LETSystem Design Manual
Fundamentals of the LETSystem
The Community Economy
- "Give someone a fish and they'll eat for a day,
- teach them how to fish and they'll eat forever."
The problem with money
Many of us are active in creating and maintaining a sense of community amongst our friends and neighbours. But more and more our hands seem to be tied: the world is in serious trouble, both ecologically and economically. Few people would argue with this, but how many would recognise a major cause of our problems? We assert that a major problem, perhaps the major problem, lies in conventional money and the form that it takes.
Every modern community depends on the flow of national currency through its internal economy. The money swirls in and it rushes out again. Money flows into the community from exports, visitors and government spending. It flows out on imports, travel and taxes.
When local industry loses an export market, when fewer visitors arrive or when governments cut spending, the money that leaves is not replaced.
As the amount of money circulating in the community falls, so does the level of trading. Business declines and people lose jobs, not because they have nothing to offer, but because there is not enough money to go around.
In the contest for a share of this limited supply, people work in ways that damage their own health, the environment and the well-being of the community.
People are prepared to do almost anything for money because they need it to take part in the game. This is the source of the problem, since money, by virtue of its very structure, is scarce and hard to come by.
There are three reasons for this:
- there is only so much in circulation;
- it can go virtually anywhere, and so it does;
- you can't issue it yourself.
All over the world communities suffer from a shortage of money, simply because there is only so much of it, it's gone elsewhere and they can't print their own.
When you think about it, this situation is nonsensical. Money is merely a means of exchange, a set of tickets, a number in your bank account. It has no value in itself - you can't eat it, wear it or build anything with it.
It is a measure of value, like an inch measures length or a ton measures weight . There need never be a shortage of the measure.
Imagine a carpenter not working because he has run out of inches!
Yet we are often idle when all we lack is the means of exchange. There may be plenty of materials, equipment, skills, time, goods and needs to be met, but we cannot work or trade with each other because there are no tickets around, no scores on the sheet, no means of measuring relative value.
The problem suggests the solution
We can get around this problem by creating local money to finance local needs, to generate wealth and protect us from poverty.
A local currency can't leave the community it serves, so it ensures connections between people exchanging skills, goods and services. With a local currency, the community is less affected by fluctuations in the external money supply.
Local currencies have been common throughout history, emerging whenever a community needs to protect its internal economy from outside disturbances such as war, or depression. The Social Credit movement was one example, and more successf ul systems were used in Austria before the second world war.
Not surprisingly, the current economic climate has spawned several systems ranging from small, informal self help networks to the hundreds of commercial "barter" networks now operating throughout the US, and increasingly elsewhere.
The growth of these commercial networks is extraordinary. In 1991 they reported $5.9 billion trading among 240,000 clients, in 450 systems. Two years later estimated trading had almost doubled to $10 billion, at a time when the US economy as a whole was standing still. This growth has occurred despite the high costs of taking part.
At present the LETSystem - Local Exchange Trading System - is the most advanced form of local currency in circulation.
The first LETSystem was developed in Canada's Comox Valley, in 1983, where some people adapted the "barter" network model and turned it into a full scale community system with greater advantages, yet operating at a fraction of the cost.
This prototype was very successful, despite considerable antipathy and even active resistance from key elements in the local community, and about 20 similar systems sprang up across North America.
By 1988 a combination of factors, principally research and development costs and fragile user confidence, caused trading in the Comox Valley system to decline virtually to a standstill.
While this created a general loss of confidence in N. America, LETSystems began to grow worldwide. Since 1987 some 70 LETSystems have been established in New Zealand and almost 200 in Australia. In Britain the number has rocketed from 7 systems in early 1991 to 150 by the end of 1993.
All these systems are based on the original prototype in Comox Valley, which has recently resumed trading with improved computer software, administration and more ways of introducing and educating people about LETSystems.
For a local currency to work people need to be able to use it alongside conventional money, and its design should resolve the three fundamental problems of that money. A local currency should ideally
- stay within the community it serves
- be issued by the people who use it
- exist in sufficient supply to meet the needs of that community.
The LETSystem meets these criteria. It is also friendly, convenient, cost effective, simple and secure.
It works much like a bank or a building society. Everyone has an account, but instead of money transferring from one bank to another, all exchanges are within a single system.
Each new account starts at zero and thereafter may hold a positive or a negative balance. Those with negative balances have, quite simply, created the money which is in the positive accounts. So this local money is essentially a promise by some members of the community to give service to others.
Money like this, which you issue yourself, is personal money.
Conventional money, while easy to spend, is hard to earn. As a result it is coercive by nature - people with money exercise power over people without it. Who pays the piper calls the tune.
In a personal network , however, money is easy to earn. Everyone has money to spend.
By the same token, nobody needs it, so things only happen when people want them to. People serve willingly, or not at all. Nobody can tell anyone else what to do.
We are acknowledged for what we give to others. Acknowledgement in the local money has value because that money is actually the commitment of people in the community, to the community.
Currency and Values
Money is the nothing we take for something before we can get anything.
Is money really real?
To paraphrase Frederick Soddy, you have something that's real, you exchange it for money that isn't , so you can get something else that is.
It helps to see how money can be used simply as a measure of value. People have value, things have value, but to say that money in itself has value is to confuse the issue.
We can use inches to measure height and kilos to measure apples. But do inches have height? Or do the kilos themselves have weight? It's the apples that have the weight., not the kilos
Conventional money, on the other hand, confuses valuations. Because conventional money is scarce, it has more than just a trading value, it also has a commodity value. Effectively, it is considered and treated as real.
