Each crisis gives birth to new money. The list of alternative currencies is getting bigger every day; there is unofficial money in Thailand, Germany, the USA and about fifty other countries. BC has studies the theory and practice of alternative currencies.

Tit for tat

Some time ago the Dnepropetrovsk aggregates plant has issued colorful pieces of paper and started giving them to their employees as compensation. Thus the plant managed not only to avoid firing people and holding back wages, but also to hire new workers. Alexei Munipov and Ekaterina Krongauz tried to understand how this works.

“Alternative money is our way to avoid inflation, support local economy and feel like we can make a change,” writes the weekly CC Magazine, which is dedicated to various local currencies not recognized almost anywhere in the world.
Though they are not prohibited either, because you cannot forbid people to agree and pay each other with wooden counters (New Orleans), self-made banknotes with images of mice (Amsterdam) or a girl with a bagel (Düsseldorf). Each month CC Magazine tells its readers a dozen of stories about how movers from some small town (in Italy, Scotland or Brazil) decided to print their own money – partly to spite the federal authorities, partly to support each other, gather money for a children’s playground, for example, and because of pride for their hometown as well.
A typical story is how a currency named “REAL Dollar” was created in Lawrence, Kansas: a couple of local lefties read how in the beginning of the XIX century the dwellers of the Isle of Man gather money for building a town hall. They just gathered all British pounds on the isle and mortgaged them for interest in London and started using their own money for paying each other for work, drinking and snacking.
The REAL dollar was created similarly. The movers found out that the American law does not prohibit printing paper money (unlike stamping of coins, because of which the creator of the American “liberty dollar,” who had been stamping very beautiful silver coins up to the previous year, took the knock). Soon REAL (the acronym stands for “Realizing Economic Alternatives in Lawrence”) was being accepted by most local stores, barbershops and bars. As for real (as distinct from REAL) dollars, they were invested at interest to banks. It is the interest that makes the whole scheme viable. Citizens found it cheaper to pay with the REALs, and besides they are considered beneficial for the local economy, as such money do not go to heaven knows where (for example, the war in Iraq), but circulate among the locals.

This spring the Dnepropetrovsk aggregates plant announced issuing of its own money. CC Magazine knows nothing about the Ukrainian campaigners yet, but the director of the plant has already enjoyed a bit of glory, he was interviewed even by German journalists. He is too busy to talk with every interviewer that is why his assistant Tatyana Yatsenko often gives interviews for him. “I listened to him a lot, and now I do speak everything correct myself. In every interview I say what a smarty our director is,” Tatyana boasts.

The Dnepropetrovsk aggregates plant has never been popular in the town. Workers always tried first to find a job on other plants and came here only if none of them were hired there. But now it is the only plant that recruits new workforce. And the only one that does not hold back wages, though the latter are paid not with hryvnias, but with cardboard pieces with a “commodity check” label, which look more like money from Monopoly. By introducing its own money, the plant managed to maintain the manufacturing capacity and avoid firing workers. Maybe this money doesn’t look good, but it can be used for buying goods, paying up loans and even paying for flats.
The decorations where the financial experiment takes place are barely adequate for taking pictures for the optimistic magazine dedicated to currencies: the vast territory of the plant is situated on the skirts of Dnepropetrovsk, Shchepkin street, and is surrounded by the ever-frozen landscape from the Brezhnev period: worn Khrushchyovka houses, a grocery store with tainted onion, and an incredible number of stray dogs. The gatehouse is a real Soviet one, with an authentic Honors Board. Inside, the vast territory is already being greened and landscaped all the way. And in the canteen, workers buy Jewish sausages at 7 cardboard pieces. 

The loudspeaker announces that the salaries payable in the town is 80 million hryvnias (more than one million dollars). Workers of the aggregates plant listen to the news almost indifferently, though a year ago they would be directly concerned by it. The last November the plant lacked 4 million hryvnias (around 55 thousand dollars) for the wages and it was clear that there was no place to get these from. The director of the plant Eugene Morozenko created an anti-crisis committee, which included himself, the chief financial officer, the trade union committee and several workers.
The chief financial officer Valery Bobko, a kind man in his fifties, looking just like the chief financial officer of an aggregates plant should look, sits alone in his huge office in a business suit, looks through his calculator and tells the story. The idea to make own money is ten years old, to say the truth. In 1999 the plant also had no money, and it was decided to pay wages to workers with commodity checks. But those could be used only to buy the Raketa vacuum cleaners, which were manufactured by this same plant. This means that the workers effectively received their remuneration as vacuum cleaners, which they sold for real money outside the plant’s gates to wholesalers. With time, the money started inflowing, but the checks were canceled only in 2003.
Now the plant manufactures aviation equipment and mining supports instead of vacuum cleaners, and these are hard to pay with: hardly will anyone buy them at the gates. That’s why this time the invented scheme became a bit more complex, but nevertheless rather simple. So, miners need equipment to mine coal, but they haven’t got any money, and if they don’t continue mining and selling coal, there won’t be any.
The plant may decide not to supply anything for the miners, as they’ve got no money, but this case it will need to fire his own workers, and this will not make it richer. That’s why the plant swaps the equipment for coal. Then it swaps the coal with the Vinnitsa sugar mill for 60 tons of sugar and the sugar for milk and sausages. Then the plant prints its own money in the amount of the initial mining equipment order and pays wages with this. Workers are already able to buy sugar, sausages and kefir. 

