Ted Trainer.

The economic renewal of a town or region cannot succeed unless a new currency such as LETS is introduced. This is because there is much economic activity that could be taking place but is not, simply because many people do not have money with which to produce and buy and sell. A LETS in effect enables anyone to "print" all the money they need to buy and sell.

It is ridiculous that millions of people are been unable to trade with each other simply because they do not have money, i.e., tokens which enable them to keep track of who owes what amount of goods and work to whom. LETS is a great solution to this elementary problem.

However it is very important to understand that a LETSystem is far from sufficient. In fact a LETS on its own will not make a significant difference to a local economy. The evidence is that on average LETS transactions make up less than 5% of the economic activity of the average member of a scheme, let alone of the region. (See R. Douthwaite, Short Circuit, 1996, p. 76.)

LETS members soon find that they can only meet a small proportion of their needs through LETS, i.e., that there is not that much they can buy with their LETS credits, and not that much they can produce and sell. Every day they need many basic goods and services but very few of these are offered by members of the system. This is the central problem in local economic renewal; the need for ways of increasing the capacity of local people to produce things local people need. The core problem in other words is how to set up viable firms.

LETS leaves individuals to come up with something they might produce and sell, and individuals can't produce very many of the things needed in the town. Also, many low income receivers in the town do not have sophisticated skills. Several of them might be quite capable of being very satisfactory employees in a small bakery producing the town's bread, but they are not likely to be able to come together to organise this. Just to set up a LETS will do nothing to get that bakery going.

Unfortunately the alternative currency literature often reveals the assumption that all we have to do is introduce a new form of money and the local economy will be automatically and miraculously regenerated. However if a council starts paying its employees half their wages in new money this will make little significant difference to anything. People who used to buy with old money will now pay for some of their purchases with new money (...assuming someone can offer to sell the things they want to buy) rather than old money. This will not necessarily get new money into the hands of poor people or create jobs for them.

Even if we gave new money to the unemployed people in the town this would not make much long term difference to the local economy. They would immediately spend more and some of the local shops might take on more workers, but because a high proportion of the goods sold in a typical town are imported, most of the additional money would soon flow out of town to pay for imports, and then the additional money would be gone and we'd be back to square one.

The core task in town economic renewal is to enable, indeed create a whole new sector of economic activity involving the people who were previously excluded from producing and earning and purchasing. This requires much more than just providing the necessary money; it requires the establishment of firms in which people a can produce and earn .

But what if we gave lots of new money to poor people? (New money can't flow out of town to pay for imports, because no one outside the town can use it.) Again unfortunately not much difference is likely to be made in the long run. It is most important to understating that the group of people with new money cannot use it to buy things from existing firms in the town unless those firms can spend the new money buying things they want from the group of people with the new money. If previously poor people get lots of new money they could use it to pay for meals from the local restaurant, only if the restaurant owner can then use the money to pay for purchases of things he wants from that group of people. Yes he could use it to buy table cloths for example from another firm in the old or normal-money economy, but before long some firm in that sector must be able to pay the new money to some individual or firm in the new sector (i.e., to the group of people who have new money to spend). If not the new money would just pile up in the old sector as goods flowed from it to spenders of new money who as a group were not selling anything to the old sector. In other words the money must circulate one way between the two sectors while goods must circulate the other way. People in the new sector can't get goods from the firms in the old sector unless they can sell goods to those firms.

So the key problem is what can the people with little old money but with access to new money produce and sell to the old/normal sector of the town economy, i.e., the existing firms with which the people with new money would like to trade? In time the main answer will be labour; some of them will then be able to sell their labour to the restaurant and be paid in new money, and then use that to pay for meals in the restaurant, etc. But this will not start to happen easily because at first the restaurant and other firms will not need more labour. They are underemployed; they will want to increase their sales a lot before they can start employing more staff.

This is where the Community Development Cooperative must come in. The economic renewal of the town will not get far unless its CDC actively works on this problem of establishing productive ventures within the new money sector which will enable that sector to sell things to the old firms in the town. In the case of restaurants the CDC's best option would probably be to set up or help others set up gardens to supply the restaurants with vegetables. Those who run the gardens would pay the workers in new money, sell the vegetables to the restaurants for new money, and use their new money incomes to buy meals from the restaurants.

The Community Development Cooperative must work hard to find and set up whatever other ventures it can because the capacity of the previously poor and unemployed group of people in the town to purchase from normal/old firms is strictly limited by the volume that that group is able to sell to those firms. Getting these productive ventures going is by far the most important task of the Community Development Cooperative, much more important than just organising a new currency in which the exchanges can take place.

The other very important thing the Community Development Cooperative must do is enable low skilled and low income people to cooperative produce many things for themselves. A considerable proportion of people in any region do not have the skills to get a job in the normal economy. This economy will condemn them to poverty and boredom. Yet they could be doing much useful work, especially work to produce many of the things they need. But again this will not happen unless it is organised. Thus the Community Development Cooperative must organise gardens and workshops and enterprises (such as furniture repair, house renovation and fuel wood cutting) whereby this group of people can work together to produce many of the things they need. They might be paid in new money according to time contributions, or they might just share goods and income from sales of surpluses..

So yes LETS or some other form of new local currency is essential; we can't get unemployed and low income people back to work without giving these people access to (new) money, but it is far from sufficient for local economic renewal. What really matters is organising productive enterprises, "firms", involving people previously excluded from economic activity. Nothing very valuable can happen unless the Community Development Committee takes up this task.

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