The first year Geography students at the University of Birmingham have been on a fieldtrip to Rotterdam. It involved a huge amount of hard work, engaging exercises and long days. As a PhD candidate with the privilege of helping to manage the trip, I thought I would try and inspire you further about human geography. My research considers “alternative currencies” and Rotterdam actually has one of its own. The “Dam” is an online digital currency that allows local entrepreneurs and businesses to trade with one another. The transactions are conducted within an alternative platform, outside of the traditional Euro-denominated system. I thought I’d give you some background within a geographical context.
Alternative currencies have gained popularity over the past ten years. Their development has been observed within local spaces in the UK; the most famous ones are the Bristol, Brixton and Totnes Pounds. These work by allowing individuals to convert their normal Pound Sterling into a local version. They are only accepted in local, independent and family-owned businesses. It is hoped that it will help stimulate the local economy through something described as the “local multiplier effect” (a pound spent in a local business is more likely to stay locally). There has also been the development of Bitcoin and a whole ecosystem of cryptocurrencies. These work through a technology called “the blockchain” that enables a limited number of Bitcoins to exist that are not open to fraud or replication. Users of the digital currency can make transactions and send money anywhere in the world, completely outside of the traditional banking system. Bitcoin has received a huge amount of negative attention, but the technology is actually pretty interesting. In fact Arnhem, a city 120km from Rotterdam is considered to be the world’s first “Bitcoin City” – where a whole range of businesses accept Bitcoin for goods and services.
Alternative currencies fall under a theoretical perspective that as the economy is socially created, there is space to create new economic structures. Neoliberal capitalism is often painted as universal and inevitable. But this is not true, we as humans create this form of capitalism and allow it to exist. In fact many of the assumptions about our system; that it is a natural development from barter, that currency is neutral and that markets are objective and efficient, are simply stories created to justify its existence. We are able to construct alternative approaches that exist alongside or outside of the dominant system. Gibson-Graham (2005) described an iceberg economy (see below) when providing the basis for creating alternative approaches. Traditional capitalist relations only make up a tiny proportion of our daily interactions. Most of our transactions are informal and not just to make money. Finally, alternative currencies are a challenge to the belief that their is only one way to construct a currency; GBP/USD/EUR. We can actually construct a currency in any way we like; designing it to reduce negative issues and promote positive outcomes.
So what is the currency in Rotterdam? The Dam is described as a “mutual credit system”. For accounting purposes, its currency is equal with Euros, but can never be exchanged for them. When a business opens an account they are credit checked and given a balance of zero. If they purchase a product for €100, the business buying goes negative by 100 Dam’s and the business selling goes positive by 100 Dam’s. The credit check determines how negative they can go. The business selling the product then has 100 Dam’s to spend with another business in the network or pay off a previous negative balance. Money in this network is only “created” when trade takes place and actually the total value of all the currency in the network is zero. The Dam is modelled on a highly successful scheme in Italy called Sardex. Starting in 2008, Sardex has undergone exponential growth and this year is expected to have €100million-equivalent worth of transactions. There are two broad sets of advantages to using an alternative system like this. Firstly, for the business its cheaper; the Dam’s are free credit, which is useful as business credit cards or overdrafts would come with interest charges. Secondly, for Rotterdam; the Dam’s encourage the localisation of some trade and supply chains, helping the local economy through the multiplier effect.
So how else does this relate to Geography? Well there are a couple of other considerations. The Dam system could be considered a response to the globalisation of trade, encouraging benefits to stay local. It is also an alternative to financialisation, which has seen the growth of a dominant and parasitic banking sector over the last 30 years. To the banks, money is just seen as a way of making more money through interest, whereas within the Dam system, its currency only exists to facilitate trade. There is a wider link to social justice here too. A very unknown fact about the tradition money system is that when someone goes into a bank and gets a loan, the bank creates new money. Yes, creates it, out of thin air, like Theresa May’s magic money tree. There is a growing movement to challenge this gross inequity, with groups like Positive Money and the New Economics Foundation actively campaigning around it. In fact a recent survey found that 85% of elected UK MPs did not know that this is where money came from. The Western world has a growing level of poverty, a need to radically and quickly change our energy systems and have an ageing population. The way money is constructed and created could help meet these challenges instead of hindering them.
What Bristol Pound, Bitcoin and the Dam all have in common is that they are alternatives. They demonstrate that as communities, either of place or of interest, we can build our own systems of exchange outside of the dominant system. If this subject is something that interests you, I would highly recommend reading or listening to; Debt: The First 5000 Years by Graebar (2011). My own research hopes to consider how alternative currencies like these could support wider sustainability goals such as investments in energy efficiency or renewable energy. I hope you are now a little more inspired about human geography and want to use it to meet the challenges of the 21st century. We are giving you the tools to construct your own future, use them wisely.
- Did you notice the alternative local currency whilst on the Rotterdam fieldtrip? - November 3, 2017
- Overview of cryptocurrencies and gaming for people considering the GameFlip ICO - October 30, 2017
- Hullcoin: A cryptocurrency for the City of Hull, UK - October 24, 2017