Notice how people are anxious to get as much as they can and spend as little as possible. They may value something highly, but they still want to spend as little as possible to get it. Everybody else thinks this way, and anyone who doesn't play the same game loses out.
You may feel guilty about getting trapped in this yourself, but what can you do? Personal valuations tend to follow the general "market" rates simply because, like everyone else, you can't afford to throw the stuff around.
That problem arises from the scarcity of the currency, not from anything to do with the unit of measure. With local money, whatever the unit of measure, you have the room to work at different rates. You can create and spend more freely, as it's coming back anyway. And also, the person you want to hire is equally able to issue his/her own money and is thus not going to put up with being exploited. There is a built in balance between the giver and the receiver, the seller and the buyer.
The determining factors are the sufficiency of the local money, and the patterns of trading that it creates. Rescaling, delinking or "floating" the unit of measure makes no difference beyond adding to the confusion.
Choosing the measure
A currency unit, to be useful, needs to represent a commonly agreed unit of measure. That measure can be arbitrary. Ten inches of spaghetti is as good as 24.4 centimeters of spaghetti., or 0.244 meters and so on. Once you get clear about the units, you can get on with spaghetti. That's what local money allows us to do.
The Bank of England doesn't determine the value you put on your time. You do that. Just as you ascribe the value you put on the time and skill of others. A bottle of coke is worth nothing to someone who hates the stuff. Would you pay £20,000 for a car? What is the value to you of your donations to charity?
Choosing the pound sterling as a unit of measure for our local unit, still allows us to adopt our own methods of valuing others, methods which are independent of the conventional "market". And we have the advantage of a commonly understood measure.
Floating free from the pound sterling will do nothing to redress values within the community. It will certainly do nothing to deter the actions of the tax office. But it does effectively prevent many traders, particularly businesses, from participating in your system.
This is our experience. In systems where the local unit has the same measure as the national one (the pound , the dollar etc) we have seen valuations moving naturally to accommodate the wishes of the community. As Philip Revell of Autur Dyfi Economi Gwynnedd (ADEG) has reported:
People have values, currency measures do not. Local currency, unlike conventional money, is not a scarce commodity for which we have to compete. LETS therefore encourages much more co- operative modes of behaviour.
This is reflected in our experiences with ADEG. The "market rates" for skills traded within the system are often quite different from those prevailing generally, with lower differentials between skills.
The LETSystem is designed to deal with the problems associated with conventional money. The system is defined by three underlying considerations: community, personal and practical.
The principle of community refers to a finite group of people who decide to participate in the system. It also requires that nobody can claim or exert ownership.
The money created within a LETSystem is personal in that it is created by the promises of the participants. The consent of the individual is required at all times. No third party can have control over the money and the money cannot leave the system.
The LETSystem differs from other personal money networks by adopting a practical stance. The unit of measure has the same value as the national currency, so allowing the local money to integrate into the mainsteam economy where it sets up beneficial cycles within the community.
These three considerations give rise to the five essential characteristics of the LETSystem as originally defined and are implemented through the standard Account Holders’ Agreements (Section 1.4).
The function of the LETSystem
The LETSystem is an economic system intentionally designed to address the problems and limitations of conventional money. LETSystems offer only one of several frameworks which can be used to facilitate the use of personal or community money. But the LETSystem differs from most of these proposals in several respects.
These specific characteristics ensure that the LETSystem works with the existing money system. Rather than proposing a replacement for conventional money, the LETSystem is designed to integrate with all aspects of economic and financial life. It is a complementary system rather than an alternative one.
The foundation of the LETSystem
The LETSystem is underpinned by three considerations. It is:
The LETSystem is defined by five fundamental criteria:
- cost of service - from the community for the community
- consent - results in the "flat start" of all accounts
- disclosure - to ensure informed action by users
- equivalence to the national currency
- no interest - no commission
Cost of service
The LETSystem is designed to operate cheaply and sustainably. Individuals who run accounts on the system will be looking for an efficient, trouble-free service. If a LETSystem is not run in a professional way, it will lay itself open to competition from systems which are better-run. Some of those systems may not share the same ethical basis.
Voluntary effort does not encourage the professional approach and is rarely sustainable. It therefore makes good sense to reward effort spent on administering the system in an appropriate way through the readily available local money.
The cost of service principle excludes any ideas of commissions and profit-taking in system administration At the same time, we can provide a service which would be the envy of any profit-making business. Through feedback from those who hold accounts on the system, we can ensure that the services provided match their needs.
All activities within the LETSystem are based on consent. This consent is freely given by all participants to each other as a condition of holding an account. The most fundamental is the consent for an individual to make promises to the community. But there are many others, including the consent for any individual to start and administer a system.
Consent also involves the recognition that the individual may choose not to do something, for example, "there is never any obligation to trade." Nor is there any obligation upon anyone to join a LETSystem.
Consent inevitably leads to the "flat start", whereby all accounts start at zero. Money will not be moved from an account until permission is given by the account-holder. Nor can money be issued from the administration account in order to start a new account in credit. There is no consent to run the administration account in commitment (although participants will probably make allowances for day-to-day fluctuations).
Disclosure of key information is necessary for the users to have control over their system. First and foremost the users have to be able to trust the system. This takes pressure off them when it comes to trusting each other. The ability to know the balance and total trading of another account is both necessary and sufficient for users to regulate the system collectively. The balance shows the commitment of an account holder and the total trading volume demonstrates the degree of participation.
Equivalence to the national currency
In a LETSystem, the unit of measure has the same value as the national currency. A brief look at the nature of LETSystem currency will show that it is a totally different kind of money from the national currency. Equivalence only means that the value or measure of the two units is the same.
