LETS get real: constraints on the development of Local Exchange Trading Schemes

Abstract

Local Exchange Trading Schemes (LETS) are widely promoted as a new tool for local economic development, but until recently the focus has been on their alleged 'potential' rather than the realities of their operation. This paper assesses the practical economic role of LETS by examining the amount of trading conducted, and demonstrates that both the volume of trading and the value of the trades are very low. Drawing on an intensive case study of the first UK LETS created explicitly as part of a local authority's anti-poverty strategy, explanations for the low levels of participation are suggested, and significant structural constraints on the development of LETS are identified.Key words: Hounslow, west London; intensive case study; local currencies; local economic development; self-help IntroductionLocal Exchange Trading Schemes 1 (LETS), and similar local currency schemes, have been created at different times and in different places for a wide range of purposes -social, cultural, economic, and political. The history of local currencies has been explored by Williams (1996), who discusses, for example, the 'scrip' money that was used in the USA in the 1930s and the Worgl local money experiment in Austria in the same decade (see also Tibbett 1997). In this paper, however, we focus on the role of LETS as tools for local economic development and poverty alleviation in the UK. First, the paper explains the operation and growth of LETS, and discusses the ways in which these schemes have been promoted at the local and national level. Then the practical economic role of LETS is evaluated by drawing upon a number of extensive surveys of LETS trading and an intensive case study of Hounslow LETS in west London. All the evidence suggests that trading levels in LETS are very low and so we then address some of the reasons for this by examining a number of systemic constraints on LETS development.LETS are "community-orientated trading networks" (Lee 1996(Lee , 1378, which aim to develop and extend the exchange of goods and services within a group, re-localising the provision of goods and services. Unlike traditional barter, trading through LETS is not reciprocated directly in a one-to-one relationship; rather work commissioned by a LETS member is paid for using a virtual local currency. Such currencies have no tangible form and are only created through the act of trading, but each transaction is normally recorded by the LETS accountant, who credits or debits the members' accounts when notified of the trade. The recipient of the goods or services is deemed to be 'in commitment' to the scheme as a whole -i.e. is expected to undertake work or provide goods for any member of the LETS at some later date.The name of a LETS local currency is often derived, sometimes playfully, from a local feature. For example, in Hounslow the name is taken from a river (the Crane) that runs through the borough, but the name was also chosen because it was felt that it would remind members that the LETS was intended to act, metaphorically, like a mecha...

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“…Bennett, 1993;Ellwood, 1996;Gosling, 1994). Until relatively recently, however, there has been very few critical analyses of LETS performance in practice (but see Aldridge & Patterson, 2002;Stott & Hodges, 1996;Williams et al, 2001). …”

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