The most successful local currency system in the US was started as a reaction to the Gulf War in 1991. "Our country was just being dragged along by the huge armaments manufacturers and the need for oil to fuel the automobile" Paul Glover, the man responsible, says. "I felt that something had to be done to build a local economy which would enable people to supplant these forces."

Paul, a journalist, graphic designer, ecological urban planner and Vietnam draft resister who once walked from coast to coast across America along back roads, had been back home in Ithaca, a city of 30,000 people and the site of Cornell University in upper New York State, for several years before he started the system. In fact, he had already helped establish a LETS in the city, but this, having traded for ten months and achieved about sixty members, ceased operations when the Community Self-Reliance Center, the organisation which had set it up and operated its computer system, closed down in 1988. The experience convinced Glover that a much simpler system was needed - specifically, one in which the currency unit actually passed from hand to hand without the necessity for computer records. It was not just the high level of administrative input connected with a LETS which drove him to this conclusion: "Paper currency is more readily used for smaller transactions. Our local Farmers' Market could not be bothered to report dozens of small LETS transactions on market days. Now we're using paper money we find it moves faster than LETS credits, involves more people spontaneously and is more fun" he says.

A friend of Glover's, Patrice Jennings, had analysed the LETS experiment for her Master's thesis at Goddard College and together they devised the Ithaca HOURS scheme to avoid the worst snags her research had revealed. "There's no law against issuing a hand-to-hand currency if it doesn't look like US dollars, and it gets around all the record-keeping problems that we had encountered with LETS" Glover says. "I got about ninety people to back me by paying a minimum of a dollar to advertise whatever goods and services they were prepared to sell for HOURS in a newspaper I told them I was going to bring out. I don't think many of them really thought that very much was going to happen. In return for their money, I paid everyone four Ithaca HOURS so that they had some currency to use when trading began." Each HOUR represented a typical hour's work and had no exact monetary value at this stage in the system's development.

Glover then spent $300 to print 5,000 copies of an 8-page tabloid newspaper which contained 260 advertisements and gave details on how the system would operate. He distributed the paper, Ithaca Money, throughout the city in November 1991. "One of the problems with LETS is that the lists of members and the goods and services they want or are offering are distributed only to members: this means that only limited circle of people get the chance to participate. You've really got to get information about the system into the hands of the whole community, not just part of it. A newspaper seemed to me to be the best way to keep everyone informed" he says. "Moreover, like other newspaper editors I'm not responsible for supplying the tax authorities with information about the business affairs of my advertisers. If I was co-ordinator of a LET system I would have to do so as in the US barter transactions are taxable ⁹. We are not a tax avoidance scheme and I announce in every issue of the paper that it is each participant's responsibility to report to the IRS the dollar value of any professional trades made."

Trading began slowly once the paper appeared but grew month by month. By late 1993 when I visited Ithaca, thirteen editions had been published and 4,300 HOURS worth $43,000 were in circulation, the national-currency value of an HOUR having been fixed at $10, the average level of wages and salaries in the Ithaca area. "Initially, we just said to people 'Value them at whatever you think an hour's work is worth' and different businesses used different rates, which varied from $6 to $12.50. Eventually, though, we decided to standardise on $10. It makes life easier" Glover told me. "This does not mean, though, that offering an HOUR will buy you 60 minutes of every member's labour. We haven't felt it necessary to require professional people accept the same rate of pay as other types of worker. It's seemed more important to try to get the lower rates up but we've seen professionals cutting their rates in the spirit of equal pay. Most participants are getting far more spending power per hour when they are paid in HOURS than they do when paid in cash, so we can more readily afford professional services.

"HOURS are real money. They are backed by real people whereas Federal money is backed by nothing at all, unless you count four trillion dollars of national debt. If critics tell me HOURS are just Monopoly money, I point out that, on the contrary, they are anti-monopoly money because they would never be accepted by the huge corporations" he continued, proud that when a thief robbed a restaurant which accepted HOURS he went out of his way to take the HOURS as well as the regular cash. "They were kept separately. He didn't just pick them up with the rest of the money. That really demonstrates the extent to which they've been accepted. HOURS have also been used as the pot in a game of poker and because my landlord will take my rent in HOURS, I can pay for about 95% of what I need with them" he said. Glover earned 447 HOURS in 1993 from selling display advertisements in Ithaca Money.

