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Environment and Planning A 1996, volume 28, pages 1395-1415

Local exchange and trading systems: a new source of work and credit for the poor and unemployed? C C Williams Centre for Urban Development and Environmental Management, Leeds Metropolitan University, Brunswick Building, Leeds LS2 8BU, England Received 24 October 1995; in revised form 1 February 1996

Abstract. In this paper the aim is to evaluate critically the potential of local exchange and trading systems (LETS) as a new source of work and credit for the poor and unemployed. LETS are local associations whose members list their offers of and requests for goods and services in a directory and then exchange them priced in a local unit of currency. From the results of a national survey of LETS, it is found that LETS are growing rapidly and that a high proportion of the national membership are poor and unemployed. With use of a membership survey of Manchester LETS, it is then revealed that, although the poor and unemployed are capitalising on LETS to gain access to work and credit, it is utilised mainly by what can be called the 'disenfranchised middle class'. In this paper it is advocated that, for a wider crosssection of the poor and unemployed to become involved, changes are needed not only in the internal operating environment of LETS but also in the approach of the government towards benefit claimants working on such systems. 1 Introduction

In contemporary Britain, there are a large number of people excluded from employment. Conventionally, the solution to this problem has been to try to get these people into jobs by seeking a return to 'full employment'. Despite this, a high and increasing share of the population are unemployed. In 1961, 24% of Britain's population of working age were not in employment, but by 1992 this figure had risen to 28% (DoE, 1994).(1) Not only is unemployment rising, but so also is underemployment, as temporary and part-time jobs increasingly replace permanent full-time employment (Thomas and Smith, 1995). Consequently, there is little if any evidence to suggest that 'full employment' or even 'fuller employment' will be realised in the near future or even beyond. Yet in the current period of prolonged mass unemployment and underemployment, there is much work needing to be done and many who would like to work. What prevents this demand and supply being matched, however, is a lack of national currency. Money, as a scarce commodity, restricts exchange. This is especially the case in low-income communities. Given this, there is a need to explore the possibility of creating what Leyshon and Thrift (1995) term 'alternative institutions of accumulation' through which the poor and unemployed can gain access to credit so as to facilitate exchange (for example, credit unions, community development banks). In this paper I extend this argument by examining an alternative institution of accumulation which is aimed at overcoming the serious lack of cash availability for everyday trading in goods and services. It does so not only by offering credit to those currently denied access to this facility but also by providing (1) Moreover, such data reveal how the era of so-called 'full employment', which existed for thirty years or so following World War 2 in a few industrialised nations (Pahl, 1984), was only an age of full-employment for men, not women (Williams, 1996). Therefore, 'full employment' for all has never existed.

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a means by which the poor and unemployed can engage in productive activity so as to finance such credit. My aim is to evaluate critically the extent to which local exchange and trading systems (LETS) are a potential source of work and credit for the poor and unemployed. LETS are local associations whose members list their offers of and requests for goods and services in a directory. They then trade these goods and services with each other, priced in a local unit of exchange (for example, bobbins in Manchester, solents in Southampton). The price is arrived at through mutual agreement between the buyer and seller. Normally, the local currency is treated as equivalent in value to the national currency unit. The association records the transactions by means of a system of cheques written in the local LETS units. The cheques are sent to the treasurer, who acts in a similar manner to a bank, sending out frequent statements of account to the members. No coins or notes are produced. No interest is charged or paid. Neither is there any compulsion to earn local currency before one can spend it. Instead, 'debt' is positively encouraged, being seen as a commitment to put energy back into the system at a later date. As such, LETS have been heralded as a potential means by which the poor and unemployed can not only access interest-free credit but also engage in productive activity (Lang, 1994). The problem when seeking to explore whether such groups of people are indeed using LETS in this manner is that little empirical evidence is available.(2) Given such a lack of data, I present in this paper the results of two surveys: a postal questionnaire sent in May 1995 to all 275 British LETS listed in the LETSLink UK Directory (LETSLink UK, 1994a) in order to provide an overview of their origins, growth, magnitude, and character; and a survey conducted in June 1995 of all members of Manchester LETS, so as to explore the nature and extent to which the unemployed and poor are using LETS as a way of engaging in productive activity and gaining access to credit. To commence, therefore, in section 2 I review the processes by which the poor and unemployed are being excluded from work and credit in contemporary Britain. Following this, the extent to which LETS provide a potential solution to this exclusion is analysed. First, in section 3 the magnitude and character of LETS in Britain are evaluated by using the national survey data. These reveal that LETS are rapidly growing and that a large share of the national membership are poor and unemployed. Second, in section 4 the extent to which these poor and unemployed are capitalising on LETS to gain access to work and credit is examined through a membership survey of Manchester LETS. This shows that Manchester LETS are helping a certain section of the poor and unemployed to access productive activity and credit. Therefore, in the final section, several alterations in both the external and the internal operating environments are recommended for LETS to become more successful in providing this facility to a wider array of such people. 2 Processes of exclusion from work and credit in contemporary Britain To display the need for 'alternative institutions of accumulation' in general, and for LETS in particular, in contemporary Britain, I examine in this section the ways in which an increasing proportion of the population are excluded from work and credit. W Notable exceptions include investigations of Calderdale and Totnes LETS as potential tools for informal economic development (Williams, 1995a; 1995b; 1996) and an analysis of LETS in South East England in terms of their inclusivity and how they facilitate locally-defined systems of value formation (Lee, 1996). 'Grey' literature on the subject include Seyfang's (1994) evaluation of the impacts of Diss LETS, and Jackson's (1995) overview of 'green dollar exchanges' in New Zealand.

