Finance

Finance in the age of climate change and peak oil is a precarious proposition. We live in an integrated, co-dependent economy addicted to growth and to ever greater energy consumption. 75 years ago, community economies were still very much concerned with producing goods and services for local and regional use. More distant demand and supply was important, but not crucial. Now these economies have become but wee nodes in a global supply chain. The processers, warehousers, distributors, and managers (“infrastructure”) that at one time were key to the functioning of community economies have long since closed, been sold off, or moved away.

One pillar of the current, globalized economic system is confidence in money and the ability of banks to keep it flowing. Companies, governments, and households are confident they can borrow money to increase production now, and earn enough from that production to repay the debt (and the interest on that debt) later. As the supply of fossil fuels shrinks and the cost of energy inevitably rises, however, that confidence will begin to unravel. Indeed, it already has. Small- and medium-sized business are increasingly starved of access to credit.

Debt and interest can be repaid only in a growing economy, where people are producing more and profit from sales to rising consumer demand. In a declining economy, none of that holds any longer. Shrinking supplies of fossil fuels and rising energy costs will drive down economic production around the world. Outstanding debt will not be repayable. New credit will almost vanish.

Our communities are highly vulnerable. We have few systems of production, distribution, or finance that are owned and controlled democratically or locally. In other words, our economic resilience is low. We get along, depending on a global financial system that circulates money backed by little more than debt.

CCCR’s approach

To reduce our exposure to this global financial system, our local and regional economies must become more self-reliant. We have to strengthen locally-owned financial organizations and initiatives and bring available investment and credit into closer alignment with local, long-term interests, opportunities, and assets. CCCR focusses its efforts on the following aspects of this task:

  • Collaboration with existing intermediaries (especially credit unions, Community Futures Corporations, and aboriginal development organizations) to build their capacity and realign their investment strategies in support of production that increases food, energy and shelter security.
  • Equity pools targeting enterprises that increase community resilience. Tax credits are one means to mobilize local investors in support of these enterprises. Another means are initiatives to build pools of venture capital and credit dedicated to long-term, triple bottom-ine investments. (For example, the Slow Food Foundation accumulates capital to finance the rebuilding local food systems.)
  • The potential for lending based on fees and savings, not on the borrower’s prospects for repaying the principal plus compound interest. This is key to enabling households to live more affordably and to fostering enterprises that meet a locality’s basic needs sustainably.

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Resources We Recommend

To make a real difference, community economic development organizations (CEDOs) have to own productive pieces of the local economy. But finding the capital to make such investments is only part of the issue. A CEDO also requires technical skills (competence) and managerial ability (capacity) that are equal to the task. Unfortunately, the funders most capable of supplying capital are also the... Continue reading: Equity Capital for CED ...
This report by the BC-Alberta Social Economy Research Alliance explains how credit unions can overcome their compulsion to compete with banks and instead develop a powerful and central role in the social economy in B.C. and Alberta. Read it now. Continue reading: Credit Unions and the Social Economy ...
The New Economics Foundation is an innovative British research organization that challenges mainstream thinking about economic systems and well-being. We recommend The Ecology of Finance, concerning the institutional diversity that must replace the current “monoculture” of mega-banks, and From the Ashes of the Crash, 20 first steps for recovery from a global economic system. Continue reading: New Economics Foundation ...
This research report by the BC-Alberta Social Economy Research Alliance (BALTA) offers a critical analysis of Nova Scotia’s co-operative development system and the role that finance plays within it. Read it now. Continue reading: Supporting Innovative Co-operative Development ...
In the last 20 years, new models of community investment and community enterprise have arisen to help get capital to communities. They in turn have raised still more questions, especially about the ability of communities to put capital to work, responsibly and effectively. Now, recession and rapid changes in energy, food, and climate have elevated community capital from a "chronic" issue to an "... Continue reading: Capital for Communities ...
The NFCDCU is a coalition of American credit unions that serve low- and moderate-income people and communities. NFCDCU’s policies and programs show what “people worthy” banking is all about. The article Building Sustainable Financial Co-operatives provides additional information about the organization and its members, especially their actions in response to Hurricane Katrina. Continue reading: National Federation of Community Development Credit Unions ...
INAISE is a global network of financial institutions dedicated to social justice and environmental responsibility. Its members exchange experience, disseminate information, and demonstrate to the world how money can be a means to achieve positive social and environmental change. Continue reading: International Association of Social Finance Organisations ...
Founded in 1980 as the E.F. Schumacher Society, the New Economics Institute is dedicated to building strong local economies that link people, land, and community. In addition to a vast range of publications, workshops, and a very thoughtful enewsletter, the Society is an excellent source of information about Local Currencies, Community Land Trusts, and Microcredit. Continue reading: New Economics Institute ...
Slow Money is an organization, a movement, and an investment strategy that aims to bring money “back down to earth” by fostering small-scale but long-term investment in local food, farms, and fertility. Its president, Woody Tasch, has now published an explanation of this strategy of food system investment - Inquiries into the Nature of Slow Money: Investing as if Food, Farms and Fertility... Continue reading: Slow Money ...