Photo by S O C I A L . C U T on Unsplash

Back in 2006, the Schumacher Center for a New Economics, a nonprofit where I work, helped to established BerkShares, Inc. a local currency issuer. Then as now, the idea behind BerkShares was to galvanize residents in Pittsfield, Great Barrington, and surrounding areas to purchase more goods and services locally. The local currency could be converted into US dollars but is designed to be spent directly in the area. The theory of change involves both encouraging local economic activity—increasing the economic multiplier effect, in technical parlance—while fostering bonds of community.

A local currency seeks to encourage recirculation and reinvestment within the community. These currencies are not new—they were quite common during the period of the Great Depression—but had fallen out of fashion. When the BerkShares currency launched in 2006, it involved something of a gamble: that a moribund tradition of local currency issue could still work to bolster local economic activity in the 21st century.

The experiment proved successful. BerkShare currency notes—printed in signature colors and sporting portraits of local historical figures—have become a point of pride among many area residents. The one BerkShare note honors the local Mohican nation; W.E.B. Du Bois is on the five BerkShare note; agricultural activist Robyn Van En on the 10, and so on. You can spot BerkShares in circulation at area farmers’ markets, Main Street storefronts, auto repair shops, and professional offices. Today, over 400 area merchants accept BerkShares for payment, revealing an enduring intention in residents’ choice of where and how to do business.

The original launch of BerkShares presaged a broader revival of interest in local currencies following the Great Recession. There are now over 200 local currencies in use worldwide, according to a database maintained by the Schumacher Center, with popularity greatest in Europe and Brazil.

Now 15 years in, BerkShares, Inc. is taking the local currency digital. With a new mobile payment app launching in December, BerkShares users will be able to transact with local merchants, exchange BerkShares for US dollars, and vice-versa from a smartphone or tablet. The addition of a digital platform to the local paper currency will make BerkShares more accessible for users while broadening access for merchants. The aim of digital BerkShares’ added convenience, ultimately, is to deepen the local currency’s impact by encouraging even more spending to stay local and fostering increased community investment.

Of course, this is an experiment, and the proof of concept remains in the execution. Given the lack of established models, there will undoubtedly be some unanticipated curves ahead. But if the digital platform works, it could generate interest far beyond western Massachusetts. While the current intent is to deepen the presence of an existing local currency, digital currency offers the potential for other local, as well as non-geographic, communities of common interest to organize systems of their own. Imagine, for example, a network of Black-owned businesses, or Indigenous-owned businesses, or worker co-ops. While initial launch is still a month away, the possibilities are exciting.


Why Go Digital?

Even before the pandemic, the popularity of digital payment methods had been steadily rising. With COVID-19, widespread health-related hesitancy to handle physical cash accelerated this pattern even further, resulting in a marked increase in cashless transactions. Today, about 60 percent of Americans report using mobile payment platforms such as Venmo for at least some transactions. This obviously could pose a barrier to BerkShares’ continued growth. At the same time, the opportunity of expansion provided by the trend proved an enticement.

The digital launch involves a partnership between BerkShares Inc., a democratically structured non-profit which issues the local currency; the Schumacher Center (which retains its affiliation with BerkShares, Inc.); and Humanity Cash, a tech venture focused on alternative digital currencies.

From the beginning, BerkShares has been about much more than just another way to pay for goods and services. Facilitating personal bonds between local producers, consumers, and suppliers can increase resiliency in periods of global supply chain disruption while cutting the carbon footprint of shipping. The bills themselves, adorned with depictions of the local heroes who embody these values, reinforce this deeper meaning of BerkShares’ use.

With this upcoming launch in December, BerkShares will uphold these same values while meeting the clear demand for digital. The user experience of the BerkShares app will resemble those of mobile payment services such as Venmo. The app will become available for free download on iOS and Android. Digital BerkShares will be backed by US dollars and will be redeemable at a 1:1 rate.

As before, it remains free to accept and reuse BerkShares, encouraging local circulation of currency. Accepting payments via the mobile app simplifies the use of BerkShares in person-to-person settings including farmers markets and other less formal services. Only when a merchant decides to withdraw funds from BerkShares circulation and cash out to dollars is a 1.5-percent fee processed to move the money. This is slightly less than Venmo’s rate and considerably less than the fees most credit cards exact from merchants on each transaction.

