HARNESSING LOCAL EXCHANGE AND TRADING SCHEMES (LETS) AS A TOOL FOR COMMUNITY RENEWAL: THE ROLE OF LOCAL GOVERNMENT

COLIN C. WILLIAMS*, THERESA ALDRIDGE*, ROGER LEE**, ANDREW LEYSHON***, NIGEL THRIFT**** AND JANE TOOKE**

Submitted to:

LOCAL GOVERNANCE

[3,736 words]

                    ****     Department of Geography, University of Leicester, Leicester LE1 7RH

****   Department of Geography, Queen Mary & Westfield College, University of London, Mile              End Rd, London E1 4NS

****  School of Geography, University of Nottingham, Nottingham NG7 2RD

                   ****   School of Geographical Sciences, University of Bristol, Bristol BS8 1SS

 Corresponding author:

Colin C Williams
Department of Geography
University of Leicester
Leicester LE1 7RH
Tel: 0116 252 5242
Work E-mail: ccw3@le.ac.uk
Home E-mail: CWilli5210@aol.com

HARNESSING LOCAL EXCHANGE AND TRADING SCHEMES (LETS) AS A TOOL FOR COMMUNITY RENEWAL: THE ROLE OF LOCAL GOVERNMENT

ABSTRACT

During the past few years, Local Exchange and Trading Schemes (LETS) have been widely advocated as one of the principal tools for promoting community renewal. Up until now, however, the only evidence available on their impacts has come from evaluations of individual LETS. In this paper, the full results of the first comprehensive evaluation of LETS are reported. The finding is that although LETS are an effective vehicle for community renewal, a lot remains to be done if these schemes are to benefit a wider range of people. The role that local government can play in supporting LETS development is then outlined.

INTRODUCTION

In recent years, a host of government policy documents have advocated Local Exchange and Trading Schemes (LETS) as a tool for community renewal (e.g., DfEE, 1999; DETR, 1998; Home Office, 1999; SEU, 2000). Up until now, however, the only evidence available on their impacts have come from evaluations of individual LETS (e.g., Barnes et al, 1996; Lee, 1996; North, 1996, 1999; Pacione, 1997, Williams, 1996a,b,c). Here, therefore, and in order to facilitate 'evidence-based policy-making', the results of a comprehensive national evaluation of LETS are reported. To do this, this paper commences by briefly outlining some of the key findings regarding the impacts of LETS on community renewal. Following this, the barriers to joining and participating in LETS are evaluated along with what role local government can play in tackling these barriers.

Before commencing, however, it is necessary to outline how a LETS operates so as to see why these tools for community renewal have received so much attention. A LETS is created where a group of people form an association and create a local unit of exchange (e.g., 'bobbins' in Manchester, 'solents' in Southampton). Members then list their offers of, and requests for, goods and services in a directory that they exchange priced in the local unit of currency. Individuals decide what they want to trade, who they want to trade with, and how much trade they wish to engage in. The price is agreed between the buyer and seller. The association keeps a record of the transactions by means of a system 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 account 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 exchanged is thus entirely dependent upon the extent of trading undertaken. Neither does one need to earn money before one can spend it. Credit is freely available and interest-free (see Boyle, 1999; Croall, 1997; Douthwaite, 1996; Lang, 1994; Lietaer, 2001).

THE IMPACTS OF LETS

In order to evaluate the contribution of LETS to community renewal, three methods were adopted. First, a national survey of all LETS co-ordinators was conducted. Second, a postal questionnaire was sent out to members of LETS and third and finally, in-depth action-oriented research was conducted for six month periods in two localities: Stroud and Brixton. The net outcome was a survey of all 303 LETS co-ordinators (with a 37% response rate), 2,515 members (with a 34% response rate) and 200 people who were not members, 78 in-depth interviews, 13 focus groups and action-research to develop LETS in the two contrasting locations. Below, the results are evaluated of over 11,000 pages of questionnaire responses and 2000+ pages of interview and focus group transcriptions.

The magnitude and character of LETS

Some 303 LETS now operate in the UK and these have 21,800 members who sell goods and services to each other using local currencies (e.g., 'bobbins' in Manchester, 'solents' in Southampton). In 1999, the equivalent of some �4 million worth of goods and services were traded in this way. This might seem an insignificant amount. For the individuals involved however, LETS have a considerable impact, as will be shown below.

