This paper suggests an investigation into the local currency system located in a slum in the town of Fortaleza, Brazil. The slum (in Brazilian called a favela) Conjunto Palmeiras, has for about fourteen years used a community currency system that has received little attention from the academic community, which is curious since this particular currency system consists of a rare combination of microcredit loans and local currency (Blanc 2010). The local currency is called Palmas, meaning hand in Portuguese, and the supplier of the currency is named Banco Palmas, meaning bank of hands. Banco Palmas provides microcredit loans to local people wishing to either produce locally, buy the local production for local distribution or to provide services locally (Ashoka n.d., Hirota n.d.). Anthropological investigations have more or less as a rule been about the local, which also here seems like a backdrop to which the scene of the conducted fieldwork will be played out.
First, I would like to outline the historical and technical mapping to which the scene is set, focusing mainly on the establishment and workings of the system. Secondly, I will present some focal points mainly based on what, to me, seems to be paradoxes in the inherent workings of the system within a grander picture, i.e. the local economy seen as a system set within both a national and a global economy. I will make an emphasis on mobility, or rather the restrain on mobility, which seems to come to fore if the social scene is compared to the system’s formal inherent workings. Hence, I feel that it is necessary to stress that the presented formal outlining of the currency system is a framework constructed on the grounds of secondary information, and may not play out in the same way empirically or in emic terms, as this is merely a pre-empirical investigation.
A bank is “born”
During the 1980s a lot of favelas were erected in Brazilian big cities, with the intention of housing the growing city population in the outskirts of the town centers (Ashoka n.d.). Necessary infrastructure such as sanitation systems, running water, electricity, and sewage systems were usually of a minimum standard, but at least provided residencies with the basic living conditions. The infrastructural services would increase rents and property taxes due to maintenance charges, and resulted in a downward spiral of the favelas conditions when the average income did not proportionally increase with the increase of expenses in the latter days of the 1980s.
A priest named Joaquim De Melo Neto Segundo witnessed the decay of Conjunto Palmeiras during the 1990s and wanted to change its course. He rounded up local stakeholders in the community: people with connections to the local churches, to the local schools, to the local soccer clubs and with connections to the wide range of other cultural groups, as a first step toward the goal of solidarily raise the community toward economic empowerment (Schwartz & Drayton 2012).
Banco Palmas was established in 1998 as an initiative to provide credit opportunities to local people who elsewhere would be denied credit loans. The bank followed a microcredit model offering low interest cost loans to people who wanted to produce locally, people who wanted to buy locally for local distribution, and to people who wanted to offer different kinds of services locally (Ashoka n.d., Hirota n.d.). Later on, the bank also introduced a local currency that was backed up by the national currency in a 1:1 relation, meaning that one Palma in theory is exchangeable to one Real (the official currency of Brazil). The currency notes were printed with a unique bar code and serial number to prevent counterfeiting. Eventually, Banco Palmas offered credit cards with limits, which were supposed to encourage further circulation of the local currency, although now also in the virtual sense. This makes it seem like Banco Palmas is very similar to any other mainstream financial institution found in the global economy. However, it does differ on some levels, as we shall see when it comes to the basis of social relations and social backing as security for debtors.
The technicalities of liquidity
When looking at the inner workings of microcredit provision and cash flow, the picture turns out to reveal mechanisms and definitions, which in terms of the economic system seems reasonable, but in the social system seems paradoxical. First, I will start with outlining Banco Palmas’ policy on microcredit, and then turn to a logical approach trying to uncover where an investigation would best be departing from. Let us, for the sake of the argument, define the receiver of a loan as a debtor. The debtor can be a producer, distributor and service provider. Later in the argument, the debtor will also turn out to be consumer, employer, employee, and in other roles also a society member, neighbor and guarantee. My main point is that I’m not speaking of homogenous groups, but of actors within different frames of which they are to be identified.
The microcredit loans are given to local community members to make them contribute to the local production, distribution and consumption, i.e. to ensure and secure a provision of goods and services in which the community can suffice and reproduce themselves by. These to-be-debtors are usually disconnected from the financial credit due to low financial security (Schwartz & Drayton 2012). Financial institutions would normally not take the risk of providing loans when the guarantee of getting their investment back is low or close to non-existent (this is called a lack of liquidity referring to the ability of paying debts). And if they take the risk they would set the interest as high as possible, which seems like a bad deal on an already high-risk debt, at least from the debtor’s perspective. Banco Palmas, however, does not require security in measures of income and economic stability (and similar) of the applicant. In stead, they need security given by proof of social backing by members of the community, such as the applicant’s neighborhood or block (Ashoka n.d., Schwartz & Drayton 2012). We could call this the social liquidity since it would imply that the applicant must have relations within the community based on a trust strong enough for the interrelations to approve of, and trust in, the applicant’s initiative and the initiative’s probability of success. This actually implies a conversion of social relations to the ability of paying back actual quantified debt. Another implication also seem apparent: the debtor obliges to give something back to the guarantees by providing the production, distribution or service within the community, which of course is laid out as an explicit term between debtor and bank if the loan application is approved (hence according to Banco Palmas’ community empowerment program).
