, CCs that deal with
non-commercial transactions (volunteering) and electronic money that deals withcommercial transactions (business) could merge further in the future.
Centrally issued, mutually paid electronic CCs improve the convenience andefficiency of individual payments by using electronic recording and calculation
processes. Moreover, they can change the operation of CCs in two main ways. First,
they make it possible to create several complicated media designs (institutional
currency designs) and can incorporate more than one currency in each medium.
Furthermore, during the introduction, or circulation period, one can change suchparameters as the premium rate (the rate of the bonus added to the value of the
CC during the conversion of the legal tender to the CC), the redemption fee rate(the rate of the discount reduced from the value of the CC during the conversionof the CC to the legal tender), the depreciation rate (the negative interest rate todevaluate the CC over time), upper-lower balance limits and points or fees pertransaction.4 Second, the traceability of transactional data has improved, making
it possible to analyse in real time records on individual transactions, issued balances, transaction amounts, circulation velocity, circulation route and circulation
network.5 Such information could be used to select a suitable media design that
could meet issuers’ objectives and disclose information on CCs to participants.
Such changes in the operation of CCs could alter the type of information
possessed by participants on CCs and their communities, thus affecting the

Taylor and Francis

Not for distribution

244

Masahiro Mikami and Makoto Nishibeparticipant’s subsequent knowledge and behaviour. The participants’ understanding of the communities and the CCs would enhance if the aggregate
information of circulation amount, CC transactions and activities are provided
along with various CC parameters. Keeping this in mind, in the present study
we have built a contactless card payment system and a virtual communityof local shops, local non-profit organisations (NPOs), local consumers andnational chain stores to examine how electronic CCs work. We then perform anexperiment using a gaming simulation and an ex post questionnaire to examine
participants’ behaviour patterns. Such patterns can change depending on (i) thepremium rates of CCs, (ii) participants’ consciousness about self and community, and (iii) the availability of aggregate information on the transactions andactivities in the community.
The rest of this chapter is organised as follows. In the next section we explain
the method of experiment for this study using gaming simulation, including the
subjects of the experiment, structure of the virtual community using CCs and thegame conditions. Section 12.3 considers results of the experiment and questionnaire in terms of the circulation of currencies (Section 12.3.1), activities of thesubjects (Section 12.3.2), their behavioural objectives and community consciousness (Section 12.3.3), and the effects of providing aggregate information (Section
12.3.4). Section 12.4 is the conclusion.

12.2 Method of the experiment

Taylor and Francis

In this study of a contactless card payment system, we recruited 12 subjects(undergraduate and graduate students) and carried out an experiment using a gaming simulation.6 In the computer room we set up a virtual community composed of
two local shops, two local NPOs, two chain stores and 12 local citizens (consumers). Each player used an electronic card to record the values of the legal currency,
Yen, and the fabricated CC, Clark.7 Using their own computers, consumers could
perform a number of actions: exchange Clark for Yen (thereby the CC goes into
circulation), inquire about their balances or confirm their transaction histories.
Consumers could also carry out ‘transactions’ in local shops, local NPOs or chain
stores by choosing to buy goods and services, donating, volunteering or working part-time. However, consumers could pay by using either Clark or Yen (orboth) in local shops that could convert Clark into Yen, whereas NPOs accepted
only Clark and chain stores (located outside the community) accepted only Yen(Figure 12.1).
As this experiment aimed to observe economic behaviour with respect to theCCs investigated here, we abstracted irrelevant factors to smoothen the progressof the game. For example, to carry out actual market transactions it would be necessary to discover the parties with whom we would be dealing with, to know what
we were dealing with and on what terms, to conduct negotiations, to draw up thecontract, to confirm that the terms of the contract were being observed and so on.
The transaction costs of these activities might then condition the manner in whichthese transactions are conducted and even the establishment of the transactions

Not for distribution

Gaming simulation: behavioural analysis 245

Local shops
d. Income from redemptione, f Payment
g. Payment

c. Redemption

i. Payment

Local
NPOs

Volunteerh. Donation

Consumers
Income 50,000 Yen
Leisure 48 hours

b. Expense for purchases

Community

Part-time jobs

Goods,
Services

Issuera. Purchases

j. Payment
Goods,
Services

Chain stores

Flow of Clark
Flow of Yen
Flow of goods and services

Figure 12.1 Flows of Clark and Yenthemselves (Coase 1937, 1960). This fact might be essential in the case of transaction of CCs as well. However, we removed any transaction costs that were notspecific to the use of CCs in order for players to focus their attention on the choice
between CCs and legal currencies. Further, to prevent the games from becoming
only a problem of price negotiation and supply-and-demand matching (which areirrelevant to the characteristics of the currencies used) the types and prices of thegoods and services provided by players were defined in advance (Table 12.1). It
was also assumed that their stock was unlimited.
In this experiment, for simplification, we focused on consumers’ behaviour
towards CCs and assumed that all shops and NPOs play only passive roles. In
other words, the roles of the local shops, local NPOs and chain stores were playedby assistants (not by the experiment’s subjects). Specifically, these assistants soldgoods and services to (and received Clark or Yen from) consumers, accepted
part-time workers from (and paid Yen to) consumers, accepted volunteers from(and paid Clark to) consumers and accepted donations (in Clark) from consumers
under the allocated budgets. By contrast, within their income of 50,000 Yen andleisure time of 48 hours per game, consumers could buy the necessary amount of
Clark and choose freely from the various uses of their Clark or Yen amounts. At
the beginning of each game, subjects were required to choose ‘self’ or ‘community’ as their behavioural priority, write down their choice on the reverse of theircurrency cards and follow their behavioural priority in each game.8
Each game lasted 20 minutes and we played five games under different conditions. These game conditions included the media design of the CC and the methodof providing feedback about the transaction data to the subjects as aggregate information (Table 12.2). For the parameters concerning the media design of the CC,
we set the premium rate (10%, 15% and 20%) in each game. However, we did not

Taylor and Francis

Not for distribution

BuyerConsumers

Consumers

Consumers

SellerLocal shop A

Local shop B

Chain store A

1 Side dishes, lunch
2 Alcohol
3 Kitchen items
4 Stationery
5 Books
6 Music CDs
7 Movie DVDs
8 Game software
9 Tearoom
10 Cheap restaurant
1 Bags
2 Clothes
3 Shoes
4 Sporting goods
5 Tools
6 Gardening supplies
7 Pet products
8 Camping equipment
9 Bicycles
10 Karaoke
1 Side dishes, lunch
2 Alcohol
3 Shoes
4 Bags
5 Clothes
6 Kitchen items
7 Interior accessories

Name of goods and services

Table 12.1 Menu of goods and services provided

Taylor and Francis

Not for distribution

Required hours
for consumers
–
–
–
–
–
–
–
–
2 hours
2 hours
–
–
–
–
–
–
–
–
–
2 hours
–
–
–
–
–
–
–

Payment
1,500 Yen / Clark
2,000 Yen / Clark
7,500 Yen / Clark
1,700 Yen / Clark
1,150 Yen / Clark
1,400 Yen / Clark
1,700 Yen / Clark
11,500 Yen / Clark
1,000 Yen / Clark
1,000 Yen / Clark
11,500 Yen / Clark
8,000 Yen / Clark
5,800 Yen / Clark
20,000 Yen / Clark
10,000 Yen / Clark
4,000 Yen / Clark
5,000 Yen / Clark
30,000 Yen / Clark
23,000 Yen / Clark
3,500 Yen / Clark
1,300 Yen
1,700 Yen
5,000 Yen
10,000 Yen
7,000 Yen
6,500 Yen
20,000 Yen

Local NPO A1

Consumers

Not for distribution* Shaded goods and services can be replaced by those with the same name.
1
Volunteer work at NPO A concerns the events and activities held in the local community
2
Volunteer work at NPO B concerns care for individuals in the local community

Local shop A
Local shop B

Local NPO B2

Consumers

Chain store B

8 Stationery
9 Café
10 Restaurant
1 Books
2 Music CDs
3 Movie DVDs
4 Game software
5 Bicycles
6 PCs
7 Karaoke
8 Bowling
9 Movie theater
10 Domestic travel
1 Educational activity for the youth (assistance for camping)
2 Assistance for festivals and events
3 Patrol for the safety of children and road users
4 Cleaning and gardening activity in the community
5 Teaching at a free school
6 Donation
1 Support for child care (temporary day care)
2 Support for the elderly (shopping and so on)
3 Nursing care for the elderly (personal care)
4 Assistance for neighbours (yard maintenance and pet care)
5 Crop work in the neighborhood
6 Donation
Part-time job
Part-time job

Taylor and Francis

1,500 Yen
2,000 Yen
5,000 Yen
1,000 Yen
1,200 Yen
1,500 Yen
10,000 Yen
20,000 Yen
50,000 Yen
3,000 Yen
2,000 Yen
1,800 Yen
70,000 Yen
1,000 Clark
200 Clark
100 Clark
150 Clark
450 Clark
1,000 Clark
500 Clark
300 Clark
800 Clark
300 Clark
600 Clark
1,000 Clark
1,000 Yen
1,000 Yen–
2 hours
2 hours––––––
2 hours
1 hour2 hours
24 hours
24 hours
3 hours
1 hour
1 hour3 hours–
5 hours
2 hours
8 hours
3 hours
6 hours–
1 hour
1 hour248

Masahiro Mikami and Makoto Nishibe

introduce a depreciation rate, upper balance limit and points or fees per transaction. The lower balance limit was fixed at zero. The redemption fee rate was thesame as the premium rate because local shops in this experiment that would pay
the redemption fee had no option to join or leave the CC, nor could they decide on
the prices of their merchandise. To give feedback and information on the aggregate data we prepared three modes (non-display, bar chart and line chart) and theselected mode was altered between different games or in the middle of the game(ten minutes after the game had started). The information used in this experiment
was composed of 11 types of aggregate information based on the quantity of thevarious transactions and activities in terms of Clark and Yen (Table 12.3).
The game design discussed above is based on the following hypotheses: first,
for the premium rate, we made the hypothesis that the higher the premium rate at
which the subjects buy Clark for Yen, the more Clark they purchase. Consumers
compare inside and outside prices in real terms (with the premium rate considered) and consume either in local shops or in chain stores depending on thoseprices. In this experiment, we offered some goods and services with the same
name in both local shops and chain stores. The prices of this merchandise were
fixed so that the 10% premium rate made inside prices higher than outside prices,
Table 12.2 Changes in the conditions between the games
Game progress

Game I
Game II
Game III
Game IV
Game V

Premium and redemption
fee rates

Feedback method(arrows show a change after
10 minutes)

Taylor and Francis

Not for distribution
both 10%
both 10%
both 20%
both 20%
both 15%

non-display -> bar chart
non-display -> line chart
non-display -> bar chart
non-display -> line chart
bar chart -> line chart

Table 12.3 Information displayed in the gamesa
Cumulative total purchases of Clark by consumers (in Clark)b
Cumulative total expenses for purchases of Clark by consumers (in Yen)c
Cumulative total redemption of Clark by local shops (in Clark)dCumulative total income of local shops from redemption of Clark (in Yen)e
Cumulative total consumption in Clark in local shops (in Clark)f
Cumulative total consumption in Yen in local shops (in Yen)
e&f Cumulative total consumption in local shops (in Clark and Yen) (=e+f)g
Cumulative total payment for part-time jobs in local shops (in Yen)h
Cumulative total donations to local NPOs (in Clark)i
Cumulative total payment for volunteering in local NPOs (in Clark)j
Cumulative total consumption in chain stores (in Yen)
* The letters in Table 12.3 correspond to the flows of Clark and Yen in Figure 12.1.

Gaming simulation: behavioural analysis 249
the 20% premium rate made outside prices higher than inside prices and the 15%
premium rate made either price higher depending on the type of merchandise.
Second, for the methods of displaying information, we hypothesised that if thesubjects could see that information they would know other people’s behaviour
and thus alter their behaviour by using Yen and Clark. Furthermore, different
ways of displaying information would bring about different influences. For example, bar charts (which show information at a specific point in time) would be lessuseful than line charts (which show information changing over time) for grasping
the overall trends in the community. The changes in these conditions such as thepremium rate and methods of displaying information were not told to the subjects
before each game.
Lastly, for the knowledge and behaviour of the subjects, we made the hypothesis that each player’s consciousness of self and community would determine hisor her behaviour and the activity of the community. To test this hypothesis, we
asked the subjects to choose their behavioural priority (self or community) at the
beginning of each game to compare this ex ante priority with the ex post priority
in their actual behaviour. In this way, we aimed to examine how such a simple
behavioural priority might lead to particular behaviour under the particular institutional structures including the CC.9

12.3. Experiment results, questionnaire results andimplications

Taylor and Francis

12.3.1 Amounts of currencies and their circulation velocity

Not for distribution

In general, the circulating conditions of CCs can be estimated by using the amountof currency issued, amount redeemed, outstanding issued amount and aggregate
amounts of the various transactions using those currencies.10 Furthermore, basedon those aggregate amounts, we can calculate their circulation velocity as theirdegree of contribution to the activeness of communities, which we can comparewith that of legal currencies. Under the experimental framework, we can calculate
the amount of Clark issued (a), amount of Clark redeemed (c), outstanding issueof Clark (a-c), amount of transactions using Clark (e+h+i), local inflow of Yen(e.g. if the income is Yen 50,000, then 12 consumers earn Yen 600,000), local
outflow of Yen (j), local circulating balance of Yen (600,000−j), and local amountof transactions using Yen (f+g). For each of the five games, Table 12.4 shows
the results obtained by calculating these indexes. The velocities of circulation of
Clark and Yen can be calculated with the following formulae, respectively.
Thevelocity of circulation of Clark
Theamount of transactionsu sin g Clark fromgame start to the game end (e + h + i )The out s tan ding issuse of Clark at the game end (a − c)

Not for distribution

217,350
312,400
269,600
349,500
328,500

89,308164,340
203,734
308,237
234,306

270,000
476,750
479,300
641,500
482,500

Game I
Game II
Game III
Game IV
Game V306,658
476,740
473,334
657,737
562,806

The amount of The amount The amount The
transactionsof Clarkof Clark
outstanding
using Clark
issuedredeemed
issue of
Clark

