At the annual Ithaca Hours Membership meeting, 17 people occupy chairs. Two children are playing under one of the tables, their voices gradually increasing in volume until they rival the grownups' and someone hushes them. Steve Burke, the current Chairman of the Board of Directors, takes the podium to talk about the state of the Hour.
"We think this could be a really big time for Hours," says Burke. "The number of media inquiries we've been getting about Hours has increased fourfold."
The collapse of several major Wall Street firms, and the Congressional bailout of same at a cost to the taxpayers of $700 billion, combined with the skyrocketing gas prices earlier this year, have many people questioning the soundness of the mainstream economic system.
"It's an exciting time for reasons we all understand," says Burke. "Ithaca Hours doesn't need a bailout from anybody."
Burke acknowledges that Hours, started in 1991 as a local "complementary currency," or barter exchange currency, has been contracting for the last few years. "From the mid-nineties to now Ithaca Hours has started to slip, because, I think, of credit cards."
When consumers gained easier access to credit, says Burke, spending Hours became less attractive. Now that fees for using credit cards are going back up, Burke hopes to see more use of Hours.
He draws a contrast between credit cards, which profit on interest rates, and Hours, which don't: "Those days of easy credit are over, I think for the good. Ithaca Hours are real money."
Are they? Complementary currencies, as they are called, have existed in one form and another since the British ruled the Colonies. The Crown's tight control of currency, and refusal to allow the colonies to print their own, fueled the American Revolution. In the early days of the colonies, people set values on commonly traded items, such as deerskins (i.e., "bucks") but that didn't work very well. People tended to trade in the worst quality items as a way to gain advantages. Massachusetts led the way to an independent money system in 1690 by issuing bills of credit. In 1723 Pennsylvania began another form of paper money. These currencies went quickly into use (the Crown expressly forbid coinage, and declared a Massachusetts mint experiment "treason") and helped the colonies trade with one another. In 1763 Great Britain passed a law against all the paper money systems in the colonies, as well. In 1775 the Continental Congress declared the colonies' right to issue their own money.
Since that time, a number of complementary currencies have been invented. They are legal as long as they don't "compete" with federal dollars, and the States are forbidden to print their own money, but even after the collapse of the Confederacy a federal court ruled that the Confederate dollars were still good. This is because money can be understood two ways: as an agreement between people on the value of goods or services, or as a representation of a material object, like a bar of gold. Since the United States went off the gold standard in 1971, US money is "fiat" money; it's worth something because people agree that it is.
Complementary currencies exist in several places in the United States, the United Kingdom, Europe and the Philippines; the government in Japan, which has between 30-40 Hours-type currencies, actively promotes them.
The currencies in Japan are built around a core idea behind Hours, which is that they build connections between people. "Beyond the economic issue, which is why it exists, there's the feel good aspect," says Burke. "Money tends to put people apart. Ithaca Hours has the opposite effect. You're networking when you spend it. It's a friendly thing." People spending Hours talk to each other about where they got them, and the effort to keep money local brings people together. In Japan, the complementary currencies are often strictly for community building: "kurins," for example, are earned for good deeds, like helping the elderly, and can be used to purchase other good deeds but not material stuff like rice or meat.
Supporting Local Businesses
Complementary currencies are often used as a way to keep money at home. Since they are locally issued and recognized, they encourage patronage of local businesses. Paul Glover, widely recognized as the founder of Ithaca Hours, saw it as a way to help out the Ithaca community.
"I saw that many of us had small businesses and because money was scarce there were too few customers, and that the extent of trust in the community was the foundation of wealth and on that basis we could have our own money," says Glover. "We didn't have gold or silver, but neither does the government. I designed money called Hours and to my surprise discovered that it was legal to do so... not that I cared either way."
In the first few years, the Ithaca Hours system grew. Glover threw himself into the project, with an e-mail list, a newsletter that came out monthly, and an ever-growing group of participants.
Hours received enormous help from, and were legitimized by, Alternatives Federal Credit Union and Greenstar Co-operative Market. Hours were kept in a vault in the AFCU basement, and the credit union continues to actively promote the use of Hours. "AFCU was instrumental from the beginning," explains Burke. "They lent us an enormous amount of credibility."
"We're very like-minded," says Carol Chernikov, the credit union's Hours contact. "Our missions are similar. We've always been supportive and taken Hours for fees and loan payments. Our tellers keep Hours in their cash drawers.
As time passed, however, Hours began to stop circulating. Instead of going back out into the community, the Hours accumulated in the offices of Greenstar and other local businesses, like Gimme! Coffee and Viva Taqueria.
