microcredit
'Occupy' Spanish-Style... Big Lessons for Us?
Back from the first global conference on money in politics in Mexico City, I'm bursting with stories that might carry messages of possibility that Americans need right now. Sure worked for me.
In Spain, with one-fifth of its population jobless, the Indignados movement--that paralleled our Occupy-- erupted with protests in 2011. But instead of fading from sight, by early 2014 the Indignados had set the stage for the birth of a new political party: Podemos, "We Can."
In only a few months, Podemos surprised everyone by winning 8 percent of the Spanish vote for the European Parliament, giving it five of 54 Spanish seats. One year later, in coalition with other grassroots movements, Podemos won mayor's races in Barcelona, Madrid and other cities. Today it is Spain's third largest political party. "Unprecedented" declared the pundits.
The Party's aim has been to "capture a desire for transparency and participation in politics" stirred by the Indignados movement, Miguel Ongil, 35, Podemos' point person on finance and transparency explained to me. During the Mexico City conference, I scribbled furiously as he laid out three ways his new party stands against corruption and for social equity.
"Crowdfunding." Miguel described the Spanish system of public campaign financing in which parties typically take out bank loans to pay their bills that are largely refunded later by the government based on the parties' showing at the polls. "But when the parties don't get the expected results, they cannot pay back their debts," Miguel explained later, so the banks then "get more credits to pay for credits..." In effect, these Spanish banks become "shareholders of political parties," another conference attendee quipped to Miguel.
But not Podemos. It wants no "bank donors" to whom it might feel an obligation, Miguel told conference attendees. His new party relies instead on "microcredit" from citizen supporters who are later repaid with public funds. This is our "innovation," he wrote to me later: "how to make your way around without state funding or bank credits, and our answer is simple: collaborative finances, crowdfunding and fresh ideas."
"Radical transparency." The party publishes all its accounts online in real time, Miguel told his audience which represented several dozen nations. Plus, "we are the only party with three external control mechanisms: the Court of Accounts, a second formal external audit, and citizens' control."
"Citizens' control": What does that mean? I asked.
Podemos' "accounts include so much detail, including the actual tickets, that an external audit wouldn't really be required," Miguel wrote later. "Anyone can do it, and they do. One of our publications of accounts had 138,000 views. Newspapers have been trying to nail us. We have so much citizen supervision it becomes a control mechanism in itself."
Radical equity. Miguel didn't use this term but for me it fits: Podemos requires that none of its elected representatives--from the local to the European level--earn more than three times the minimum wage. Any income above this level goes to the Party, where we "spend 50 percent in the Party and 50 percent goes to a fund to which anyone can apply for social projects. The sympathizers of Podemos decide in a 100 percent-participatory mechanism which projects are to be funded."
Clearly, commitment to participation runs deep in Podemos, and that includes some direct guidance from citizens. Podemos uses, for example, web tools to enable people collectively to develop its key documents, with party "synthesizers" weaving together the final versions.
At their height about a thousand Podemos "circles" connected citizens and their party in regular, horizontally-organized, local meetings. Miguel notes that in growing as a party, Podemos is working to find a new balance between in-person and virtual participation, "including electronic mechanisms of direct democracy." For example, citizens have the "possibility to propose 'legislative citizen initiatives,' which require the support of a minimum number of votes or circles. These give circles some weight."
Aligning action with its philosophy, another Podemos touch boils down to postage stamps. The head of the party is long-term activist Pablo Iglesias whose campaign letters were hand delivered to mailboxes, with this explanation:
This letter did not reach you by post, because mailing a letter like this all over the country costs over 2 million Euros. Ask the parties who sent you an election letter by post where they got the money to do so and in exchange for what. "We don't ask for favours from bankers or corrupt [politicians]... If you are reading this it is because someone who lives near you wants to change things for real.
Podemos policy positions range from strengthening the public health system to halting evictions over mortgage defaults to promoting clean energy. But, "underlining the entire platform is a proposed change in political culture, bringing transparency and participative democracy to all institutions," notes what's called a "Dummies Guide" to Podemos--making it as much about how we do politics as about any specific issue.
Since it's the takeover of our democratic process by big money that makes most Americans angry, Podemos is a story from which Americans could take heart. Saying good-bye to Miguel, I sensed his determination and clarity of purpose. I felt fortified to do everything I can to pick up where Occupy left off and to help build a passionate US democracy movement.
Now I hear Miguel whispering in my ear: The Indignados "created a new social majority that no party was able to represent." And now Podemos is determined "to turn that new social majority into a new political majority." Even three years ago, he could not have foreseen how far Podemos has already come. Hmm. Maybe it's not possible to know what's possible.
