Wednesday, June 20, 2007
A pastor friend sent me a story of a different kind of dollar alternative. It isn't uncommon for bastions of progressivism to take up these alternative monies. Local business owners tend to think they will be helped by loyalty from residents. But this one is interesting insofar as they encouraged acceptance by intentionally devaluing the local scrip by 10%.
There are about 844,000 BerkShares in circulation, worth $759,600 at the fixed exchange rate of 1 BerkShare to 90 U.S. cents, according to program organizers. The paper scrip is available in denominations of one, five, 10, 20 and 50.But of course the people who receive the money are doing business with a devalued currency and cannot get outside suppliers to accept BerkShares, so they end up losing on the transaction.
In their 10 months of circulation, they've become a regular feature of the local economy. Businesses that accept BerkShares treat them interchangeably with dollars: a $1 cup of coffee sells for 1 BerkShare, a 10 percent discount for people paying in BerkShares.
Named for the local Berkshire Hills, BerkShares are accepted in about 280 cafes, coffee shops, grocery stores and other businesses in Great Barrington and neighboring towns, including Stockbridge, the town where Rockwell lived for a quarter century.
"BerkShares are cash, and so people have transferred their cash habits to BerkShares," said Susan Witt, executive director of the E.F. Schumacher Society, a nonprofit group that set up the program. "They might have 50 in their pocket, but not 150. They're buying their lunch, their coffee, a small birthday present."
Great Barrington attracts weekend residents and tourists from the New York area who help to support its wealth of organic farms, yoga studios, cafes and businesses like Allow Yourself to Be, which offers services ranging from massage to "chakra balancing" and Infinite Quest, which sells "past life regression therapy."
"The promise of this program is for it to be a completed circle," said Matt Rubiner, owner of Rubiner's cheese shop and Rubi's cafe. Some local farmers who supply him accept BerkShares, but he pays most of his bills in dollars.I recall that for some time, when the Canadian dollar traded at about 95 cents on the dollar, northern New England merchants took Canadian currency at par to the US dollar. It wasn't worth the bother to have someone give you that five cent surcharge. You didn't get foreign currency enough to make it overcome the transactions costs. But paradoxically, if you get the BerkShare more accepted, there will be more pressure to move the exchange rate back to $1=1BS. And that might lead the bank to stop converting BerkShares to dollars.
"The circle isn't quite completed yet in most cases, and someone has to take the hit," Rubiner said, referring to the 10 percent discount. "The person who takes the hit is the merchant, it's me."
The article portrays this as a liberal cause, but it's something other communities have done. Business people of left and right wings both like the idea of having local consumers purchase locally.
I think it's a transactions cost issue. What do you think?
Stephen Burkle, president of the Ithaca (NY) Hours program, said the notes are a badge of local pride.
"At the beginning it was very hard to get small businesses to get on board with it," said Burkle, who also owns a music store in Ithaca. "When Ithaca Hours first started, there wasn't a Home Depot in town, there wasn't a Borders, there wasn't a Starbucks. Now that there are, it's a mechanism for small businesses to compete with national chains."