Creating Currency to Care For the Elderly

Did you know that Japan has found an ingenious way to “create” money that can be used to care for the elderly?

Bernard Lietaer, author of Access to Human Wealth: Money beyond Greed and Scarcity (Access Books, 2003) describes the system in this interview with Ravi Dykema, publisher and editor of Nexus, a leading Holistic journal.

Lietaer begins with the basics, by explaining what money is: “I define money, or currency, as an agreement within a community to use something as a medium of exchange. It’s therefore not a thing, it’s only an agreement – like a marriage, like a business deal…And most of the time, it’s done unconsciously. Nobody’s polled about whether you want to use dollars. We’re living in this money world like fish in water, taking it completely for granted.”

Lietaer, who co-designed and implemented the convergence mechanism to the single European currency system (the Euro), and served as president of the Electronic Payment System in his native Belgium, doesn’t take currencies for granted. He knows that a dollar is simply a piece of paper (which is no longer backed by gold). It has value because we have agreed that it has value.

But today, he points out, new currencies are being created: “There are many new agreements being made within communities as to the kind of medium of exchange they are willing to accept.” For example, “In Britain, you can use frequent flier miles as currency. It’s not a universal currency, it’s not legal tender, but you can go to the supermarket and buy stuff. And in the United States, it’s just a question of time before privately issued currencies will be used to make purchases. Even Alan Greenspan, the [former] governor of the Federal Reserve and the official guardian of the conventional money system, says, ‘We will see a return of private currencies in the 21st century.’”

Frequently, Lietaer notes, countries design a new currency with a social purpose in mind. This brings us to Japan: “there are about 300 or 400 private currency systems in Japan to pay for any care for the elderly that isn’t covered by the national health insurance,” he explains. “They are called ‘fureai kippu’ (caring relationship tickets).

“Here’s how they work: let’s say that on my street lives an elderly gentleman who is handicapped and cannot go shopping for himself. I do the shopping for him. I help him with food preparation. I help him with the ritual bath, which is very important in Japan.

“For this help, I get credits. I put those credits in a savings account, and when I’m sick, I can have other people provide such services for me. Or I can electronically send my credits to my mother, who lives on the other side of the country, and somebody takes care of her.”

No matter what service is provided, one hour of service equals one credit.

This system “makes it possible for hundreds of thousands of [elderly] people to stay in their homes much longer than they otherwise could,” Lietaer observes. “Otherwise, you’d have to put most of these people into a home for seniors, which costs an arm and a leg to society, and they’re unhappy there. So nobody’s winning. In contrast, Japan has created a currency for elderly care.

“In the United States, Florida is the only state that has the same density of elderly people as Japan does—18 percent of the population is more than 65 years old. But Florida is a model for our collective future. Colorado will be there in 2020. Germany will be there in 2006, France in 2008, Britain in 2012…If you put all of these elderly in homes for seniors, you’d go bankrupt. Japan has been looking for another way, and has found it by introducing a monetary innovation.”

In the U.S., currencies based on hours of service are called “time dollars.” As this Time Banking website explains, a record of accumulated “Time Dollars” is kept in a computerized “Time Bank,” and Time Banking is now well established in the US. “Programs range widely, from the MORE programs in East St Louis which focuses on health and training and has 12,000 members who exchange 100,000 hours a year, to small street projects involving a dozen residents.

“In New York, Mashi Blech has been running the Member to Member Time Dollar Program for sixteen years. This is funded by an HMO and offers older residents a catalogue of health related products and activities in exchange for time credits.”

The website goes on to lay out the rules of accumulating and using time dollars:

1.    Participants list the services they can offer and those that they need2.    All agree to both give and receive services3.    Everyone is interviewed and provides references4.    Every hour giving help earns the giver one credit called a time credit5.    Participants ‘buy’ the services and support they need with their time credits:             every hour received is one time credit6.    The time broker co-ordinator matches up the giver and receiver7.    Every transaction is recorded on a computer using a software package called             Timekeeper8.    Participants receive a regular time bank statement9.    One hour is one credit regardless of the skills one offers10.   Participants can donate credits to other participants or the ‘time bank pool’11.   Everyone is seen as special with a contribution to make

What is almost magical about the concept is that, as Lietaer points out, “For those people who are willing to give some of their time, the money manifests automatically.” In that sense, the system creates money.

“It doesn’t quite work that way with dollars, does it?” he asks.  “One of the two of us has to get dollars by competing for them somewhere outside of our community.”

“Time dollars” by contrast “are helping in a lot of communities where conventional money is scarce: in ghettos, retirement communities, high unemployment zones, student communities.” These are places where people are likely to have more time than money. Rather than competing in a competitive market where dollars are exchanged, they share services in a co-operative market where they help each other.

“There are 31 states in America that are paying employees to start such time dollar systems, because it solves social problems, says Lietaer. “There are some operating in Chicago, fairly big ones in Florida. For example, in Chicago, there are entire neighborhoods that used time dollar systems to create a neighborhood watch system that got rid of drugs and gangs. It’s working, it doesn’t cost anything to the taxpayer, it doesn’t create a huge bureaucracy, and it encourages the solution of the local problems by and with the very people who know most about them.”

Lietaer explains that the time dollar system was invented by Edgar Cahn, the author of No More Throw-Away People(Essential Works Ltd, 2000). Cahn claims that “if you can’t compete in the dollar economy, you’re thrown away.” He shows how a time dollars system provides a solution to this process, because it operates in parallel with the conventional competitive economy, and it creates an environment where everybody can contribute.”

Time dollars can help to solve social problems without taxation or large governmental bureaucracies. All you need is a community. Japan’s model is certainly worth keeping in mind as we devise ways to provide the home health care services that the elderly need.

