The diversity of finance

37. Framing essay: the diversity of finance Maliha Safri and Yahya M. Madra Copyright 2020. Edward Elgar Publishing. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. INTRODUCTION: WHAT IS FINANCE? Finance encompasses the processes by which people save and invest, borrow and lend. People have saved, even before the invention of money, as when farmers saved part of the harvest in case the following year’s output was lower than anticipated. Savings allows for inter-temporal allocation of resources, producing a kind of stability and security in the face of emergencies and unforeseen events. Alternatively, when saving is oriented towards growth, the function of investment is introduced. The farmer can use some savings to expand production at a larger scale in the future to accommodate the growth in family or community. Written treatises on borrowing and lending go back to Aristotle, as well as the scriptures of all major religions. For Aristotle, all interest, or profit for lending, was ‘unnatural’, as it makes a gain out of money itself and not the uses to which it is put (Kozel 2009). Religious scriptures allowed for interest, but decried what is known as usury, or interest rates that are ‘too high’. The Qur’an, for instance, mandates that an impartial scribe should record the terms of a loan: ‘He shall write, while the debtor dictates the terms . . . refrain from all kinds of usury . . . if the debtor is unable to pay, wait for a better time’ (Qur’an chapter 2, p. 282; pp. 276–80). In fact, the lender who was unable to be patient would be visited with retribution. Both castigation of the lender, and that the borrower dictates the terms, are ideas that seem altogether foreign today. The first pairing of savings and investment is a non-monetary example. Whereas the second coupling of borrowing and lending, to the extent that it involves interest rates, is premised on a monetary system of equivalence measuring disparate things in the common medium of money. Lending at an interest rate requires an equivalence between money and time – the length of time of the loan translates into an amount of money in addition to the loan that must be repaid. The processes of borrowing and lending through the credit system brings into existence money as a generalized system of equivalence (see also Graeber 2012). Finance can assume both monetary and non-monetary forms. One can invest one’s own labour and sweat, what people commonly call ‘sweat equity’, although labour is often made invisible in finance. One can invest capital, or one can invest some combination. Investment is linked to expectations of growth and claims on surplus (profit being the most commonly used term), with swirling and competing ideas for how surplus should ‘rightly’ be claimed or distributed, and who should bear the risk if there is a problem in realizing the anticipated surplus value. The relations above are direct: the farmer saves for herself, by herself; the borrower strikes a deal with the lender who wants to lend precisely the same amount; the entrepreneur self-finances. Money is itself a form of intermediation, however, the signifier ‘finance’ refers to an entire family of institutions that carry out the function of intermediation. The institution of the bank, as one of the most prominent actors of intermediation, pools and redistributes 332 EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY AN: 2381087 ; Gibson-Graham, J. K., Edward Elgar Publishing, Dombroski, Kelly.; The Handbook of Diverse Economies Account: s9001366.main.allehost Framing essay: the diversity of finance 333 money for different purposes and facilitates relations between savers, borrowers, investors and lenders. The role of finance assumes its most polarized terms in contrasting Marxist and neoclassical economic approaches. From a traditional neoclassical economic perspective, finance performs a number of beneficial roles: (1) it provides capital for a variety of types of investment so that investment is not constrained by the ability of the capitalist entrepreneur to self-finance, (2) it smooths consumption by allowing people to save today to consume later, (3) it diffuses risk since gains and losses are spread across many rather than one, and (4) it turns illiquid stores of value into more liquid forms of value, by using assets like homes and firms as collateral for further borrowing. Banks are one way to connect anonymous savers and borrowers, but they are not the only actors to perform these roles; equity markets (i.e. stocks and bonds) constitute another channel. In stock markets, ownership claims (or shares) of capitalist corporations meeting minimum criteria of credit worthiness are sold off to raise capital. Those shares of stock are tradable assets and hold the promise of profit distributions in the form of dividends. Bonds are simply loans promising interest payments, issued by the public and private sector alike.1 From a traditional Marxist perspective, finance capital is a variation of capitalism that is essentially parasitic. The capitalist producing commodities obtains surplus value, or profit, by engaging in exploitation of labour. The productive circuit begins with a sum of money capital, the capitalist purchases commodities (labour power and the means of production including raw materials), labourers produce commodities with greater value embodied in them, and the capitalist appropriates and realizes that greater value as profit upon sale of the final commodity. The shorthand for the circuit of capital is M–C . . . P . . . C′–M′ where M denotes money capital, C denotes input commodities (labour power and means of production) and P denotes the production process in which new value is created. C′ denotes the final commodities produced inside the production process with the prime mark indicating the expansion in value that labour has added, and M′ is the expanded monetary value of these commodities – the prime here