Can complementary local currencies with universal basic income reduce inequality?
A complementary currency may reduce inequality in the absence of a well functioning means of payment. The currency may promote additional transactions, which otherwise would not occur. It turns out that this is especially the case in sparsely populated or geographically detached areas with a large portion of households with low incomes.
Shayma Lamsallak, 2021
Bachelor Thesis, Verein Encointer
Betreuende Dozierende: Mathias Binswanger
Keywords: complementary currency, UBI, demurrage
Encointer is a blockchain platform for local community cryptocurrencies. People in a community can come together to launch and name their own local currency. Every 41 days, there is a meetup, where they confirm each other’s personhood. Once successful, everyone gets a UBI on their cell phone wallet. The objective of the paper was to find out what the necessary conditions for Encointer are to succeed in reducing inequality. And why the approach to reduce inequality is done through a complementary currency instead of a progressive income tax.
An analysis of four existing complementary currencies outlines how they work, who the participants and what the benefits to their communities are. This shows what kind of businesses take part in a complementary currency and what is needed to be successful. Lastly, an example community is envisioned, that succeeds in reducing inequality.
Of the four existing complementary currencies, only one works in an environment with deficient liquidity. Its benefits include reducing inequality in the community, as people can meet their basics needs through this alternative currency. The other three complementary currencies show benefits such as strengthening the regional economy. Moreover, a complementary currency needs to make transactions happen that otherwise wouldn‘t occur. Various research show that the best community for a complementary currency is situated in a less populated or geographically detached area with households with relatively low incomes. Furthermore, the analysis outlines that inequality can only be reduced in surroundings with deficient liquidity. Finally, the example community displays how people can trade their goods and services to each other through Encointer and how it helps them to meet their basic needs.
Studiengang: Business Administration International Management (Bachelor)
Fachbereich der Arbeit: Accounting, Banking, Controlling and Finance