Game
progress

3.02
2.90
2.35
2.08
2.06

The
circulation
velocity of
Clark

Table 12.4 The amounts and the circulation velocity during each game11

Taylor and Francis
218,700
209,900
202,000
231,400
248,000

600,000
600,000
600,000
600,000
600,000

The local
The
inflow ofamount oftransactions Yen
using Yen

298,900
185,400
289,800
156,800
190,500

301,100
414,600
310,200
443,200
409,500

The local The local
outflow of circulating
Yenbalance of
Yen

0.73
0.51
0.65
0.52
0.61

The
circulation
velocity ofYenGaming simulation: behavioural analysis 251
Thevelocity of circulation of Yen
Theamount of transactionsu sin g Yen from game start to the game end ( f + g )The out s tan ding issuse of Yen at the game end (600, 000 − j )Table 12.4 shows that the circulation velocity of Clark is three to six times higher
than that of Yen as a result of the institutional structure of the local CC used in thisexperiment. The flows of Clark and Yen (Figure 12.1) show that Yen obtained asincome or earnings for part-time work by consumers must be used (when usedwithin the community) in local shops or converted into Clark (i.e. excluding chain
stores). By contrast, although Clark obtained in exchange for Yen or volunteer
work can be used in local shops or local NPOs, consumers cannot exchange Clark
into Yen. This shows that Clark, which has several usages or several circulationroutes, is therefore structurally easy to circulate, and thus contributes to the transaction activity and has a significantly higher circulation velocity than the Yen.
In addition, the per-minute circulation velocity of Clark and Yen are calculated
by using the following formulae, respectively:
The per − min ute velocity of circulation of Clark fromtt ot + 1 min utes aftergamestart
Theamount of transactionsu sin g Clark fromtto +1 min utes after game start
The out s tan ding issuse of Clark at t +1 min utes after game start

Taylor and Francis

Not for distribution

The per − min ute velocity of circulation of Yen
Theamount of transactionsu sin g Yen fromtto +1 min utes after game start
The out s tan ding issuse of Yen at t +1 min utes after game start
By using these formulae, the development of the circulation velocity in eachgame is shown in Figures 12.2 to 12.6.
0.6
0.5
0.4
0.3
0.2
0.1
0

Per-minute circulation velocity of Clark
Per-minute circulation velocity of Yen

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19

Figure 12.2 The development of circulation velocity in Game I(minute)

0.6
0.5
0.4
0.3
0.2
0.1
0

Per-minute circulation velocity of Clark
Per-minute circulation velocity of Yen

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19(minute)Figure 12.3 The development of circulation velocity in Game II

0.6
0.5
0.4
0.3
0.2
0.1
0

Per-minute circulation velocity of Clark
Per-minute circulation velocity of Yen

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19(minute)Figure 12.4 The development of circulation velocity in Game III

Taylor and Francis

0.6
0.5
0.4
0.3
0.2
0.1
0

Not for distribution

Per-minute circulation velocity of Clark
Per-minute circulation velocity of Yen

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19(minute)Figure 12.5 The development of circulation velocity in Game IV

0.6
0.5
0.4
0.3
0.2
0.1
0

Per-minute circulation velocity of Clark
Per-minute circulation velocity of Yen

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19

Figure 12.6 The development of circulation velocity in Game V(minute)Gaming simulation: behavioural analysis 253
The causes behind the changes in circulation velocity are identified by using
the development of the subject’s activities, which in turn are related to the alterations in game conditions (e.g. increase and decrease in the premium rate) as wellas methods of displaying aggregate amounts and also to the subject’s behavioural
objectives. In Section 12.3.2, we first confirm the attributes of the subjects that
could condition the game, the quantitative development of the subject’s behaviour
and the influence of the different premium rates on those behaviours. We thenexamine the relationship between the subjects’ behaviour and their behavioural
objectives in Section 12.3.3 and the relationship between the subjects’ behaviour
and the graphs of aggregate amounts in Section 12.3.4.
12.3.2 Attributes of the subjects, the premium rate and the amount ofactivities
According to the results of the ex post questionnaire, the majority of the subjects
had little prior knowledge or experience in CCs. Regarding the question, ‘Do
you know about community currencies?’, two subjects answered, ‘I know themwell’, nine answered, ‘I don’t know them well but I have heard about them’, andone answered, ‘I know nothing about them’.12 To the question, ‘Have you everused community currencies?’, two subjects (i.e. those that were knowledgeable
in the previous question) answered, ‘I have used community currencies’ and ten
answered, ‘I’ve never received or used community currencies’. Therefore, themajority of the subjects had to learn the role of CCs, especially the meaning andfunction of the electronic CC used in the virtual community set-up in this experiment. Although the subjects were provided with a map of the virtual community
in the room and the flowchart of currencies (Figure 12.1), they might have understood the structure of the games only after they actually experienced them.
We then attempted to understand the factors that determined the amount purchased and amount of the various Clark transactions in each game. According
to our hypothesis proposed in Section 12.2, one of those factors might be thepremium rate. However, the relationship between the premium rate and all consumers’ amounts of the various activities in each game in Table 12.5 showed nostatistically significant correlation.
Table 12.6 shows the correlation coefficients between the premium rates andamount of the various activities in Games I–V per consumer. Only two of the 12
subjects (i.e. Consumers A and C) took action to increase their consumption in
local shops when the premium rate rose, which increased the amount purchased.
For Consumer A, when the premium rate rose, he or she increased his or her
part-time job (receiving more Yen to purchase more Clark), increased his or
her donation to local NPOs (using more leftover Clark), used no Yen in local
shops and decreased his or her consumption in chain stores (buying relatively
inexpensive items in local shops). Two other consumers (i.e. Consumers B andG) reduced their volunteering work in local NPOs when the premium rate rose
(because the purchase from Yen was a more advantageous method for obtaining
Yen than payment for volunteering was). Thus, while the response of the subjects

Taylor and Francis

Not for distribution

Not for distribution

Game I 10
Game II 10
Game III 20
Game
20
IV
Game V 15
Correlation
coefficient withthe premiumrate
p-value

278,780
433,400
394,445548,114489,388
0.565

0.321

306,658
476,740
473,334
657,737

562,806
0.670

0.216

0.148

441,600
0.745

279,550
391,800
411,400
553,700

0.116

397,600
0.785

237,850
354,900
392,400
541,300

0.082

44,000−0.83041,70036,90019,00012,4000.222

204,000
0.663

177,000
173,000
183,000
219,000

0.667

74,0000.265

21,000105,000
73,00086,0000.987

10,9000.010

11,15016,85013,90014,2000.817

190,500−0.144

298,900
185,400
289,800
156,800

0.411

2.318
0.481

0.935
2.113
1.419
3.531

0.634

0.053
−0.291

0.062
0.097
0.076
0.065

Game
Premium Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Consumption Payment forvolunteeringin local
total
total
total
total
total
total
total
total
Progress rate
total-------------donations payment for consumption shops
consumption consumption consumption payment
purchases expenses-------------- Payment forvolunteering in chain
to localfor partin Clark in in Yen inin localof Clark by for
Consumption part-time
stores (inlocal shops local shops time jobs in NPOs (in in local
consumer purchases shops (injobs
in chain
Yen)
NPOs (inlocal shops Clark)(in Yen)(in Clark)(in Clark) of Clark by Clark andstoresClark)(in Yen)consumer Yen)(in Yen)Table 12.5 Correlations between the premium rates and the amount of activities in each game

Taylor and Francis

Gaming simulation: behavioural analysis 255
to the premium rate varied, on average the effect of the premium rate was small
in this experiment.
This analysis was based on the behaviour of the subjects. Next, we include
their motives in our analysis.
12.3.3 The subjects’ behavioural objectives and self-versus-community
consciousness
In this experiment, the subjects were given the following three instructions fortheir behaviour:−−Choose and mark ‘self’ or ‘community’ on the reverse of your currency cardand follow that behavioural priority.
−− It is up to you how to use or save the given income and leisure time.
−− Do not touch other people’s currency cards or PCs and avoid looking attheir PCs.
Before each game started the subjects were asked, ‘In this game, will you prioritise self or community?’ and were required to choose between the two. Afterall the five games, they were asked in the questionnaire, ‘What was your actual
weight on self and community in game . . .?’ and were required to choose theself to community ratio that matched their actual feelings on a scale of 10:0 to
0:10. That is, the rationality or internal consistency required to be followed by the
subjects would not be their constant pursuit of self-interest but the consistency intheir weight placed on self or community.13
Table 12.7 shows the ex ante behavioural priorities that the subject chose before
each game started and their counts by game and by person. As there was no constraint on how many times the subject could choose self or community in the fivegames, self was selected 37 times and community was selected 23 times if counted
for all the games. If counted for each game, Game I had 11 self-oriented participants and only one community-oriented participant, whereas the rest of the games
had five or seven self-oriented participants and the remainder were communityoriented, which shows no particular tendency across games.
We then attempted to examine the specific behavioural objectives of selforiented and community-oriented subjects. In the ex post questionnaire, we asked
about their behavioural objectives in each half of each game (up to three answers
per person). The result shown in Figure 12.7 highlights that many self-oriented
subjects choose ‘to earn as much Yen as possible’, ‘to consume as much as possible’ and ‘to do as much part-time work in local shops as possible’. On thecontrary, many community-oriented subjects chose ‘to consume as much as possible in local shops’, ‘to do as much volunteering as possible in local NPOs’ and‘to make as much donations as possible to local NPOs’.
Grouped by their ex ante behavioural priorities, experimental subjects showed
the following patterns in their amount of activities in Games I–V. First, allself-oriented consumers followed this pattern: Consumption in chain stores >Taylor and Francis

Not for distribution

0.940*0.108

0.910*

0.554−0.244−0.842−0.187−0.496

0.829
0.553
0.669
0.018

Consumer A

Consumer B

Consumer C

Consumer D
Consumer E

Consumer F

Consumer G

Consumer H

Consumer I
Consumer J
Consumer K
Consumer L

0.727
0.644
0.609
−0.034−0.542−0.247−0.890*

0.518
0.310

0.898*

0.060

0.939*

Cumulative
total
expenses forpurchasesof Clark by
consumers(in Yen)

0.375
0.201
0.755
−0.051−0.783−0.183−0.4750.869−0.1930.932*

0.044

0.937*

Cumulative
total
consumption
in localshops (inClark andYen)

- not applicable * Statistically significant at 5% significance level

Cumulative
total
purchasesof Clark by
consumers(in Clark)

Correlation
coefficientwith thepremium rate
in Games I–V

Cumulative
total
consumptionin Clark inlocal shops(in Clark)

Not for distribution

0.375
0.201
0.753
0.023

−0.711

0.292−0.4750.751−0.1970.932*

0.074

0.937*

Cumulative
total
consumption
in Yen in
local shops(in Yen)Table 12.6 Correlations between the premium rate and the amount of activities across all games

0.180
0.020

−
−
−0.559−0.559−0.908*−0.559−−−0.140−Taylor and Francis
0.749

0.688
−0.494−0.227−0.030−0.498−−0.066
0.591

−

0.824

0.896*

Cumulative
total
payment for
part-timejobs in local
shops (inYen)

−0.144
0.570
0.354
0.157

0.273

−0.563−0.280−0.456−0.280

0.792

0.502

0.913*

Cumulative
total
donations tolocal NPOs
(in Clark)−0.2050.400
0.407−0.0280.326−0.906*

0.770

0.208
−0.434−0.265−0.907*−0.559Cumulative
total
payment forvolunteeringin localNPOs (inClark)−0.493−0.662−0.521
0.303

0.544

0.754

0.242

−0.5590.388−0.1650.192−0.892*

Cumulative
total
consumption
in chainstores (inYen)

Not for distribution

Consumer A
Consumer B
Consumer C
Consumer D
Consumer E
Consumer F
Consumer G
Consumer H
Consumer I
Consumer J
Consumer K
Consumer L
Self-oriented
Community-oriented

Self
Self
Self
Self
Self
Self
Self
Self
Self
Self
CommunitySelf
11 persons
1 personGame I
Self
Community
Community
Community
Community
Self
Community
Self
Community
Self
Self
Community
5 persons
7 personsGame II
Community
Self
Self
Community
Self
Community
Self
Self
Self
Community
Community
Self
7 persons
5 personsGame III

Table 12.7 Behavioural priorities chosen ex ante by the subjects

Self
Community
Self
Self
Self
Self
Self
Community
Community
Self
Community
Community
7 persons
5 personsGame IV

Taylor and Francis
Self
Community
Self
Community
Community
Self
Self
Community
Self
Community
Self
Self
7 persons
5 personsGame V
4 games
2 games
4 games
2 games
3 games
4 games
4 games
3 games
3 games
3 games
2 games
3 games
37 games

Self-oriented

1 game3 games
1 game3 games
2 games
1 game1 games
2 games
2 games
2 games
3 games
2 games
23 games

Community-oriented

258
40

Masahiro Mikami and Makoto Nishibe(person)

1. To earn as much Yen as possible.

34

2. To earn as much Clark as possible.

3530

3. To consume as much as possible.

29

27

4. To consume as much as possible at local shops.

26

5. To consume as much as possible at chain stores.

25
20
15
10
5

20

18
13

6. To save as much Yen as possible.
7. To save as much Clark as possible.

15
10

8. To do as much part-time job as possible at local shops.

12
11

9. To do as much volunteer as possible at local NPOs.

8

66

5
2

1

3

6
1

2

4

0
Self-oriented

10. To do as much donation as possible at local NPOs.

6

11. To save as much leisure time as possible.

012. Nothing particular.

Community-oriented

Figure 12.7 Experiment subjects’ behavioural objectives through all the games

Consumption in local shops and Part-time jobs > Volunteering, while communityoriented consumers followed: Consumption in chain stores < Consumption in
local shops and Part-time jobs < Volunteering.
Second, the following characteristics of the two groups were noted:−−

Taylor and Francis

Not for distribution

Consumption in chain stores by self-oriented consumers > Consumption inchain stores by community-oriented consumers−− Consumption in local shops by self-oriented consumers > Consumption in
local shops by community-oriented consumers−− Part-time job by self-oriented consumers > Part-time job by communityoriented consumers *−− Volunteering by self-oriented consumers > Volunteering by communityoriented consumers *−− Donation by self-oriented consumers < Donation by community-oriented
consumers(* Valid in terms of both monetary amount and number of hours)
Thus, we observe clear differences in the amount of activities between the selforiented and community-oriented groups. Further, for Games I–IV, we find an
additional pattern, namely Clark purchased by self-oriented consumers < Clark
purchased by community-oriented consumers, which did not apply for Game V.
The analysis above was based on the subjects’ self-determined behavioural priorities (self-oriented or community-oriented) at the beginning of each game. Next
we examine whether the rules of such behavioural priorities were actually followedin the games. The subjects may not have necessarily always followed their own
choice of behavioural priority. Indeed, in the process of experiencing electronic CCs,
behavioural priorities could change from the subject’s ex ante choices. Figures 12.8
to 12.12 show their ex post weights on self and community in each group.

