WIR/Cooperative Credit & Exchange
May 25, 2009
Dear Friends,
Erick B. Hansch was a colleague of Robert Swann and Ralph Borsodi at the
International Independence Institute. One of the projects of the Institute
was the launch of a currency called "The Constant" in Exeter, New Hampshire
in 1972. Borsodi, an economist, was in his 90's at the time and decided to
issue the currency as a one year experiment to prove it could be done,
rather than just writing another book on the subject.
The Constants were issued by a bank in Exeter and were valued according to a
weighted basket of commodities. The intent was to demonstrate how to issue
a currency that would not deflate but which instead held "constant" buying
potential.
The Institute was also the vehicle for launching the community land trust
movement in this country. Erick Hansch was one of the authors with Bob
Swann and Ted Webster of "The Community Land Trust: a Guide to a New System
of Land Tenure in America" published in 1972, the complete text of which is
available online:
http://www.smallisbeautiful.org/clts/clt_book.html
In 1974 the Institute hosted E. F. Schumacher's historic trip to this
country. Swann and Schumacher formed a close alliance as a result.
Erick Hansch, Ralph Borsodi, and Fritz Schumacher all died within a month of
each other in 1977. Bob Swann continued working with the ideas of his
friends and mentors and in 1980 founded the E. F. Schumacher Society in
Great Barrington, Massachusetts which has been a leader in the study and
application of local currencies and community land trusts. The Schumacher
Society's current work with BerkShares local currency
(http://www.berkshares.org) has grown from this long tradition of economic
scholarship and innovative practice.
Erick Hansch had a gift for languages. In addition to English he spoke
Chinese, German, and Spanish. In anticipation of the launch of the
Constant, he traveled to Basel, Switzerland to study the WIR currency
program (http://www.wir.ch) that has been in circulation in parallel to the
Swiss Franc since the 1930s. His unfinished typed report is in the archives
of the E. F. Schumacher Library. Thanks to the good work of volunteers, it
has been entered into electronic format and is available in full at the
Society's website:
http://www.smallisbeautiful.org/local_currencies/wir.hansch.html
We have excerpted sections of it below for you.
Best wishes,
Susan Witt, Sarah Hearn, and Stefan Apse
E. F. Schumacher Society
140 Jug End Road
Great Barrington, MA 01230 USA
http://www.smallisbeautiful.org
* * * * * * *
Selections from "Initial Results of WIR Research in Switzerland"
by Erick Hansch, November 1971
In August, 1971, during a stay of several weeks in Switzerland, I had
lengthy interviews with managing personnel of the WIR-Cooperative, both in
the Zuerich and Basel offices, the latter being the headquarters of the
Wirtschaftsring (meaning: Economic Ring, using the first three letters as
acronym; also, the German word 'wir' means 'we').
WIR is a cooperative association of small to medium sized, independent Swiss
businesses for the purpose of mobilizing their own credit potentialities,
i.e., without using commercial banks as intermediaries, to facilitate
business transactions within their own circle. This arrangement prevents,
or at least inhibits, the outflow of capital and profits to the large chain
stores, department stores, stock corporations, etc. WIR credit can be
described as supplementary, low-cost credit, but has had also the fully
intended result of increasing the business volume of their members. As a
self-help measure, it appears to have been successful in large measure in
protecting the small, independent businessman against the constantly
increasing pressure from large, financially strong competitors.
The WIR Cooperative has been in existence and uninterrupted operation since
1934, when a small band of independent businessmen, joined together to form
this 'internal credit' organization. Their motto was: 'Free exchange of
goods and services, without exploitation of our fellowmen, and without
government coercion.' In their minds, high interest charges were one of the
more apprehensive aspects of exploitation, and they sought to avoid it.
Transactions among WIR participants are quite simple. To join as a
participant, a businessperson need only declare his/her intention to accept
WIR booking orders as partial or total payment in any transaction with other
participants. The percentages of WIR accepted are listed in the classified
directory. Regarding pricing, transactions in WIR are at par as transactions
in Francs. Each participant has a set of booking order forms, similar to the
conventional bank checks, with the imprint of name, address and account
number. In making purchases from another participating member, the buyer
will give to the seller such a booking order after having written in the
amount for whatever the seller has obligated himself to accept. Many
participants commonly accept 100% payment in WIR.
In contrast to regular bank checks, WIR booking orders are not transferable
by endorsement, the main reason being that this would lead to avoidance of
the 1% booking charge. The income from this charge is used to defray
WIR-office administrative overhead expense.
