Finance
Let’s wrest control of the financial system from private banks and financial institutions, so that the money we save, borrow and spend serves the needs of local communities rather than global speculators.
One of the easiest steps you can take to help your local economy is to move your bank account from a large national bank to a community financial institution: a local bank or credit union focused specifically on supporting local businesses and citizens. The collective impact of millions of people transferring assets from multinational to local institutions would significantly shift the dynamic of the global financial system.
Take action
- Find a credit union near you with the World Council of Credit Unions' map Our Global Networks. We encourage you to choose smaller, locally based and rooted credit unions if possible.
- Learn more about why and how to move your money with Green America's Community Investing Guide (US).
- Organize a local move-your-money campaign with the Institute for Local Self-Reliance's resource list Tools for Starting a Local Move Your Money Campaign.
- Find a community bank near you with the directories on Find a Better Bank (US) and the Community Savings Bank Association (UK).
- Compare banks and credit unions in your area based on a number of local impact metrics with Banklocal.info (US).
- Find a bank that offers environmentally and socially-responsible services through the Global Alliance for Banking on Values' map Find Members. Note: some of the member banks are national in scope.
Get inspired
- Triodos Bank in the UK focuses on financing social, cultural, and environmental initiatives such as organic farming, childcare facilities, small businesses, and renewable energy projects.
- The Ecology Building Society in the UK offers savings accounts and mortgages for co-housing, renovations, and other sustainable construction projects.
- Maine Harvest Federal Credit Union is the only financial institution in the US that focuses its loans on growing a healthy local food system.
- The Clean Energy Federal Credit Union in the US state of Colorado focuses on financing small-scale renewable energy projects.
Joining with others to provide capital for new or established local businesses is a great way to meet entrepreneurs in your community, strengthen relationships among friends, and bring more vitality to your local economy.
Take action
- How to Invest Local by Locavesting (US) offers extended guidance on a dozen models for local investment groups. Most of these are applicable worldwide.
- Join or start a Slow Money group. These groups provide interest-free loans to local food and farming enterprises. Most existing groups are in the US, but there are also chapters in Canada, Australia and France. Find a group near you, or start one of your own.
Get inspired
- Through their Local Investing Opportunities Network, residents of Port Townsend (Washington state, US) have provided more than $7 million to local businesses through a peer-to-peer lending program mediated by the town government.
- The US state of Vermont is home to at least two innovative investment clubs. The White River Investment Club provides financing to small businesses that contribute to a stronger local economy, while the Vermont Solidarity Investing Club invests only in cooperative businesses.
- The members of FarmWorks, in Nova Scotia, Canada, annually purchase shares in a diverse portfolio of local food and farming businesses, bringing almost CAD$3 million to 95 local enterprises.
- Slow Money chapters worldwide have shifted $79 million towards food and farming enterprises since 2010.
Bartering – the direct exchange of goods or services – is one of the oldest forms of economic transaction, and it still thrives in many parts of the world today. Barter not only provides a way for people without cash to exchange what they have for what they need, it also strengthens social ties in the process.
Take action
- One-on-one bartering is difficult: you need to find someone who has exactly what you need, and who needs exactly what you have. Increase the odds by adding "willing to barter" whenever you post something for sale.
- Set up a barter market in your community.
- If you have a business, consider ways that you could incorporate payments by barter.
- For an understanding of the laws around bartering in the US, check out Money Soup: A Legal Guide to Bartering, Giving, and Getting Stuff without Dollars, put together by the Sustainable Economies Law Center.
Get inspired
- The report Barter markets: sustaining people and nature in the Andes by Neus Marti and Michel Pimbert explores how barter markets in Peru contribute to food sovereignty, agricultural biodiversity, and community resilience.
- Alam Sehat Lestari in Kalimantan, Indonesia runs a medical clinic that accepts payments in seedlings, handicrafts, manure, and more. In addition, the clinic offers discounts up to 70% for patients from villages that have collectively reduced illegal logging.
- The patients at Panamédica Cooperativa de Salud in Mexico City, Mexico can choose to pay for medical services with a “solidarity fee,” where 50% of the payment is done in-kind through community service.
- The Fitzroy Urban Harvest in Melbourne, Victoria is a monthly event where residents both barter and give away homegrown and homemade food.
