Further economic reforms are being discussed around the world, new concepts are being conceived and new approaches tried. We can distinguish two main approaches here:
On this website you will find further explanations of the following themes:
Common Good Economy
Ethical Investment
Crowdfunding and Microcredit
Sharing Economy and Gift Economy
Regulatory Approaches
In connection with reforming the financial system, people are often recommended to change their bank and to consider ethical criteria when investing money.
Attac – the anti-globalization network – has been calling for some time for a ‘mass migration‘ of bank accounts to other banks: people should choose banking institutions like the German GLS or Umwelt (environmental) banks, Triodos or local banks like the German ‘Sparkasse’ or the cooperatively organized Volks- or Raiffeisen banks, instead of using purely commercial banks. Connected with the question where we as savers should invest our money is the question: where do entrepreneurs actually get their capital? A whole new business genre has established itself on the internet, so-called ‘crowdfunding’ platforms. With Crowdfunding a group of people is sought, who will put their money into a joint pot so new projects can be realized. This is how some bands work with fans to finance their next album. Film makers sell DVDs in advance for their yet to be produced film. Festivals give tickets “to the crowd”, who fill up the financial coffers in advance. Instead of going to big banks and paying lots of interest, such projects thus finance themselves from a variety of small contributions from those who will later use their services. The customer becomes the financier.
The cooperative model functions in a similar way. In the golden era of energy cooperatives in Germany, cooperatives sprang up like mushrooms. They collected money to create small energy generating stations like solar panel or wind energy installations, which then belonged to those who lent the money (cooperative members). Social cooperatives operate on the same principle, but their goals are social projects rather than energy projects. For example, the regional currency Sterntaler in Berchtesgadener Land is structured as a cooperative. The investments of the members have been used to create an exchange ring, a village shop and a solar power generating installation alongside the regional currency. The Big Idea: for the cooperative members to have everything in their hands that is necessary for life.
Where there is no group of financiers, Microcredit can be a financial solution. In ‘developing’ countries, microcredit has often been a springboard to self-employment when it has been used to create the necessary tools for a small business. In Germany, the GLS Bank and the cooperative that runs the Chiemgauer regional currency in Bavaria – Regios e.G. – have experimented with microcredit. In the Chiemgau region, such microcredits were even cross-subsidized and issued interest-free when they were created in the regional Chiemgauer currency. Here microcredit and regional currency mutually supported each other.
The idea of the Common Good Economy is to be understood in contrast to the for-profit economy. While it is supposed to be self-evident that businesses are there to maximize profit for their owners, the Common Good Economy concept shows that doing business is much more. It is also about having good relationships with suppliers and customers, looking after the health of co-workers, creating meaning, integration with local voluntary groups and taking a wider view of how one’s own economic activities fit with sustainability. Promoters of the Common Good Economy encourage people to create ‘common good’ audits alongside the usual financial accounts. Not only should money flows be analyzed and disclosed but also the whole breadth of interactions of a business with its stakeholders and its environment. Enterprises that regularly do common good audits have a much more comprehensive picture of how their business is embedded in general economic life and can observe from their development whether they only make a profit financially or whether they also make a ‘profit’ in other areas. The approach of the Common Good Economy offers us a great opportunity: Common Good Audits can be carried out without official ‘permission’ so that this new way of ‘doing economy’ can take place from the bottom up. When a business thinks carefully about its impacts, that simultaneously has an effect throughout the business and can completely change the way a company does business. Because companies are the essential nodes in economic networks, a comprehensive reform of economic life led by businesses can result – with long-term, far reaching effects.
Promoters of the Gift Economy want to alter the underlying economic philosophy of society and its resulting thought and action. Why, they ask, must goods and services always be mutually exchanged, why should something always be demanded in return when one gives something? Couldn’t an economic order also be created through unconditional giving? If everyone ‘gifted’ their services and was ‘gifted’ by others, everyone would get what they needed, wouldn’t they? Whole areas of our lives function only through the gift economy: most work done in families operates on the principle of the gift economy, for example parents working hard to bring up their children.
