Alternative Economic Systems (AES) Research – Somerset

A "Quick Tour" of AES Principles and Working Models

Introduction

This short Guide is linked to the AES Somerset Research Project conducted by Robin McDowell Consultancy Services in different areas of the County over July / August 2000. It is intended to assist those participating in the local consultations and members of their respective groups or organisations, who may have little or no knowledge of other models apart from LETS (as promoted by the LetsLink UK network). It does not attempt to be comprehensive but to provide a basic outline of some existing models in theory and practice.

What is meant by use of the term "Alternative Economic System" ?

As the economic and cultural processes of "globalisation" have intensified over the last two decades, with both world trade and financial markets becoming increasingly integrated under a technologically advanced global capitalist system which now dominates most activity in national, regional and local economies, the issue of whether there are any real alternatives to this seemingly remote, unaccountable and even amoral global system and what form they might take has attracted a growing interest from all kinds of people. Also, with the failure, or at least demise, of large-scale alternative systems such as the "command-and-control" industries and economies developed at national and international levels within the former "communist bloc", a new focus has emerged on the creation (or rediscovery) of decentralised and small-scale alternatives which are more orientated to communal values and local production for local need than to free market competition and profit maximisation.

For some the appeal of LETS and perhaps the reason for its rapid growth during the 1990s in UK is purely its practical utility as both a communal social and economic network which complements or partially substitutes their mainstream activities. For others participation in LETS is also a political act and all about (re)gaining a sense of local control of economic life – at both an individual and collective level – and starting to build a more ethical economic system around values of co-operation, social equity and environmental sustainability. LETS and other related community-based systems and structures are thus the emerging tools of what has been called for a decade or so now the "new economics" or more recently the new "localisation" trend. Rarely, except amongst the more idealistic, are they promoted as a complete and viable alternative to the mainstream economy, but more often as complementary systems which will help sustain communities, increase local self-reliance and provide some shelter from the storms of global economic insecurity and material deprivation. Beyond the slogans, there are certain key features which underpin most working AESs :

Working Models of AES

1. LETS - "Co-operative Model" (USA, Canada, Australia, NZ, Ireland and UK)

Invented by Canadian, Michael Linton, this is now the most widely used and flexible model for community currency systems in the world, and broadly the one promoted by LetsLink UK.

• multi-activity exchanges or trading using "invisible" units debited or credited to individual or group accounts administered centrally by community and transparent to all
• often supplemented by the printing and circulation of paper notes or tokens for both convenience and to give the currency a tangible reality / public profile
• inclusive and open to a broad spectrum of economic and social /community purposes
• may use either national currency or time units as yardstick of value, or combination
• generally interacts with both established national currency and other local currencies.


2. LINK – a smaller-scale and much more limited predecessor to LETS in the UK

Developed by charities led by Age Concern and by health insurance companies in the 70-80s principally to promote the well-being and social interaction of elderly people in local areas

• centrally co-ordinated local system using tokens for exchange of time / tasks
• open to all but mainly taken up by elderly - with schools later involved to top up supply of labour for manual tasks (the main area of demand)
• may now be re-emerging in the form of the national volunteering initiative "Time Bank" ?


3. TIME DOLLARS – mainly USA / Canada

Developed by Edgar Kahn in the 80s, this more specialist system has spread rapidly across the USA to over 200 schemes. It is now being piloted in UK as "Fair Shares" in Gloucestershire.

• Similar to LETS in several respects, but using only time-based units of account and mainly orientated to care and personal services – i.e. not multi-activity.
• not used for commodity-based economic exchanges but as a non-market related system of "service credits" based on mutually valuable time, trust, and egalitarian principles
• strong social and community development emphasis and complementary to LETS
• pro-active role given to co-ordinators to match up "needs" and "offers" of members.


4. ITHICA HOURS – USA (New York State)

Another community / local currency system established in the 90s with broad economic and social function like LETS, but distinctive in that it aims to improve on LETS models by:

• a large-scale issue of paper currency notes for faster local exchanges "hand to hand"
• use of standardised time-based unit of value (1 hour = $10)
• more open or "whole community" trading promoted via wide distribution of a free newspaper, Ithaca Money, advertising goods and services available using Hours.