Local finance and banking alternatives can help communities and local economies, but their impacts will not be big enough to fundamentally remake the global financial system. For that, policy changes that extend beyond the local level will be needed.
Get started
- The International Movement for Monetary Reform is one place to learn about the policy changes needed to transform the global financial system – in particular, taking money creation out of the hands of private banks and vesting it in governments.
- In the United States, the Public Banking Institute has been pushing for public banks at the state level. Encourage your state to create a public bank with the tips, sample letters, and more in their Advocacy Kit.
- The Pathways to a Peoples’ Economy Toolkit contains a number of policies and case studies on limiting the size and power of banks and creating financial institutions that prioritize the communities they serve. The toolkit is US-based but many of the steps can be applied elsewhere.
- Learn how US cities and states can fight back against the power of big banks in the Banking chapter of Fighting Monopoly Power, by the Institute for Local Self-Reliance. It offers some "potent levers that states can pull to curb the power of megabanks and strengthen and expand community banks and credit unions." (Scroll down to the section, "How States and Cities Can Fight Back.")
Get inspired
- The Transnational Institute's book Public Finance for the Future We Want describes how public finance is shaping regenerative and redistributive economies around the world, from India to Germany, Costa Rica to Vietnam. Available as a free download in English, Spanish, Italian, and Greek.
As any economics textbook will tell you, money is a medium of exchange, a unit of account, and a store of value. But that textbook is unlikely to tell you how money is created.
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Every time a bank issues a loan, the money deposited in the borrower’s account didn’t previously exist: it was created – conjured out of thin air – by the bank. (Most people believe that a bank lends out the funds entrusted to it in the form of savings and checking accounts, but banks can actually make loans for at least 10 times that amount). [1]
The system of money creation via bank lending is one of the reasons that economies require growth: each borrower must pay back the full amount of the loan, plus interest, and the money supply must constantly increase or there wouldn’t be enough for all that interest to be repaid.
Bank loans are just one small piece of a $26.5 trillion global financial system – representing over 30 percent of world GDP [2] – that has enabled multinational banks and financial institutions to amass incredible wealth.
In recent decades the global financial system has become little more than a casino. Every day, for example, more than $5 trillion in currency exchanges occur – and 98% of that amount is pure speculation unrelated to the real economy of goods and services. [3] In addition to currency and stock speculation, bets are also placed on complex derivatives that are even further removed from the real economy. Speculative activity "leveraged" through borrowed money created by banks creates immense wealth for a few, but can have a devastating impact on the lives of millions of ordinary people. The financial crisis of 2008, as well as currency crashes in Mexico in 1994 and East Asia in 1997, are just a few examples.
Unfortunately, most small locally-owned businesses and family farmers have little choice but to turn to this same bloated and precarious financial system when they need capital. New businesses and aspiring farmers may need start-up funds to get off the ground. Existing businesses and farms may not have enough money on hand to replace or upgrade equipment. And individuals may want to finance a large purchase like a car or a home. Most often, this means going to a commercial bank for a loan, or even paying for their needs with bank-issued credit cards.
For local economies, reliance on these sources of capital poses serious problems. Borrowers may end up saddled with high interest payments that make it difficult to make ends meet, or to pay employees a livable wage. What’s more, those interest payments are drained out of the local economy, winding up as profits for distant bank shareholders or Wall Street investors.
Many of the initiatives in this section aim to meet local needs for capital without relying on the global financial casino, while others are attempts to create alternatives or supplements to the money created by banks. While these and other steps at the local level are valuable, they will not be enough to limit the worst damage caused by the global financial system: only government policy shifts can accomplish that.
References
[1] Ellen Brown, Web of Debt (Third Millennium Press, Baton Rouge, LA:2007)
[2] Sean Ross, “Financial Services: Sizing the Sector in the Global Economy”, Investopedia, Feb. 6, 2020. https://www.investopedia.com/ask/answers/030515/what-percentage-global-economy-comprised-financial-services-sector.asp
[3] Statista, “Average daily turnover in the global foreign exchange market from 1998 2019:, https://www.statista.com/statistics/247328/activity-per-trading-day-on-the-global-currency-market/; Bernard Lietaer, The Future of Money (Century, 2001)