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First, the processes by which individuals and households are excluded from work are highlighted and, second, the ways in which many low-income groups and the unemployed are being denied access to credit are explored. 2.1 Social polarisation in contemporary Britain Social polarisation refers to the processes by which the life chances of the relatively poor and affluent are diverging (Jordan and Redley, 1994). To explore this phenomenon, two alternative approaches have been adopted (Pinch, 1993; Williams and Windebank, 1995a). First, and most widely employed in the United States, is the approach which focuses upon the 'individual in the employment place', in which social polarisation is analysed in terms of the shifts in the structure of occupations and their impacts upon individuals' earnings. A decline in middle-income jobs and an expansion of high-paying and low-paying employment at each end of the occupational hierarchy have been identified (Bluestone and Harrison, 1982; Harrison and Bluestone, 1988; King, 1990; Murphy and Watson, 1994; Sassen, 1991; Stanbach, 1979), and this is explained in terms of the shifts in the industrial structure which have caused a move away from manufacturing (and consequently skilled manual jobs) and towards services (and thus both more highly paid professional or managerial jobs and a large number of low-skilled and low-paid jobs). The outcome is not only that jobs are increasingly becoming either high paid or low paid but that there is a growing 'disenfranchised middle class' in contemporary society who are being excluded from work as the middle mass of jobs disappears from the formal labour market. The alternative perspective towards social polarisation, which has been emerging mainly in Britain, takes the household as the unit of analysis, rather than the employment place, and examines all forms of work. From this perspective it is found that British households are increasingly either of the multiple-earner or no-earner variety and that the proportion of single-earner households is rapidly declining (Borooah and Hart, 1995; Borooah et al, 1995; Dex and Taylor, 1994; Gregg and Wadsworth, 1994; Williams and Windebank, 1995a). Comparing data from the 1970s with those from the early 1980s, Dale and Bamford (1991) and Pinch (1993) posit that this shift is the result of a growing proportion of households which have no earners rather than an increase in multiple-earner households. Nevertheless, the 1980s data were collected during a widespread recession so it is unsurprising that there were more no-earner and fewer multiple-earner households. Despite this, a growing 'underclass' was mooted on the basis of this evidence. As revealed in table 1, however, more recent data from the 1991 Census Sample of Anonymised Records show that the proportion of no-earner households remained the same in 1973 and 1991. Instead, the growing social polarisation into either multiple-earner or no-earner households is actually the result of a rise in multipleearner households. Harrison and Bluestone (1988) identify a similar pattern in the United States. Table 1. Distribution of households by number of earners, 1973-91: percentage of households (sources: Dale and Bamford, 1991; OPCS, 1991 Census of Population: Sample of Anonymised Records). Year

2 or more incomes

1 income

No incomes

1973 1982 1991

39 34 47

36 32 28

25 34 25

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In major part, this polarisation is caused by the way in which the feminisation of the labour force is articulated and mediated at the household level. It is often not worth a married woman continuing with, or taking, part-time jobs if her husband is on means-tested social security, as it affects his entitlement to benefits (Hewitt, 1994; Morris, 1994). Wives of employed men, in contrast, are free to accept such part-time jobs. Consequently, given the trend towards employing more women and more part-timers, the result has been a polarisation of households (Dex and Taylor, 1994). This inequality in access to employment is further accentuated by the extent to which these household types engage in informal work. Multiple-earner households undertake more domestic, voluntary, and paid informal work than do no-earner households (Pahl, 1984; 1988; Wallace and Pahl, 1986; Warde, 1990; Williams and Windebank, 1995a; 1995b). On the one hand, therefore, there are 'resource-rich' households, or what could perhaps more accurately be named 'the new workhouses', who not only have multiple jobs but also conduct a wide range of domestic, voluntary, and paid informal work. On the other hand, there are 'resource-deprived households', or what Morris (1987) calls the 'no-longer working-class' households, who suffer not only unemployment but are also unable to redress this through the informal sector. This is because they lack the money to buy the materials necessary to engage in informal economic activity (Pahl, 1984; Smith, 1986; Thomas, 1992), own fewer capital goods and less property and thus undertake a narrower range of tasks (Mingione, 1991; Pahl, 1984), often do not possess the skills necessary to engage in such work (Smith, 1986), feel more inhibited about engaging in paid informal work for fear of being reported to the social security authorities (Williams and Windebank, 1995a), and because the reduction in the size of their social networks following unemployment means fewer chances of hearing about opportunities for undertaking work or for receiving help (Miles, 1983; Morris, 1993; Renooy, 1990; Thomas, 1992). Consequently, these two approaches to social polarisation in contemporary Britain reveal the growth of a 'disenfranchised middle class' as the middle mass of jobs disappears and exposes the existence of a large number of no-earner households who are excluded from all forms of work. Whichever approach is adopted, therefore, a large number of individuals and households exist in contemporary Britain who are not only denied access to work but also, as will now be shown, are increasingly excluded from credit. 2.2 Don't bank on it: financial exclusion in contemporary Britain

Financial exclusion refers to those processes that serve to prevent certain population groups from gaining access to the financial system (Leyshon and Thrift, 1993; 1994; 1995). Recent attempts to chart its nature and extent in contemporary Britain reveal that in the early 1980s, having abandoned the less-developed nations, international banks sought out new customers in developed nations. Large amounts of credit were provided for the construction and purchase of property (Warf, 1994) and to support the consumption of goods and services by individuals through personal loans and other credit facilities (Leyshon and Thrift, 1993; 1995). In the wake of the debt crisis of the early 1990s in developed nations, however, the financial services industry has redirected credit away from poorer social groups and towards the more affluent. As Leyshon (1995, page 1024) asserts, "the financial system is rapidly retreating to a middle-class heartland". This means that "it is becoming increasingly difficult for many citizens of developed countries to gain access to the financial systems" (Leyshon and Thrift, 1995, page 313).


