LETS and ‘open money’
The late twentieth century saw a revival of self-organized credit money, paradoxically in the leading centres of western capitalism. LETS, meaning ‘Let’s do it’, but later elaborated as Local Exchange Trading Systems, began in British Columbia in 1982-83 at the initiative of Michael Linton. This was in response to a temporary downturn in the local economy because of reduced demand for the defence industry and provincial government finances. Since then the LETSystem design has spread through the English-speaking countries and beyond, to France, Germany, Japan and Argentina. Many thousands of people have joined LETS systems which until now have generally been independent of each other. Most communities and even nation-states depend heavily on imports and exports and their internal economy has a weakly developed structure. Community currencies, on the other hand, sustain self-regulating economic networks allowing members to issue and manage their own money supply within a bounded system. As such, they may be conceived of as a way of closing off local communities from the market economy; but Linton has subsequently emphasized the need to integrate these circuits into existing commerce.
In LETS, people, businesses and organizations open accounts in one or several systems, with the unit of account, often named distinctively for local cultural resonance, made equivalent to the national currency for ease of calculation. Member accounts start at a zero balance with no deposit of normal money nor any requirement to buy before selling. No interest is paid or charged on balances. There is a register of members (which would normally include businesses as well as individuals and organizations), sometimes listing the services they offer. Payment for goods and services may be in some combination of local and national currency, with only the former being registered in the circuit. Transfers and balances are recorded by a registry which is a virtual bank with no ‘real’ money. Minimal administrative expenses are recovered from member accounts in community currency on a ‘cost of service’ basis. There is never any obligation to trade; and, if desired, members may know the balance and turnover of other members. In the latest stage of the technology, these transactions are recorded off-line on smart cards capable of registering a plurality of currencies and then communicated card-to-card via the internet. Any existing bank could perform this function for a large number of such networks, but they do not.
Each individual member listed on the common register issues the currency whenever the balance of their exchanges drops below zero. In doing so, they make a promise to honour their commitment, acknowledging the gift of goods or services made in return. At any moment, the totality of exchanges sums to zero. These multiple-issuer currencies are more robust than the conventional, single-issuer variety in that the ability of members to trade is not diminished by the disappearance — by default, migration, death or whatever — of accounts with substantial negative balances. Even so, trade can dry up if some members accumulate significant positive balances and find little to buy within the circuit. Most of all such a system offers a means of economic empowerment to individuals as members of communities brought together in a practical way through a circuit of exchange with its own medium of communication. This in turn is an education in citizenship of a new kind, where society may take the form of many levels of association, not just those depending on the economic monopoly of the nation-state.
A proper currency service provider would enable users to create their own systems in the space available and give them access to other similar systems. A stand-alone community currency is like a radio or TV that can only tune to one station, a computer with just one programme. Supporting trade between people who keep their accounts in different currencies requires that the registries can communicate with each other through a cross-clearing network. This would be operated primarily through the internet, using its own money domain naming system (MDNS). The MDNS proposed by Linton would start with national top-level domains responsible for the registration of regional sub-domains, which would be in turn responsible for local registration. This facility would be further enhanced by ‘multi-cc’ smart-card systems. The cards can currently carry up to 15 different currencies at a time, off-line and anonymous, and are designed to make community money systems easily adopted in the retail sector. The card system enables every participating business also to have a loyalty loop specific to their own business, if they choose. The combination of the cross-registry clearing and smart card systems would create a platform for virtually any form of open money. When the LETSystem software achieves a kernel of cross-platform protocols capable of defining the integrated platform of any application, it will become open source software, open money in the fullest sense. Of course, co-ordination in this area is difficult when there is no one body concerned with establishing standards.
