Why community currencies and LETS are not working

I devote a lot of pages in our P2P Foundation wiki to the issue of monetary reform. In the macro-economic sense, we have a scarcity-based monetary system that leaves five billion people largely outside its benefits, and as people like Bernard Lietaer have shown, it is possible to conceive of sufficiency-based monetary systems where individuals are not discouraged from doing human and economic activities just because there is no initial money.

On the micro-economic front, we pay attention to the many initiatives around community currencies, open money, LETS, etc…

But in the following exchange, a long-time LETS activists concludes that these systems are not really working, which echoes my own experience in Brussels, where I was taken aback by the effort it take to maintain such systems (in other words: the participation treshold is in fact quite high).

Here are the conclusions from John Rogers:

“Many LETS have failed, achieving average participation rates of 120 members with a few thousand credits exchanged a year. The biggest known LETS was I think the Australian Blue Mountains LETS with about 2000 members but that was a rare exception to the norm. Most of them struggle (d) along on volunteer effort, some have experimented with funding and development workers but the story remains essentially the same – high promise, low delivery.

Four years ago I got involved in the UK time banking movement. I joined the board of Time Banks UK. Here the same story was repeated. High hopes, lots of rhetoric, some time banks doing very well and then collapsing when funding ran out, a few struggling along without funding. Lots of well meaning effort without a strategic sense of how to improve practice and ‘sustainability’. I kept on pointing out the need to pay attention to feedback from the field and to look at the sustainability question seriously.

We set up the Wales Institute for Community Currencies in 2003 with the specific aim of learning from 20 years of experiments with both LETS and time banks with no ideological commitment to any particular model, except in the short term to promote a new form of time banking as a tool for community development in the ex coalfields areas of South Wales, based on community development aims.

This is what we have learned.

The person to person ‘mutual credit’ model of both LETS and conventional Time Dollars/Time Banks is a limited model that will continue to produce frustration, burnout and limited effects in practice. Why?

Take person to person first. Setting up a structure to encourage exchanges between individuals, encouraging them to offer their time and skills to each other will build community but very slowly, one exchange at a time. In LETS people find it frustrating because they list all their skills in a directory and then sit and wait for the phone to ring and it doesn’t. So they go out to social events and meet people and then a few more exchanges may happen. In a time bank people wait for the broker to set up exchanges for them. It will happen eventually, but it will only benefit a relatively few people after much effort and investment of time and money (where funding is involved). The mutual credit mechanism is also problematical. The theory has always been that those ‘in commitment’ (to use LETS jargon) have some kind of moral obligation to pay off a negative balance to the system or club or community. In practice people leave LETS with both debits and credits and they are written off. Some systems may well have crashed because people lost belief in the purchasing power of their credits. Time banks do not seem to worry so much about this aspect as the primary aim is social rather than economic but it could cause problems if they grew bigger. “

After this negative assessment of his experience, John Rogers describes the new, more successfull approach, he has taken:

“Development worker (agency) or local volunteer asks Community A what they wish to achieve over the next 12 months. Together they list a set of simple goals. Run the community centre, plant trees, do litter picks etc. They then analyse existing volunteer capacity to do these jobs. (We call it a ‘baseline audit’). Say there are 5000 hours available at the moment. We ask how much capacity we need to achieve the above goals. Say we need to double capacity to 10,000 hours. We now know we need to be able to ‘underwrite’ or guarantee 10,000 hours of labour or effort. The job of the time bank is now to make sure that 10,000 hours of rewards or services are available for people to redeem their time credits when they have gained them from community service.

We are discovering that this approach works particularly well with young people attending youth centres. By offering motivating rewards such as trips and driving lessons (funded by Lottery, local businesses etc.) young people change their attitude to community work and volunteering and youth workers report a complete change in the working atmosphere. It also works with adult learners to encourage them into adult learning activities and it works to encourage people to run community centres.

The Holy Grail here is scale. How many people could potentially benefit from such an approach whilst keeping funding costs to a minimum?

One answer we have found to this is to start talking to local authorities about undercapacity in leisure and arts centres so that an hour of swimming or cinema at the local centre can also be contributed to the central pot to underwrite community participation. “

1 Comment Why community currencies and LETS are not working

  1. AvatarSam Rose

    Hmmm…So the reason that it dodn’t work was because the people who set them up failed to make the currency worth anything?

    According to the quotes, the times that it does work, people figured out how to make the currency worth something.

    So, to make LETS work, make the currncy *worth* something. Lesson learned. Thanks!

    Also, making the system more automatic, less labor intensive. More cybernetic when possible, might help. Plus, giving people legal ways to easily convert community currency to real “hard currency”.

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