Everyone in society has something to sell to others, be it labour, skills, knowledge, produce or product.
The free market economy would not exist without this exchange of goods & services, these transactions are the bedrock of wealth & resource distribution within our society. It therefore seems logical to assume that by increasing transactions between individual citizens, wealth and resource distribution would also be increased.
This would reduce state dependency of low income households, create more economic freedom and opportunity for all of our citizens.
In the modern economy the vast majority of daily transactions are facilitated by exchanging goods & services for money, however a few transactions are still made by simple barter, the exchange of one type of service or goods for another.
Money is the essential economic oil that allows transactions between citizens. So the simple solution to increasing transactions, would be to increase the money supply within society through state spending or the issuance of so called “helicopter money”.
This solution does however carry great risk. By creating more money its scarcity is reduced and so is its value. If the value of money falls too much, people lose faith in the monetary system, withdraw their savings and spend them rapidly.
This increases the money supply even more and leads to hyperinflation. The risks associated with increasing the sovereign money supply are too great, another medium of exchange is required.
Community Credit Explained
This new medium of exchange is based on using an electronic version of Silvio Gesell’s ‘ stamp scrip ‘ mentioned in his book ‘ The Natural Economic Order ‘ 1916.
The most famous trial of stamp scrip was conducted in a town called Worgl in Austria, July 1932, according reports and eye witness accounts at the time, stamp scrip helped increase local transactions, employment, entrepreneurship, reduced poverty and increased local authority spending on infrastructure projects.
How Would Community Credit Work?
The community credit system would be held on a secure electronic central database under local authority administration. Every citizen within the local authority could apply for a community credit account.
The community credit account would operate in a similar way to a normal current bank account, with credits and debits added, subtracted and recorded automatically.
The only difference would be that unlike bank account deposits that accrue interest, the community credit account would deduct from deposits, a form of negative interest rate.
The percentage of negative interest rate would be set by local authorities. This negative interest rate operates as an anti hoarding device, encouraging people to spend their community credit and increase local transactions without the risk of hyperinflation.
Silvio Gesell’s original stamp script idea had a similar anti hoarding device, people had to purchase a monthly stamp and attach it to the script in order to maintain its value.
The client software applications used to access and perform transactions on the central community credit database, could be uploaded onto account holders home computers, tablets and mobile phones.
Issuance Of Community Credit
Local authorities spend money on buying goods and services needed in the local community. This is where community credit would be issued.
Using a services and goods procurement system that has a presumption in favour of community credit, local authority suppliers would be encouraged to accept community credit as part payment for their services and goods.
Obviously if goods and services could not be sourced from the local community the presumption in favour would not apply.
This presumption in favour would encourage local entrepreneurs to start supplying local authorities, boosting local transactions. It is important to state that only part of the payment for goods and services would be paid using community credit, the percentage would be set by local authorities.
By using a part payment system, suppliers to local authorities would be more willing to accept community credit as payment.
Why Would People Accept Payment In Community Credit ?
Community credit would be based on a tax foundation. Local authorities would accept community credit in exchange for payment of local business tax / council tax , parking fines, parking charges and rental of local authority owned buildings.
This would give community credit value within the local area. It would encourage people to spend their community credit with local businesses and other citizens who would use it to pay their local taxes, this would again increase local transactions and distribute wealth and resources.
Unlike local currencies such as the Bristol pound, community credit would not be exchanged back into sovereign money. Community credit would be a closed system, only of value to the local community who pay taxes, fines, charges or rents to the local authority.
The precious community credit lubricant for facilitating local transactions could not leak out of the local economy. It would simply be recycled back into the local area.
Local Authorities get nothing in return for giving grants and tax breaks to local businesses & retailers, it seems foolish to give away public funds for nothing, when so many communities need local authority services.
Community credit would help local retailers, community credit could only be spent in their shops helping them pay their local taxes & rents, online retailers outside of the community would have no use for community credit.
Central government may have concerns that community credit could not easily be integrated into our centralised taxation systems. However I see no reason why community credit should need to be taxed.
The negative interest rate on community credit is already form of taxation, and if community credit allows businesses to start and grow, the increase in taxation revenue from other transactions made with sovereign currency would more than compensate for any taxation losses made with community credit transactions.
If regulation was needed, a maximum deposits received limit over a 12 month period could be placed on community credit account holders. A maximum amount of issuance could also be placed on local authorities.
Community credit would allow local authorities to expand their purchasing power, increase services & fund community projects without the need of borrowing or raising taxes.
It would allow more goods, produce and services to be sourced locally, reducing transportation, carbon footprint, CO2, packaging and waste. It would encourage local entrepreneurs to start small businesses, it would usher in a new age of cottage industries making use of locally sourced commodities and encourage the learning of new skills.
It would give a boost to those people / businesses that recycle / repair or upcycle domestic goods that would normally end up in landfill.
Our local communities have huge unrealised economic potential, community credit is the key to unlocking that potential, it is an opportunity for everyone in society to join our free market economy and help distribute our wealth and resources more evenly.
The only thing holding us back is the political will to try something new!