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III

I claim to be an alternative economist. As such, I am interested in searching for ways of making money more available to everyone and to help them avoid Orwell’s ‘spiritual squalor’. Alternative economists have their own institutions. One of them, TOES (The Other Economic Summit), met for the first time when the G7 leaders of the seven richest nations held their summit in London in 1984. The thought of all those conventional economists getting together in limousines to ruin the planet so annoyed the alternatives that they held their own show. TOES 1984 was an enormous success, attracting a strange mixture of futurists, greens, renegade economists, new age businessmen, hippies, social critics and complete crazies. The media took no notice at all, but some of the ideas which emerged – green taxation, new ways of measuring success – are now on every politician’s agenda, whether they like it or not.

Economists, with some notable exceptions, regard us alternatives with suspicion. Radicals get irritated because we don’t think the world’s problems are absolutely hopeless, and it spoils their pessimism. What Keynes called ‘plain men’ regard our ideas as bizarre perversions of the natural order of things. Alternative economists say the current world of money is quite bizarre enough already: the idea of fractional reserve banking, for example, means that banks create most of the money we use simply by lending it – anything up to ten times the deposits which they hold as backing. This is the real ‘funny money’. ‘The process by which banks create money is so simple,’ said John Kenneth Galbraith, ‘that the mind is repelled.’

There is a traditional critique of the money system, with a pedigree that goes back via Major C. H. Douglas – the inventor of ‘social credit’ – to Abraham Lincoln, Robert Owen and William Cobbett, and it now seems to have almost completely disappeared underground, though it pops up every so often on the right and left of politics, in US militia groups, or in strange men with carrier bags who shout ‘Fraudsters!’ from the back of the hall during political meetings.

This tradition is enraged by the way banks are allowed to create money, loading us all up with unrepayable debt. They argue that only governments should be allowed to do so, and they should do it interest-free and debt-free. Both Britain and America have experimented with ideas like this to stave off a banking crash: Lincoln by printing ‘greenbacks’ during the American Civil War and Lloyd George with ‘Bradburys’ during the First World War. Both were rapidly wound up under pressure from the banks, who were afraid they would create inflation.

But there needs to be money in circulation for the wheels of the economy to keep turning, and these arguments raged on both sides of the Atlantic until a century ago. In the USA this led to the great battle between gold and silver – between reliable money backed by gold, and available money backed by the much more plentiful silver. Now these ancestral battles are all but forgotten, ridiculed out of existence by the coruscating wit of George Bernard Shaw, and shunned because so many of the people who believed in an international bankers’ conspiracy also believed it was Jewish. The changes they called for are now extremely unlikely to take place.

The issues remain, but this book is not about them – there are other people far better qualified to write about them than I am. But I do want to write about creating money, because if its creation is so simple that banks and governments can do it, we may now be entering a world where we can all do the same thing for ourselves – which is the idea behind Local Exchange and Trading Systems.

LETS is a whole new kind of money altogether. What do you do, asked the people who came up with the idea, when you are in a community which is rapidly running out of cash? You have the people with skills and the time on their hands, and you have the jobs that urgently need doing – but no money to bring the two together.

The traditional definitions of money – a medium of exchange, a store of value and a unit of account – all apply equally well to LETS. Accepting money instead of a direct swap is a kind of agreement to accept something which is not useful in itself, but which you know can be exchanged later for something which is. It’s the same with LETS, but with LETS you simply imagine a new kind of money and start trading in it. You go into debt to your neighbour, and denominate that debt not in pounds or dollars, but a whole new currency of your choice which you agree about. The first LETS currencies were called ‘green dollars’, but you can probably do better than that. And hey presto! The money exists, the job gets done, and somebody has to pay off the debt by doing something else in exchange for the same currency. No pounds or dollars are involved, no bank accounts reached into, but it is money nonetheless. LETS currencies are a magnificent burst of independence from governments, bank managers and bureaucrats: they allow people to create the money themselves. The idea emerged in British Columbia in the late 1970s, the brainchild of an academic called David Weston, and was given its present form in the early 1980s by Scots-Canadian Michael Linton, whose inspiration has taken LETS all over the world.

