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LETS: The Economic System of Giving
The Problem of Money
As Sholom Aleichem, Jewish fiction writer and humourist, once wrote:
"Money is round and rolls away." The conventional dollar economy is in
many ways a creation of the Industrial Revolution, and has never been
properly re-interpreted in the light of the changing world-view of the
Information Revolution. The flaws in the current economy are becoming
more and more obvious.
Money was invented to get around the biggest flaw of barter, the
previous method of trade, which was that you couldn't always find
someone who wanted what you had to offer in exchange for what you wanted
from them. Money has solved that problem, but it has introduced new
ones, principal among which is that it has become a limited resource in
its own right. In a monetary economy, you no longer have to worry about
having something worth trading; everyone takes cash. But if you don't
have any money, no-one will trade with you.
Thus we have the problems of social welfare (redistributing wealth so
that poor people have some money to keep themselves alive), easy credit,
fast-money entrepreneurs, credit squeezes, interest rates, inflation,
and all the other problems that stem directly from the idea that money
is a limited resource and we can charge more money for the use of it. We
even have games like forex trading where people play with numbers for a
while and then agree who has "made" money and who has "lost" it.
The Problem of Work
A related problem of modern industrialised societies is the definition
of work, a subject which has often been addressed in the last decade or
so (see Sleepers Wake by Barry Jones, for example) but to little
avail. Work is currently defined as what one does to make money, and
thus many things are considered work which are negative and destructive
to the environment, society or the human soul. Conversely, many useful,
positive and constructive things that people do are not classed as work
because they do not earn money.
A long-standing problem is that much of the labour that women do has
traditionally been unpaid (housework, for example) and thus does not
fall into the current definition of "work" and is not measured in the
present economic system. This is sexist and unfair, but has proven
highly resistant to change.
Finally, as discussed in Sleepers Wake and elsewhere, the increasing
mechanisation of industry is decreasing the amount of "work" available
and making it harder for people to earn the money they need to live. But
preventing mechanisation is no solution when doing so retains less
efficient production methods and the most repetitive and soul-deadening
jobs. The solution is to redefine work and it is my contention that in
order to do that it may also prove necessary to redefine money.
LETS - The Additional Economy: Theory
LETS provides a means by which people can continue trading, can continue
working, without having to wait for the social lubricant of money.
Everyone creates their own currency. They can continue trading as long
as their word is good, thus allowing the local economy to keep moving
even when hardly any cash is available.
The general idea is that any person's interaction with society includes
both production and consumption. Both of these roles are essential to
the economic functioning of society; there must be people who consume
more than they produce, or there would be no customers for those who
produce more than they consume. It is no social stigma to be a net
consumer; indeed, it is expected of a fairly large portion of society
(the young and the old, as well as students and the sick).
In a LETSystem, every member of the community agrees to offer goods and
skills of their choice to the community in return for an agreement from
the rest of the community to do the same for them. A few people perform
the administrative functions of recording transactions, issuing
statements and publishing a newsletter and a trade directory listing all
the goods and skills on offer (and desired) within the community.
LETS in Practice: A Step-by-Step Example
You are a new member of a local LETS group and you decide to buy a bag
of apples from another member using LETS units. You negotiate a price
with them (for example, ten units) and sign a notification slip to the
LETS administration to authorise them to record the transaction. The
recipient then drops the slip into the nearest LETS drop-box (or mails
it to the administration).
Now you are ten units in commitment to the community, and the other
member has ten more units commitment from the community. You agree to
assist other members of the community to the best of your ability to the
value of ten units at some time in the future, and the community as a
whole agrees to assist the other member to the same value.
Later you will receive your statement which will list every transaction
you have made since the last statement, just like a bank statement. If
your records disagree with the statement you will be able to cross-check
with the administration and the other party to the transaction.
Common Worries and Their Answers
- What about taxation and social security benefits?
It is every citizen's responsibility to fill out their tax returns
correctly to the best of their knowledge, and to declare income to the
department of social security when required. The LETS group as a
whole has no legal obligation to report transactions to anyone, though
the balance and turnover of any member will be public knowledge or
available on request.
The actual LETS units have no physical existence and no value in and
of themselves, and in most groups will not be a freely exchangeable
currency. They serve only as a method of recording a member's
commitment to their community or vice versa. Therefore, I would not
declare them as income, though if I used LETS units to purchase goods
or services I might need to declare the dollar value of those goods or
services as income. Ask your accountant for advice if unsure.
- What if someone spends a lot of LETS units, then runs off without
fulfilling their commitment?
This does happen occasionally, but the inverse also tends to happen -
people leave the group still in commitment to the community. In
either case no individual is affected, only the group as a whole. The
two tend to balance one another out over the long term. It is also
unlikely that anyone will be able to spend a lot of units unless they
are considered trustworthy by other members of the community.
- I really wouldn't want to spend any LETS units until I had made some.
Why not? The whole idea of the LETSystem is to get away from the idea
of money as a limited resource, and get the local economy moving.
When you spend LETS units, you are by definition helping someone else
in the community earn units.
- Won't I make a loss if I sell stuff for LETS units?
There's no point in making a transaction if you're going to make a
loss on it. You are perfectly welcome to ask for a proportion of the
price of an item in dollars. You will, after all, want to cover any
overheads that you had to pay in dollars. Whenever you make any
transaction in a LETSystem, you should be sure that it is something
you don't mind doing in the first place. LETS units are not intended
to be an incentive to do something you really don't want to do!
The Successes: Landsman, Maleny
LETS has been in existence for over ten years now and already the system
is being used internationally. One single mother in the original
Canadian LETSystem wrote to tell her story. She had been able to get
all sorts of work done around the house during the recession there in
return for cooking home-made frozen lasagna for the local community. The
LETSystem enabled her to get many things done that she could otherwise
never have afforded. It also allowed her to contribute her skills and
feel a valued member of the community.
Such luminaries as Bill Mollison support it as a working example of a
"permaculture economy". There are dozens of active LETS groups in
Australia, the most notable being Maleny in Queensland, where they have
also opened a community credit union in conjunction with the LETSystem.
How You Can Get Involved
(updated 14 October 2004)
LETSystems - the Home Page
LETS in Australia
Copyright © April 1992 Andrew Pam <xanni@glasswings.com.au>.