Can complementary currencies – used in conjunction with the established monetary system – help us recover from the credit crisis and prevent economic downfall in the future?

Yes, says the Belgian monetary thinker Bernhard Lietaer. A system without interest, as an addition to our current system, can save us. Litaer challenges the monopolistic position of the current monetary system in many of his talks, books and interviews.

Short-term thinking
Firstly, hoarding money on bank accounts to earn a little interest weakens the economy. This can lead to an economic crisis, with people losing their jobs and income, causing the situation to deteriorate even further. Secondly, the monopolistic position of the current monetary system, according to Litaer, causes greed, competitiveness, individualism, a concentration of wealth (those with money automatically gather more money) and short-term thinking, which inhibits the formation of a sustainable economy.

To start with greed: individuals taking a loan have to pay interest, money they have find elsewhere. According to Litaer this leads to individualism, reduced community sense and increased competitiveness. These traits are necessary to earn the money needed to pay the interest. It also leads to an increase in bankruptcies, since people need to go bankrupt to reduce competition and allow others to pay off their loans.

The short-term thinking that is needed to drive the ever growing economy is undesirable, says Litaer. Instead, we need long-term thinking to deal with big issues like the climate and population aging. The current, interest driven, economy undervalues healthcare and educational work, both crucial to a healthy society.

A sustainable economy simply cannot be built upon the current monetary system. For instance it is currently more profitable to cut down trees, sell them, put the money in a bank account and earn interest than it is to let them grow. Long term investments, for instance in solar power, lose from short term profits in the form of interest.

Meanwhile, third world debts continue to increase, causing third world countries to fall further behind. This is partly due to the instability of the exchange market. The risks of third world investments are too great for the bigger corporations, so instead they invest in each other and leave the rest to their fate.

Bernhard Litaer (© Jan de Zutter)

They cannot work alone
Litaer is an obvious advocate of complementary currencies, based on trade and free from interest. The advantages: alternative systems increase cooperation within the society and strengthen the ties within communities.

Take for example the frequent flyer miles, a currency created by airline corporations. People can use these frequent flyer miles to pay for their groceries, hotel accommodation and phone bills. Also, complementary currencies allow important and valuable work to be done, because they allow investments for which there is no formal financial market, Litaer says.

The economist emphasizes that complementary currencies can only work as an addition to the current economic system. They cannot work alone. He compares our monetary system with an ecosystem. Both need diversity. A forest with only one species of trees would be the pinnacle of efficiency, but also doomed to extinction. The same goes for our current monopolistic economic system.

Litaer feels supported by the large amount of successful examples: a few thousand alternative currencies are used across the world, and in the US alone 60 different currencies are in use. Together they make up 15% of the world trade, with a 15% annual growth, while trade using traditional money is growing by only 5% annually.

Information technology
The economist expects a further increase of barter trade, privatized currencies, and ’soft’ complementary systems such as the Time Dollar which you can earn by helping people and can be used to pay for help from others. Lietaer does not expect the increasing diversity in alternative currencies to lead to chaos. According to him, information technology will help to keep things manageable.

A few examples of complementary currencies:

Local Exchange Trading Systems (LETS)
A local barter system used in various countries, without interest or inflation. Currently, over 5000 systems are active in communities of 500 to 5000 individuals.

Wirtschaftsring (WIR)
The WIR currency was established in the 1930s in Switzerland when corporations had trouble getting money. The currency circulates amongst the members. In times of crisis, the amount of currency grows, in good years it diminishes.

The Trade Reference Currency (TRC/Terra)
Members of the Terra alliance use the Terra. Established by Bernard Lietar, the Terra is a stable currency without inflation that stimulates long-term investments.

Hureai Kippu, ‘Caring Relationship Tickets’
A Japanese community currency created in 1995 by the Japanese Welfare Institute so that people could earn credits helping seniors in their community.

Gelre
The Gelre is used in Gelderland in the Netherlands, amongst societies, NGOs, consumers and small businesses. When purchasing Gelres (value: 1 euro) you get a 5% bonus, which you can donate to charity.

Community supported agriculture (CSA)
Consumers invest in farmland, paying an annual fee. In return, they get a weekly supply of vegetables. This provides a stable income for the farmer, even after a bad harvest.

Other examples include: Frequent Flyer Miles, RES, Regiogeld in Germany and QOIN in the Netherlands. In the 1930’s during the recession, a currency named Worgl was used in Austria.