The value of money and the value of people are totally different things. Money is used as a measure, like a ruler is used to measure feet and inches. When we agree on what the measure is, we can value people's efforts in those terms. Conventional money, because of its scarcity, distorts valuations. In a LETSystem we are much more likely to value others at their true worth.
Equivalence means that a large number of individuals and organisations will be able to use LETSystems. Issues of accessibility, taxation and business accounting become straightforward. If equivalence is not present, many sections of the community are effectively prevented from using the system.
LETSystem money exists solely to allow exchange. It arises from people's promises to one another and there can be no profit in storing it up or treating it as a commodity. Interest is an idea which is alien to the way that the system works.
The principle of no interest applies to positive balances as well as negative ones. No interest means just that: so-called negative interest, where charges are levied on positive balances, has no place in the LETSystem. Agreements ensure that system administrators have no permission to levy any interest-related charges.
The above points underpin the definition of a LETSystem and the all important account-holders’ agreements. The principles should apply not only to the LETSystem itself, but to all our efforts in starting and developing systems.
If a money system does not adhere to these five principles it is still valid and it can still be workable. But it is not a LETSystem.
Some notes on LETSystem fundamentals, the Definition, and the Account-Holders’ Agreements
Looking at our five fundamentals:
- cost of service/community (no ownership)
- consent/"flat start" (no obligation)
- disclosure (no cheating)
- equivalence to the national currency (no confusion)
- no interest/no commission (no point)
A community is a group which relates to itself. In any true community we have a sense of being there for each other and we act in a mutually supportive way.
The LETSystem is a finite network of participants that provides an opportunity for them to interact. Trading on the LETSystem brings benefits to all those who participate in addition to any individual gain. Any self-regarding community can therefore be supported by a LETSystem. Further, the system itself actively encourages a sense of community.
Communities can be both local and global. So LETSystems can be both local and global, too. Within LETS, "local" means local to the network of participants. In all cases, "local" is defined by the community itself - it may mean a geographical area, then again it may not.
"Cost of service" relates to the idea of community and "no ownership". This principle is secured by item 8 in the agreements
"Consent" recognises the freedom of the individual. It is secured by the authority to transfer (item 3) which automatically leads to:
- no interest
- a flat start.
The flat start criterion is important, as it emphasises whose money it is and tends to discourage "budget stuffing" by administrators.
Consent is made explicit in "no obligation to trade" (item 2) Consent is also secured by disclosure of balance and trading figures (item 6)
The value of the unit is related to the value of the legal tender. (Stated in "essential characteristics"). "No interest" is also a practical consideration.
Definition and Account Holders' Agreements
A LETSystem, Local Exchange Trading System, is a self-regulating network which allows its users to issue and manage their own money supply within the boundaries of the network.
The LETSystem accounting service maintains a system of accounts for its users.
A LETSystem has the following essential characteristics:
- A service in the community.
- Administrative costs are recovered, in the internal currency, from each account according to the cost of the service. The system operates on a not- for-profit basis.
- Consent is required at all times
- There is never any obligation to trade.
- It is the account-holders who have control over the movement of money out of their accounts. The administration can only act on the instructions of the account-holder who is making payment.
- All accounts start at zero, no money is deposited or issued.
- Key information is available to all account-holders.
- Any account-holder may know the balance (the degree of commitment) and trading volume (the level of participation) of any other account on the system.
- A convenient measure
- The unit of account is a measure equivalent to the pound sterling.
- Your money belongs to you
- Your money is personal, in every way your own money. No interest is charged or paid on balances.
A personal money network that adopts all the above criteria and agreements is a LETSystem.
1) A LETSystem is based on the free association of individuals (the users) who take out accounts on the system. The LETSystem Registry provides a service which allows account-holders to exchange information to support trading, and maintains such accounts of that trading as users request.
The account-holders delegate the maintenance of these accounts to the Recording Co-ordinators. The account-holders also delegate responsibilities to Stewards as stated in this agreement.
2) Account-holders shall be willing to consider using their accounts in [name of LETSystem] to trade with each other.
3) The Recording Co-ordinators will transfer money from one user's account to that of another only on the authority of the account-holder making payment.
4) The LETSystem Stewards may instruct the Recording Co-ordinators to decline to record an acknowledgement considered inappropriate.
5) The unit of exchange is a measure equivalent to the pound sterling.
6) An account-holder may know the balance and trading volume of any other account-holder.
7)a) Accountability for taxes incurred by users is the obligation of those involved in an exchange; the LETSystem Registry and its agents, including the Recording co-ordinators and Stewards, have no authority, nor liability, nor obligation to report to taxation authorities or to collect taxes on their behalf.
b) No warranty or undertaking as to value, condition, or quality of the items exchanged is expressed or implied by virtue of the introduction of users to each other.
c) Account-holders agree to the recording of any information that they supply and to the holding of all such information on computer. While all information, excepting balance and turnover of accounts, is considered confidential, neither the LETSystem Registry nor its agents can guarantee that confidentiality, or necessarily be held liable for any breach of it, once it has been legitimately disclosed.
8) Recording Co-ordinator(s) are authorised to levy charges on users' accounts in [name of internal currency] at rates assessed by the Registry Steward(s) in liaison with the Recording Co-ordinator(s).
Registries and multiLETS
The needs for local currencies are many and varied. This will be reflected in the number and variety of the systems which people will set up. The Registry:
- is a design for operational support of multiple currencies in local areas.
- provides facilities for registration and account recording facilities.
- supports a primary community currency through a LETSystem which provides accounts to all those registered.
