Local Exchange Trading Systems (LETS) are schemes that aim to allow alternative means of access to local markets and economic systems. There is no one single LETS scheme. LETS are a very flexible tool and the features of the scheme should be designed to meet the particular circumstances in which the LETS seeks to provide support. As with all schemes that have the same broad objective, that is, to create a sustainable local economy not dependent on either the national currency or the wider national markets to survive, there are protagonists arguing that adoption of such a scheme will result in a wide range of benefits that only such a scheme is able to generate. Protagonists are usually unwilling to take a balanced view. The risk from this is that LETS can be introduced in the most inappropriate circumstances and therefore not only fail to achieve the sought for benefits and perhaps even cause actual damage to fragile communities, but also lead to damage to the whole LETS idea leading ultimately to its lack of use or even abandonment as a useful tool.
THEREFORE THOSE SPONSORING OR DESIGNING A LETS SHOULD ENSURE THAT BOTH POTENTIAL BENEFITS AND DISBENEFITS ARE IDENTIFIED AT THE OUTSET. THOSE WHO WILL BE AFFECTED BY THE SCHEME SHOULD BE INVOLVED IN ITS DESIGN. UNLESS THERE IS SUCH AN INVOLVEMENT THERE IS THE RISK THAT NOT ONLY WILL THE SCHEME NOT MEET ITS OBJECTIVES, BUT ALSO IT MIGHT OFFEND PUBLIC POLICY LEADING TO ITS BEING SHUT DOWN (AS THIS GUIDANCE NOTE WILL DEMONSTRATE). SUCH INVOLVEMENT WOULD NOT ONLY ENSURE GREATER COMMITMENT TO THE LETS BUT ALSO PROBABLY AFFECT THE DESIGN OF THE SCHEME INCLUDING THE OBJECTIVES THE SYSTEM WAS INTENDED TO ACHIEVE. A FURTHER BENEFIT IS THAT INVOLVEMENT WOULD ENCOURAGE PARTICIPATION BY THE INTENDED BENEFICIARIES OF THE LETS IN THE IMPACT ASSESSMENT PROCESS. PARTICIPATORY METHODS OF IMPACT ASSESSMENT THOUGH ARE NOT THE ONLY FORMS OF ASSESSMENT THAT SHOULD BE USED WITH LETS AND SCHEME SPONSORS AND DESIGNERS SHOULD CONSIDER AT THE DESIGN STAGE, ALL THE ALTERNATIVE METHODS OF IMPACT ASSESSMENT THAT WOULD BE USED TO IDENTIFY WHETHER OR NOT THE SCHEME WAS ACHIEVING THE DESIRED BENEFITS AND DISBENEFITS. THEREFORE, FEATURES SHOULD BE DESIGNED INTO THE SCHEME FROM THE OUTSET THAT WOULD ENABLE AN EFFECTIVE IMPACT ASSESSMENT TO BE MADE. THIS ALSO MEANS THAT APPROPRIATE BASELINE SURVEYS SHOULD BE CARRIED OUT.
THE PURPOSE OF THE APPLICATION GUIDANCE NOTE IS TO SET OUT:
• AN INTRODUCTION TO LETS, THE THEORIES BEHIND THEM AND ASPECTS OF THEIR PRACTICAL APPLICATION
• TO SHOW HOW IMPACT ASSESSMENT HAS, OR HAS NOT, BEEN USED DURING LETS PROJECTS AND WHERE IT HAS BEEN USED WHAT TOOLS WERE USED AND WHETHER THE IMPACT WAS WHAT WAS EXPECTED OR WERE THERE UNEXPECTED IMPACTS. THREE EXAMPLES BASED IN THAILAND, ARGENTINA AND MEXICO ARE ANALYSED IN THIS WAY.
• TO INDICATE WHICH ARE THE MOST APPROPRIATE IMPACT ASSESSMENT TECHNIQUES TO USE AND WHY; AND,
• TO INDICATE WHERE DIFFERENT IMPACT ASSESSMENT TECHNIQUES MIGHT BE APPROPRIATE DEPENDING UPON THE BENEFITS SOUGHT FOR FROM THE LETS.
AN INTRODUCTION TO LOCAL EXCHANGE TRADING SYSTEMS
What are LETS?
LETS are community orientated trading organisations, which aim to develop and extend the exchange of goods and services within a self-regulated economic network (Ekins, 1986; Schraven, 2001; Tooke et al, 2001). They operate through the creation of locally created money, i.e. a locally recognised means of exchange as distinct from the national currency (see Box 1) and are an informal employment initiative (Ingleby, 1998). Such systems have been used in recent years as a means to stimulate local economic activity and as alternative strategies for income generation. They also tackle social exclusion by addressing working opportunities, social cohesion, and access to financial services for the unemployed and people living on low incomes (Seyfang, 2001). As such, LETS and community currencies aim to make a significant contribution to purchasing power and economic development in local economies.
