The Local Economy
The plan introduced
in this chapter is intended as a sketch
of what the economic structures in the temporary settlement could look like.
It is an idea, built with building blocks of various elements taken from
existing and often successful examples. Although the plan is presented as a
blueprint for a Local Economy Organization (LEO), this is done for the sake of
clarity, to go beyond abstract concepts and sketch something concrete. The
real economic and financial structures in the settlement will need to be
adapted to the people and organizations involved, and to the financial means
This plan should therefore
be read as a carefully selected set of ideas that can contribute to the
success of the Nest!. Special emphasis is put on how
the combination of these ideas creates new opportunities. What this study
demonstrates, is that by working together things can be achieved that would
not be possible otherwise.
Goals and Gains of a Local Economy
In this chapter we
develop a plausible economic structure for the temporary settlement for the
time of its duration. The specific aims of this economic structure are to
make the best possible use of the available capital and capacities in the
temporary settlement as well as in the developing neighborhood, to allow
equal exchange between the efforts people put into the community (in terms of
work and time) and in terms of financial capital, to create new possibilities
for validating the work people do and as a result to improve the quality of
life in the community.
Local Economy Organization is intended to be tightly linked to the Euro
economy - it is not the intention to create an isolated local economy which
is economically separated from the rest of the world. The economic structures
described here are not alternatives to mainstream economy. They provide additional financial facilities that
are strongly linked with the national economy.
Strengthening social Cohesion
economic and financial structures have become huge institutions. Although technically
they may be efficient, socially they are not. Bigger is not always better.
Sometimes smaller structures perform better - even economically - because
they require less bureaucracy, have a stronger involvement of
clients/participants and not only achieve their direct goals but also build a
Doing as much as
possible with own Resources
Instead of turning
to subsidies immediately it is often much better to see what you can do
yourself. People have much stronger commitment to things that are achieved by
their own efforts. By working together financially people can make use of
their collective economic power, and various new opportunities arise.
People with limited
financial means also have limited chances to get something off the ground
economically. Often they don't have the knowledge and confidence to start
something like a business. But even if they do, the chances are big that
banks are reluctant to co-operate. Different economic structures are needed
to provide the necessary coaching, support and access to financial means for
economically less strong groups.
Time Gaps as
In the postwar reconstruction period it was
accepted that initially bus lines in a new area would function at a loss.
Nowadays public transport is not available till it is profitable – and
by that time people are used to their cars. The same applies even stronger to
services and shops that today are larger in scale and therefore need a larger
population before they can function. The result is that the first inhabitants
suffer and that the start of a community in the neighborhood is difficult.
During the time period that the neighborhood is
not finished, which coincides with the existence of the temporary settlement,
small-scaled community businesses and services can thrive that under normal
circumstances could not (or barely) exist. They can fill the vacuum and
temporarily have a monopoly, a situation that gives a good head start for
consolidation into permanence. The type of business can vary, fulfilling
needs for the time pressured households in the new area, who are also likely
to be able to afford them. The time gap between the arrival of the first
inhabitants and the full operational functioning of shops, services,
transport and other businesses can provide a market niche for small scale
II) The Local Economy Organization (LEO)
The Local Economy
Organization, further referred to as LEO, is the organization that runs the
local economic and financial structures in the settlement.
The general goal of
LEO is to improve the economic and social well-being of the local community.
In the first stage, the local community will be people involved in the
temporary settlement (inhabitants, businesses or people otherwise related to
the settlement). In a later stage, the local community may also include the
permanent residents of the new neighborhood.
The concrete tasks
of LEO are:
to provide affordable temporary
housing for people, organizations and businesses in the settlement,
to organize co-operative saving
structures that allow people with low incomes to build up own capital
to provide investment capital
for local business start-ups,
to run a local currency scheme
that guarantees sufficient means of exchange for healthy local economic
interaction to develop,
support local exchange and interaction, both economic and social.
In order for LEO to
be run effectively, these various tasks need to be separated in four
different functional parts. To a large extent, the different parts can
operate independent from each other, but in some respects they all rely on
each other. Linking together the different functions creates opportunities
that would not be there otherwise; the total is more than just summing up the
This will become
clear in the detailed descriptions further on.
functional parts or branches of LEO can be identified:
Local Currency Fund
Savings and Loans Division
Local Job Agency
In theory, each of these branches could become an entire organization. This
depends entirely on the size of the settlement. LEO can develop and grow
gradually along with the settlement. In the beginning the Local Economy
Organization is more likely to exist of one active coordinator and a hand
full of people being part-time involved in the different aspects of the work.