- enables registrants to associate and form multiple special systems with a minimum of effort.
Meeting local needs
Much energy has been wasted on discussions about the RIGHT way to operate a local currency. This seems to derive from a belief that one local currency can in itself correct the problems caused by the dependence of an economy on a single national money. When you think about it, this is totally unreasonable. There is absolutely no reason to suppose that any one formulation of a local currency will optimally meet everyone's various needs.
On the contrary, there will be as many systems in any community as people find useful: large and small systems, some related to sterling and some based on hours, some charging "tithes" and some not, some with "credit" limits and others without, and so on.
The task at present is to open channels through which all sorts of systems can co-exist in the same community with the minimum confusion and maximum benefit. We do not have to argue what is best; evolution will show us what works. It's likely there will be a broad spectrum of systems ranging from the mainstream, sterling based, tax accountable systems serving large and small populations, through equal hour networks like those promoted by Ralph Nader in the USA, all the way to others almost totally informal but very friendly. How much of our energy we circulate through each of our accounts will depend only on our personal needs and interests.
This leads us to the design and implementation of what we have termed multiLETS, which includes the introduction of registries to meet the diversity of needs within the community.
This is not simply a matter of choice, in the sense of it being a proposal that may, or may not, be adopted at some stage. Whether we initiate them or not, registries will happen in some form or another and by some name or other. Our recommendation is simply that we prepare for the inevitable. There is only one issue of practical interest: what sort of accounting services will emerge to meet the needs for maintaining multiple accounts?
Recent work in Australia and even more recent work in Canada and the UK has generated the following recommendations for the various components of Registry operations.
The Registry design presented here will manage multiple currencies in a village or a town straightaway. It is sufficiently malleable and lightweight that it can accommodate future developments. The arrangements are considered to be those most generally and immediately applicable to the mainstream economy. Comments and questions are invited.
In any area, there will be a Registry, through which individuals and organizations declare an account identifier which they can use in whatever systems they choose to join in that area. Thereafter, anyone who wants to start a new system can easily do so, announcing the terms of operation, conditions of membership, fees, names of stewards, etc. Those who see additional benefit from another account will join. Others will not. Systems will thrive, indeed survive, only if they do actually fulfil a need in the community.
The functions of the Registry
The Registry provides operational support for :
- registration: a record of local identifiers
- a primary community currency - through a LETSystem which provides accounts to all those registered
- multiple special systems (supporting many forms of personal money).
(The distinction between the LETSystem and other local and/or personal currency systems is laid out in the Fundamentals of the LETSystem (see Section 1.3)).
The functional elements of the Registry are as follows:
- Registration of individuals and their identifiers
- Organisation and supervision of account recording facilities - authorisation of competent transaction inputters/recorders - monitoring of those recorders - co-ordinate multiple recording channels for the internal systems - report to external systems regarding records kept for them - provision of statements to account holders
- Stewardship: maintaining the authenticity and integrity of Registry activities
The Registry confines itself to this operational support for the local currencies associated with it, together with any other recording/accounting services which registrants may request. It restricts its activities to the functions outlined above and can therefore recover its costs with relative ease.
What the Registry does not do
The Registry does not get involved with promotion and induction. That is the work of the associated Regional Development Group (see Sections 5.0 and 5.1 ).
The Registry does not get involved with noticeboards, listings and other community information systems. This is the work of separate groups within the various systems. It may also be taken on by Regional Development Groups during the early stages of development.
Regional Development activities require separate funding. If they are charged to small numbers of account holders, charges will become punitive. The "cost-of-service" principle will also be undermined. But if the activities are not charged at all, the results will be unsustainable and the activities maybe taken over by someone else (see Section 5.1).
Choosing an identifier
multiLETS - within and beyond the Registry
Organisation and Operations
Organisation of the Registry
A Registry has no need to be incorporated or constituted into a formal body.
The key roles are:
- stewardship - responsibility for integrity
- recording co-ordinator - responsibility for maintenance of accurate accounts
Integrity and accountability are reinforced by a group of advisors.
The Registry is the primary level of organisation for LETSystem operation. It can be as large or as small as you like.
The functions of the Registry are listed in Section 2.1. When we organise to carry out these functions, we intend the structure and the processes to reflect those of the LETSystem itself. As a result, we adopt the Fundamentals of the LETSystem (see Section 1.3), including the cost-of- service principle. This promotes a coherence which gives clarity of thought and action to all concerned, both inside and outside the Registry.
A Registry has little or no need to be formalised as an incorporated body. Because of its clear functions and limited scope, it can exist as an unincorporated association of individuals, without the need for constitution. Registry organisation is along similar lines to that proposed for the organisation of the LETSystem itself (see Section 3.2).
Any person or organisation (the steward/trustee) can open and announce a Registry - thereby providing an opportunity for individuals to declare their willingness to participate. This person specifies the conditions of registration - geographic region, purpose, registration fees etc.
Roles and Responsibilities
The registry steward is responsible for the integrity of the Registry. The steward thus has the right to decline an application for an account. While the right to use "personal" money is considered inherent, the exercise of this right within any particular Registry is the responsibility of, and lies at the discretion of, the registry steward.
The recording co-ordinator is responsible for the organisation and supervision of recording facilities for account-holders. This includes accurate entry of transactions, co-ordination of multiple recording channels and the provision of accurate statements to account-holders.
The recording co-ordinator sets the charges payable by account-holders, in consultation with the steward. The recording co-ordinator is responsible for obtaining the most cost-effective recording services for the account- holders and paying the recorders from the account charges. The steward must ensure that the cost-of-service principle is adhered to.
