Can changing the accounting system make a difference?
Photo credit: Charlie Waterhouse
March 14, 2012 // By: Susan Steed
Some time ago Tim Harford commented that ‘Money (whether pounds or Brixton Bricks) isn’t wealth. It’s just a way of keeping accounts, and swapping one system of accounts for another isn’t going to alter the basic productive potential of Brixton.’ Based on discussions with two groups of students about the B£, one at the LED forum and one at Schumacher College and a range of business owners, I have to disagree with Tim.
In economics, only one type of exchange is recognized - one where money changes hands. It presumes that market exchanges allocate all resources efficiently. Of course, most of us would see that with over one in five young people out of work, something is going wrong. There are lots of resources that the market isn’t using.
Enter the world of complementary currencies. These aren’t trying to replace sterling, but run alongside it and make things happen that £s can’t, or for some reason, won’t.
Time banking is the type of currency that most clearly does things that sterling can’t. It enables people with no access to sterling to both start producing something and offer their services to others. Every time bank hour offered creates a chain of future trading. It also creates a space where people whose labour is valued differently in the market can trade and exchange goods. In the market whilst you might have a lawyer ‘buying’ the services of a cleaner, you never really have a reciprocal exchange.
So, how do we get from timebanking, to a currency like the Brixton Pound (B£)? Do they really have anything in common? A time bank hour doesn’t need someone to have sterling to initiate a trade, whereas a currency like the B£ has to be accepted by businesses (and is run through business accounts like sterling).
Well, there is a similarity between the two. When the first person ‘spends’ a time bank hour, it enables someone else to ‘earn’ a time bank hour. They can then spend this, and some else can earn it, and so on… In the same way, each B£ starts a chain of circulation. Any person that buys B£s commits to spending them locally. Likewise any business owner that signs up is also pledging to try and support other businesses by respending them. Signing up to this is a choice they make above putting that money straight in the bank to earn interest.
This is different to how large corporations use money. In our B£ workshop last night, Liam from Seven talked of his experience managing a high street chain where you viewed all other shops as ‘competitors – if they fail you do well’. He saw this as a different mindset from managing an independent store working within a network of businesses in Brixton market trying to support and supply from each other.
Back to Tim Harford’s point. Can the B£ change the productive capacity of Brixton? Well, there is still some way for community currencies to go in terms of scaling up and proving their impact (indeed we’ll be working on this with funding from NESTA). And the currency can only work alongside activities such as our workshop last night to try and match up local people who have had a business idea with a local businesses like Anne from Cornercopia who said she is ‘desperate to find more local producers’. But, economics is also beginning to show us that small changes in the way something is presented can have effects that are surprising in their magnitude.
Having these colourful notes in a business’s till or in a person’s wallet reminds them that they want to source locally. The number of businesses taking them (200 now) is broader and more mixed than those you get at a business forum with less barriers to participating. Yet more than this, they change the nature of the transaction itself. It helps to signal to other people that you want to be part of a broader community and find others who want to do the same.
So, let's remember, the accounting system we have is something we created. A large part of nef’s work is to try and change the way we account for value. But at the same time we can try out alternatives. These alternatives sometimes develop in times of crisis. But we might just find that when we time bank, or use the B£, they change not just what we buy, or where we shop, but how we relate to each other when we do. This can open up quite a different space for exchange. One that we might rather like.
Thanks to all the businesses who attended last night, particularly Seven, Ms Cupcake, The Breadroom, Ossie’s Fresh Ginger, Brixton Cornercopia and Healthy Eaters. Thanks to those students at the LED Forum at LSE, and to attendees of the workshop at Schumacher college.