Local solution to Greece’s international crisis

We may forget with the church sex scandals still reverberating in Ireland, the good work the Catholic Church has done and continues to do in South America. OK, OK the Church’s contraception prohibition is indefensible too.  But just read this excellent article ‘Local solution to Greece’s international crisis‘ by David Boyle of NEF on local money systems and see especially mention of C3,  a commercial money independent of banks and rating agencies.  Here are excerpts;-

..The assumption is that decades of serious austerity lie before the Greeks as they dedicate their work and imagination to satisfying the world’s bankers for years to come. In the absence of bankruptcy protection for nations – or the people who live in them – what can they do? What would Belloc and Chesterton have suggested had they been here to advise us? I imagine they would have suggested learning the lessons of Latin America, a decade after the bankruptcy of Argentina.

One of the lessons there has been the ability of new kinds of money to keep people alive while the bankers extract their pound of flesh. The problem with the euro, in this respect, is not that it is too big, it is because it is the only means of exchange available to Greece. Its interest rates are set to favour the financial centres of Europe. For single currencies – whether they are the pound, the dollar or the euro – don’t measure the local needs and assets in individual economies very accurately. What they miss out gets ignored; then it gets forgotten. It’s as if only what distant bankers and speculators say is important…

…This is a lesson forgotten since medieval times, when alongside the gold and silver coins circulated a whole range of tin coins – worthless in international times, but providing the means of exchange around cities and cathedrals.

Argentina plunged into new kinds of money more than a decade ago, and in a similar situ­ation – their currency was tied to the dollar. The IMF was horrified at the notes issued by regional government and stamped them out. But people power came up with its own solution. By 2002, the local money printed by organisations known as “global barter clubs” were supporting around two million people. Inevitably, that pressure was too strong and widespread counterfeiting brought the experi­ment to an abrupt end – though there are still global barter clubs there and in Venezuela.

But a decade on, local money has got more sophisticated. The Central Bank of Brazil took legal action against its new community banks, lost, and is now fully supporting the initiative – the first central bank in the world to do so. There are now 51 community banks in Brazil, issuing and managing social currencies – which are legal food and transport tokens – but also organising low-interest microcredit loans in both currencies. To get these loans, you can bypass the credit-protection agencies as long as your neighbours vouch for you. There are plans for 300 community banks by 2012.

Even more sophisticated are the Commercial Credit Circuits (C3), now in five Latin American countries, and developed by the Dutch consultancy the Social Trade Organisation (STRO), backed by the World Bank, the International Labour Organisation (ILO) and the European Commission. They are designed to increase the liquidity of small to medium-sized enterprises. The C3 factors their debts, insuring them against default and paying out in C3 credits instead, all to speed up the circulation of money in the small business sector. There is usually a negative interest of 0.5 per cent to stop people hoarding credits. All state-owned enterprises (water, electricity, public transport, communication) now accept C3 credit and taxes can be paid in C3 credit too.

A Distributist approach to surviving national bankruptcy, if there is one, would provide these extra means of exchange so that ordinary life can carry on. In fact, providing this kind of alternative to the euro in people’s lives might make some kind of bail-out more acceptable politically.

One more point. It is strange that the European Commission can back C3 in Uruguay, but apparently not in Greece – or other parts of Europe, like our own cities, where small enterprises no longer get support from the banks.

Smart Taxes has been in touch with STRO about bringing C3 to Ireland.  How can the ECB object when it is supporting it elsewhere?  Watch this space for developments…

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