Money stays local
In LETS, it is impossible for money to be drained out of where it originates with very limited hopes of ever returning. In a global economy, private investors can move their profit to any part of the world, thus depriving the community who created it and increasing speculation and the concentration process of money in international financial places. This is of course not possible in LETS where trade can only take place within a finite community. The economic circuit is short and your money comes back to you easily.
Boost for the local economy
Local money has to be spent locally, which is very interesting for local businesses because they have a chance to gain new local customers who might otherwise trade outside of the community. As not every business is a member, this is an incentive for account holders to come back regularly rather than -shopping around-. Moreover, increasing the proportion of local suppliers and customers helps save travelling time and telecommunications costs. Finally, LETS provide individuals with a means of trading among themselves.
Friendly atmosphere
Being members of the same system with a strong community ethos has an impact on how trade occurs. The proportion of individual users is still very high but all participants prove much friendlier than average. I noticed this when I conducted my interviews. If we compare trade among private LETS members to one that occurs tahnks to an advertisement in a newspaper, the atmosphere is not the same at all. Account holders clearly have something in common.
Help for local charities
Businesses joining a LETS are invited to make a donation to a local charity or community fund even where the Contribution to Community principle is not applied. A stress is put on the fact that the local money they donate eventually comes back to them. Private members can also support local their local communities through donations in the form of local money.
Less pollution
By developing local trading, LETS help reduce pollution in two ways. Firstly, they increase local self-sufficiency and thus reduce the need for transport and thus pollution. Secondly, local money cannot be used for speculative operations which often end up supporting ecologically and socially disastrous projects without the private investors even knowing it.
Availability
Personal money is issued instantly and without limit by every member according to his or her needs. Such a currency is therefore relatively easy to earn and always available, which has important consequences. There is no need to delay trading until cash is there. People who do not have conventional money can trade freely and the only limits are their imagination and their ability to -repay- in future, in one way or another. There is no overdraft limit and no cheque can bounce Availability also encourages people to trade things or skills they would not consider trading otherwise. Moreover, there is no precautionary demand for money because there is no need to save for unexpected needs.
Notional money
Lets currencies are only notional; they are mere acknowledgements towards the community and this has positive consequences. First of all, local currencies are legal because they do not breach central bank issuing monopoly. They cannot be forged or stolen and lost -cheques- have no value to non-users.
Positive psychological effects
The principle of personal money implies that the people issuing it are responsible. They evaluate their ability to -repay- and determine their level of commitment according to what they consider sensible for them. They plan earnings and expenses freely without being penalised or ashamed when their balance is negative. On the contrary, this is considered as a normal situation. LETS make it possible to start -buying- before -selling-, thus breaking the logic where one is prepared to accept almost anything when desperately needing cash. Potential problems can arise if a member does not assess his or her earning capacities properly and goes into a highly negative balance without feeling able to -repay- it. However, there is no such thing as unemployment in LETS as there are permanent entries in directories proposing users to take part to administrative and operational work (directory updating and printing, trade fairs preparation, newsletter mailout, etc.). In this way, there should never be anyone trapped in permanent commitment.
MV = PT
where M is the nominal stock of money in circulation, V the transaction velocity, P the average price of all transactions and T the number of transactions that take place during the time period. Both MV and PT measure the total value of all transactions in different ways and are thus always equal. We can say that:
_ _
MV = PT
which means that M depends on T, i.e. the quantity of money created depends on the number of transactions. The logic of conventional money is inverted: instead of having a fixed amount of money which has an influencing role, we have one which depends on the economic activity measured by the number of transactions. Money becomes an instrument serving trade. The only limits to transactions are the imagination of people and their willingness and ability to trade, which shows the perfect adequacy of personal money to needs.
The money of the account holders with a positive balance comes from those with a negative one. Every member is free to go into commitment and to go back to a positive balance at his or her own pace, which increases significantly the number of transactions. The absence of interest means interest-free credit, which is invaluable for businesses encountering cash flow problems or for people who want to learn new skills. Finally, no interest means no risk of speculation.
Low awareness
Despite several articles in mainstream and alternative media, LETS are still a marginal phenomenon and awareness is still relatively low. Even if I do not mean that what happened to me is typical, it is still revealing. I arrived in England at the end of June 1993 and made every effort to keep informed by watching television, listening to the radio and reading newspapers during the week-end. Although I was living with English people (as an au pair near London during the summer and with other students in Manchester during the academic year) it was only in March that I discovered the existence of LETS. I then found only one advertisement for LETSgo Manchester outside my research work until I left England one year after my arrival. This illustrates the problems of actually getting the message through.
Strong alternative image
Most LETS members belong to alternative circles and are seen as originals. The media also convey this image. For example, John Vidal's article in The Guardian stood under the heading -other lives-. This impression is also reinforced by what is on offer in directories: people offering vegan cookery or aromatherapy clearly outnumber those offering legal advice or computer programming. The general public tends to wait and see and is still hesitant about joining. Despite a boom in the number of LETS, they are only 400 across the UK and membership is at around 25,000, which is very low for a 57 million population.