The Other Side of the Coin in Spain
MALAGA, Spain - Wholemeal rye bread, lettuce and chard are some of the products on offer from the El Caminito urban vegetable garden at the small organic produce market in this southern Spanish city, with prices set in "comunes", one of more than 30 social currencies circulating in the country.
MALAGA, Spain - Wholemeal rye bread, lettuce and chard are some of the products on offer from the El Caminito urban vegetable garden at the small organic produce market in this southern Spanish city, with prices set in "comunes", one of more than 30 social currencies circulating in the country.
"The aim is to find an alternative to the curse of unbridled capitalism and to sow the foundations of a more just and compassionate society," activist David Chapman of the Malaga Comun platform, the network responsible for the market, told IPS.
In the network, more than 700 registered users exchange goods and services using "comunes" as currency and recording transactions on the internet.
In Spain, over 30 local currencies coexist with the euro, and they are "tools empowering communities by means of the exchange of products and services and the creation of parallel markets," economist and writer Julio Gisbert told IPS.
The comun, the lazo and the coin in Malaga, the puma in Seville, the zoquito in Jerez de la Frontera (Cadiz), the pita in Almeria and the justa in Granada - all in the south of Spain - are some of the social currencies created with the shared mission of dynamising local economies and moving toward a more sustainable economic and production model all over the country.
The Puma Social Currency Network was launched a year ago in the Old City of Seville as a people-to-people mutual credit system. It seeks to "relaunch and localise the economy of this part of the city, and create community," local resident Natalia Calzadilla, one of its members and a producer of vegetable jams, told IPS.
Puma users keep a hard copy of their transactions in goods and services on cards. They also upload their offers and requests on the Community Exchange System (CES), a platform created in 2002 in Cape Town, South Africa, which can be used in 56 countries for transactions in social currencies or time exchange.
Madrid has the boniato; in the northern city of Bilbao, the local currrency is the bilbodiru; and in the northeastern town of Girona, the euro-RES.
The euro-RES was created in Belgium over 15 years ago, with the same value as the euro. It is used by a network of some 5,000 small and medium businesses, as well as by individuals, as explained on its web page.
Users of these alternative currencies come from all walks of life: "They are masseuses, doctors, electricians, lawyers, professors... and the quality of what is on offer is amazing," said Chapman.
The Puma Network, which brings together students, the unemployed, professionals and tradespeople, promotes creativity, the development of new skills, moral support and self-esteem for its members, said Calzadilla.
She paid another member 25 pumas (equivalent to 25 euros) for a massage. Now that person is credited with that amount to buy another service or goods in the community. The project organises a monthly market, called Mercapuma, where producers display their wares, and on Mondays a food store sells organic and homemade foods.
Carmela San Segundo offers English, French and Esperanto classes to members of Malaga Comun, and told IPS she paid for painting two rooms in her house and repairing her computer in comunes.
Spain's economic and financial crisis is encouraging experiments in social exchange, which may use alternative currencies, barter or time banking, "because people are seeking different ways of life," said Gisbert, the author of "Vivir sin empleo" (Living Without a Job) and the blog of the same name.
According to Gisbert, there are more than 300 time banks in Spain, so called because they do not bank money but hours. When a person performs a service, he or she is credited with the appropriate number of hours in return.
Although complementary currencies are criticised for not solving the problem of poverty, Gisbert argues that their goal "is not to feed people in need, but to seek mutual help to achieve self-sufficiency and a new and more sustainable social model."
The coin, a currency created in the town of Coin in the province of Malaga, is part of the global transition movement and is intended to serve as an instrument of reaction to and change from "the energy, economic and environmental crisis," according to its web site.
Most of these social currencies, launched by organisations or networks, have no official basis, Gisbert said. However, that does not mean this small-scale phenomenon is illegal.
Alternative currencies are not a new invention, but a global phenomenon that has emerged especially in industrialised countries. There are complementary currencies in the United States, Canada, Germany, Austria, Switzerland, the Netherlands and other countries. For instance, in the multicultural London borough of Brixton, transactions can be made in Brixton Pounds.
The Brixton Pound, which is issued in different bills annually, is one of the most innovative social currencies, Gisbert said.
Meanwhile, groups associated with alternative currencies are becoming interested in providing microcredit. Jose Luis Gamez, the son of the founder of the axarco, which circulates in Axarquia in Malaga province, would like to be able to finance social economy projects in the region with this currency that was created in 1988.