The recording co-ordinator also:
- manages the cash funds from the registration fees to support the recorders in their function.
- develops "cash for local" exchange opportunities so as to maintain cash viability and eliminate the need for cash input from fees etc.
Accountability is reinforced by a group of advisors. This group is self- selecting and self-sustaining. It has no authority beyond making recommendations to the steward.
Stewards and advisors are unpaid until and unless their duties turn into a major job. Recording co-ordinators, on the other hand, are paid, but only in the local money.
As additional systems are introduced, each of these will determine its own steward, board of advisors etc.
The use of specific technical names and tight definitions for these jobs is intentional. There is no consent for stewards, co-ordinators or advisors to do anything outside of the activities covered by the Account-Holders’ Agreements.
Appendix - Notes on Organisation
- A primary function of the registry is just to define the locality - economic, social and operational rather than geographic, although that too. No definition is exclusive. It is the most organised registries that will attract the most activity. Our opening moves must show we do actually know what we are doing, and this means demonstrating that we have an organisation that is immediately compatible with the adoption of local currencies by the mainstream.
- The only centralised feature of the Registry is the database of IDs. The concept of "membership" of the Registry is therefore not appropriate , or else misleading. All other aspects of the Registry, including the accounting services, can be decentralised as far as is required.
For instance, the accounts will generally be kept by several different community recording agencies, with the support of many different recorders to do the data inputting. Recording co-ordinators and the recorders themselves are independent sub-contractors providing a service to the participants. The Registry will probably authorise several different recording agencies. For example the credit union, local bookkeepers, a community answering service, and so on. Typically, in the beginning, of course, there will be only one authorised recording agency - the Registry itself.
- The primary currency system attached to the Registry is run as a LETSystem. This means that there is no incorporation or constitution, and no formal requirement to "join" as a member, so ensuring a wide accessibility throughout the community. No formal agreement exists between trading individuals, other than the relevant Account-Holders’ Agreements.
- Other systems within the Registry are completely decentralised, self- regarding and self-defining social arrangements.
- The Registry has an implict agreement with the registrants to maintain accounting. What if the operators fail to do this? If the community is keen to continue, it will re-establish the Registry with other operators. If not, who cares? Who will sue? So what is the point of legal structures?
With the registry LETSystem, however, Account-Holders’ Agreements apply (see Section 1.4). This is a form of contract which defines the responsibilities of the operators, together with the mutual responsibilities of the participants. Further legal requirements in the form of constitutions etc are unnecessary.
- It becomes clear that a successful Registry will have a minimal structure and facilities. It is critically important that a Registry must stay a very light, low asset organisational entity. It CANNOT afford to put money into equipment, premises and so on, as it would very quickly lose its shirt when the existing data processing and financial clearing houses begin to offer high tech and low cost services. If a Registry has any substantial investment, it will sink like a stone, taking credibility with it, and in the process misdirect considerable effort that could be better placed.
- Data processing, such as entry of transactions, and all other office tasks will be done by account-holders, preferably as independent sub- contractors, and will generally be paid in local money only.
- A Registry holds no significant assets. Account-holders can lease assets to the registry in return for local money. If equipment such as computers and photocopier is owned by a community organisation, it may be possible to lease that equipment for local money, which may then be used by that organisation for work within the community.
This route is particularly useful when equipment is offered in the form of a grant. The assets themselves can be held by a local trust, which then receives a steady stream of local money from the Registry, which can then be put to good work by the trust. This enables money to work twice, once for the Registry and again for the trust. This gives the Registry the opportunity to demonstrate that it operates at "cost of service" and can therefore repay any grants or loans.
Organisation of the LETSystem
A LETSystem is like a club, but to think of it as a formal Association can be misleading. It's more like a community that comes together to hold parties or meets regularly on Sundays to play football. A core group is useful in getting the system up and running. But for the day-to-day running, a committee approach brings unnecessary bureaucracy and can be contrary to the spirit of the LETSystem.
In a LETSystem there is always enough information to allow participants to regulate the system themselves. There is no need for a separate group to "govern" the system. But organisers are needed to make the system work. Like all other participants in the system, they are accountable to everyone involved.
Once it becomes clear who does what, there is no further need for regular meetings, constitutions and other legal paraphernalia. All that is required is that responsibilities are clearly laid out and consent to those arrangements is freely given. This is easily achieved through the account- holders' agreements. (These are agreements between account-holders, not an agreement with a central or higher authority.)
Keeping it in mind that work needs to be kept to a minimum and that all running costs are recovered from the account holders, the following organisation is recommended:
1) The Recording Co-ordinator takes responsibility for keeping the accounts. Since this function is performed by the Registry Co-Ordinator (see Section 3.1), any systems attached to a Registry can do without their own Recording Co-Ordinator, and rely on the Steward for liaison with the Registry. The tasks are to:
- ensure that all entries are made according to the instructions of the account holders
- make available accounting information when it is required by the account holders
- keep the administration account in balance
- levy charges (after consultation with Advisory Group and Stewards) to recover costs of accounting administration
- carry out valid requests from LETSystem Stewards (see next section)
Note that this is a co-ordinating role and the accounting work can be shared amongst other participants. Both the co-ordinating and the accounting work should be rewarded in local currency and charged at cost to the account holders. (A flat fee per transaction is the fairest way.)
2) The stewardship role is about looking after the LETSystem as a whole and maintaining its integrity. A Steward (sometimes called the trustee in other countries) is responsible for:
- setting charges in consultation with the Recording Co-ordinator and Advisory Group
- acting in the best interest of account-holders in general to:
- suspend accounts or
- instruct the Administration to refuse to record a transaction (in cases of anti-social behaviour which is damaging to the operation of the system).