Pioneers as Developers – The
The Nest! Housing Co-op
is an essential factor in the whole settlement project. It is responsible for
acquiring, setting-up, renting-out and maintenance of the temporary houses
and it is responsible for developing the privately commissioned housing
described in the next chapter. These are the major economic factors in the
settlement. The capital and financial flows involved will form the basis of
the Local Currency and the local saving schemes.
The Housing Co-op
is the developer for the temporary settlement. It takes care of the whole
process of buying the temporary houses, laying foundations, setting up the
houses, preparing a minimum of required infrastructure and facilities (roads,
water, electricity, etc.) and managing the renting out and maintenance of the
temporary houses. A high degree of involvement of the pioneers in all this is
possible and desired.
Co-op will buy the temporary houses. A bank loan will be necessary to do
this, but also pioneers who have some money or outside investors can buy
shares in the Co-op. The Co-op has expenses for all work involved: build up,
maintenance, and administration. On the income side, the pioneers pay rent
for their temporary houses to the Co-op. The price of the rent includes the
capital costs of the bank loan (interest), rent costs for the land, set-up
and maintenance of the temporary houses, insurance, legal costs and costs for
running the organization of the Housing Co-op.
Strengthening Local Exchange through
Local Currency – The Local Currency Fund
The Local Currency
Fund is responsible for printing and safeguarding the proper functioning of
the Local Currency. It issues the Local Currency and keeps track of the way
the local economy evolves and the currency is used.
To start up a Local
Currency system various aspects are important: the issuing (who creates the
currency and how?), the backing (what guarantees the value of the currency?)
and the circulation (why would people use it?).
The Local Currency
is issued by the Local Currency Fund. The value of the Local Currency is
backed by the Housing Co-op in form of temporary houses, by the Local
Currency Fund based on the future value of the Co-op and through sales at
cultural events and in the various initiatives in the settlement.
the amount of Local Currency to be issued the different levels in which it is
backed, need to be taken into account.
The Housing Co-op
uses Local Currency for all its
payments within the settlement. It can do so because the people who receive
this Local Currency also need to pay rent to the Co-op, which they would have
to do with Euro otherwise. In fact, the Local Currency is nothing but a piece
of paper saying "this is worth 1 Euro when you pay it back to me".
The Local Currency directly represents Euro.
The big advantage
is that the Co-op does not need to borrow these Euros from the bank first.
The Local Currency therefore reduces the bank loan required by the Co-op, and
consequently reduces the level of the interest payments. It is of direct
economic interest of the Co-op to involve people from the settlement.
This part of the
Local Currency is backed by the main 'product' the Co-op offers: housing. The
Co-op accepts this currency for rent payments. This is a very suitable form
of backing for a currency because rent involves a considerable amount of
money, and it is something everybody needs. People in the settlement will
therefore have no problems accepting the Local Currency, because for them its
buying power is as good as Euro as it can buy a “product” they
use on a daily level.
Backing by Future
The second level of
issuing Local Currency is based on the value of the Housing Co-op after the
estimated period of 5 to 10 years that the settlement will exist. The Co-op
has bought the temporary houses and the necessary infrastructure for the
settlement, which no doubt represents a considerable capital, even after
several years of use. By the time the bank loan for the initial investment
has been repaid, all this property belongs to the Co-op. The amount of this
capital, that can be guaranteed, can be used as backing for issuing more
Local Currency up-front.
This way of issuing
has several advantages. In the first place part of the capital,
that is invested in the temporary houses, can be made liquid again, so
that more can be done with limited resources.
more Local Currency can be created from the very start of the project, enough
can be issued for a healthy local economic exchange. The first type of
issuing is limited by the amount of work the Co-op can commission locally,
and this may not be sufficient to facilitate other local trading in the
And thirdly, the
Local Currency Fund is free to decide how to spend this currency. It can
therefore be used to pay for various tasks done in and around the settlement,
including various social tasks. The Local Currency Fund thus can provide
subsidies to local initiatives and establishes a local subsidy commission to
decide what initiatives should be granted subsidies in Local Currency.
This part of the
Local Currency is backed by the future value of the Co-op. The backing
therefore represents a value in Euro - which is a condition we tried to meet
throughout the entire plan, but a value that can only be accessed at the end
of the settlement, when the Co-op is dissolved and the houses are sold. The
Local Currency issued in this way can not be changed back to Euro directly.
