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Sustainable economic development brought to you by . . .  Tesco?
Along with untold millions of other UK residents I buy my groceries at Tesco, where I recently signed up for a ‘ Tesco Club Card’ that earns redeemable ‘Tesco Points’ every time I shop.  I have only the weakest confidence that the scheme will save me money, but Tesco Points illustrate a larger point about the rise of complementary currencies in the modern economy and their potential for meeting public policy objectives.  Complementary currencies may also help explain why valuation problems may arise between the residents of different European regions as the Monetary Union continues to expand.

What are complementary currencies?
A complementary currency is money that people spend and circulate much like national money, but which is issued by an organisation that is not a national government, like a grocery store in this case.  Complementary currencies have a limited range of uses compared to national currencies and are sometimes referred to as ‘special purpose’ monies because they are useful only for particular transactions within a relatively ‘closed’ social network.  These are examples besides Tesco Points:

• Airline companies issue complementary currencies in the form of frequent flyer miles to ensure that customers are loyal to the airline in the long-term, and so the company can track customer spending and travel patterns with greater precision.
  
• Credit card customers who choose particular cards can earn points toward a charitable donation, a holiday, a car rebate, petrol, DVD rentals, or show tickets, depending on the card.  Again the benefit to the company is improved information on spending patterns, and heightened customer loyalty.
  
• In parts of rural Africa a mobile phone-based system of money transfer has emerged allowing individuals with no access to a wire transfer service to buy a voucher, equivalent to £10 or another sum in national money, scratch off the panel to get the voucher number, then text the number to a friend in another part of the country.   The recipient uses the number to redeem the cash.

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Bernard Lietaer in his book The Future of Money (2001) uses these examples and others to point out that today large companies regularly invent and issue complementary currencies to suit their own commercial needs.  Their motivation is simple: greater customer loyalty means a company can understand purchasing patterns, refine product lines, improve marketing strategies, and ultimately sell more product.  But Tesco’s problem is that my loyalty is a difficult thing to purchase outright with regular pounds and pennies.  What Tesco would like to acquire is actually a particular behaviour, a pattern of buying habituated to a particular location.

One way to acquire this behaviour pattern would be to pay me one lump sum to sign a contract of some sort to do all my shopping forevermore at Tesco.  Except this would be costly and difficult to enforce, and I would probably not spend my signing bonus with them.  So Tesco decided that a more advantageous solution would be to invent a special currency that I can only acquire by shopping at their company, and which I can only redeem in goods from their supermarkets.  In the exchange I get a very slight discount on my groceries and they get my repeat patronage.  But the important part is the mechanism they invented to be able to buy something that was nebulous, difficult to define, and largely unpurchasable with the national currency.  ‘Club Points, ’ frequent flyer miles, and credit card points are all monetary innovations by private companies to acquire things from people that have economic value but are essentially unpurchasable with the regular national currency.

Next page (2 of 4):
What about complementary currencies to meet public objectives?

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Further Information
For information on this article contact David Grover on the details below:..