"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.

Personal Money

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.