Beyond the direct advantage to small merchants, digital BerkShares’ competitive fee structure is meant to keep more area capital at work in the Berkshires. While we may not think of it when swiping a credit card in-store, all those processing fees add up, bolstering the profits of big financial corporations. Likewise, holding a balance on Venmo or even pre-loading gift cards from chain retailers gives those corporations capital to invest on Wall Street.

As many Americans now realize all too well, present-day financialized capitalism, with its huge stock buybacks and asset inflation, has fueled the nation’s widening economic inequality. A handful of America’s largest financial corporations are also leading investors in global fossil fuel extraction. With BerkShares, by contrast, reserves are held with individual community banks, which reinvest directly via lower-risk loans to start-up farmers and other small business ventures.

Beyond these benefits, running a local currency on an app opens even more potential for experimentation. Digital BerkShares will launch with a newsfeed feature, providing a community channel for local businesses, like the local food co-op, to communicate with their constituents. As a platform for such local activity, more participatory forms of engagement are already envisaged—an area “culture pass” for museums and arts institutions is one exciting example—to further stimulate local activity. Although still in ideation, digital BerkShares has even garnered philanthropic interest for the possibility to test universal basic income (UBI) distributed through local currency among low-income residents.


Local Currency as a Tool for Community Economic Development

Local currencies thrive on a spirit of communal interdependence. Often, they have appeared at moments of economic crisis. The first wave of local currency issue in the US came in the 1930s, in the wake of the Great Depression. Producers were eager to work and people always need food, but the stock market crash meant that capital for wages and investment was scarce. As with area precursors to BerkShares, many of these experiments were rooted in food production—local food security being foundational for any healthy and ecologically sustainable economy.

Given this history, it is unsurprising that interest in alternative currency was rekindled in the wake of the Great Recession. In the US, corporate finance was bailed out of its speculation-gone-awry after being deemed “too big to fail” by the Federal government. Rather than banking being decentralized after the malfeasance, the opposite ensued. As historian Gar Alperovitz noted in 2012, some 30 percent of all deposits in the US had by then already been concentrated in just five of America’s largest corporate banks (it is now over 35 percent).The unequal economic recovery which followed only deepened the widening chasm of wealth inequality the country faces.

Amid such systemic crises, local producers and communities can turn to each other for support. Local currencies are by no means a panacea for America’s deep economic injustice and poverty. The benefits they deliver to a community are, in the end, as strong as community members’ commitment to local solidarity. What such currencies can do is provide a conduit for that commitment, creating a tangible manifestation of interdependence which becomes a hallmark in everyday exchange. So, while local currencies are but one tool, they can be a powerful complement to broader efforts to build community wealth and a solidarity economy.

This framework specifically rejects the neoliberal mold by privileging local reinvestment and inclusive ownership. The implications for bottom-up theory of change were well summarized by James Dickson in 2019:

[T]here is…after decades of neoliberal hegemony…an alternative…we can reorganise our economies so that they work to make the lives of all citizens better. The task now is to…entrench a new economic common sense—that the economy need not be a remote and divisive structure facilitating the extraction of wealth…but can instead be made to work for all of us.

Berkshires residents know something about the importance of reinvesting in the local economy. In the 1990s, closures like that of the General Electric plant in Pittsfield in the 1990s had a lasting effect on the health of the local economy. Growing the available reserve of BerkShares will enable local banks to invest in new ventures to fill procurement gaps—products and services currently being imported from outside the region. This import replacement approach, a notion popularized by urbanist Jane Jacobs in the 70s and 80s, could offer greater opportunities for young adults wishing to stay or move back to small communities like the Berkshires, a tendency that has become more prevalent in the wake of COVID-19.

One final advantage of the digital currency is richer data and insight that could inform such economic development. BerkShares data could be analyzed (in an anonymized and transparent format) to identify local procurement gaps. Regular reports from BerkShares, Inc. could point residents to potential areas of investment opportunity.

Nationwide, interest in local currency has risen in response to COVID-19 and its continuing economic repercussions. Municipal governments, in particular, are exploring creative and responsible ways to encourage local economic recovery.

In 2020, we witnessed a remarkable flourishing of direct mutual aid networks in response to the COVID-19 pandemic and resulting economic shutdown. Because local currency thrives on the same spirit of communal solidarity, it has great potential to help focus and sustain such efforts into the future. Whether it be cities working to recover from decades of neoliberal divestment, climate activists seeking to catalyze publicly owned sources of renewable energy, or efforts to “Buy Black” or “Buy Native,” local currency can help harness collective power at a more human scale—empowering everyday people to shape and direct the economic futures of their own communities.