Sloman is from Bristol!

I've already mentioned this new initiative, launching a new currency in Bristol. You'd almost think they timed the announcement to coincide with econ101b! It turns out that the main author of our textbook, John Sloman, is a Bristolian, and on the Sloman blog he's just written a bit about the Bristol Pounds being minted as I type...

What I mentioned in the lecture was that while the Bank of England only accepts the real thing, i.e. Pounds Sterling, that doesn't mean we can't deal in our own currencies - provided when we deal with the Bank (via our own bank usually), it's in Pounds Sterling. So this little initiative can exist because the Bristol Credit Union stands behind it, willing to issue Pounds Sterling on a one-to-one basis with Bristol pounds.

Sloman refers to a few people who are justifying the new initiative because Bristol doesn't want to become like a clone town - all the other British high streets that have chain stores everywhere and look alike.

However, and please do (yet again) excuse my cynicism on this, but this is a very static argument. The Local Data Company has just released a report on the health of the retail industry in the UK and it makes quite chilling reading; in some areas as many as one in three stores in a shopping centre is empty. The high street is currently changing beyond all recognition, suggesting more than anything that the "clone" model of saturating the high street with well known brands, may not have been overly successful.

Of course, it may simply mean that stronger branded stores take over more of the empty space (e.g. Tescos and Sainsburys), but the sheer volume of excess supply means prices must come down, encouraging small local retailers to set up shop.

So an initiative such as a local currency, which restricts what its users can do with it (spend within Bristol or else!), may not be particularly useful in achieving what the market may achieve on its own!

Topical Initiative in Bristol

Just as we start lecturing on money, the BBC reports that Bristol is issuing its own currency: The Bristol Pound. The Bristol pounds, which Bristol is calling on locals to design the notes for, will be exchanged 1:1 with actual pounds (Pounds Sterling), hence operating on a fixed exchange rate system, yet will have one important, and designed, limitation - they can only be traded in Bristol.

This may sound, on the face of it, like a great local initiative, but one has to really question why this is being done, and it really begs the question of whether this will succeed. Why, if you are a Bristol trader, would you actually use these things? They have the same nominal value as a normal pound, yet you can only use them in a restricted geographical area. What happens if your suppliers are outside the local area?

The bottom line is we trade because there is a mutual benefit from doing so - both parties benefit. If someone outside the Bristol area can do something more efficiently, why not let them do it, so Bristol folk can get on with things they are good at? Why instead have Bristolians waste time and effort replicating at greater cost what others do better? Why not instead have them being innovative and thinking about new ways to add value and be creative?

Localism is an increasingly popular movement, yet it is a rather short sighted one once it loses sight of the fact that trade creates opportunity - if we all do the things we're good at, more is produced - it's not a zero sum game.