Regionalentwicklung.de

The limits of globalised markets

From an economic point of view, the catchword 'globalisation' is often related to labour displacement. The contemporary economic system tends to produce products, where the costs of production are as low as possible respectively where the efficiency of production is high. That makes sense from a global point of view. Why should mankind accept additional expenditure for production, when the global division of labour allows efficient production?

But there are limits to the global processes of production because not all products are appropriate for export. Supply of services are not in any case exportable. Haircuts, nursing services, personal education, cultural services and various other services have to take place where they are 'consumed': namely, by the people or in the close surrounding of the people. (the export of an haircut is only possible if the customer is exported as well, this case would be called migration)
The same applies to regional products, like agricultural products, which depend among other things on local climate conditions. An other example is regional traffic.

From this follows: a multitude of products and services must be provided regionally, because they are not exportable.

The "drying-up" of regional money circles

Today's global currency systems follow a simple rule: money goes where the highest interest is expected. The maximum return on investment can be expected where the economic growth is high. Especially in developed regions there is a certain amount of economic saturation observable – that is visible as the stagnation of economic of markets (“zero growth”). Therefore money flows globally into fast growing regions and causes lack of money in regions, where economy declines.

This causes a self-energizing process: If there is a lack of money as medium of exchange, then the exchange of goods and services becomes more and more difficult. The unemployment rate increases, the economic growth decreases, more and more money flows away - and the wealth of several regions is at risk.

The individual, global currencies and the value creation chain

The responsible consumer answers to the process of globalisation with a new buying behaviour. He is more conscious about the products that he buys. He prefers regional products. With a global currency like the Euro the influence of the individual to control how much regional value the product entails is limited. In the worst case, it is imaginable that all production steps take place outside of the region. Just the labelling takes place in the region: 'made in Germany' (labelling industry). From a shallow point of view it might appear as if a regional product, that strengthened the individual's surrounding economy was sold. A closer analysis of the value creation chain would prove that this was not the case. How many customers have the opportunity for such an analysis and the time to arrange their shopping list adequately?

By using global currencies customer loses influence on what the seller will do with the money: is the regional value creation supported or depends the production completely on import.

Local currencies as a tool in the hand of final-consumers

The consumer loses control over the value creation chain by using a global currency and wins it back by using local currencies. If people buy by retail with a regional currency, than the retail can only spend the money within the currency region. No matter which supplier a merchant pays with local money – the supplier will spend the money again within the region. If a customer uses local money, then he can be sure that the product that he buys participates more in the regional value creation chain.

Regional currencies are some kind of tool for the consumer to gain influence on the whole value creation chain. Consumers are not anymore dependent on the regional consciousness of merchants and producers.

Regional currencies create regional markets

A currency creates a market. The Euro as the European currency lead to a huge single European market. A currency holds together all economic actors, who buy and sell within the same currency area.

A regional currency builds up a regional market. The dimension of the market is determinated by the dimension of the currency area. If a regional currency is used in addition to an supra regional currency, then the economic actors have the choice between two markets. Within the regional market people trade mainly regional produced services and goods. Due to the supra regional currency the access to supra regional markets is furthermore available.

The extra payment instrument, that is available to the economic actors, supports economic cycles that tend to “dry out” because of lack of Euro. A region, that creates itself an regional market with an regional currency enlarges its room for maneuver and develops its economic independence – the region still remains connected to the global market by using a supra-regional currency.

ecological aspects of regional currencies

Regional markets are organised within a smaller area. Transport distances decrease if the economic actors find their partners within the region. Local markets that are established through regional currencies bring the economic partners closer together. Long distance traffic decreases and costs for expensive fuel are saved. For the region this means a reduction of costs and effective environment protection.

If transport routes become shorter, it is easier for the individual, to observe the conditions of production. The idea that many customers can buy ecological sound products is foiled by an economic system that is constructed for global markets. The monitoring and control of production conditions is more difficult if the production takes place on an other continent. Within a region is it easier to influence the conditions of production. Especially for agriculture this is a valuable approach.

Conclusion

There are limits to the globalisation of markets. These limits cause disastrous symptoms. Regional currencies shape regional markets. For the economic partners the scope of opportunities increases because there is a global and a regional market. The consumer has more influence on the value creation chain and therefore on the mode of production. Transport distances become shorter and environmental pollution decreases.