The biggest systems, like the Blue Mountain LETS in Australia, involve over 2,000 people. I ran across the idea in New Zealand, at the Auckland Green Dollar Exchange – a regular meeting of enthusiastic traders, surrounded by assorted knitted hats, jams, cakes, beer, eggs, leaflets and some bilious green armchairs. I watched astonished as one woman sold her genealogical skills for green dollars to a woman trading mittens. This was 1991, and already 0.1 per cent of New Zealand’s population were dealing in green dollars. If you signed on the dole, the social security officials would give you a leaflet about it. It all seemed a long way from the UK.

Michael Linton brought LETS to Britain at the TOES meeting in 1985, and in 1992 – encouraged by the recession – it suddenly took off. By Christmas there were forty trading systems up and running, and the currencies had strange names which caught the imagination of journalists. The new currency for Stroud was called ‘strouds’, in Manchester ‘bobbins’, in Bath ‘olivers’; ‘groats’ in Stirling, ‘tales’ in Canterbury. And in Brixton they were called ‘bricks’; in Donegal, they fell back on ‘sods’, which must have been confusing. It was almost like a secret code – Salisbury has its own special money for kids, called ‘kebbles’. Their parents trade in ‘ebbles’. The turnover in local money was by then the equivalent of £100,000 a year.

The expansion has continued since. There are now over 450 local currency systems in the country. Some involve just a few neighbours. Some, like the local money in Kingston upon Thames, allow you to buy organic vegetables. Some, like the system in Manchester, allow you to pay part of your rent. The European Commission gave a grant to Bradford City Council to set up its own currency, and researchers think the equivalent of £2 million is traded in LETS currencies in the UK every year. The idea links people across class, age and income, and it allows them to think more widely about the kinds of things they can do – be it making cakes, T-shirts, sewing, baby-sitting, accountancy, law, building or drawing astrological charts. People report feeling liberated using these whimsical new currencies, and it builds communities. And not a penny comes from the banks.

‘It attracts more open-minded people,’ one member of a Northern Ireland LETS money system told Jonathan Croall for his report LETS Act Locally. ‘And that helps to bridge the gap between the two communities. That’s important to me, after my narrow upbringing. I have dreamt that LETS will eventually grow big enough in Northern Ireland to make a real difference.’ LETS is now an increasingly familiar idea in Britain, though it is too early to tell whether it is going to stay in a marginal niche or break out into the mainstream. The real innovations are happening in the USA.

IV

So I went there to find today’s new alchemists, to the land of the Treasury bill and Wall Street and the dustbowl and the Great Crash and Michael Milken, rumoured to be earning $1.5 million a day before his fall from grace. I went there because I wanted to write about the American attitude to money, because I thought it might be an antidote to our own rather puritanically English attitudes, and because there is another money revolution going on there. I wanted to find people who were looking for practical ways of producing the money we need ourselves, but I had another motive as well. I wanted to see someone I had known in London and who I missed when she had gone home to the USA to work for a big bank in Princeton.

You may think love is irrelevant to a discussion about money, but actually it goes to the heart of the debate. Money is supposed to be a measure of wealth – economists will tell you that is what it is. But actually if you look at the aspects of life that make you wealthy, they go way beyond money. Hot chocolate and relaxing over a video are wealth. Hot baths are wealth. Love and friendship and children are wealth: everybody apart from the most narrow-minded of economists knows that. Maybe you can’t measure such things in the nation’s accounts, but even so, I was wealthier for knowing my friend in Princeton and I wanted to know her some more.

I remembered as soon as I arrived how different American attitudes to money are. They have a self-confidence about it which we lack. They walk differently: if they need money they usually know they will be able to get a job and earn it. If they have a money-making idea, they tend to have supreme confidence that they will be able to make it work – should they want to. You don’t see those hunched, mournful types you run across every day on the London Underground, which is probably why there are now over 128 billionaires in the USA – 127 more than there were twenty years ago.