Understanding the microcredit is fundamental for the currency system because it introduces the means to begin production in the first place. Unless they produce for their own consumption, which would have ended the economic system and Banco Palmas’ program before it had even started, the producers are dependent on distribution. The producers may themselves be distributors, which actually is a fact in Conjunto Palmeiras where market place sales straight from the producers are encouraged (Ashoka n.d.), but the division of labor is more effective for both consumer and organization purposes. It can also support more producers for a broader distribution, and engage more local community members as employees.
According to capital logic, following Marx’ grand opus (2005), exchange starts with the distribution of products (Bunzel 1979). Distribution is actually the venture point of circulation, and, thus, the venture point of currencies used to simplify exchange and transactions. This is where, I will argue, the Palmas’ possibility of coming into being originated, but not solely as an independent means of exchange, but as a dependent on the microcredit system providing both means of production and the means of distribution. In other words, a measure of some sort of value (in this case the Real) is introduced beforehand of the local community currency’s existence. But if we follow Graeber’s argument that monetary economy starts with debt (2005, 2011), i.e. value as a virtual measurement, then the odd causality of one measure of value creating another measure of value could be transcended through abstraction, i.e. the microcredit starting out as virtual, the loan given as hard cash and eventually interchanging this into a community currency. The distribution link, hence, seems like a good place to start investigations to understand the currency system. But this is not all because of the logical conclusion based on origin, hence the discussion below.
Means of purchases is not limited to Palmas, but are also accepted as Reais (plural of Real). This means that the distributor acts as a mediator between two sorts of currencies, hence the often-used term complementary system for local currency systems. The distribution link would also be the acceptant of credit card purchases, which in a way re-introduces the virtual into the system from whence it once came. Thus, the distributor is a mediator between the different producers and the consumers, and a mediator between the local currency and the national currency, but also, at least as argued above, between the virtual in the one end and the virtual in the other.
The paradoxes of an “endogenous” economy
Even though Polanyi (2001) mainly argued that the market economy originated with the help of stately intervention (Graeber 2001:10), he also emphasized that the economy cannot exist as an endogenous system (also see Hart, Laville & Cattani 2010). Nearly 70 years later the latter seems to be quite right. The globalization following in the latter half of the twentieth century introduced new theoretical focal points emphasizing flow, disjuncture and discourse (Appadurai 1996, 2002, Ferguson 2002, 2009, Moore 2004). Since its origin Banco Palmas’ program has been to strengthen and empower the local community due to the economic marginalization through the 1990s. Its investments in local resources has been fruitful, but it seems like there may be some issues that should be investigated further regarding the community’s social relations seen in the light of Polanyi’s statement.
The system seems to be working as an immobilizer in some aspects. First of all, if you want to improve a community, you need to locate and secure the resources at hand. In my discussion resources are limited to the human interrelations as a basis for the system to function properly. The introduction of the Palmas provided a possibility of wages paid solely in the local currency to the employees. Conversion from Palmas to Reais is possible, but comes with a charge (Ashoka n.d.). If we regard the Palmas as buying power, then conversion to Reais decreases it. On the other hand, member clubs exist where some shops gives discount when purchases are made in Palmas, which enhances the buying power of the local currency. This move seems to be an incentive to reduce the mobility of the currency’s users, i.e. the community’s resources. The same goes for the debtors dependent on social liquidity. The latter group raises an interesting problem: is the debt to the guarantees, i.e. the debtor’s social relations, payable?
Decoding the system in relation to this question seems to me to be the main focal point of such an investigation, and puts this research project into a long line of anthropological studies in economy. In today’s wake of the financial crisis of 2007, we are experiencing disturbances and demonstrations from mostly unemployed youth in the southern parts of Europe, mainly Spain and Greece. My suggestion would be to look at Conjunto Palmeiras as an alternative when, and if, an economic crisis occurs. This would be a direct response to the recent requests from economic anthropologists to where a future economic anthropology should be headed (Gregory 2009, Hann 2010, Hann & Hart 2011, 2011, Hart, Laville & Cattani 2010, Olivier de Sardan 2005). The similarities between the local currency system’s different functions and the functions of the financial global economy seem apparent. An investigation might thus potentially be of a more general contribution to economic studies rather than particular in its rarity (Blanc 2010).
As argued, the social and the economic may be based on conflicting models, and initially seem so in a pre-empirical investigation. Starting with the distribution link as a venture point, following the trajectories from there to the microcredit provider, the producers and, of course, the consumers, could lay bare an overview which could be put against the empirical evidence gathered through participant observation in the actors’ social life. Put in short, my argument shows a possible response to the request of a new interest in the branch of economic anthropology with the possibility of contributing to the methodology in economic studies.
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