Community Service, which became The Arthur Morgan Institute for Community Solutions in 2009, was founded in 1940 by Arthur Morgan. November 14th, 2020 marks our 80th anniversary! As part of our celebration of our 80th anniversary, we’ll be posting 7 archival reflections, as well as our vision for the future. This is the fourth post in this series.

Back to the Future: The Yellow Springs Exchange by Megan Bachman

If you spend $100 at a locally-owned business, about half stays in your community to be re-spent; by contrast, only $14 spent at a chain store does. Known as the “multiplier effect,” it’s a simple way to explain how buying local is a boon to one’s local economy.

But what if we could keep money local by design? That’s one function of a local currency, an idea that has long been explored at the Arthur Morgan Institute for Community Solutions.

In this week’s 8 for 80 series, we look at the history of our founder’s own local currency experiments during the Great Depression, and his broader efforts to promote an economy of local self-sufficiency.

In the height of the depression in the early 1930s, then-Antioch College President Arthur Morgan saw that there was plenty of everything in the community of Yellow Springs — farm products, raw materials, factories, workers, even money in the banks — but that many were struggling to put food on the table. 

“Everyone is talking about the curious condition of our country in which there is an abundance of everything, and yet many millions are in want,” he wrote in August 1932.

So, with the help of others, Morgan set up a local barter exchange in a storefront in downtown Yellow Springs and issued a paper currency so people could “exchange what they have for what they want." The Yellow Springs Exchange was born. 

“If we can thaw out the frozen resources of our own community and can exchange the things that are produced right here, and consumed right here, we may help our local situation very much,” he wrote in an announcement of the exchange. 

In the model, both goods and services could be exchanged, everything from food, furniture and clothing to the services of architects, doctors, seamstresses, plumbers, dentists, teachers, farm laborers and more. The exchange facilitated direct barter, but also issued paper currency, which could only be spent locally and expired after two years (to keep the money circulating).

“Many persons would be glad to do one kind of work in exchange for another,” Morgan explained of the barter idea. “A woman may be glad to can fruit or vegetables for someone, in exchange for having a dress made. The dressmaker may be glad to make the dress in exchange for having her roof mended. The carpenter may be glad to mend the roof, in exchange for the services of a dentist. The dentist may be glad to do the work, in exchange for having some fruit canned.”

“If such things as these can be done among ourselves without the use of legal money, we may get many of the things done that we cannot seem to afford now,” he wrote.

Morgan’s local economics vision went beyond Yellow Springs. He also set up a Midwest Exchange, which could facilitate the trade of items that couldn’t be procured locally, such as coal and gasoline. The larger exchange would be made up of smaller exchanges, ideally 50 or so, including the original one in Yellow Springs.

But in 1933, Morgan’s energies were pulled elsewhere, when President Franklin D. Roosevelt tapped him to be the first chairman of the Tennessee Valley Authority. His ideas for community building came to fruition with the development of the cooperative worker’s town of Norris, Tenn.  But he also continued to promote his somewhat radical ideas for revitalizing the economy of the whole region.

In a Nov. 1933 speech in Knoxville, Tenn., brought to light by researcher Paul Salstrom in a 1988 thesis on Appalachia, Morgan promoted an economic system for the area centered on self-sufficiency. Those ideas, Salstrom would argue, were used by his fellow chairmen to discredit him in Washington, D.C., which Morgan believed to play a role in his dismissal from the agency in 1938.

“I do believe that to a certain limited degree this region might well set up its own local economy,” Morgan said to the Third Conference on the Companionship Between Agriculture and Industry. “It can produce its own goods and deal with it. But if a region is going to build up a new economy by making things it needs at home, it will in a limited sense have to build up a whole economy and not a fragment of an economy.”

Morgan continued on with how he would build an economy for the Tennessee Valley in contrast to the prevailing idea of attracting a few large industrial employers: 

“I would build a cooperative of some sort. I would have a central purchasing organization, a central sales organization, a distributing organization, and I think I’d have that cooperative organization have its own token of credit --- a sort of local money.” 

Despite his attempt at balancing what might now be called “import substitution” with an economy centered on the export of a few products, Morgan admitted, “there are no roads going our way.” Instead, what prevailed was the “deeply worn channels of trade, almost all leading into and out of the leading business and industrial centers,” he said. Morgan pondered the future, asking, “Does it mean that this region must always continue to be a vassal of the big centers?”

By issuing a local currency, people in the region would be “compelled to buy from each other,” Morgan said. But local currencies were never meant to replace the U.S. Dollars, as his critics would argue, only to supplement them. Morgan later wrote that his proposal would actually “stimulate the general economy by making a legal tender move more easily where only it would serve.”

Morgan’s idea wasn’t unique; so-called “scrip” currencies popped up across the country during the early years of the Great Depression. But his role in the TVA gave him a greater platform to promote, and take place, for the concept. Perhaps the future of Appalachia would have been different if Morgan's ideas were pursued. Community Service, Inc., and later Community Solutions, would go on to revisit the idea of local currencies many times.

For instance, in 1989, Salstrom wrote an article in the Community Service Newsletter about local "scrips" and the U.S. Economy. In 1995 Bill Felker covered a new time banking system in the village, the Neighborly Exchange, in the organization’s newsletter. 

And in 2018 Community Solutions brought Michael Shuman to town to brainstorm local economic development strategies such as a local debit card, a modern version of a local currency.

Megan Bachman is the editor of the Yellow Springs News. She is also a current board member and former outreach director for Community Solutions.