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Ithaca, New York is Printing Its Own Money and Promoting Community Economic Development

Your article about Ithaca HOURS in the December 5-9 issue stimulated my thoughts about that longest lasting of local currencies. You ask, "Has the HOUR passed?" I'd like to suggest that its time has arrived.

The prototypic local currency of the modern era circulated in Wörgl, Austria for little over a year, 1932-1933, before the town government succumbed to pressures from the Austrian central Bank and the growing regional pro-German National Socialist party. The dates are those of the depth of the global depression, a phenomenon we often hear mentioned these days. The mayor of Wörgl backed the currency, called "labor certificates," with Austrian schillings. For a year the citizens could use the certificates to pay their taxes and to buy groceries, clothing, fuel and shelter. Companies paid wages in this scrip and the government was able to keep schools open and employ a substantial number of workers for infrastructure projects such as roads and bridges. The town was one of the few in Austria that avoided economic collapse in the year before the national government shut it down.

Times are different now but memories of the unstable economy of the 1930's haunt us. We worry over the enormous debt we owe personally as individuals and collectively as local, state and national governments. Many are concerned about the flight of local capital into pockets far away, some of them invisible to public view, and none of them with Ithaca's particular interests as a priority. We lose sleep over the shrinking or even disappearing value of our savings and pensions, and whether costs for electricity, fuel and health will soon outstrip our ability to buy them. We fear that we may not be able to send our kids to college for the education needed not only by them personally, but for the county, state and nation. More and more of us are seriously anxious about costs to our environment. Some of us are old enough to have seen the dustbowl and the Mississippi floods of the 1930's and think that maybe there were hard links between a failing economy and a failing environment.

Tompkins County residents are among the most environmentally active people in the country, with exemplary, cost-saving and composting and recycling efforts. House prices are stable here (as anyone recalling the most recent property tax assessment knows), with at least one real estate firm opening up an additional office. Our unemployment and underemployment figures are the envy of some of our upstate neighbors. There is a thriving, increasing production and marketing of local food and wines. Local chefs are imaginatively taking advantage of this. The bumper sticker that suggests that we (Ithaca in particular) are on "an island surrounded by reality" is now brag instead of a jibe. However, the so-called "real" economy surrounding our more stable one does affect us and is likely to have more serious consequences in the immediate future.

Our local currency, Ithaca HOURS, exchangeable in a twenty-mile radius, has had some positive effects locally. Interestingly, it is responsible for what could be called "media tourism" with a steady stream of radio, TV and print journalism crews coming here to do stories on this economic curiosity, as you mention in your story. According to Glynis Hart's quotation of HOURS President Steve Burke, this is on the increase, even as the membership is on the decrease. The HOURS program has also attracted field trips by officials of government and non-government institutions from Canada, France, Germany, Italy, Japan (many) and the UK. In turn, HOURS officers and board members have traveled to each of these places and to conferences on local economies in the United States to give invited presentations. Three doctoral dissertations, one for the University of Paris, one for a university in Japan and one for the Department of Anthropology at Emory University discuss various aspects of this community currency. The Cornell University program selected two HOURS members, one in 1998-1999 and one in 2003-2004 as Civic Fellows. A grant from the Ben and Jerry Foundation enabled the organization to have an executive administrator for a year, and it was during this subvention that the HOURS directory, its outreach and its membership reached its highest point.

A major difference between Ithaca HOURS, its sibling, Berkshires in Massachusetts cited in the Hart article, and the several local currencies and time banks in Japan, Germany and Italy is that the HOURS cycle of time/currency is anchored solely and entirely in its membership, although it benefits the larger community and the environment. Local financial institutions guarantee Berkshares; the municipal government backed the labor currency of Wörgl; prefecture and provincial governments support efforts in Japan and Italy with financial guarantees and/or provision of offices, computers and personnel; and a major foundation provides on-going financial subvention for local exchange coupons and time-shares in Germany. The Wörgl government could gather fees and taxes to support the local currency.

HOURS Inc. takes no fees and by fundamental policy charges no interest on loans. It thus has no marginal income. Getting necessary administrative tasks fulfilled depends entirely upon volunteers and sometimes with personnel who take HOURS as full pay. Its guarantee is anchored in the labor of the participants in the circulation, and, unlike dollars that can be saved in a bank or even hoarded in that old sock we hear of, HOURS have value as an exchange currency only when they are in circulation. This person-to-person transaction is a strong point from the standpoint of social solidarity and of the establishment of trust. A mark of this trust is that no-interest loans granted by HOURS have a rate of repayment of an estimated 98%, far higher than that of most financial institutions in ordinary times and astoundingly better than in the situation facing us today. Steve Burke points out that HOURS exchanges for goods and services necessarily entail a face-to-face engagement with other members of the community. This is significant, as visitors from other localities are quick to observe.

Less easy to observe directly is the leverage effect of HOURS on the local economy. That is, in addition to the direct circulation there are additional benefits that show up externally. This technical analysis was the subject of one of the dissertation studies of HOURS done by a Japanese doctoral student studying for a year in the Cornell University Department of Planning. He was able to show net positive effects. A French study indicated that the interest free loans, with the currency spent in the local community and the value-added remaining in the community also had strong net positive effects.

A weak point, as is analyzed by international scholars of local economies and exchange methods, is that HOURS currency is tied to the dollar and thus is what is known as a "fiat" currency. That is, as long as there is faith in the dollar, HOURS is equally fungible. But the dollar, as some are now loudly lamenting, is now unanchored in any hard standard such as gold. HOURS as originally conceived by Paul Glover and his colleagues, were tied to local labor, with an estimation that an average hour of labor in this locality was "worth" $10.00. One HOUR thus became fungible with 10 US dollars. This remains the rate of exchange, while we know that the average wage is double that (average wage in the county is about $20.00) and a living wage in Tompkins County is more than double that amount. As the dollar declines in value so does the HOUR.

A strong point, sometimes overlooked in currency discussions, is that the emphasis on the circulation of local goods and service implicit in local currency circulation is a positive environmental gain. Just to cite two related examples, there is a significant reduction in the environmental burden from long distance transport. The shorter distance and time foodstuffs travel farm-to-table the higher the nutritional value. Both these gains have additional positive side effects.

Tompkins County must import the preponderance of its inputs for retail businesses and services, for agricultural products and even nursery and forestry products. Sometimes these must come from far outside. We have few raw materials here and no significant amount of primary building materials. We have little manufacturing that produces goods for local use. For many income-producing efforts, the largest and sometimes only local element is labor. Labor we do have, not only in good supply, but also with a high proportion of that labor highly skilled. Our carpenters, cabinetmakers, masons, electricians and painters - all our builders - are an important local skill resource. Many of them work on projects that require exceptional training and experience. We also have underpaid and under-employed labor forces that might see a net gain for themselves and for all of us when we succeed in integrating our local currency as an active component in household budgets. At least one study done with HOURS in collaboration with Cooperative Extension provides a starting point for identifying the issues to be solved and the ways to move forward. This does not have to entail getting the big-box global stores to accept HOURS.

Two decades of HOURS as a concept and as an organization in and with this community, and as a subject of study and influence for communities all over the world yields a wealth of information and experience. In this moment a great changes taking place and severe stresses on the economy all the way from kitchen tables to international corporate board rooms and the cabinets of world rulers, HOURS is uniquely positioned to engage in an energetic effort to make a strong positive contribution right here locally.
Le Grace Benson
Former Ithaca Hours Board Member