What is a Community Exchange System (CES)?

[Les Squires]

Objective:
Members can explain to a total newcomer how this form of money works -- how it is like and how it is different from 1) national currencies; 2) barter; 3) internal revenue service taxation; 4) trading local.

Tips:

• Print this article and carry it around in your notebook for a few days for easy review.
• Post your questions, insights, summaries and suggestions on this topic at the bottom of this page.
• Click on FOLLOW at the bottom of this page to track comments added by members.

What is the Community Exchange System?

The Community Exchange System (CES) is a community-based, global trading network using a money other than our familiar national ones — an alternative, parallel, local, community or complementary currency system. In short, the CES is a new money system.

There are many similar trading systems around the world, commonly know as Community Exchanges, Local Exchange Trading Systems (LETS), Mutual Credit trading systems or Time Banks. Many commercial 'barter' systems operate in a similar way, but their prime motive is make money of the conventional kind whereas most complementary currency systems are attempts to do without or replace national currencies.

The main difference between these and conventional money systems is that the scope of the money is usually restricted to a geographical area or organisation. Money in the above types of complementary currencies does not ‘exist’ like conventional money so there is no need for a supply of it and you don’t need any to start trading. Money in these systems is a retrospective ‘score-keeping’ that keeps a record of who did what for whom and who sold what to whom. There can therefore never be a shortage of money and money does not have to be created by a third party (banks or government) outside the circuit of buyers and sellers. For this reason money and credit are free, for the buyers and sellers 'create' it at the moment of trade.

There are many different types of complementary currency systems (CCs) and they are growing in popularity throughout the world. Some use ‘hard’ currencies, where notes and coins are issued by the group for their own use; others use time as a currency rather than notes; and yet others use a ‘virtual’ currency which is the recording of the values of goods and services exchanged.

Complementary currencies foster the real wealth of communities and rebuild a sense of worth and self-esteem among their users. Around the world they report an increased sense of vitality in all sectors of the communities using them. While these trading systems might have a slightly different function for each of these sectors, it certainly has relevance to all.

From child care to karate lessons to phone companionship, to computer programming and gardening, there's no limit to the ways of earning money in these systems. In this way a community currency acts like a supplementary currency, creating an additional stream of value in a community. By supplementing conventional cash flow with a local currency, a community can maintain full employment and protect itself from changes and fluctuations in the national money supply.

I help you, and you help another—and someone else helps me. The recipients of help become, in turn, the providers of help. What goes around comes around. The currency you earn by helping others can be used to receive services or help from someone else and buy goods on offer. When you spend your community currency, someone else earns it.

How does it work?

CES exchanges compile and distribute a directory of goods and services offered by the traders registered with them, as well as a list of their ‘wants’ or requirements. When a trader requires something advertised in the directory the seller is contacted and the trade takes place. The buyer 'pays' the seller with the community currency. This usually involves the handing over of a cheque-like Trading Slip that records how much the buyer is paying for the goods/service delivered. The Slip is either handed by the seller to a group administrator who will enter the amount into a group account, or the information is recorded directly by the seller on a central computer ‘bank’. Sales are recorded as credits for sellers and purchases as debits for buyers. The central book-keeping system records the relative trading positions of the traders. Those in credit can claim from the community goods and services to the value of their credit and those in debit owe the community goods and services to the value of their debit.

Traders receive a regular newsletter and statement of account that lists their trades and gives their balance at the end of the period. Information about the trading position of others prevents unscrupulous buyers from exploiting the system. News about the group assists in building links and enhancing the sense of community.

Is this a form of Barter?

No! Barter almost always involves bargaining between two individuals to establish the relative worth of the goods or services they wish to exchange. There is no bargaining with a community currency. When you purchase something you are in no way obliged to the seller; you 'pay' for what you have received by delivering/selling something at a later time to another trader in the community. Community currencies are as versatile as conventional ones.

Is this just a tax dodge?

Definitely not! Our motives are noble. We want to create a more equal society where wealth is distributed according to contribution, not according to your ability to ‘make money’. In other countries where these systems have become big, the state has either ignored the tax angle because it saves state expenditure on welfare payments, or there is an agreement to provide services to the state. Our approach is that when the CES become big, the state should become a user of the CES and participate in the normal way. In this way the state could credit itself through the services it provides to all members and debit itself by purchasing the services of CES users.

