Hochschule für Wirtschaft und Recht Berlin École Supérieure de Commerce Extérieur Paris Debate about alternative monetary systems – Silvio Gesell, John Maynard Keynes, Irving Fisher Thesis in fulfillment of qualifications for the degree requirements of the Master of Science (M.Sc.) in International Finance First supervisor: Prof. Dr. Herr, Hansjörg Second supervisor: Prof. Dr. Pédussel-Wu, Jennifer Student: Laubisch, Lina Student number: 252706 Address: Bernstorffstraße 7 13507 Berlin E-Mail: [email protected] Place/ Date: Berlin, 15th of July 2013 Abstract Due to the instability of current financial and monetary markets worldwide and the dysfunc- tions of current capitalism, this Master’s thesis studies alternative monetary systems. The ob- jective of this paper is to debate about historical as well as current alternative monetary sys- tems and to evaluate their concept, theory and success. First of all, the theoretical approaches to the problems of monetary systems of Silvio Gesell, John Maynard Keynes and Irving Fisher will be analyzed. Furthermore, a critical acclaim will be subjected by discussing the advantages and disadvantages of these reforms. Finally, the theories of the three economists will be compared in order to define similarities and differ- ences. In the second main part, this thesis aims out exploring alternative monetary systems which have been implemented into practice. In the course of this analysis two historical case studies as well as seven current ones will be described and evaluated. The historical alterna- tive monetary systems are based on Gesell’s approach and the current systems represent com- plementary currency systems. The aim of this evaluation is to identify if alternative monetary systems can offer an added value for the economy and society. In the last chapter, this paper also aims out exploring if a global alternative monetary system could be established. In conclusion, it can be said that all three economists developed alternative monetary systems which could have been very effective at that time. Nowadays, an adaptation of these systems is needed by changing them to complementary currencies instead of replacing the official cur- rencies or by guaranteeing the preservation of national sovereignty for instance. In addition, complementary currency systems can be very successful by stimulating the local economy as well as strengthening the community. Furthermore, they are able to offer a monetary stability, sustainability and reduction of international inequalities. Nevertheless, they have to be man- aged well and there has to be a democratic decision on the amount of complementary curren- cy that should be issued. In summary, the introduction of complementary currency systems is recommended, because they are able to strengthen the economy as well as the community. If the economy is weak, these systems will have the potential to support the national currency by stimulating the local economy. Furthermore, these systems do not represent a high risk of financial failure due to low start-up costs. I Contents Contents ..................................................................................................................................... I Index of Appendices .............................................................................................................. III Index of Figures ..................................................................................................................... IV 1. Introduction .......................................................................................................................... 1 1.1 Literature review ............................................................................................................... 3 2. Theoretical approaches to the problems of monetary systems......................................... 4 2.1 Silvio Gesell ...................................................................................................................... 4 2.1.1 Silvio Gesell’s theory of interest ................................................................................ 4 2.1.2 Free Money System .................................................................................................... 8 2.1.2.1 Description of Free Money ..................................................................................... 8 2.1.2.2 Description of Free Land....................................................................................... 10 2.1.3 International Valuta Association .............................................................................. 11 2.1.4 Critical acclaim ........................................................................................................ 13 2.2 John Maynard Keynes .................................................................................................... 15 2.2.1 John Maynard Keynes’s theory of interest ............................................................... 16 2.2.2 Keynes’s monetary reforms ..................................................................................... 19 2.2.3 Bancor Plan .............................................................................................................. 22 2.2.4 Critical acclaim ........................................................................................................ 24 2.3 Irving Fisher .................................................................................................................... 26 2.3.1 Irving Fisher’s theory of interest .............................................................................. 26 2.3.2 Stamp Scrip .............................................................................................................. 28 2.3.3 Compensated Dollar Plan ......................................................................................... 32 2.3.4 Critical acclaim ........................................................................................................ 35 2.4 Comparison ..................................................................................................................... 36 3. Case studies of Gesellian’ monetary systems in the past ................................................ 38 3.1 WÄRA – a demurrage-charged currency ....................................................................... 38 3.2 Wörgl – a free economy experiment ............................................................................... 39 3.3 Free Money – realizable in practice nowadays? ............................................................. 40 II 4. Complementary currency systems .................................................................................... 41 4.1 Definition of complementary currencies ........................................................................ 42 4.2 Development of complementary currencies ................................................................... 44 5. Current case studies of complementary currencies......................................................... 46 5.1 Regional currencies ......................................................................................................... 47 5.1.1 Chiemgauer .............................................................................................................. 47 5.1.2 Bremer Roland ......................................................................................................... 52 5.2 Local Exchange Trading Systems ................................................................................... 55 5.2.1 Graine de sel ............................................................................................................. 56 5.2.2 WIR – Wirtschaftsring ............................................................................................. 57 5.3 Community currencies .................................................................................................... 59 5.3.1 Ithaca hours .............................................................................................................. 59 5.3.2 Curitiba ..................................................................................................................... 61 5.3.3 Fureai Kippu ............................................................................................................. 62 5.4 Critical acclaim ............................................................................................................... 64 6. Could a global alternative monetary system be established? ......................................... 66 7. Conclusion ........................................................................................................................... 70 8. Appendix ............................................................................................................................. 73 Bibliography ............................................................................................................................ 97 Statutory Declaration ........................................................................................................... 106 III Index of Appendices Appendix 1: Concentration of wealth ....................................................................................... 73 Appendix 2: Increasing volume of investments brings a decreasing return ............................. 74 Appendix 3: WÄRA stamps ....................................................................................................