Examining who joins LETS, the finding is that if non-employment and low household incomes are taken as surrogate indicators of social exclusion, then the membership is heavily skewed towards the socially excluded. Just 38% of members were employees and merely 34% lived in households with a gross income of more than �,000.

Turning to why they join, 25.2% do so for ideological purposes. LETS for them are 'expressive communities': acts of political protest and resistance to the 'mainstream'. They are spaces where ideals can be put into practice. For the remainder, however, more practical rationales are cited for becoming a member. Some 2.5% join explicitly to improve their employability. The remaining three-quarters (72.3%) see it either as a 'social' vehicle for building communities, meeting people or helping others (22.9%), or as an 'economic' vehicle for overcoming their lack of money (12.2%), exchanging goods and services (20.1%), using skills (1.1%) and receiving a specific service (8.8%). 'Social'/community-building reasons tend to be cited by the employed and relatively affluent and economic reasons by the relatively poor and unemployed.

Impacts on Economic Exclusion

Turning to its impacts on their lives, the first important finding is that it acts as a vehicle for economic inclusion. For 5% of respondents, the LETS had helped them gain formal employment. Working in the LETS office administering the scheme had enabled valuable administrative skills to be acquired which had been used to successfully apply for formal jobs. Moreover, some 27% of all respondents asserted that the LETS had boosted their self-confidence (33.3% of the registered unemployed) and 15% per cent that new skills had been acquired (24.3% of the registered unemployed), all of which are indirectly useful for increasing their employability.

A further 10.7% of members asserted that LETS had been a useful seedbed for developing self-employed business ventures. It had enabled them to develop their client base (cited by 41% of those who were self-employed), ease the cash-flow of their business (cited by 28.6 per cent) and provided a test-bed for their products and services, cited by nearly all who defined themselves as self-employed.

For most members however, it was the ability of LETS to help them give and receive mutual aid that was most important. For 64.5% of the registered unemployed, for example, this ability to engage in productive activity outside of employment had helped them cope with unemployment. Not only did some 3.1% of their total income come from their LETS activity but also possessed a strong sense that they were making a contribution to their community.

The economic activity conducted on LETS, moreover, does not take away jobs from the formal sector. Just 13.4% of the goods and services acquired would have been bought from a formal business if the LETS did not exist. Instead, the finding was that LETS create new economic activity and substitute for ‘cash-in-hand’ work. Some 27.4% of the goods and/or services would not have been acquired without the LETS and 39.1% would have been otherwise acquired on a 'cash-in-hand' basis if the LETS did not exist.

Impacts on Social Networks

A major problem for low-income households and the unemployed is that they have relatively thin social networks. The result is that they have few people upon whom they can call for help (see Williams and Windebank, 2001). Can LETS overcome this problem? Some 75% of respondents (82% of the registered unemployed) said LETS had helped them to develop a network of people upon whom they could call for help, 55% that it had helped them develop a wider network of friends (68% of the registered unemployed) and 30% deeper friendships. LETS are thus more effective at developing 'bridges' (i.e., bringing people together who did not before know each other) than 'bonds' (i.e., bringing people who already know each other closer together). They develop the 'strength of weak ties' (Granovetter, 1973).

For most members, this was very important. In contemporary society, kinship exchange is the chief source of mutual aid and LETS members seemed to join LETS as a substitute for their lack of kin in the locality. Some 95.3 per cent had no grandparents living in the area, 79.5 per cent no parents, 84.3 per cent no brothers or sisters, 58.2 per cent no children, 92.6 per cent no uncles or aunts and 90.8 per cent no cousins. This function of LETS was particularly important for the unemployed because contrary to what is sometimes believed, jobless households have fewer kin living nearby than employed households (Williams and Windebank, 1999). Given that they also suffer from thinner social networks and are likely to mix only with other unemployed, LETS play an important role in expanding the breadth of their social support networks.

In sum, for those who join LETS, these initiatives play an effective role in facilitating both economic and social inclusion. They both enable participants to improve their employability and provide them with alternative means of coping by bolstering their social support networks. Given that LETS thus appear effective vehicles for community renewal, then the question that needs to be answered is why so few people have joined them and why the level of activity on LETS is so low.