‘Our people spend their whole time being told they can’t do things, believing they can’t do things,’ said the British business guru Sir John Harvey-Jones – and he’s right. Money is more available to Americans, somehow. They don’t count it up and eke it out.

It is different there, and on one level we have always known it. For over a century, we have blamed American money culture for debasing our European standards, perverting our youth, causing crime, stultifying our men, luring away our women with expensive silk stockings. It’s not that there isn’t poverty in the USA – there is a terrible, powerless kind of poverty – but their attitude to the whole money business is different from ours. Americans don’t seem to have the same awe, respect or care about money, just as they don’t about land. They seem able to waste the former on glitz more than we can in Europe, just as they seem happy to waste the latter on mile upon mile of hideous ribbon development.

It is almost de rigueur for the British to be cynical about the USA, to deride its traditions and sneer at its judicial system, gun culture and bizarre romanticism, but I don’t share that sense of superiority. There is a welcoming generosity there, combined with energy and imagination, which I find inspiring. Americans also seem to touch the source of money more closely than we do, and amid their undoubted difficulties, it seems to give them a sense of liberation – however tough the business of earning money may be to them at the time.

So by visiting the sources of money in the USA, and tracking down the people who are reinventing those sources and bringing them closer to home, I wanted to write about that liberation – maybe get some of it to rub off on to my life too – and enter that peculiar alchemical world where money gets conjured apparently out of nothing.

Because for someone brought up with the picture of sober-suited City gents, serious bank managers and careful budgeting, the US money system is enjoyably non-rational. Vast sums slosh across their computer screens, yet the pockets of poverty are even denser than they are in London or Liverpool or Glasgow. This is, after all, both the richest and the most indebted nation on earth, where astrologers earn a great deal of money predicting financial patterns to Wall Street analysts, and where dogs get sent credit cards even without applying for them.

But then Zabau Shepard wasn’t able to actually use them: she found it hard to sign her name. It’s good to know there are some safeguards.

Chapter 1 Washington: money as time

‘Put not your trust in money. Put your money in trust.’

Oliver Wendell Holmes, The Autocrat of the Breakfast Table.

I

‘Remember.’ said Benjamin Franklin in one of his irritating homilies to tradespeople. ‘Time is money.’ He meant, of course, that sitting around chatting or watching The X-Files tends to waste time which could have been used earning. But imagine for a second that he meant it literally – that time really is a kind of currency.

If that were true, we would all be born with a regular basic income of twenty-four hours a day, eight of which we have to spend asleep – a kind of tax which keeps us relatively fresh and healthy the next day. Nobody would have any more than twenty-four hours a day, and every morning we wake up with twenty-four more. Everybody would earn the same, and it would give a whole new meaning to the phrase ‘spend a few hours down the pub’. But maybe this is a theoretical universe we can learn something from, because anyone without pounds or dollars does at least have time – too much of it. If you are earning, and you do have access to money, the chances are that you are pretty poverty-stricken as far as time is concerned.

It may have been no coincidence that the time dollar idea should emerge in one of the world’s most problematic, budget-stretched and exhausted cities – Washington DC – because Washington is going through both the best of times and the worst of times. It is the capital of the richest nation on earth at the height of its powers. It is the bankrupt, poverty-stricken city, crumbling like a small town in eastern Europe, administered by a mayor straight out of prison for drug offences. It used to be a relatively healthy-sized city of 700,000 people just twenty years ago, about the size of Sheffield. Now it has just 550,000 and the number is falling fast. The moment people can afford to move out, they go – and they take their taxes with them.