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As Leyshon and Thrift (1995) explain, this process of financial exclusion exists because of the way in which risk is assessed and credit is priced. The cost of money is determined by the level of risk which a financial institution believes that it incurs in lending money to a borrower. The perceived level of risk is inversely related to the likelihood of the borrower repaying. The greater the risk, the greater the repayment. The outcome is that affluent populations are more likely to get access to credit and at cheaper rates. Examining the 'credit worthiness' of the borrower thus punishes the poor and privileges the rich who can get credit cheaper. The present systems, therefore, are disenfranchising a large proportion of the population from credit. As Leyshon and Thrift (1993, page 223) argue, "the current process of financial infrastructure withdrawal has serious social and economic implications for those social groups and localities abandoned by the financial community". One outcome is that as many as 35% of those receiving social security benefits are not in possession of either a bank or a building society account (National Association of Citizen Advice Bureaux, 1993, cited in Leyshon and Thrift, 1995, page 313). Furthermore, the inequalities produced by this abandonment of certain populations by formal sector financial institutions is reinforced, rather than reduced, by alternative informal institutions of accumulation, such as kinship and friendship networks. Redundancy, for example, leads to a drastic reduction in the size of social networks (Dawes, 1993; Griffin etal, 1993; Morris, 1995) and thus of kinship and friendship networks which are potential sources of informal financial support for the unemployed. Indeed, there is growing evidence that not only do the long-term unemployed tend to mix mostly with other long-term unemployed, but that informal financial aid provided by those in employment is more likely to pass to others in employment than to unemployed people. The unemployed, meanwhile, are at least as dependent for informal financial aid upon other unemployed people as they are upon those in employment (Morris, 1995). Those marginalised by formal sector financial services, therefore, not only are less likely to receive informal financial aid from the employed than are those in employment but also are relatively dependent upon others in the same situation as themselves. The result may be that a proportion of such marginalised populations, if they require financial aid, have little choice but to turn to the unregulated market for financial services, where annual interest rates of 1000% are not unusual (Leyshon and Thrift, 1995, page 318). Given these processes of social polarisation and financial exclusion in contemporary Britain there is an urgent need to explore whether there are alternative institutions of accumulation which can be developed and used to mitigate the circumstances of the large proportion of the population dislocated from work and credit, whether defined as the 'disenfranchised middle class' or no-earner households. Credit unions have been heralded as one such alternative institution. However, these aim only to provide access to credit (not work) and are currently relatively underdeveloped in Britain (Leyshon and Thrift, 1995; McKillop etal, 1995). Here, therefore, the potential of another alternative institution of accumulation will be explored which is aimed at overcoming not only exclusion from credit but also exclusion from work. 3 The growth, size, and character of local exchange and trading systems in Britain The idea of creating local currencies to resolve exclusion of the poor and unemployed from work and credit is not new. During the 1930s 'alternative' currencies were established to combat poverty and unemployment throughout Europe and North America (Greco, 1994; Offe and Heinze, 1992). For example, an experiment with

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local money in Worgl, Austria, resulted in over 300 other Austrian towns becoming interested in replicating the experience before it was terminated when the Austrian state bank threatened legal proceedings (Offe and Heinze, 1992; Weston, 1991). Learning from this experience, local currencies which have emerged during the past decade or so view themselves as 'complementary' to the national money system and no notes or coins are issued (Dauncey, 1988; Dobson, 1993; Seyfang, 1994). By far the most popular and widespread form of local currency system is the LETS. ( 3 ) T h e first LETS was established in 1983 by a self-employed Canadian, Michael Linton, in response to the shortage of national currency in his home town of Courtenay, British Columbia, following the closure of the externally owned key industry upon which the locality was heavily dependent for employment. T h e resulting reverse multiplier effect meant that few residents had sufficient money to buy his goods and services, which prompted him to search for alternative ways in which they could pay. T h e idea reached Britain in 1984 when he presented a paper at 'The Other Economic Summit', a forum for 'new economics' thinkers which runs alongside the G7 Economic Summit (Linton, 1986). Since then, LETS have been advocated and developed throughout the English-speaking industrialised nations by those connected with the 'new economics' (Boyle, 1993; Brandt, 1995; Dobson, 1993; Greco, 1994; Lang, 1994). By late 1994, 171 LETS had been created in Australia (Jackson, 1994), 57 in New Zealand (Mallinson, 1994), 275 in Britain (LETSLink UK, 1994a), and 20 in North America (Greco, 1994). T h e idea is also now starting to diffuse into other industrialised nations, including Denmark, Finland, France, Germany, Holland, Norway, Spain, Sweden, and Switzerland (LETSLink UK, 1994b). In Britain, the first LETS was established in Norwich in 1985 (Lee, 1996). It was not until the 1990s, however, that the idea really began to take off. In early 1992 there were only 5 LETS in operation, but there were 40 by December 1992, 275 by December 1994, and an estimated 350 by mid-1995 (Lang, 1994; Lee, 1996; LETSLink UK, 1995). To assess the magnitude and character of LETS in contemporary Britain, in May 1995 I undertook a survey of the 275 LETS listed in the December 1994 Directory of LETS in the UK (LETSLink UK, 1994a). Of these 275, 90 responded (a 32.7% response rate). (3) Other forms of local currency system currently in use include time dollars (Cahn and Rowe, 1992) and Hours (Greco, 1994), both of which are confined to North America. These measure work in terms of the volume of the inputs (the time spent on an activity), whereas LETS gauge work in terms of the value of the outputs (money). Ekins (1986, pagexv) defines the 'new economics' as being "based on personal development and social justice, the satisfaction of the whole range of human needs, sustainable use of resources and conservation of the environment". (5) This postal questionnaire sent to the coordinators of all LETS asked for information on three issues. Questions about its foundation included: when it commenced trading; who founded the LETS (for example, if an individual, information was asked on their gender, age, and occupation); their reason for setting it up; and the main problems confronted when setting it up. On the current operation of the LETS, questions were asked on: the geographical area covered by the LETS; whether any particular groups are targeted for membership; its annual turnover; the level of trading since its creation; whether it is expanding or contracting (and why); and the main problems so far as its current operation is concerned. Membership questions included: the current number of individual and business members; the percentage of members who are women, unemployed, newcomers to the area, and believers in green ideas; how they would describe the type of people to have joined their LETS; and whether they felt that the LETS has been successful in (a) rebuilding social networks, (b) encouraging local trading, and (c) helping poorer sections of the community get by. Although useful as a