Upon application of a businessperson to participate, a WIR-field
representative will make a preliminary investigation as to reputation,
character, business acumen, etc. The WIR Co-op subscribes to a credit
bureau and obtains information on the applicant, which, with the field
report, is submitted to an Admissions Committee of three members. When
accepted, the new participant can accept WIR booking orders in payment, and
send them in to the WIR head-office in Basel for credit to his/her WIR
account. He/she can then dispose of this credit similarly by making
purchases from other participating members, either for business purposes, or
for private use and consumption.
The present structure of the WIR Cooperative is such that of about 18,000
participants (in 1970) in the credit operation, only a comparatively small
number (761) are active members of the cooperative with paid-in shares
(Fr.802,000) and voting rights in the general assembly.
The form and amount of dues and their collection, as well as of the booking
charges, were changed from time to time. At present, there is a one-time
charge of 1% (the lowest for the entire period of existence) of all credit
entries made to a WIR credit account. These charges are billed quarterly
and are payable in cash, while the yearly dues of Fr.12.- are deducted in
WIR from the account balances. There is no initiation fee.
Participants receive without additional charge the classified directory
listing participating firms by articles, with geographical subdivision in
each article. Participants also receive free a copy of the monthly magazine
WIR-Pioneir (WIR Pioneer), which beside articles of general interest to
business owners, carries a large amount of ads by participants. These ads
in some cases list WIR-percentages higher than those in the directory as
specials for certain months to attract business during an otherwise stagnant
period.
New WIR are being created by any participant applying for additional credit
over the amount already in his WIR credit account. Reasons for such
applications may be the planned acquisition of more costly articles like
furniture or large electrical appliances, also cars, or even houses.
A Credit Approval Committee must pass on these applications, and sufficient
security must be available as collateral. The present management is of the
opinion, based on past experience, that an optimum ratio of WIR-credit
outstanding to total WIR turn-over should not vary substantially from a
proportion of 1:3. There is at present a limitation put on paid-in capital
of Fr.250.- per co-op member. Share capital now receives 12% interest p.a.
A few data will give a brief run-down of the organizational start of WIR and
the rapid spread of the idea:
1. Founding of the WIR Cooperative on October 16, 1934, in Zuerich. The
first group of cooperators consisted of 16 persons with a total paid-in
cooperative capital of SFr. 42,000, average per person SFr.2625.
2. Already on November 1, the first issue of the WIR-News (WIR-Nachrichten)
came out. Initiation fee was set at Fr.5.-. and the required minimum amount
of a share of Fr. 25.- could immediately be used for credit transactions
with other members.
3. In 1935, local WIR-groups were set up in Basel, Bern, Zuerich,
Winterthur, Biel and Derendingen. That year also saw the first edition of
the Classified Directory. During the 1st and 2nd of August, 1936, the first
WIR-convention was held at the Vierwaldstaetter See.
4. 1939 to 1942 was a period of reorganization. As personal comments by
WIR-personnel indicated, it was a critical time for the organization, and an
appeal was made to the members to subscribe additional capital for the
emergency. The prospects were dim, but additional capital was signed for
about Fr.250,000, mostly from loyal members, and the organization pulled
through.
5. There were 900 participants in 1945; transactions in WIR credit were Fr.
717,000. The number of participants stayed below 1000 until 1949 when it
began to climb rapidly. The stagnation during the preceding years had to do
with the shortage of goods during the war.
6. In 1958, there were between 11,000 and 12,000 participants, and
transactions in WIR credit had climbed to Fr.53 million. (Estimating
conservatively 40% WIR in all transactions as an average rate, the total
turn-over in goods and services involving WIR would be over Fr.130 million.)
7. There were over 18,000 participants in 1970, and WIR credit transactions
ran to over Fr. 180 million. Figuring about 50% WIR participation (as
indicated by the president of the executive committee, Mr. F. Hubschmid, in
the Business Report for that year), the total value of goods and services
involved can be assumed at over Fr.360 million.
(Note that by 2007 when I visited WIR offices in Basel, the amount of WIR in
yearly circulation had grown to 1.6 billion. The WIR Co-op is now
functioning more like a bank. In addition to its WIR accounts, it accepts
deposits in Swiss Francs. The dual currency capability has meant that it can
offer credit partially in WIR at little or no cost, and partially in Francs
at conventional interest rates, providing the convenience of one loan
application for its members. WIR exchange began strictly as business to
business transactions. For the past several years individuals have been
encouraged to open deposit accounts in Francs at the bank and then convert
deposits as needed to WIR for purposes of trading with WIR businesses. This
has expanded the program, inviting in the consumer. Circulation of WIR
continues to strengthen the independent businesses of Switzerland even
during difficult economic times. Susan Witt)