- working with the Advisory group to resolve complaints about stewardship
- monitoring development and liaising with other groups.
The idea is to keep intervention to a minimum. This job is generally unpaid, and should stay so until there is good reason for a change.
3) A self-selected Advisory Group is composed of account-holders who are not involved in other aspects of organisation. They put themselves forward at an early stage to act as sounding boards and to advise the Steward or the Recording Co-ordinator.
This role is one of observing and communicating. As with stewardship, the advisors are unpaid.
It is vital that system start-up and development activities are kept separate from system administration. Account holders pay for services as they use them. It is totally unfair and counter productive to expect the first few users to cover large initial development costs for systems which will eventually benefit many, many people. It's like opening a hairdressers and asking the first day's customers £1000 each for a haircut. Development funding is provided externally and those active in development can charge their efforts through a LETShare (refer to Section 2.3 and Section 5.3.)
The directory/noticeboard is also a separate function which does not require the involvement of anyone outside the directory group. Once a system is up and running, the directory can be provided by this independent group as an offer through the system. Costs are recovered from users of this service as they are incurred and are transferred to those who operate the directory.
The same applies to organisation of socials etc. Users feed back directly to the group concerned.
No need for constitution
The LETSystem is based on the idea of community where there is interaction but no ownership. If the system is organised in the above way, responsibilities are limited and clearly defined. No profits are made. Any assets such as computers can be leased or rented. Ownership is not an issue, so there is no need for constitutions, formal decision making, regular meetings etc.
Recent research has shown that account holders are very happy to leave the running of the system to responsible individuals. Experience also tells us that the committee style of organisation is associated with a particular way of thinking which is often associated with volunteerism, make-work and political activity.
The answer to the constitution problem is incredibly simple. Don't constitute. There are no reasons for, and every reason against doing so.
The LETSystem is designed to be easily understood by government agencies and individuals alike. This is underlined in the definition of the LETSystem (Section 1.2). The legal issues discussed here apply to systems with that definition. Other community currency systems may have different legal implications and they will need to be considered separately, according to the way they are set up and run.
When discussing legal issues, it is useful to draw a distinction between two types of trade:
- commercial exchanges, where you are offering something connected with your normal line of work, and are supplying something regularly which obviously results from a business.
- social exchanges, where you are doing something unconnected with your normal work. These exchanges can be classed as "doing a favour for a friend".
With the emphasis on community-building and skills share, a lot of trading will fall into the "social favour" category of exchange. The Inland Revenue recognises that these exchanges are outside the tax system. The DSS, on the other hand, seems to make no distinction between social and commercial exchange.
Commercial exchanges play their part in strengthening the system and revitalising all parts of the local economy. The position here is simple: tax may be liable and should be paid according to existing legislation.
Exchanges which are recorded on a LETSystem are not barter. Barter opens up a legislative can of worms. Much effort will be saved by avoiding the legal analysis of barter. It is sufficient to say that:
- Barter means that the requester must pay something back to the offerer. With the LETSystem this is not so. The commitment is to the membership as a whole, not to any one person. Further, you can make a commitment on the LETSystem with no thought of when or where you will balance it. This point should be stressed wherever possible.
- LETSystem trades assign a value to the exchange which is measured in pounds sterling. This is a contract between two parties which is freely entered into. This contract should not be subject to any valuation by outside authorities. If I want to charge you less than the "going rate" and you accept, that's our decision. We should not have to conform to any requirements for notional valuation.
If the monetary value of a transaction is not clear, the authorities can put a sterling value on it according to their idea of "the going rate". This is often called a "notional value". When assessing notional values, they need not pay any attention to the implied value of the transaction.
Within a LETSystem, the monetary values are clear and the problem does not arise. But with other forms of community currency, lack of clarity over valuations may attract investigation. The investigators may ignore guidelines over "local exchange rate" (the number of units to the pound sterling) and fall back on notional values. Thus we lose the opportuniy to value our own work within the community and are forced back into the values of the national economy.
Dealing with Government Agencies
Local officers were not born yesterday. Rather than set up smoke screens, it may be a better policy to communicate with them, clarifying the social aims of LETS and explaining that many trades are not purely commercial.
LETS and the administrators
A few words on legal structure of LETSystems are appropriate here. One legal freedom that we have in this country is freedom of association. To form an association, all we need to do is to get together and get on with it.
If you do nothing about legal structures then you are considered to be an "unincorporated association". All "members" will then be legally responsible for any debts the association runs up, or any legal offence it commits. If registries and systems organise themselves according to the recommendations in Sections 1.2 and 3.1, several key legal points emerge.
- Because of the "cost of service" ethic, no serious debts should be necessary.
- No assets are held by the Registry/LETSystem. Issues of trusteeship do not arise.
- There is no group responsibility (no "corporate identity" and no "officers"). Legal infringements are a matter for the individuals concerned. Anyone in an administration role is fully accountable to the account-holders for the job they are doing (but nothing else). Their role should be made clear in the Account-Holders’ Agreements (Section 1.2)
- There are no "members" in the conventional sense, just "users" who are bound to each other by the contract set out in the Account-Holders’ Agreements.
LETS and Government
Existing regulations on taxation, Social Security etc are as relevant to local money as 19th century transport regulations were to the first aircraft. Landsman Community Services Ltd will persist in bringing to the attention of national and local authorities:
- the benefits that will be realized by communities everywhere establishing their own LETSystems, and
- that these benefits can be greatly enhanced by minor amendments to current legislation.