It can be paid back when the Co-op is dissolved at the end of the settlement.
This means the Local Currency can become an attractive way for saving for the
future. This is by no means a limitation on the practical use of the
currency. The limited options for directly changing it to Euro may even
stimulate people to spend it faster: if they have the choice to pay Euro or
Local Currency, most people will probably use the Local Currency first.
A consequence of
issuing Local Currency in this way is that under certain conditions a
limitation may have to be built in for how much Local Currency the Co-op can
accept for rent payments, e.g. a maximum of 50% in Local Currency and the
rest in Euro.
However, if the
currency gets used for various other kinds of trading in the settlement, such
a limitation may not be necessary after a while.
Backing by Euro
If many people
visit the settlement for events which are organized there, the Local Currency
can be used for buying consummations. The currency can be bought for Euro by
anyone, both pioneers and visitors. It can be used like the special coins you
buy during events to get a drink. As such, this already has advantages: you
have an internal medium for trade and at the same time you generate Euro to
buy goods outside the settlement.
Extra advantage is that
visitors may not always use all their Local Currency,
or they deliberately keep some as a souvenir or even a collector’s
item, which creates extra income for the settlement. Of course this works
best if the coins or notes are made attractive in some way. At the Heineken
Music Hall, for instance, they
make new coins for every concert with a print of the musicians playing that
night. They probably make a good extra profit on people keeping the coins as
If the settlement
attracts sufficient visitors, it can be interesting to attach an extra social
fund to the Local Currency. For visitors nothing really changes, they still
pay 1 € for 1 unit of the Local Currency. But from every Euro they
spend, 10% goes into a social fund for local activities. Such a fund can for
instance support a local environmental project, a playground or any other
social activity in the area. When any of the businesses or initiatives that earns Local Currency wants to convert it back to Euro,
they get 90% back in Euro. The
Local Currency can now be promoted with a slogan like: "Support the
environment! Use Local Currency!".
For the currency
issued this way the backing is very simple: outsiders buy the Local Currency
with Euro, so these Euro directly form the backing.
If the event organizers need Euro to buy goods from outside, they can change
the Local Currency they receive as payment from visitors back to Euro at the
Local Currency Fund.
Other ways Euro
enters the system are when services are paid in Euro at the Job Agency or
when down-payments are made in Euro in the privately commissioned housing
development project described in the next chapter.
With these three
levels of issuing in place there will be a considerable amount of Local
Currency circulating within the settlement. The Co-op will be a main factor
in this. For all work to be done, the Co-op will hire pioneers as much as
possible and pay them in Local Currency. Pioneers will have no problem with
accepting relatively big amounts of Local Currency because they can use it to
pay their rent.
The Local Currency
has even more positive effects if it supports the local exchange of goods and
services. A few conditions to stimulate this are already built in: within the
settlement it is relatively easy to earn Local Currency (for most people
probably easier than earning Euro), while for spending it there are less
options to choose from. The value of the Local Currency is the same as the
Euro, but you can not get everything with it. People will therefore be
inclined to use the Local Currency when they have the choice. If these
factors are properly balanced, the Local Currency may get a very high circulation
The challenge will
be to extend the use of the Local Currency to various other services and
trades. The local job agency will therefore facilitate the exchange of
services and tasks, which can all be paid at least partially in Local Currency.
If there are
sufficient options for trading and other services offered against Local
Currency, then workers will be able to accept even more of their payment in
Local Currency than their monthly rent because they will still be able to
Changing back to
With rent payments
being accepted in Local Currency, not many people need to change it to Euro.
Only some businesses and initiatives are allowed to change the Local Currency
back to Euro. This is controlled by the Local Currency Fund and can only be
done under certain conditions. The main condition is that the backing of the
Local Currency remains in place. Businesses will obviously have to change
Local Currency to Euro when they need to buy supplies or hire labor only
available outside the settlement. This will be made possible. Under normal
circumstances, however, exchanging Local Currency back to Euro is not
possible. Only when the project ends and all capital of the Co-op is sold can everything be changed back to Euro. However,
this would mean the end of all Local Currency and may not be desirable at all
if the currency is successful.
The whole idea of
the backing for the currency is that you do not need it when people already
accept the Local Currency and rely on it. But in order to achieve that
situation, especially in a temporary setting like this, we need to provide
transparent and easy to understand security.