According to the survey responses, LETS schemes have an average of 85.6 members and a mean level of trade equivalent to £6006 per annum, assuming parity between local currency units and sterling (see table 2). (6) Extrapolating from this, the 350 LETS in Britain which have now been identified (LETSLink UK, 1995) can be estimated to have some 3 0 0 0 0 members and an annual turnover equivalent to £2.1 million. These vary significantly in size, according to the length of time they have existed. Older LETS not only have larger memberships but also higher turnovers, a product of the time which they have had to establish themselves in their locality. So, given that 80.2% of all LETS responding were formed only in the two-year period before the survey, and are thus in their infancy in formal business terms, it can be assumed that LETS are likely to continue to expand during the next few years. This conclusion is reinforced by the survey. Some 8 6 . 3 % of LETS assert that they are continuing to expand, 1 0 % that they are stable, and only 3.7% that they are contracting. T h e LETS which are contracting are those which have not reached what appears to be a 'critical mass' of 50 members, which is required for offers and requests to be more easily matched and for people to gain confidence in the system. LETS with larger memberships, meanwhile, have relatively high and expanding turnovers because the range and spatial density of goods and services available on them broadens and deepens as membership levels increase, facilitating the easier matching of members' offers and requests. Indeed, whether or not the membership is geographically dispersed is an important determinant of the capacity of a LETS to facilitate trade. Those based on a small geographical area, such as a village, or LETS in urban areas with larger memberships, generally have higher levels of trade per member than those with Table 2. Size of British local exchange and trading systems (LETS) by year established (source: author's survey). Year established

Percentage of all LETS

Average number of members

1995 1994 1993 1992 1991 and earlier Total

8.6 35.8 35.8 9.9 9.9 100.0

31.0 56.9 71.3 162.5 183.5 85.6

Average turnover (£) total

252.00 2690.50 3223.40 17085.00 16500.00 6006.00

P e r member 8.13 47.28 45.21 105.14 89.92 70.16

(5) (continued). way of collecting the basic census-type data on LETS which has so far been unavailable, it did restrict some of the nuances of LETS being explored (see footnote 6, for example) and prevented the meanings attached to their development and operation from being more fully explored. (6) Although Lang (1994) asserts that only 65% of LETS are calibrated to sterling, this more recent survey reveals that over 96% of responding LETS tie their local currency to sterling. One explanation may be that recently-created LETS are heavily tied to sterling. According to informal feedback from nonrespondents, however, it may also be because parts of the questionnaire (for example, on turnover) appeared inappropriate to LETS using time-based accounting systems, engendering a low response rate from them. Future research, therefore, will need to monitor carefully the extent to which LETS are calibrated to sterling and be more sensitive to the varying ways in which work and credit are valued. The vast majority of respondents to this survey, nevertheless, embrace parity between the local currency and sterling, adopting a 1:1 ratio, and those with different ratios have been converted to sterling equivalents when assessing trading levels.

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more spatially diffused memberships (see table 3). This is because much of the trade on LETS is in consumer services, which conventionally tend to be purchased close to the home. The problem for those LETS which cover a wide geographical area is that a good and/or service may not be available within easy reach of the buyer's household, so the purchaser will forego the opportunity to purchase the service or good on the LETS. Baby-sitting, for example, is a service usually sought close to a person's home. The problem on many LETS with dispersed memberships, however, is that a great distance has to be travelled to receive this service. This review of the magnitude of LETS suggests that their ability to provide work and credit is relatively minor. Nevertheless, to assess LETS purely in terms of their macroeconomic impacts is to do them an injustice. Although the overall level of work and credit is small, for the individuals involved in LETS the impacts on their quality of life have been shown to be very significant (Williams, 1995a; 1995b; 1996). Therefore, it is more useful to think about LETS in terms of their use value to the individuals concerned rather than simply in terms of their overall magnitude. Who, therefore, joins LETS? Few LETS explicitly target specific social groups to encourage them to join. However, many do so unintentionally by aiming their publicity in the first instance at groups likely to be interested, such as environmental organisations, and then rely on 'word-of-mouth' as the main means of advertising the system. The result is a skewed membership profile with many 'greens' and 'alternative life-stylers' joining, but few people from other social groups. As Lee (1996) discovered in a study of LETS in southeast England, the outcome is that many feel excluded, especially the poor and unemployed, seeing LETS as something for others but not for themselves. Table 3. Trading on British local exchange and trading systems (LETS) by geographical area (source: author's survey). Area