At first the notion of local communities developing and using their own currencies appears strange and perhaps pointless, showing a return to pre-modern forms of exchange with perhaps even illegal and potentially wide ranging national impacts (Barry and Proops, 2000). The development and theory of money (Box 1) and more specifically a currency relies ultimately on mutual trust and if that trust is undermined through development of an informal currency and debasement of the coinage then this could potentially destabilise the national currency (Poggi, 1993). Yet such currencies are not designed to replace the legal tender and LETS do not seek to challenge the dominion of the formal capitalist economy but to develop a parallel complementary form of social and economic organisation within a local context (Pacione, 1997).
Box 1
The theory of money
The underlying theory of money is based around its ability to act, in essence, in a tripartite fashion. That is, to be a medium of exchange, a unit of account and a store of value (Drake, 1980). While these are not its sole functions they are often regarded as its main economic purpose. In contrast to barter where the buyer must offer real goods of the same value as the goods purchased (Hummel, 2001) money works as a means of payment through providing a universally acceptable asset whose value in terms of goods in general is usually more predictable than that of other assets (Laidler, 1993). Moreover, money is unique among financial assets in that it alone provides immediate purchasing power and is supremely liquid (Drake, 1980). However, to be acceptable as a medium of exchange, money has to be divisible so it can be used for transactions of different sizes; scarce (money that ‘grows on trees’ would not be suitable); transportable; and non-perishable (Seidman, 1986; Douthwaite, 1999). As a unit of account, money permits the comparison and calculation of values in the abstract, rather than those of individual utility as in barter and enables the keeping of financial records and the quoting of prices (Douthwaite, 1999; Ingham, 1999). Finally, for money to be truly accepted within a society it must be seen to store intangible value, and, while this might fluctuate through, for example, inflation, it must be generally possible for similar amounts of goods and services to be purchased regardless of when the money was spent (Douthwaite, 1999).
Money’s function as a medium of exchange is widely regarded, in orthodox economics, as the most important aspect of its role, since the core of economic action lies in exchange (Poggi, 1993). As a result money is seen to act as a symbol or token directly representing values of ‘real’ commodities in the economy (Seidman, 1986; Ingham, 2000). This assumption underlines the thinking that money exists primarily to facilitate comparisons between commodities and to mediate the resulting exchanges and that money’s existence is the outcome of individual rational utility maximisation (Poggi, 1993; Ingham, 2000). Nineteenth century theorists such as Smith, Ricardo and Marx supported this perception of money, suggesting that it was a ‘neutral veil’ or ‘lubricant’ to the real economy, unable to act as an autonomous force, merely allowing us to do more easily that which we could do without it (Ingham, 2000; Smithin, 2000). Thus
“in a sense money has no value of its own; or rather its value consists in money’s ability to assess and store the value of other objects” (Poggi, 1993, p 150)
However, modern currency has become more than a veil which needs to be drawn aside in order to reveal the real economic transactions behind it. It is the overriding factor by which value is established and recorded in price lists and debts (Ingham, 1999). Money is held so that individuals can participate in transactions and makes possible the reproduction and continuity of economic life in a complex economy.
Once the equilibrium of money is disturbed, through, for example, hyperinflation as seen in Germany in the 1920s, then disruption of the real economy is not far behind (Ingham, 2000). Furthermore, the holding of money is seen in the context of potential and possibility.
“Even in smaller amounts money is associated with choice” (Poggi, 1993, p145)
Consequently, money is connected with freedom, the ability to choose, and, through such choice, contributes to the division of labour and specialisation (Seidman, 1986). Additionally, the monetary growth models of Friedman (1960) and Stein (1970) argue that money is an essential input in its own right because it releases capital and labour from the distribution and exchange processes thus allowing them to be more effectively used in producing goods and services (Darrat and Al-Yousif, 1998). However, it must be noted that in very poor areas, particularly in the rural areas of developing countries, there is not the same level of specialisation. Moreover, with the increase in trading on the international money markets, almost 90 percent of money transactions are now speculative and have no direct part in the production of goods and services (Strange, 1986).
Yet money is still not entirely autonomous. It is unable to work without the commitment of a central authority that possesses the legitimate power to construct and maintain it and the state plays a significant role in making an advanced money economy possible (Poggi, 1993; Ingham, 2000). The development and the effective operation of money require an atmosphere of generalised trust. To function properly it requires everybody’s willingness to accept it from everybody else. Thus that willingness presumes in turn an attitude of trust, a shared awareness of money’s virtues and effects and a disposition to act so as to confirm and make use of it. Money can only be routinely accepted if the risk of disappointment is taken to be minimal (Kennedy, 2000).
“Money’s ultimate dependency on trust is well conveyed on a motto on Maltese coin: “non aes sed fides” What matters is not the bronze but the trust” (Poggi, 1993, p 149).
However, as suggested by Schumpter (1934; in Ingham, 1999) economic and political power is also based on the production and control of forms of credit-money. Therefore control over the monetary instruments and the monetary institutions which operate them, becomes one of the main ‘contested terrains’ in the struggle for political control and supremacy in any society (Smithin, 2000).
