My interest is then to look at how experimentation with currencies makes its ingress within Transition, and of how particular forms of currency experimentation serve different purposes – depending on the possibilities for engagement they offer – and therefore negotiate different types of fit inside the process of self-specification through which Transition appears.
Now, experimentation with currency and trading systems within Transition has its most recent antecedent in the wave of currency activism that was started in Canada in the 1980s, through the promotion of the network of LETS (Local Exchange Trading System) schemes. At the same time, LETS are not just taken up ‘as is’ inside Transition, but they appear instead as a reference point that enables its ongoing differentiation and transformation.
In the Transition Handbook, for instance, Hopkins introduces the idea of a Transition currency precisely as a variation on the experience of the LETS, which becomes the term of reference for that experiment:
LETS schemes (Local Exchange Trading Systems) are not really up to the job of economic relocalisation. While they have an essential role to play, they tend to have a limited lifespan, and rarely make the step into being of much use to local businesses. Given the scale of the challenge presented by peak oil, and the degree of urgency in the rebuilding of local resilient infrastructure, likened by some to a ‘wartime mobilisation’, we felt Totnes needed more than LETS.2
Transition currencies, as the quote above suggests, hold the promise of broader circulation and greater durability than a LETS scheme and, therefore, become the object through which alternative modes of engaging with currency and exchange can be made more widely accessible in the moving of Transition.
LETS and local currencies
Before advancing further, however, it is important to signpost a few essential concepts and differences between a LETS scheme and a complementary currency. This is to ensure that readers are not bogged down in technicality, and can instead follow this chapter, keeping their eyes on the differentiation through which the self-specification of Transition unfolds, as it runs through currency experiments.
A LETS scheme can be thought of as an ‘exchange ring’.3 What this means is that a group of individuals get together, and elect to provide each other credits (which we may think of as tokens) to be spent on services that can be provisioned within the circle of participants. Participants would therefore list their skills, which they may subsequently be called upon to offer others who may present them with a LETS token (which can be either a physical token, a recording in a clearing system like an Excel sheet held by the LETS organiser, or for a more tech-savvy version, in an online clearing platform). Each individual starts off with a certain amount of credits (these are the result of the initial act of collective will, whereby each participant makes him-/herself available to others, in return for others making themselves available to him or her to offer any services they may be willing to provide). After this initial round to get the ‘exchange ring’ started, individuals spend and earn further credits, so as to keep the cycle going. What is distinctive about a LETS scheme is that, through an act of mutual credit, individuals create new purchasing power, which is expendable inside that particular exchange circle.
This is a crucial difference from a complementary currency, which follows instead the ‘voucher’ system. In this case, a currency is issued in exchange for the national currency. This means that – rather than the value of the local currency being backed by the services that can be exchanged in a restricted exchange circle, as in the case of a LETS – the complementary currency is backed by a currency with wider circulation so that, effectively, it derives its value from the potential exchanges it can feed into and that can be undertaken in the national currency network as well.4 For this very reason, of being issued in exchange for, say, pound sterling, and unlike a LETS scheme, local currencies do not really create new purchasing power, because they simply ‘translate’ purchasing power denominated in a national currency into purchasing power denominated into a local currency. Therefore, the sort of mechanism in place is simply one that adds ‘stickiness’ to money. In the sense that it tries to restrict its circulation to a particular area, without it leaking away, so that wealth produced in a given area keeps circulating to fuel local exchanges and, at least in theory, multiplying opportunities for the production and exchange of local goods. The degree to which this stickiness can be enforced, however, is still limited. This is because, from a technical point of view, a local and complementary currency is a voucher that needs to remain redeemable in the national currency, so that money converted in, say, Totnes Pounds, can be converted back into pound sterling. The incentive to stick to the local currency to fuel the local economy comes more from personal commitment to participate in an alternative currency network, than from any formal, law-like mechanisms that would discourage conversion back into a local currency.
To further summarise: at its simplest the difference between a LETS scheme and a complementary currency lies in the creation of additional purchasing power. LETS members can spend all of their income in, say, pound sterling, plus their income in LETS credits, and the two add up. In a local currency scheme, instead, participants choose to transform – or, to use a sociologically more informed term, ‘earmark’5 – a particular amount of their earnings in national currency for conversion into a local currency, and then may decide to ring-fence that area of their spending, so as to keep it confined to a more localised circulation than it would experience in the national denomination.6
Therefore, a LETS scheme not only facilitates local exchanges, but it also injects new money in the local economy. On the other hand, the voucher model of a local and complementary currency does not achieve as much, as it simply adds stickiness to already existing purchasing power, whilst affording a wider choice as to what exchanges can be undertaken compared to a LETS scheme, as a local currency typically involves substantial numbers of participating businesses. On the contrary, a LETS scheme is often limited in its variety by the need for LETS members to be in small enough numbers to know what skills are on offer, and by whom.7 This creates problems about the diversity of what can be purchased with a LETS token, such that LETS schemes have sometimes been caricatured as alternative currencies for aromatherapists or as resulting in everyone walking each other’s dogs.8 Furthermore, LETS schemes can lead to a strong administrative burden, due to the need for a clearing house to record changes in people’s credit accounts (although this critique holds less ground today, when online platforms that automate the recording of transactions have been developed9) as well as for ensuring that the credits are continually spent in circulation and do not accumulate.10 In this last case in particular, there can be instances where some people overspend but do not offer any service, and therefore eventually drop out of the circle and others over-accumulate. In a situation of this sort, a few people end up having tokens to spend, while others end up not offering any services, and dropping out after having spent their initial credit. Last, but important for the point I will be making below, LETS schemes require people to be somewhat like-minded, and – as suggested by Peter North11 – this is in fact the ideal condition to set up a LETS scheme, while at the same time a barrier to it being more inclusive. Indeed, a LETS scheme becoming too inclusive has been described precisely as one of the challenges to their lasting longevity.12
Alternative currencies and Transition
These