A Crisis In Leadership
From the beginning, Ithaca Hours - or Ithaca Money, as it was originally called - was tied closely to the activities and the personality of Paul Glover. Glover himself began to find the connection irritating, and after several years of interviews, refused any longer to let the newspapers photograph him.
After involvement in the LETS (Michael Clinton's local barter exchange), which collapsed in 1988, Glover launched Ithaca Money in 1991 with a grant from the Forum for Investigative Journalism. Documents on file at the History Center include Glover's correspondence with the FIJ. In a letter to the Forum dated June 20, 1992 regarding the $1000 grant, of which he had so far received half, Glover writes:
"Dear John...After extensive research, I decided to investigate (Ithaca's) economy further by actually altering our economy. Therefore in 1991 I invented money. My intention is to report my investigation of the local economy through Ithaca Money."
Glover's energetic championing of Hours included soliciting grants from a multitude of organizations, both local and national, ranging from Ben & Jerry's to the Whole Earth Quarterly. He fought to have Ithaca Money distributed more widely, such as taking on Center Ithaca when they balked at stocking the newsletter, and he spoke extensively and exhaustively to media ranging from local news outlets to international film crews. He networked with other local currency supporters and sold a mail-order "Hometown Money Starter Kit" for $20. Hours supporters met twice a month, at first, for potluck dinners.
Meanwhile, cracks were appearing from within the system. Since the Ithaca Hours were largely service oriented, their usefulness was limited. The exchange problem had never been solved to everyone's satisfaction, and after a certain point, Hours seemed to have spread as far as it was going to go. In 1997, Bill Myers, then-head of AFCU, e-mailed Glover: "The growth of the system is limited to the amount of Hours people are willing to keep in their pocket. No one wants to hold thousands of dollars in value and trade in these sums unless you can collect and disburse Hours more easily."
Then because the currency was so closely tied to Glover himself, his relationship to the community began to affect people's faith in Hours. Signs that the attention was going to his head began to appear; in an e-mail to Peter Warshall of the Whole Earth Quarterly, Glover expounded:
"When I began to announce in October 1991 that Hours were better than dollars and that they were sweeping our country, I was lying because Hours were practically useless and few people had ever heard of them. By persistent creative lying, however, Hours have actually become extensively accepted, useful, and beneficial."
To his credit, Glover seemed willing to accept and respond to criticism, and in many instances shared credit with others. By 1997 he began to step out of his role and pursue other endeavors.
In e-mail correspondence, Sept. 27, 1997, Myers wrote to Glover: "The (Hours) Board has no ability to act. Whether you like it or not, the system is now de facto yours. Into the vacuum of this lack of structure you are free to act as you wish." Myers advised Glover, who was considering stepping out of his role as director, to "Submit yourself to the authority of that Board from that point on. You can't endorse a structure and then act outside of it in its name."
In 1999 Glover disengaged himself from the Hours Board, and moved out of Ithaca, at least temporarily. In 2004 he ran unsuccessfully for Mayor of Ithaca on the Green Party ticket. He currently teaches Metropolitan Ecology at Temple University and is working on Green Jobs for Philly as well as the Philly Orchard project. He retains ownership of the original website, Ithacahours.com. The current Hours website, ithacahours.org, contains a rather wistful plea that Mr. Glover "relent" by letting them use the dot.com orientation. Meanwhile, the Glover site remains more extensive than the dot.org site, detailing the history of Hours and linking to dozens of other complementary or community currencies and barter systems.
An Imbalance of Trade
One of the things Glover did for Hours was make sure businesses didn't accumulate a backlog of unspendable currency. For instance, when Greenstar's Hours balance went over 1,000H, Glover would buy several hundred with his own cash. Without someone making sure the Hours moved through the community, they began to pile up.
Asha Sanaker, Greenstar's Finance Manager, explains the backlog. "We had 30,000-plus Hours on our balance sheets... and physically, sitting in our store." Although many Greenstar employees received a percentage of Hours as part of their pay, and many of the vendors accepted all or part Hours as payment, the Hours found their way back to the co-op's cash registers. "We were the only vendor in town, year round, where you could get the basic staples of life," says Sanaker. The Hours directory lists many services, such as massage and spiritual counseling, but it falls short on stuff like food. It also doesn't include the wholesalers that Greenstar, Ace Hardware, and Viva have to pay for their goods. "Hours works well as an individual-to-individual system," says Sanaker, "But the system was not set up with enough opportunity for businesses" to recirculate the currency. Gimme!, Ace and Viva have stopped accepting Hours. In April, Greenstar reduced the amount of Hours it will accept as payment from fifty percent to one quarter of a grocery bill, with the total bill being at least $20. According to Sanaker, this is working well and for the first time in years, the tide of Hours is flowing out of Greenstar, not just in.