5. SMALL BUSINESS BARTER / MUTUAL CREDIT SYSTEMS

There are various types of systems in existence across North America and Europe, including the UK, but most barter networks are run on a purely commercial and /or sectoral basis for all sizes of business and are not geared to any alternative economic vision. Their appeal to businesses lies in the scope for cost savings or to reduce reliance on costly external bank credits for expansion. One model which is not local but has provided an otherwise radical alternative to conventional sources of finance since 1934 is the Swiss WIR or "economic circle". This is effectively a national small business club with its own private currency (Wir) for transactions (trading or credit transfers at zero-interest) between its 60,000 + members. Attempts have been made to replicate this kind of mutual credit system in local areas elsewhere with very mixed results – in the UK, idea of issuing "bonds" (on a parity with sterling and interest free) to local business networks which are only redeemable with members of the same in order to stimulate local inter-trading and business development.

6. CREDIT UNIONS AND COMMUNITY BANKS

Credit Unions are a form of Community Bank in the sense that one can both deposit and borrow money with/from them. But they differ from conventional banks in the way this is done and the relationship between customer and bank. CUs are member-controlled financial co-operatives providing low-interest credit and savings facilities for the benefit of their member-shareholders. It is about mutual aid, not profit-taking from money-lending. Thus members with a geographic, social or occupational "common bond" save together and according to specific rules lend to each other from the consolidated funds. In the UK, though, due to quite restrictive legislation, loans can only be made to individuals for private consumer or domestic, and not business purposes – and only £10,000 maximum. In other countries, e.g. Ireland or USA, CUs are a mainstream local institution, whereas in the UK their utility has been greatest for people on low incomes or excluded from mainstream sources of credit.

This has underlined the lack (n the UK at least) of locally-owned banks or loan funds dedicated to the long term economic interests of the area (and not the short term profit demands of distant institutional shareholders) with wider powers to attract local savings or investments, recycle them into local or community small business ventures, and then support their survival and growth. A variety of AES initiatives have emerged in recent years which are attempting to do this, i.e community re-investment trusts and loan funds; ethical banks; micro-credit schemes and so on, but there remain many obstacles in their path !

7. COMMUNITY LAND TRUSTS

Alongside more locally accountable financial institutions and interest-free or cheaper credit for individuals and businesses, securing access to land for productive activities for community benefit is an increasingly important objective. Apart from the inequalities of land ownership across society, which remain especially marked in rural areas, a major obstacle to more self-reliant communities is that under our existing economic system and despite development controls land is generally treated as just another commodity to be bought and sold to the highest bidder – and often to distant and anonymous speculators. These market forces are extremely difficult to resist and even public authorities often fail to do so when they might be expected to uphold the public or community interest in land disposals.

One response now gathering momentum in the UK is the establishment of Community Land Trusts, which are really a reaffirmation of the ancient principle of long term "stewardship" of land by the community as an alternative to private ownership of land for private gain. This goes much further than providing common land or parks for recreation or amenity. The idea is that a community charity is established to raise local, charitable and public funds, purchase or encourage gifts of land which it then holds in trust for economic, social and environmental purposes of long term benefit to the community, e.g. sustainable agriculture and food production, social housing, renewable energy production etc. The charity may then establish separate community enterprises or co-operatives for specific activities, or lease plots of land or buildings to private entrepreneurs whose objectives and methods are compatible with the long term vision for the land and the community. CLTs have begun to be quite widely established in remote areas of Scotland, where land reform and extending community land ownership is now a major policy priority of the Scottish Parliament, but models also exist closer to home, e.g. Dorset Land and Food Trust and Stonesfield CLT (Oxfordshire).

8. "SECTORAL" LETS AND TRAINING POUNDS

This survey of AES has concentrated on general structures and systems which directly or indirectly support a variety of economic and social activities at local or community level. But it is important to note that LETS principles can and are being applied to individual "sectors" of the economy or even to specific functions such as training or marketing – and this need not be restricted to local level and could be made to work at regional or national level. Thus LETS and other AES practitioners are attempting to support or improve the operation of individual trade, professional or other specialist activity networks and exchanges. And so, new initiatives have emerged such as LETS for food growers, processes, distributors, retailers, restaurants, caterers etc, LETS for therapists and care providers.