(person)

5
4

Ex-ante choices

3

Self-oriented
Community-oriented2
1
0
10:0 9:1 8:2 7:3 6:4 5:5 4:6 3:7 2:8 1:9 0:10

Ex-post senses(self : community)

Figure 12.8 Ex ante choices and ex post senses of subjects’ behavioural priorities (Game I)(person)

5
4

Ex-ante choices

3

Self-oriented
Community-oriented2
1
0
10:0 9:1 8:2 7:3 6:4 5:5 4:6 3:7 2:8 1:9 0:10

Ex-post senses(self : community)

Figure 12.9 Ex ante choices and ex post senses of subjects’ behavioural priorities (Game II)(person)5
4
3

Taylor and Francis

Not for distribution
Ex-ante choices

Self-oriented
Community-oriented2
1
0
10:0 9:1 8:2 7:3 6:4 5:5 4:6 3:7 2:8 1:9 0:10

Ex-post senses(self : community)

Figure 12.10 Ex ante choices and ex post senses of subjects’ behavioural priorities(Game III)
(person)

5
4

Ex-ante choices

3

Self-oriented
Community-oriented2
1
0
10:0 9:1 8:2 7:3 6:4 5:5 4:6 3:7 2:8 1:9 0:10

Ex-post senses(self : community)

Figure 12.11 Ex ante choices and ex post senses of subjects’ behavioural priorities(Game IV)

260

Masahiro Mikami and Makoto Nishibe(person)

5
4

Ex-ante choices

3

Self-oriented
Community-oriented2
1
0
10:0 9:1 8:2 7:3 6:4 5:5 4:6 3:7 2:8 1:9 0:10

Ex-post senses(self : community)

Figure 12.12 Ex ante choices and ex post senses of subjects’ behavioural priorities(Game V)In these graphs, the extent to which subjects were self or community oriented
seems divergent, at least in their ex post senses. Even in Games II–V, where there
seemed no tendency in the ex ante choices of the subject’s behavioural priorities,
we can find large divergences between games in terms of the ex post distributionof their weights on self or community. In particular, Games I, II and IV had alarge gap between the distributions of the self-oriented and community-oriented
groups while the results for Games III and V showed that the distributions ofboth groups overlapped.14 Furthermore, the distribution in Game V was uniformly
scattered and flat. To quantify this point, let us define cp (0<=cp<=10) when‘self:community = sp:cp’ as ‘community priority’ and calculate its average for all
the subjects in each game. Table 12.8 shows the correlation between the averagecommunity priority of the subjects in each game and their amount of activities.
On the relationship between the subject’s (consumer’s) community priority
and the amount of each activity, the former had strong positive correlations withthe amount of Clark purchased and amount of donations made to local NPOs but astrong negative correlation with the amount of consumption in chain stores (local
outflow of Yen, see the shaded columns in Table 12.8).15 Especially in Game I,
where the subjects’ community priority was the lowest (because 11 of the 12
subjects prioritised ‘self’), note that the cumulative consumption total inside thecommunity fell below that of the total outside the community. The subjects thus
seem to have understood that the purchases (charges) of CCs or donations of CCs
to local NPOs contributed to the community, while consumption in chain stores
negatively affected the community. In addition, the ratio between consumption in
local shops and consumption in chain stores had a strong positive correlation withthe subjects’ community priority. This finding suggests that subjects might havethought consumption inside the community would contribute much more to thecommunity than consumption outside the community.
Then let us assess the correlation coefficients between community priorities
and the amount of each activity by consumer (Table 12.9). The community priorities of nine of the 12 subjects (i.e. Consumers D, E, F, G, H, I, J, K and L)
had a very strong positive correlation with either donations to local NPOs or the

Taylor and Francis

Not for distribution

Not for distribution

278,780
433,400
394,445548,114489,3880.900*

0.037

306,658
476,740
473,334
657,737
562,806
0.856

0.064

* Statistically significant at 5% significance level.
** Statistically significant at 1% significance level.

Game I 2.92
Game II 4.92
Game III 3.75
Game IV 5.17
Game V 4.33
Correlation
coefficient with‘community
priority’
p-value
0.085

279,550
391,800
411,400
553,700
441,600
0.825

0.104

237,850
354,900
392,400
541,300
397,600
0.800

0.512

41,70036,90019,00012,40044,000−0.3940.365

177,000
173,000
183,000
219,000
204,000
0.524

0.036

21,000105,000
73,00086,00074,0000.902*

0.259

11,15016,85013,90014,20010,900
0.625

0.019

298,900
185,400
289,800
156,800
190,500−0.937*

0.001

0.070
0.566
0.251
0.548
0.388
0.992**

0.635

0.063
0.097
0.076
0.065
0.053
−0.291

Game
Average of Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Consumption Payment forvolunteeringin local
total
total
total
total
total
total
total
total
Progress community total-------------priority
purchases expenses for consumption consumption consumption payment for donations payment for consumption shops--------------- Payment forvolunteering in chain
to localpart-timein Clark in in Yen inof Clark by purchases in local
Consumption part-time
stores (inlocal shops local shops jobs in local NPOs (in in local
consumers of Clark by shops (injobs
in chain
Yen)
NPOs (inClark)
shops (in(in Clark) consumers Clark and (in Clark) (in Yen)
storesClark)Yen)
Yen)(in Yen)Table 12.8 Correlations between community priority and the amounts of activities in each game

Taylor and Francis

262

Masahiro Mikami and Makoto Nishibepayment for volunteering in local NPOs. When participants placed more weighton the community, they donated more and carried out more volunteering tasks.
The community priorities of two of the 12 subjects (i.e. Consumers B and K) had
a very strong negative correlation with consumption in chain stores, which meansthat if their community priorities rose, their consumption outside the community
would decrease. In particular, Consumer B had such a large correlation that his or
her amount of Clark purchased and consumption in Clark within the community
increased at the same time as his or her community priority increased. In this manner, the sense of ‘community-oriented’ differed from subject to subject.
Note here that two participants showed no correlation between their community priority and amount of activities (i.e. Consumers A and C). These participants
were the same as those who had strong correlations between the premium rates
and amount of activities in all games (see Table 12.6). That is, the behaviour ofConsumer A and C were mainly determined by the changes in premium rates,
while the remaining ten subjects were influenced by their community priorities. As an overall tendency in these games, the amounts of each activity were
dominated by the community priority. In other words, the dominant factor in thisexperiment was the community priority.
In the next section we assess the relationship between the methods of displaying aggregate information and behaviour of the subjects.
12.3.4 Methods of displaying aggregate amount and the subjects’
behaviour

Taylor and Francis

In this section, we examine whether the methods of displaying the aggregate
amounts (see Table 12.3) affect the subject’s behaviour. We calculate how manytimes they referred to the graphs of aggregate amounts in each game (i.e. how
many times they switched their window to display the aggregate amounts on their
computer monitors).
Although the method of displaying the graphs changed ten minutes after thestart of each game, this seemed to have no effect on the amount of the various
activities. There was no statistically significant correlation between the accesscounts of the graphs of aggregate amounts and the amount of the various activities. There was little correlation even by subject. Only one of the 12 consumers(i.e. Consumer A) showed a correlation between the access counts of the graphsof aggregate amounts and the amount of the various activities. The frequency ofthe subject looking at the aggregate amounts might be one thing, while the extent
to which they understand and pay attention to the aggregate amounts is another.
Mechanical counts of views might thus be inadequate for the latter criterion.
In the ex post questionnaire, we asked participants their top three reasons forlooking at the bar charts of aggregate amounts (in Games I, III and V) and the line
charts of aggregate amounts (in Games II, IV and V). According to the results, themost popular reason for focusing on these charts was ‘because they reflect otherparticipants’ behaviour’. Also, more people chose this reason for line charts thanfor bar charts. The subjects might therefore have considered line charts over bar

Not for distribution

0.994−0.465−0.7590.291−0.875

0.803

0.357

−0.177
0.059
0.685
0.603

Consumer B

Consumer C

Consumer D
Consumer E

Consumer F

Consumer G

Consumer H

Consumer I
Consumer J
Consumer K
Consumer L−0.289−0.012
0.676
0.594

0.303

0.842

−0.868−0.7680.330−0.4390.993−0.718−0.5170.418
0.538−0.2930.107−0.714

0.219
0.510

−0.596

**

0.997

**

0.307

Cumulative
total
consumption
in local shops(in Clark and
Yen)

0.319

Cumulative
total
expenses forpurchasesof Clark by
consumers(in Yen)- Not applicable* Statistically significant at 5% significance level,** Statistically significant at 1% significance level

**

0.314

Cumulative
total
purchasesof Clark by
consumers(in Clark)

Consumer A

Correlation
coefficientwith‘community
priority’through
Games I–V

Cumulative
total
consumption in
Clark in local
shops (in Clark)

Not for distribution−0.718−0.5170.422
0.545−0.2620.317−0.714−0.6720.137−0.596

0.997
**

0.307

Cumulative
total
consumption
in Yen in local
shops (in Yen)

0.946*
0.655

0.526

−
−
−0.6100.299−0.354−0.281−−−−0.349−0.871−0.858−0.396−0.473−0.038−−0.904*
0.655

−

0.548

0.683

Cumulative
total payment
for part-timejobs in local
shops (in Yen)

Table 12.9 The correlations between community priority and the amounts of activities through all games

Taylor and Francis
0.915*
0.924*
0.951*
0.993**

0.845
0.869
0.976**
0.994**−0.727−0.468−0.974**−0.689−0.382

0.923

0.938

−0.706
*

0.407

0.420

0.431
0.677

−0.272−0.976**−0.18

Cumulative
total
consumption
in chain stores(in Yen)*

0.982**

0.919*
0.764

0.749

−0.147−0.250

Cumulative
total payment
for volunteeringin local NPOs
(in Clark)

0.989**

0.161

0.553
0.935*−0.588

0.782

0.748

Cumulative
total
donations tolocal NPOs
(in Clark)

264

Masahiro Mikami and Makoto Nishibecharts to be more suitable for observing the tendency of other participants because
the former show diachronic changes, while the latter only show temporal information on the situation in the community.
Lastly, we assessed the relationship between participant’s ex ante chosen
behavioural objectives and the aggregate amounts, especially the aggregate
amount on which the subjects focused in each game. The number of participants
who answered ‘nothing particular’ was much larger in the self-oriented groupthan in the community-oriented group. Therefore, the 11 types of aggregate
amounts may have been more useful for community-oriented participants thanself-oriented participants. In addition, self-oriented participants evenly focusedon various aggregate amounts, while more than ten community-oriented participants especially focused on several aggregate amounts such as ‘cumulative total
donations to local NPOs’ and ‘cumulative total payment for volunteering in local
NPOs’. These two aggregate amounts correspond to the popular behavioural
objectives seen in community-oriented participants, that is, ‘To make as many
donations as possible to local NPOs’ and ‘To do as much volunteer work in local
NPOs as possible’ (Figure 12.4). Moreover, throughout all the games compared tocommunity-oriented participants, self-oriented participants focused more intensively on ‘My balance of Yen’, ‘My balance of Clark’ and ‘My hours of leisuretime’. This finding suggests that they were more interested in their own status
than that of the entire community. This result concurs with the analysis above.

Taylor and Francis

12.4 Conclusion

In this study, we examined the premium rates of CCs, participants’ behavioural priorities (self or community) and access counts of the graph of aggregate
amounts. The most influential factor determining the extent of activities was theparticipants’ priority (community or self-interest) rather than the premium ratesof CCs or access to aggregate information. In this regard, participants’ specificactivities induced by those factors showed several patterns, while activities of twoof the 12 participants were dominated by the premium rates of the CCs rather thanthe priority they placed on community. As for access to aggregate information,
only one of the 12 participants showed a correlation between his or her activities
and his or her access to graphs of aggregate amounts; indeed, the relevant factor inthis regard was the specific information on which the participants focused.
Under the specific institutional structure of a virtual CC community, participants that display such a simple behavioural priority (self or community)
could exhibit certain suitable behaviour to meet their objectives. The ex post
questionnaire results revealed that aggregate information on activities was relatively useful for community-oriented participants. However, our set-up for thisexperiment was only able to demonstrate the correspondent relations between
aggregate amounts and participants’ behavioural objectives, not the causal relations between the display/non-display of the aggregate amounts and participants’
consciousness and behaviour.16

Not for distribution

Gaming simulation: behavioural analysis 265
These results indicate that the effect of increasing premium rates is limited
for CC users balancing between self and community. As participants differ in theextent of their priority to giving to community, it is important to invite various
actors to join the community as well as to provide extensive information on theactivities within the community, thereby facilitating various channels of distribution for CCs and allowing them to contribute to the community in various ways.
In doing so, aggregate information (which expresses the institutional contexts ofCCs) would help participants understand the structure of communities, focus theirattention on other participants and foster the transactions between them.
Despite these findings and implications, this study has some limitations.
First, 12 subjects recruited from the same university are insufficient for confirming the generality of the results. With more subjects instead of assistants,
we could give active roles to local shops, local NPOs, chain stores and theissuer. This would endogenise their activities as the primary determinants, comparable to those of the consumers. Second, some initial values in the experiment(e.g. consumers’ income and leisure time, the menu of goods and services) are
pre-determined exogenously, and therefore, leave arbitrariness in the study.
Finally, we could provide the subjects with more types and forms of aggregate information on CCs and their community. These tasks remain for future
research to tackle.

