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  • Charity May

The Function of Money

Money plays a pivotal role in alternative economic systems, serving not just as a tool but as a language that shapes the entire economic framework. The way we define money, its purpose, and its operational methods, ultimately determines the nature of the economic system we inhabit. In these alternative systems, the goal of money is to foster an economy where all participants can collaborate towards a shared vision of thriving and collective prosperity. 


What is the function of money?

One of the most notable functions of money is that it is a medium of exchange. Money is the way we facilitate trade and economic transactions, where parties agree on the value of a unit and trust the exchange of that unit to make a trade. However, in our modern economy, money's central purpose has become more heavily weighted on storing value, thus perpetuating the incessant pursuit of accumulation. This creates a blindspot in economic functions, where we lose sight of the access that money can create when thriving as a medium of exchange instead of a driver towards accumulation.


What are the current problems with our monetary systems today?

While there are many, we’ll name here current challenges stemming from the mismanagement and misprioritization of monetary resources, as well as the centralized control of currency formation. Instead of fostering local economic development and supporting small businesses, resources are often funneled towards large institutions and corporations. This approach encourages unsustainable growth practices, environmental degradation, and the exploitation of workers and natural resources in pursuit of short-term profits, rather than promoting long-term sustainability and equitable distribution of wealth through creative measures.


How might small and medium businesses and community leaders address these problems?

Fortunately, there are alternative models that put the real needs of thriving communities first. These include mutual credit systems, barter networks, community currencies, shared asset pools, and more. At their heart, these models re-envision money not just as an extractive commodity, but as a catalyst for facilitating mutual exchange, reciprocal credit, and collectively strengthening local economic resilience.

One prominent example is Sardex, a successful mutual credit system operating in Sardinia, Italy since 2010. Sardex created a closed-loop credit clearing circle, allowing companies to buy and sell goods and services to each other using digital credits instead of euros. This boosts liquidity, supports local trade, and keeps wealth circulating within the network rather than being siphoned away. Over 10,000 companies have participated in exchanging over 220 million credits (equivalent to 220 million euros) as reported on their website in April 2024.


Why create separate markets and redefine money's rules?

By forming our own production, exchange and credit systems based on different rules and values, we can create economic counter-power to the dominant extractive model. We can collectively remove unnecessary intermediaries, prevent wealth extraction, and circulate real productive resources to those who need them most. We can embed principles of solidarity, reciprocity, and shared stewardship of commons and natural resources that our current debt-money system ignores. We can escape a system of artificial scarcity created by financial speculation.

Ultimately, by rethinking how we provision ourselves and facilitate exchange using tools like mutual credit, barter, community currencies and more, we take a step towards economic democracy, radically re-empowering communities, small enterprises and frontline workers to meet their own needs through self-determination and cooperation. We shift incentives away from a mentality of extraction and enclosure towards one of regeneration and mutual support.


An invitation to learn more 

If you're intrigued by these ideas, pick up a copy of our book Assets in Common. In this book, I delve into the story of the Sardex system and other examples of mutual aid where communities and businesses brought together different assets and capabilities in more collaborative ways.

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