Average turnover (£)

Average number of members

Average trade per member (£)

Whole city Whole town Neighbourhood Village Rural area

21410 4060 2807 7020 4285

156.7 134.3 66.5 88.0 73.0

136.60 30.20 42.20 79.80 58.70

However, in table 4 it can be seen that this may be rapidly changing. Although the early LETS are rightly caricatured as being playthings of the 'environmentally conscious middle class', more recent LETS have many more jobless and women members and far fewer greens. Indeed, all LETS coordinators who describe their members as 'very varied' have been formed since 1994, whereas those characterising their members as 'mostly greens or alternatives' were formed earlier. However, although more recent LETS have smaller proportions of employed and green members (table 4), some care must be taken in assuming that LETS are transcending their green origins and appealing to a wider audience. These data provide information only on the current membership profile of LETS which were formed in different years. It does not supply data on the historical variability of membership. Although some limited data gathered on Totnes LETS do suggest that this particular LETS has become more inclusive over time (Williams, 1995b), whether this is more widely the case cannot be ascertained from this snapshot of a particular moment in time.

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Given that LETS in Britain are rapidly growing and given that an increasing proportion of the membership in more recent LETS are unemployed, attention now turns towards a case study of whether LETS are indeed helping the poor and unemployed to overcome their exclusion from work and credit. Table 4. Profile of the membership of British local exchange and trading systems (LETS), by year of establishment (source: authorrs survey). Year established 1995 1994 1993 1992 1991 and earlier All LETS

Percentage of members who are: women

not in employment

'greens'

62.6 59.6 59.5 58.1 54.6 59.2

32.7 30.5 27.5 27.5 24.7 29.4

51.0 67.5 70.3 74.8 73.7 70.4

4 A case study of Manchester Local Exchange and Trading System In a bid to answer the above question, a postal survey of all 500 members of Manchester LETS, the largest in Britain, was conducted in June 1995.(7) A total of 109 members responded (a 21.8% response rate). In this section of the paper, I analyse the membership profile of Manchester LETS and then examine whether this LETS is enabling the unemployed and low-income members to engage in productive activity and gain access to credit. 4.1 Membership profile Of those members responding to the survey, 43.9% were employees, 13.1% were self-employed, and 43.0% were not in employment. Of those not in employment, 80.4% live in households with a gross annual income below £10000, indicating that the vast majority of the unemployed respondents are not the jobless spouses of people in well-paying jobs. They are people living in low-income households, struggling to get by. An examination of the household income of all members, moreover, reveals that the membership of Manchester LETS is skewed towards low-income households. (7> In this postal questionnaire sent to all members of Manchester LETS I collected data on three issues. Membership profile data included their gender, age, annual household income (before tax), highest educational qualification, employment status (and previous occupation if unemployed), family ties in Manchester, and the length of residence in the city. Questions on trading over the past year covered the total value of goods and services sold and bought; the specific goods and services both offered and requested, and sold and bought, along with the number of times sold and bought, and the price; whether any goods and services sold on the LETS are exchanged or traded outside of the LETS as part of their main formal occupation; if requests had in general been met immediately, or whether they had waited some time; whether they are satisfied with the range of goods and services on offer and, if not, what they would like offered; and for each good and service bought on the LETS, what they would have done if the LETS did not exist. To begin to explore the meanings they attach to their LETS activity, questions were asked on their main reason for joining; how they had heard about it; and whether the LETS had helped them develop a wider network of (a) people they can call on for help; (b) friends; and (c) enabled them to develop deeper friendships; improved their material standard of living and enabled them to use skills which they would not otherwise use. Given the lack of data so far collected on LETS, this emphasis on the membership profile and nature and extent of trading was necessary. Underemphasised, however, was the meanings which members attach to their activity, which will need to be explored in future research.

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Some 56.0% of respondents live in households with a gross annual income below £10000, whereas in the North West region as a whole 39.1% of households had a gross income under £9100 in 1992 (CSO, 1994, table 8.2). The relatively affluent, meanwhile, are underrepresented. Although 30.8% of all households in the North West had a gross annual income over £19500 in 1992, only 20.5% of respondents lived in households earning over £20000. Such figures thus negate the popular prejudice that LETS are playthings for the bored affluent middle classes. From table 5, moreover, it can be seen that the most popular reason for joining Manchester LETS is economic, cited by 81.5% of respondents. The vast majority, therefore, are seeking an alternative means of helping themselves to get by. Indeed, economic motivations are more commonly cited amongst those in lower income households and by the unemployed. The second most commonly stated reason for joining is to widen social networks and rebuild a sense of community. Given that the unemployed and poor have relatively weak social networks, as discussed above, it is perhaps little surprise that this motivation is frequently cited. Nevertheless, neither the poor nor the unemployed commonly cite community-building reasons alone when explaining why they joined, unlike the case for economic reasons, which are frequently cited as the sole motivation for joining. Table 5. The motivation for joining Manchester local exchange and trading system (LETS): percentage of respondents (source: author's survey). Motivation

All members

Members in households earning; less than £5000 per annum

Unei

Economic Community-building Social equity Environmental Solely economic Solely community-building Economic and community-building Economic and social equity Economic and environmental Economic, community-building, and social equity Economic, community-building, social equity, and environmental

