The Swiss WIR System
was founded as a self-help organization in 1934 by Werner Zimmermann and Paul Enz, both adherents of the "free-money" theory of Silvio Gesell. Small and medium-sized businesses were especially hard hit at that time by the depression following the stock market crash of 1929. Sales had receded massively, and many employees had lost their jobs. There were no signs of a recovery....
The new self-help organization was intended to provide a remedy. It started with 16 members and an initial capital of SFr 42,000....
The WIR-founders were not alone at the time. All around the globe similar organizations were springing up. Whole towns and associations of people of the most diverse types were seeking effective remedies to the crippling mood of the great depression, using tools like non-cash barter circles and self-created money. These groups followed the same general approach:
1. As a stopgap to replace the missing national currency, they created complementary currencies which functioned within an overseeable framework.
2. They equipped the new medium of exchange with a stimulus to spend it quickly, rather than holding on to it. Thus as a rule, not only was no interest paid on accounts, but on the contrary, a "storage fee", a kind of negative interest, was charged. This was to counteract people's tendency to hang onto their money for fear of the future. In this way, the familiar "blocked thought and action" syndrome -- perceived by psychologists even in the group pathology of the depression -- was to be broken through and the circulation of money assured....
In Scandinavia many self-help organizations with their complementary currencies were able to survive up to the time of the Second World War. But then they were all dissolved, sometimes owing to internal problems and sometimes to the wartime turmoil. The WIR Cooperative in Switzerland also experienced difficulties. But after the war it made a new start, and in the postwar boom period its membership rolls grew rapidly. This demonstrates that the basic complementary currency idea is advantageous not only in times of economic crisis. The demurrage feature that burdened accounts with a storage fee was done away with. Such a strong stimulus for spending money rapidly would have been inappropriate to the fast-moving business climate of those years. But the interest-free feature was maintained, and has remained constant to this day: WIR accounts earn no interest....
The WIR Cooperative now numbers over 62,000 members, who amongst themselves create transactions worth approximately SFr 1.65 billion [!] annually. Considering that payments on average are made only from 30-40% in WIR and the remainder in Swiss francs, the total value of goods and services traded in the Cooperative more than doubles that amount.
Regarding that last bit of information, the reason payments within the system are not made entirely in WIR is that members need national currency for dealing with those on the outside who do not accept WIR (including the government, which does not accept them in payment of taxes).
Thomas Greco has a good review of Tobias Studer's WIR and the Swiss National Economy at Reinventing Money. Among Studer's criticisms of WIR that Greco quotes: “One [limitation] is that public services are not available for WIR, nor as a rule can WIR be used to pay taxes; Secondly, use of WIR is limited strictly to domestic transactions.”
One significant advantage of WIR over American LETS systems is that it is a system for credit as well as exchange. Although Studer is ambivalent toward this function, Greco is quite enthusiastic:
the credit clearing function is the WIR’s most distinctive feature and the main reason for its success....
The issuance of WIR loans was the key step by which the WIR was able to monetize the value created and held by its members, freeing the WIR credit from the official system of money and banking. This monetization of the members’ own goods and services is what is necessary to create a true alternative to legal tender.
Like the mutual banking system of William Greene, WIR requires participants to accept its notes in at least partial payment for their own goods and services. According to Studer,
The offering of goods and services for WIR is promoted by the fact that every official participant is obligated to accept payment in WIR for at least 30% of the first 2000 francs of the selling price, and every loan holder must amortize his/her debt by selling goods/services for WIR.”
Greco, on the other hand, would prefer to expand the percentage covered by WIR:
This 30% limit, in my opinion, is inadequate to assure the lively flow of credits that Prof. Studer is so eager to achieve. As a result it tends to have a devaluing effect on the WIR currency. Ideally, any member who has a negative (debit) balance should be required to accept WIR credits for 100% of the purchase price, and on a par with the corresponding national currency up to some maximum amount. This is common practice among many commercial trade exchanges. A per-transaction limit could probably be retained without negative consequences as a way of preventing sudden liquidation of one’s credit line, which could conceivably cause financial embarrassment.
In practice, it will very likely be more advantageous and less confusing to extend the 100% requirement to all members. If some members find that they are accumulating more credits than... can easily spend, that means that others are earning less than they need to keep their balances within limits. Their respective limits should then be adjusted to correspond more closely to each member’s earning capacity. Remember, credit clearing is a dynamic system, like riding a bicycle. In static terms, balance seems impossible, but given a proper start, it takes only small adjustments to keep it operating smoothly.