TACKLING BARRIERS TO PARTICPATION IN LETS: THE ROLE OF LOCAL GOVERNMENT

To explain the low membership and activity levels of LETS, this research questioned not only members but also people who had nothing to do with LETS why this might be the case. The finding is that there are five consecutive hurdles that anybody wishing to join and participate in LETS has to overcome, and which any local government that wishes to foster this voluntary sector initiative needs to resolve.

Does a LETS exist?

The first question confronting somebody who wishes to join a LETS is whether one exists in their community. The finding of this survey was that LETS currently cover just 15% of the land area of the UK. For the population of most areas, the main barrier to participation in LETS is thus that one does not exist. Hence, a lot of work remains to be done to create LETS. The first issue for local governments is thus to check whether there is a LETS currently operating in their area. The 'death rate' of LETS, similar to small businesses, is high and the existence of a LETS a few years ago does not necessarily mean that it is either still fully operational or even in existence.

Does the population know about LETS?

If one exists, the next hurdle is whether people know about it. A large share of the population does not. Asking people in Stroud, a relatively small tight-knit town that possesses one of the longest-standing and largest LETS in the UK (which even has a high street presence), 51% of those surveyed had never heard of LETS. This is comparatively high when compared with the London borough of Brixton, which is perhaps more representative, where 92.1% of the population had never come across LETS.

In major part, this is due to the way in which LETS advertise themselves. The principal method used by LETS is `word-of-mouth' (employed as the principal marketing device by 64% of LETS). The reasons why this is used as the main marketing device is because it is one of the only 'no cost' methods available. Most other marketing methods cost sterling money that these voluntary groups do not possess. Indeed, just 49% of LETS had received financial support, of which 75% comes from local government. However, only 7% of all LETS had received financial support to help with publicity and these tended to have a more representative membership profile of the local community than those who had not.

If one exists therefore, there remains a lot of work to be done in raising the profile of LETS amongst the local population. It cannot be simply assumed that people know about them. Indeed, and as will now be shown, the provision of financial support for publicising their existence to a wide cross-section of the population is very important if these are to be inclusive mechanisms for all social groups.

Do people think that it is something for them?

If one exists and people know about it, the next question is whether they feel it is something for them. Two-thirds (67%) of people surveyed thought that it was not. First, this is because they were either 'money rich but time poor' or had extensive kinship networks that substituted for LETS. Second, however, it is because they either feared having their social benefits curtailed (dealt with below), perceived LETS as something for people other than them or their illiteracy prevented them using LETS cheques.

Most of the time, they were absolutely correct in assuming that the membership was different to them. Some 62% of members hold graduate or above qualifications and 48% support the Green Party. It is thus the case that these inclusive mechanisms for some (i.e., low-income non-employed graduate greens) are exclusionary for others. This membership profile arises due to the way LETS advertise themselves discussed above. Using primarily 'word-of-mouth' and contacting groups that they feel will be interested, usually environmental organisations, the outcome is a skewed membership profile with many `greens' and `alternative life-stylers' joining. This results in intransigence in membership profiles since many then perceive LETS as something for others rather than them.

Recognition of how these advertising and recruitment practices lead to exclusion of other social groups is the first step in resolving this problem. The next is to adopt marketing practices that resonate with particular groups (e.g., choosing appropriate locations for trading and social events, designing targeted promotional material). To achieve this, more financial support is required than has so far been forthcoming. The form of financial support required, moreover, is not great. Most LETS require two forms of aid. First, they need help to start up, such as in the form of the provision of a hall to launch the scheme, or money to purchase a computer, produce advertising leaflets and a directory of the goods and services on offer. Second, there are on-going costs in the form of advertising and up-dates of the directory and this often requires little more than access to photocopying facilities. The impacts of such aid however, can be significant. This study suggests that the LETS that had received such financial support had more representative membership profiles and that the average level of trade per member was 27% higher than in non-funded LETS.

Do people think that they have something to contribute?