81.5 49.9 18.4 16.6 47.4 18.5 14.8 1.8 0.9 0.9

85.2 44.4 7.4 7.4 55.6 14.8 22.2 0.0 0.0 0.0

86.9 37.0 19.6 19.6 63.0 13.1 4.3 0.0 0.0 0.0

15.7

7.4

19.6

It is important to note, moreover, that of those joining for economic reasons, there are two distinct groups. On the one hand, there are those people who join for straightforward economic reasons, such as "I needed services which I couldn't afford to buy" (man in low-income household), "I have no money" (unemployed woman), or "We needed a few specialist jobs doing around the house and no money to pay for them—a few hours of my time doing things for others was/is an ideal solution" (unemployed woman). On the other hand, there is a significant minority who give economic reasons which are more ideologically motivated, such as "to get jobs done I cannot afford whilst taking a step away from the international money economy into something more locally controlled" (man in low-income household), or "to engage in alternative trading to get by as a step towards a more localised anticapitalist economy" (unemployed man). The former group are more likely to be people, often women, who are either poor or unemployed, whereas the latter group


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are more likely to be men, often with high educational qualifications, but either unemployed or in low-income households. Consequently, with an overrepresentation of the poor and unemployed on Manchester LETS, and the dominance of an economic rationale in respondents' motivations for joining, the extent to which LETS provide a source of work and credit for the poor and unemployed are now examined. Each is considered in turn. 4.2 A new source of work for the poor and unemployed? The total earnings of the 109 respondents during the past year is the equivalent of £14351, one 'bobbin' (b) being the equivalent of one pound sterling. This is an average of £131.66 per member. The total value of trade in the past year on Manchester LETS (500 members) can thus be estimated to be the equivalent of £65 830. Such bland macroeconomic figures, however, say little about the relative importance of this form of trading to the LETS participants. To discover this, respondents were asked which income brackets their total household income (before tax) fell into. Taking the middle-income figure for each income bracket, the average annual household income (before tax) of Manchester LETS members is £11800. Assuming that each household has only one LETS member, their LETS earnings thus represent 1.1% of total household income. Moreover, respondents in lowincome households (defined here as having a gross annual income of less than £5000) earned an average of b69.37, which represents 1.4%-2.8% of total household income. Although such an amount might seem insignificant, this is not the case, especially for those at the lower end of the income scale: 48.1% of respondents in low-income households and 44.4% of the unemployed respondents stated that their activity on Manchester LETS had helped them to improve their material standard of living. Take the example of Cathy,(8) in her mid-thirties, who came to Manchester four years ago and has no relatives in the city. She* is unemployed at present, having been made redundant from her previous job as a psychiatric social worker which she obtained after successfully completing her undergraduate studies. During the past year on Manchester LETS she has dug gardens twice for b6 per hour, engaged in general labouring four times at b6 per hour, has undertaken house cleaning for b3 plus £3 per week for the past 16 weeks, has sold one massage for b6, and reflexology eight times at b6 a time. She feels that the LETS has not only improved her material standard of living and allowed her to employ skills which she would not otherwise use but also has enabled her to develop a wider network of people she can call on for help and a broader circle of friends. For her, the LETS has provided a means by which she can engage in productive activity so as to overcome her social exclusion, mitigate her poverty, and meet her need for socially validated and meaningful activity. In this sense, she is typical of many other unemployed and lowincome respondents. Of the unemployed and low-income households, only 19.6% and 18.5%, respectively, have failed to sell any goods and services, most of whom have only recently joined. Very few who have been members for over a year have failed to sell goods and services. In table 6 it is revealed that, although the unemployed feel that they have a narrower range of goods and services to offer, they are just as successful as the employed at selling what they do tender. Nevertheless, the total earnings of the unemployed and members in low-income households are generally lower than the earnings received by the employed and more affluent households. Those members Respondents' names have been changed in order to protect their identity.

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who are unemployed or in low-income households also receive both a lower rate per hour for their services and a lower mean price for the goods which they ^ell and/or hire. This is because the advantages accruing through employment are consolidated in LETS. Take the example of hiring goods. The employed and affluent have more money to invest in capital goods, which they can then sell or hire on the LETS at higher rates than those goods acquired by the unemployed and poor. Let us take the case of Alexandra, a National Health Service doctor who moved to Manchester ten years ago. She joined the LETS in order to sell her excess furniture and had so far earned b l 5 0 by selling various desks and chairs. She had therefore sold the goods surplus to her requirements which she had acquired with her formal sector earnings. Table 6. Trading on Manchester local exchange and trading system, by job status and household income (source: author's survey). Mean number of goods or services offered Job status: employee 4.6 self-employed 4.7 unemployed 4.0 Gross annual household income: £30000 4.0 All respondents 3.8

Total price (bobbins)

Mean price of goods sold or hired (bobbins)

Price per hour of services sold (bobbins)

No. of respondents

3.0 2.6 2.6

162.36 148.50 97.63

20.12 10.63 10.68

7.52 6.68 5.74

47 14 46

2.1 2.3 2.0 3.1 1.9 3.6 2.3

69.37 113.36 117.67 251.10 203.53 179.81 131.66

9.20 7.53 35.34 26.44 16.15 30.05 15.30

5.87 5.58 6.63 9.32 8.36 6.00 6.84

27 33 15 10 15 7 107

sold

Also, higher income households and the employed receive more bobbins per hour for the services they sell because of the way in which skills are valued, with formal sector values generally being transposed onto the LETS. Indeed, those with marketable skills in the formal sector will normally also find a ready market for their services on a LETS. Andrew, for example, is in his mid-thirties and a publicity officer for a local authority and lives in a household earning over £30000 per annum. He moved to Manchester five years ago, and has no relations living in the city except a sister. He has earned b300 by providing a half-day training course in desk-top publishing (for b40), providing one-to-one tuition on computers (b6), designing leaflets and invitations (two times for a total of blOO), producing a LETS directory (b80), selling a carpet and an exercise bike (bl5 and b l 2 , respectively), making fruit cakes (two times for a total of b36), and cooking Indian food (three times for a total of b50). Here, therefore, is somebody not only selling goods acquired through his formal sector wealth but also using on the LETS his professional skills from his main formal occupation as a means of earning additional income. The price received for goods and services on LETS, therefore, is often closely related to one's formal sector status and level of affluence. Nevertheless, such findings should not detract from the fact that there are a large number of unemployed people and members in low-income households who are engaging in productive