Our immediate direction will be to open discussion on principles that local LETS credits are:
- a) liable for tax assessment and should thus be payable for tax commitments, and
- b) only partially applicable to necessities and hence their receipt should not necessarily entail reduction of Social Security entitlement.
This section is based on material written by Michael Linton and published in Australia during the summer of 1993. It was prefaced with the following comments on LETSystem development:
"On the one hand, there are all sorts of developments in place. However, there is still as yet not much financing, and so not many people able to devote a great deal of time or other resources to this, and thus, regrettably, not as much real result is emerging as we really need to see. Hence we presently face a serious risk of being overrun by others with perhaps less purpose and/or ethical scruples, but more money and organisation."
A matter of organisation
All the pieces are more or less in place. The LETSystem itself is clearly demonstrated. It functions in many different forms - small scale and large, community based or commercial, accounted in sterling or hours, with competent and even with incompetent administration, it works, it survives. Sometimes it even pays its way.
So now what? So now the next level.
Given that the appeal, and indeed the need, is universal, and that the system is stable within any reasonable limits, there is a clear opportunity. And a responsibility.
If the social and ecological components of our planetary process were to hold together long enough, LETSystems in various forms would eventually become commonplace, without much significant effort from any of us. Just because the process is powerfully contagious, and largely irresistible.
However there is little hope that the social and ecological context can hold together that long. The very pattern of conventional money trading is destroying our world, and far faster than all the efforts of all those dedicated to arresting or modifying the process.
LETSystems must become mainstream very soon if we are to have any hope of leaving to future generations a world in which they can even survive, much less thrive.
So what do we have to do? Basically, we have to get our acts together; we have to start behaving as though this were a matter of life or death, which it very probably is. That doesn't so much mean working harder - some of us are already putting everything we have into this. It does mean is that we have to work smarter - and that more of us have to get to work.
We have to start applying the lessons of the LETSystem to our work on the LETSystem. And the most important lesson is simply this - that organization matters. LETSystems don't depend primarily on how people are, as individual actors; they depend on how people connect and interact.
It will not serve us to continue to suppose that, and act as though, the manner in which we manage our LETSystems is merely a matter of local style and preference. Clearly, some arrangements are effective, some are not - and some are entirely detrimental. It is proof of the extraordinary resilience of the LETSystem concept that it survives almost all of our often misguided efforts on its behalf. To rephrase an old line - the operation was a failure, but the patient lives.
Let's get organised so that our development programs are aimed at realistic ends.
Organising for development
It seems obvious that multi-system registries are the inevitable outcome in the long term, and that communities will typically be supported by several independent and yet co-operative registries. Certainly cities will have at least as many registries as there are defineable localities, and rural bioregions will be similarly differentated.
Yet clearly the efforts that people apply in one locality to establish their LETSystems will directly affect growth and development in those of their neighbours. Thus there is a clear need to organise so that there is some degree of group co-ordination of efforts throughout the region; and equally that there is a clearly defined process whereby those who do the work share equitably in the financial rewards that will emerge in time.
A further consideration is the need to form organizations of an appropriate local scale, large enough to be effective and well funded, and small enough to avoid becoming centralised and disconnected from their source - the local community.
While we must also take careful account of all ethical factors, and the normal considerations of prudence, there is little justification for acting slowly and every reason to act quickly. In this case the old adage applies - if you don't do it, somebody else will. We must act promptly and effectively to protect ourselves against the short term schemers who will very soon be attracted to the ideas of personal money and local currencies as means of making lots of money for themselves.
LETS get down to business. LETSystems for small subsets of society may be warm and cosy, but they won't do much to protect us when the great economic meltdown comes along. We need changes in the mainstream economy if we are to survive at all. And we are only going to make the necessary difference in how the economy works when a major proportion of the local population is involved. The general public will only take interest when they can buy groceries, clothes, dental services, restaurant meals etc in the local money.
So we need to bring business into LETSystems. There is really little impediment to this. After all, money that comes back when you spend it is as attractive to any business as to any individual.
Notice how commercial "barter" organizations are growing - despite their exorbitant costs and the internal restrictions. The success of these networks is an indication of how well LETSystems will do when they enter the same market. Nor should we be in the least concerned that "commercial" networks will overrun LETSystems; on the contrary, we need expect little or no difficulty in assuming their business.
Administration costs and development funds
No free lunches here. Most of the systems (that I heard of) have trouble supporting any system development through administration charges. Which is good; this is how it should be.
Administration and development need to be clearly separated. In any case, operating costs must be kept low, by efficient procedures, to avoid any excessive drag on the system. People are discouraged from trading if service costs are perhaps 5 per cent of their trading - it can feel just like a tax. And for people who trade about œ20 per month, a charge of just a few pounds is a high percentage of trading. So, particularly in the beginning, when trading voluimes are low, it is essential that operating costs are kept low.
Although administration is an unavoidable cost for any system, it's also a small cost when the system itself is small. Unfortunately, this is also the time when design, organization, development, promotion, etc., etc. is most needed, and when the system can least bear the load of paying for that work.
All such development is a long term process, and should be related to long term revenues and sources of funding. If we can establish what it is we are aiming at, the scale that LETSystems might have in, say, 5 years, then we can design an approach based on the end result rather than the situation at the beginning. We can be looking at £100,000 ideas rather than penny pinching for £100 here and £50 there.
Also, recompense, to those noble adventurers who put their resources - energy, time or money - into this effort, should be paid from results. If development is succesful, those who do it should be paid; if unsuccessful, it further compounds the problem to pay for those efforts out of administration budgets.
Since multiple systems in any area all contribute to each others' development, the organization should be a regionally based group process, using a system of group incentives and/or rewards.
