This article refers to a specific network; for more general articles on related topics, see the See also list.
The Community Exchange System (CES) is an internet-based global trading network which allows participants to buy and sell goods and services without using a national currency. It may be described as a type of local exchange trading system (LETS) network based on free software. While it can be used as an alternative to traditional currencies such as the Australian dollar or euro or South African rand, the Community Exchange System is a complementary currency in the sense that it functions alongside established currencies.
The CES name was coined by an online web service which started in 2003 in Cape Town, South Africa, as the Cape Town Talent Exchange (CTTE). From there it spread to 99 countries, with the biggest take-up in Australia, where CES Australia was founded in 2011.[1] This original CES takes the idea of LETS and similar systems a step further by providing the means for inter-community trading; it is a global network of communities using non-monetary exchange systems.[2]
The CES is international in scope.[3] It does not have printed money or coins[4] but uses computer technology to serve as an "online money and banking system" or alternative exchange system and as a marketplace.[5] It is an advance from an arrangement in which either one good or service is exchanged for another good or service, or commonly called barter, since it uses a digital unit of value (not the same as a digital currency).[3][4]
Background
While money typically takes the form of a national currency such as dollars or euros, there have long been other types of "currencies" ranging from simple IOU notes––in which one person declares a debt to a second person in a written document––to more sophisticated programs such as frequent-flyer programs in which points are accumulated in a side-system as a result of purchases.[6] Some communities, typically remote ones, have instituted what is sometimes called a community currency, sometimes with paper notes, such as the Totnes pound in the town of Totnes in the United Kingdom; the idea was to promote local commerce and to "keep money circulating within the town's local economy," according to one report.[7]
The advent of internet technology made alternative (aka complementary) currencies more viable, as databases can keep account of credits and facilitate trading.[5]
The abstract unit of currency (unit of account/value) was called the "Talent", but there were no physical bills or coins made. The purpose was to bring the advantages of a trading network to destitute persons who were unable to get credit or loans using traditional national currencies, as well as assist marginalised communities within the city of Cape Town, such as Khayelitsha, to become self-sustaining.[11] The initial design was as a local moneyless not-for-profit exchange which was similar in most respects to a LETS, which record members trading goods and services using a locally created currency called "LETS Credits".[12]
The exchange later evolved into a more complex system which took advantage of internet technology to reduce the costs of administering the system and allowed expansion to other places, including areas outside of the borders of South Africa. The software permitted the exchange in one city to link up with similar exchanges in other cities to form a global network.
Community Exchange Systems Ltd was formally constituted and registered as a not-for-profit company under the Companies Act of South Africa in 2008 and is known as CES International. CES Australia was set up in Australia in 2011.[1]
As of March 2019[update] there are four CES servers hosting different communities, with CES International in Cape Town the "global" server, another in Taiwan, and two in Australia hosting the Australian communities and Timebanking Australia in New South Wales. A Spanish system, IntegralCES[13] (serving Argentina, Brazil, France, Greece, Italy, Spain and Mexico), and Geneva-based CommunityForge.net[14] are also part of the network.[15]
Size
Reports vary about the number of complementary currency exchanges linked up in the network. One report in 2011 suggested that the network consisted of 100 linked exchanges which operated in 15 different countries;[5] a second report counted the number of exchanges at approximately 300 in 30 different countries.[4] According to a 2006 estimate, there were 2,000 members trading on the Cape Town Talent Exchange and a global total of 6,700 members in 50 groups in eight countries.[3] By 2011, the number of participants in the Cape Town Talent Exchange was estimated to be 4,000.[4] A report in Time suggested that alternative forms of money are "growing in popularity" in places such as South Africa and elsewhere.[5] Since 2003, when the system was initiated, there have been about two and a half million talents traded, which was about 500,000 South African rands, according to one estimate.[3] One estimate suggested that the total value of local exchange trading systems trades worldwide was one billion South African rands in 2004.[4]
The CES web site reported that there were 485 exchange groups hosted on its global server at the start of 2013. These were located in 53 countries, with another 37 Australian exchanges on its Australian server.
