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Fiscal localism comprises institutions of localized monetary exchange. Sometimes considered a backlash against
global capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
or
economic globalization Economic globalization is one of the three main dimensions of globalization commonly found in academic literature, with the two others being political globalization and cultural globalization, as well as the general term of globalization. Econo ...
, fiscal localism affords voluntary, market structures that help communities trade more efficiently within their communities and regions.


Fiscal localism

"Buy local" or
local purchasing Local purchasing is a preference to buy locally produced goods and services rather than those produced farther away. It is very often abbreviated as a positive goal, "buy local" or "buy locally', that parallels the phrase " think globally, act lo ...
is the most visible face of fiscal localism. There are more complex institutions (both new and well established) that contribute to a community's ability to flourish. Institutions like
credit unions A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including deposit accounts, provisio ...
, CDFI's (Community Development Financial Institutions), and
local currency In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community curren ...
or
complementary currency A complementary currency is a currency or medium of exchange that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies. Complementary currencies are usually not legal tender and thei ...
all can contribute to making communities more resilient and wealthy. Local currency has been in the news most, with journalists citing the Berkshares in
Massachusetts Massachusetts (Massachusett language, Massachusett: ''Muhsachuweesut assachusett writing systems, məhswatʃəwiːsət'' English: , ), officially the Commonwealth of Massachusetts, is the most populous U.S. state, state in the New England ...
, and the
Ithaca Hours The Ithaca HOUR is a local currency formerly used in Ithaca, New York and was one of the longest-running local currency systems, though it is now no longer in circulation. It has inspired other similar systems in Madison, Wisconsin; Santa Barb ...
in
Ithaca, New York Ithaca is a city in the Finger Lakes region of New York, United States. Situated on the southern shore of Cayuga Lake, Ithaca is the seat of Tompkins County and the largest community in the Ithaca metropolitan statistical area. It is named af ...
. Beyond these salient examples, there are thousands of local currencies all over the world. Fiscal localism is rooted in the concept of
decentralization Decentralization or decentralisation is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group. Conce ...
. The creation and maintenance of a regional economy is supported by communities who believe that their community is economically better off sustaining itself rather than being part of and relying upon a larger economy, such as a national economy or the global economy. This is a movement against the increasing globalization of all economies around the world. The main tenets of fiscal localism include buying products that are made locally and using a currency that is unique to that local economy. This allows a community to grow at a controllable and sustainable rate by supporting farmers, shopkeepers, and service providers of a community. Consumers in these communities are more informed about how their foods and products are grown and made. Using a unique form of currency allows a community to determine its economic growth and health more accurately than using metrics of a national economy to gauge economic health. Taxation in these communities is emphasized at the local level and low importance is put on national taxes. These communities want to separate themselves from the larger national economy so they must rely on revenue generated from local taxation. Banking is also preferred to be done on a local level. Communities that follow fiscal localism would rather have one local bank than be customers of a massive bank that does business across the country as well as internationally.


Local currency

Unique currencies used by local economies are often backed by a national currency. The town of Totnes, England, from 2007 to 2019 used the Totnes Pound, which was backed by the British Pound sterling at a one-to-one ratio. The idea behind using a unique, local currency is to keep money flowing through the community while preventing money from leaving or relying on money to enter the community. This allows a community to become self-sufficient, have enough funds to create an energy source for the community to use, and eliminate transportation costs for bringing products into the community. A large reason Totnes wanted to become self-sufficient is to decrease its dependence on the use of oil; the town believed that it would be better off in the long run if it were able to operate without relying on oil, which is a finite resource. Following in Totnes' footsteps, several other English towns have established currencies of their own: the Bristol pound, Brixton Pound, Stroud Pound, and Exeter Pound. A few towns in the United States have also adopted unique currencies. Berkshire, Massachusetts and Ithaca, New York have implemented Massachusetts BerkShares and the HOUR, respectively. While a BerkShare is worth $.95 US dollars, the HOUR is not convertible to US dollars or any other type of national currency. Calgary Dollars, created in 1996 as the Bow Chinook Barter Community, has not been backed by or exchangeable with national currency, Canadian dollars. Their belief is that the valuation of 1:1 without exchangeability allows exchanges to be simplified but reduces the linkages to the problems associated with national currency that complementary currencies are seeking to address such as currency speculation and interest-bearing design. This concept is to "complement" the national currency with unique Calgary Dollars economic activity and increasing the local multiplier of both the Calgary Dollars and the associated percentage of national currency that is often included in the transactions. A British Quaker colony in Pennsylvania created and used the Pennsylvania Pound in the 18th century, but fiscal localism failed for the colony and the currency was abandoned. Lorenzo Fioramonti, director of the Centre for the Study of Governance Innovation at the University of Pretoria in South Africa, believes that the European Union would be more stable if it used multiple local currencies combined with a "digital euro".