indicating surplus value. On the other hand, the circuit of financial capital M–M′ is much shortened. There is an initial sum of money capital, lent out to productive capitalists and workers alike, and in exchange more value is received (in the form of interest). Unlike industrial capitalists, financial capitalists are not involved in the production of surplus value. Rather they receive returns from lending (interest income), returns from holding equity (dividends) and returns from trading financial assets (capital gains). Financial capitalists may lend to industrial capitalists, or to workers and communities. When they lend to industrial capitalists, that returning flow is a cut from the surplus value extracted by industrial capitalists from direct labourers. When financial capitalists lend to workers and communities, the returning flow is a direct transfer of value from the income of workers to lenders. This is what Marx called ‘secondary exploitation’ or ‘profit upon expropriation’ in order to distinguish it from the class exploitation that occurs inside the production process as a result of the appropriation of unpaid labour (Lapavitsas 2013, pp. 141–7). From a Marxist perspective, therefore, finance involves a form of profit that is distinct from, yet complexly related to, the profit from production. In between these two radically opposed positions, there is a third position that simultaneously affirms and criticizes finance. The British economist John Maynard Keynes (1936, 1937), writing in the aftermath of the 1929 stock market crash and during the Great Depression when the pro-market laissez faire programme of neoclassical economics had lost all its legitimacy, argued forcefully that financial markets have an in-built tendency to produce business EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 334 The handbook of diverse economies cycles (booms and crises). Given ‘fundamental uncertainty’ regarding the future states of the economy, Keynes argued, the economic actors, and in particular, investors, have no secure ground to anchor their expectations regarding prices, and therefore base their decisions not on the so-called fundamentals but on other economic actors’ behaviour. While this herd behaviour may be the right thing to do for each investor, it leads to speculative bubbles and sudden bursts, thereby increasing the systemic risk of failure. Liquidity, considered to be a virtue from the neoclassical perspective, turns out to be an attribute of the financial system that can also be a source of trouble if there’s too much of it. In response to this inherently irrational dimension of finance, Keynes’ advice is not to eliminate finance altogether but to govern it through a coordinated mix of monetary and fiscal policy interventions and regulate it to harness its intermediary functions for the growth of the private, capitalist sector. For Keynes and his followers, like Marxists, interest-bearing capital and the rentiers are parasitic, as they ‘exploit the scarcity-value of capital’ (Keynes 1936, p. 376). Yet, unlike Marxists, they do not connect this ‘profit upon expropriation’ with the injustice of class exploitation that structures capitalist relations of production and instead embrace ‘the advantages of decentralisation and of the play of self-interest’ (Keynes 1936, p. 380) albeit within bounds regulated by the public sector. One pole in this normative debate holds finance to be beneficial, while the other holds it to be parasitic. In this chapter, we approach finance from a class-based, diverse economies perspective to demonstrate that there is nothing inherently ethical or unethical about finance. This is a difficult proposition, since it is uniformly seen as one or the other: we seek instead to show that it can be either, or both. We explore why a diverse approach to finance is important, moving from the idea of diversity to the ethico-political choices that are at stake in different forms of finance. Finance in the capitalist realm is perhaps always extractive, but if finance is being deployed to further collectively desired processes, actors and organizations, and assuming both monetary and non-monetary forms, then it can be deeply ethical in terms of sharing the surplus to facilitate communities and replenish the commons. DIVERSE FORMS OF DARK FINANCE Let us begin with a type of finance that rarely reaches our attention, but one that can have devastating impacts in the majority world: debt bondage. Recent research in Uttar Pradesh, India has identified debt bondage as the dominant form of finance in entire villages around the city of Shahjahanpur (Kara 2014). The process of debt bondage began about 15 years ago, when carpet contractors began recruiting male heads of family by providing money advances almost entirely to meet basic consumption needs. The average loan size for the 2 010 bonded labourers interviewed by the researchers was $85 (Kara 2014). Contractor/lenders then required men, women and children of the family to work 12 or more hours a day, six or seven days a week to meet a production quota of hand-made carpets as repayment for the debt. Families (split between poor minority Muslims and those in the lowest castes) became ensnared for years, unable to leave the villages or pursue other employment. This form of finance (debt bondage) had dramatic effects on labour relations, and was intentionally designed to do so. All people interviewed said they were forced to work in difficult and dangerous conditions, that they ate only two meals a day, and were forced to live and sleep in the same place they work (with some being locked in or chained to the loom). Common ailments reported were eye disease, spinal deformation due to hunching over the loom, malnutrition, cuts, sores, infections, and EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use Framing essay: the diversity of finance 335 pulmonary ailments. Extrapolating from their sample, Kara estimates 28 per cent