17 March 2012

Alternative finance radicals: Infusing rebellion with entrepreneurial creativity

Several weeks ago I sat in a pub with someone from, what I’d call, ‘the confrontational Left’. He was caught up in passionate indignation at the injustice of the financial sector, highly eloquent at providing a persuasive diagnosis of the flaws of the system that he perceived. His language was phrased in terms of rebellion

by Brett Scott | Mar 16 2012 by OpenDemocracy in Energy Bulletin | Mar 16 2012

The next day I sat at a financial innovation conference, at a table with entrepreneurs. Their focus was on the very real potential to challenge financial incumbents via ‘disruptive’ financial technologies such as peer-to-peer finance and complementary currencies. Their language was phrased in terms of creativity.

In general, there is limited crossover between those focused on stirring intellectual dissent via alternative ‘heterodox’ economics, and those who are involved in practical financial innovation. A more explicit programme of ‘silo-breaking’ is needed between the rebellion-based critiques of the Left, and the creativity-based enterprises of the innovation community.

The critical eye in the sky: The alternative economics intelligentsia

The Left has traditionally been a thought-leader in alternative economics. Many individuals who self-identify as ‘left-wing’ are at their best when providing cutting and insightful macro-level critiques of structural flaws in economic systems, often from a justice perspective.

At their worst though, these critiques can break down into moralistic martyr-complexes underpinned by a chronic sense of jaded victimhood. A side-effect of this can be a muted ability to recognise when and where positive change is occurring.

At many left-wing events, the energy is high, the ideas are exciting, and a captivating sense of community exists. Unfortunately, there is also often the hallmark of a bounded ‘scene’ that locks up its energy within self-referential silos, bringing a constant risk of groupthink and a lack of curiosity about outside perspectives.

The grounded disruptors: Practical protagonists of the financial innovation scene

Outside the internal debates of the alternative economics intelligentsia though, there is a wide spectrum of people already pushing for financial sector change via other channels.

On the one end of the spectrum, there are concerned ‘mainstream’ professionals who are sympathetic to financial reform proposals. Some, like Paul Abberley of Aviva Investors, are prepared to be openly critical, but they are wary of the reputational associations of traditional ‘radicals’ and unorthodox ‘quacks’.

Some of these individuals move into the realm of professional reformists. These are people who interface comparatively easily with the mainstream financial sector, and who are involved in the ‘acceptable face’ of sustainable finance innovation. This can include climate finance initiatives (such as green bonds), market failure studies, ESG & socially responsible investing (SRI), and impact investing.

At some point though, professional reformists blend (or morph) into alternative finance radicals, entrepreneurial types who are adamant about disrupting mainstream finance, and who have invested significant energy into that. They’re sometimes in the background at left-wing events, but are often more stimulated by technical debates onalternative currencies, social finance, and new ways of doing renewable energy financing and microfinance.

There is a sub-set focused on technological innovation, experimenting in the realm of financial disintermediation. Hot areas include peer-to-peer (P2P) platforms (incl. P2P lending and P2P currency exchange), crowdfunding, mobile banking, and electronically enabled alternative currency platforms.

The tech scene attracts people who are more likely to read Wired Magazine than Prospect. Techno-anarchist visionaries and tech-savvy hippies seek to harness the internet to bring humanity together, while others display strands of red-blooded libertarianism. The diverse energy of this #futureofmoney crowd is excellently captured in this video (aspects are also found in Adam Curtis’ excellent documentary All Watched Over By Machines of Loving Grace).

Barriers to collaboration

Many members of the left-wing economic justice community feel, understandably, out of their comfort zone in areas of financial innovation. Furthermore, they’re often concerned that tinkering on the edges of mainstream finance merely works to provide a more acceptable face for an exploitative system.

Professional reformists involved in SRI and environmental economics initiatives (such as valuing ecosystem services) are sometimes viewed with disdain by those calling for more radical solutions. These initiatives use the tools and language of the status quo and are often perceived to implicitly endorse and reinforce the values of existing systems.

The much hyped social impact bonds, for example, are seen by some as being little more than a politically charged Big Society project. The deep critique leveled at these efforts is that they do not fundamentally change the underlying economic system. Does peer-to-peer finance actually change anything?

Many individuals involved in alternative finance innovation though, perceive themselves to be making crucial steps towards radical changes in existing systems, shifting the sector closer to the values espoused by social movements. Incremental innovation in the margins can erode major paradigms and provide footholds for new ones.

For example, the technologies being developed for peer-to-peer lending are being incorporated into models for potential future sharing economies. An important current area of innovation is found in the intersection between the market economy and the gift economy that underpins it. This includes collaborative consumption and productioninitiatives, and timebanking.

The hybrid radical

The distinctions set up in this article are, to a large extent, artificial. They could be seen as expressions of the same basic impulses for change within different types of people, and are not mutually exclusive.

Left-wing, rebellion-based approaches make bold stands against systems perceived as unjust, while entrepreneurial creativity-based approaches seek to make those systems redundant by bypassing them. Both are forms of subversion, although the latter tends to require a keener engagement with the mainstream.

Financial activism, traditionally associated with economic justice ‘activists’, should also be thought of as including those who are proactively building new models outside of the traditional activist ‘scene’. Perhaps the ideal is ahybrid radical, well-versed in the micro-level practicalities of alternatives, and possessing an entrepreneurial flair infused with the rebellious spirit of critical theory.

Encouraging hybrid radicals entails overcoming silos, and that’s part diplomatic mission, and part a co-ordination problem. It’s also about articulating a common vision that cuts across different networks with different immediate priorities and internal languages.

Perhaps the networks can be brought together under the archetype of the hacker. Hacking, in its true sense, is at once an act of rebellion and an act of creative re-wiring, engaging in innovation as a subversive act. It’s the art of creative disruption, rather than just disruption, or just creativity. The aim is not merely to build something new (standard entrepreneurialism), but to actively subvert an existing object in the quest to build something new.

Organisations such as FairPensions are making important steps to unleashing hybrid radicals, providing an interface for economic justice advocates to lock into (‘hack’) the shareholder community. The WWF/ICAEW Finance Innovation Lab is another pioneering attempt to bridge these gaps. This remains a highly under-developed area though, so there’s much exciting work that remains.

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