References

Taylor and Francis

Coase, R. H. 1937. ‘The Nature of the Firm’. Economica 4(16): 386–405.
Coase, R. H. 1960. ‘The Problem of Social Cost’. Journal of Law and Economics 3: 1–44.
Kichiji, N. and Nishibe, M. 2007. ‘Characteristic Comparison between Dispersive andConcentrated Money Creation – Random Network Simulation of Local Exchange
Trading System (LETS) [in Japanese]’. Keizaigaku Kenkyu, University of Hokkaido
57(2): 1–14.
Kichiji, N. and Nishibe, M. 2008. ‘Network Analyses of the Circulation Flow of Community
Currency’. Evolutionary and Institutional Economics Review 4(2): 267–300.
Kichiji, N. and Nishibe, M. 2012. ‘A Comparison in Transaction Efficiency between
Dispersive and Concentrated Money Creation’. International Journal of Community
Currency Research 16, 49–57.
Kurita, K., Miyazaki, Y. and Nishibe, M. 2012. ‘CC Coupon Circulation and Shopkeepers’
Behaviour: A Case Study of the City of Musashino, Tokyo, Japan’. International
Journal of Community Currency Research 16, 136–145.
Mikami, M. and Nishibe, M. 2012. ‘The Application of Electronic Community Currency
for Media Design and Community Dock [in Japanese]’. Discussion Paper Series B (The
Graduate School of Economics and Business Administration, Hokkaido University)
103: 1–24.
Nishibe, M. 2002. Let’s Learn about Local Currencies [in Japanese]. Tokyo: Iwanami
Shoten Publishers.
Nishibe, M. 2012a. ‘Community Currencies as Integrative Communication Media for
Evolutionist Institutional Design’. International Journal of Community Currency
Research 16: 36–48.

Not for distribution

266

Masahiro Mikami and Makoto NishibeNishibe, M. 2012b. ‘The Present Problem of the Hokkaido Regional Economy and a
Remedy: A Reform Plan of the Institution of Money and Finance by Using Hokkaido
Community Currency’. Evolutionary and Institutional Economics Review 9(Suppl.):113–133.
Nishibe, M. 2016. The Enigma of Money: Gold, Central Banknotes, and Bitcoin.
Heidelberg, Germany: Springer.

Notes
1 For a comparison of the transaction efficiency between dispersed and concentrated
money creation, see Kichiji and Nishibe (2012). For the full simulational and mathematical analysis of the same topic, see Kichiji and Nishibe (2007). For the history anddevelopment of CCs in Japan, with a case study of the city of Musashino, see Kurita etal. (2012).
2 Electronic CCs enable the flexible media design of currencies and facilitate bottom-up
policy implementation (Mikami and Nishibe 2012). See also Nishibe (2012a, 2012b)
for the framework of evolutionist institutional design including media design and community dock.
3 Although such CCs are similar to account CCs (dispersedly issued, mutually paid),
they are different in that they have such media as smartcards and are issued centrally.
For example, WIR in Switzerland, Community Hero Card in the United States and theCommunity Currency Model System in Japan are classified into this type. On the other
hand, the recent development of Bitcoin using block-chain technology suggests thescalability of electronic account CCs. For the implications of the worldwide diffusionof Bitcoin and similar cryptocurrencies on the modern capitalist market economy basedon national currencies, see Nishibe (2016, 37–58). A fifth type of CC (dispersedly
issued, mutually paid) has become possible as such monetary innovations as blockchain and proof of work that Bitcoin initially introduced are now available to build
various virtual CCs.
4 To make traditional paper money CCs depreciate over time, a complicated procedure isnecessary, such as putting stamps on CCs periodically to keep their value.
5 To trace traditional paper money CCs, issuers have to ask users to write their names on
the back of the CCs in every transaction and withdraw all the CCs after the period ofredemption. For an example of calculating the circulation velocity of CCs, see Kichiji
and Nishibe (2008).
6 The experiment was held at Hokkaido University on 31 July 2012. The time required
for the experiment was three hours, for which we provided participants with book
vouchers worth 2,000 Yen (about 20 euros at the exchange rate at the time).
7 This was named after William Smith Clark, a prominent adviser for Sapporo Agricultural
College, now Hokkaido University, where the experiment was conducted.
8 In addition, we asked the subjects about their ex post weight for self and community(on a scale of 10:0 to 0:11) in their actual behaviour in each game. Although we cannot
completely control for experimental subjects’ behaviour, we can secure the reproducibility and analysability of the experiment by making them choose their behaviouraltendencies alone and quantifying those tendencies by using such a scale.
9 In this respect, this experiment is different from laboratory experiments that produce acompletely controlled environment. This experiment rather aims to provide the subjects
with social contexts that are free to some extent and to reconstruct realities for them.
10 For the detailed data of the game, see Appendix. Figure 12.13 to 12.17 respectively
show the development of aggregate amounts in each game, while Tables 12.10.1 to12.10.5 respectively show the agents’ balances and cumulative transactions at the endof each game.

Taylor and Francis

Not for distribution

Gaming simulation: behavioural analysis 267
11 Only local shops can transfer Clark into Yen. Because redemption is performed asneeded at the experiment assistants’ discretion, some Clark are left in local shops at
the end of the game. Therefore, to remove such arbitrariness in the calculation of thecirculation velocity, we assume that all Clark in local shops are redeemed. Then, therecalculated circulation velocity of Clark in Games I–V are 3.92, 3.91, 5.92, 5.51 and
3.57, respectively, even higher than those of Yen.
12 To the question ‘What image do you have about community currencies?’, 11 of the 12
subjects chose ‘Vitalisation of local areas’ (1 of the 12 provided an invalid answer) fromthe alternatives of ‘Volunteer’, ‘Vitalisation of local areas’, ‘Ecology’, ‘Connection ofpeople’ and ‘I’m not sure’.
13 Therefore, in this experiment, we did not use such a method to motivate the subjects
to participate by promising monetary rewards (cash) linked to the result of the game.
Payment for the subjects’ participation was provided in a non-cash form (i.e. book
vouchers).
14 Especially in Games III and IV, one subject who chose community before the relevant
game started answered, in the ex post questionnaire, that he or she actually placed moreweight on self than community.
15 One of the two amounts of activities concerning Clark purchases, namely ‘Cumulative
total purchases of Clark by consumers (in Clark)’ did not have any correlation with thecommunity priority. However, this does not necessarily negate the correlation between
purchases of CCs and the community priority because the amount purchased was determined by both Yen expenses and premium rates, the latter of which were different
game by game.
16 One reason might be that subjects made their consumption decisions at the start of
the game; if so, even if we had changed the method of displaying the aggregate
amounts ten minutes after the game had started and they had adequately recognised
the change, it would hardly have affected their consumption behaviour in the last halfof the game.

Taylor and Francis

Not for distribution

Appendix

Cumulative total purchases of Clark by consumers(in Clark)
Cumulative total expenses for purchases of Clark by
consumers (in Yen)
Cumulative total redemption of Clark by local shops(in Clark)
Cumulative total income of local shops fromredemption of Clark (in Yen)
Cumulative total consumption in local shops (inClark and Yen)
Cumulative total consumption in Clark in local shops(in Clark)
Cumulative total consumption in Yen in local shops(in Yen)
Cumulative total payment for part-time jobs in local
shops (in Yen)

700,000
600,000
500,000
400,000
300,000
200,000
100,000

Cumulative total donations to local NPOs (in Clark)

0
0

5

10

15

20
(minute)Cumulative total payment for volunteering in local
NPOs (in Clark)
Cumulative total consumption in chain stores(in Yen)Figure 12.13 Development of aggregate amounts in Game I

700,000

Cumulative total purchases of Clark by consumers(in Clark)
Cumulative total expenses for purchases of Clark
by consumers (in Yen)
Cumulative total redemption of Clark by local shops(in Clark)
Cumulative total income of local shops fromredemption of Clark (in Yen)
Cumulative total consumption in local shops (inClark and Yen)
Cumulative total consumption in Clark in local shops(in Clark)
Cumulative total consumption in Yen in local shops(in Yen)
Cumulative total payment for part-time jobs in local
shops (in Yen)
Cumulative total donations to local NPOs (in Clark)

600,000
500,000
400,000
300,000
200,000
100,000

Cumulative total payment for volunteering in local
NPOs (in Clark)

0
0

5

10

15

20
(minute)Cumulative total consumption in chain stores(in Yen)Figure 12.14 Development of aggregate amounts in Game II

Taylor and Francis

700,000

Cumulative total purchases of Clark by consumers(in Clark)
Cumulative total expenses for purchases of Clark by
consumers (in Yen)
Cumulative total redemption of Clark by local shops(in Clark)
Cumulative total income of local shops fromredemption of Clark (in Yen)
Cumulative total consumption in local shops (in Clark
and Yen)
Cumulative total consumption in Clark in local shops(in Clark)
Cumulative total consumption in Yen in local shops(in Yen)
Cumulative total payment for part-time jobs in local
shops (in Yen)

600,000

Not for distribution

500,000
400,000
300,000
200,000
100,000

Cumulative total donations to local NPOs (in Clark)

0
0

5

10

15

20
(minute)Cumulative total payment for volunteering in local
NPOs (in Clark)
Cumulative total consumption in chain stores(in Yen)Figure 12.15 Development of aggregate amounts in Game III

700,000

Cumulative total purchases of Clark by consumers(in Clark)
Cumulative total expenses for purchases of Clark by
consumers (in Yen)
Cumulative total redemption of Clark by local shops(in Clark)
Cumulative total income of local shops fromredemption of Clark (in Yen)
Cumulative total consumption in local shops (in Clark
and Yen)
Cumulative total consumption in Clark in local shops(in Clark)
Cumulative total consumption in Yen in local shops(in Yen)
Cumulative total payment for part-time jobs in local
shops (in Yen)

600,000
500,000
400,000
300,000
200,000
100,000

Cumulative total donations to local NPOs (in Clark)

0
0

5

10

15

20
(minute)Cumulative total payment for volunteering in local
NPOs (in Clark)
Cumulative total consumption in chain stores (inYen)

Figure 12.16 Development of aggregate amounts in Game IV

Taylor and Francis

700,000

Cumulative total purchases of Clark by consumers(in Clark)
Cumulative total expenses for purchases of Clark
by consumers (in Yen)
Cumulative total redemption of Clark by local
shops (in Clark)
Cumulative total income of local shops fromredemption of Clark (in Yen)
Cumulative total consumption in local shops (inClark and Yen)
Cumulative total consumption in Clark in local
shops (in Clark)
Cumulative total consumption in Yen in local shops(in Yen)
Cumulative total payment for part-time jobs in local
shops (in Yen)
Cumulative total donations to local NPOs (in Clark)

600,000

Not for distribution

500,000
400,000
300,000
200,000
100,000
0
0

5

10

15

20
(minute)Cumulative total payment for volunteering in local
NPOs (in Clark)
Cumulative total consumption in chain stores (inYen)

Figure 12.17 Development of aggregate amounts in Game V

−15,000−20,000

0

0

0

0

50,000 48

50,000 48

Local NPO B

Chain store A

Chain store B

Consumer A

Consumer B−7,280−50,000−23,232

50,000 48
Average ofcommunityoriented
consumers

Average of all
consumers

081,135

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

114,480* Shaded consumers are ‘community-oriented’

25,55555,00022,878000−306,658 −195,615

22,00055,00033,00044,00022,00024,7508,008

26,18011,00022,00016,50022,220

0

0

0

0

0

−90,150000217,350

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

−127,2000−25,0170−27,291

0−33,900

0−52,600−10,100−8,500−6,500−32,600−26,200−20,000−6,800−41,200−61,800

221,300

78,900000−23,296−31,450−22,5550−30,000−31,450−33,050−30,650−19,750−44,500−6,000−27,450−7,500−10,700−16,000−22,500

0

0

0

0

161,700

117,850−3,4750−3,791

0−11,500

00

0−7,200−23,000

0

0

0

0

0

0

0

0

0

0

26,50015,200

Not for distribution

50,000 17−20,798

Average of
self−oriented
consumers

50,000 48−20,000

278,780

50,000 48

Consumer L−50,000−30,000−40,000−20,000−22,500

0

50,000 48

Consumer K

050,000 48

Consumer J

Issuer

50,000 48

50,000 48

Consumer H

Consumer I

50,000 48

50,000 48

Consumer F

Consumer G−23,800

50,000 48

Consumer E−10,000

50,000 48

50,000 48

Consumer C−20,200

0

0

0

0

Consumer D

0

0

0

0

0

0

Local NPO A

0

0

0

0

Local shop A−19,821−31,450−18,7640−18,500−31,450−33,050−30,650−12,550−21,500−6,000−27,450−7,500−10,700−16,000−22,500

