The REC Barcelona project has launched a citizen’s currency in the city of Barcelona. The results of the period in which it has been operating with funding from the European Union (80%) and the Barcelona City Council (20%) have just been published. This period has been a total of 13 months: from the beginning of October 2018 to the end of October 2019. The report can be found in different languages, in the links at the beginning of the references, at the end of this document. My involvement in it has been total until mid-November 2019 when I started a new project, and since the funding was obtained (October 2016), but its gestation began much earlier, approximately at the beginning of 2015.
With this article I do not intend to give more information about the pilot project but my own personal perspective on the impact this experience may have in the future and how the particular way the project has been carried out influences it.
Essentially, it has been an experience of channelling public expenditure towards the local real economy, using the citizens’ currency. When we say local economy, we have to understand that these are SMEs and micro-SMEs that are managed independently from external decision centres and have the capacity to make their own decisions choosing suppliers, without the need to rely on anyone else. The experience was mainly about testing whether the currency was capable of generating an increase in economic transactions in the local environment per unit of public expenditure employed. The result has been that this local economic impact of public spending has increased by 54% in 13 months.
To put this result into context and understand its potential, two facts are on the agenda:
- The climate emergency and the need to abandon the imperative of economic growth that results from it.
- The possible emergence of central bank digital currency (CBDC). A trend that is being discussed and disseminated among central banks, following the emergence of Bitcoin and blockchain developments and other decentralized ledger technologies (DLT), which consists of generating a virtual currency by the central bank, a kind of virtual cash, an alternative to the digital money that is widely used today, which is bank money, that is, money created by banks in the form of deposits for their clients.
These two facts have the potential to combine in a providential way, since there is no way to face the climate emergency, nor to abandon the imperative of economic growth, without a change in the current monetary and financial model which forces us to exponential growth or to enter into recession.
It is important to bear in mind that abandoning the imperative of economic growth does not mean always and in all circumstances to degrow. The transition must respond to a plan that envisions a sustainable economic system and reinforces the economic structure that underlies it. However, there are trends today that run fairly counter to any form of sustainable economic system. For example, the desertification of the rural environment, or the concentration of business profits in fewer and fewer large companies, due, among other things, to the digitalisation of the economy. According to a study (BBVA, 2019), e-commerce in Spain is leading to a drift of income from the commercial sector towards ever larger companies, mostly located outside the national territory, with the consequent loss of income for the local population, local jobs, and income for the public purse that this may entail.
In my view, creating and sustaining local citizen currency systems such as the REC can have advantages in counteracting these trends and helping to achieve a sustainable economic model. I have summarized in several points the main changes that can be brought about by an experience such as the REC.
1. Strengthening the local economy and food sovereignty What we must not decrease is the consumption of the local product but increase it to the detriment of a product with a larger carbon footprint. A system of a citizen’s currency that can channel public spending towards the local economy is an incentive to bring consumption into local commerce, first of all, from where, as the experience of the REC has shown, it can gradually “recirculate” more and more towards other local economic actors and establish a path towards the consumption of the local product. In the REC, the recirculation ratio started at almost zero and after 9 months was at 33% of revenues in RECs, which were spent back on RECs in the local economy, instead of being switched to Euros. At the end of the 13 months studied in the report, it was found that the local economic impact generated by public spending (economic multiplier) had increased by 54%, from 1.91 to 2.95.
2. Means of paying guaranteed minimum income or basic income. Basic income is a measure that has more and more advocates in the face of the unstoppable advance of automation and the demercantilization of products of the knowledge economy (Martín Belmonte, 2016). However, what is essential in a basic income is not the income in its nominal value but in its purchasing power. The basic income itself, as a demand, must not only serve to reinforce local consumption towards zero km consumption for environmental reasons, but to reverse the process of business concentration mentioned, or else the lack of competition and the annihilation of the local economy will deflate the nominal value of this income in a short time, while its funding will continue to be a problem. The basic income in itself does not imply any change in the consumption model or in the production model, but it would have the possibility to be just that if it were distributed with a local citizen’s currency, as the 25% of the minimum guaranteed income that has been tested in Barcelona using the REC during 2018 and 2019 has been distributed, and accompanied by other measures, such as the reduction of the working day.
3. The use of the CBDC at the service of a new economic model The fact that the payment system is in the hands of the banks, thanks to their ability to create money as deposits when they give credit, leads to the financing of speculation, on the one hand, and, on the other, forces states to bail out banks. Both are undesirable. However, the transition to the CBDC may generate short-term instability in the current banking system, as a recent article on the IMF environment shows (Gross & Siebenbrunner, 2019). The idea of creating central bank currency (CBDC) calls into question the future of the banking sector and raises questions about the new forms of money issuance that should put into circulation this type of money. One way in which the CBDC can be put into circulation easily would be as a back up for citizen currencies that have minimum characteristics that guarantee the common good, something that could be done without causing any disruption in the financial system in the short term and allowing it to gradually adapt. In fact, the above-mentioned article provides for the introduction of the CBDC under these conditions, in which this proposal fits:
Regulations regarding the use of CBDC can address some of the financial stability risks posed by its introduction. While a CBDC would conceivably always be treated as legal tender, the sovereign still can restrict its use as social money, per Definition 1. By imposing limits on how much CBDC can be held by any one individual (stock constraints), the sovereign could effectively curtail its use as a store of value. Further imposing limits on transaction volumes (flow constraints) can be used to reduce its use as a medium of payment, restricting its use to smaller transactions and thereby rendering it more similar in usability to physical cash. (Gross & Siebenbrunner, 2019, p. 21)
4. Tokenisation of the assets of the social, solidarity and sustainable economy. On a much more experimental level, new formulas for direct financing between citizens can be tested, materialising commitments to frequent consumption and providing transparency and traceability, among other advantages. The fact that the REC’s management entity is associated with a certified payment entity in the Eurozone also allows it to do so with maximum guarantees for the consumer. These mechanisms can be an instrument for the formation of sustainable productive capital in the hands of citizens. For example, its use is being studied so that FoodCoop Barcelona’s cooperative members can finance the cooperative with a minimum initial or periodic purchase, with total transparency regarding total volumes of debt, token maturity, etc.
In short, if properly supported, and working in collaboration with local governments, citizen currencies can be very useful instruments for the transition towards a truly sustainable economic model.
REC Report in English: https://rec.barcelona/en/rec-data/
REC Report in Spanish: https://rec.barcelona/es/los-datos-del-rec/
REC report in Catalan: https://rec.barcelona/dadesrec/
BBVA, A. C. (2019, March 22). E-commerce is gaining ground over traditional commerce in Spain: it accounts for 20% of spending. BBVA NEWS.
Gross, M., & Siebenbrunner, C. (2019, December). Money Creation in Fiat and Digital Currency Systems. IMF.
Martín Belmonte, S. (2016, Sep 2). The Age of Abundance and its Determinants “Financial Sovereignty. https://soberaniafinanciera.org/la-era-de-la-abundancia-y-sus-condicionantes/