Collaborative Finance (CoFi)

This topic is part of Economy & finance.

The commons movement is a backlash to the idea of private property, in which ownership of land and other assets is exclusive, which gradually splits society into classes of owners and of the disposessed. But ownership is just a part of the problem.

Collaborative Finance addresses another dimension of the problem, which is how the the money and financial system puts the state, its institutions and its plutocrats between people struggling to make a living, skimping and confiscating their resources at every turn.

When we talk about finance we mean instruments or services like

Insurance
Pensions
Gambling
Saving
Lending
Investment
Payments

Many of which are essential to modern life and their smooth and fair operation is critical - their failure can ruin lives. Stringent reguluation helps to protect against fraud and failure, but also to obstruct small players and innovators. Maybe this is fair - when it comes to risk management, the larger institutions can juggle more assets and cope with larger hazards. But this also leads to the financial sector being owned and run exclusively by the ruling class. Those elites can evade these regulations because they can afford specialist accountants and access tax havens. The products and tools are arcane and difficult for the government to regulate. Revolving doors, corruption and other mechanisms compromise the regulatory system. Despite all the government protection, violent speculative cycles, scams and abuses still happen, and justice fails to catch up. The largest institutions are often the most prolific criminals, and in some ways hold sway over government itself.

Meanwhile for most of us the financial services have become like indifferent machines; algorithms decide if we are credit worthy; our pensions are used to finance polluting industry and war-criminal governments; we struggle to keep our data from predators and time-wasters. We watch all the money slipping through our fingers and being collected in enormous pots to buy things like superyatchs we will never enjoy or vanity projects like missions to mars that nobody needs.

Being organised at such a large scale ensures that only remote rich people design these systems and derive all the secondary benefits. But what if there was a more appropriate scale, in which trust actually played a role, in which profit was not the prime directive and was ploughed back into the system? In which the people taking risks helped to manage those risks? What if the so-called free market had space for small-scale financial services? House and car insurance in every street. What if pensions managed by the local government which, after all is the provider of elderly care. What if we could invest in the very businesses that produce and sell our necessities, as a way of ensuring our own security? What if those businesses turned around and invested in us, making our secutiry mutual? And what if this myriad of local human financial organisations could de-risk through voluntary federation?

Re-thinking finance provides us with an opportunity to rethink money, the instrument on which all official finance depends. National monies are very powerful, but they are also blunt all-purpose instruments which may distort communities' values. Self-organised groups may prefer to base their financial instruments on other units of value, stores of value, and media of exchange.

This is the dream, but the obstacles are many. Perhaps the greatest challenge is finding each other and building real, trusting relationships. Many people are awake to the failings of the financial system, but they are thinly spread, which makes it hard to meet, to associate, to know each other, and to build trust and build institutions. In many ways the incumbent system is safer and more convenient than having to build new services, even for those who don't like or trust the institutions we have, and who see the wide mal-effects of participating in them.

Commoners do not have the capital to build stable (large) financial institutions overnight; the risks of incompetance or malice in unregulated services cannot be calculated. Yet it has been done before. The original collaborative finance started in the 19th Century industrial revolution with workers setting up the first building societies and mutual funds. Over the decades these became competitors to banks until governments caused them to be dissolved in the 1980s.

So building a more collaborative financial system can only happen gradually, cautiously. There's a chance the global economy will crumble first, but if it does, the financial trust relations we have built will become even more important.

This topic belongs to the section Economy & finance. You can ask questions or add information on the corresponding Forum section.