0

0

0

0

135,200

102,6500014,7503,000

15,818036,0003,000

38,0002,000

28,00020,000

0

0

8,000

0

10,00032,000

0

0

942

2,900

764

0

300

2,900

800

1,750

0

1,800

0

1,600

0

450

500

1,200

0

0

0 −6,200

0 −5,100−89,000−88,000−1,750−18,000

−273

0

0

−18,000

00

0−1,000−2,000

0

0

0

0

0

0

0

9,000

12,000

0

0

−15

−3

−16

0

−36

−3

−38

−2

−28

−20

0

0

−8

0

−10

−32

0

0

0

0

89

88

−12

−41

−9

0

−2

−41

−8

−30

0

−14

0

−30

0

−3

−5

−12

0

0

59

86

0

0

−3

0

−3

0

−6

0

0

−2

−4

−1

−4

−2

0

−2

−7

−2

22

8

0

0

0

0

−2

−4

−2

0

−4

−4

−2

−2

−6

0

−2

−2

0

0

0

−2

0

0

0

0

10

14

3,800

8,450

750

15,100

9,450

4,050

8

330

3,500

11,750

1,000

920

0

0

2,800

6,900

8,000

12,50048

3,000

13,938

0

18

0

0

0

0

12

10

13

42

14

40

43

26

0

22

8

59

86

99

102

13,027 4,926

8,450

4,605

83,165 −89,308

20,600

3,000

5,400

1,900

42,30018,00010,120028,00023,2003,800

0221,300

78,9000051,980

8,335

Yen
Clark
Time
Hours
Hours
Redemption Consumption Consumption Consumption Consumption Payment Payment for Donations Hours Hours of
Income Leisure Expenses Purchases Income
volunteering consumed consumed balance balance balanceoffor part- volunteering in Clark
in Clark in
in Yen inin localof Clarkin Yen inof Clark fromin Yen time in forin chain in local
partin Clark
local shops local shops time
chain stores shops
Redemption
hours purchases
shops
storestimejobs inin Yenof Clarkjobs
Yen
in YenLocal shop B

Player Name

Table 12.10.1 Agents’ balances and cumulative transactions at the end of Game I

Taylor and Francis

4,40058,41027,5002,310

50,8207,700

93,50055,00048 −25,000−2,10048 −46,200−7,00048 −85,000

48 −50,000

39,72848 −36,117

Average of all
consumers* Shaded consumers are ‘community-oriented’

0

0

0

0

0

−1,1500−15,450−971−35,720−32,650−37,421−25,9700−71,600−70,000
0−69,300−11,850−47,000−41,500−8,000−48,500−13,000−7,500−68,000−4,4000000−6,000000−32,600−3,8000−3,0000−70,000

159,800

25,6000202,400

189,400−3,075−3,486−2,50000−1,0000

0−11,500

00

0−11,500

0−12,900

0

0

0

0

0

11,50025,400

Not for distribution

50,00048,46348 −44,057

50,000
Average ofcommunityoriented
consumers

0

312,400

27,5000 433,400

48 −25,000

0−476,740 −281,160

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

−153,400
00−159,000

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

138,060

143,100

00

77,0000

48 −70,000

48

48

48

48

−4,000000

48 −53,100

0050,000

Average of
self−oriented
consumers

Issuer

50,00050,00050,000Consumer G

Consumer H

50,00050,000Consumer F

Consumer L

50,000Consumer E

Consumer K

29,70070,40048 −27,000

48 −64,000

50,000Consumer D

50,00050,000Consumer C

50,00050,000Consumer B

Consumer I

50,000Consumer A

Consumer J

0Chain store B

0

0

0

0

0

0

Chain store A

0

0

0

0

0

0

0

0

0

0

Local NPO A

0

Local NPO B

0

Local shop B−29,575−33,936−23,4700−71,600−150−69,300−11,850−35,500−41,500−8,000−48,500−1,500−7,500−55,100−4,4000000

190,900

164,000

14,417

10,143

20,4000

20,00021,00025,000032,00035,000000

0

16,00024,000

0

1,404

1,829

810

0

1,600

450

1,600

2,750

1,700

1,500

300

2,900

1,850

1,600

600

0

0

0

−8,750−12,143−4,0000−7,0000

0−18,000−20,000−50,000

0−5,000−2,000−3,000000055,0000 −8,800
050,0000 −8,0500000−115,000−58,000

−14

−10

−20

0

−20

−21

−25

0

−32

−35

0

0

0

0

−16

−24

0

0

0

0

115

58

−18

−25

−7

0

−28

−3

−17

−41

−14

−12

−3

−41

−17

−30

−6

0

0

0

84

128

0

0

−5

0

−10

0

0

−24

−2

0

0

0

−2

−3

0

0

0

−24

55

0

0

0

0

0

−2

−2

−2

0

0

0

−4

−4

−2

0

−6

−4

0

0

−4

0

0

0

0

0

8

16

74

9,775

11,629

2,808

4,213

840

9

11

7

0
7,180

152,240 −164,340

0

0

3

0

1

37

0

31

18

22

0

55

0

84

0

300

2,700

2,600

1,200

3,500

0

220

660

18,600

3,910

0

0

0

46,20041,950 128

37,500 123

5,000

Time
balance

0

0

0

5,000

23,00020,5000

10,400036,40022,00000159,800

25,6000034,560110,500

Yen
Clark
Hours
Hours
Redemption Consumption Consumption Consumption Consumption Payment Payment for Donations Hours Hours of
Income Leisure Expenses Purchases Income
volunteering consumed consumed balance balanceoffor part- volunteering in Clark
in Clark in
in Yen inin localof Clarkin Yen inof Clark fromin Yen time in forin chain in local
partlocal shops local shops time jobs in Clark
chain stores shops
Redemption
hours purchases
shops
storestime
in Yenin Yenof Clarkjobs
in YenLocal shop A

Player Name

Table 12.10.2 Agents’ balances and cumulative transactions at the end of Game II

Taylor and Francis

0

0

0

0

0

0

0

0

0

0

0

0

0

34,51046,35239,445394,445−28,759−38,627−32,870

50,000 48
Average ofcommunityoriented
consumers

Average of all
consumers* Shaded consumers are ‘community-oriented’.

0

0

0

0

0

0

−24,150−11,220−33,3860−70,00000−34,283−39,450−30,5930−4,800−45,000−34,100−49,300−2,000−70,000−1,800−53,000−5,000−57,600−27,000−43,000−4,450−86,150

0

0

0

0

−20,000−34,800−5,0000−2,700−64,200−21,300

240,900

48,90000127,400
284,000

4,000−1,583−3,400

−286

0

0

0

0

0

−2,00000

0−17,000

0

0

0

0

0

0

0

15,000

Not for distribution

50,000 48

0

0

0

0

0

0

0

0

0

0
0

269,600

4,800−4,0000000−473,334 −215,680

60,000−50,000

0

0

0

0

0

72,000−60,000

000
0−95,100−174,500

052,200−43,500

0

50,000 48

50,000 48

Consumer K

Consumer L

050,000 48

Consumer J

00

Average of self- 50,000 48
oriented
consumers

50,000 48

Consumer I

Issuer

50,000 48

Consumer H

4,601

66,013−3,834−55,01150,000 48

50,000 48

Consumer F

7,920

55,200−6,600−46,000

50,000 48

50,000 48

Consumer D

Consumer E

56,400−47,000

50,000 48

6,960−5,800Consumer C

87,240−72,700

50,000 48

00050,000 48

Consumer G

76,0800 139,600

0

0

0

0

0

Consumer A

0

0

0

0

0

Consumer B

00Chain store A

Chain store B00

Local NPO A

Local NPO B

00

Local shop A−32,700−36,050−30,3070−4,800−45,000−34,100−49,3000−53,000−5,000−57,600−10,000−43,000−4,450−86,150

0

0

0

0

269,000

123,400

15,25010,80018,4290

24,0000

10,00012,00024,00048,000

0

1,000

0

0

20,00044,000

0

1,158

1,990

564

0

0

3,100

2,550

750

0

0

2,200

2,400

2,100

800

0

0

0

0

−6,083−12,000−1,8570

0−18,000−40,000

00−3,000−1,0000

0−10,000

0−1,0000030,0000 −8,200
043,0000 −5,700

0000−120,000−63,000
0

−15

−11

−18

0

−24

0

−10

−16

−28

−7

0

0

−46

−38

−6

0

−24

−19

−38

−35

−5

−1

−8

0

−24

0

0

−2

−24

0

−4

−2

0

0

−8

0

52

6

0

0

−2

0
−12

0
0

0

0

0

0

81

109

0

−48

0

−1

0

0

−20

−44

0

0

0

0

120

63

−1

−1

−1

0

0

−2

0

−4

0

0

0

−2

0

0

−2

−4

0

0

0

0

0

14

6

0

5

0

0

6,646

7,553

8

1,820 11292

2,910 13

0
5,998

178,765 −203,734

0

0

0

100

450

3,650 240

10,013801 25020 13

4,200 40

2,510 24

90

0 52

0

21,800 81

37,300 109

94,500 120

28,300 77

Timebalance

0

0

0

0

16,7002,000

22,98911,366

026,400300

00240,900

48,9000034,60017,080

Yen
Clark
Hours
Hours
Redemption Consumption Consumption Consumption Consumption Payment Payment for Donations Hours Hours of
Income Leisure Expenses Purchases Income
for part- volunteering in Clark of part- volunteering consumed consumed balance balancein Clark in
in Yen inin localof Clarkin Yen inof Clark fromin Yen time in forin chain in local
time
local shops local shops time jobs in Clark
chain stores shops
Redemption
hours purchases
shops
storesjobs
in Yenin Yenof Clarkin YenLocal shop B

Player Name

Table 12.10.3 Agents’ balances and cumulative transactions at the end of Game III

Taylor and Francis

0

0

0

67,10454,811−38,359−55,920−45,676

Average of self- 50,000 48
oriented
consumers

50,000 48
Average ofcommunityoriented
consumers

Average of all
consumers* Shaded consumers are ‘community-oriented’.

0

0

0

0

0

0

−1,000−13,067−800−21,829

0

0

0

0

0

−4,000−50,000−46,142−50,300−43,1710−89,000−56,500−89,500−15,400−4,500−25,000−6,000−71,000−31,800−23,000−41,500−86,100−116,200

0

0

0

0

0

0

0

0

126,000

30,80000267,900
285,800−1,033−2,280

−143

0

0

0

0

0

−2,00000−1,00000−9,400

0

0

0

0

0

0

12,400

Not for distribution

50,000 48

46,031

548,114

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

349,500

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
0

−158,700−190,800

097,200−81,000

126,960

152,640−657,737 −279,600

88,80051,600−43,000

67,20036,000−30,000−74,000

26,412−22,010−56,000

0

24,000−20,000

5,405

60,000−50,000

083,520−69,600−4,504

0

117,600

0

0

0

0

0

−98,000

0

0

0

0

0

0

50,000 48

Consumer L

Issuer

50,000 48

50,000 48

Consumer I

50,000 48

50,000 48

Consumer H

Consumer J

50,000 48

Consumer G

Consumer K

50,000 48

50,000 48

50,000 48

Consumer D

Consumer E

50,000 48

Consumer C

Consumer F

50,000 48

Consumer B0050,000 48

00Chain store B

0

Chain store A00Consumer A

00

Local NPO A

Local NPO B

00

Local shop A−45,108−48,020−43,0290−89,000−56,500−89,500−15,400−2,500−25,000−6,0000−23,000−41,500−76,700−116,200

0

0

0

0

285,800

255,500

0

18,25016,20019,7140

31,0006,000

24,000

6,000

9,000

37,000022,0007,000

029,00048,000

1,183

2,230

436

0

1,800

2,650

1,000

2,950

3,750

0

750

0

500

800

0

0

0

0

−7,167−15,600−1,1430−10,000−13,0000−13,000−37,000

0

0

0

0

−7,000−5,000−1,0000

034,0000 −7,700
052,0000 −6,5000000−120,000−99,000

−18

−16

−20

0

−31

−6

−24

−6

−9

−37

0

−22

−7

0

−29

−48

0

0

0

0

120

99

0

−24

−14

−26

−6

0

−17

−40

−3

−1

−5

0

0

0

0

0

−3

−34
−39

0

−10

−24

0

0

0

0

27

10

0

0

0

0

−5

0

−6

−8

0

0

0

0

72

101

0

0

−1

−2

−1

0

0

−2

0

−2

−2

0

−2

−2

−2

0

−4

0

0

0

0

0

6

10

72

8,474

7,200

3,720

5,714

2,295

11

3

16

0
9,384

0

0

0

1

0

11

31

0

33

40

15

0

27

10

0

350

300

26,150

250

1,412

155

0

1,500

12,300

1,820

400

0

0

26,30045,500 101

95,000 126

96,800 109

Timebalance

268,514 −308,237

0

0

0

13,00023,00014,99013,696037,000000126,000

30,8000032,64040,360

Yen
Clark
Hours
Hours
Redemption Consumption Consumption Consumption Consumption Payment Payment for Donations Hours Hours of
Income Leisure Expenses Purchases Income
volunteering consumed consumed balance balance
for part- volunteering in Clark ofin Clark in
in Yen inin localof Clarkin Yen inof Clark fromin Yen time in forin chain in local
partlocal shops local shops time jobs in Clark
chain stores shops
Redemption
hours purchases
shops
storestime
in Yenin Yenof Clarkjobs
in YenLocal shop B

Player Name

Table 12.10.4 Agents’ balances and cumulative transactions at the end of Game IV

Taylor and Francis

0

0

0

0

50,000 48

50,000 48

Local NPO A

Local NPO B

Chain store A

Chain store B

Consumer A

Consumer B

50,000 48

50,000 48

50,000 48

Consumer J

Consumer K

Consumer L

45,455 44

50,000 48

9,200−36,284−10,580

41,72750,598000−25,384* Shaded consumers are ‘community-oriented’.

