The need for regional currencies

The arguments above and in this item - adapted from an article in 'New Catalyst' (Canada) sent to the Institute by the American Schumacher Society - are perhaps equally relevant to Eastern Europe and to the debate on a common currency for the EC.

We have all become so accustomed to assuming that national currencies are the norm and preferable. In her book, 'Cities and the Wealth of Nations' (Random House, 1984) Jane Jacobs illustrates 'how national currencies stifle the economies of regions.'

She views the economy of a region as a living entity in the process of expanding and contracting. She understands the role of a regional currency as the appropriate regulator of this ebbing, flowing life. If a region does not produce enough of its own goods, relying heavily on imports, its currency is devalued. As a result, import costs increase, discouraging trade. At the same time, because the currency is less in demand, interest rates will decrease, thereby encouraging local borrowing for the production of 'import replacing' goods. Conversely, if the region is adequately supplying its own needs, then its currency 'hardens', that is, holds its real value relative to other currencies. As a result, imports are cheaper, encouraging trade, and interest rates higher.

'Can small businesses in rural areas compete with international corporations and the federal government for access to national currency?'

Currencies are powerful carriers of feedback information, then, and potent triggers of adjustments, but on their own terms. Should the Industrial Great Lakes Region or the Farmbelt States, both in a condition of severe economic depression, adjust their local economies in the same manner as the thriving Sunbelt or the booming Silicon Valley of the West coast? Can small businesses in rural areas compete with international corporations and the federal government for access to national currency, especially when interest rates are kept artificially high by the federal government?

The dependency on national currencies actually deprives regions of a very useful self-regulating tool and results in the paradoxical creation of stagnant economic pockets in a seemingly properous nation.

You can rate how well you like this idea. Click 0-10 below and press the Submit button.
Bad Idea <- 0 1 2 3 4 5 6 7 8 9 10 -> Great Idea
As of 05/28/96, 10 people have rated this page with the overall rating (0-100%) of: 70%

Previous / Next / Table of Contents