Those of us with net worth at all are capitalists (not that we subscribe to the ideology that capital exclusively should control and profit, and that workers should only labor). We are capitalists in the sense that we have the legal and personal rights of capital, the liberty to use our assets in the manner that we intend.
We can individually choose to just hold the capital in some form of money, or we can choose to make it available for others’ use either directly investing or loaning funds, or contributing our capital to corporate firms that invest or loan funds. (Most “investment” in pre-existing securities is not investment really, but actually speculation in that we are not creating or facilitating anything new but only seeking gain on ownership shares.)
The advantage of investing and loaning directly from our own volition, is that we can put the money to uses that we support, that we want to see happen. The disadvantage is that most of us are NOT financially savvy, certainly not sufficiently to assess whether a business or project is prospectively effective, profitable, humane. So, we delegate that responsibility and control to banks, to mutual funds, to venture funds, to trusts.
Even in our delegation, we are the individuals responsible for the use of the capital, but often NEGLECT to fulfill that responsibility. We JUST delegate and most often entirely on the basis of maximum financial return, with no other consideration.
Even though I think of myself as an educated, morally responsible individual, my own retirement investments are in broad based indexes. I manage them solely on the basis of return relative to market uncertainty.
Even the common sense of portfolio balancing neglects the moral responsibility of capital. It works for the “investor/speculator” in protecting from risk while still realizing market gains, All regulated finance professionals must now subscribe to the conventions of portfolio balancing. (That’s not all that personal financial planners, or investment managers do by any stretch.)
There are currently many good ways for those with net worth to put their capital to socially productive use. There are screened portfolio funds that eliminate certain investments from the pallette of funds that they invest in. There are assertive venture and sector investment funds that identify specific types of enterprises to contribute to. There are community loan funds that make loans available to communities for which capital is not naturally attracted.
These are not inconsiderable in our economy. Often large pension organizations, endowments, foundations and others adopt screens and assertive investing strategies to make good happen, not just return (usually seeking both).
Foundations are potentially especially effective in realizing good in the world, as they can BOTH invest in efforts that further their stated mission, AND contribute charitably to efforts that fill in the cracks or facilitate the development of new institutions.
There is a new generation of social investment efforts that take a step or many steps forward towards assertively and responsively addressing the social problems and efforts that are apparent in the world.
There are many causes to social problems. One key observation (without identifying an institutional cause, though I have my explanations) is that there is a constant migration of capital from working people to large and largely institutional owners (from work to ownership) and from rural to urban.
Communities that are able to develop a porfolio of competencies in their regions, that realize a significant amount of inter-regional trade, can thrive. (There is a down side of accompanying inflation in housing costs.) Those communities that are dependant on resources, skills, exports in a single company or industry, are more vulnerable. With the globalization of capital and trade, even a region that does very good work, can lose their industry to regions, mostly overseas, that might not even do as good work, but can do it cheaper.
Domestically, the economy migrates to performing services for capital (either investment, professional, or business-to-business trade) more than goods and services for use. Typically, there is then inflation in securities and even commodities’ prices as there is limited available paths for productive use of capital, and money drifts to speculative bubbles.
It takes assertive efforts to affect an alternative outcome. It takes creation of purchasing power regionally, to create any viable economy (even if temporarily inflationary). It takes intentional guidance of capital to every macro-region and micro-region, to realize universal prosperity. And, politically, it takes recognition that the current emphasis on global marketplace and unregulated competition has destroyed macro-regional markets. (Detroyed more markets than were created, ironically.)
As siting production decisions are so cost-driven, even a currently thriving developing region is not confident that their recent development will last more than a generation, as firms may then move to find the next cheap site. (I saw it in my family business – grandfather’s and then father’s and then mine, in which clothing manufacturing migrated from New England, to the Midwest, to the South, to Guatemala and Santo Domingo, all in two generations.)
Those individuals with capital that note that that migration of dirty and exploitative manufacturing migration is NOT an example of sustainable or healthy society, need another vehicle, another institutional form that can confidently fund regional economy/society in a relatively stable, and therefore controllable manner to realize universally convivial communities, with optimal employment opportunity. A place where families can LIVE for more than a single generation.
Common Good Finance is attempting to construct one leg of that model. For capital, the Common Good model emphasizes preservation of capital more than aggressive growth, “Slow Money”. It is conceived as prospectively creating common banking services (CD’s, checking accounts, loans). The model includes features that construct community guidance over lending priorities, that are simultaneously socially good and financially prudent.
The model incorporates features of the Mondragon cooperative network, that creates/insists on a collaborative and intimately accountable relationship between bank and enterprise.
Its design incorporates the establishment of local currency accounting, thereby creating purchasing power locally, based on community intimacy and accountability.
The model doesn’t do everything to create universal prosperity, but it does resemble a/the form that social responsible banking needs to to realize universal regional prosperity by transformation, not revolution.
More later.
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Great article Richard! For more about the Common Good Bank Project, see http://commongoodbank.com