Another new proposal is for Training Pounds, which would be a national or regional exchange network with its own currency for training and education providers, especially those looking to fill surplus places, and employed / unemployed / small businesses seeking training or work experience placements. Cash-and-time-pressured small businesses could "buy" training for their owners or employers in return for providing placements for other trainees. Appropriately skilled unemployed or part-time employed could earn credits by "backfilling" for small business personnel undertaking training and temporarily away from the workplace.

Alternative Economic Systems and Community Currencies
Some further food for thought …

American economist, Robert Putnam, has concluded that the most successful local economies are found in areas which do not necessarily have lower taxation or lower inflation but have "overlapping networks of social solidarity" making a close-spun web of civic communities.

"The regions characterised by civic involvement in the late 20^th century are almost precisely the same regions where co-operatives and cultural associations and mutual aid societies were most abundant in the 19^th century, and where neighbourhood associations and religious confraternities and guilds had contributed to the flourishing communal republics of the 12^th century".

Putnam is quoted by David Boyle in his book "Funny Money: In Search of Alternative Cash", where he suggests that in modern times the successful areas are those with more newspapers, more people involved in local politics, pressure groups, sports clubs, scout troops etc. "They are not places where everyone shops at on Wal-Mart (Asda) and then goes home to sit in front of Blind Date".

Ithica, a town of about 30,000 people in New York State, is just one such example of a place. "Hours (its currency) may just be a tool here: what is really circulating isn’t so much money, it is spirit. And where the spirit and creativity circulate, the money follows."

Paul Glover, "inventor" of Ithica Hours, has a practical vision of a more self-reliant economy and a better quality of life in the town based on the continuing expansion of the Hours currency system now in its existence for 9 years:

"We’ll be able to insulate from the national sector, reduce the loss of money to the utilities and the damage to the environment, and be able to install transport alternatives, like a trolley system and bike ways. We’ll be able to do anything the government is not disposed to do and without waiting for their approval."

Ralph Nader, US Green campaigner and presidential candidate, is strongly supportive of Time Dollars describing it as "an organised, inflation-proof currency that can provide as constant, as powerful and as reliable a reward for decency as the market does for selfishness". There are now well over 200 time dollar systems across the USA.

Edgar Kahn, its inventor and popularist, explains how it goes beyond bartering or economics:

"The real issue is how you build a community. We need to rebuild the social capital we have been living off – call it trust, reciprocity, or just engagement, if you like – and we need to find a beachhead wherever we can. Ultimately it is that social capital which is in severest need of repair. The real function of time dollars is to provide value in a world where the market economy defines the work which the majority of people do – looking after old people, bringing up children – as useless. All those tasks are work which will never be adequately valued in a market system which must devalue what is common or universal. To give adequate value you just have to step outside the system… Dollars or Pounds value what is scarce. I hope these things – love, neighbourliness, community, altruism, charity – are never in such short supply that they become valuable in the market economy."

The AES bandwagon is rolling into the 21 st century … and closer to home …

• 1,000 LETS schemes on UK model across Europe
• About 20% of local authorities supporting local / community based or sector based LETS
• London, South West and Scotland regional currency initiatives
• "Fair Shares" pilots of Time Dollar systems in Gloucestershire
• "Time Bank" voluntary sector initiatives
• "West London Interest Free Trading" – pilot of currency for small businesses modelled on the Swiss "Wir" system
• Sweden JAK interest free money system:
• 38,000 members £300 million turnover
• Holland tax / benefits disregard for 3,000 local currency earnings per year
• Italy 120 Time Banks (Banca del tempo)
• UK / Europe spread of Local Food Links companies, Land Trusts, Credit Unions, Community Banks and Co-operatives

A very good, readable and relatively inexpensive source of further information and inspiration on community currencies is "Funny Money: in Search of Alternative Cash"by David Boyle. Published by Flamingo, 1999. Price £6.99.