Not all Local
Currency can immediately be changed back to Euro because of the combination
of the different forms of backing: a reserve in Euro, rent payments and the
value of the Co-op. The first part can be changed back instantly, the second
part month by month, and the last part only when the
project ends. For this reason also visitors can not change back Local
Currency to Euro, unless specially marked currency is sold for this purpose.
Ways for Pioneers to save in the
Temporary Settlement – The Savings and Loans Division
The Savings and
Loans Division manages the various saving schemes applied in the settlement
and handles the loans and subsidies given out to local projects and
The Housing Co-op
as a Saving Scheme
The Co-op as
described above already is a type of saving scheme. All participants pay
rent, but by doing this they slowly increase the value of the Co-op, of which
they themselves are the owners. With every bit of the bank loan that is
repaid, the Co-op increases its value. In the end, the pioneers have a
valuable share in the Co-op. What happens after that depends on how things
will continue. Maybe the used temporary houses and whatever other goods of
value that belong to the Co-op will be sold and everyone gets their share.
And now they get that share in Euro!
Because of the
co-operative structure with the pioneers as members (as opposed to a
privately owned housing company), the pioneers gradually become the real
owners of the Co-op with every bit of the bank loan that is repaid.
Indirectly, they become owners of their own houses and thus of the capital
This also allows
the equal exchange of human and financial capital: people who have enough
money can pay their rent in Euro, those who are active in the community can
earn a lot of Local Currency and use this to pay (part of) their rent. At the
Co-op this is of equal value with Euro. Because the Co-op requires both Euro
and Local Currency, it is good to have both types of people in the
As long as enough
people pay their rent in Euro, others can be allowed to pay the full 100% in
permanent Housing: the Building Society
The value of the
temporary houses is much lower than that of permanent houses (an average of
€6.000 to €25.000, against at least €150.000 for permanent
houses). Additional saving opportunities are required for people who want to
save for a permanent house, possibly in the newly developed settlement. The
method of the Building Society is very useful for this purpose.
aim of the Building Society is to provide financial means for affordable
housing. All participants in a Building Society profit from saving
collectively instead of individually. Suppose a house costs €120.000.
Without a mortgage, one person would need to save 500 every month for 20
years to be able to afford that house. If 10 people all save for a house it
would take each of them 20 years to buy the house. But if they put their
money together, then already after 2 years they would have enough to buy a
house for the first person, in another 2 years the next, etc. Only for the
last person it would still take 20 years, but the average time to get a house
has already gone down to 11 years.
If new people join
at a later stage, their savings contribute to help the last people from the
first group to get their houses faster. People who access their house the
first can be required to pay more than the monthly 500 for the rest of the
period the Building Society exists, for two reasons: because they have the
advantage of having their house before others, and because they have their
house now, they no longer have to pay rent.
have a history that goes back to the mid 18th century in England.
Most of the early building societies were so-called terminating societies,
meaning that they were dissolved when all members had been housed. They were
typically started as community initiatives. Nowadays building societies can
be found all over the world, but especially in English speaking countries.
Due to their success and the high level of regulations to comply with,
building societies have grown into large institutions that have in many cases
lost their community character. Nevertheless, many societies are officially
still owned by their membership. Nowadays, besides mortgages, many building
societies also provide various other financial services. Although this may
have contributed to the alienation of the membership (because it usually
involves further growth of the organization), it is a logical development that
has most likely been supported by the members themselves.
Society is an effective way to collect financial means for buying houses out
of people’s own resources. It is a co-operative organization form and a
form of community banking, which fits perfectly to the ideas and principles
of the Nest!. Because the Local Currency is entirely
backed by Euro, savings in either currency are treated equally. No limitation
is required for how much Local Currency can be accepted by the Building
Learning from the
South: Saving and Credit Groups
and Africa neighborhood saving groups have a long
tradition as a means of economic empowerment. Through international
grassroots women’s networks and the Grassroots Women’s
International Academy (GWIA) conducted during Expo 2000 (see chapter 4) the
approach has also been transferred to neighborhood groups in Northern
Countries, and is included as one of the economic
empowerment strategies of the Nest! Project.
local Saving and Credit group consists of 10-15 people that commit to saving
an agreed on sum of money (for instance €50) each month. This sum is
collected every month at a group meeting. At the same meeting, group members
present requests for a loan and following discussion in the group, decisions
are made as to who will receive a loan that month. Repayment procedures, time
spans and interest rates are also discussed and determined collectively.