Almost every conceivable trade and profession offers its services through the newspaper and the list of 250 businesses which accept HOURS is impressive. At the end of 1995, it included two locally-owned supermarkets, six delicatessens, thirty of the stalls in Ithaca's weekly farmers' market, and several restaurants on at least one night a week. The city cinema was not only taking them but giving change in Federal notes and coins, while the Ithaca credit union, although not maintaining HOURS accounts, would take them for loan repayments and other fees. "When our printer started keeping the HOURS printing plates in his safe, I knew they were being taken seriously" Glover comments. "He now takes part-payment in HOURS for each batch of HOURS he has printed himself."

What about the possibility of forgery? "Everybody asks that" Glover laughs. "In the US it's been found that forgers don't bother with notes of less than $20 in value, so we've taken great care to make our two-HOUR ($20) especially difficult to counterfeit. It is printed on watermarked paper hand-made from cattails (marsh-reeds) here in Ithaca using rare antique numerators for the matching serial numbers and a type of printing ink which is no longer manufactured." The other denominations have embossed serial numbers and are printed with several colours. Notes are also date-stamped when first issued in a colour sequence only Glover knows.

Glover spends a lot of time checking that retailers, who tend to earn plenty of HOURS, are able to spend them satisfactorily so that they will be happy to continue to take them. "I encourage businesses to start accepting HOURS in a limited way and then gradually extend. That's much better than having them go in too big and then cutting back drastically" he comments. "It’s best for a high volume business likely to have [a queue of ] customers at the till to take a fixed maximum amount in HOURS rather than a percentage." If he finds a business with a build-up of HOURS, he goes through the complete list of goods and services available for HOURS with the owner or manager and helps him or her draw up a shopping list.

These visits to businesses and contacts with individual participants (the Ithaca system has no formal membership) allow Glover to assess whether it is safe to put more HOURS into circulation, although the actual decision on whether or not to do so is taken by a twice-monthly meeting over a pot-luck meal to which anyone can turn up. So far, the rule has been to provide each new participant with four HOURS when he or she places their first advertisement and to allow them to claim a further two HOURS as a loyalty bonus if they are actively using the system eight months later. Interest-free loans are also available subject to the offer of suitable collateral. "We've also put HOURS into circulation by making grants to local community organisations who spend them on participants' services" Glover says. "In fact, we've been titheing. 9.5% of our total currency issue is given to groups according to decisions taken at our fortnightly meetings."

Since the Ithaca system has been growing, these methods of adjusting the number of HOURS in circulation have worked well. However, serious problems are likely to arise should ever the level of trading contract, as it might well do if the US economy picked up and participants found that, since they could earn Federal dollars more easily, they did not really want to be bothered with dealing in HOURS as well. In these circumstances, people might find it increasingly difficult to find anyone to accept their HOURS and the system could go into a tail spin, with holders dumping their HOURS for whatever goods and services they could still get from the diminishing number of people prepared to accept them. Such dumping would cause an inflation which would further undermine confidence in the system and could well lead to its collapse.

The chief structural weakness with the Ithaca HOURS system, then, is that it lacks any means of withdrawing HOURS from circulation if the level of trading declines. Indeed, although his antennae are highly sensitive to changes in activity level, Glover has no precise idea of the total amount of trading taking place nor how many people are actively participating: he employs two part-time workers, paid in HOURS, to check that people are still prepared to accept the Ithaca unit before repeating their listing in a new issue of the newspaper. The beauty of a LET system, on the other hand, is that nobody ever needs to decide on how many units ought to be in circulation or to make adjustments to it. Each transaction creates the purchasing power needed to carry it out and, if participants pay their obligations off and drop out, the number of units in the system automatically declines.

Glover replies to this type of criticism by arguing that even if the US economy recovered dramatically, it would not remove the need for local currencies. "In the Great Depression, local currencies were issued primarily as emergency money when banks closed and when federal programmes gradually returned dollars to communities, the local issues faded away. Today, however, we can expect local currencies to become secure and permanent money supplements because millions of well-paying industrial jobs have been shipped overseas, forcing many communities to re-invent their economies on non-industrial lines. Consequently, these communities will not see dollars return even if what is left of American industry prospers. Moreover, the supply of dollars has become so monopolised by the big corporations that money will have to be created locally for use by small enterprises and traders whatever the national economy does.

"Minimum-wage service jobs keep 20% of Americans below the official poverty level, forcing millions on to public assistance or into crime. Ithacans need so much more money than we have for food, rent, clothes, fuel and pastimes that we need to create it ourselves. Government, industry and the big corporations are leaving us behind. That situation is permanent. So, therefore, is our money" he told me in a letter.