Average of all
consumers

community−oriented
consumers

92,000−80,00000029,8640

0−12,109−2,000−26,7140−9,900−50,000−10,000−1,8000

0−35,00000−26,500

0−63,800

115,700

81,30000−32,855−42,800−36,8000−92,000−55,000−32,000−25,050−34,000−31,850−8,800−45,900−25,300−11,500−76,800−33,400

0

0

0

0

271,600

200,000−4,000−8,800

0

0

0

0

0

0

−4,00000−28,500−11,500

0

0

0

0

0

0

0

15,00029,000

Not for distribution

Average ofself-oriented
consumers

Average of

55,000−47,82600328,500

46,000−40,000

0

0

0

0

0

0

0

0

0

0

0

0

0

−562,820 −279,225

43,700−38,000

0

0

0

0

0

0

0

0

0

0

0

0

0

−89,900−238,600

039,011−33,92176,415

202,810

095,103−82,690−43,997

50,000 48

Consumer I

8,351−7,26150,000 48

50,000 48

Consumer H

24,725−21,500

489,398

50,000 48

Consumer G

25,30017,25081,650−71,000−22,000

34,730−30,200−15,000

0

0

0

0

0

0

0

0

0

0

0

0

0

50,000 48

Consumer F

050,000 48

Consumer E

Issuer

50,000 48

50,000 48

Consumer C

Consumer D

0

0

0

0

0

0

0

0

Local shop B−28,855−34,000−36,8000−92,000−55,000−32,000−25,050−30,000−31,850−8,800−17,400−13,800−11,500−76,800−33,400

0

0

0

0

256,600

171,000

12,636

5,200

25,429040,00048,0000

13,000033,000

0

0

5,000

0

21,00044,000

0

991

1,670

364

0

0

0

2,000

1,100

2,000

0

450

2,850

1,500

1,000

0

0

0

0

58

−6,273−8,600−4,4290

0

0−16,000

−13

−5

−25

0

−40

−48

0

−13

0
0

−33

−20,000

0

0

−5

0

−21

−44

0

0

0

0

146

−11,0000−10,000−2,000−10,000−4,000−1,0000054,0000 −3,100
0

20,0000 −7,8000000−146,000−58,000

−19

−33

−6

0

0

0

−48

−11

−48

0

−4

−40

−29

−24

0

0

0

0

29

175

0

0

−2

0

−3

0

−8

0

0

−2

0

0

−8

0

0

0

0

0

12

6

0

0

0

0

−2

−2

−2

0

0

0

0

−6

0

−4

−2

−8

0

0

0

−4

0

0

0

0

4

20

78

25,798

8,116

4,718

−14,853

797

9,733

9

8

12

0
0

0

0

16

0

11

34

0

14

24

27

0

12

6

29

210,173 −234,320

00

19,75011

43,253

1

175

2,950

4,800

850

330

0

0

50,90012,200 175

18,000 150

81,100Timebalance

0

100

174

0

23,20012,079

310

7,739

0

28,500

1,500

0

0

115,700

81,3000071,81047,415

Yen
Clark
Hours
Hours
Redemption Consumption Consumption Consumption Consumption Payment Payment for Donations Hours Hours of
Income Leisure Expenses Purchases Income
volunteering consumed consumed balance balance
for part- volunteering in Clark ofin Clark in
in Yen inin localof Clarkin Yen inof Clark fromin Yen time in forin chain in local
partlocal shops local shops time jobs in Clark
chain stores shops
Redemption
hours purchases
shops
storestime
in Yenin Yenof Clarkjobs
in YenLocal shop A

Player Name

Table 12.10.5 Agents’ balances and cumulative transactions at the end of Game V

Taylor and Francis

13 For the policy maker
When and how is monetary plurality an
option?
Georgina M. Gómez

13.1 Introduction
There is little doubt that monetary plurality has been prevalent throughout history and that monetary singularity is characteristic only of the last century ofhumankind. We find numerous periods and areas of monetary plurality across theworld, in developed as well as developing countries, from the distant past to ourpresent days. Despite this ubiquitousness, the idea of monetary plurality in ourtimes is seen as a signal of monetary failure or malfunction due to extraordinary
circumstances such as war and hyperinflation. Political proposals to deploy complementary currencies within a regular monetary system are quickly disregarded
without sufficient discussion to determine how and when these initiatives could
make sense to support economic activity. This is a sign that monetary singularity
is installed around the globe, even if it is far from unchallenged, but it does notmean that it has been proven as the superior option.
Aware that an informed debate requires reliable data and research, this book
aimed at contributing to the public discussion on how, when and where monetaryplurality is a viable alternative. The different chapters tackled various aspects ofmonetary plurality, its characteristics, the ways in which it works in theory andin practice, and the variety of forms it adopts. This chapter is not meant for theconvinced practitioner, but for a regular policy maker who has not yet decided onwhether monetary plurality makes any sense. So, the issue is approached from
more mainstream angles and in dialogue with more orthodox sources. Matthew
Forstater (2015: 198) notes that complementary currency experts have notengaged sufficiently with modern monetary theorists. Taking up that challenge,
this chapter offers some policy reflections on monetary plurality. Under what circumstances does it emerge? What are its potentials and pitfalls as a policy tool?
These reflections seek to guide the analysis without proposing a specific designfor complementary currencies, because monetary plurality by definition implies
diversity and adaptation to space, time and context.

Taylor and Francis

Not for distribution

13.2 Monetary plurality: a black hole of habit?
It is puzzling that the existence of monetary plurality is almost ignored by many
economists. As a matter of fact, most students of economics do not know that276

Georgina M. Gómez

monetary singularity need not be the rule and that its superiority as a monetary
solution is debatable. A publication by the Institute of Economic Affairs (Schwartz
et al., 2013) characterises the lack of public and academic debate on monetaryplurality as an intellectual loss for the discipline. Why is this?
The lack of understanding of how monetary plurality works prevents economists and policy makers from considering it as a policy option that may be worth
discussing. Marie Fare and Pepita Ould-Ahmed (2017) dive into the reasons
behind this black hole in the discipline, and attribute it to the methodological andnormative concepts in economics that are designed to capture macro phenomena
with large amounts of data but are ill-suited to study small economic systems at
the local level. While there are 3,500 to 4,500 complementary currencies aroundthe world (Blanc, 2012; Seyfang and Longhurst, 2013), each one is relatively
small and rarely engages more than a few hundred participants. In turn, the epistemological foundations of economics point in the direction that can safely ignore
these small-scale phenomena because they would not affect the larger picture –that is, a macro economic system that works on the basis of one official currency
per country.
Once the narrative is repeated ad infinitum, the existence of monetary plurality
is established as a ‘habit of thought’ (Veblen, 2004 [1899]) that prevents humanbeings from considering other options. The invisibility of other, smaller and alternative schemes contributes to making monetary singularity a social fact (Searle,
1995, 2005) that is too obvious to need proof or reconsideration. The separationof the four monetary functions in different types of money, for example, appears
in the literature only rarely because it is assumed that all four functions are to be
performed by one type of money. Money is defined as all-purpose money andother monetary expressions are discarded as primitive, small, and generally not
worth considering as an object of enquiry.
Against the negative perception of monetary plurality, various groups acrossthe political spectrum, and in different countries, have never stopped flirting with
the idea of complementary or parallel currencies. A myriad of time banks exists
across continents, often with the approval of the local governments and sometimes with their financial support in cash or kind (Gregory, 2014). Complementary
currencies based on voucher systems are used in several European countries to
induce environmentally sustainable behaviour, such as recycling and caring for
public spaces. The best-known variation of community currencies are the Local
Exchange and Trading Systems (LETS), that work as mutual exchange systems
often tied up to official currencies (North, 2007; Williams et al., 2001). These
complementary currencies often seek the promotion of one or more dimensionsof economic development at the local and regional level (Gómez and Dini, 2016;
Gómez and Helmsing, 2008).
At the same time, the possibility of introducing monetary plurality at thenational or multiregional scale has been considered in countries as diverse as
Greece, Italy and Ecuador (Lynn, 2017). In Greece it was considered more thanonce (2010, 2012 and 2015), each time the country ran out of euros to serve thedebt and seemed on the verge of default. The Economist (25 April 2015; 2016)

Taylor and Francis

Not for distribution

When and how monetary plurality an option 277
characterised the introduction of a Greek currency, parallel to the euro, as a ‘monetary
trick’ sometimes used in emergencies. Bruno Théret and others (Kalinowski et al.,2015) called the policy instrument a ‘monetary lifeline’ in an article in the Frenchmagazine, Libération. At that time, it seemed plausible that Greece would facean emergency situation if it was expelled from the Eurozone in chaotic circumstances and was forced to readopt an unbacked Greek currency. The introductionof monetary plurality appeared as an intermediate way between that catastrophic
scenario and the continuation in the Eurozone, in which euros need to be
extracted as taxes to serve the interests on the debt. A parallel national currency
represented a way of keeping the euro while the government could regain someflexibility with its own complementary currency. The Greek currency could be
used, in principle, only as means of payment for local and national exchanges.
With regular changes of ministers and governments, the proposal never madeenough progress.
Another European country where there is some public debate on the use of acomplementary currency is Italy, similarly proposing to keep the euro but introducing an Italian currency at the same time (Bossone et al., 2015). Althoughfor different reasons, political groups from both left and right refer to monetaryplurality as a way to reactivate the economy, create jobs and bring the public
debt under control. From the left, the proposal of the Sylos Labini Institute, forexample, underlines the positive effects of adding flexibility to the rigid monetary
singularity of the Eurozone (2015). At the other end of the political spectrum,
Silvio Berlusconi proposed an Italian currency as a symbol of national sovereignty in relation to the euro and the European Union (Montalto Monella, 2017).
The discussion is ongoing, and it has had periods in which it resurfaces and thenrecedes, until it builds up again.
Ecuador is in a different continent and context but faces a related problem.
The country adopted the US dollar as legal tender in the crisis of 1999. Once theeconomy was stabilised, subsequent governments found that the dollarisationof their economy was often a straightjacket for economic growth, considering
its dependency on oil prices, and its sovereign decision-making powers. There
have been repeated discussions on reforming the monetary system back to having an Ecuadorian currency, but the responses of economic agents have been
invariably negative. Since then, the discussion on how to exit dollarisation isparalysed by the fear that reintroducing a national currency would cause massive crisis. The implementation of a complementary currency was considered as
an intermediate solution that would not require abandoning the dollar but would
give the Ecuadorian government its own monetary system again. The debate in
Ecuador is also hungry for reliable data and research that would inform such a
critical decision.
The implementation of monetary plurality in all three countries, like others
where the interest in the issue is less notorious, has met sharp scepticism. The
introduction of complementary currencies is perceived as an untidy solution
and is associated with governments that lack fiscal discipline; hence it may
put banks and the entire financial system at risk (Schwartz et al., 2013). More

Taylor and Francis

Not for distribution

278

Georgina M. Gómez

importantly, such a solution has rarely been tried and that generates, quite
understandably, all sorts of fears. The debate has not been mainstreamed around
specific and clear lines of discussion, often mixing arguments and experiencesof local, community and national complementary currencies. Besides confusinglevels of implementation, the criticism refers to proposals that vary and showthat there is limited understanding of the implications of monetary plurality intheory as in practice.

13.3 Good currency versus bad currency
A clear argument for monetary singularity refers to Gresham’s Law. Almost 500
years ago, British banker Thomas Gresham observed that if a country has morethan one currency, the one that is perceived as more valuable would be stored andthe one that is considered less valuable would be used for circulation. Eventually,the ‘bad’ currency loses its value because nobody wants to hold it and, ultimately,
will not accept it any more. Gresham’s postulation is often invoked to explain
why ‘good’ currency disappears through exporting or hoarding while ‘bad’ currency is used in exchange, hence prevailing over the ‘good’ currency. The timeframe, within which the bad currency is rejected by users, remains undeterminedin the statement, but it can be inferred that in the medium run, monetary singularity will prevail.
The aim of this section is to better understand how the claim that ‘bad money
drives out good money’ still dominates the current thinking against monetary plurality among economists. It does not seek to discuss the details of the postulation
itself, which has been covered by others (Fetter, 1932; Greenfield and Rockoff,
1995; Rolnick and Weber, 1986; Selgin, 1996). Before that, it is essential to contextualise that Gresham lived in times when commodity money was the norm. In
his day, ‘currency’ necessarily meant metals such as gold and silver, which were
too valuable for the vast majority of the population of the 16th century, who weremainly engaged in farming. Discussions about gold coinage were detached fromthe daily lives of the majority who did not use metallic money, but mainly concerned the courts, merchants and other elites.
There is significant confusion regarding Gresham and his actual publications. As noted by Fetter (1932), Gresham was neither Minister of Finance nor
Director of the Mint, as cited by several sources (for a list, see Fetter, 1932:481). Gresham was a merchant, ambassador, financial representative of the
British crown in Antwerp, founder of the London Royal Exchange and, uponhis death, donor of the Gresham College in London. Burgon (1839) publisheda detailed bibliographic study based mainly on Gresham’s correspondence, andthere are no records that the banker ever postulated the statement known as‘Gresham’s Law’. Instead, Gresham observed that the exchange rate of the
English currency dropped in relation to other currencies in Flanders, where he
was posted, after King Henry VIII debased English silver coinage. In 1558,
Gresham explained this relationship in his correspondence with the newly
crowned young Queen Elizabeth I, who reacted with a currency reform andrecoinage within a few years.

Taylor and Francis

Not for distribution

When and how monetary plurality an option 279
Before the reform became effective, she issued a proclamation on 27
September 1560 in which she announced the value at which the old coins would
be accepted by the public offices and referred to their devaluation as a ‘crying down’ of value. In the proclamation two days later on 29 September, she
explained that ‘divers subtle people have changed’ the coins and have ‘transported and carried out the same gold and silver’ to locations where the metal
content in these coins was valued more (letter in Ruding, 1840: 334–336, quoted
in Fetter, 1932). In the same document, Elizabeth I laments that great quantities of gold and silver used in her new coins had left her kingdom, so ‘no part
thereof is seen commonly current’ while part still circulated and another part‘percace by the wiser sort of people kept in store, as it were to be wished thatthe whole were’. The Queen hence distinguished between the coins that werein circulation and coins that disappeared by hoarding or had left the kingdom
because of their metal content. She implemented the currency reform according to what she understood of what Gresham was reporting from abroad on thedisappearance or hoarding of British coins that contained more valuable metalthan their face value.
About three centuries after Elizabeth’s reign ended, Henry Dunning MacLeod
stated that ‘good money and bad money cannot circulate together’. MacLeod
was a key scholar on monetary thought at a time when modern single-currency
systems were being established (Skaggs, 1997). During these debates, he resurfaced Gresham’s name as the inspirer of his own reflections on why good and badmoney cannot circulate together and concluded that ‘we may call it Gresham’s
law of the currency’ (MacLeod, 2007 [1858]: 478). Jevons (1875) also mentioned
Gresham as initiator of the statement that ‘light’ and ‘good’ currency could not
circulate together and added that the ‘law’ on bimetallism applied to paper money,
too. Fetter (1932: 484), hence, attributed to MacLeod what became known as
Gresham’s Law.
However, in the fourth edition of The Theory and Practice of Banking, MacLeod(1884) elaborated on his previous versions of Gresham’s Law and admitted thatbimetallism was possible if the currencies were given different monetary valuations by legal tender laws. He referred to a multiple monetary system in terms of‘light’ and ‘good’ coins and claimed there would be two possibilities:

Taylor and Francis

Not for distribution[e]ither those persons who have commodities to sell will make a difference intheir nominal price according as they are paid in good or in light coin; that is,
the light coin will be at a discount as compared with the good coins: or if there
be a law to prevent this, and to make both to pass at the same nominal value,
every one will endeavour to discharge his debt at the least possible expense.
(MacLeod, 1884, quoted in Fetter, 1932: 488)
In other words, MacLeod suggested that monetary plurality was possible, andseveral currencies could circulate together as long as the nominal valuation represented their metallic value. That is how the claim that ‘bad money drives out goodmoney’ became established, in a context in which what qualified money as ‘good’or ‘bad’ was its metallic content.

