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

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.

The local multiplier of income support paid in a complementary currency: Comparative evaluation in the city of Barcelona

“…Despite the interest of public administrations, previous research regarding the local multiplier and local circulation retention of public expenditure in a complementary currency is scarce (Martín Belmonte et al, 2021; Muns et al, 2019; Seyfang and Longhurst, 2013). Moreover, results of previous research only contrast these measures with national spending or fiscal multipliers (De la Rosa and Stodder, 2015; Martín Belmonte et al, 2021). We argue that such an approach is limited as it compares multipliers of expenditures with substantially different purposes, areas of implementation and objective populations (Michel and Hudon, 2015).…”

“…Notwithstanding these conditionings, since local public administrations have limitations in generating debt, complementary currencies have gained progressive policymakers' attention as mechanisms to promote the local economy and to reduce inequality (Martı´n Belmonte et al, 2021). The public sector can have a direct role in issuing a complementary currency or promote it by fostering its use.…”

“…In Santa Coloma de Gramenet (Catalonia), the local administration launched the Grama in 2016 to give grants to retailers and Small and Medium Enterprises' (SMEs) associations (Muns et al, 2019). More recently, in 2018, Barcelona (Catalonia) launched the REC to subsidise disfavoured neighbourhoods (Martı´n Belmonte et al, 2021). The present study is based on data from this later experience.…”

“…Previous studies on the REC describe the flows originated and the involvement of participants (Martı´n Belmonte et al, 2019Belmonte et al, , 2021. The Supplemental Material summarises the results of surveys made to consumers and businesses and the exchanges made between September 2018 and October 2019.…”

“…Albeit having to mediate with the contradictions of institutional action, the agenda of the municipal government included fostering cooperatives and social enterprises, the municipalisation of public services and providing support to 'transformative social innovation' in areas such as housing, public procurement or public participation in policymaking (Blanco et al, 2020). Among the experimental policies developed in Barcelona, the city launched a complementary currency in 2018, the REC, to provide an inclusion support payment across 10 disfavoured neighbourhoods (Martı´n Belmonte et al, 2021).…”