Local Currencies

My latest blog on the London Review of Books site, on local currencies, runny Spanish omelettes and ‘the Miracle of Worgl’:

Death to the Euro.’ The handmade sign was pinned to the wall of a community centre in San Luis, a gentrified neighbourhood just inside the boundaries of Seville’s old city. It was a balmy Friday evening, but inside a crowd of around a hundred people were listening to a 45-minute PowerPoint presentation on puma, a new local currency for San Luis launched last month. Puma is the third local currency to be introduced in the Andalusian capital this year. Pepa and jara already circulate in Macarena, a working-class district on the other side of Seville’s city walls.

After explaining how the new currency would work – euros can be exchanged one-for-one for puma notes, which are valid in designated San Luis shops – the speaker took questions from the floor: an elderly man with a straw hat wanted to know if his local café would acceptpuma; a young mother asked how she could sign up for the scheme on-line.

Repeated doses of EU-enforced austerity have hit Spain hard. Last week, the country officially slipped back into recession. The Spanish economy, the fifth largest in Europe, is expected to contract by 1.7 per cent in 2012.

In the slipstream of the Eurozone crisis, local currencies – perfectly legal, so long as income tax is paid – have proliferated across Spain. Thezoquito has circulated in parts of Galicia since 2007. Local currencies are proving popular in the UK, too: the Totnes pound has been around since 2007; the Brixton pound, with a natty picture of Ziggy Stardust on the tenner, emerged in 2009; the Bristol pound is about to launch.

Local currencies tend to circulate more rapidly than national (or transnational) currencies, as well as keeping money in the area, with the result that local economic activity increases. In 1932, the mayor of Wörgl in Austria replaced the faltering national currency with specially printed ‘Certified Compensation Bills’. Inspired by Silvio Gesell’s theory of ‘free-flowing money’, the Wörgl bills were designed to depreciate by 1 per cent of their value each month in order to promote rapid circulation and dissuade hoarding. Within weeks Wörgl had almost full employment. A new ski jump was built. Roads were repaired. Six neighbouring villages soon copied the ‘miracle of Wörgl’. In 1933, the Austrian Supreme Court upheld the Central Bank’s monopoly over the issuing of currency. Thirteen months after it began, Worgl’s experiment was over; within weeks joblessness in the town returned to around 30 per cent.

At the end of the evening in Seville, plates of runny omelette were passed around the room. An activist in his late twenties – a member of Spain’s M15, or indignados, movement – said the presentation was ‘fantastic’: ‘He wasn’t just talking about money, he was talking about trying to create a new society. We need another system. The currency is just a tool.’

Seville Youth Bear Brunt of Economic Collapse

A middle-aged man with a Che Guevara beard and a black and white keffiyeh smiles down from an election poster attached to a lamppost in Gines, a middle class suburb on the outskirts of Seville. Below the photograph a single word instruction emblazoned in bright red ink: ‘Rebelate’. But there is little sign of rebellion on the neat, tidy streets of Gines, just a weary fatalism about the prospects for Seville, and for Spain.

The main road into Gines is pockmarked with empty office blocks and faded signs advertising housing developments that never materialised, victims of the Spanish construction bubble that popped four years ago. ‘Since the 80s, all the business here was building, but now that’s finished and politicians have done nothing to help the situation,’ says local resident.

Opinion polls suggest voters in today’s election to the regional Andalusian parliament are unlikely to heed the (largely former Communist) United Left’s calls to rebel. Indeed after more than 30 years of continuous power in the sunny southern region, the Spanish Socialist Workers’ Party (PSOE) are set to lose control of Andalusia to the conservative People’s Party (PP), previously a marginal concern in an area with a long history of left-wing activism and support.

‘I don’t think PP are any better than PSOE but after all these years Andalusia needs a change,’ says Solina, who has seen many of her friends immigrate to Germany, France and even Brazil and India in recent years. Defeat for PSOE in Spain’s most populous autonomous community would leave conservatives in control of every regional administration. This comes on the back of PP president Mariano Rajoy’s crushing victory over the ruling Socialist government in national elections in November.