280

Georgina M. Gómez

The confusion around who actually postulated Gresham’s Law is less important than exploring why it still dominates monetary thinking in current days.
When the US economy was in free fall during the Great Depression and the principle of the gold standard was being questioned, Fetter (1932: 492) elaborated thatthe favour for a single currency system was ultimately one of ‘familiarity’ andGresham’s Law was used as a ‘catchword’ to support monetary singularity. The
belief that monetary singularity is a superior monetary solution resonates withthe discussion on ‘habits of thought’ in this volume, a concept coined by Veblen
that helps us understand the limitations of some economists, policy makers andso on to revisit the convenience of monetary plurality. Five centuries of repeating
Gresham’s Law seem to have made it what Searle terms ‘an institutional fact’(Searle, 1995) and the statement that ‘bad money drives out good money’ easily
resists scrutiny against substantial empirical evidence that monetary plurality has
been and continues to be pervasive. The implication is that monetary singularity
has the undeniable advantage that the public feels generally comfortable with it.
So, the transition to a different multiple currency system would have to come withsignificant advantages and an institutional framework which enables multiple currencies to coexist.

13.4 Modern version of good versus bad money
Finding no trace of Thomas Gresham in Gresham’s Law has not been sufficientcause to dismiss it as an institutional fact that shapes modern perceptions thatmoney is intrinsically valuable because it is scarce. Gresham and other scholars
who constructed the statement that bad money drives out good money framed
their thoughts in a world of metallic currencies, reasoning that the difference
between the metallic content of money and their legal tender value was the cause
for money being ‘light’ or ‘bad’. Currently, almost all money worldwide is fiatmoney, which is ruled by legal tender laws and normally bears no relation tophysical collateral. In other words, money is a layering of credit-debt relations
embodied in paper notes and coins, and presently often circulating as electronicand digital transactions via financial institutions. In modern days, Friedman(1990) hence suggested that Gresham’s Law needs to be specified more precisely. There have been various attempts to make it more precise, although someauthors argued that it should be entirely dismissed. For example, Rolnick andWeber (1986) declared it a ‘fallacy’, while Velde, Weber and Wright (1999: 1)
considered that its ‘empirical validity is questionable, or at least seems to dependon circumstances’. This section will look into the modern versions of Gresham’s
Law in which money is fiat money.
A way to adapt Gresham’s Law refers to the ‘market value’ of money (Selgin,
1996; White, 2000) or to international comparisons between currencies in termsof trust or acceptance, however these are defined. Sometimes the geographicaldissemination of a currency in international trade is taken as key indicator of‘good’ money. For instance, Hogan (2011) refers to the intrinsic or international
value of currencies, in reference to currencies circulating in larger economies that

Taylor and Francis

Not for distribution

When and how monetary plurality an option 281
present themselves as more stable in international trade, but which do not have
any intrinsic value either. With some rephrasing, Gresham’s Law hence results in‘bad or legally overvalued money drives good or legally undervalued money outof circulation’ (Hogan, 2011: 2). So, the key issue in the preference for currencies
is the difference between the market value (in goods or foreign currency) and thelegal value of the notes. If there were no legal tender laws setting a fixed exchange
rate between currencies, they would always have equal market value because theirvalues would adjust (White, 2000).
Other authors have considered that Gresham’s statement bares little ground,anyway. Rolnick and Weber (1986) showed that there have been multiple casesin history in which ‘good’ and ‘bad’ monies circulated together, at the same time
and within the same territory. The authors also suggested a further specification
for the relation between good and bad money and proposed instead that a multiple
currency system is possible when the transaction costs of using more than one
currency are similar.
Selgin (1996) built on that version and claimed that the modern version ofGresham’s Law is verified in some situations, but a multiple monetary system ispossible when there is no loss or gain to be made from the choice of the currency.
The relation between currencies depends on the legal tender laws that affect thetransaction costs of using various currencies. Selgin (1996) reasoned that monetary plurality creates a Prisoners’ dilemma in which domestic transactions emerge
as a non-cooperative equilibrium, but legal tender laws can offset that situationand solve or affect the dilemma. That is, Selgin brought back the state as key actor
that can affect the fate of currencies in a multiple monetary system. The presenceof the state is frequently ignored in discussions about ‘good’ and ‘bad’ money
under conditions of monetary plurality. The conclusion can also be interpreted asa call to consider the institutional framework around monetary plurality, in contrast to looking at money alone as a reified instrument.

Taylor and Francis

Not for distribution

13.5 Institutional frameworks of monetary plurality
The re-introduction of the state as the key actor that affects the value of currencies
under conditions of monetary plurality indicates a different direction for the modern version of Gresham’s Law and the possibility of monetary plurality. Goodand bad money can circulate together provided that legal tender laws equal thetransaction costs of the two currencies. In this version, the emphasis is on the state
and the institutional framework at national or regional level to define legal tenderlaws within its territory in such a way that the transaction costs would not create again or loss. The last sentence in Selgin’s article (1996: 648) addresses preciselythat point: ‘just how strict legal tender laws must be to give effect to Gresham’s
law remains an open question’.
On that key issue, several contributions in this volume added information andreflected on the institutional frameworks that enable monetary plurality. Théret’s
chapters on fiscal federalism are particularly enlightening. If legal tender is a debt
that the state has with its citizens, then it can be paid back with a debt that citizens

282

Georgina M. Gómez

have with the state. The debt with the state is cancelled as tax revenue and it iscertainin terms of payment dates and amounts. The state indicates what legal tender it will accept as tax collection, so it can also choose to accept instruments thatare not the main currency. An example is the tax anticipation scrip which is nota legal tender, but a voucher or bond accepted in payment for good and services
under specific conditions (for example, during a certain period of time) and thateventually ‘dies’ when it returns to the state to cancel tax payments. So, its nominal value is pegged to its ultimate fiscal value to repay debts. It was used all over
the USA at the local level during the 1930s (Gatch, 2008, 2012).
Forstater (2015) proposes this kind of instrument be issued by local andregional governments to promote their economies and to finance public works.
Their taxes act as guarantee of what these vouchers will be worth at the end of
their circulation. When recession and unemployment are widespread in a locality,
money becomes scarce while labour and resources do not move (Lerner, 1951).
Such vouchers can help to increase the mobility of labour and resources. In current days, state agencies have laws that determine what legal tender is, but they
do not always have provisions to specify what means of payment are accepted incontracts or to cancel tax debts. The amount of taxes to be paid are indicated in
the unit of account enforced in the country, but it is not the same as declaring thatthe taxes have to be paid with the medium that corresponds to the national unitof account.
California used this system of scrip in 2009. Théret (Chapter 8, this volume)
has extensively researched the example of Argentina where badly hit regional
economies got a boost and provincial public services were improved when local
governments circulated local currencies backed by local taxes. Fiscal federalism
is centred on the design of specific local monetary systems that accommodate theinterests and needs of subnational entities. It is a middle path for areas that cannot
or do not want to leave a national currency area although they need some extra
flexibility to manage their finances. It is what Fare (Chapter 10, this volume)refers to as the principle of monetary subsidiarity.
Local tax anticipation scrip is an intermediate solution with a few points ofconcern. During the Great Depression, when hundreds of local scrips flourishedin the USA, Fetter (1932) underlined that the unit of account in which amounts
are nominated signals the preference for a currency and indicates it as ‘good’money. The unit of account reflects an institutional framework in which all othercurrencies are to be seen as ‘light’ currencies: acceptable as long as they can be
returned to tax collection offices or converted into ‘good’ money with transaction
costs. This consideration implies that legal tender laws are not enough to defend‘bad’ currency and that a closed circular flow, a la Schumpeter (2014 [1970]), isneeded to keep a sustainable currency circuit. This point is discussed in the lastsection of this chapter.
The second point of concern is the scale of the issuance. Again, Fetter (1932:487) gave a hint that monetary plurality at the local level is possible as long as
there is ‘not too much of the “bad” money’. The Economist presented a similar
position when it discussed the example of Greece and concluded that the country

Taylor and Francis

Not for distribution

When and how monetary plurality an option 283
could alleviate its shortage of cash by issuing such tax anticipation vouchers, but
this solution would only help for a while. The time span hence seems an issue ofconcern, but the length of this time span is actually unknown. Théret (Chapter 8,
this volume) researched the case of the small Argentine province of Tucuman,
which used regional scrips for over two decades with the support of the local government and its business elites. The last section will expand on this.
Apart from the role of the subnational state in creating monetary plurality,
there is another scenario in which bad money need not drive out good money. It
refers to circumstances in which agents may not be able to determine which one
is the ‘good’ and which one is the ‘bad’ money for them. Fetter (1932) referred tosituations in which the public did not care to use some monies because of custom,
prejudice or appearance. Accepting any currency is a matter of choice exercisedby the seller or the creditor and this choice may be biased by different groups’
perceptions, information at the time of defining the transaction costs of the currencies, and a number of non-economic considerations.
In this scenario, the four functions of money become fragmented and performed by different currencies. While the function of reserve of value may best
be served by one currency and not others, it is generally of little relevance for thesegments of the public that do not save. Agents that use all their income immediately to satisfy basic needs may not have any preference for reserving value but
will certainly have a preference for currencies that are easier to obtain and can beused as media of exchange. Examples of this scenario are the Redes de Truequein Argentina, the Community Banks in Brazil and other cases of monetary plurality widespread among the poor in developing countries. These experiences are
essentially contextualised and engage specific groups of agents and their circumstances. In this volume, several authors discussed such cases of complementary
currencies even when legal tender laws operate. Gómez (Chapter 4, this volume) and Kuroda (Chapter 6, this volume) referred to periods in which multiple
currencies performed different functions. Miyazaki and Kurita (Chapter 9, thisvolume) researched the use of complementary currencies to motivate volunteers.
Kobayashi, Hashimoto, Kurita, and Nishibe (Chapter 11, this volume) presented
it as a matter of ideological values and perceptions. The difficulties in defining
individual preferences are related to one or a combination of reasons: geography,
ideology, convenience, accessibility, or function. Again, we reach a discussion
on institutions and how they define transaction costs in general, and currencies
in particular.
There is a third and final scenario in which monetary plurality is possible andwhich follows Gresham’s Law. Once the good money has disappeared, agents
continue to exist and need money to sustain their daily economic activities. This
scenario relates to situations of crisis in which all the higher quality money has
been hoarded or exported from the territory and bad money or no money is left.
The reasoning is that the transaction costs of having no media of exchange areinfinite, so any currency of whatever quality is better than no currency at all.
In situations of extreme economic downturns, such as the Great Depression, theWorld Wars, the crisis of the Millennium in Argentina and other similarly

Taylor and Francis

Not for distribution

284

Georgina M. Gómez

dramatic events, the good currency is exported or disappears from circulation.
These situations confirm the so-called Gresham’s Law in the way that MacLeod
and Jevons stated it, and they also fit in what Kuroda (Chapter 6, this volume)
calls ‘famines of cash’. However, that is only one step of the story. Unlike theauthors that contributed to phrasing Gresham’s Law, Kuroda addressed what happened in various historical moments in reaction to famines of cash. Once the goodmoney is gone, other monies appear and bad money – the only money – becomes‘good enough’ money. Elites, local businesses and other groups use the authority they have left to take action to create new local currency. Gómez and vonPrittwitz (Chapter 7, this volume) discuss several such historical cases.
So, while Gresham’s Law has been historically applied to repeated occasions,
there have been many exceptions because it only tells part of the story. Creative
agents followed suit to offset the effects of scarce good money. They established
new currencies with new units of account or means of payment and media of
exchange tied to the disappeared unit of account. The immediate effect was that
trade and economic production resurged in the short term, because economic relations got reconnected. For a while at least, monetary plurality has provided suitable
though temporary solutions to local economies. In these cases, complementary
currencies are no indication of malfunction of the economy but a creative reaction
to a crisis that helps in re-establishing some sense of normality in the economy.

