‘LETS: An Economics in Waiting’ by Michael Colebrook

The July/August 1997 issue of The Ecologist contained a series of articles highlighting the problems of the globalisation of economic activity. The September/October issue of Resurgence focused on the same topic. When the issue of Echoes (an occasional magazine produced by the World Council of Churches) did the same, I remembered the words of wisdom: ‘once is happenstance, twice is coincidence, three times is enemy action’. What is happening is very significant. In their article in The Ecologist, Nicholas Hildyard, Colin Hines and Tim Lang describe how companies are restructuring their operations on a global scale. They justify this on the grounds of the need to be competitive, ‘it is not companies which are competing, however, but workers and communities… Workers are being pitted against workers and communities against communities as companies relocate from one country to another in search for new markets, the weakest unions, the most flexible rules on working conditions and the largest subsidies.’ In his article in Echoes, Jose Bittencourt writes, ‘in the new capitalist logic, those population groups that cannot be exploited for production are permanently discarded. We are arriving at a stage where being exploited is a ‘luxury’, as it means not being excluded’. The losers in the competitive battles are being more than marginalised, they are being excluded from the system altogether.

A story I saw on the back page of the Guardian struck a chord with me. It was about young children being paid a pittance for picking jasmine flowers in the Nile delta for the French perfume industry. Just 25 years ago these flowers were being grown on the terraced fields around Grasse, which is where the perfumes are made. These fields have now vanished under expensive villas which the local people can’t afford to live in (I know this area and have seen this happening).

In a recent book review Diana Schumacher quotes a modern version of the Golden Rule: ‘The golden rule is that he who has the gold makes the rule’. The possession of money confers power because in the conventional economy, money is needed in order to do almost anything and those who have money can control what gets done.. To add insult to injury, the bankers and dealers who help companies with their take-overs and their restructuring pay themselves outrageous salaries, while their activities usually result in substantial numbers of productive workers being made redundant.

In addition to problems with trade and manufacturing, the deregulation and globalization of the economic system has had other unwelcome effects. In 1990 the total value of world trade in goods and services was about $4.25 trillion. On the stock exchanges and money markets the volume of trading is more than $1 trillion every day. The amount of money engaged in making money out of money is more than eighty times the amount involved in trade in goods and services. There is no shortage of money. It is simply in the wrong hands and not doing what is was originally designed for.

At the moment economics is about the rich getting richer and the poor getting poorer. Are we failing to grasp the enormity of the greed, the injustice and the immorality being perpetrated in the name of the free market? The time has come for an economics which puts the environment and people first. In which he who has the gold no longer has the power to make the rules and in which competitiveness is no longer seen as a virtue. The green economist Rudolph Bahro believes that the existing economic system is not reformable. He claims that it has to be replaced by something completely different.

LETS stands for Local Exchange Trading System. In LETS a group of people in a locality agree to trade with each other using a new currency, not connected to pounds and pence. The process is exactly the same as buying and selling goods and services for ordinary money except that no actual cash changes hands. All the trading is done with the equivalent of cheques which are entered to individual accounts just as a bank does. There are two key differences between LETS and ordinary money. Firstly, you don’t need to have any of the LETS currency before you can spend it and, secondly LETS units of currency are not convertible. These differences might not seem at first sight as all that remarkable, but, in relation to conventional economics, they are revolutionary and deeply subversive. Let me try to explain why.

In LETS there are no rich and poor, there is no such thing as debt. There are only those who have a credit in their account and those who have a debit. Every transaction is based on mutual consent between equals. No interest is charged on debits, there is no usury, there is no borrowing or lending, there simply is no point. The ability to buy depends solely on other people’s willingness to sell to you and not upon whether you have any money. One of the many problems with normal money is that it is not always there when it is needed. Alan Watts, writing of the Great Depression of the 1930s said that it ‘was not so much tragic as absurd. Following the Wall Street crash, all the same materials, all the same factories, all the same farms, all the same people, all the same skills, were all still available and still in place. But the economy was paralysed because there was no money’. LETS recognises that real value resides in materials, factories, farms, people and skills. LETS currency has no intrinsic value, real or imagined, and the money supply is infinite.

The non-convertibility of LETS currencies is the antithesis of globalization. It means that the value or wealth involved in trading stays within the local trading community, it cannot be siphoned off to fill the pockets of absentee landlords or overseas investors or multinational corporations. In fact, given a wide enough trading community, the whole concept of financial investment based on capital becomes redundant. If the resources to do something are available within a community, and the community decides that it would be a good idea to do it, they just do it and pay each other in LETS currency. When I said this recently to a social worker, she replied that in her deprived area of Plymouth there was no longer any sense of community. Apart from being a sad reflection on the economic system which is substantially responsible for this state of affairs, it highlights one of the problems raised by LETS economics which is as yet unsolved. Since money no longer decides who can have how much of anything, something else has to take its place. In LETS the state of everybody’s account is available and known to all the members. In a small community in which everybody knows everybody else things more or less work out by themselves. People can judge whether somebody is exploiting the system. At the moment hardly anybody ever says no to a transaction. If LETS systems ever get large enough to aspire to genuine local economic self-reliance and autonomy, methods of decision making about when and how to say no will be needed.. The problem of trading between communities, between regions and nations also needs to be addressed. Concerns about long term sustainability and degradation of the environment mean that such trading will be at much lower levels than at present but it will still be necessary. One solution might be to have a hierarchy of LETS type currencies for trading at local, national and international levels. As far as I know nobody has seriously explored the possibilities of doing this.

LETS provides an economic framework within which individuals and communities can be empowered to realise their creative potentials without the constraints currently imposed by lack of money. If this sounds too good to be true, it is already happening, albeit on a limited and modest scale.

For more information about LETS in the UK go to LETSlinkUK