The New Barter Economy: An Appraisal of Local Exchange and Trading Systems (LETS)

A new form of barter economy is emerging in many industrial nations. People are exchanging goods and services through Local Exchange and Trading Systems (LETS). These are local associations whose members list their offers of, and requests for, goods and services in a directory and then exchange them priced in a local unit of currency. Using a United Kingdom case study of Totnes LETS, this paper presents a preliminary appraisal of their economic, social equity and community-building objectives. It finds that although LETS are fulfilling these objectives, achievements could be substantially improved with some alterations in public policy towards LETS. Barter can be defined as the process by which there is the direct exchange of goods and services without money changing hands. If somebody has a particular good or service to offer, and requires some other good or service, s/he can either find somebody with matching requirements, or make one or more intermediate transactions to obtain the good and/or service wanted. Such a system is obviously cumbersome, especially in the contemporary economy, since specialization increases the need for an exchange economy to enable an easier satisfaction of demand. Some form of money, in terms of which the value of each good and/or service is expressed, and which can be exchanged for any good and/or service, has become essential. The problem, however, is that there are many people with unmet needs, and many others able and willing to work, but this supply and demand cannot be matched due to a shortage of money. Consequently, in the past few years, a new form of barter economy has started to emerge in industrialised nations in the form of Local Exchange and Trading Systems (LETS). The function of LETS is to enable people to trade goods and services in a locality without using the national currency. To achieve this, a group of people form an association and create a local unit of exchange. They then sell goods and services to each other priced in these units. 86 Colin C. Williams Acorns, for example, are the local currency unit in Totnes, favours in Calderdale, solents in Southampton and stokers in Stoke. Normally, one unit is made equal to one unit of the national currency. To facilitate trade, each LETS member offers a range of goods and services in a directory which is circulated to every member. This also contains a list of the goods and services each member wants to receive. Individuals then decide both what they want to trade, who they want to trade with and how much trading they wish to do. The price is agreed between the seller and buyer, although the seller will sometimes state the price s/he wishes to receive in the directory. The association maintains a record of the transactions by means of cheques written in the local LETS units. Every time a transaction is made, these cheques are sent to the treasurer who works in a similar manner to a bank sending out regular statements of accounts to the members. No actual cash is issued since all transactions are by cheque and no interest is charged or paid. The level of LETS units exchange is thus entirely dependent upon the extent of trading conducted. The concept of LETS was first propounded in the early 198os by a Canadian, Michael Linton, who introduced the idea into the United Kingdom in 1985 at 'The Other Economic Summit', a forum for 'new economics' thinkers, after successfully developing such a system in Vancouver (Linton, 1986). Indeed, from that point onwards, it has been advocated and developed mostly by those connected with the 'new economics'.' It was not until the l990s, however, that the idea began to take-off. In early i992 in the United Kingdom, for instance, just five LETS were operating. By late 1994, this had expanded to more than 300 LETS in operation with over 2o,ooo members (LetsLink UK, 1994a). Other countries have witnessed a similar level of growth during the 1990s. New Zealand now has 54 LETS (Mallinson, 1994), Australia has 171 (Jackson, 1994), Canada has 10 and there are 10 in the USA (Greco, 1994; LetsLink UK, 1994a). Many of the early LETS were set up by individuals acting on their own initiative. However, a small but rapidly growing proportion of the more recent LETS in all of these countries are being set up by public sector agencies. In a December 1994 survey, moreover, Gibbs et al. (1995) discover that 64 per cent of United Kingdom local authorities intend to develop a LETS in their