The Sharing Economy by contrast has been taken over by profiteers for some time now. In the beginning, the idea was to share tools, vehicles or rooms with each other while one wasn’t using them. In the meantime, completely capitalistic business models have grown out of this movement. With “Air B n’ B”, renters ‘share’ unused rooms with tourists, with “Uber” car owners share journeys with people seeking lifts. Apart from these two well-known profit-oriented examples there are many others that keep the true spirit of the sharing economy alive: car sharing firms allow non car owners to be able to use cars and thus replace eight private cars with one shared car. In communal city gardens, hobby gardeners share land, tools, work and often very happily the harvest too. In Community Supported Agriculture a group of usually 100-200 people shares the living costs of the farmer: the group decides together what is to be planted and pays the farmer his or her living costs; the farmer plants and cares for the crops then divides the harvest amongst the group members – both the harvest and the risks are shared and people take great responsibility for each other and for a healthy diet.
Reform movements at the national level generally have a hard time. They need to lobby for years or even decades to influence politicians and their advisors, they must develop politically convincing concepts with a sound basis in fact. When reforms succeed at the political level, they often have far-reaching effects, for laws remain in effect for a long time and apply to everyone, not just to those who have made a personal decision to reform themselves. Monetary reformer and author Helmutz Creutz, amongst others, proposed a comprehensive tax reform in Germany (1984). Instead of taxing work, as happens today with income tax, Creutz proposed taxing above all our use of environmental resources: energy, resources, land, traffic. Governments naturally wish to steer the dynamic of society through taxes. If work was cheaper and instead the use of resources and energy were dearer, the system of society would tend to minimize resource use, whilst workers would always be able to find work. Fundamental tax reform could be very effective but is not easy to implement because people do not change easily and do not happily give up benefits. In spite of powerful lobbying organizations, proposals for tax reform continue to be made regularly, including those that would reduce the redistribution of wealth from poor to rich through Capital Gains Taxes. A continuing topic is the (re)introduction of a Wealth Tax. Wealthy people should not only pay taxes on extra income but on their existing wealth. The economist James Tobin proposed a Transaction Tax on foreign exchange transactions in order to calm the financial markets. The so-called Tobin Tax was the reason the campaigning organization Attac was founded – the two Ts in “ATTAC” stand for Taxation of financial Transactions (taxation des transactions financières). If tax was charged for currency transactions or even shares on the stock markets, the hectic business would calm down because each transaction would have to pay for its tax charges too. There would also be additional tax income from speculative business. Regulation of banking business has been hotly debated since the beginning of the 2007/2008 financial crisis. It would be possible to introduce a divided banking system, whereby commercial banks are forbidden to mix the business of loans to private customers with risky investment banking. It would also be feasible to limit the size of banks so that banks would have to divide up or sell parts of their business if they grew too big. The idea behind this is when smaller banks get into difficulties, the resulting problems are also smaller. Today too many banks are “too big to fail”, that is, too big to be liquidated. Their sheer size forces the state to ensure their survival. Banks should, just like other businesses, also be able to go bankrupt without running the risk of bankrupting the whole economy because monetary transactions collapse. Regulation of the banking sector could also lead to a ban on ‘short selling’, the sale of ‘credit default swaps’ or the maximizing of ‘equity shares’. The fact that wealth can lead to social tensions was introduced by Karl Marx in his discussion in the book Das Kapital. Criticism of the system of ownership continually arises. The economists Gunnar Heinsohn and Otto Steiger derive the creation of money from the availability of wealth. Money and its functions were thus strongly influenced by the idea of private wealth. A particular form of wealth is land, which cannot be increased. Whereas other goods can be produced and thus increased, this only applies to land in a very limited way (for example through winning new land on the coast). Private possession of land has thus been questioned through reform proposals for decades. The commonest land reform idea is to regard land not as a private possession but as the common property of everyone. Whoever wishes to use land, leases it from the community. Here there is a spectrum of ideas about the Commons, for which Elinor Ostrom received the Nobel Prize for Economics in 2009.
Social Enterprises are businesses whose primary goals are social. Two elements distinguish them from a normal business: first, they concentrate on an area of work seen as ‘charitable’ (such as education, research, youth, elderly care etc.) and second, they plough any profits back into the business.
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