Occasions for which loans can be given include for instance education and
further training, paying off of debts, business investments, furniture and
equipment, travels, or medical bills.
time the group funds increase steadily, in terms of savings accumulated by
each member, in terms of the amount of funds available for giving out loans
to group members, as well as in terms of funds acquired through interest.
These funds can be used to give out business loans to other members of the
temporary settlement or to support projects. The more loans are given out,
the more financial capital is acquired by the group. This stimulates the
development of ideas, plans and projects.
If some people save
in Local Currency and others in Euro, loans are possible in either currency,
or in a combination of both. This can further strengthen the Local Currency.
A set of rules and
agreements needs to be developed by the group to give the process structure
and continuity and as precaution to potential conflicts. These rules need to
address the following issues:
many members should be in the group?
long are the monthly meetings and where are they to be held?
sum is saved every month by members?
much should the interest rate be?
long are members required to stay in the group?
are the savings reimbursed, after a member leaves the group?
the group members earn interest or is interest
reserved solely to the benefit of the group fund?
is the procedure, if a group member cannot make it to the monthly meeting?
majority is needed for loan decisions?
what time span do loans need to be paid back and in which rates?
are track records to be kept and who does the book-keeping?
it be possible to save additional sums of money or not?
is the procedure if payments are late?
and when are decisions made on how to use the interest?
agreements need to be made regarding confidentiality?
are group funds placed and who has access to the account?
rules and agreements are needed to assure participative and open
Benefit of Saving and Credit Groups for
the Temporary Settlement
Saving and Credit Groups can
support the Local Economy in the temporary settlement in many ways:
Local Saving Groups support the
building up of regular savings for inhabitants of the temporary settlement.
Being able to use the Local Currency as savings is a further incentive and facilitation to engage in saving.
The experiences in Southern countries and also in Germany show that saving
collectively in a group is a very effective way of creating the motivation
and discipline needed to save regularly, also in groups with no or low saving
habits or track records. This opens up financial opportunities and long term
“I have become much more
disciplined with my finances. I never thought it was possible to save so
much. The discussions in the group make me realize where I have unnecessary
expenses and how I can keep better track of my money.
As a result I have been able to realize
some dreams and ideas I never would have otherwise.”
“Simply talking every month about
my finances is a great support. It keeps me on top of things and has made me
aware of many more ways I have to both earn and save money. Many taboos and
issues I had around money have cleared up. It really helps to share
experiences and views on these things with others.”
“Our group is much more than a
savings and credit system. It is a training scheme for handling money and an
empowerment scheme in dealing with money.”
Local Saving Groups are a low
threshold means of accessing loans for groups with little or no collateral or
for everyday life issues that you usually do not go to a bank for to get a
loan. The way the local saving groups work is that group cohesion and group
control provide the loan security usually maintained by financial assets.
World-wide experience in local saving and credit groups show that the
repayment rate – even among economical risk groups - is far superior to
regular bank loans.
“Sometimes an everyday crisis situation like the break down of
your car or an expensive visit to the dentist can create financial
tight-spots. You don’t want to go to the bank or to friends with such
issues. Our saving group is just perfect for such occasions. It is a great
back up system for my family finances.”
“A bank is something anonymous. But in my saving group I have
to look the others in the eye every month, so I have a completely different
motivation to hand over my monthly payments. I know the other group members,
who depend on it. It is my own group I am paying to.”
Local Saving Groups have an
amazing effect on social cohesion and social bonding. They generate openness,
trust and transparency as well as confidence and mutual support. These
qualities are generated in the groups not as a response to good will and good
intentions, but as a result of the intense and sincere communication required
in the process of deciding who will get loans out of the collective savings
or how to ensure that every member in the group contributes their monthly
saving and/or repayment rate.
“Since we are putting our money together, we need to create
reliable relationships among each other. This causes a very different
communication than in other groups. Money issues require honesty. In the
beginning this was not so easy, but together you grow into it. You really get
to know people when you learn about how they handle their finances. Over time
we have developed a lot of trust and respect for each other.”
The funds accumulated in the
local saving groups are a valuable asset for investments and loans in local
businesses or projects of the temporary settlement. This is a further way of
assuring that local resources can stay in the community and be used to
benefit the economic development of the community.
Schemes for local Projects and Business Start-ups
The Housing Co-op
as well as the various saving schemes may be acquiring considerable amounts
of capital. This capital can be applied for loans to local projects and
business start-ups. Naturally, proper economic judgment is required to deal
initiative can be started including various kinds of coaching and support for
starting entrepreneurs, thereby limiting the risks of defaulting loans.
