Financing the Society We Want

finance.jpgA fish will never create fire while immersed in water. We will never create sustainability while immersed in the present financial system.

Denis Meadows,  Foreword to Money and Sustainability1

Bob Wilkinson2 was a prosperous, North Carolina builder for 35 years…until the money for small-scale development loans dried up in 2008. The problem wasn’t that Bob didn’t have collateral or wasn’t paying his bills or didn’t have a great track record. No, the problem was that the local bank Bob had dealt with for many years had been bought by a bigger bank, which had been bought by a bigger bank still. The new gargantuan bank didn’t know who Bob was and didn’t care. For them, Bob was small potatoes—too small really to be worth the cost of giving him a loan.

Bob and thousands like him are still going out of business because big banks find it too costly to invest in little guys. Unfortunately, a downward domino effect then follows. When people like Bob go out of business: their employees lose their jobs; their suppliers lose business; the school district loses taxes; and all the businesses that supply food, gas, healthcare, clothing, etc. to all those people lose money as well. As stories like Bob’s multiply, local economies become ever more fragile—even as the big banks and corporations accumulate more and more cash that they siphon away from our state and into Cayman Island accounts and Indian factories.

Common sense tells us that today’s one-size—“Too Big”—finance system is killing grassroots economies across America. A mountain of hard data is now confirming this fact (see “Why Invest Locally/Regionally” section). A 2012 report from the Club of Rome to the World Business Academy and Finance Watch lists its devastating effects as:

  • It causes boom and bust cycles in the economy
  • It produces short-term thinking
  • It requires unending growth
  • It concentrates wealth
  • It destroys social capital

“Any one of these is probably enough to derail the most carefully considered plan for transition to sustainability. Together they are a prescription for disaster, which is precisely what they are giving us.” 

The question now is: “what then shall we do?” A new approach to using local money to create local social and economic vitality is needed. We call it Good Cause/Good Return Investing.

As part of our mission to foster vibrant, diverse, and economically resilient communities, SPI, a registered 501(c)3, is seeking to repatriate local money, that is, to get it circulating into local projects that increase local economic vitality while providing a reasonable return to local investors. Our goal is to create a self-sustaining flow of money going from small-scale local investors into good cause local projects such as affordable housing, green energy or an eco-industrial park.

We believe getting Good Cause/Good Return Investing to work is going to require:

  • Local investors get a reasonably good return on their money;
  • Their investment has a high probability of success and is secured with some kind of collateral;
  • The project is in line with both the investor’s values and the long-term health of  the whole local economy and community.

We provide the conceptual framework and the project expertise to allow people to participate in such Good Cause/Good Return investments in their own locale, where they can see what’s happening and know who’s doing the work.

One of SPI’s long-term goals is to make Good Cause/Good Return local investing easy, reliable and profitable for all stakeholders. In the process we hope to help “REV NC”— Rebuild Economic Vitality in North Carolina.