The pandemic has revised interest in a topic that has surfaced repeatedly in Tomorrow’s Transactions events over the years, and that is the issue of local and complementary currencies. The Bristol Pound, the Brixton Pound, the Lewes Pound and many other experiments have sprung up around the country (indeed, around the world) to try to stimulate and regenerate local and regional trade and prosperity in response the changing economic circumstances. We tend to think of currencies as being instruments of the nation state but that’s actually a recent invention in the great scheme of things. There’s no reason to see optimal currency areas as inviolable laws of nature rather than transitional borders under prevailing monetary and financial arrangements.
To see where this might be going, some of you may remember a superb presentation by Gill Ringland (a former head of strategy at ICL amongst other things) back at our 2012 Digital Money Forum. Gill was talking about financial services a generation from now and explained at the time that in order to create scenarios for future generations, she found it useful to take into account the accelerating pace of change and therefore look two generations back to consider the asset classes managed by the financial services industry in 1930. These were broadly commodities, cash, equities and brains. Looking forward, she added a fifth asset class based on demographics for 2050.
Financial transactions are about the exchange of these asset classes. This is especially interesting in a city-centric context because, for example, a permit to reside in a desirable city could well become a key tradable commodity. Indeed, this view was reinforced in a recent FS Club discussion with eminent futurologists (including Gill), where the even more expansive view that cities might begin to dictate the policies and trajectories of the nation state was put forward. In this context, Gill’s prescient discussion of the “C50” (the organisation of the 50 richest city-states that will replace the G20 as the mechanism for “managing” the world economy) forms a solid narrative around future economic organisation. As Martin Wolf wrote in the FT some years ago “this is the age of cities, not of national economies” (going on to say that “it is high time London became a true city state”).
A world economy built up from cities and their hinterlands will obviously demand different financial services and institutions from one based on national economies. This was foreseen by the wonderful Jane Jacobs’ work “Cities and the Wealth of Nations” that was published way back in 1984. My Jacobs-influenced city-centric perspective was reinforced when I happened to read a Canvas8 report “The city as an identity anchor” (which echoed some of Gill’s points about identity, but that’s another story) and then the World Economic Forum (WEF) 2017 report “Cities, not nation states, will determine our future survival”.
This surely implies that the “cash” of cities will become the most important kind to the average person. In other words, having abandoned Sterling for London Lolly and US Dollars for New York Notes and LA Loonies, these will be sufficient to provide the medium of exchange for future citizens. Right now, almost all transactions are local and even at the national level only 1%-2% of European transactions are cross border. If I live in London and use London Lolly for the train, for lunch and at the supermarket, is it such a big deal to convert it to Moscow Moolah to buy something online? Especially when your phone does it for you and you don’t even have to think about it.
So why don’t we use these currencies already? Well, as a recent Bloomberg article discussing the renewed interest in complementary currencies noted, a key problem for them has been “finding a suitable way to cover operating costs”. This is where, we think, there might be a crossing of streams at last. On the one hand, the pandemic means that a great many people are looking toward city-centric means of exchange as a specific kind of complementary currency that may contribute to rebuilding economies, and on the other hand the technologies of money have advanced considerably in recent years as the electronic money evolutionary tree has grown and flourished. Brixton bank notes might be pretty, but a Brixton app makes more sense, especially in the post-pandemic contact-free retail environment of the future.
It’s time to take a serious look at using the new technologies to implement non-fiat currencies. Way back in 1996, Neil McEvoy and I wrote that this would be the long-term impact of the new technology and a generation later it looks as if this view is entering the mainstream. If you don’t like their money, create your own. You can start by giving us a call.