Maggie Mahar is an award winning journalist and author. A frequent contributor to THCB, her work has appeared in the New York Times, Barron’s and Institutional Investor. She is the author of  “Money-Driven Medicine: The Real Reason Why Healthcare Costs So Much,” an examination of the economic forces driving the health care system. A fellow at the Century Foundation, Maggie is also the author the increasingly influential HealthBeat blog, one of our favorite health care reads, where this piece first appeared.

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9 replies »

  1. This looks promising and I hope people in charge of making the lives of elderly more comfortable will reach this. I just hope the people concerned will take Japan’s model into consideration and think of seniors, and provide them with quality care they deserve.

  2. I like the sound of it and I too feel this would work well only on a community scale. But that said, it is only a matter of time before the IRS gets wind of this and comes up with a way to tax this. Keep it under the radar, please!

  3. “…can cost an arm and a leg.” That is what you say, but all you have to do is do a little bit of research. There are places out there like ‘www.standrews1.com’ that can help you find a fit for any budget. They offer assisted living, counseling, and in home care living services that work with your budget. Don’t give up on elder care, do your homework!

  4. Well, wow; I just read something in the Washington Post that indicates maybe we better have volunteers keeping our elderly out of institutional settings:
    From an interview with newly appointed Sunrise Senior Living CEO Mark Ordan: (WP Business section, D3, 8/4/08)
    “I thought this was an opportunity to combine everything I’ve known….it’s an entrepreneurial company, a big, complex company, and it’s a very heavily real-estate-driven company…..For me, it’s an opportunity to be partners with a great entrepreneur like (Sunrise co-founder) Paul Klaassen.”
    Anybody see one word in there about taking care of seniors who live in his real estate? I find this attitude chilling – especially since my grandmother lived and died in a Sunrise facility.

  5. Bev M.D., Paul and Paul Tarini–
    Thanks for your comments.
    Bev M.D.–I think you are right. This works best as a grassroots communiity effort.
    I can’t really see an HMO pulling it off. Reading RWJF’s report, it seems that they were working with a pool of people whose only connection was that they used the same HMO. That’s not really a community.
    The non-profit HMO in quetion is a very good one, and it certainly was an admirable effort on the part of RWJF. But I think you need a mixed pool of people –preferably young and old. Middle-aged people with full time jobs who are raising famlies are less likely to have the time.
    I know the time dollar has worked very well in Ithaca, New York (There they call it the Ithaca dollar.) Within the small city of Ithaca some merchants even take the Ithaca dollar for some portion of their sales (maybe 20%) and individuals also help each other in exchange for Ithaca dollars.
    A plumber fixes a senior’s plumbing and she bakes him a cake from scratch. (Remember, services are valued according to how long they take, not how much we pay for them in the regular market. That’s one of the things I like. In the market where dollars are exchanged, some services are over-valued and some very important services are under-valued.)
    Ithaca is a liberal college community (Cornell and Ithaca college) with many students and a fairly sizable older population, and I suspect this is one reason it works. Many people have some free time –and many have more time than money. It’s also a pretty liberal town and a place where people are accustomed to the idea of helping each other out. (If you have a flat tire, people stop to help you.)
    I suspect “time dollars” would work well in many university towns where more and more elderly people are choosing to retire (because of the cultural attractions.)
    I also would guess it might work in certain neighborhoods of some large cities. But I don’t think the scale can be too large–it needs to feel like a community.
    I wonder if it has been tried in any senior communities?
    Here I’m not thinking of “assisted living”–too few people are healthy enough to volunteer. But rather retirement communitites for relatively healthy people who may not still drive but can cook, or can drive, but need someone to come in and stay with a bedridden spouse when they’re out running errands, etc.
    I very much like the reciprocity. I’m sure people make friends that they never would have made. And the whole idea of replacing the money-driven transactions is very appealing.

  6. A very interesting concept that I had not heard of before. I took the time to read most of the link provided by Mr. Tarini(if for no other reason than to find out what RWJF stood for!) and the “lessons learned” section is very informative. It appears that the most successful projects may be the local, grassroots ones rather than large, bureaucratic projects run by organizations seeking to prove they save money (or to expend as little money as possible running them).
    As a volunteer myself, I think the HMO’s could have learned lessons from many nonprofit organizations with much experience in recruiting, motivating and retaining volunteers – such humble ones as public gardens, animal shelters and food banks, at which I volunteer. They all did a good job in my opinion. A sense of belonging and community is key, as noted in the “lessons learned.”

  7. Very interesting concept,this can work. Volunteerism seems to be lacking in the USA perhaps if we could bank these hours and get something back we would be successful. We are blessed with great minds, lets do this NOW. I live in Pittsburgh PA. Please get in touch.
    I know of no reason why we can’t make this work

  8. We tested a version of this notion during the 1990s in our Service Credit Banking Program. Results were not encouraging. Here are excerpts from a posted Grant Results Report:
    “Key Results
    Ultimately, most of the service credit banking projects at the managed care organizations were unable to meet either of the challenges that prompted RWJF to launch the program: financial sustainability and information management.
    Facing decreasing profits and, in some cases, organizational upheaval, four of the five managed care organizations abandoned their service credit banking projects.
    Two ceased providing Medicare coverage altogether, and a third substantially scaled back its coverage.
    Only the Rocky Mountain Health Maintenance Organization and Blue Shield of California maintained their service credit banking operations beyond the end of 1999.
    The program did not determine whether earning service credits is a meaningful incentive for volunteers or whether service credit banking programs can produce savings that offset their administrative costs.”
    Click here for the full report: http://www.rwjf.org/reports/npreports/bankinge.htm#int_proj_list