Arguable assumptions
It is important for designers to believe in what they create if they are to convince other people. However, Landsman may well be over-optimistic for LETS future and tend to make assumptions that are not likely to be widely accepted and also seem to consider themselves as the mankind's saviours. Even though it is a bit long, the following quotation perfectly illustrates this:
Given that the appeal , and indeed the need, is universal, and that the system is stable within any reasonable limits, there is a clear opportunity. And a responsibility. If the social and ecological components of our planetary process were to hold together long enough, LETSystems in various forms would eventually become commonplace, without much significant effort from us. Just because the process is powerfully contagious, and largely irresistible.Such a radical and alarmist way of thinking is not likely to be regarded as sensible and might be a strong impediment to LETS expansion out of alternative circles.However, there is little hope that the social and ecological context can hold together that long. The very pattern of conventional money trading is destroying our world, and far faster than all the efforts of all those dedicated to arresting or modifying the process.
LETSystems must become mainstream very soon if we are to have any hope of leaving to future generations a world in which they can even survive, much less thrive.
So what do we have to do? Basically, we have to get our acts together; we have to start behaving as though this were a matter of life or death, which it very probably is (53).
Manchester LETS' information leaflet contains the following question: - Couldn't someone run up a huge commitment and then leave?- The answer is simply:LETS is a social network, this sort of problem is unlikely. Any member may enquire on the current balance and turnover of another's account. Where someone is going further and further into commitment and seems unable to earn any credits, the community should help them discover what they have to contribute. Experience of LETS systems to date shows that many people actually leave credit balances when they leave.
Even if someone did run off leaving a big commitment, it's different from a "bad debt" in the money economy, where someone else would be left out of pocket, and their ability to trade would be reduced. Within LETS, no individual person would be disadvantaged.
The only person who would really lose out would be the one who had broken their agreement by leaving without clearing their balance - because they would not be able to join LETS again.
I am not convinced that this is a sufficient deterrent for dishonest people. Unfortunately, LETS designers and developers seem to believe that the mere fact of joining a scheme implies the same strong ethical convictions as theirs. They are reluctant towards what they call unnecessary bureaucracy and Landsman make the following recommendation to system administrators:
- Once it becomes clear who does what, there is no further need for regular meetings, constitutions and other legal paraphernalia- (55).
I think it is better to take legal guarantees rather than relying solely on confidence. Even for such essential functions as Registries, Michael Linton considers that:The Registry has in implicit agreement with the registrants to maintain accounting. What if the operators fail to do this? If the community is keen to continue, it will re-establish the Registry with other operators. If not, who cares? Who will sue? So what is the point of legal structures?
This approach might both deter honest people from becoming members and encourage abuses.
Possible take-over by commercial networks
Landsman is small and has little money and there is an unsual statement on the first page of its LETSystem Design Manual. The concepts of personal money, community or local currency are regarded by Landsman Community Services as in the public domain. The LETSystem is a specific design in this field originated by Landsman in 1983 and Landsman remains the sole authority regarding the operation of
LETSystems.
This means that any opportunist with more money and perhaps better commercial skills could try to change a minor characteristic of the system. This would in fact allow to -take over- the idea of LETS whilst dropping its community orientation and its initial ethos. If this competitor's development was quick enough, Landsman would have little chance of reaching any significant size.
Distinction between commercial and social trade
Trade is only liable to tax when it is of a commercial nature, i.e. when it is regular and linked with a normal line of work. Every other exchange is considered as a social favour and is not liable to tax. LETS are unincorporated not-for-profit mutual organisations and therefore fall into the second category.
Tax assessment
As local currency units are equivalent to the pound sterling, there is no need for the tax authorities to resort to notional values, i.e. to estimate the sterling value of the goods and services exchanged. Trade within a LETS is treated in the same way as that with conventional money except that businesses have to add an extra column in their accounting books to register separately the trading they make with local currency. However, tax must be paid in sterling. It is always possible to balance LETS sales and expenses when problems are liekly to arise because of LETS trading.
Conditions
Claimants must be -available for work- and -actively seeking work-, which can be considered as incompatible with trade within a LETS. However, account holders' agreements state or imply that this availability remains unchanged and that claimants are ready to delay or cancel a trade in the system if they are offered employment. LETS trade can take part at any time, including evenings and weekends, and claimants are therefore not prevented from actively seeking work.
Remunerative work rule
People engaged in remunerative work are normally not eligible to claim Income Support. -Remunerative work is defined as work in which the person is engaged for, on average, 16 hours or more a week and in which is done in expectation of payment-57 . It is arguable that LETS credits are a payment because they do not have the same purchasing power and cannot be used to meet the subsistence needs benefits are designed to meet, e.g. gas, electricity, food. There is still no clear cut decision in this respect and all depends on local Adjudication Officers' good will.
On the whole, legal issues in the UK are still not fully clarified but LETS developers are actively seeking advice and approaching the administration to remedy this.