8. Inter-LETS: how you get round the limitations

The astute reader may have noticed that I have referred to separate LETS systems as organising separate currencies rather than a single new kind of currency that can be traded between all members of all LETS schemes. This is both the strength and the weakness of LETS based economies. The smaller the currency, the sooner your money comes back to you and the more trading will depend on non-economic values such as a sense of community. There may on occasion be the need to combine two LETS currencies into one, because a large overlap forms between their memberships and to avoid the duplication of administrative and development effort. But much of the beauty of the LETS concept derives from the smallness of its origins and the fact that it starts from the grass roots of society, grows organically and encourages both diversity and a healthy form of competition between different LETS schemes. The smaller community based LETS scheme matches local needs and resources well but does not provide sufficient competition or economy of scale to generate adequate trade or sufficient diversity and choice to enable its members to enjoy the quality of life which they have come to expect, without using another currency which operates on a larger scale.

The business of keeping separate currencies in separate pockets for those trading on more than one LETS system need not be too complicated in practice, because LETS money systems are inherently simple in comparison with the old currencies. Some will find it easier to earn in one kind of currency while another is easier to spend. There should be no need for a busy specialist to become a jack of all trades simply so he or she can be involved in a small LETS group which provides an insufficient market for his or her specialism. There is inherently no reason why someone should not be able to buy one currency in exchange for a second if someone else wants to buy the second in exchange for the first; the extra flexibility this gives is of benefit to both parties and enables greater participation in a LETS scheme. To use a LETS currency you must be a member of a LETS association. For such a transaction to take place between two LETS type currencies both parties would need to be members of both schemes. 

If, as I propose in the next chapter, taxes are to be charged in future on all transactions resulting in income to a private account, this would make imports relatively uneconomic compared to local products and exports relatively uncompetitive. There would still be a place for global industries where the economies of scale are sufficient to justify the extra taxes, e.g. the computer, telecommunications and air-travel industries.

LETS does not have to be local. There is no reason why a LETS type currency should not serve a major conurbation or regional community with several million inhabitants. This will obviously need a more professional approach to the administration and facilities management. The essential features that will need to be maintained for it not to deteriorate into something just like another old kind of currency are as follows: 

  1. The currency should only be used within a community which values itself as such.
  2. The circulating credit should be based on debits spread between many individuals or businesses. Banks, charities, public agencies or the LETS system itself should not go into debit. 
  3. All payments go through the accounts. There are no notes or coins.
  4. The administration of the system is accountable to the community it serves; i.e. the trading members who hold accounts.
  5. There should be no interest charged on balances in debit or paid to those in credit, though administration, service charges and taxes ( in accordance with members requirements for reasons I will explain later) may be deducted from income received.
  6. Transactions only take place by agreement between buyer and seller.
  7. Information about the income, expenditure and current balances on all accounts is made available to all members of the scheme.
There are many situations where those engaged in a cooperative form of economic activity can benefit from using a LETS type currency to enable and encourage their internal transactions. For example, The European farmers will need to replace some of their specialised technological inputs with local skills and resources resulting in more sustainable and organic forms of agriculture if trading extensively using local or regional currencies, but their customers will still want to buy foods produced more easily in different climates so they have every reason to trade amongst themselves using their own currency system. Some would also be able to trade farm machinery or specialised goods or services into this scheme if these were available locally in exchange for currencies obtainable through sale of agricultural products into the farmer's local community. 

Other areas where this kind of approach would work include the global telecommunications, computer and software industries where the businesses involved in this already carry out much inter- trading amongst themselves and need to operate on a global scale. On a smaller scale, a good basis for a local LETS scheme involving building and construction trades is the idea of a "self build" cooperative, whose members buy a large plot of land which is subdivided into smaller plots so they can pool skills to build a house for each member. By using a LETS currency to account for the use of each other's skills, this can continue to circulate and expand to finance other community activities and projects after the original houses are completed. 

A new currency system could also be used to enable the industrialised countries to provide their technological expertise and abilities to help the third world build up its basic infrastructure to the point where this effort can be repaid without harming these emerging economies. This trade is necessary, both for the third world to become more self-reliant and to provide useful employment among those with the necessary skills and organisational abilities in the industrialised world.

I can see no sustainable objection to this kind of currency being brought into existence if it operates according to the principles described above and helps liberate the poorer half the world from having to pay so much of its earnings as interest to the richer half. Income received in the form of a global currency could also result in taxation being raised for the finance of global institutions. The UN is in urgent need of finance without strings attached by governments with their own nationalist agendas, to pay for its peacekeeping, health and educational programmes.

The experience gained so far with operating LETS type currencies at the local level indicates that any community can create its own currency system. If we are serious about solving the third world debt crisis it is time we started thinking of all humanity as belonging to a global community. 

Version #001 20-12-94

Written by Richard Kay  rich@driveout.demon.co.uk