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activity so as to improve their material standard of living which would not otherwise be possible if the LETS did not exist. Elizabeth, for example, who is unemployed and in her mid-fifties, twelve times has earned b46 by selling cakes she makes herself, three times undertaken ironing, twice giving a haircut, and three times doing some typing. David, an unemployed single father in his mid-thirties, has sold his carpentry skills on the LETS four times, for a total of b40. Bob, an unemployed builder, has done tiling, put up a fence, and given people lifts in his car three times, for a total of blOO. All, therefore, and in the absence of surplus goods to sell or hire, but with time available, sell their labour power. Nevertheless, all believe that the LETS has improved their material standard of living, enabled them to use skills which they would not otherwise use, and developed a wider network of people that they can call upon for help. For some, moreover, the LETS provides a useful vehicle for reinserting themselves back into the world of work. As Jim puts it, "I had been made unemployed as a result of a bereavement and lost a lot of confidence in everything. LETS has provided a way for me to take part in things again, in a way that was manageable." So, although the total amount earned by unemployed and low-income LETS members is relatively low, to assert that the system is not enabling the unemployed and poor to engage in productive activity as a means of getting by is unjust. Moreover, as I have previously argued, "to examine purely the quantitative economic impacts [of LETS] is to do an injustice to their more qualitative social and community-building effects" (1995a, page 214). As discussed above, many of the poor and unemployed have joined Manchester LETS not only for purely economic reasons but also because of their lack of social networks and kinship support structures. Indeed, 34.8% of unemployed respondents had moved to Manchester within the past eight years, indicating that the density of their social networks are likely to be relatively low compared with those who have lived in the city all of their lives. Furthermore, only a small proportion of respondents have kin living in Manchester, and the unemployed have even fewer kinship networks in the Manchester area (see table 7). Table 7. Kinship networks of the members of the Manchester local exchange and trading system: percentage of respondents (source: author's survey). Relatives in Manchester

All members: grandparents parents brothers and sisters children uncles and aunts cousins Unemployed: grandparents parents brothers and sisters children uncles and aunts cousins

all of them

some of them

none of them

not relevant

3.7 20.5 13.1 19.6 3.7 4.7

1.9 5.6 10.3 28.0 11.2 9.3

47.7 52.3 53.3 33.6 60.7 64.5

46.7 21.5 23.4 43.9 24.3 21.5

2.2 21.7 13.0 15.2 2.2 2.2

2.2 10.9 10.9 2.2 17.4 13.0

43.5 47.8

52.2 19.6 19.6 45.6 21.7 19.6

56.5 36.9 58.7 65.2

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For many, therefore, the LETS will be providing a substitute for their lack of kinship and other social networks in the city. Indeed, the evidence suggests that Manchester LETS is relatively successful in providing such informal support structures. Some 73.3% of the unemployed and 74.1% of respondents in low-income households claim that the LETS has enabled them to develop a wider network of people that they can call on for help. Furthermore, 37.8% of the unemployed and 51.9% of respondents in low-income households assert that the LETS has enabled them to cultivate a wider network of friends, but only 17.8% and 11.1%, respectively, claim that it has also allowed them to form deeper friendships. Consequently, Manchester LETS, although successful at providing a framework of support for members which they can call upon for help, is not so effective at converting these contacts into friendships. It may be the case that this will transpire over time, but at present this has not occurred. Given that Manchester LETS does appear to supply a means by which some of those excluded from work can engage in productive activity and, in so doing, enlarge their social networks, LETS appear to be valuable vehicles for assisting those not in employment to redevelop their self-esteem and a role in the community, none of which can be accomplished merely by dispensing them with a substitute income through the social security system.(9) 4.3 A source of credit for the poor and unemployed?

At present, and as Leyshon and Thrift (1995) highlight in their work on financial exclusion, the unemployed and poor have relatively little access to credit from formal sector institutions. Neither, and as indicated in section 2.2, can they draw upon informal sources of support to the same extent as other groups. Instead, and in the absence of alternative institutions of accumulation, such credit may have to be secured through, for instance, loan sharks' at rates of interest substantially higher than in the formal sector. LETS, however, represent an alternative means by which the poor and unemployed might acquire credit. In a LETS, credit is freely available to everyone and no interest is charged or paid. Whether or not the poor and unemployed use Manchester LETS as a credit facility is an issue now addressed. Between June 1994 and June 1995 the average level of goods and services obtained on the LETS amounted to the equivalent of £78.89 for respondents in low-income households, and £84.98 for the unemployed. Of the 46 respondents not in employment, 20 had sold more than they had bought over the year, 19 had purchased more than they had vended, and 7 had acquired the same as they had sold. Consequently, the unemployed do not use the system solely as a source of credit, nor simply to engage in productive activity. It is utilised for both purposes, although some will have used it more for one reason than for the other at any particular moment in time. An examination of what was purchased by the unemployed reveals that Manchester LETS is a source of credit not for the purpose of acquiring 'luxuries' but, rather, for the purchase of many basic necessities. The item most commonly purchased by the unemployed was food (bought by 36.7% of all unemployed respondents), followed by clothes (obtained by 33.3%), and improvement and maintenance work such as decorating, plumbing, carpentry, and roofing (purchased by 30%). Little was spent on luxury' goods and services. Where this did occur, it was (9) This survey, however, in being confined to responses from LETS members, may result in LETS being cast in a more positive light than might be the case if a wider group were interviewed. Future research could usefully have a control group of nonmembers so as to elicit their opinions about the potential of the LETS concept.