But the silver and copper axarco coins are no longer used because of the cost of minting them. Today, they are collectors' items.
As well as promoting the exchange of goods and services, alternative currencies can be used to put a value on the work of volunteers or those who create learning, according to the philosophy of an international project, tgl (teaching, giving, learning).
As it makes headway in Spain, tgl is using the social currency L, which is created when people teach or learn skills or knowledge, participate in voluntary projects or carry out social enterprises that generate employment and local wealth.
"L is not a currency to facilitate barter or exchange, but to generate wealth because it injects liquidity into the system. It is created by teaching and learning, volunteer work and social enterprise," Raul Contreras, co-founder of the social change platform Nittua and promoter of the Okonomia popular economics school, where students and tutors are paid in this alternative currency, told IPS.
The Wolf Is Guarding the Sheep: Why Microfinance Needs Regulation Too
In the wake of the biggest financial sector collapses in nearly a century, calls for increased regulation are commonplace. And yet the microfinance sector remains almost entirely immune from any oversight. The US general public generously lend to poor people in developing countries via lending platforms and specialized microfinance funds in the belief that their money is being used to help. Evidence to date challenges this belief. While the SEC appeared largely incapable of regulating the financial service sector in the US, it is either ridiculous or naive to the extreme to believe that the microfinance sector is somehow unaffected by the warped motivations that led us to the current mess. Philanthropy may encourage individuals to invest in microfinance, but there is no assurance that those managing the funds are as principled.
Microfinance faces mounting criticism. Mohammed Yunus, the Nobel Peace Prize winner often believed to have founded the microfinance movement, was fired last year from the bank he founded. A string of client suicides and cases of forced prostitution in India under the pressure of aggressive microfinance banks did little to improve the reputation of the industry. The microfinance sectors of entire countries have collapsed, perhaps most spectacularly in Nicaragua. Academic evidence is rapidly disputing the claims of poverty reduction following a $100 loan, and yet the US general public continues to provide the fuel for these fires with zero protection from the SEC, reassured only by the vague promises of self-regulatory bodies largely run and financed by, you guessed it, the microfinance funds. The wolf is guarding the sheep.
If microfinance really is a new asset class it should be regulated as such. Vast profits from over-hyped IPOs, most notably in India and Mexico, have yielded phenomenal returns for a few lucky players. The profit incentive, ever present where Wall Street operates, drives the financial sector of the planet. Regulators intervene to limit the damage such incentives can potentially have on vulnerable or uninformed citizens. The recent financial meltdown demonstrated the damage reckless profiteering can have on individuals, and entire countries. Apparently, when a US citizen lends $100 to a poor Nigerian woman through Kiva or the microfinance fund of some Wall Street behemoth, neither the US citizen nor the Nigerian woman requires regulatory oversight. Is it any surprise abuses occur?
US-based NGO Accion netted a tidy $270 million profit in the IPO of Compartamos, a Mexican microfinance bank that charges up to 195% in interest to the poor women of Mexico. Kiva invested $5 million, predominantly from the US general public, into a Nigerian bank that was charged interest rates of 126% and operating beyond the confines of even Nigerian banking law. Kiva users preferring to finance activities in Latin America could chose businesses as diverse as cock-fighting or coca leaf vendors, despite both being illegal under California State law. In the case of the questionable Nigerian bank, Kiva and various funds did eventually withdraw their investments once the media began investigating. The question is how, and why, did they invest in the bank in the first place? They either knew what was going on, or had no idea - it is not clear which is worse.
That microfinance can be profitable is well known, but less well known is the number of children of so-called micro-entrepreneurs who are removed from school to stack shelves or sell wares in their parents businesses, often in contravention the UN Convention on the Rights of the Child. We are told loans are used to finance entrepreneurial activities. Estimates of the proportion that is used for pure consumption are as high as 90%. Does this appear remotely transparent?
If microfinance is to survive the current wave of criticism, and improve its abysmal track record on poverty reduction, it appears that increased regulation might be a wise place to start. Those most vehemently against such regulation, the free-market devotees, will naturally resist such measures. But if we genuinely believe the poor deserve to participate in the financial services we take for granted, we should afford them the regulatory protection we also take for granted. Regulating the financial services sectors of developing countries is cumbersome, so perhaps instead we should regulate the microfinance funds and lending platforms in Europe and the US. This may reduce the atrocities practiced by the less scrupulous practitioners in the field, if their source of funding is jeopardized each time a client is forced into prostitution to service a loan; and it may reassure the general public that their funds are being deployed wisely rather than exploitatively.