Although a weary electorate endorsed Mr Rajoy’s manifesto of austerity and budget cuts last winter, jobs remain the most important issue for most Spanish voters. According to figures released by the Spanish Ministry for Employment last month, the country’s unemployment rate stands at 22.9 per cent, the highest in the euro zone. Among 18-25 age group, work is even scarcer: over 40 per cent are not in education and without work.

Of Spain’s regions, Andalusia has been hardest hit by the downturn. Historically an economically deprived area, official unemployment now stands at a vertiginous 31 per cent. Julio is typical of many in the picturesque regional capital, Seville. The 34-year-old studied music at university before gaining a scholarship to study at a famous conservatory in Colombia. On returning to Spain he completed another degree, in history and science of music.

‘When I was finished the only job I could get was in a supermarket, stacking shelves,’ says Julio, who now ekes out a living teaching music in Seville. ‘I have three degrees and a scholarship paid for by the state. I passed five civil service exams but I didn’t get a public job because there isn’t any anymore.’

Diego Beas, a Spanish policy analyst and journalist based in Washington, describes youth unemployment as ‘the biggest problem facing the next generation’. ‘Spain’s is a very structural unemployment that isn’t going to just go away with an upturn in the world economy.’

Mr Rajoy’s proposed labour reforms – which will make it easier for employers to hire and fire workers – are strongly opposed by trade unions. A nationwide general strike has been called for Thursday. Meanwhile, Mr Rajoy has asked the European Union for more flexibility on Spain’s deficit-cutting commitments: it is estimated that the deficit will be 5.8 per cent of total economic output in 2012, higher than the agreed target of 4.4 per cent. The Spanish economy contracted by 0.3 per cent in the last quarter of 2011.

In January, Mr Rajoy outlined €8.9bn in new budget cuts, as well as tax increases designed to raise €6.3bn. Such austerity proposals are unpopular with many young, unemployed Sevillians. ‘Politicians here try to look at the Irish model – but after four years of cuts we are worse than at the beginning. (The new measures) look like they will make things even worse,’ says Francisco Jurado Gilabert, a bright, articulate 29-year-old studying for a PhD in the University of Seville.

‘We are fighting with each other for internships earning €400 or €500 a month. It’s impossible to think of the future, of having your own house with a wife and children. It’s very difficult to think in a stable way about the future anymore.’

Gilabert is a leading member of Real Democracy Now (DYR), a public platform against corruption in politics and unemployment that played a pivotal role in a wave massive demonstrations and occupations across Spain on May 15. The 15M movement – named after the protests’ hashtag on Twitter – has garnered strong support among the young and unemployed, the vast majority of whom are deeply disillusioned with mainstream politics.

‘We are not happy with the political system in Spain,’ says Gilabert. ‘Voting every four years is like giving a free cheque for four years. The two big parties (PSOE and PP) are the same, it doesn’t matter who wins. Most people don’t vote or only vote because they feel they should. They don’t believe in politicians.’

Real Democracy Now is not running in the Andalusian elections, or any other for that matter. ‘We don’t want to run for election, that is the first step to joining the system. We don’t want to have any structure. We are a network only, without leaders, without public speakers,’ Gilabert says of a movement that became known around the world as ‘the Indignados’, inspiring Occupy protests from Nigeria to New York, via Dame Street and London.

Diego Beas says that the scale of the May 15 demonstrations, which saw hundreds of thousands take to the streets of cities and towns across Spain, was a ‘complete surprise’. ‘It created a sense in which young people could participate in the political process in a way that was completely unheard of before May 15,’ says Beas.

If Mr Rajoy’s government is unable quickly to provide jobs and opportunities for the next generation he could feel the wrath of this new, still inchoate political voice. ‘Unemployment needs to come down significantly within the next year. If it doesn’t start dropping, that could cause huge problems for the current government,’ Beas remarks.

This article originally appeared in the Sunday Business Post, 25 March.