Method of operation
A person wishing to join creates an account with a particular local exchange via the Community Exchange System website. This gives them access to an online community, sometimes described as an "online shopping mall" which is similar in some respects to a social networking website. They can then offer to sell goods or services, and as these are bought, their credits accumulate, which in turn allows them to buy things on the exchange as well from participating sellers. Generally, each exchange has its own "currency", or unit of measurement, which serves as a recording mechanism to keep track of values as they are transferred. Most exchanges operate according to principles of mutual credit, time banks; some even use exchange-specific paper currencies as a portable physical record documenting the electronic credit.[citation needed]
The registered member accesses a host server which manages a particular exchange, and this access enables a user to link up with other exchanges.[5] Generally, there is not a fixed exchange rate between a Community Exchange System unit of value and a national currency; rather, values fluctuate. Database software keeps track of which persons have which amounts of "money".[5]
The buyer "pays" the seller by signing a trading sheet provided by the seller or by handing over a trading slip that records how much the buyer is agreeing to be debited by the seller for the goods/service delivered. The slip is either handed by the seller to a group administrator who will enter the amount into the computerised system, or the information is entered directly by the seller.[16]
Generally, members are not allowed to accumulate either too much "debt" or too much "credit" on the system.[3] When a deficit builds up, other members generally will usually stop trading with such a person until the person does more work or sells more items or services; when an individual person's credit becomes too extensive, other members will urge that person to begin trading to bring down this amount.[3] It is taxed like any currency and a "nation's tax rules apply ... just like national currency."[5] If a particular member does not have a computer or lacks Internet access, it is possible for a local area coordinator to enter the trade for them into the system.[4]
Benefits
The CES's stated aims as of March 2019[update] include mobilising the real wealth of a community, fostering self-reliance & self esteem, fostering social justice & equality, keeping wealth where it is created and fostering a sense of community.[16]
Advocates suggest the Community Exchange System is a "means of empowerment" for poor people, the elderly, disabled persons or those described as underemployed.[5] An advantage cited is that a destitute person can begin earning credits by working, since it does not require such a person to first have an acceptable credit history or credit score to qualify for a traditional job.[5] Regardless of a person's past financial situation, each person's new contributions have exchangeable value based on the worthiness of their contribution.[5]
Proponents claim that it is not essentially different from traditional national currencies in the sense that both types of money are in digital form. Advocate Margaret Legum of the South African New Economics Network claimed that the currency comes into existence only when a trade happens and, as a result, there is no risk of inflation or deflation since "there is no such thing as too much or too little money."[3] She argued that it was a superior arrangement because no interest was charged and that the system was "transparent" because everybody could see everybody else's balance of credits and debits. "Money is not used as a commodity in itself - to be lent and borrowed and kept out of use. By contrast, the supply of national currencies everywhere comes into existence as a commercial debt to a bank, without reference to whether or not that extra money is needed to match the supply of goods and services."[3]
Persons can borrow or take a loan using the system, although generally these amounts are not large, and there are forces pushing persons to not have either a large deficit or a large surplus in their particular account.[3] And it is international in scope.[3] Other advantages cited include benefits for the environment,[5] being good for remote areas without access to traditional banks,[5] It can be "ideal for launching small businesses or piloting projects without spending cash", according to one view.[4]
Disadvantages
The network still incurs administrative costs, although with internet technology, the costs are less than in a traditional LETS group. There is a small fee required to help defray administrative costs which is either a one-time fee or else a small "transaction tax in talents" to compensate the system's organizers for their work.[3]
Other drawbacks include being "unwieldy" since money is useful primarily when it is "widely accepted", and for a Consumer Exchange Service to operate effectively, many consumers and merchants and employers need to be using the system. It is also an alternative paradigm of money, requiring considerable adjustment of perception (through education) of positive and negative balances (which are erroneously perceived as debt) of one's account. Interfacing the new currency with a nation's tax accounting can "pose problems", possibly resulting in accounting issues.[5]
Other potential problems include the possibility that a particular exchange may cease operating (so persons with credits built up may lose them), as well as the possibilities for error, fraud, and difficulties with dispute resolution which are problems for any trading currency.
