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Democratizing Finance

The financial meltdown generated by Wall Street and the too big to fail culture of global money-center banks and financiers is generating local initiatives and demands to decentralize and democratize finance.

Meanwhile, at the global level, the G-20 countries demands to democratize the voting structures of the IMF and the World Bank are essential to reflect the changing balance of economic power. The G-7 and G-8 group of countries are no longer relevant now that the G-20 group (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America, and also the European Union) has taken center stage.

While national safety-nets are unraveling due to budget cuts, local leadership is rising, offering many creative alternatives for communities to nurture healthier homegrown economies:

€ Local barter-clubs, like, Craigslist and LETS, and scrip currencies are proliferating ­ as they always do when central bankers and the International Monetary Fund fail or apply the wrong remedies and make matters worse. Some of the most successful complementary currencies are Switzerlands WIR and in the USA, BerkShares, with equivalent to $2 million issued in the first two years and accepted by banks and businesses in Massachusetts. Similar complementary currencies are matching needs and resources and clearing local markets in Britain, Canada, Australia, Argentina, Brazil and other countries.

€ People-to-people lending and microfinance projects are booming in many countries. Womens World Banking, Grameen Bank in Bangladesh, now emulated in many countries, FINCA and ACCION in Latin America, as well as the newer online versions, including Microplace, Kiva, as well as lenders in the USA and in Britain. Credit unions, operated in Europe and North America for a century, are becoming more proactive. They are filling new local needs, reaching out to poorer people and adding microfinance and lending to small businesses.

€ Associations of small local banks and businesses are wielding more political clout, as are credit unions. In the USA, they are demanding equal treatment in the governments TARP, TALF, and other bailout funds currently showered on the big banks whose reckless lending triggered the financial mess. Venture capital and venture philanthropy firms, including the Rudolf Steiner Foundation, Acumen and the foundations of Ebay founders Pierre Omidyar and Jeffrey Skoll, are investing in social enterprises which meet social needs while making modest profits. Such social capital is now creating a new hybrid sector in many economies.

€ The Business Alliance for Local Living Economics (BALLE) is such a network in North America, as well as the New Voice of Business, Green America, the Social Enterprise Alliance, the Fourth Sector Network and the Business-NGO Working Group. focuses on helping small businesses with their Private Company Index (PCI) which outperforms most stock indexes. Britains New Economics Foundation (NEF) has been generating both local initiatives, such as the Transition Towns movement, as well as its Green New Deal and alternative indicators to correct GDP, measuring wellbeing and ecological sustainability. NEFs proposal to save Britains 11,500 postal offices by adding local banking functions is backed by trade unions, small businesses, public interest groups and pensioners.

€ Time banking, a brainchild of Edgar Cahn in the USA (see, is now helping local people connect and share services in Japan, Europe and other countries. Neighbors contact each other via a local time banker to provide meals and help for shut-ins, babysit each others children, watch over property, mow lawns and share appliances. Car-sharing has now spawned many new companies such as Zip Car in the USA and others in Canada and Europe where people can make ride arrangements rapidly on Blackberrys and laptops.

€ China is host to many such local initiatives, linking small businesses on networks, including,, as well as which provides affordable loans to Chinas 25 million students. Circle Pleasure, a private company selling prepaid consumer cards, has formed a joint venture with Qifang for people-to-people banking, the first private company to receive a banking license from Chinas Central Bank. In many countries in Africa, cell phone banking has taken off. Cell phones are the basis for the phone ladies in Indian and Bangladeshi villages, who rent out use of their cell phones to other villages. Rural farmers and fishers can consult prices being offered in nearby towns and markets on their cell phones to make sure they take their goods to the best places to sell them.

How far can people-to-people finance go in bypassing big, greedy banks and ethically challenged Wall Street financiers and their political allies? A long way, thanks to all the communications tools now widely available. Using these new information-sharing tools is helping people realize again what money is: just one form of information. Today it is possible to trade using pure information exchange. For example, in rural areas in Florida, radio stations have call-in programs where farmers can say I have spare time on my tractor to exchange for fertilizer or pepper, melon, eggplant seeds. The farmer gives her phone number and the trades are exchanged off-line. Similarly, the growth of farmers markets and contract-supported agriculture allows local consumers to buy fresh produce directly from nearby farms.

All these local solutions and people-to-people safety-nets raise the question How did we allow big banks and centralized finance to grow so large that they become predators on the real living economies which produce the worlds real wealth? Local people around the world are realizing that they can simply bypass big banks, stock exchanges and create all these services locally. The old, bloated financial sectors must downsize, cut their bonuses and take the losses from their reckless bets in their global casino. A truly efficient financial services sector should be less than 10% of a countrys GDP. Those in Britain and the USA grew to 25% of GDP, metastasizing with their financial engineers preying on the real economy. Now students are looking for jobs as real engineers, teachers, doctors and entrepreneurs.

In a very real sense, we humans dont have a financial crisis but a crisis of perception. We are beginning to see our world differently than mainstream media portrays. We see our choices with new eyes. We know that money is not real wealth. We learn as we watch central bankers printing money on TV. Real wealth is generated by productive people using the Earths resources wisely. Money is a great invention. When it is managed properly, locally, nationally, globally or electronically, it is a useful medium of exchange. Hoarding money is no longer a reliable store of value. We are all rediscovering the many stores of value in our own communities. We find wealth beyond money. We can change our values for the new times we live in and restore the love economies to their central role in our lives.

Hazel Henderson, author of Ethical Markets: Growing the Green Economy (2006), is president of Ethical Markets Media, an independent social enterprise covering local economies, new currencies and the growing green sectors ( She co-created the Calvert-Henderson Quality of Life Indicators, updated regularly at She lives with her husband in St. Augustine, Florida.

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