Examining Local Currency Systems: a social audit approach

Abstract

The Local Exchange Trading System (LETS) is a form of local currency which is non-tangible, interest-free, freely created, and restricted to the local community. It is advocated by ‘green’ economists as a tool for enabling more sustainable economic development; that is, it is claimed to promote self-reliant communities, overcome cash scarcity (which inhibits economic activity), and incorporate environmental and socially equitable ethics. To test whether this is indeed the case, a social audit of one LETS is conducted. The case study is found to be a small, low-trading rural system with no local import-substitution and limited opportunities for the creation of new economic opportunities. However, there were large social and community benefits and a ‘warm glow’ effect associated with participation; most members were involved for these political and ethical reasons. This characteristic seems to be broadly similar to other LETS.