Focus group research in 1996 on the Toronto, Canada, LETS, however, showed that the transparency of mutual credit systems makes them highly resilient and difficult to defraud. Indeed one participant joined with the expressed intent of defrauding the system and found it to be pointless. A type of class system can emerge, however, when some participants have services or products in great demand and accumulate surplus credits that they cannot spend while others have great needs and find themselves unable to accumulate them.
One source suggested that an administrative upper-limit ceiling for the number of trades was 700 million; if the system gets more trades than this, it becomes difficult to manage in an administrative sense.[4]
In trade, barter is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish barter from gift economies in many ways; barter, for example, features immediate reciprocal exchange, not one delayed in time. Barter usually takes place on a bilateral basis, but may be multilateral. In most developed countries, barter usually exists parallel to monetary systems only to a very limited extent. Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable or simply unavailable for conducting commerce.
A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a system of money in common use within a specific environment over time, especially for people in a nation state. Under this definition, the British Pound Sterling (£), euros (€), Japanese yen (¥), and U.S. dollars (US$)) are examples of (government-issued) fiat currencies. Currencies may act as stores of value and be traded between nations in foreign exchange markets, which determine the relative values of the different currencies. Currencies in this sense are either chosen by users or decreed by governments, and each type has limited boundaries of acceptance - i.e. legal tender laws may require a particular unit of account for payments to government agencies.
The Ithaca HOUR is a local currency formerly used in Ithaca, New York and was one of the longest-running local currency systems, though it is now no longer in circulation. It has inspired other similar systems in Madison, Wisconsin; Santa Barbara, California; Corvallis, Oregon; and a proposed system in the Lehigh Valley, Pennsylvania. One Ithaca HOUR is valued at US$10 and is generally recommended to be used as payment for one hour's work, although the rate is negotiable.
In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community currency might be local or be used for exchange within an online community. A local currency acts as a complementary currency to a national currency, rather than replacing it, and aims to encourage spending within a local community, especially with locally owned businesses. Such currencies may not be backed by a national government nor be legal tender. About 300 complementary currencies, including local currencies, are listed in the Complementary Currency Resource Center worldwide database.
A local exchange trading system is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community information service and records transactions of members exchanging goods and services by using locally created currency. LETS allow people to negotiate the value of their own hours or services, and to keep wealth in the locality where it is created.
In economics, a time-based currency is an alternative currency or exchange system where the unit of account is the person-hour or some other time unit. Some time-based currencies value everyone's contributions equally: one hour equals one service credit. In these systems, one person volunteers to work for an hour for another person; thus, they are credited with one hour, which they can redeem for an hour of service from another volunteer. Others use time units that might be fractions of an hour. While most time-based exchange systems are service exchanges in that most exchange involves the provision of services that can be measured in a time unit, it is also possible to exchange goods by 'pricing' them in terms of the average national hourly wage rate.
A complementary currency is a currency or medium of exchange that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies. Complementary currencies are usually not legal tender and their use is based on agreement between the parties exchanging the currency. According to Jérôme Blanc of Laboratoire d'Économie de la Firme et des Institutions, complementary currencies aim to protect, stimulate or orientate the economy. They may also be used to advance particular social, environmental, or political goals.
Economic secession has been variously defined by sources. In its narrowest sense, it is abstention from the state's economic system, such as by replacing the use of government money with barter, Local Exchange Trading Systems, or commodity money such as gold. Wendell Berry may have coined the term "economic secession" and promoted his own version in his 1991 essay Conservation and Local Economy. John T. Kennedy used the term to refer to all human action that is forbidden by the state and explains economic secession as tax avoidance or refusal to follow regulations as a method to reduce government control.
