Localism

In for a penny: is your town joining the digital currency revolution?

By Adam Westbrook 20 March 2017
Summary

Sticking it to the big banks and multinationals.

In 1949 people were going crazy for Passport to Pimlico, a now nearly-forgotten British comedy.

It follows the people of Pimlico in south London who, tired of post-war austerity, secede from the rest of the UK. They create their own government, local currency and introduce border checks on the outskirts of the borough.

Naturally enough for an Ealing Comedy, things quickly start going wrong.

Nearly 70 years on, fictional farce is becoming a surprisingly successful reality – at least in part – with technology leading the way.

The local currency revolution

Towns across the UK are doing their own ‘Passport to Pimlico’, by launching their own local currencies.

Liverpool is the latest (and perhaps the biggest) city to join the movement. It follows Exeter, Bristol and Brixton in south London.

The currencies – usually named after the town itself: the Liverpool Pound, the Brixton Pound and so on – are digital only, using the Blockchain framework to handle the transactions.

Read more: The Blockchain Explained (with cake)

It means paying via an app rather than cash or card.

The key is this: the currency can only be spent in independent local shops and restaurants and, occasionally, the local council.

You won’t get far spending a Brixton Pound in Tescos.

This sounds limiting, but it is the whole point of the exercise.

“It’s a way of seizing back control from big multinationals,” Alison Lockett-Burke, a restaurateur who’s part of the scheme in Liverpool, told The Times. “Seeing people getting behind the scheme and choosing not to go to Starbucks but to come here and use the local pound is really heartening.”

Keep it local

At least half of all money spent in a local economy leaves it within the day, sometimes even ending up abroad, according to the latest research.

Will local currencies help support local business?

The reason of course, is that more often than not, local money is spent in multinationals chains, from Aldi to Ikea and even McDonalds.

And in times of austerity, this makes all the difference to independent local businesses. Just like the fictional residents of Pimlico, it’s not surprising to see local currencies emerge in times of prolonged austerity, where trust of central government and big banks is at a historically low ebb.

Brexit is also spurring the transition too, with some predicting that local business will become more important if trade with the EU becomes more difficult.

The concept has its drawbacks.

With no central bank to underwrite the currency, it’s always at risk of suddenly losing its value. And, as The Times adds, the startup managing the transition to local currency is not exactly local itself – it’s based in Israel.

A glimpse of the future?

So it has its skeptics and it’s still in the category of “funny things local people do”.

But there’s a fascinating long-view story here too: what seems like a local quirk may, within our lifetimes, become the only way to buy.

It all depends whether our financial system can weather the perfect storm of rising welfare costs, lower taxes and ballooning debt.

Money after all, is a fictional concept – it doesn’t exist in real life, only in the heads of humans – and it works only if everyone believes in it.

The British sterling has a value because enough people around the world believe our banks, and by association our government, will be around long enough to honour its debts. The 2008 financial crisis hit that confidence hard.

If trust one day collapses – then central currency could collapse too.

Experts think in that scenario, society would revert back to a local level, and having a well established local currency would be a very handy thing to have.

With Birmingham, Kingston-upon-Thames and Glasgow all queuing up to launch their own local currencies, it seems more and more people are hedging their bets.