Local Currencies

In various pockets around the world, some communities are encouraging the use of a local currency (Brazil example here), so that the community imports less products and tries to prevent the destruction part of creative destruction.  I have thought hard about these kinds of issues, especially in their relation to local foods (see an article I wrote on local foods here).

The more I think about the issue, an idea keeps presenting itself.  I wonder if one strong motivation (among several) for warding off trade is a belief that non-local producers are less ethical than local producers.  That is, I believe a corporation will do everything it can to not pay the costs of the environmental harm it imposes, whereas the farmer down the road insists on being held accountable for everything he does?

This is related to a more general idea I find increasingly appealing: that both Libertarians and Progressives believe in the felicity a free market can deliver, if externalities are intensely sought and rectified.  However, they disagree on whether these externalities can be accounted for without a very coercive government.