A private currency is a currency issued by a private entity, be it an individual, a commercial business, a nonprofit or decentralized common enterprise. It is often contrasted with fiat currency issued by governments or central banks. In many countries, the issuance of private paper currencies and/or the minting of metal coins intended to be used as currency may even be a criminal act such as in the United States. Digital cryptocurrency is sometimes treated as an asset instead of a currency. Cryptocurrency is illegal as a currency in a few countries.
Thomas Henry Greco Jr. is a community economist, who writes and consults on monetary exchange alternatives, including private credit clearing systems, complementary currencies and local currencies.
The Totnes pound (t£) was a complementary local currency, intended to support the local economy of Totnes, a town in Devon, England. It was in circulation from March 2007 to June 2019, when it was discontinued due partly to an increasingly cashless economy.
Emissions Reduction Currency Systems (ERCS) are schemes that provide a positive economic and or social reward for reductions in greenhouse gas emissions, either through distribution or redistribution of national currency or through the publishing of coupons, reward points, local currency, or complementary currency.
Fiscal localism comprises institutions of localized monetary exchange. Sometimes considered a backlash against global capitalism or economic globalization, fiscal localism affords voluntary, market structures that help communities trade more efficiently within their communities and regions.
Eco-Pesa is the name of a Kenyan community currency, used to reduce poverty and support environmental conservation in a slums areas inside the Kongowea Location, Mombasa District, Kenya. Pesa is a Swahili word for money. Eco-Pesa's was in circulation for one year and was considered the pilot that resulted in the more sustainable Bangla-Pesa model of community currencies that have been duplicated in five communities in Kenya and two in South Africa.
The Crédito was a local currency started on 1 May 1995 in Bernal, province of Buenos Aires, Argentina, on a garage sale, which was the first of many neighbourhood barter markets that emerged in Argentina during the economic crisis.
Fureai kippu is a Japanese sectoral currency created in 1995 by the Sawayaka Welfare Foundation so that people could earn credits helping seniors in their community.
The Bristol pound (£B) was a form of local, complementary, and/or community currency launched in Bristol, UK on 19 September 2012. Its objective is to encourage people to spend their money with local, independent businesses in Bristol, and for those businesses to in turn localise their own supply chains. At the point of the close of the digital scheme in August 2020, it was the largest alternative in the UK to official sterling currency, and is backed by sterling.
Túmin is an alternative currency used in the municipality of Espinal, Veracruz, Mexico. Its name means "money" in the Totonac language.. Espinal is a municipality of some 2600 inhabitants, 19% of whom are indigenous Totonac people. Used as a complementary currency, the Tumin was first put in circulation in 2010 as a student project at the Intercultural University of Veracruz, where students were trying to find ways of strengthening the local economy. In Espinal the access to cash is scarce as most people work for the minimum wage. The project creators analyzed the economy of the area and concluded that there were sufficient goods and demand, but that a medium of exchange was lacking. The creators designed bills and started promoting its use as a kind of exchange coupon among locals in Espinal, in order to support a barter economy. The bills are decorated with the likenesses of Emiliano Zapata and paintings by Diego Rivera, and they describe the value of the bill in Spanish and Totonac. The Tumin is accepted in Espinal in the purchase of services from health care to tacos and internet cafe visits.
Sarafu-Credit is a community currency system operated in Kenya. It is used by five different communities, all located in informal settlements or slum areas, including small businesses and schools.
↑ Rob Sharp (May 1, 2008). "They don't just shop local in Totnes - they have their very own currency". The Independent. London. Retrieved 2011-10-03. Brown, along with thousands of her fellow residents...uses Totnes pounds: notes printed and traded locally... The idea for the pound – used in 70 businesses round these parts – was introduced a year ago, to promote links between local businesses while reducing reliance on big business. The aim is to keep money circulating within the town's local economy.
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