Complementary currencies

Abstract

Recent decades have witnessed the proliferation of monetary instruments that differ, in many respects, from the official currency issued by the central bank and by the regulated banking system, such as local currencies, corporate barter, and mutual credit systems. Today, complementary currencies tend to appear as a bizarre exception to the rule of one single, all-purpose currency for each country (or currency area). However, in historical and comparative perspective, it is monetary plurality that prevails: different monies coexist side by side, serving different purposes, in most economies throughout most periods. The most significant and pervasive distinction in premodern economies was between internal and external money: one currency for the domestic economy and a different one for foreign trade. Only the rise of modern territorial states in the seventeenth century established the uniformity of the currency in each jurisdiction and the monopoly of coinage as a prerogative of sovereignty. In this chapter, we provide a broad overview of the various forms of complementary currencies throughout history, we analyze more recent experiments, and we review current proposals to introduce parallel currencies, before we turn to discuss how an enquiry into monetary complementarity can help shed light on the very nature of money itself.