A powerful ‘free (libre) and open source software’ movement (FLOSS) has emerged in recent years, building on the achievements of the Free Software Foundation’s Richard Stallman and the founder of Linux, Linus Torvalds (Hart 2005). The latter is a free operating system that has gained phenomenal popularity in recent times because it allows users to modify software to suit their own needs. Linux is a collaborative effort of thousands of programmers interacting over the internet and is therefore not owned or controlled by any one company. By exposing software source code to peer review by a community of users quickly and often on the internet, it has posed a strong challenge to the closed business model of seeking to derive monopolistic rents from secret intellectual property. The robustness of the open source model lies in its being able to draw on a much larger pool of potential developers than could ever be employed by a single firm. In similar fashion, the spread of community currencies would benefit from sharing software developments and other forms of innovation within a community of associations using open money. Already community currency design, code and other relevant information has been made freely available for others to use and to contribute to its development. Moreover, like open source, these developments take place through an egalitarian (‘flat’) network rather than through hierarchical institutions. There are other parallels between the two cases. Open source appears to be a driven by a logic of giving and sharing, more than financial reward; and in circuits organized through community currencies concern with money prices is often secondary to the individual and collective purposes of exchange.
There is a paradox in my use of the terms open and closed in this context. For the majority of community currencies such as LETS the definitive principle is that the exchange circuits they sustain are closed. In contrast, the markets sustained by conventional money are open-ended networks of limitless extent, so that money seems to drain away to unseen centres of power that are invariably located elsewhere, leaving us powerless to prevent its passing. The whole point of LETS is that the purchasing power generated by trade comes round again to nourish the participating community; and it promotes internal production rather than the import/export pattern that predominates in mainstream markets. This becomes more obvious when the circuits are small, as they usually are, and when the community supporting a currency is a well-defined local area. But open money circuits may be scaled up to a much larger membership that could easily be dispersed around the internet. There are trade-offs between these poles of association, small- and large-scale, local and virtual, closed and open. Some may choose the intimacy of relations with those they know well, whereas others may prefer looser connection with a large pool of strangers. If they are to succeed, community currencies must embrace both poles. Thus, the greater control afforded by closed circuit networks needs to be offset by an open source approach to the software needed to operate community money. This dialectic of local community and global network, reflected in the combination of closed circuits of exchange and open distribution methods, has been a constant feature of LETS’ evolution over the past two decades.
The variety and limitations of community currencies
The general aim of community currencies is to enable trading and exchange, when purchasing power in the conventional market economy is especially defective. But clearly the form lends itself to a wide variety of social and ecological purposes whose rationale may not be narrowly economic in that sense. LETS and similar systems are differentiated in a number of ways. Of these the most important is the degree of integration in the national economy, but others include: the monetary measure (based on the national currency or on hours of work, for example); the organizers’ reliance on free or salaried labour or government grants; digital or material records of payment; involvement of businesses or exchange of services between individuals only; local or virtual association; forms of leadership and participation; and so on. Many LETS associations are reluctant to band together in case their autonomy is compromised. They still bear the hallmarks of Victorian philanthropy, aiming only at the poor, forming boards and committees, protecting their insular and clubby nature against all-comers. Such institutions are usually time-consuming and dogmatic, with a bias against business and for public grants. Their main motive appears to be to get away from the conventional economy into a separate world of their own, however small.
At another extreme, community currencies may, in their desire for economic integration, mimic national money so closely as to resemble it more than the family of currencies associated with the LETS movement. The Limehouse Townhall in London’s East End has been occupied since 2001 by a miscellaneous network of artists and activists. In October 2005 they launched a series of events known as the World Summit for Free Information Infrastructure (http://www.okfn.org/wsfii/). As part of their engagement in the local economy, they also launched their own currency, known as the lime. This is a bright green paper scrip similar in appearance to supermarket discount tokens. Denominations are 1, 2 and 5 units upwards and have purchasing power equal to the pound sterling. The lime circulates in the local community, where it is accepted by some shops and restaurants. These in turn may redeem the tokens for national currency whenever they choose; some of them offer a discount of ten percent to the issuing authority (not to the customers). Although it is intended as a permanent feature of local life, the lime is mainly used now as an event currency, with many goods and services available internally only in exchange for the community currency.
The organizers of the lime have discovered the joys of central banking: the sole issuer of the currency has the power to create money that did not exist before, to the extent that tokens are not immediately redeemed for normal cash. The scheme also has the merit of being easily understood by participants, some of whom may be just passing through the community; and it adds flexibility to local markets. Its drawbacks are those of conventional currency. The lime is impersonal, undemocratic in origin (single-issuer as opposed to multiple issuers), easily counterfeited and unconnected to the new information technologies. As such, it is a long way from LETS; but what it loses by mimicking the pound sterling, it gains in terms of cultural acceptance.