2.2.3. Mutual exchange systems
Mutual exchange systems are the second most common type of complementary currencies in terms of numbers of initiatives, representing 41.3% of the total.
Mutual exchange systems are created by the act of buying or spending: one person’s credit equals another’s debit, so accounts always add up to zero. Both the value and utility of the currency are maintained by trust in other members to meet their commitments or ‘debts’.
These systems may or may not operate within a defined geographical area, and offer their users interest-free credit, which can be spent within the trading circle of businesses or users signed up to the programme. Members advertise their wants and offers in a directory, and transactions are accounted for on a record sheet showing the participants and the amount of the transaction, by manual or technological means. Some projects link the value of their currency to the national currency; others prefer a time-based system (like the time banks), and some even mix time and currency values.
All the evidence suggests that, despite the fact that mutual exchange systems are clearly aimed at supporting local economies, it is the social and community-building benefits that have the greatest impact as a result of the social networks generated.
The best-known examples are LETS, the first of which was the brainchild of community activist Michael Linton on Vancouver Island, Canada, in 1983. The original idea was to create ’emergency money’ during the recession. LETS, generally emerging out of civil society, soon spread through Canada, the UK, New Zealand and Australia via green activist networks during the 1980s and 90s. Growth of LETS peaked in the UK at the end of the 1990s, but it would be another few years before the same happened in the rest of Europe. Adaptations of LETS exist in France, Hungary, Germany, Austria, Switzerland and Australia, and similar models have emerged in South Africa, Japan and Canada. LETS have inspired and given rise to new forms and hybrid systems in other countries. The “Community Exchange Services” or CES model, for example, is inspired by LETS, providing an electronic platform for mutual exchange. This system originated in South Africa but has since spread worldwide and been used by many existing mutual exchange systems.
The characteristics and advantages of these LETS systems can be summed up by the following:
- All legitimate transactions are made possible so that a trading community will never experience a lack of credit.
- Credit is assigned, on a democratic and decentralized basis, by participants according to their own regulations and levels of mutual trust.
- Participants can save because they avoid paying interest and bank transaction charges.
- Participants can avoid the adverse effects of external factors such as monetary inflation, restrictive bank credit policies or world economic or financial instabilities.
Notwithstanding, there are a number of factors to keep in mind when launching a LETS:
- It is important to avoid the fundamental error of generating excessively high expectations and clinging to the initial design of the system, which must be flexible and adapt to the local socioeconomic context.
- Ensure that people are adequately introduced into the system, explaining to new members how the system works and confirming that they understand.
- Manage the system in a professional manner, producing advertising materials and well-designed directories, and organizing events and trips for members to get to know each other.
- Offer a sufficient variety of skills to cover people’s needs (food production, repair services, recycling and reusing, etc).
- Have a well-defined spirit, building consensus on the mechanism and objectives of the system.
- Advise all members of the limitations of the LETS system (only non-professional goods and services that would not be sold for legal-tender money are eligible).
- Looking after active members, intervening where necessary to prevent members with highly sought-after talents and skills from accumulating too much positive credit, to the extent they become tired of offering the service and leave the system.