One business that has been successful in keeping its balance of Hours flowing both in and out of the registers is the Ithaca Bakery/ Collegetown Bagels. "They're very entrepreneurial at spending them," says Burke. "They don't have a minimum (purchase). They have a limit of one half hour, equivalent to five dollars. When they have a new vendor they talk to them about accepting Hours, which cements the relationship between Ithaca Bakery and that business."
"We spend them as many ways as we can," says Ramsey Brous, co-owner of Ithaca Bakery. "Landscapers, painters, restaurants, guitar lessons. It's a hugely supportive thing for the local economy and I see them coming into the store directly; people come in to spend the Hours we've paid out to them."
Meanwhile, the Hours directory, which lists businesses and individuals willing to take the currency, is shrinking. Part of that, according to Burke, has been his effort to clear out the deadwood. Although Hours members were supposed to pay membership dues to get listed in the directory, when he began updating the directory he found that many had never been asked for dues after their initial subscription. Others had left town or dropped out of the system. Without staff to oversee the circulation of Hours and update the directory, the use of Hours began to shrink. From a peak of 900 businesses and individuals participating in the Hours system, the directory now lists less than 600.
Burke would like to see Hours hire a part or full time paid staff person. "We've never really had an aggressive outreach campaign," he says. Hours needs to gain wider acceptance in the business community, reaching beyond the core group that have been using them. "We need to get away from that 'hippie money' thing," says Burke. "We've outgrown it." He'd like to see Hours reach out to more mainstream businesses, which after all employ local people. "We've been a closed circle, but we're thinking about going out."
Glover agrees that Hours needs staff to make it work.
"Dedicated volunteers tend to burn out," says Glover. "The reason Hours was growing bigger was because it had a full time networker constantly promoting the system."
Lessons for the Future
Meanwhile, with Ithaca Hours being the oldest complementary currency now circulating in the United States, other scrips have been launched. While some have failed, others are building on the lessons of the past. A state away in Massachusetts, the Berkshires community launched "Berkshares," a complementary currency slightly different from Hours, in 2006.
"You should be really proud of what Hours has inspired in other places," says Susan Witt, of the E.F. Schumacher Institute, a financial think tank. Witt played a similar role to Glover (whom she remembers from his researches at Schumacher in 1991) in getting Berkshares started, but she took it one further by making presentations to all the banks and asking them to come on board.
"We have a strong connection with and respect for Hours, " says Witt. Berkshares, however, have the backing of five local banks, which exchange Berkshares for dollars. Ninety U.S. dollars will get you 100 Berkshares, which can then be spent at many local businesses, including paying your fuel bill with the Stockbridge Fuel Company.
Each bank branch that accepts Berkshares keeps a separate account of Berkshares, so that when people buy Berkshares that account is debited, and when they redeem them the account is credited. Unlike Hours, Berkshares never come free. In the Hours system, members receive Hours for signing up, or Hours go into circulation as loans to small businesses, which then must find ways to spend them. Businesses can always cash in their Berkshares for dollars.
'We felt it was good community involvement," says Nancy Missagia, branch manager of Salisbury Bank in Massachusetts. "It keeps the money here in the Mom and Pop stores."
"Berkshares makes the in-between stages easier for businesses," says Witt. "It gives them an option if they can't be circulated. The difference between Berkshares and Hours is that Berkshares are fully backed. Ithaca Hours is a more truly independent entity. It's based on future productivity; if someone is a producer, they agree that they will (produce the equivalent of an Hour.) It's a very, very important model, but we chose this strategy." Only two years into its project, Berkshares has around 2 million in circulation; Hours hovers around 120,000.
"Ithaca Hours is kind of a test case," says Stephen Zarlenga, Director of the American Money Institute. "What you're seeing in terms of local currencies is that there's no acceptor of last resort. The dollar is always accepted by the government for payment of taxes. For those local currencies to work the local authorities would have to accept them for taxes. It's got to be negotiated, and that's a political fight."
Zarlenga warns, however, that the monetary system as a whole is in trouble. Critics of the American money system often point to 1913, when Congress authorized the Federal Reserve Board, a collection of private banks, to coin and regulate money; the Fed has never been audited, and operates like a fourth branch of government - outside the system of checks and balances. Zarlenga emphasizes that people need to stay involved with how their money works. "If people can set up local systems of trading, that's fine. They have to understand it's a lot more work than they think. And even if you can do that you have a really strong interest in the national system working properly. Injustice can still rain down on you from above."