The local multiplier of income support paid in a complementary currency: Comparative evaluation in the city of Barcelona

Emerging from social activism, 'new-municipalism' initiatives have gained traction in local administrations as movements of political insurgency (Dikeç and Swyngedouw, 2017), with the city of Barcelona becoming something of a flagship (Russell, 2019; Thompson, 2021). They have shifted the attention of local administrations to welfare systems (Andreotti et al., 2012) and towards institutionally supporting programs aimed at controlling capital flows, shortening supply chains, socialising finance, creating self-sufficient circular economies, and re-localizing wealth creation (Jarvis, 2019; Thompson et al., 2022).

In this context, grounded in the conceptualisation of the urban economy as a 'leaky bucket' from which resources flow out due to the forces of capitalism and globalisation (Ward and Lewis, 2002), complementary currencies have been promoted to protect, stimulate, and re-orient economic activities at the local or regional level (Blanc, 2011; Seyfang, 2006). Previous research has identified the need to move beyond the identification of alternative practices towards analysing their convenience, strengths, and weaknesses (North, 2014; Jonas, 2010; Fickey, 2011). Existing literature on the local effects of using complementary currencies to provide support payments in deprived areas is scant and inconclusive (North, 2014; Pacione, 1997).

To fill this gap, our study in the paper analyses the local effects of income support payments provided in a complementary currency in Barcelona. The study is based on comparing the LM3 Local Multiplier measures (Sacks, 2002) of income support payments provided by the City Council of Barcelona in euros and in a complementary currency, the REC, developed under the B-MINCOME program of public support for disadvantaged neighbourhoods by the local government of Barcelona.

The results obtained show that the local impact of public income support can be enhanced when it is paid in a complementary currency and identify factors that mediate this effect. Results show that, after 13 months of circulation, the REC complementary currency achieved a larger local multiplier than payments in euros. Whereas the LM3 multiplier for payments in euros was 1.94 in Eix Besòs, implying a rate of local circulation retention of 6.21%, the LM3 multiplier for payments in RECs was 2.09 and the rate of local circulation retention was 21.79%. Moreover, the weighed cumulative local multiplier considering the total effects of the complementary currency assessing all the exchanges generated by the currency reached a value of 2.95.

Although public administrations have shown interest in complementary currencies, this study contributes to going beyond theorisation and boosterism surrounding grassroots initiatives by providing  concrete empirical evidence of an instance where complementary currencies increase the local impact of public expenditure. Moreover, while it shows their positive local impact it demonstrates a novel comparative methodology for evaluating public policies based on complementary currencies.

References

Andreotti A, Mingione E, Polizzi E (2012) Local welfare systems: A challenge for social cohesion. Urban Studies 49(9): 1925–1940.

Blanc J (2011) Community, complementary and local currencies: Types and generations. International Journal of Community Currency Research 15: 4–10.

Dikeç M, Swyngedouw E (2017) Theorizing the politicizing city. International Journal of Urban and Regional Research 41(1): 1–18.

Fickey A (2011) ‘The focus has to be on helping people make a living’: Exploring diverse economies and alternative economic spaces. Geography Compass 5(5): 237–248.

Jarvis H (2019) Sharing, togetherness and intentional degrowth. Progress in Human Geography 43(2): 256–275.

Jonas A (2010) ‘Alternative’ this, ‘alternative’ that… interrogating alterity and diversity. In: Fuller D, Jonas A, Lee R (eds) Interrogating Alterity: Alernative Economic and Policial Spaces. London: Ashgate, pp.3–30.

North P (2014) Ten Square Miles surrounded by reality? Materialising alternative economies using local currencies. Antipode 46(1): 246–265.

Pacione M (1997) Local exchange trading systems as a response to the globalisation of capitalism. Urban Studies 34(8): 1179–1199.

Russell B (2019) Beyond the local trap: New Municipalism and the rise of the Fearless Cities. Antipode 51(3): 989–1010.

Sacks J (2002) The Money Trail. Measuring Your Impact on the Local Economy Using LM3. London: New Economics Foundation and The Countryside Agency.

Seyfang G (2006) Sustainable consumption, the new economics and community currencies: Developing new institutions for environmental governance. Regional Studies 40(7): 781–791.

Thompson M (2021) What’s so new about new municipalism? Progress in Human Geography 45(2): 317–342.

Thompson M, Southern A, Heap H (2022) Anchoring the social economy at the metropolitan scale: Findings from the Liverpool City Region. Urban Studies 59(4): 675–697.

Ward B, Lewis J (2002) Plugging the Leaks: Making the most of every pound that enters your local economy. London: New Economics Foundation. Available at: https://neweconomics.org/uploads/files/9215d0d00f79789377_cxm6bu0ue.pdf (accessed 9 December 2022).

Read the accompanying article on Urban Studies OnlineFirst here.