Business Week

July 18, 2007

Buy Local—With Town Currency
Dollar alternatives, such as BerkShares in Massachusetts, are shoring up local economies by keeping money in the community

by Jeffrey Gangemi

…”Over the last few years there has been an explosion of grassroots activity to revive and strengthen independent businesses,” says Stacy Mitchell, author of Big Box Swindle and senior researcher for the Institute for Local Self-Reliance (ILSR) (see BusinessWeek.com, Winter, 2006, “Chains That Choke”). Mitchell says there is evidence, as in Wal-Mart’s announcement that it will slow its ambitious expansion plans, that community-based action is working (see BusinessWeek.com, 6/1/07, “Wal-Mart Lets Up on the Gas”).

Some research has pointed to devastating effects of big-box stores on local communities. One study in Maine by the ILSR found that, for every dollar spent at a big-box store, about 14 cents stayed in that state. The researchers then compared that to locally-owned businesses, where they found that 54 cents of every dollar stayed in the state. “If you can shift 10% into retail businesses, you generate more jobs and income. Community currencies can be an effective tool for that as they allow people to see what happens to the dollar,” says Mitchell.

But starting a new currency is no picnic. For local merchants it involves more difficult accounting, and possibly separate cash registers to keep the community currency and federal currency separate. Organizations that produce local currencies are prohibited by U.S. law from producing coins or printing bills that resemble federal dollars. There are also some minor complications with reporting sales tax to the state, which Carlotta says takes him about one extra hour a month to sort out. Perhaps most importantly, merchants have to devise a way to spend the currency, which can be a problem if they’re using suppliers out of their local area…