of India’s two million carpet sector workers are in a form of debt bondage. Tracing the supply chain of the carpets, investigators found they ended up in Bloomingdale’s, Macy’s, and other major retail stores in the USA. What this immediately brings into focus is the relation between debt bondage and modern-day slavery. Essentially, debt bondage profoundly changes the labour relations of carpet weavers and turns them into slaves. Most people interviewed had little idea of how much debt was left, and it was up to the judgement of the contractor to determine when the debt had been repaid. Slavery, a regime of labour, is actually produced by a regime of finance. This joint regime occurs in many industries and countries including agriculture (e.g. shrimp, rice, cacao), manufacturing (including beedi cigarettes, bricks, construction) and services (prominent examples being sex work and domestic labour) (Bales 2004; Belser et al. 2005; Human Rights Watch 2018; Iqbal 2006; Kara 2009, 2014). These commodities are often sold far away from their place of production, with goods like hand-woven carpets ending up being purchased by the richest consumers in the richest countries. Deeply extractive forms of finance occur in the richest countries as well, albeit amongst the poorest communities in those countries: pawn shops and payday lenders. Payday loans are small short-term loans, in which a person provides a post-dated cheque for the loan plus a fee dependent on the amount borrowed. The standard time frame for loan maturity is two to four weeks, corresponding with the borrower’s next ‘payday’.2 In the USA, the majority of loans range from $100 to $500 with an average loan amount of $375 (Burtzlaff and Groce 2011). The financing charge is usually $15 per $100 borrowed, which translates to an annual percentage rate (APR) of 400 per cent (Bhutta et al. 2016). While they are marketed as very short-term loans, the average borrower holds a payday loan for five months, rolling it over because they do not have enough money to repay the loan when it is due (Pew 2012). Pawn shops also issue loans (on average $100) but on the basis of physical collateral like jewellery and electronics. The size of the pawn loan is a fraction of the pawnbroker’s assessed value of the collateral, ensuring that the loan is more than fully secured in the case of default. Pawn shops usually charge an annual interest rate of 250 per cent (Bhutta et al. 2016). For the sake of comparison, in recent years credit cards have charged an annual percentage rate of around 14 per cent, going up to 30 per cent for those with poor credit histories. Users of ‘grey market’ lenders like pawn shops tend to be young, black, and economically disadvantaged in terms of income, education and employment (Baradaran 2015; Bhutta et al. 2016). Both pawn shops and payday lenders have dramatically increased in prevalence in the USA inside communities of colour in the last decades, with ‘how to start a pawnshop!’ books proliferating on Amazon. From the Marxist perspective, these are stark instances of ‘secondary exploitation’ hitting working families and poor communities, regardless of the way they earn their livelihoods: as wage-earners or worker-owners, self-employed or precariously employed, they are all subordinated to the unequal terms of the relationship, each with different levels of vulnerability. Neoclassical economic perspectives also consider these as problems. Yet, the problem is, ironically, defined as not enough finance. According to institutions like the US central bank (the Federal Reserve), the diagnosis is that these borrowers are excluded from formal financial markets, which is why they are subject to these usurious interest rates (Bhutta et al. 2016). If only they could gain access to formal financial markets, were able to access credit cards, have checking accounts, home mortgages, student loans or small commercial business loans, then the outcomes would be entirely different. The new pro-poor mantra in emerging market and EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 336 The handbook of diverse economies developing economies is ‘financial inclusion’, an idea that holds that these segments of the population must be included in the shared benefits of formal finance. How, then, has the panacea, formal capitalist finance, worked out in the last 40 years? In the neoliberal era, finance has been liberalized (or ‘freed’) in most economies. This move toward liberalization reflects the power of the global financial community and the power of ideas about the need to unleash finance. In this context there has been a process of financialization that has had dramatic implications for households and communities. On the household front, two important developments mark this period: the decline in the share of income going to labour, and the transformation of the welfare regime across advanced capitalist countries. Government spending as a share of gross domestic product has declined, and inside that shrinking pie there has been a reallocation of state spending away from public goods (Rudra 2002). This was a shift away from the priorities of the so-called ‘golden age’ of the post-Second World War years that privileged social services including education and housing. At the same time, there has been a marked increase in public debt, with the USA leading the pack because of the unique advantages it enjoys in the global system due to the domination of the dollar. With the bottom 90 per cent of households experiencing either a decline or stagnation in wages (also because of a universal decline in the power of collective labour), and a decline in the social services they received from the state, they turned to credit, or debt, to address the gap. Household debt rose in many ways: using credit cards to finance consumption, using mortgages to finance shelter, using student loans to finance education. As a result, finance replaced the Keynesian welfare state as