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Business Week:

Steve Carlotta, owner of the camera store Snap Shop, had been losing business for the last five years to discounters on the Internet.

Then, in September, 2006, his town launched a currency program called BerkShares designed to strengthen the local economy by encouraging consumers to support local businesses. Participating businesses agreed to offer shoppers who used the program’s BerkShares paper scrip instead of dollars a 10% discount on all purchases.

The program works like this: Shoppers visit one of 10 branches of four participating local banks and convert their cash into BerkShares scrip. For every 90 cents, they receive one BerkShare note, that is accepted at some 280 participating area businesses; it’s also honored at about 250 other businesses throughout the Southern Berkshires region that aren’t officially registered, but still do some business in BerkShares.

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 Stacy Mitchell, author of Big Box Swindle.

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.

Photo by Business Week.

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Originally posted by Rich Whittle on July 30, 2007 in Ideas.

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