Organizing this requires knowledge and experience. Whether it will be useful
to set this up in the settlement depends on the amount of business start-ups
and the demand for such loans.
schemes described in this chapter provide more than individual and collective
savings. They provide awareness building, group building as well as training
for economic literacy and the handling of money. The Savings and Credit Groups
are more suitable for small groups whereas the Building Society works for
bigger groups and the Micro Credit scheme can work even for individuals. All
schemes support economic empowerment.
Participating in the Labor Market-The
Local Job Agency
The local job
agency is responsible for linking the demand and supply of services, for
mobilizing the capacities in the settlement, and for finding and possibly
also training people for much required skills. This will be organized in
cooperation with the Neighborhood Academy
(Chapter 4) on site. As such, the local job agency is a combination of a
volunteer job exchange like in a LETS-system, a vocational training office
and a job referral agency. By not separating these functions, opportunities
are opened for people to slowly grow into real jobs.
The Local Job
Agency links the wants and offers for jobs and services. If people from
inside or outside the settlement, especially the inhabitants of the newly
developed settlement, need services like babysitting, gardening, or various
kinds of handyman tasks, the agency will try to find people for this. The
services will be paid for either with Local Currency or with Euro. People
doing the jobs receive Local Currency.
To match demand and
supply various means are used: a notice board in a central place with little
notes is the simplest form for communicating wants and offers. A web-site
makes it also possible for people a bit further away to check the ads and
write their own offers or requests.
A coordinator works
proactively to find the best possible ways to apply the skills and capacities
available in the temporary settlement in ways that are needed. The skills
audit applied in the Neighborhood Academy
will support this process by providing documentation of the expertise present
in the settlement as well as boosting confidence and motivation on the side
of the pioneers to apply their skills and talents. The coordinator links up
people who can be of use for each other. When useful, the coordinator can
also look for training opportunities and coach people in their job experience
and job performance. This process can have a very empowering effect on people
who have been out of the job market for a longer time. By trying certain
tasks on a basis that is not too formal and demanding,
people can re-discover what they want to do and what they can do, without
having a formal full-time job immediately.
If the settlement
is not all that big, the role of the coordinator may function largely informally.
People will know each other and probably ask each other for help when needed.
If it gets bigger,
more organization and communication will be required. For people from outside
the settlement to make use of the capacities in the settlement, an active job
agency will be required from the beginning.
III) Organizational Structure
The Local Economy Organization
The Local Economy
Organization (LEO) is the umbrella organization and consists of 4 branches.
Each of them has its own legal structure and organizational requirements.
These will be lined-out briefly in the tables below. The LEO itself can best
be organized in a foundation. That ensures that the over-all goals of the
settlement are kept throughout the project and it may be instrumental for receiving
subsidies on behalf of different branches of the organization, e.g. for job
re-integration or business start-up programs (which would be a combined
effort of the Local Job Agency and the Savings and Loans Division).
(with the aim to improve the general social and economic development of the
temporary settlement and the new neighborhood as a whole)
The organizational structures
and requirements for the four branches of the Local Economy Organization are
1. The Housing
(owned by members who rent a house or building from the Co-op, some may
work for the Co-op) Buying shares through investments is also possible.
maintenance service of temporary housing
Management of privately
commissioned permanent housing development
contacts, finding new inhabitants, communication with members
desk: complaints, questions, suggestions of members
(membership, finances, running the office)
maintenance of the temporary houses and infrastructure
of new ideas concerning housing
(partly in Local Currency)
loan for investment in temporary houses and infrastructure
Rent of the land
temporary houses (partly in Local Currency)
costs (staff, overhead, partly in Local Currency)
2. The Local
(with strictly set goals: controlling the proper functioning of the Local
Management of the
administration: keeping control of the amounts of Local Currency in
issuing of the Local Currency
Co-ordinating Local Currency subsidy commission
on capital investment
3. The Savings and
will function like a credit union or membership bank
request for loans, sales of Local Currency, savings deposits
information, membership recruitment, communication
about savings, loans, conditions
balances, payments, debts
management: checks and controls for loans
management: dealing with defaulting loans
for micro-credit scheme
4. The Local Job
(membership consists of pioneers and people from outside who make use of
information on supply and demand: notice board, newsletter, web-site
Job co-ordinator: actively links needs and requests to
workshops, courses, training, business-incubator for starting businesses
and publication of wants and offers
on-line demand and supply web-site
Payments for jobs
and services (partly in Local Currency)
costs/surcharge (partly in Local Currency)
Payment to people
performing jobs and services (in Local Currency)
IV) Practical Examples in the Settlement
descriptions of how various activities in and around the settlement can make
use of the economic structure are presented here to demonstrate the concept.
