LETS and Time Banks

LETS

Local Exchange Trading Systems (LETS) may be regarded as a professionalization and further development of neighborly help. On the one hand, they allow participants to meet each other’s needs without using money. On the other hand, alongside the material benefits, idealistic and social elements also play a large role. The aim of exchange rings, which are mostly run by groups of volunteers, is the creation of social networks, sometimes spanning generations. Exchange rings can and should create community, increase the value of one’s own and others’ contributions and enable self-help and individual responsibility. A certain independence from the jobs market is also often part of their philosophy. Exchange rings can promote cultural and social integration because participants do not need Euros to participate and so the status and financial situation of participants hardly plays a role. Many exchange rings denominate their units of exchange in time (minutes or hours), which brings the worth of peoples’ work into discussion. Here the differences between exchange rings and time banks or ‘caring currencies’ are minimal, see below.

From a tax point of view, offers in exchange rings are counted as neighborly help so long as they are not someone’s normal profession or occupation and do not overstep a prescribed legal income limit. Participants are responsible for reporting their exchanges for tax where necessary.

In practice, a neighborly exchange ring might look like this for example:

Thomas needs help installing a new operating system on his laptop. He becomes aware of Sabine through the exchange platform. She does the job in two hours and Thomas transfers the estimated exchange units from his account to Sabine’s. Thomas’s account balance is accordingly reduced. Thomas can do this because he either has a sufficient credit limit on his account or he has for example given another participant English lessons and received credits himself. Sabine is happy to receive credits from Thomas because another participant is ready to do a job for her she doesn’t like – washing the windows.

Scotsman Michael Linton is seen by some as the ‘inventor’ of non-commercial exchange rings. He conceived the first exchange ring, which became known as LETS and served as a blueprint for many later developers, particularly in the English speaking world, in the Canadian Comox Valley on Vancouver Island in 1982.

The exchange ring scene in Germany has clearly differentiated itself from the Regio or regional currency movement for a long time now because exchange rings see themselves as practicing “economic transactions not mediated by money”, according to the former chief organizer of the German Exchange Ring Movement, Klaus Gräff.

Exchange rings are mostly organized by voluntary groups or cooperatives. Exchange rings, like local or regional currencies, can be organized on a neighborhood or regional basis and they are often networked across regions so that participants can take advantage of offers in other places (e.g. overnight accommodation). Some exchange rings are tied to regional currencies, such as the Talente-Tauschkreis Vorarlberg in Austria (www.talentiert.at). Others have agreements with commercial Barter Clubs and so provide more flexibility and possibilities. The Austrian GIT Trading works closely with the Graz exchange ring and so combines business and private exchanges. Some systems are also experimenting with selling exchange units for Euros.

Time Banks

The popularity of Time Banks in the USA can be attributed to the work of Dr. Edgar Cahn, who wanted to improve the quality and effectiveness of public services. He is also the founder of Time Banks USA , an umbrella organization founded in 1995 that supports and develops time bank initiatives in various ways. Here the ‘currency’ is also time, which can be earned for social engagement and later exchanged for services. Cahn saw the need to promote time banks in order to counter the reduction of public services by the state. Here the concept of ‘coproduction’ is important – the idea people should not just be passive receivers of public services but play an active role. These participants can play a role in shaping public services. Time Banks USA, which serves a network of 200 Time Banks in the USA, defines the following five principles of time banks:

Assets: each person is an asset and we all have the ability to make a valuable contribution.
Redefining work: the value of many activities is beyond market valuation.
Reciprocity: it is in human nature both to give and to receive help.
Respect: each person deserves to be heard because everyone counts. We are responsible for each other.
Community: we grow social networks because we need each other. We can achieve more together than alone.

Time Banks became popular in the USA in the 1980s through the work of Dr. E. Cahn and then in Great Britain in the 1990s, where they were promoted by Martin Simon at Fair Shares and David Boyle at the New Economics Foundation (NEF), a think tank for a socially, ecologically and economically sustainable economy. Timebanking UK reports the existence of around 300 Time Banks it supports. NEF is a partner with Spice, which has further developed the time bank model by including government organizations. The Spice Time Bank model was supported by the “Community Currencies in Action” project, which was funded over several years by the EU to establish and develop alternative money systems. In the Spice model, participants earn ‘time credits’ through participating in various community activities. These can be offered by partners in the Spice network. In contrast to conventional time banks, a voluntary organization or government body is the receiver of services. The time credits that participants earn are then used for example to visit leisure centers, museums and cultural events amongst other things. The ‘return service’ that volunteers receive for their time credits is a good deal for these organizations because they usually offer services that have otherwise not been sold or other spare capacities. A particular application of time banks is ‘caring currencies’ like the Japanese Fureai Kippu System and the Timesaving Foundation of the City of St. Gallen, Switzerland.

Taxation issues

Time credits in the USA are free from taxation. The tax authorities make a distinction between Time Banks and commercial Barter Systems, whose participants are taxed. Their charitable objectives are recognized and so they are not taxed, which in view of the weak public services in the USA is not surprising. Private Time Banks and Exchange Rings are also seen as charitable in the UK. In Germany by contrast, normal tax and trade regulations apply. In spite of their charitable aims, Time Banks and Exchange Rings in Germany are not exempt from taxation. Participants are generally assumed to gain economic benefits from participation.

Distinction between Exchange Rings and Time Banks

Many neighborhood Time Banks can hardly be distinguished from Exchange Rings. However, some Time Banks also include the option of saving for old age care. Time Banks also usually put a greater emphasis on the social benefits, which is why the involvement of public and charitable bodies such as Spice makes sense. Many studies have shown Time Banks demonstrate socially beneficial effects: people learn to value their skills because Time Banks offer people opportunities to discover their strengths and to offer them in exchange for help in return. The strengthening of communities, extension of social networks and respect for one another are values that cannot be measured with money. It is exactly these values that Time Banks seek to strengthen. Time Banks can be an instrument for meeting the challenges of an ageing population by strengthening and promoting social commitment. That is where people often glimpse so much potential – so long as it is not just about reducing costs in the existing system but about offering new ways of working that are more socially, economically and ecologically sustainable. These systems are not just about providing a direct accounting system for credits but much more about saving social and caring hours for one’s own caring needs in the future.

Software

Many organizations use online software for administrating membership and accounting information, such as that developed by the Netherlands-based development organization STRO, the open source Cyclos software or the CES exchange platform developed by Ashoka Fellow Timothy Jenkins in South Africa, now in use in 34 countries.

Some Exchange Rings use software they have developed themselves, such as the Elbtal Exchange Network for example.