13.6 Design principles of monetary plurality

Taylor and Francis

This chapter sought to take a more orthodox monetary approach and follow theestablished thought on multiple currency systems along the lines of competition between them and the so-called Gresham’s Law that would eventually drive
the system to monetary singularity. Gresham’s Law, however, is not a law and
Gresham has barely been involved in it. The statement that bad money drives out
good money was accepted as an institutional fact in Searle’s sense (1995), whichmeans that it counts as social reality because it relies on the attitudes of mutuallyindependent participants and leads to the subsequent reproduction of attitudes
under similar circumstances. At the same time, the chapter adhered to the principle that there is more than one way of organising monetary systems, as repeatedby various scholars (Dodd, 2014; Gómez and Dini, 2016; Redish, 2016). It concludes by elaborating on a few key design principles of complementary currency
systems that were discussed in the chapter.
The first design principle has to do with legal tender laws and institutionalframework. This presents a triple challenge. First, if a complementary currency
has to depend on legal tender laws to make it acceptable, these regulations need
to be formal, simple and transparent to secure its stability and confidence. The
participation of the state at any level of governance assures the legitimacy andinstitutionalisation of complementary currencies (Blanc and Fare, 2013). Second,
they must be consistent with the national or supranational legal tender laws,
which sometimes prohibit the creation of other legal tenders. However, a complementary currency is not necessarily a legal tender but a payment voucher with

Not for distribution

When and how monetary plurality an option 285
different attributes. It need not fully qualify as money in terms of the four functions of legal tender laws and other monetary regulations. It ought to be different
in terms of its usage or geographical coverage to develop its own appeal to users.
This is the third point: it should provide a clear benefit to the networks of users
or local economy by promoting income generation, supporting vulnerable groups,
disseminating environmentally friendly behaviour, increasing local production
and trade, reconnecting economic activities, facilitating access to local services,or any other similar benefits that would make the currency attractive. Considering
all the limits and challenges on legal tender regulation, the implementation of
a complementary currency would not make sense if the aims or expected outcomes are not substantial and clear to everyone who is supposed to accept it.
Théret zooms in on the case of Tucuman with its tax backed currency as a schemethat found an intermediate solution to these three restrictions. Tax anticipation
scrips in the USA (Gatch, 2008, 2012) and the vouchers for volunteers in Japan(Miyazaki and Kurita, Chapter 9, this volume) are examples that present similarly intermediate solutions: consistent with the national legal tender laws, easy to
defend and use, and with clear expected benefits. In these cases, legal tender laws
balanced transaction costs, a requirement of modern versions of Gresham’s Law.
The second design principle relates to the conditions of public commitment
at the time of introducing the complementary currency. This refers to the insight
among the public and media that monetary plurality is a solution to a social problem or, more modestly, at least a tool to alleviate a perceived common difficulty.
A complementary currency that most people do not see the need for will probably
not become popular once it is launched. Théret (Chapters 5 and 8, this volume)and Gómez (Chapter 4, this volume) emphasise the consensus around some ofthe provincial currencies in Argentina: the agreement of a series of governors, thelocal business elites and several groups in the population on creating and sustaining subnational currencies, at least for a period of time. Their circulation increased
their acceptance and created a local virtuous circle, but there was significant support or need when they started. Those conditions enabled Tucuman (Chapter 8,
this volume) to sustain the Bocade scrip as a structural effort to create a long-term
device to gain local autonomy, strengthen the provincial fiscal accounts, increase
resilience and promote regional economic development. Gatch (2012) and Blanc(Chapter 3, this volume) similarly underline the importance of public support toaccept that the short-term transaction costs may be offset and become a benefit in
the longer term.
The third principle is relatively less understood and relates to the separationand completeness of the currency circuits. If multiple currencies do the samein terms of function, time, space, goods and services to trade, actors, and othercharacteristics, then the currencies will compete in such a way that there will
be a distinction between ‘good’ and ‘bad’ money. This point was already raised
above in connection with legal tender laws. Monetary plurality depends on currency circuits not being competitive but complementary, as shown by Gómez(Chapter 4, this volume), and this has two implications. The first corollary isthat multiple currencies should not perform the exact same functions. Each type

Taylor and Francis

Not for distribution

286

Georgina M. Gómez

of money should do something that others do not, which means a supplementary
relationship. Kuroda (2008) and Gómez (Chapter 4, this volume) further introduce the idea of ‘couples’ in reference to the connections between currency,
function, and agent. Each currency should be preferred for a specific use orgroup of users, or characteristic.
A second implication of the completeness of a currency circuit draws on
the monetary circuit theory (see, for example, Graziani, 2003; Parguez andSeccareccia, 2000; Realfonzo, 2006; Rochon and Rossi, 2003; Sardoni, 2017)
and the Schumpeterian monetary conception (see, for example, Ingham, 2004;
Lakomski-Laguerre, 2016; Schumpeter, 1961 [1934], 2014 [1970]). When a currency is introduced, it should subsequently circulate to create a circuit that binds
the exchange of a myriad of independent transactions and agents. By definition, acircuit has no start and no end, and this point should be contemplated at the design
stage. What are the uses that will support the circulation of the currency with noadditional transaction costs? The issuer needs to contemplate both the introduction of the parallel currency and its permanent re-entrance in the circuit, so thatthe transaction costs would stay the same as those of the currency that serves asunit of account. Again, the tax anticipation scrip is an example. The provincial
currencies in Argentina, introduced by partial payment of the wages of public
servants, further circulated among independent economic agents such as supermarkets and utilities providers, and were eventually used to pay local taxes at theirface value from which they were re-introduced as public wages (Gómez and Dini,2016). If the currency circuit is not designed as a complete circle (entrance and reentrance) the transaction costs will be higher than the currency that serves as unitof account. Additional ways of securing its acceptability are access to a common
public service (e.g. public transport, tolls and parking), utilities or a key good thatmost of the public consumes (e.g. petrol, and fresh farm products).
A fourth principle addresses the dimensions of context and purpose and relates
to the case of an accomplished Gresham’s Law situation in which money has disappeared. In the case of crisis and demise of the financing infrastructure, there would
be no ‘good’ currency as reference, so the principle of comparing preferences andtransaction costs would not apply in the same way. Choices are constrained by direneed of media of exchange. Alternatively, there may be a strong shared ideologythat creates a similar perception among a group of the population, creating theeffect to be inclined to favour complementary currencies among a certain public.
Blanc (Chapter 3, this volume) refers to them as social currencies, when there isa strong ideology to empower a social group to take back issuing powers fromthe banks, promote local economies and subnational finances, regenerate social
ties, or encourage desirable behaviour such as volunteering and environmental sustainability (examples by Fare, Chapter 10, this volume, and Miyazaki and Kurita,
Chapter 9, this volume). Along the same vein, complementary currencies may be
specifically targeted at groups that earn irregular or low income.
These four design principles of a multiple money system are based on empirical historical data and several theoretical considerations presented in this volume.
The final implication is that in the same way as monetary plurality has been

Taylor and Francis

Not for distribution

When and how monetary plurality an option 287
pervasive along the history of human kind, it can also serve as a policy tool. Like
all tools, complementary currencies will serve their purpose within specific limits
and the appropriate alignment between design and purposes.

References
Blanc J. 2012. Thirty years of community and complementary currencies: a review ofimpacts, potential and challenges. International Journal of Community Currency
Research 16(D):1–4.
Blanc J. and Fare M. 2013. Understanding the role of governments and administrations in
the implementation of community and complementary currencies. Annals of Public andCooperative Economics 84(1):63–81.
Bossone B., Cattaneo M., Grazzini E. and Labini, S.S. 2015. Per una moneta fiscale gratuita. Come uscire dall’austerità senza saccare l’euro. Rome: MicroMega.
Burgon J.W. 1839. The Life and Times of Sir Thomas Gresham. https://archive.org/details/
in.ernet.dli.2015.40825. London: Effingham Wilson, Royal Exchange London.
Dodd N. 2014. The Social Life of Money. Princeton, NJ: Princeton University Press.
The Economist, 25 April 2015. Scrip tease. The Economist.
Fare M. and Ould-Ahmed P. 2017. Why are Complementary Currency Systems difficult to grasp within conventional economics? Papers in Political Economy, special
issue Dialogues et controverses sur la nature sociale du rapport monétaire. Revue
Interventions économiques/Papers in Political Economy, no 59. https://journals.
openedition.org/interventionseconomiques/3960.
Fetter F.W. 1932. Some neglected aspects of Gresham’s Law. The Quarterly Journal of
Economics 46(3):480–495.
Forstater M. 2015. Complementary currencies, communities, cooperation: the local job
guarantee in the Eurozone. In: Bitzenis A., Karagiannis N. and Marangos J., eds.,
Europe in Crisis: Problems, Challenges, and Alternative Perspectives. New York:
Palgrave Macmillan. 195–204.
Friedman M. 1990. The crime of 1873. Journal of Political Economy 98(6):1159–1194.
Gatch L. 2008. Local money in the United States during the Great Depression. Essays in
Economic and Business History: The Journal of the Economic and Business Historical
Society 26:47–63.
Gatch L. 2012. Tax anticipation scrip as a form of local currency in the USA during the
1930s. International Journal of Community Currency Research 16(D):22–35.
Gómez G.M. and Dini P. 2016. Making sense of a crank case: monetary diversity inArgentina (1999–2003). Cambridge Journal of Economics 40(5):1421–1437.
Gómez G.M. and Helmsing A.H.J. 2008. Selective spatial closure and local economic
development: what do we learn from the Argentine local currency systems? World
Development 36(11):2489–2511.
Graziani A. 2003. The Monetary Theory of Production. Cambridge, UK: Cambridge
University Press.
Greenfield R.L. and Rockoff H. 1995. Gresham’s Law in nineteenth-century America.
Journal of Money, Credit and Banking 27(4):1086–1098.
Gregory L. 2014. Resilience or resistance? Time banking in the age of austerity. Journal ofContemporary European Studies 22(2):171–183.
Hogan T.L. 2011. Gresham’s Law revisited. In: Hogan T.L., ed., Essays on Money,
Banking, and Finance. Fairfax, VA: George Mason University. 1–24.

Taylor and Francis

Not for distribution

288

Georgina M. Gómez

Ingham G. 2004. The Nature of Money. Cambridge, UK: Polity Press.
Jevons W.S. 1875. Money and the Mechanism of Exchange (2001 ed.). London: Elibron
Classics.
Kalinowski W., Théret B. and Coutrot T. 2015. Th Veblen Institute, The Euro-Drachma,a Monetary Lifeline for Greece, 16 March 2015. www.veblen-institute.org/The-EuroDrachma-a-Monetary-Lifeline-for-Greece.html.
Kuroda A. 2008. What is the complementarity among monies? An introductory note.
Financial History Review 15(1):7–15.
Lakomski-Laguerre O. 2016. Joseph Schumpeter’s credit view of money: a contribution
to a ‘monetary analysis’ of capitalism. History of Political Economy 48(3):489–514.
Lerner A. 1951. Economics of Employment. New York: McGraw Hill.
Lynn, M. 2017. Opinion: Italy’s economy could soar with a parallel currency. MarketWatch,Vol. Nov 2017. www.marketwatch.com/story/italys-economy-could-soar-with-a-parallelcurrency-2017-08-23.
MacLeod H.D. 1884. The Theory and Practice of Banking, 4 ed., Vol. 1. London:
Longmans, Green, Reader, and Dyer.
MacLeod H.D. 2007 [1858]. The Elements of Political Economy. New York: Cosimo
Classics.
Montalto Monella L. 2017. Doppia valuta in Italia: primo passo per l’abbandono dell’euro oper il suo rilancio? euronews.com, Vol. Nov 2017. http://it.euronews.com/2017/09/22/
doppia-valuta-italia-minibot-borghi-aquilini-dacrema-euro.
North P. 2007. Money and Liberation. The Micropolitics of Alternative Currency
Movements. Minneapolis, MN and London: University of Minnesota Press.
Parguez A. and Seccareccia M. 2000. The credit theory of money: the monetary circuit
approach. In: Smithin J., ed., What is Money? London: Routledge. 101–123.
Realfonzo R. 2006. The Italian circuitist approach. In: Arestis P. and Sawyer M., eds.,
A Handbook of Alternative Monetary Economics. Cheltenham, UK: Edward Elgar
Publishing. 105–120.
Redish A. 2016. Monetary systems. In: Cassis Y., Grossman R.S. and Schenk C.R.,
eds., The Oxford Handbook of Banking and Financial History. Oxford, UK: Oxford
University Press. 321–340.
Rochon L.P. and Rossi S. 2003. Modern Theories of Money: The Nature and Role ofMoney in Capitalist Economies. Cheltenham, UK: Edward Elgar.
Rolnick A.J. and Weber W.E. 1986. Gresham’s Law or Gresham’s fallacy? Journal of
Political Economy 94(1):185–199.
Ruding R. 1840. Annals of the Coinage of Great Britain and its Dependencies: From the
Earliest Period of Authentic History of the Reign of Victoria. London: Hearne.
Sardoni C. 2017. Circuitist and Keynesian approaches to money: a reconciliation?
Metroeconomica 68(2):205–227.
Schumpeter J.A. 1961 [1934]. The Theory of Economic Development: An Inquiry into Profits,
Capital, Credit, Interest, and the Business Cycle. New York: Oxford University Press.
Schumpeter J.A. 2014 [1970]. Treatise on Money. Aalten, Netherlands: Wordbridge
Publishing.
Schwartz P., Cabrillo F. and Castaneda J.E. 2013. Saving monetary union? A market solution for the orderly suspension of Greece. In: Booth P., Rodríguez F.C., Castaneda J.E.,
Chown J., Dannhauser J., Dowd K., Hengstermann K., Herzog B., Lilico A., Minford P.,
Record N. and Schwartz P., eds., The Euro – The Beginning, the Middle . . . and theEnd? London: Institute of Economic Affairs. 123–146.

Taylor and Francis

Not for distribution

When and how monetary plurality an option 289
Searle J.R. 1995. The Construction of Social Reality. New York: Simon and Schuster.
Searle J.R. 2005. What is an institution? Journal of Institutional Economics 1(1):1–22.
Selgin G. 1996. Salvaging Gresham’s Law: the good, the bad and the illegal. Journal of
Money, Credit and Banking 28(4):637–649.
Seyfang G. and Longhurst N. 2013. Growing green money? Mapping community currencies for sustainable development. Ecological Economics 86:65–77.
Skaggs N.T. 1997. Henry Dunning Macleod and the credit theory of money. In: Cohen A.J.,
Hagemann H. and Smithin J., eds., Money, Financial Institutions and Macroeconomics.
Dordrecht, Netherlands: Springer. 109–123.
Veblen T. 2004 [1899]. Theory of the Leisure Class. Whitefish, MT: Kessinger Publishing.
Velde F.R., Weber W.E. and Wright R. 1999. A model of commodity money, with applications to Gresham’s Law and the debasement puzzle. Review of Economic Dynamics
2(1):291–323.
White L.H. 2000. The History of Gold and Silver. London: Pickering and Chatto.
Williams C., Aldridge T., Lee R., Leyshon A., Thrift N. and Tooke J. 2001. Bridges into
work: an evaluation of local exchange trading schemes. Policy Studies 22(2):119–132.

Taylor and Francis

Not for distribution

Taylor and Francis

Not for distribution