Add to this heady mix all of the following: a public-works budget that has been slashed by more than half in the past few years, leaving streets overgrown and bridges collapsing. A murder rate growing at anything up to 25 per cent a year. A third of the city’s fire engines are kept out of service every day to save money. Officials have been pumping extra chlorine into the drinking water to counteract the bacteria from corroding pipes. AIDS clinics have to shut down periodically because they run out of drugs. It is terrifying, and the city is still running out of money. ‘Everything has broken,’ the city’s chief financial officer, Anthony A. Williams, told the Washington Post. This isn’t just a car which has run out of gas. There is something fundamentally wrong with the car. The gas pedal doesn’t work and neither do the brakes.’

Over this huge disaster strides the figure of Mayor Marion S. Barry Jr, large, mustachioed and mayor for fourteen of the past eighteen years. Barry’s term of office was interrupted briefly by a six-month spell inside for drug possession, after he was videotaped in a downtown hotel smoking crack. His re-election was one of the most astonishing political comebacks of all time. ‘Mr Barry is a tremendous politician,’ said the fearless Mr Williams. ‘But he’s a lot like nuclear power. On a good day, he can light up the city. On a bad day, he can blow it up.’

When I took the Amtrak train south to Washington it was swelteringly hot, as only Washington can be with its humidity and bogland – one of its metro stations is even called Foggy Bottom. I was visiting the Washington law professor Edgar Cahn, author of the book Time Dollars, which had such a long sub-title that I barely needed to read it: The New Currency That Enables Americans to Turn Their Hidden Resource – Time – into Personal Security and Community Renewal.

His book – co-written with Jonathan Rowe from the Christian Science Monitor – is a little hazy about where the idea came from. The authors imply it was the brainchild of the first person mentioned in the book – a disabled lady called Dolores Galloway, living alone in the notorious Washington district of Anacostia and running a time dollar bank in her apartment complex. ‘We don’t want charity,’ she is quoted as saying. ‘It’s one hand washing the other. I wash your clothing. Maybe you can wash my dishes.’

But actually if you probe a little bit further into the history of time dollars, it emerges that the idea for a new kind of money came from Professor Cahn himself, lying flat on his back after a serious heart attack at the early age of forty-four. ‘It became an obsession of mine,’ he told me later, his eyes lighting up with excitement. ‘I was lying in hospital being waited on hand and foot by the equivalent of a retinue of servants which, in normal circumstances, I could never afford. And I was wondering why I didn’t like it. I realized I didn’t like being useless. It was a very personal thing, and – this was 1980 – I also realized society was busy labelling all sorts of other people as useless too.’

During a visit to London, he had been haunted by the un-American words used by the B B C to describe the unemployed: ‘redundant’. It scared him. Margaret Thatcher was then doing her bit to encourage more of this kind of redundancy and Ronald Reagan was doing something similar. ‘So I started struggling with the question of how to put people to work and fulfil all those growing needs when society has no money to pay for them,’ said Cahn. ‘And I thought: why not create another kind of money?’

Cahn was also struggling in his mind with the problem of demographic change. By 2040, one in five Americans will be retired. Many of these will be the sprightly kind of elderly Americans we see on tourist buses all over the world, but many will be increasingly old and infirm – needing a range of services, from medical care through to simple companionship, which the present economic system doesn’t seem able to afford. His money was not intended to work like ordinary money. It was supposed to fund the way families and communities used to behave: to be paid to people for helping each other out, minding each other’s children, running errands, or just phoning each other up for a chat. It was supposed to encourage people to be good neighbours in a way that ordinary money doesn’t any more – a way of paying for what you need using time. Cahn called it time dollars.

You go along to your local time dollars project, and tell them what kind of work you are prepared to do – anything from roofing to giving people lifts – and the things you need doing in return. All these details are entered into the computer. Then one of your elderly neighbours suddenly needs a lift to the doctor at a time when you are free – or maybe they just need driving to the shops. They phone the office, who call you up. The final judgement about whether the two of you are suited is made by the time dollar organizer, who phones up first to see if you are available and willing. Result: you spend an hour helping your neighbour and you earn one time dollar. You get a statement showing your earnings at the end of the month, and you feel good about yourself.

