Jumpstarting An Island’s Economy
Sardinia’s Local Currency—Sardex—Tolls A Familiar Ring
By Paul Smart
See if this sounds familiar: An online platform for doing business on credit for services and products one needs. Instead of using regular dollars and cents, there’s an account that starts with a credit for what one does, what one creates, based upon how much debt they and the people they trade with feel they can handle. Similarly, they set limits on how much credit they can handle from trading partners.
At the center of this transactional universe is a central entity that helps those involved find trades, good matches of products and/or services; and that their transactions maintain a good balance…for the benefit of all members.
The idea came about in an area that had many talents, lots of things to offer, but little cash or means of attracting outside investment. The idea was to take the local economy and grow it by keeping it local, by keeping its value from being dispersed elsewhere.
No, we’re not speaking about the Hudson Valley Current, but about something many are starting to hear about called Sardex, a regional business-to-business (B2B) “commercial credit circuit” or “credit club” members-only network that allows local Sardinian small and medium-sized enterprises to do business by extending each other euro-denominated credit rather than paying in cash. It started after the Great Recession left the scenic Italian island with an 18 percent unemployment rate; now Sardex has over 3,200 business members with more than $100 million in transactions a year.
Sardex signed up its first paying members in 2010, but then ran into trouble building that membership. It took a while to convince people from various trades, skill sets, and product lines to start sharing what they had. They wanted carpenters, but not too many. How to find doctors and dentists ready to try the new transactions? Grocers and farmers were willing, but what if they all grew artichokes, or made olive oil? Getting the mix right took time, and a lot of effort. Fortunately, Sardinia is an island, and quite ancient. It was easy, once one got the hang of it, to identify prospective members and reach them.
Local economy models like Sardex’s, and the Current’s, are all about a “credit loop” that allows members to do more and more of their economic transactions without using cash—in Sardinia’s case, Euros. It’s about building trust; everyone gets to see where other members stand in terms of credits and debits. But it’s also about helping one’s economic system grow by bringing in members that are beneficial on a truly mutual basis.
Think in terms of how immigrants made their neighborhoods work when they arrived in New York or other American port cities. Think about the base idea behind insurance, or how community banking started. But also what it takes to pay for all those introductions, that friendly oversight. The way Sardex funds itself is through annual membership fees. These help pay for the entity’s “brokers” to really get to know the inner-workings of their local economy through regular, in-person interactions with thousands of small and medium enterprises. But as the Sardinians at Sardex have found, the local economy process—the need for partner members to fill transactional needs, from products for employees taking pay in Sardex to farmers trading for medical procedures or carpentry—also makes all Sardex members equally expert, over time, in local economic issues.
The idea is to make 20 percent of one’s business local, or Sardex, says the currencies founders, and now its members. But some have found as they reach for that goal, they overleap it. How and why? They get to know the economy so well that they realize where the limitations of outside cash currency lie and move beyond them into new, previously unseen and profitable market niches.
A few years ago, my family was traveling around France and ended up in the city of Nantes, which everyone told us was sort of like Brooklyn or the Hudson Valley in its youth and vigor. We liked what we saw, including this sense that everyone seemed to be having more fun than they should, given what we knew about local unemployment rates. Yes, the prices were low, the art plentiful, the joie de vivre constantly palpable. But how did they achieve all that?
It turns out that they, like Sardinia, had started their own SoNantes membership…and similarly grown into 3,000 members in a matter of years. Which, we found out, was how young tradespeople and artists, tech geniuses and good-minded hard-workers, were finding means of living their lives, fresh from Paris and elsewhere around France and Europe, so comfortably.
Sound familiar? It’s all about getting what one wants in new ways, using what one’s achieving, creating, and dreaming up to help us all, economically and societally.