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It is common knowledge that small businesses create more new jobs, generate more tax revenue, train more new employees, and produce more innovations than larger firms, yet they are often losers in the competition for capital. As capital has become increasingly mobile due to technological advances, deregulation of the financial services industry, and a centralization of corporate decision-making, small businesses and local communities have been ignored in favor of placing fewer, larger loans in projects that promise greater short-term growth. What remedies exist for this "capital misplacement"? How do we redirect capital flows toward socially accountable firms?
The South Shore Bank specializes in loans other banks are reluctant to make: loans to novice minority entrepreneurs and loans to buy and renovate small apartment buildings in a handful of run-down Chicago neighborhoods. The bank and its affiliates have financed the rehabilitation of about 30 percent of the 25,000 apartments in South Shore, helping to rescue a neighborhood that fell on hard times about 25 years ago. The bank has been consistently profitable, and its loan-loss figures compare favorably with those of similar-sized banks. (The Wall Street Journal, 6/23/92: A1, A12)
The Grameen Bank, founded in 1983, serves nearly 2 million borrowers in Bangladesh, 94 percent of them women. According to Muhammad Yunus, the bank's managing director, Grameen works in half of Bangladesh's 68,000 villages. The repayment rate remains above 98 percent, demonstrating that, contrary to economic theory until the late seventies, the poor can be more reliable than the rich when it comes to repaying loans. There are more than 100 Grameen programs in 40 other countries. (International Herald Tribune, 3/16/94:8)
In France, a network of 150 local savings clubs called CIGALES support socially innovative entrepreneurship. They have helped to capitalize over 100 small businesses. Another French cooperative, GARRIGUE, provides risk capital to socially responsible small businesses. The first GARRIGUE helped to finance over 35 enterprises, and has just opened a branch office in the northern part of France near Belgium.
Local currencies, or a multi-level currency system, are one way to alleviate local unemployment, according to James Robertson (Future Wealth, London: Cassell, 1990). The need for local currencies arises when localities which depend entirely on national currencies experience declining local competitiveness in the national or international economy, with the result that too little money is available in local circulation even for internal economic purposes within the locality itself. Local unemployment rises and local land and other physical assets lie unused while many local needs remain unmet Ð all for want of enough money circulating locally as a medium of local exchange. In Keynesian terms, the demand management policies appropriate for a national economy at any particular time are likely to be inappropriate for many of the local economies within it. As Jane Jacobs puts it, "Today we take it for granted that the elimination of multitudinous currencies in favor of fewer national or imperial currencies represents economic progress and promotes the stability of economic life. But this conventional belief is still worth questioning. ... National or imperial currencies give faulty and destructive feedback to city economies and this in turn leads to profound structural flaws in those economies, some of which we cannot overcome, however hard we try." (Cities and the Wealth of Nations, Penguin, 1986, p. 158). During the 1930's, the local government in Worgl, Austria, set about remedying this situation and injecting local purchasing power into the local economy by issuing local currency in the form of "tickets for services rendered" paid as wages to otherwise unemployed men who were put to work on public works projects. These tickets were used to pay taxes as well as to pay for purchases at local shops. Two hundred other Austrian towns wanted to follow suit, but the Austrian National Bank took legal action against the experiment, the Austrian Supreme Court decided in favor of the Bank, and the innovation was squashed Ð for a time. But the Green dollar, a local currency in Western Massachusetts, is just one of many local currencies which have come into use since then.
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