Setting up the Temporary Houses
The start of the settlement will be marked by the arrival
of the first temporary houses. The Co-op will borrow money (from banks and
share holders) to buy the houses and necessary materials. For the work
involved in setting up the houses the Co-op will try to hire as much as
possible people from the settlement and pay them with Local Currency. Euros
are used whenever materials are needed or specialized work needs to be bought
from companies outside. As a result, all work commissioned within the
settlement results in lower capital costs (because less
Euro have to borrowed).
Training a local Electrician
The houses require
connection to electricity, water supply, possibly gas. Many practical
technical skills are required for setting up and maintaining the temporary
houses. If there is nobody in the settlement with the skills for e.g.
electrical installation, somebody may be trained for that job. A skilled
technician can be hired as supervisor for one or more trainees.
supervisor probably has to be paid with Euro, but in the future more of this
work can be done by the local trainees. Government support may be possible
for the trajectory to train people with limited job-opportunities. The
co-ordination of this training trajectory can be done by the Local Job Agency
in cooperation with the Neighborhood
(see chapter 9) is a combination of many activities. It offers childcare, a
social meeting place, workshops, and even some of the functions of the Local
Job Agency and a business incubator may be integrated into the Mother
Center. All services at the Mother
Center are paid with Local
Currency, and the expenses the Mother
Center makes will be spent
locally using Local Currency wherever possible.
Center rents a building from the
Co-op for which it can pay in Euro or in Local Currency, but it first has to
earn the latter. Local Currency can be earned from pioneers using facilities
at the Mother Center,
and it can be entitled to receive subsidies from the Local Currency Fund for
pub would work like any other pub or café, except that here you can buy your
consummations with Local Currency. The pub is allowed to address the Local
Currency Fund to change the Local Currency it earns back to Euro in order to
buy food and drinks. The rate for changing back to Euro is 90% (1 local unit
= € 0,9). The other 10% creates a social fund
(in Euro). The 90% rate is also a motivation to spend as much as possible
locally. If, for example, the pub needs to hire a bookkeeper, it would be
cheaper if somebody can do that locally.
Where the pub would
normally be run by volunteers, they now get paid Local Currency. If the pub
becomes a full-time business, payment will need to be a mix of Local Currency
and Euro because the Local Currency will not be able to buy everything
Babysitting can be
provided as a service to pioneers as well as to the inhabitants of the newly
developing neighborhood. People who need these services can get in contact
with the Local Job Agency (possibly combined with the Mother
Center) to get in contact with a
suitable babysitter. For payments, people from outside the temporary
settlement change Euro for Local Currency, or pay Euro directly at the Job
Agency. The Job Agency subtracts a small fee and pays the rest in Local
Currency to the babysitter, like any other job-agency.
Of course the same
goes for any other service offered by people in the settlement. If costs (in
Euro) are made for doing these jobs, these costs are paid for by the Job
Agency and will be charged to the clients.
principle of the baby sitting will work the same with any other small
business like a local delivery service, a carpenter, or a tailor. The main
difference being that for them this income is not additional, but may soon be
their main income. For that reason payments cannot remain only in Local
Currency. Such businesses may also require investments (in Euro). Businesses
of a bit larger scale will therefore need special considerations.
If the business
earns partly Local Currency and partly Euro, they may not have any problem
with that at all.
can spend the Local Currency on renting a building (a local business center
could even be founded) and partly to pay the worker(s) who also spend it for
the main part on rent.
businesses earn more Local Currency than they can spend, then special
exchange agreements can be made with the Local Currency Fund. Since all Local
Currency in this plan is backed by 'hard economic value' it is very well
possible to allow various exchange possibilities.
may also be interested in loans, maybe in Local Currency, but most likely in Euro.
If the Local Currency and the different branches of LEO work properly -
especially the savings schemes - they will be creating capital reserves that
can be used to provide business loans for the settlement.
The plan presented
in this chapter has many different aspects. The entire construction is rather
complex, but not everything has to be implemented, and not necessarily all at
Central element in
the plan is the choice for a Local Currency that is entirely backed by 'hard
economic value'. This gives the currency a guaranteed value for the
participants which will enhance its acceptance, but
it also adds a considerable amount of complexity.
