Psychologist Angels Corcoles recently taught a seminar about self-empowerment for women, and when she finished the organizers handed her a check with her fee. The amount was in hours, not euros.
But Corcoles didn’t mind. Through a citywide credit network that allows people to trade services without money, the 10 hours Corcoles earned could be used to pay for a haircut, yoga classes or even carpentry work.
At a time when the future of the euro is in doubt and millions are unemployed or underemployed with little cash to spare, a parallel economy is springing up in parts of Spain, allowing people to live outside the single currency.
In the city of Malaga, on the country’s southern Mediterranean coast just 80 miles from Africa, residents have set up an online site that allows them to earn money and buy products using a virtual currency. The Catalonian fishing town of Vilanova i la Geltru has launched a similar experiment but with a paper credit card of sorts. It implements a new currency worth slightly more than the euro when it is used at local stores.
You can find another series of accounts here.
One interesting feature of these enterprises is that they push a bit of emphasis away from sticky wage and price theories of depressions. In essence the sellers participating in these exchanges are price discriminating, by trying to sell more of their output — for lower prices — through credit or barter mechanisms. Getting back credits in return really is like receiving a lower price or wage. So these exchanges show that at least some people are wildly willing to cut prices, wages, and returns, if only to sell more.
(Please, no need for a lecture here on Keynes and downward price spirals; the ECB is keeping a price floor at the very least.)
So which factors behind depressions receive marginal support from the prevalence of these practices? First, these exchanges are a substitute for dysfunctional credit markets. Second, these exchanges attempt to solve the buyer-seller-buyer coordination problems analyzed by Clower, Leijonhufvud, and others.