Can I only trade with members of my own exchange group?

The CES is an international trading network with exchanges in many countries. Credits earned in one exchange can be spent in another, or if you are visiting another area you can trade with local CES traders. New exchanges are starting in new areas all the time, and existing ones are growing steadily.

What other benefits are there in using a community currency?

One of the reasons we took the initiative to launch this project is that it is in line with New Economics thinking. New Economics is about rebuilding society using alternative/sustainable economic policies and practices. Community currencies fall into this category because they are instrumental in:

• Mobilizing the Real Wealth of a Community: The knowledge and skills of its people is the real wealth of a community. Conventional money drains away while a local currency keeps this wealth working in the community, generating employment and income for all involved. People who have accumulated a wide range of skills and abilities suddenly become once again highly valued members of the community.
• Fostering Self-Reliance & Self Esteem: In our communities unemployment is growing and increasing numbers of people are unable to get their needs met. Single-parents may need respite care or other services for their children. Elderly pensioners also need a range of specialised services or may simply require company to combat loneliness. At present a person's ability to access these and other services is proportional to their purchasing power. The community currency system breaks this bottleneck, by making it more possible to match someone's need with another's available labour. People are no longer dependent upon welfare or charity, and everyone's self esteem benefits. Increased Personal Savings & Disposable Income: Because members can get local goods and services through a community currency, they can substitute it for the national currency. Disposable income in conventional money, available after basic needs are met, actually increases. Those who regularly trade with community currencies will find they have more money left in their pockets at the end of each week. The rate of community savings, and therefore of community investment and capital generation, will improve. This will result in an improvement in the quality of life for everyone.
• Creating Local Economic Control: Local currencies help to plug the leaky bucket of the local economy. By creating a local currency that cannot leave the community, uncontrolled and activity-limiting capital outflows are reduced. As a community currency only has value in the community in which it is generated, it continues circulating to create more wealth for everyone. They give community members a powerful new tool with which to "steer" the local economy in directions which benefit everyone.
• Building Community Support Networks: Because community currency systems plug members into a local information network, they provide new or isolated residents with an instantaneous community support system. This avoids the embarrassment of introductions to strangers. Through a CES/LETS network all members have a ready reason for calling for support or help. Elderly pensioners, unemployed youth, supporting parents, new arrivals, and single-income families with partners trapped in a dormitory suburb can all build firm friendships on relationships established through a functioning network.
• Fostering Social Justice & Equality: Because the value attached to one's time and commitment is set individually by participants, a community currency equalises the wage differentials that exist in the conventional economy between the work of women and the work of men. This greater equality helps prevent the polarisation of the community "haves" and "have-nots". There is no point in accumulating community currencies as they do not earn interest. It is only by putting them to productive work that the individual or community benefits. Community currencies foster participation at all levels in the local community.
• Building a Sense of Community: The increasingly transient, temporary and mobile lifestyle in the world today has seriously damaged our sense of belonging to a meaningful community. Because a community currency builds local relationships it is a powerful means of regenerating a sense of trust among members, a necessary component to the health of any community. As communities become more self-aware and self-reliant through the use of a community currency, isolation, fear and loneliness diminishes and everyone benefits.
• Keeping Wealth Where it is Created: National currencies always leak away to the 'money centres' creating money deserts and a reduction of local economic activity. Complementary currencies, on the other hand, are community based and so keep wealth where it is created. Where previously economic activity was stagnant, the local currency stimulates trade and permits things to happen where formerly there was no economic activity. By circulating in a community the entire community becomes self-sufficient and does not have to rely on external businesses to provide what is required.
• Bringing the 'Money Power' Back to the Commons: The money we use in our daily lives is provided by the corporate financial system as a profit-making enterprise, not by the government as a public service to the community. As such, the money we use does not belong to the commons and so we have little control over how it is spent and who it benefits. A community currency brings the 'money power' back to the people because its users can decide how that power is exerted.

[Nizam]

This is great and timely. I wasn't sure how to explain a CES to others, but have read the links on the homepage that explain it. I think this will be great to print or share.