Although it might have seemed at the outset that much less work was going to be required to operate a hand-to-hand currency than a LET system, this has probably not been the case, although Glover points out that a lot of his time was taken up by the continuing process of inventing the system and responding to contingencies. When I met him, Glover had just completed almost three years of much-more-than-full-time unpaid work to get the system going, not even issuing himself with HOURS to compensate for the effort he was putting in, although he had received five small grants during the period. Fortunately, though, that period of hardship was ending: he was finding it increasingly possible to delegate his work and the local credit union was paying him a regular stipend.

Glover thinks that discussing whether LETS or HOURS is superior a waste of time. "We will prosper by experimenting and learning from each other rather than theorising. I'm impressed by what I hear about LETS in Australia and include a news story I wrote in 1986 about the Ithaca LETS when that started up in case people want to try a LET system."

The fact is that no local currency of any type will thrive and develop unless there is at least one person prepared to put a great deal of effort into its first two or three years and, if at any stage Glover had limited his commitment, the Ithaca HOUR system would have been just as likely to collapse as the LET system which preceded it. "If I was hit by a truck even now, people would look at their money and start to question it so I'm institutionalising the system to make it less dependent me" Glover says. At the moment, the only formal structure behind him is an advisory board, which meets monthly, but the system is a legal entity as it is covered by the charter of the former Commumnity Self-Reliance Center.

As part of the institutionalisation process, Glover intends to hand over to others some of the work selling advertising in the newspaper. "I've exhausted all my contacts by now" he says. "New people will be able to gain access to groups which are culturally inaccessible to me." Another project which will help make the system less dependent on him is the opening of a shop through which people can sell things for 100% HOURS. "We had one on the main street last month but we had to close it after three weeks when the owner changed his plans. The store will provide an outlet for people who do things like baking bread or knitting sweaters and make it even easier for people who have earned HOURS to spend them"

Glover hopes that in a few years' time it will be possible to pay local taxes in HOURS and that almost all locally-owned stores will accept them. In the longer term still, he hopes they will help make the Finger Lakes Bioregion far less dependent on distant corporations and resources as part of a national change which turns the US into a nation of strong ecological local economies rather than a single national one. For the present, however, there is no doubt that the Ithaca HOUR works well for almost everyone who uses it. Hundreds of thousands of dollars worth of trading has been done and at least three thousand people have participated. Moreover, by the end of 1995, twenty other places had started HOURS systems.

"HOURS changed my life" Bill, an architect, was reported as saying in the system's newspaper, which carries success stories in every issue. "I had no jobs, was out of money and was scared. I got two jobs through Ithaca Money which kept food on the table and turned out to be steady work. One of these employers has become a good friend. Now I've got a third major HOUR job, very creative and exciting. There's a lot less stress associated with HOURS and they're fun to spend." Susan, another satisfied user, added: "I trust a person more who has HOURS in their wallet. It means they're invested in Ithaca and that they are willing to be open-minded about the value of labour."

The 200 similar testimonials which have been published so far demonstrate that, despite the HOUR's undoubted economic impact, its most important achievement so far has been to bring people together, create friendships and build community spirit. As Lynn, another user, told Ithaca Money "HOURS bring back the sense of co-operation and interdependence, of a more personal and caring economy."

2002 update on Ithaca Hours by Caroline Whyte

The idea of using Hours to pay local taxes is still being discussed with local authorities. There are issues concerning the legality of that kind of transaction. Another idea that hasn't yet been carried out is that of having a store in town that deals only in Hours. But there have been some other novel uses found for Hours. The Board of Directors recently made a large loan of 3,000 Hours to help the local credit union, Alternatives Federal Credit Union, build new headquarters. This should not only benefit the credit union but will also bring more Hours into circulation. The credit union is helping in turn by paying in large part for the printing of a new note, the one-tenth Hour (worth one dollar).

There's now also a successful program whereby Hours are given out to some employees as pay by community employers. The employees decide how many Hours they would like to receive as a proportion of their total pay, and they get them as part of their pay packets. This has been an effective way to get new members into the system without their having to do something other than their ordinary job to earn Hours. It also helps the employer to disburse the Hours that they receive from customers.

The Ithaca Hours system has influenced the development of many other local currency systems around the world. There are about 20 local paper money systems operating in Japan, and systems are also in place in Canada and Mexico, as well as numerous parts of the United States. The E.F. Schumacher Society has also been instrumental in helping these systems get established. Its website contains links to information about the these systems.