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 dispossessed. 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, skimming and confiscating their resources at every turn.

Lets consider some common, even essential, financial instruments:

Insurance
Pensions / Unemployment benefit
Gambling
Loans and mortgages
Saving and investment
Payments

These mechanisms' smooth and fair operation is critical because their failure ruins lives. Stringent regulation 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 pools which overflow with riches we may never enjoy.

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 were 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 security mutual? And what if this myriad of local human financial organisations could de-risk through voluntary federation?

One of the first assumptions we unpack is about the role of money, the thing that integrates all our activities with the omnicidal capitalist machine, and makes <em>each of us</em> part of the problem. Money is really good for standardising accounting, taxation and fines but it is quite hard to obtain and hold on to! Maybe if we could enter into different financial relationships we could find other ways to settle debt, to account for exchange and to ensure the future?

Mainstream financed is optimised to maximise profit for the owners by maximising revenue for the customers, at least as far as the cartel allows. The benefits of doing it another way then, are everything but maximal revenue! Instead finance done collaboratively between peers should be less fearful, more flexible and less legalistic, more fun, more participative, more considerate of the environment and community. It should build social bonds, it should provide more non-monetary and serendipitous returns.

This is the dream, but the obstacles are many. Most people very conservative with their money and the incumbent system is the devil they know, it is more or less predictable, and is highly efficient. By contrast a young CoFi initiative has very many ways to fail and potentially lose its members' assets. For this reason it is important not to put all one's eggs in a single #cofi basket. Another challenge is finding each other and building real, trusting relationships. The people who are awake to the menace of the financial system are thinly spread, which makes it hard for them to meet, to associate, to build trust and to build institutions.

Building large scale, trustworthy institutions from scratch takes years or even decades of patience, yet commoners have achieved it many times before. Building societies took hold and thrived amongst the urban poor of the Industrial Revolution; savings pools can be found in nearly all the monetised societies of the world; the Mondragon Coop still dominates a whole region of Spain. But there is a lot of churn in this field. Many projects fail to get off the ground, fail because of governance or personality problems, and if successful, there is always the danger of being coopted and the temptation to sell out.

The most important thing is to re-frame many of the words and ideas we take for-granted. * Money is be a means, not an end in itself. * Value is what YOU value, not the market. * Work is the creation of wealth for yourself or for your community. * Wealth is not the balance of your bank account but the quality of your life, your health and your relationships. * Security is emotional and relational, not just physical. With this grounding you can work with others to create wealth and security together. 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.

Every summer geeks from this field meet in Austria to exchange ideas and collaborate around these ideas. More information…

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

Here we point to some examples of new and established projects. The Local Exchange Trading Systems (LETS) is where it started for many of us: local groups serving each other and keeping account using abstract accounting units. The heyday was the 1990s, but many groups remain. Any ecovillage involves collective managing of resources, whether it be around housing, energy, work, food or money. A newer project, Kin coop offers fiscal hosting (a virtual bank account) to activist groups, saving them admin work, and ensuring their accounts are transparent. In Stroud, UK the team that built this wiki Stroud Commons is working on a whole cluster of projects related to resource management and finance . Local Loop Liverpool is bringing small businesses together to cancel out paymets within the network, reducing cashflow risk for all of them. The Economic Space Agency is rethinking economics, accounting and money from the bottom up. In Kenya, Grassroots Economics has developed its own tools and language to revive and update pre-colonial traditions of cooperation.