Then the anti-crisis committee decided to diversify the range of buyable items by purchasing some goods from manufacturers for real money and sell them (at a higher than the initial price, but cheaper than the market price) for the plant’s money. “The most important thing,” Bobko says, “is that our workers are not obliged to receive wages in our money. They can take all in hryvnias; there seem to be no troubles with payroll. Commodity checks are entirely voluntary. But, first, it is cheaper to buy with them, and, second, one can get them in advance, in consideration for the future wage.”
Valery Bobko dials the bookkeeper and orders for himself in consideration for the April’s salary 88 commodity checks, he wants to show all available denominations – 1, 2, 5, 10, 20 and 50 commodity checks.

“When we just introduced them, I ordered 300 hryvnias in checks. Gave a lead, bought a bag of sugar.”
If not for this voluntariness clause, this funny money would be a classic continuation of the recession, similar to food coupons and cards.
The capability to pay to workers with own money which cannot be spent anywhere but in the plant’s own store is tempting for companies not only during crises (the Mexican branch of Walmart paid their workers with coupons until quite recently), but especially many kinds of such money emerged during the Great Depression, most of all in Germany and Austria. The quantity of currencies of little towns and large factories was almost equal to the quantity of the towns and factories themselves – partly because outside funds depreciated, partly because they were lacking physically. Some complex barter schemes collapsed with a bang, some gave unexpected fruits: the mayor of Woergl, a small town in Austria, invented such a successful scheme (which is now included in learning books on economy) that resolved problems of unemployment, non-payments and absence of money in the treasury, that Woergl’s shillings became more popular than the state money for a while.
It is this lack of compulsoriness that makes the Dnepropetrovsk experiment one of the touching and ambitious attempts to create one’s own small, steady, exceptionally impermeable world, where everybody knows everyone, where everything is native, even the money. Of course, often such proud ideas are disturbed by minor follies, as was the case with the bartered sugar: those of the workers whose workshops were located closer to the entrance gates grabbed up all the sugar before it reached the warehouse and other workshops. They took 100 to 150 kilograms per person. Someone stored it on the balcony, someone sold it to neighbors. That’s why the trade union committee had to limit the following shipments by one bag per person. “They did it by force of Soviet habit, but then the hysteria passed away,” says Elena Pyanykh, for whom the plant is the “vine and fig tree”: her husband is head of marketing; she is deputy head of the trade union committee. “Now everyone understands that it is not the Soviet time coming back. On the contrary, this is a European way of solving the problem. More care of people than of the plant’s benefit. For the plant there is in general no difference, the savings are not that big.”

The strange combination of Soviet and European does not end with this. The plant gives its employees interest-free loans, even now, in the hard times. But the decision on each loan is made by the director himself. Each Monday he receives workers. These times are hard, so he will hardly give a loan for window repair, but will surely do for medical treatment for a child. “He’s such a smarty, our director,” repeats Tatyana Yatsenko, “he’s been working here for 39 years. First was an operator, then master, then foreman, and the director for 12 years already. He knows every problem. Shakes hands with workers. Another one wouldn’t.”

Elena Pyanykh shows me the buffet, where several workers just bought a complete lunch for 10 commodity checks (1 check = 1 hryvnia = 13 US cents). The assortment includes everything which a standard grocery store provides, except for fruits, vegetables and alcohol. “This is of course a double-edged sword,” says a setup man buying the lunch for unreal money, “feeling like having money without having such. This is why the crisis happened. But it is voluntary, and besides it’s good that the plant wasn’t close, like other plants in the town.” “We’ve made up a questionnaire,” Elena says, “all workers are asked to write, which goods and services they would like to get for the commodity checks. And then started working for these.” Despite some employees asked for “a recreation in the Canaries,” the plant managed to accomplish almost every wish. “We made arrangements with manufacturers of all necessaries. People living in plant’s residential houses are able to pay for utility services. The loans that workers took from the plant may be paid off with the same money, as well as loans from other banks associated with the plant. We also have agreements with summer recreation centers,” says Elena Pyanykh and adds that in the near future it will be possible to put the plant’s money on mobile phones.
In the meantime, a woman from the bookkeeping is sitting in the reception area near Eugene Morozenko’s office. She’s prepared a barter exchange offer; maybe the plant’s store will soon sell tights.

But the director is busy talking to the chief street-keeper. The director has brought some special French plastic broom, which is very handy. And decided to give this broom to the worst street-keeper.
“You see, what a smarty he is,” says his assistant Tatyana Yatsenko, “another one would’ve decided to give the broom to the best street-keeper because he is working better. And the worst one would’ve continued cleaning with a bad broom. And our director gives the broom to the worst worker so that he becomes the best one. Do you understand?”

“Big City”, No.7 (228) 22.04.09