Do you know where your money is? More importantly, do you know what your money is doing?
Most of us feel confident that we know what money is. But few of us feel confident in taking responsibility for what our money does. We hand over the power of money to banks and mainstream finance with real, often damaging, consequences for people and planet.
A unique collaboration between an academic and a practitioner, this book tells the story of money, from ancient Athens to the Bitcoin revolution, to explain how crowdfunding is the way for people to reclaim the power of their money in pursuit of a fairer and greener society.
In a still more profound way than we may think, we are in a period of crisis. Every aspect of the human condition and the social institutions we have made together are today in doubt. In the popular imagination, a crisis is a marker of something vexing that is to be overcome. It enjoys a temporal dimension, seeming to diagnose a present problem at the same time as it already imagines a future moment when the crisis will cease to be, when things will ‘return to normal’. Writing this book together during the the COVID-19 pandemic that began in 2020, that desire for a return to normal life is especially acute, currently providing the basis for a new and common hope all around the world.
And yet, the extent to which we should want to ‘return’ to what we previously understood as ‘normal’ is immediately problematic. The 21st century has already seen an unprecedented cadence of social, environmental, political and economic emergencies that have called into question the belief systems that have hitherto underpinned that normality. These emergencies have resulted in a steady decline in our trust in the value of our democratic political systems, which is seldom attributed to a globalized financial system that is too often responsible for driving these outcomes. The COVID-19 pandemic is providing humanity with an opportunity for a ‘great reset’ with the chance to ‘build back better’, but some are asking if we really want a swift return to the way things were.
In order to reveal how crowdfunding is different from mainstream finance, we first need to say something about the typical ways in which people understand and use their money. Since most people believe they cannot be trusted with money and so lack confidence when it comes to finance – a convenient story to tell people if you are running the financial system – it’s important to begin our journey in familiar territory. After all, it is still the case that the average school leaver in the UK will have spent longer studying the mechanics of sexual reproduction than they will the workings of financial services products. Many young adults leave full-time education in the mistaken belief that a ‘credit’ card is somehow preferable to a ‘debit’ card – and who can blame them, when ‘credit’ is something that school teaches them to pursue, and ‘debit’ looks rather too much like the word ‘debt’ to be immediately reassuring. This confusion of a means of immediate payment with the idea of personal debt (actually acquired through using a credit card) does little to instil confidence.
This point is exaggerated along gender lines too. As we saw in Chapter One, women have been frequently positioned by mainstream finance as too emotional or irrational to be eligible for access to mainstream products like current and savings accounts. In a 2015 study by Abundance Investment, however, when investors were asked a question about the effects of inflation, or the risk of loss to housing equity from a drop in house prices, it was male respondents who were frequently mistaken in their calculations.
The rise of crowdfunding and P2P finance in the 21st century has been driven in part by its public promise to facilitate the democratization of finance. At the same time, and in a radically different direction, we have seen a massive concentration of the power over wealth in the mainstream finance industry. As described in Chapter One, we see this concentration as resembling Hobbes’s figure of Leviathan in the scale of its influence and reach over our lives.
The growth of this new financial Leviathan, and the redrawing of the social contract by which we negotiate our individual and collective well-being, has occurred at the same time as a widespread collapse in trust – in the state, in democracy and in finance itself. This collapse has placed responsibilities for managing the various trials of daily life increasingly onto already burdened individual shoulders, both in terms of the here and now and in making sufficient provision for later life. In turn, as trust has been lost in the capability of our institutions to protect and provide for us, individuals have chosen to place their trust – that is, their money – into the financial Leviathan, without whose benevolent protection they would be forced to face the future war of all against all from the position of a life that is ‘nasty, precarious, and skint’ (to misquote Hobbes).
In these times of rapid change and uncertainty, we have thus become beholden to a decreasing number of companies who we are empowering to make decisions that affect much of the world’s wealth and how it is used.
In February 2021, Marie Ekeland, one of the most influential figures in the French FinTech sector, set out the ambition for her new funding vehicle 2050 – designed to have a long-term positive impact on issues like equality and sustainability – in the following way:
When you invest, you’re shaping the future. When you put your money here, you’re not just following the wind, you’re making it blow. So the real question is: ‘What is the world you want to live in?’ This question is very complex to answer because we’re living in a very complex world and there is no vision that is well articulated today.1
In the absence of an overarching and positive vision of how to build a better world collectively through formal democratic processes, and with the future appearing to promise little more than an endless series of world-ending threats to be managed in order to mitigate their most harmful effects, Ekeland struck a more optimistic note in the same article with a very simple but profound observation: ‘Money is actually very powerful but it has to have a destination … If finance is only reproducing the past, then we’re not going to find any solutions to the current new challenges that we have because people do not know how to solve them.’
The story that finance likes to tell about itself, at least since the entrepreneurial turn of the 1980s, is that it is at the cutting edge of innovation.
In exploring new ways of seeing money and finance, this book has aimed to empower and embolden the reader to start to look at money differently and to question the purpose of our finance system, both what it is now and what it should be. After all, alternative finance was created by a wide social movement across business, academia and civil society, involving many collaborations between people outside of finance with those who were and are utterly disaffected within it.
As well as encouraging more social movements to see the importance of money and finance for furthering their own causes, we hope also that many more practitioners within the finance industry will begin to challenge themselves to develop financial innovations that are founded upon a belief that money can be a force for public good and that finance ought to be more than a complex machine for creating and extracting private profit. The world out there is not an external resource to be mined in the interests of creating financial value. That world out there is nothing less than the lives of billions of people and countless other species in the natural world. The future of finance needs to take far greater care of both if it is to keep hold of its social licence and play a role in delivering the transformation we need to protect people and planet from the urgent threats that both currently face. In this final chapter, we extend our analysis to set out what we think are some of the most pressing and difficult questions that need to be addressed if we are to free our understanding of finance from its gilded cage and continue our journey towards a world were money is something social, collaborative, accountable, democratic and sustainable.
In recounting her experience of being asked the ‘Bitcoin Question’, Lana Swartz reveals that her response to friends and family enquiring about the risks of getting in on the cryptocurrency game is to ask what they want to achieve through their acquisition.1 Simply put: what are all the Bitcoins for? The typical answers to Swartz’s provocation are both achingly dull and easily anticipated. People have heard of others making decent returns by speculating on Bitcoin rallies and want to get in on the action. In other words, the primary motivation of those who want to acquire Bitcoins is to use them to acquire more Bitcoins, which at some point in the future will have risen to a price deemed high enough to ‘cash out’ via a fiat currency of choice. At the exit point of sale, after all, nobody imagines selling their Bitcoins for more Bitcoins.
The more imaginative would-be speculators answer in ways that reveal a growing sense of existential threat. As political, social and economic institutions lurch from one catastrophe to the next, at least they are providing a distraction from the impending world-ending breakdown of the climate. In short, if Bitcoin is to be the only non-institutionalized global currency within a matter of decades, doesn’t it make sense to start hoarding them now?
In both responses, we can see the same instincts that drive people to save money. A desire to have more of it stored up against an uncertain future makes a good deal of sense from one point of view.