Special on purpose: complementary currencies in the hierarchy of money

Abstract

No money is universally acceptable. What distinguishes special-purpose monies (SPMs) from national currencies is not the fact of geographical or institutional constraints on their acceptability as such, but the intentional imposition of such constraints as a design priority. This article integrates SPMs into the theoretical framework of the credit theory of money and proposes a novel typology of complementary currencies. In this view, any money is part of a global hierarchy of credit monies. The position of each money in that hierarchy depends on its liquidity, including the degree of commensurability and convertibility, and on the degree of sovereignty that backs it, including aspects of sovereignty that are based on monopoly power and social norms that have no necessary link to states. The position of national currencies in the global hierarchy can be assessed along the dimensions of liquidity and sovereignty. Along the same lines, four types of SPMs can be distinguished. Non-commensurable SPMs backed by some form of sovereignty and connected to public provisioning systems appear to be a more promising instrument than private convertible currencies for supporting effective sustainability transitions.