What can you do with your new-found wealth? Well, that depends on the scheme. You could spend it on services from other people in the system. Or you could give it to an elderly relative who might need it more. Or you could keep it for a rainy day. Or you can just forget all about it: only about 15 per cent of time dollar earnings are ever actually spent.

When Edgar Cahn came up with the idea, he and his wife Jean were already well-known and successful radical lawyers. A Washington Post Magazine feature about them carried the cover headline: ‘The brilliant angry careers of Jean and Edgar Cahn’. Jean was black; Edgar was Jewish – they were the perfect ‘liberal’ couple. Edgar had worked with Bobby Kennedy, writing his speeches when he was US Attorney-General in the early 1960s, and went on to advise Lyndon Johnson when he was president. He and Jean together had founded the Antioch School of Law, now the District of Columbia Law School, where Washingtonians can get legal qualifications without having to pay vast sums of money, and where students are sent out to learn on the job by taking on cases for people who can’t normally afford lawyers. Both also set up the national legal advice service for people on low incomes. His sudden foray into alternative economics was characteristic, but a little confusing for the economists.

As Mrs Thatcher gathered the reins of the UK, he took up the offer of a spell at the London School of Economics, honing the idea against the cynicism of British academia. The trouble is that once academics get hold of an idea, they can worry it to death. The evaluations of his ideas at the time were full of fearsome possibilities. Would time dollars discourage governments from spending money? Would there be so many old people one day that the whole thing might break down? We need to be a little bit cautious here, academics say.

Back in the USA it was also difficult getting organizations to find out whether the idea would work, but by 1985 a number of pilot projects were running – all of them linked to caring for old people. The Miami project ran into immediate trouble with local bureaucrats in the divided and highly-charged world of Florida politics. Florida’s officials finally emerged with a damning indictment of the whole idea in 1987: ‘Volunteers are least suited to the types of services required for time dollar programmes, specifically personal care, homemaker, health support, and inhouse services in general,’ they wrote.

This followed a concerted campaign by officials at the Florida Office on Aging to stymie time dollars. First they came up with an estimate of the cost to set up a mammoth computer network across the state. It was $250,000. Then there were the bureaucratic requirements. Everyone taking part would have to undergo a full criminal reference check. Everyone who wanted a lift to the doctor’s would have to fill in a ten-page form and read over thirty pages of detailed instructions. ‘Had the department been assigned to invent the family, the procedures would have exceeded the entire Code of Federal Regulations,’ wrote Cahn and Rowe bitterly. ‘With further studies pending.’

But there were reasonable worries for the politicians. What would happen, for instance, if there was a run on the time dollar bank? If every time dollar earned is a potential demand on a hospital or government department, does that mean the state would be legally liable? The questions hung in the air. Then there was the problem of volunteers, the people earning the time dollars – or ‘service credits’ to use the official term – by helping old people. Should they be trained? What happens if they get sued? Or worse, what happens if they abuse or defraud the system? There were some organizations that were implacably opposed to the whole concept. ‘We feel that one of the basic tenets of volunteer service is NOT receiving a quid pro quo,’ the American Red Cross told congressional hearings on the subject.

But as Carolee DeVito from the University of Miami School of Medicine said: ‘Service credits legitimize the worth of time.’ And it was because of this that the Miami project was rescued suddenly by Florida’s Senator Carrie Meek. She was enraged by the cuts to black elderly programmes in Miami being sponsored by the Florida Office on Aging. ‘We missed out on urban renewal. We missed out on the War on Poverty. We missed out on the money to rebuild Liberty City after the riots. And we are NOT going to miss out on this opportunity.’

Senator Meek’s ‘volunteers’ managed to attract old-fashioned dollars from the Robert Wood Johnson Foundation, the biggest health trust in the USA, which was just then looking for pilot time dollar projects. They arranged for twelve government-sponsored volunteers from the massive VISTA programme, and they divided the whole project equally between the blacks, the Hispanics, the Jewish community and the blue-collar Anglos.

