Ivan Tsikota has produced an interesting Master’s Thesis confirming that complementary currency systems (broadly conceived) have positive economic effects, and under which conditions these effects can be stimulated. Also of interest is that Ivan proposes a new taxonomy of economic systems.

* Master’s Thesis: Complements to Economic Systems: Increasing Local Economic Sustainability. Ivan Tsikota. 2011-05-14. EC9901 Master’s Thesis, 30 hp . Department of Economics , Stockholm University

Today we excerpt two aspects of the findings in more detail:

* Comparative Typology of Complementary Economic Systems

Ivan Tsikota:

“6.1. For-profit complementary economic systems

This category represents largest systems in terms of scope, both in turnover and membership. The systems have the longest record of operation an demonstrate clear positive economic effects, both on micro- and macro levels. In one instance (Islamic banking in Iran), favourable developments both in the monetary and the real sector were reported. Example of Swiss barter network suggests that these complementary systems have a potential to work in a counter-cyclical and anti-inflationary fashion; further research is needed to generalize this observation for the whole group. In most case studies, consistency in resolving social issues was noted: growth of employment opportunities, empowerment of poor people etc. Several shortcomings are worth noting. First of all, a ‘principal-agent’ problem; both in cases of credit financing and barter exchanges proofs against mal-use are needed. In view of this, participation of local authorities is advisable.

6.2. For-profit complementary systems with social goals

Distinctive feature of systems from this category is their social orientation. It arises from the focus of their operation, which can be generalized as providing help to the local community. Analysis of the case studies suggests that they are successful in realizing it by alleviating poverty, ensuring the social engagement, empowering population and in some cases favouring gender balance.

In economic terms, these systems provide wider employment opportunities, increase welfare of the clients, and may be flexible to external changes (e.g. Triodos Bank). It can also be argued that they provide more optimal allocation of financial resources (or goods) from the social perspective, since all operations are fulfilled with the participation of groups from the local community.

6.3. Not-for-profit complementary systems

This category represented the biggest sample with 20 case studies having been classified into it. In the majority of examples, positive economic effects of implementing these systems were observed; they comprised growth of welfare of the local population, increase in employment opportunities, widening of the access to financial resources/good/services, and stimulation of business-cycle. Social effects included resolution of problems with housing for homeless people, reviving connections in labour markets, and fostering community building. The analysis suggests that support from the state is needed for a successful operation of the systems.

It was found that non-profit complementary systems may lack membership, which adversely affects the range of goods and services provided, and represents an impediment for success of such systems.”

* Recommendations for Local authorities’ participation

“Analysis of the case studies revealed several issues relating to the performance of complementary economic systems, namely: ‘principal-agent’ problem, low level of participation/awareness of people, low level of expertise in some systems etc. With the exception of for-profit complementary systems, there is a lack of coordination at a level above grass-roots initiatives. One of the consequences of this is, for instance, the lack of data on the matter or discrepancies therein.

In view of the aforementioned, local authorities may contribute to the performance to success of complementary economic systems in the following ways: coordination of efforts between public and civil society organizations, providing necessary legal framework, ensuring its transparency and unanimous enforcement, introducing safeguards against possible mal-use and/or fraud, collecting and sharing data, raising public awareness, and serving as a contact platform for businesses and members of the communities. They may help in addressing the shortcomings of voluntary character of many initiatives, namely high dropout rate and low expertise. Analysis suggests that there is also a need for international cooperation, and local authorities are not only a candidate, but also the best candidate for it. In this respect, it is advisable to create an international platform for sharing best practices, developing guidelines for complements’ use, and standards for data collection and dissemination.”