Crisis Mitigation through Cash Assistance to Increase Local Consumption Levels—A Case Study of a Bimonetary System in Barcelona, Spain

Susana Martín Belmonte,Jordi Puig,Marta Segura,Mercè Roca

doi:10.3390/jrfm14090430

Abstract

Subsidies in the form of direct transfers from the government to citizens constitute a powerful mechanism for crisis mitigation and for the alleviation of economic inequalities. However, the connection between direct transfers of cash assistance to selected individual beneficiaries and the prosperity of their immediate surrounding local economy has not been sufficiently explored. This paper presents a case study which analyzes the effects of allocating cash assistance in the form of a local currency. It shows that, under certain conditions, such a transfer not only provides the beneficiaries with additional purchasing power to satisfy their needs but also that the monetary injection benefits local SMEs by generating additional turnover. Using transactional data from the system, some indicators are proposed to analyze the properties of the system, namely, user satisfaction, total and average income generated by local businesses, the local multiplier, the recirculation of the local currency, and the velocity of its circulation. Our findings indicate that cash assistance provided in the REC local currency could contribute to local economic development and financial stability by sustaining local commerce, while preserving most of the original positive effects of cash assistance in a legal tender.

Highlights

Complementary currencies are monetary devices that are frequently issued as notfor-profit initiatives with the purpose of fostering social and economic transformation and development at the local and regional level (Gómez 2019; Gómez and Dini 2016) to protect, stimulate, or reorient economic activities (Blanc 2011).On the other hand, subsidies in the form of cash transfers have been increasingly used in the mitigation of economic inequalities and for the development and humanitarian aid initiatives
Our findings indicate that cash assistance provided in the REC local currency could contribute to local economic development and financial stability by sustaining local commerce, while preserving most of the original positive effects of cash assistance in a legal tender
From the theoretical propositions that led to the case study, we focused our attention on key questions and data, from which we extracted a set of indicators that allow evaluating to what extent cash assistance paid in REC achieved the objective of linking aid with local economic development or promotion

Summary

Introduction

Complementary currencies are monetary devices that are frequently issued as notfor-profit initiatives with the purpose of fostering social and economic transformation and development at the local and regional level (Gómez 2019; Gómez and Dini 2016) to protect, stimulate, or reorient economic activities (Blanc 2011).On the other hand, subsidies in the form of cash transfers have been increasingly used in the mitigation of economic inequalities and for the development and humanitarian aid initiatives. This article analyzes the performance of REC, a pilot local-virtual currency, which is part of a bimonetary system in Barcelona, Spain This consists of the REC monetary system and a euro prepaid bank card, and it is used to pay the so-called Municipal Inclusion Subsidy, provided by the Barcelona city council to disfavored citizens of 10 predefined neighborhoods. Such public policy is aimed at creating a positive economic impact, on the subsidized beneficiaries, and on their surrounding local economy. In the USA, cash assistance has declined in favor of in-kind aid, and this has been associated with a reduction in the wellbeing of impoverished families with children (Shaefer et al 2019)

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