It can be difficult to attract enough money on an ongoing basis into poorer areas. It makes sense to make as much as possible of any money there is. However, in our modern economies money often flows much too quickly out of these local economies – just like a leaky bucket.
As a first step in plugging these leaks, people need to know more about where their money currently goes. New Economics Foundation’s ‘Plugging the Leaks’ programme is therefore all about mapping and measuring local money flows – and then devising strategies to plug those leaks!
The Multiplier Effect…
An economic measurement tool called the ‘multiplier’ is a useful way to calculate the overall impact of spending money in the local economy. In a community in which all the money that enters the economy immediately leaves it again, the multiplier will be only 1.
If a pound enters the area, only the original owner benefits. In a healthy community where money is re-spent over and over again, the multiplier is much higher – many people benefit from the first pound before it eventually leaves the community. Plugging the Leaks is all about communities trying to increase the number of times money changes hands before leaving the area.
Are the businesses in Moray Bathtubs, Hoovers or Dustbins ?
Bathtubs collect and re-circulate money in the local economy – employing local people, buying local goods and services, and keeping profits locally.
Hoovers may employ local people, but they also take money from the local economy and deposit it elsewhere.
Dustbins exploit a local resource: they may employ local people, but they disturb the social or environmental fabric of the area while sending profits elsewhere. So the trick of sustainable local economic development is to create bathtubs while avoiding hoovers and dustbins.
(Thanks to Drew Mackie of Gaia Planning)
With over 500,000 LETS now in local circulation, New Moray LETS is now a HUGE bathtub. Unlike cash, LETS cannot be spent ‘out of town’ without great difficulty. And even then they are guaranteed to be replaced by others in order for us to stay in balance with other Scottish LETS groups.