I am moving to Bristol next month. On my preparatory visits, one of the things local people have brought up repeatedly is the upcoming launch of the Bristol Pound, another alternative currency in the mould of the Lewes Pound and the Brixton Pound. “It’s such a great idea!” they enthuse.
It isn’t. It’s a bad idea. It will cost small business money, hinder local shoppers, and provide extra jobs only for those who are administering the ridiculous scheme. Those who promote alternative currencies are (sometimes well-meaning) nitwits. Their projects harm, rather than help their local areas.
I say this as an enthusiastic supporter of local businesspeople, who really do not need the hassle of cashing up and accounting in two currencies, who need to put their cash in a bank, who need to pay providers of goods and services from outside the area, and who don’t need to train their staff to detect a range of new possible forgeries, nor to end up with a pile of worthless paper when the scheme inevitably collapses.
But fundamentally, I say this from a modicum of understanding of monetary economics. Say you have two banknotes, £10 Sterling and £10 Bristol. You can exchange the former for £10 of goods in any shop in the country, or place it in a bank. You can exchange the latter for £10 of goods in a few shops nearby (or take it to a counter somewhere to swap it for Sterling). The former is more flexible and therefore has a higher value. This differential is reinforced by the greater potential for local currency default and for counterfeit notes. So despite the nominal peg to Sterling, the Bristol Pound will always be worth less than Sterling. Nobody in their right mind would prefer to own £10 Bristol when they could own £10 Sterling. Have you ever asked your employer if they would pay you in book vouchers because you really like reading?
After that, you have the cost of the scheme. Who pays for the currency to be printed is one question. A more fundamental question would be why. If you wanted a currency that was hard to exchange outside the local area, you could start using Malaysian Ringgit, Disney Dollars, or the national currency of Bhutan. There would be no printing costs, no monitoring costs, and the currency could be exchanged at the few Bureau de Change that stock minority currencies.
Local currencies are a step backwards for local areas. They take local businesses into a parochial realm of rusticity, with all of its inefficiencies and inconveniences. They encourage customers to spend on the basis of local affiliation rather than the quality of the goods or services. They benefit only those who draw a salary from the scheme, at a cost to all those who naïvely participate. The Bristol Pound is a very bad idea indeed.