Two years later, it was Miami’s time dollar project which received the first nationwide TV coverage. The report covered a low-income block of housing for old people, 85 per cent black and 10 per cent Hispanic. They filmed one resident, a grandmother called Daisy with an artificial leg, tutoring in the local primary school in return for time dollars – and spending them on lifts from the store from Pepe. Pepe spoke almost no English, but somehow the two of them managed to get along on their weekly shopping trips. ‘I don’t know what I would do without Pepe,’ she told the cameras.

Nearly a decade later, the Miami project was administering more than 8,000 hours of time dollar earnings every month, across thirty-two offices in the city. It had long since burst out of just helping old people, and the system had been taken over by the community as a whole. You could spend time dollars there on anything from plumbers to baby-sitting.

Miami was lucky. Just when they needed heavyweight backing, the Robert Wood Johnson Foundation was looking for them. Miami, Boston, New York City, Washington DC, St Louis and San Francisco were given enough money to fund time dollar banks for three years, paying wages to organizers, setting up computer systems, renting offices, and funding all those other mundane things you need in offices, like paper clips, plastic cups and lavatory paper.

The St Louis project also attracted media attention. They were based at Grace Hill, an energetic programme to help old people carry on living at home, backed by generous federal grants – which suddenly disappeared with a wave from a magic wand by the Reagan administration. Organizers were left with 750 frail old people on their books, 500 of whom would have to go into nursing homes if they received no support. What could be done? Board members locked themselves away for a day with a management consultant to come up with a solution. ‘We told them we had to find a way to make less more,’ said Grace Marver, later director of the local time dollar programme.

And that’s just what they did. MORE – the Member Organized Resource Exchange – used time dollars to fund the services they needed. Now up to 10,000 volunteers help 1,500 old people stay out of old people’s homes. Only a third of the volunteers told researchers that they had been motivated by earning time dollars, but then a third of them had never volunteered for anything before.

By 1990, three years later, the six projects in the six cities were already organizing more than 143,000 hours of time dollars every year and had attracted 4,500 participants to earn them. Edgar Cahn’s idea was beginning to work, and some solutions to the potential pitfalls were also beginning to emerge.

The state of Missouri decided it would underwrite the value of time dollars themselves, like central bankers. They had been the first state to pass time dollars legislation, and had the good sense to realize that bureaucracy would kill the idea stone dead. They even managed to resist the temptation to draft regulations until a whole year after time dollars began there. Missouri still backs people’s time dollar earnings: if the system collapses, the state will provide the services which honour the earnings. They ‘promise to pay the bearer on demand’.

Most of the big time dollar banks decided to solve the ‘volunteer problem’ by taking out volunteer insurance. Most check out the people when they join. Many will refuse to fix young people up with tasks which would take them into old people’s homes. ‘It’s not that I was afraid for the seniors,’ said one organizer I met later. ‘I was worried about the safety of the young people.’

In fact, according to Cahn and Rowe, in all the millions of time dollar transactions around the US A in over a decade, nobody has ever sued. ‘People don’t mess with their local support systems,’ he said. No volunteer has ever been sued in writ-happy America, which is why you can still get a million dollars’ worth of volunteer insurance for $3.

Then there was the big daddy of problems: were time dollars taxable? It would be a terrible waste if all those frail elderly people had earned their time dollar hoards by looking after their neighbours’ children or by finger-aching achievements in crochet, only to face an IRS swoop for tax evasion. Worse, the IRS would obviously expect them to pay tax in old-fashioned dollars. The same problem was faced by the local money pioneers in the UK: ‘I don’t think the Chancellor of the Exchequer really wants his lawn mowed,’ said one Inland Revenue official.

But Edgar Cahn was a law professor and this made all the difference. Time dollars can’t be taxable, he said, because they are not real money: they are just records of services. ‘In the old days, did you tax people when they looked after their neighbours’ kids? Did people get taxed on the sugar they lent?’