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Is a Community Currency Just Another Welfare System?

Submitted by on September 17, 2010 – 4:26 amNo Comment

To many people, anything that helps the poor is a welfare system.   While that is indeed the case in most programs, community currencies are an exception.

Let us consider a practical example from a city that, by American standards, would be considered an extreme case of poverty.  It will show that a community currency does indeed help the poor–but by using market forces, not any transfer of resources from the rich to the poor. In fact, it makes some welfare systems unnecessary because it puts the poor to work to help themselves.

When Jaime Lerner became mayor of the medium-sized Brazilian town of Curitiba in 1973, he had a tricky garbage collection problem. The majority of the 500,000 people of Curitiba lived in shanty towns (favelas) which had been built so haphazardly that even the garbage trucks could not get into them. The accumulation of garbage attracted rodents, which in turn spread diseases at alarming rates. The classical solution would have been a welfare program to try to clean up the mess, but Lerner did not have that option because there were too few rich people in Curitiba, and the necessary funds were not available.

The mayor was forced to invent another way. His solution was to pay public transport tokens to people for their garbage, under the condition that they pre-sort and deposit it in recycling bins around the favelas. For organic waste, which was composted for use by farmers as fertilizer, people received chits that could be exchanged for food. The program worked spectacularly: the favelas were clean-picked by the kids, who quickly learned to distinguish between the different types of recyclable products. People could leave the favelas by public transport and travel to the center of town where the jobs were. The additional buses and gasoline were paid for with the proceeds from the sale of the pre-sorted garbage to the glass, paper, and metal manufacturing companies. Even “normal” money was saved because fewer trucks and less gasoline were required to pick up the pre-sorted garbage. And all this does not even include the savings due to reduced disease and a more efficient labor market. Today, Curitiba is clean, prosperous, self-sufficient, and the only Brazilian city I know to refuse money from the state. It has a state-of-the-art public transportation system and a popular mayor who has been repeatedly reelected. Perhaps most significant, a strong sense of community and pride has arisen in a place where none was visible before.

There is a general lesson here that politicians from every country should become acquainted with: welfare programs can be replaced by imagination and creativity if the right leadership is available.  Also, politicians get reelected for providing such leadership.