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used to acquire such services as piano lessons, car maintenance lessons, mathematics tuition for their children, and driving lessons. To an extent, therefore, the credits are being employed to obtain skills and training. Much of the work procured on Manchester LETS, moreover, would not have been undertaken if the LETS did not exist (see table 8). As might be expected, the likelihood increases that they would have used the formal sector to get the work done as household income rises. Lower income households are far more likely than higher income households, however, to state that they would not have purchased the good or service. This displays that Manchester LETS is a means by which poorer sections of the community are getting work done which they would not otherwise be able to do. Some 47.1% of all goods and services bought by low-income households would not have been received if the LETS did not exist. Neither would 36.8% of the goods and services obtained by the unemployed. However, given the kinds of people involved in LETS (see below) and the inclusive social relations of LETS, work and activity may be induced in LETS by virtue of their participation. Perhaps, therefore, it is more relevant to examine how much of the work would have been purchased in sterling if the LETS did not exist. In this regard, only 26.4% of all the work received on the LETS by low-income households, and 26.3% of all the work received by the unemployed, would have been purchased in sterling if the LETS did not exist, portraying the significance of LETS for overcoming social exclusion. Manchester LETS, therefore, appears to be dispensing funds to enable work to be undertaken by the poor and unemployed. It is creating new economic activity which, as aforementioned, is improving these people's material standard of living. Table 8. Manchester local exchange and trading system (LETS) as a substitute for other forms of work: percentage of all work used by the respondents (source: author's survey). Form of work respondents would have used if the LETS did not exist paid in sterling

paid cash-inhand

given something else

asked a favour

not done it

done it myself

Job status: employee 37.5 self-employed 57.9 unemployed 26.3 ross annual household income: 26.4 £30 000 57.1

9.4 5.3 7.0

4.7 0.0 1.7

6.2 0.0 7.0

28.1 21.0 36.8

14.1 15.8 21.0

5.9 8.5 10.0 7.1 15.4 0.0

0.0 4.2 0.0 0.0 15.4 0.0

35.7

7.8

2.8

5.9 4.2 0.0 21.4 7.7 0.0 5.7

47.1 34.0 20.0 21.4 15.4 14.3 30.7

14.7 14.9 30.0 0.0 23.1 28.6 17.1

1 members

Take the example of Pauline, who is unemployed, in her mid-fifties, and has lived in Manchester most of her life but who has no relatives whatsoever in the city. During the past year she has had her gutters cleared (bl4) and repaired (b52), tiling undertaken (b66), some curtains sewn (b20), and a blouse made (b39). She felt that these purchases had improved her material standard of living. If these goods and services could not have been bought on the LETS, then she claimed that this work

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C C Williams

would not have been undertaken, except making the curtains, which she would have endeavoured to do herself. Jane, who is unemployed, suffers from ME and lives in a low-income household. During the past year, she has bought on the LETS labouring for her garden, as well as a variety of music books. Kath, also unemployed, spent b94 on hiring the use of somebody else's washing machine, having her bicycle repaired, hiring tools so that she could do some odd-jobs around the home, and had purchased a handmade plate. Another unemployed woman, Kate, had spent b5 on car maintenance, b l 6 on the hire of a lawnmower, and b45 on hiring labour to get her garden cleared. Last, John, also unemployed, had spent b35.50 on food, b7 on a haircut, b l 8 on clothes, and b34 on gardening. Such anecdotal examples are evidence that LETS can operate in a manner which provides credit for those who need it and who may be ineligible for such support from formal sector credit donors. All claim that most of these goods and services would not have been received if the LETS did not exist. However, although Manchester LETS represents a credit facility for a small number of the unemployed, the vast majority of the jobless do not presently take advantage of this interest-free credit facility. 4.4 Is Manchester LETS including the excluded? The evaluation so far thus suggests that the poor and unemployed are using Manchester LETS as a source of work and credit. However, it is only a small section of the unemployed who currently participate in LETS. An examination of the education level of the members reveals that, whereas only 8.5% of people of working age have a degree or higher qualification (LMQR 1992), 63.0% of unemployed respondents had a degree qualification or higher (see table 9). Manchester LETS therefore appears to appeal to those unemployed who were earlier referred to as 'the disenfranchised middle class'. These are the unemployed who are a product of the decline in the middle mass of jobs as the labour force has increasingly polarised between low-wage and high-wage jobs. One reason why it may be more attractive to this group of the unemployed than to others is because trading on LETS requires some degree of self-confidence that one has something to offer. This section of the unemployed, who have educational and cultural capital even if they lack 'material' capital, are thus more likely to appropriate the LETS and use it as a tool for achieving their own ends than are other sections of the unemployed. Table 9. Membership of Manchester local exchange and trading system, by highest educational qualification: percentage of respondents (source: author's survey). Postgraduate Job status: employee 10.8 self-employed 0.0 unemployed 15.2 Gross annual household income: