Ecovillage Economics: Dancing Rabbit’s ELM System
By Jonathan Swiftcreek, Earthaven Ecovillage
I was so impressed with Dancing Rabbit’s local currency— the ELM System — when I visited in March, 2009, I wanted to know more. See article, “Our College Class Visits Dancing Rabbit”. So I asked Jonathan Swiftcreek, a fellow Earthaven member who’s helping stimulate Earthaven’s own local currency system, to learn more about the ELM system in order to write this article. — Diana Leafe Christian
The Start of Dancing Rabbit’s Community Currency
Until May, 2007, Dancing Rabbit (DR) — a 60-resident ecovillage in rural northeast Missouri — used a time-based and credit-based alternative currency system called HOURS. It used a paper scrip but was also a LETS-like credit-based system (“Local Exchange Trading System”). Each Dancing Rabbit member had their own HOURS account, and they could write “checks” as well as “withdraw” HOURS from the system in the form of a paper scrip. Each HOUR had the same purchasing power as seven US dollars.
When people and organizations joined the system they began with a zero balance and were allowed to spend up to minus-40 HOURS. They could spend their HOURS immediately, without having to earn any first. For example, if Jack wanted to buy a dozen eggs from Jill for one-half an HOUR, he could write Jill an HOURS check for one-half an HOUR. That half HOUR would then be manually subtracted from Jack’s account and added to Jill’s.
A DR member had a positive balance in the Quicken accounting software if they received more HOURS than they spent, or a negative balance if they spent more than they received. It was completely OK to have a positive or negative balance: that’s how the system worked.
People and organizations in the system could go into the negative by up to 40 HOURS anytime they wanted to do so.
Switching from a Manual Hour-Based System to an Automated Dollar-Based System
Earlier in DR’s history, a CSA farmer in the community had accepted HOURS for his produce. Cattail, DR’s only dining co-op at the time, bought his produce using HOURS. This allowed Cattail to accept HOURS in payment for co-op membership. Later the farmer left Dancing Rabbit, the Cattail Co-op dissolved as a food co-op, and the use of Dancing Rabbit HOURS dropped off to almost nothing.
So in 2007 Nathan proposed the following ELM (Exchange Local Money) system to make the local currency easier to manage, understand, and use:
1. The ELM system is also a LETS-like credit-based system, but balances are tracked online. (At first there was no paper scrip, but eventually it was added to the system, though almost no one used it because the online system seemed to be far more convenient).
3. An ELM has the same purchasing power as one US dollar.
4. In all other ways the system remains the same as the HOURS system.
Interest in approving the ELMs proposal spread throughout the ecovillage, but a major change usually doesn’t happen quickly in a community that uses consensus decision-making. However, two factors increased receptivity towards the ELM proposal. First, people were already discussing increasing DR’s “standard wage,” which was $7 an hour (hence 1 HOUR of currency was worth $7). The community was looking to increase the standard wage to $8 an hour immediately, while also creating a mechanism to automatically increase the standard wage in the future to keep pace with inflation. This created a dilemma for the community: should the value of HOURS also change with the shift in the standard wage?
A second factor which helped the ELM proposal was the general feeling that a change in strategy was needed to boost the use of an onsite local currency because HOURS usage just wasn’t thriving.
In May of 2007 DR members approved the ELM proposal, but it didn’t do much to increase use of the currency. In the first month, only two transactions were conducted online, totaling $10. At first the ELM system was used by the same relatively small number of people who had used HOURS, but that began to change in an unforeseen way.
Building Faith In Dancing Rabbit’s Currency While Gaining Access to Interest- Free Money
Also, DR Land Trust regularly encountered a brief cash flow shortage every fall because their mortgage payments were due a few weeks before the Land Trust received its annual large check from the US Department of Agriculture’s Conservation Reserve Program. (See article, “Our College Class Visits Dancing Rabbit”).
There was an immediate flow of ELMs out of DR Land Trust and into the community as the Land Trust exchanged ELMs for dollars with members of the community. This meant many more ELMs were suddenly in members’ accounts and these members started buying goods and services onsite with ELMs instead of dollars. DR Land Trust got the ready cash it needed to pay its mortgage without having to pay any extra interest, and this decision inspired so much more confidence in the ELM system that nearly all the onsite DR co-ops and businesses joined the system.
How Well-Used Is The ELM System Today?
Many onsite jobs at Dancing Rabbit pay in ELMs, including support tasks for the community such as some committee work, co-op management, and various clerical, bookkeeping, managing, and maintenance tasks.
ELMs usage has grown considerably since 2007. In March, 2010, DR members and residents made 169 ELMS transactions, with a value total of nearly $20,000.
