The big problem about abolishing the pound is that one interest rate cannot possibly suit a whole continent, and the bigger the currency, the more dangerous the effect on poorer people of pretending that it does. Germany’s economy, for example, has been greatly damaged by the belief that one currency can suit east and west. Argentina’s present plight can be traced back to its decision to link the peso to the dollar.
Changing the value of their currency, or varying their interest rate, is how disadvantaged places make their products more affordable. When you prevent them from doing these things, you trap whole cities and regions into poverty with no way of trading themselves out.
Even the single currencies of, say, Britain and the US are not satisfactory. Central banks set interest rates to favour their capital cities. At the Bank of England, Eddie George has often confirmed how the pound divides the south from the manufacturing north. In London, the level of the pound is geared to the needs of the City, pricing out homes or activities that are not directly related to financial services. In the US, you can see great gulfs between rich and poor, with cities such as Detroit in deep depression.
And that is the danger of the euro. It brings success to places that are already successful, but plunges regenerating cities such as Glasgow and Manchester into a bigger struggle.
The solution is not one currency, but currency choice. Go into any branch of Marks & Spencer these days, and you will find at least one till where you can pay in euros. The same is true of many other big names in retailing. And even if you can’t yet pay in euros in some of the smaller chains – Accessorize, for example – you will find prices of everything in both currencies. So whatever the outcome of the current tussle between the Prime Minister and Chancellor about the euro, the currency is going to be circulating in Britain anyway.
There is nothing new in this: any tourist is familiar with countries where people prefer US dollars to the local currency. Indeed, more than a quarter of all US dollars circulate outside the US – many of them in neighbouring Canada.
It makes sense for businesses that have customers who hold euros to persuade them to spend them here; equally, it makes sense for people with holiday money left over to spend it here instead of changing it back to pounds at high cost.
It is true that this circulation is pretty small-scale so far, and it is often hard to get change in euros even if you can use them at the till. But taken together with the increasing pressure on British exporters to invoice in euros, this may be a more important phenomenon than it looks. It could change the basis of the whole euro debate in the UK – taking it beyond the stark yes or no that we are confronting.
Pro-Europeans like me could campaign for an incremental euro, taking its place alongside the pound because people use it, and not because it is foisted on them. We could campaign step by step for local authorities to accept payment for fines in euros or for the government to accept tax in euros.
And there is no reason why we should stop there. As we have seen, it is not just that the euro is too big a currency for the whole of Europe; the pound is also too big a currency for the whole of Britain. If the pound and the euro both circulate in Britain – one geared to the City, the other to the needs of big euro-business – that will make it easier to solve problems of inequity, by setting up other parallel currencies alongside them.
This would lead to a future where London had its own currencies – geared to the needs of small business, and providing cheap loans. They would circulate alongside the pound and the euro, but they would not flow away, because nobody would be able to use them in offshore hedge funds. East Anglia, Tyneside and Truro might all have their own currencies to underpin local needs. We would use whichever one suited us best, depending on the occasion. We wouldn’t have to make a once-and-for-all choice between, say, euro and truro.
Complementary currencies are about using resources better, allowing small business more access to low-cost loans, underpinning different aspects of our lives. They could circulate on smart cards and be downloaded on to mobile phones. You may think this is hopelessly futuristic, but a multiplicity of complementary currencies is emerging in Japan, and there are dramatic stories of local regeneration – in Ithaca in New York State, for example – thanks to local currencies that support farmers. The highly successful, 70-year-old, Swiss WIR system does much the same for the restaurant and building trades.
In Argentina, a rush of regional currencies is all that is now keeping some people alive – although because these kinds of money have no proper backing, the IMF is probably right to be suspicious of some of them.
Two-thirds of all Fortune 500 companies now use electronic currencies called trade dollars through business barter networks. Pounds, dollars and euros, they find, do not value all their assets very well. They can sell advertising space, airline seats, shirts in last year’s colours for trade dollars, when they can’t for euros. Why should not cities and communities be able to do the same?
Indeed, if we do abolish the pound, we shall need parallel currencies of this sort to offset some of the effects in disadvantaged cities, regions and sectors. They are an alternative to American levels of division between rich and poor, which are the inevitable result of relying on an American-sized currency.
But even if Gordon Brown wins his struggle with his next-door neighbour, and we hold back from the euro after all, we might still find complementary currencies would help make Britain a more equal, more efficient place than it is now.
David Boyle is a senior associate at the New Economics Foundation, which will publish a report on the euro, Beyond Yes and No, later this month
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