If one exists, people know about it and feel that it is something for them they may still abstain. This is because they do not perceive themselves as having anything to contribute that others might want. This came across strongly in our interviews with non-members. For instance, the elderly and disabled felt that they could do little as did the unemployed. At the advertising stage, therefore, concrete examples are needed not only of what people can get on LETS but also what they can contribute. Once they have joined, pro-active policies are then required to enable people to recognise their skills as well as acquire and develop new ones.

The dissemination of 'best practice' on this and all other aspects of LETS development however, is currently hindered by an institutional thinness in LETS at both the regional and national levels. At the national level, the demise during 2000 of LetsLink UK, following the end of its National Lottery funding, has left LETS without a national LETS development agency or even a point for people to contact to receive information on how to set up a LETS. At the regional level, meanwhile, there is little cross-fertilisation of ideas with most LETS operating on an autonomous basis and seldom if ever contacting other LETS to disseminate 'best practice'. Indeed, it is perhaps the Local Authority LETS Information Exchange (LALIE) that currently provides the most appropriate, if not only, vehicle for taking over this national and regional co-ordinating role for LETS development and disseminating 'best practice' advice. At present, however, it does not have a full- or even part-time worker but rather, is organised on a voluntary basis by local government officers.

Do people think that they are allowed to participate in LETS?

If all these barriers to joining and participating are overcome, the lack of clarity by central government over how LETS earnings will be treated will then need to be resolved, especially with regard to the registered unemployed. 65% of registered unemployed members are fearful of the benefit authorities and nearly all those who claim benefits and do not currently belong to LETS. This is because the DSS have refused to provide clear regulations regarding how LETS earnings are to be treated.

Consequently, this research endorses the current policy proposal of the Social Exclusion Unit in its National Strategy for Neighbourhood Renewal: a framework for consultation. In key idea 4, this document proposes a pilot study to give 'people new freedom to earn a little casual income or participate in a Local Exchange and Trading Scheme (LETS) without affecting their benefit entitlement'. This research, however, shows that this policy shift alone will not suffice. Many additional barriers to participation in LETS will need to be overcome, as highlighted, and this will require local government to play a more central role in supporting these voluntary sector initiatives than has so far been the case.

CONCLUSIONS

In sum, the results of this wide-ranging research project reveal that although LETS are moderately successful at maintaining and improving employability, they are most effective at mobilising people to help themselves and others by rebuilding social support networks. However, significant barriers remain that prevent a wider proportion of the population from participating. LETS currently only cover a minor area of the UK, most people have never heard of them, many who would benefit from LETS see them as something for people other than them, they have little idea what they could contribute and the unemployed in particular fear how central government will react to their activity. To tackle these barriers, LETS need to be developed where they do not exist, awareness of their existence needs to be raised, they need to be developed and promoted in inclusive rather than exclusive ways, people need to be helped to recognise their skills and talents and last but not least, central governmental regulations need to be addressed.

Local government has a key role to play in tackling these barriers and facilitating this voluntary sector initiative to promote community renewal. When facilitating these initiatives however, it is important for local government to recognise that the 'value-for-money' criteria used to judge the effectiveness of spending cannot and should not be based on job creation or employability indicators. The principal contribution of these schemes is that they develop social support networks. As such, any criteria used will need to reflect this function. This might be the number of exchanges conducted either overall in the LETS or by specific social groups if the desire is to strategically encourage the LETS to target specific socio-economic groups. It is also important to recognise that the institutional thinness of LETS at the national and regional levels necessitates that support be provided to organisations such as LALIE to develop LETS and disseminate 'best practice'.

Indeed, this study of one of the most widely advocated 'third sector' initiatives displays that although they are effective mechanisms for community renewal, they cannot possibly reach a wider share of the population without support from local and central government. Indeed, unless this is forthcoming, these third sector initiatives will become listed as yet another failed experiment rather than a pioneering integrative approach to community renewal.

ACKNOWLEDGEMENTS

This research was funded by the Economic and Social Research Council (ESRC) (Ref.: 000237208). We are grateful to all who participated in this research, especially the co-ordinators and members of Stroud and Brixton LETS, for their co-operation and the many individual respondents for their critical but constructive participation in the project. Colin Williams would also like to thank the University of Leicester for providing Study Leave, during which this article was written.

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