How It Works“Local Exchange,” an open source community currency software written in PHP and developed by Calvin Priest. It is overseen by the ELM committee, currently Nathan and Sam. ELM users can log in and browse online listings (like classified ads) of goods and services other DR residents want to sell or buy with ELMs. Users can easily check their account balances and transaction histories, record transactions, and more.
At Dancing Rabbit nearly everything can be paid for with ELMs. “We’re the only intentional community I know of where an individual can pay for all their daily living expenses with locally currency,” says Nathan. “And to my knowledge, we are the only local currency in the world in which this can be done.” Because some people can use ELMs for all their daily needs, many DR members and residents participate in the system, and simply value ELMs as money.
As noted earlier, no interest or penalty accrues for having a negative balance, however, there are hard-coded limits in the system preventing people from spending more ELMs than they have been approved to use.
In addition, community-wide organizations at Dancing Rabbit, such as the DR Vehicle Co-op, have been given access to a larger maximum negative balance allowance (minus 1,000 ELMs). And theoretically an individual or organization could ask the community for a higher negative balance allowance.
What About US Dollars?
The main personal benefit to Dancing Rabbit members who exchange dollars for ELMs is convenience. A member can write one large check for ELMs, and then make fast and easy electronic payments within the community, instead of having to write multiple small checks for payments within the community. That said, the more significant benefit for these members exchanging dollars for ELMs is indirect. They know that they are helping nourish the ELM system with a constant influx of dollars. This support makes it possible for other individuals and organizations within Dancing Rabbit to get access to interest free money (like DRLT mentioned in the example above).
The Future of Dancing Rabbit's ELM System
Here’s how this scenario could come into being:
1. More people providing onsite labor, especially in homebuilding, accept payment in ELMs (This is already starting to happen).
2. More rental housing comes online, and the owners of this housing accept ELMs, allowing members to pay for rent using the local currency. (This is already starting to happen).
3. Existing food growers at Dancing Rabbit increase their food production, allowing more food to be purchased using ELMs. (This is already starting to happen).
4. More people move to Dancing Rabbit who grow food and accept ELMs in exchange for the food they sell. (This is already starting to happen).
6. New businesses start within the community and they also pay their staff in ELMs. (This is already starting to happen).
Ultimately, to reduce dollar expenses, more products and services have to be sourced locally from entities that accept ELMs. This illustrates the difficulties of creating a truly local alternative economy when using technologies such as off-grid power (photovoltaic, wind or hydro); computers, telephones, and the Internet; building materials such as rebar, cement, and metal fasteners; manual and power tools, and so on. However, the goal of Dancing Rabbit’s alternative currency system is to just keep moving in the direction of creating a sustainable local economy, which ideally will be resilient enough to endure even as the national economy continues to weaken.
Creating an Alternative Currency in Your Ecovillage
Here’s what Nathan advises for other ecovillage projects:
1. Your alternative currency system needs to be easy to understand. Do this by making it similar to what people already know — your country’s currency system — while maintaining the integrity of an interest-free money system. (For example: use your country’s currency instead of hours to denominate your currency).
3. People need to have confidence in your system. Do this by getting the most trusted institutions within your community to use your local currency. You can entice these institutions to participate by giving them the greatest access to interest-free money.
4. Encourage cash-earning members of your community to exchange their cash for community currency. This enables individuals or organizations onsite with cash expenses to still accept 100 percent of their payments in your community currency. They can do this because when they need cash again, they will be able to exchange their community currency with your cash-earning members.
5. The system needs to be self-governing. People need to know which entities are creating economic value within your system so that everyone can quickly and easily give these entities greater access to interest-free money in a decentralized way. (For example, create an “open money” system where everyone’s current balance value and cumulative transaction value is publicly available. Don’t have hard limits on negative account balance allowances, and allow members to refuse payments from those who they believe are taking economic value from the system).
If you support a healthy community currency in your community, that system will then create greater economic opportunities for all involved by eliminating the need for economic contributors to borrow money at interest!
Earthaven Ecovillage, where he’s involved with agricultural projects, village life, ecovillage development, and outreach. He introduced and co-organizes Earthaven’s Visitor Experience Week.
- Ecovillage Tour: Our Collage Class Visits Dancing Rabbit — May '10
- Will Earthaven Become a “Magical Appalachian Machu Picchu”? — May '09
- Is The Farm an Ecovillage? — Oct '08
- L.A. Eco-Village Stops Bulldozers! — May '08
- How Yarrow Ecovillage Got “Ecovillage Zoning” — May '08
- Whole Village Moves Ahead — Oct '08
- What We Can Learn from Ecovillage Sieben Linden — Jan '09
- From Russia with Love — Nov-Dec '09
- What Visiting Huehuecoyotl Taught Me — May '09