Regional Development Funding
For consistency and coherence, our organisational basis should reflect the fundamentals of the LETSystem itself (see Section 1,3). These are taken into account when outlining the group process for development activities (see below).
Key points for organisation
We have identified key points which make an effective organisation for the task we have set ourselves. These are:
- clear aims
- open participation
- rewards linked to results
- easy to copy.
If you don't know where you're going, any road will take you there. Agreement on aims gives us a sense of shared work which holds us together even when events are moving fast and communications are poor.
We have set ourselves a large task which will be achieved more easily and quickly if we involve a large number of competent people.
Enthusiasm and talent is widely available. It is much easier to recruit that talent in a framework which emphasises participation and reward.
Open participation is achieved by a group which operates as a collective of independent individuals, each free to act as they choose. Work done on behalf of the group must be acceptable to the group as a whole.
Rewards according to results To ensure continued commitment from competent contributors, rewards must be both available and fairly distributed. The risk of inadequate rewards is shared by all the participants and final distribution will reflect the quality and quantity of each individual's input. This puts a focus on results.
This allows a group to begin with a small amount of cash, paying minimal amounts to contributors. However, the agreed value of individual inputs is recorded in detail. The shortfall between amounts paid out and agreed values will be paid out when funds are available to do so.
This is a form of "sweat equity" which can be recorded as a LETShare and is consistent with the fundamental LETSystem philosophy.
Our task is a project: it has a beginning and an end. Both response and timescales are highly unpredictable. Even predictable projects are dynamic and require flexible, team based organisation. And different stages of a project require different skills and resources.
Response to LETSystem development will not be linear. Hence the need for an organisation that can grow rapidly. This is where the issues of aims, participation and rewards become vitally important.
Many problems associated with large organisations can be avoided by working as a federation of small groups, all adopting similar protocols along the above lines. Success can establish successful patterns which can be learnt and easily put into practice by others, enabling rapid growth when required. And it's much more fun than being a small cog in a big wheel.
All LETSystem operational process and administration should reflect, or follow the pattern of, the LETSystem process itself - the community managing its own best interests.
It follows that the development group:
- must be as open as possible,
- allows participation by as many as want and are able to contribute,
- must have an equitable and effective decision-making process,
- must not become the exclusive territory of any particular individual or group.
Naturally, the design of organisations for LETSystem development will also follow this direction.
Landsman's recommendations for development efforts use the LETShare model :
- anyone can contribute
- each says what they think they have contributed
- the group accepts the submission, or responds to it
- if your act isn't supported, perhaps you can change it
- nobody is in charge
- decisions are personal and group
- if you can't get support for your ideas, you can still do them yourself, and see if the group likes the results
- incentive systems are group rather than individual.
A system that embodies the ethics and practice of good community will not thrive if its support organizations fail to reflect these same values.
Detailed procedures will of course vary from place to place.
Generally, participants will file statements of their contribution (submissions for acknowledgement) on a regular basis - probably weekly or monthly - citing time, money and other expenses attributable to their work on LETSystem development.
Through ongoing discussion of these submissions, budgets will be allocated and, eventually, revenues distributed.
With regard to further levels of organisation, the same considerations are highly recommended. Initially, central funding may be usefully applied in all sorts of ways. However, any such organization can only be considered successful if it stimulates grass-roots action that in turn develops resources from local operations to provide continuing support to a national/wide regional body.
If further funding is necessary, something is wrong.
Landsman's recommendation for any large-regional (e.g. national) organisation is that it be composed of resources and contributions from participating local regional development groups in that territory.
The revenues generated at the local regional level - through the collaboration of natural affiliations of registries and activists - should be sufficient to underwrite the ongoing costs of networking amongst those regions, and in due course repay any initial funding.
Once things are moving well, minimal funds will be necessary to keep the network effective, as much of the action and co-ordination can be in the form of direct contributions by the regional development groups. Thus, one region might sponsor a conference, another might produce adminstrative training materials, another explore legal issues, another design software, etc etc. The coordination will ensure that there is good communication, that duplication of effort isn't excessive, and that the recording of contributions provides a measure whereby continuing support is negotiated.
Regional Development Group Process
The group operates as a collective of independents, each free to act as they choose, and required to ratify their contribution with the whole.
The LETShare model is to be used to record accounts and determine how revenues deriving from the program are distributed.
Control of finances is vested in those liable for borrowed funds.
Incentives are implemented to encourage broadest distribution of funds to finance as many participants as possible. Incentives should be conservative, ethical, and consistent with overall program design.
The development group acts as a channel for receiving and distributing funds. It does not acquire assets; equipment, premises, etc are leased, preferably from a community equipment co-operative.
Sections 5.0 to 5.3 can be summarised as follows:
- eventually universal
- multi-registry / multi-system / multi-administration
- extractive methods insupportable in long term (self-defeating)
- setting precedents
- means must be related to ends
- service rather than extraction
- inhibit rather than stimulate speculative interests
- non - exclusive
- group efforts / group rewards
- no commissions / no territory
Regional Development Plan
Landsman Community Services Ltd.
This material may be copied and distributed without restriction except that:
- the original source is identified
- any changes to the material are indicated
- any charges made for such distribution must only reflect costs and not personal profit
- copyright remains with Landsman Community Services Ltd
The concepts of personal money, community or local currency are regarded by Landsman Community Services as in the public domain. The LETSystem is a specific design in this field originated by Landsman in 1983 and Landsman remains the sole authority regarding the operation of LETSystems.
Landsman Community Services Ltd (Canada)
Version 1.3 August 1994