DEMOCRATISING FINANCE

By Hazel Henderson and - - Reprint | | Print |

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ST.AUGUSTINE, Mar 31 2009 (IPS) - The financial meltdown generated by Wall Street and the “too big to fail” culture of global money-centre banks and financiers is generating local initiatives and demands to decentralise and democratise finance.

While national safety-nets are unravelling because of budget cuts, local leadership is rising, offering many creative alternatives for communities to nurture healthier home-grown economies:

-Local barter-clubs, like Freecycle.com, Craigslist and LETS, and scrip currencies are proliferating, as they always do when central bankers and the International Monetary Fund fail or make matters worse. Some of the most successful complementary currencies are Switzerland’s WIR and in the US, Berkshares, with equivalent to USD 2 million in circulation and accepted by banks and businesses in Massachusetts. Similar complementary currencies are working well in Britain, Canada, Australia, Argentina, Brazil, and other countries.

-People-to-people lending and microfinance projects are booming in many countries: Women’s World Banking, Grameen Bank in Bangladesh, now emulated in many countries, FINCA and ACCION in Latin America, as well as the newer online versions. Credit unions, operated in Europe and North America for a century, are now filling new local needs, reaching out to poorer people and adding microfinance and lending to small businesses.

-Associations of small local banks and businesses are wielding more political clout, as are credit unions. In the US, they are demanding equal treatment in the government’s bailout funds currently showered on the big banks whose reckless lending triggered the financial mess. Venture capital and venture philanthropy firms, including the Rudolf Steiner Foundation, Acumen, and the foundations of Ebay founders Pierre Omidyar and Jeffrey Skoll, are investing in social enterprises that meet social needs while making modest profits. Such social capital is now creating a new hybrid sector in many economies.

-Britain’s New Economics Foundation (NEF) has been generating both local initiatives, such as the Transition Towns movement, and its Green New Deal and alternative indicators to correct GDP, measuring well-being and ecological sustainability. NEF’s proposal to save Britain’s 11,500 postal offices by adding local banking functions is backed by trade unions, small businesses, public interest groups, and pensioners.

-Time banking, a brainchild of Edgar Cahn in the US, is now helping local people connect and share services in Japan, Europe, and other countries. Neighbours contact each other via a local “time banker” to provide meals and help for shut-ins, babysit each other’s children, watch over property, mow lawns, and share appliances. And car-sharing has now spawned many new companies.

-China is host to many such local initiatives, linking small businesses on networks, including Baidu.com, Alibaba.com, as well as Qifang.com which provides affordable loans to China’s 25 million students. Circle Pleasure, a private company selling prepaid consumer cards, has formed a joint venture with Qifang for people-to-people banking, the first private company to receive a banking license from China’s Central Bank. In many countries in Africa, cell phone banking has taken off. Cell phones are the basis for the “phone ladies” in Indian and Bangladeshi villages, who rent their cell phones to other villages so rural farmers and fishermen can consult prices in nearby towns and markets to optimise sales.

How far can people-to-people finance go in bypassing big, greedy banks and ethically-challenged Wall Street financiers and their political allies? A long way, thanks to all the communications tools now widely available. Using these new information-sharing tools is helping people realise again what money is: just one form of information. Today it is possible to trade using pure information exchange. For example, in rural Florida, there are call-in radio programmes where, for example, a farmer may offer to trade tractor use for a quantity of seed. Similarly, the growth of farmers’ markets and contract-supported agriculture allows local consumers to buy fresh produce directly from nearby farms.

So how did we allow big banks and centralised finance to grow so large that they became predators on the real living economies which produce the world’s real wealth? Local people around the world are realising that they can simply bypass big banks and stock exchanges and create these services locally. The old, bloated financial sectors must downsize, cut their bonuses and take the losses from their reckless bets in their global casino. A truly efficient financial services sector should be less than 10 percent of a country’s GDP. Those in Britain and the US grew to 25 percent of GDP, metastasising with their “financial engineers” preying on the real economy. Now students are looking for jobs as real engineers, teachers, doctors, and entrepreneurs.

In a very real sense, we humans don’t have a financial crisis but a crisis of perception. We are beginning to see our world differently from the way the mainstream media portrays it. We see our choices with new eyes. As we watch central bankers printing money on TV, we learn that money is not real wealth. Real wealth is generated by productive people using the Earth’s resources wisely. Money is a useful medium of exchange when managed properly, locally, nationally, globally, or electronically. Hoarding money is no longer a reliable store of value. We are all rediscovering the many stores of value in our own communities. We find wealth beyond money. We can change our values for the new times we live in and restore the love economies to their central role in our lives. (END/COPYRIGHT IPS)

(*) Hazel Henderson, author of Ethical Markets: Growing the Green Economy (2006), is president of Ethical Markets Media ( www.ethicalmarkets.com). She co-created the Calvert-Henderson Quality of Life Indicators, updated regularly at www.calvert-henderson.com.