Ecology’s Ethics Manager Anna Laycock considers what democratic finance means in Ecology
Could this be the start of a financial revolution? A few years ago, the term ‘democratic finance’ was barely mentioned; now, within the alternative finance community at least, the concept is frequently used to highlight the need to give ordinary people greater knowledge and control of the financial system. Much of this debate is focussed on the concept of disintermediation – taking out the organisation that intermediates between borrowers and savers.
Historically, financial intermediaries were essential for transforming funds over space and time, enabling individual savers to contribute to long-term, large-scale investments. Today, online crowdfunding platforms enable people to invest, lend or donate directly. It’s an exciting area – so exciting that some think we’ll be able to do away with financial institutions altogether – but we think there will always be a place for intermediaries, not least to spread risk and manage the information demands of investment. So an important and overlooked question is: what does a democratic financial institution look like?
Ownership must be part of the answer. We’re huge fans of mutual governance structures, because they enable organisations like Ecology to put our mission and our members first. We say ‘members’ because that’s what they are: not passive consumers but owners of our business and part of a community of shared values. Some are more active in their engagement than others, but all of our members have a stake in our decisions and our success.
Without a duty to maximise profit for external shareholders, we can focus on maximising our contribution to the sustainability of our built environment, while balancing our borrowers’ and savers’ needs for long-term value. As Forum for the Future’s James Cole argues:
Many proposed alternatives attempt to strip banking back to its original purpose – allowing groups of people to pool savings to smooth the need for credit across society. A mutual organisation can be seen as the very embodiment of this aim, serving only the interests of its members, without the same profit motive.
But mutual or co-operative governance is a facilitator of democracy, not a guarantor. And just as political democracy can be meaningful or token, so can organisational democracy. The culture of the organisation and the attitudes of its leaders towards member empowerment are critical. These attitudes are made concrete in mechanisms which enable and encourage members to take part in the governance of the organisation – or not. Giving members a say is only meaningful if we’re transparent about how we make decisions and how we use the opinions they share with us to influence those decisions. Being clear about what can’t be influenced is just as important as creating the opportunity for dialogue.
For Ecology, the next stage is to move from representative democracy – voting for our Directors and formal motions at the AGM – to participative democracy. This means giving our members a say in the decisions that we make on important issues, such as changes to our lending policy. But this doesn’t mean putting all of these decisions to the popular vote; it means finding a meaningful way to enable our members to feed in their views and debate those views with other members. It also means ensuring we put our mutual principles into practice internally: engaging the whole team in building our vision of the future and planning how we achieve it. At our recent AGM I led a session to share our aspirations for democracy with our members, as well as the challenges it presents, and to hear their views on our ideas (you can see the session materials here).
Facilitating genuinely meaningful engagement isn’t a small task. It can demand a serious amount of time from the organisation and doesn’t lead to simple conclusions. It certainly doesn’t lead to consensus – so who decides the compromise? How do we ensure we’re not just hearing the loudest or keenest voices? Getting involved requires (some) members to have the knowledge, skills, time and inclination. There’s usually a significant gap between the numbers of those who think voluntary or civic engagement is a good thing to do and those who actually want to do it themselves – and understandably so, because we all juggle a range of priorities.
It’s also understandable that some organisations will fear giving away control – it’s not always easy and you don’t always get the result you expect. That doesn’t mean it’s the wrong result. In our AGM workshop, I planned to kick off discussions with a question: what would the most democratic financial institution on the planet look like? But the group didn’t want to talk about this. Or rather, those that spoke up didn’t want to talk about this (that’s another problem with democracy: you only know the views of those that express them). So I took a vote, and half of the room decided to focus on democracy within Ecology, while the other half explored wider issues around housing and democracy.
Where will this all take us? Right now we’re researching the feasibility of the ideas our staff and members have suggested – including how we might resource them within the constraints of a small organisation. We’re committed to making our 2014 AGM even more participative and member-centred, and we want to keep the conversation going in between events, and with a wider audience. So tell us: what should we do next?