However, since the
main aim of the local economy is to provide ways in which the human capital
of the people in the settlement becomes exchangeable with the financial
capital of others, the choice for a backed currency seems totally valid.
Further details can
be provided when the concepts are adapted to the concrete conditions in
practice. Whether it can work economically depends on various factors like
the prices of the land, the temporary houses, and the required
infrastructure. At that stage it will be possible to give an exact estimate
of the economic feasibility of this scheme and the scale of the different
aspects of its economic structure.
benefits of the Local Economic Organization come on many levels.
By introducing the
Local Currency, economic opportunities are created for the temporary
settlement to create value by exchanging skills and talents inside the
settlement. The more the Local Currency is exchanged back and forth, the more
value is created.
The Local Currency
can be expected to circulate more and faster within the local economy for two
It can only be used locally, so
it won't leave the community.
can not buy everything with Local Currency, so whenever people have a choice,
they will spend their Local Currency and hold on to their Euro'. This effect
is known as Gresham's Law, "good
money drives out bad money" which is more accurately expressed as
"cheap money drives out dear, if they exchange for the same price."
For example: If the
circulation speed of the Local Currency is quick enough to go back and forth
12 times during a year, then 300 Local Currency units are enough to pay rent
for one housing unit for a whole year.
With Local Currency
all forms of work can be measured and rewarded, even those which are normally
not paid for in Euro and even when there are no Euro available to pay for it.
The Local Currency provides the local community with extra spending power, so
it has more room for valuing what it finds important. And somewhere down the
line the value created by this kind of work could also be measured and paid
for with Euro, since the Euro-value of the community increases over time.
The Local Currency
system provides an opportunity to valorize forms of work that are usually not
considered work, that stay invisible or are kept outside the formal economy.
Especially for women, who contribute enormous amounts of unpaid work, this
opens up interesting perspectives. The Local Currency can become a valuable
tool of awareness building and contribute to more gender equality by bridging
the chasm between productive and reproductive work. on
which gender hierarchy is greatly based. But also for many other groups,
whose skills and talents stay outside of the formal economy, like youth, or
the elderly, or for whom it is difficult to access paid work, a Local Currency, that links to the Euro system provides new
A group for whom
the Local Economy System in the temporary settlement can open up doors and
perspectives that otherwise seem totally blocked or unattainable, are asylum
seekers, who are not allowed to work in the formal economy, until their
status has been cleared.
These groups could
contribute their skills and talents in the temporary settlement and get paid
in Local Currency, which, however, they can only exchange back to Euro if and
when they have obtained legal status as refugees. If not, their contributions
go into the community fund.
The Local Currency
can also create space for negotiation and innovation in regard to the
regulations around supplementing welfare subsidies with community work.
The local economy
system is designed in a way that makes use of and validates the contributions
of all groups in the temporary settlement. Every hour that is contributed,
every person that participates, strengthens the local economy. By creating a
link to the Euro System, every Euro that is introduced into the system raises
the backing of the Local Currency. By allowing unlimited Euro to come in, but
limiting the amount of Euro that can leave the Local Economy, skills and
resources are kept inside the community, contributing to local development
and economic independence. Economic growth of the system both benefits all
individual participants in the Local Economy as well as creating
opportunities for collective investments in collective projects. Investments
or subsidies from outside partners are met by a community that has mobilized
its own assets and resources, as well as identified service and business gaps
in the local market.
Examples of Services
Laundry and Ironing services
Janitor and Repair services
Pick up and transport services
Grocery Delivery Services
Tailoring and mending services
Health, Beauty and Wellness services
Development of Individuals
The Local Economy
supports self development and economic empowerment for groups who have
difficulty accessing affordable housing or accessing jobs that link to their
skills and interests. It does so by offering a wide range of opportunities
including cheap rents, as well as opportunities to acquire skills, start
businesses, save money, contribute to building your own house, or find work.
For some, the temporary settlement can provide the room and inspiration to
realize a dream, for others it can provide the necessary support to try out
skills and gain enough confidence to get off welfare and realize economic
Cohesion with economic Tools
With the Local
Economy Organization described in this chapter financial sustainability is
balanced with social sustainability. The interests of individuals are served
while at the same time strengthening the economic power of the community as a
whole. Money is used in a way that links people and creates social bonding
rather than separating and dividing people. This is especially prevalent in
the collective savings systems, where getting together with other people
becomes the prerequisite and the means for individual economic empowerment,
and where individual economic empowerment comes in the package with
collective economic development.