Taxes

Proponents of fiscal localism argue that paying higher local taxes and lower national taxes will help communities grow and thrive. A report from The TaxPayers' Alliance states that a decentralized form of taxation leads to a more efficient public sector. This report references a German econometric study which found that "government efficiency increase with the degree of fiscal decentralization". Reasons used to support local taxation include responsiveness, cost efficiency, incentives, and accountability. The Spanish Institute of Fiscal Studies conducted a study over a period stretching from 1972 to 2005 using data from 23 countries regarding taxes. The study found that "reducing the share of central government in total tax revenue by one percentage point boosts long-run GDP growth by about 0.06 per cent per annum". Setting local taxes is complicated, because too high a tax rate will lead to taxpayers refusing to pay while too low a rate will not give the local government enough funds to function and operate effectively. These taxes are separate from state and federal taxes and are not set at the state or federal level. Increasing local taxes allows a community to reinvest revenue generated from the taxes into public institutions or programs that help the local community. Residents are able to physically see and experience where their tax money is going and how it improves their lives.


Banks

Modern banks have become monolithic institutions with thousands of branches in their respective countries of service. This globalization of banking institutions and the banking practices used by these organizations is the antithesis of what fiscal localism is about. Toby Blume argues for a shift in the banking system in his essay "Changing the Debate: The Ideas Redefining Britain." Blume writes, "A more localised banking system - which is more common in other countries but we don't have in the UK - provides a way to connect surplus capital with productive purpose (for the mutual benefit of savers/investors and borrowers)." Advocates for fiscal localism argue that the banking system should be restructured to accommodate the needs of smaller, local communities. These communities that are built around the tenets of fiscal localism want to have local banks that have consumer bases which are limited to the population that is geographically located around the bank. This allows the bank to know its customers on a personal level in order to determine the risk of giving a loan out to someone who lives in the community. It also allows the bank to use its excess capital to invest in services and businesses that are located in these towns, which in turn spurs the local economy at a consistent growth rate.


Local exchange trading systems

A local exchange trading system (LETS) is composed of local members that want to trade goods and services with other members in the group. These LETS use a unique local currency on which all trade is based upon. Those who are in LETS believe that they benefit both the members and the local community due to the organized nature of these LETS. The five core traits of a LETS include “cost of service, consent, disclosure, equivalence to the regional currency, and interest-free.” Member transactions through a LETS do not have to be solely monetary. A purchase can be repaid through a service performed for the other member involved in the transaction.


Brexit Brexit (; a portmanteau of "British exit") was the withdrawal of the United Kingdom (UK) from the European Union (EU) at 23:00 GMT on 31 January 2020 (00:00 1 February 2020 CET).The UK also left the European Atomic Energy Community (EAEC or ...

A recent, and perhaps the most widely known, push for fiscal localism occurred when the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
voted to leave the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
in 2016. The
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
is an economic union that was formed in order to allow free movement of resources and capital between the countries that compose the organization. Discussions of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
leaving the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
have gone on for many years, but was not made official until the public of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
voted to leave. Many of those who were proponents of leaving the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
wanted to do so for economic reasons. Nigel Farage, one of the most prominent endorsers of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
leaving the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
, wrote, "We know that the European Union is hell bent on further, deeper centralisation." The disdain that
Nigel Farage Nigel Paul Farage (; born 3 April 1964) is a British broadcaster and former politician who was Leader of the UK Independence Party (UKIP) from 2006 to 2009 and 2010 to 2016 and Leader of the Brexit Party (renamed Reform UK in 2021) from 20 ...
has for centralization is rooted in both economic and political reasons, but the economic reasons lie in his desire for increased fiscal localism. Many citizens of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
share the same negative view of centralization. This resulted in the voting populace choosing to leave the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
. This historic decision of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
is an example of a community choosing to reject the increasing globalization of economic institutions and policies. However, many citizens of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
did not want to leave the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
. These opponents of Brexit preferred to remain in an organization that encouraged wealth and services to move freely among countries within the union. Then Prime Minister of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
,
Theresa May Theresa Mary May, Lady May (; née Brasier; born 1 October 1956) is a British politician who served as Prime Minister of the United Kingdom and Leader of the Conservative Party from 2016 to 2019. She previously served in David Cameron's cab ...
said in April 2016 that if the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
left the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
, "There would be little we could do to stop discriminatory policies being introduced, and
London London is the capital and largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary down to the North Sea, and has been a major s ...
's position as the world's leading financial centre would be in danger."


See also

*
Barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distingu ...
* Credit union * Cooperatives * CDFI * Community currency * Community-based economics *
Informal sector An informal economy (informal sector or grey economy) is the part of any economy that is neither taxed nor monitored by any form of government. Although the informal sector makes up a significant portion of the economies in developing countrie ...
(aka informal economy) *
Local multiplier effect The local multiplier effect (sometimes called the local premium) is the additional economic benefit accrued to an area from money being spent in the local economy. The concept has been taken up by advocates for "spend local" campaigns in addition to ...
* New Economy movement * Time-based currency * Time banking *
Transition Towns The terms transition town, transition initiative and transition model refer to grassroot community projects that aim to increase self-sufficiency to reduce the potential effects of peak oil, climate destruction, and economic instabilitythrough ...


References


External links

* * * * * * {{Globalization , collapsed Localism (politics)