the agency managing ‘effective demand’ (Marazzi 2008). Debt has become the new basis for social life leading some observers to argue that everyday life has been financialized (Lazzarato 2012). Individuals must self-manage a set of financial calculations no longer undertaken by the state or other institutions (such as labour unions), privately managing investments in education, housing and an asset portfolio for retirement (Bryan et al. 2009). A new subjectivity of risk pervades the social fabric, and generates a growing inequality between at-risk households and those few capable of managing these new techniques and ways of being (Martin et al. 2008). This is what is meant by the financialization of daily life as a new form of governmentality, or logic, that leads to a finance-based assessment of value and measure of life (Joseph 2014; Martin 2002). In this view there is a mythic assumption that we have all become entrepreneurs of the self, calculating risk and reward across a range of life’s daily basic functions of school, housing, health, retirement, etc. and moving resources capably between the most lucrative outcomes across those functions.3 Financialization signals a competitive calculus that goes beyond finance capital, and also generates more crisis-prone dynamics that culminate in events such as the 2008 recession. US households (particularly within communities of colour) had increasingly turned to the subprime market for home mortgages; being excluded from the prime market meant that they were subject to predatory lending and adjustable rate mortgages (Dymski et al. 2013). After the housing price peak in 2006, those adjustable interest rates reset at much higher levels, and homeowners found themselves unable to sell at purchase prices or refinance their debt, and foreclosures soared. Assets (securities) backed by mortgages began to lose their value, and investors around the world were affected, leading both to the spectacular demise of large financial institutions, and the global tightening of credit, which had recessionary effects globally. Jobs were lost, homes were lost, home prices declined, construction and other firms shrank, and yet bailouts helped the very financial institutions at fault because we were told that EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use Framing essay: the diversity of finance 337 their collapse would be apocalyptic. High financial institutions were able to offload the risk that they themselves created onto poor households who bore all the consequences. All these processes designate finance as an apparatus of dispossession, a speculation driven casino economy prone to crisis, a cluster of mechanisms and dispositifs that facilitate the transfer, rather than the production of value. Yet, as Michael Hardt and Antonio Negri (2017) argue, finance, or better yet, the processes of financialization (securitization and marketization through derivatives) do not only transfer value but actually design and implement mechanisms of the extraction of the common, whether this entails ‘the control of social cooperation and the extraction of value produced in the innumerable circuits of social life’ or ‘the extraction of value from the earth and the various forms of natural wealth we share in common’ (Hardt and Negri 2017, p. 162). Financialization, they argue, by creating mechanisms of measurement and commensuration that safeguard the investors against risk and uncertainty, captures the immeasurable and the incommensurable, whether it is pollution, indigenous knowledge or social networks. The cases of debt bondage discussed above, or even some cases of microloans, to the extent that borrowers are subjected to the ‘secondary exploitation’ of finance, can also be seen as ways in which finance takes its cut from the social value produced by the deep and diverse hinterland of economies beyond the capitalist mainstream, whether it be value produced through household labour or through non-capitalist relations of production. FORMS OF FINANCE THAT WORK AGAINST THE GRAIN Finance, under financialization, has outgrown its subservient role as an intermediary between lenders and borrowers or savers and investors and become a constellation of mechanisms and dispositifs that salvages and creates ‘capitalist value’ out of ‘non-capitalist value regimes’, out of the circuits of social life and cooperation, and out of the earth and its ecosystems. Viewed from this perspective, it is indeed Finance (with a capital F) against the commons in its most expansive sense, in all the glorious diversity of the forms of living and being. Yet, there is a sense in which finance itself is a commons. To begin with, banks themselves do not own most of the money capital that they lend out, even though they control how and to whom that capital is allocated (Biewener 2001). As Marx writes about the banking and credit system: neither the lender nor the user are its owner or producer. It thereby abolishes the private character of capital and inherently bears within it, though only inherently, the abolition of capital itself. Through the banking system, the distribution of capital is removed from the hands of private capitalists and usurers and becomes a special business, a social function. (Marx 1981, p. 742) What this means is that although the bank is inherently a commons, offering the opportunity for intentionally and collectively deliberating the allocation of capital and for what purposes, this does not mean that in practice, this collective control is enacted or enabled. Instead, formal Finance has, for the most part, been characterized by a very different evolutionary path in which the socialized character of the bank has been displaced and usurped. A few get to decide what to do with the collective deposits of the many. In this section, we would like to turn our attention from how Finance controls and captures the common to how finance-as-commons can be put to the use of the common. Or, what would EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 338 The handbook of diverse economies it mean to mobilize finance as a commons, to support postcapitalist politics? In other words, what are the forms of finance that work against the grain? In a manner, finance, as an aggregated common of capital distilled into an abstraction and emancipated from the proprietorship of its owners, by making capital mobile and deployable, creates the possibility of social cooperation at an increased scale. Usually, for its champions and detractors alike, Finance is associated with a global scale. Yet, finance, with a small f, can refer to a multiplicity of scales, local, regional, national, and, of course, translocal and transnational. By distinguishing Finance from finance, we do not seek to create another sterile binary, rather, we seek to pluralize and diversify approaches to finance. Here we cannot promise a uniform calculus in opposition to financialization. We don’t have one ‘Other’, we have many ‘others’ to offer that have their own ways of negotiating what it means to perform finance. This is what a diverse economies approach to finance is: to not presume one type, but to actually investigate the diversity of financial forms and intermediation that currently exist. Our section’s contributors deal with various forms of finance – Islamic banking, rotating savings and credit associations, hacking finance through cryptocurrencies, community finance, indigenous finance and allocation – all guided by very different norms, constituted by different communities, and assuming different forms of functioning. Their commonality lies in their alterity to conventional finance, but also in terms of how they each approach an ethical grid of coordinates. We are particularly influenced by Gibson-Graham’s (2006) examination of how diverse economic practices deploy ethical criteria in their decision making around necessity, consumption, the commons, and surplus. In Take Back the Economy, Gibson-Graham et al. (2013) expand this list to include encounter and investment. Decisions around these nodal points require the broad participation of all those affected, solidarity with humans and non-humans, and fostering of class justice. In what follows we make use of the growing literature on ethical coordinates in the diverse economies tradition, as well as the proposals by critical finance and economic researchers that advocate for changes that lessen inequality and further social equity and fairness (Chang and Grabel 2014; DeMartino 2002). The diversity of principles that may orient and ground forms of finance working against the grain, or that would be supportive of community and solidarity economies, include the following: ● Heterogeneity. A commitment to heterogeneity has implications for how finance is organized, how organizational forms of surplus labour receive credit, and how debts are repaid. There would be a diversity of institutional forms and practices that provide finance at the right price to the full range of enterprises including cooperative ones; to borrow from ecology, a pluriculture of finance would be richer than a monoculture serving capitalist priorities. A pluriculture would be abundant in experimentation (Grabel 2018). Debt need not extract a pound of flesh, instead, it can be paid in-kind, or labour, or in outcomes such as biodiversity conservation (Biewener 2001). ● Justice. An ethic of care would ask the question of what fair finance ought to look like. When it comes to international trade, a rich field of critical inquiry and practice has built up around ‘fair trade’ (DeMartino 2002), whereas an accompanying emergent agenda of ‘fair finance’ is not as legible as a distinct social movement. Fair or ethical finance would be organized around solidarity, seeking to protect from risk especially vulnerable social groups rather than exposing them to the harshest and most extractive terms. EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use Framing essay: the diversity of finance 339 ● Transparency. There would be a commitment to transparency to the maximum extent possible. To the degree that people cannot understand the instruments they use and the contracts they enter, they can be subject to risk they did not know was even possible (the 2008 financial crisis is a case in point). If the instruments of finance, e.g. the operations of derivatives, are not transparent, then it also becomes exceedingly difficult to regulate them. But also, transparency leads to the democratic possibilities of participation, something that current forms of finance which uphold it as the domain of ‘experts’ cannot accommodate. Taking this conceptual grid, of justice, heterogeneity and transparency, we now think through some concrete examples to show what we mean. First, we think through a whole range of ‘other banks’ including zero-interest rate and below market interest rate institutions such as credit unions, rotating savings and credit associations and public banks, as well as ‘time’ banks. Second, we consider a whole domain of finance beyond debt, including debt cancellation, contracts that don’t use money for repayment, grants, and gifting. Third, we think through a range of finance designed to support or incubate worker ownership and control as versions of postcapitalist politics of investment. We also readily admit that finance may be the most under-researched area in diverse economies scholarship, and infuse this section with questions that may guide future research. All three forms reveal heterogeneity – of how they organize finance, of what kind of economies are sustained, and of how debt is repaid. They are all ways in which both class and other concerns of justice are foregrounded. And their mechanisms of operation are reached through broad participation and public debate, thereby providing transparency in finance. Nonetheless these clusters are neither exclusive nor complete; they reflect our interests. ‘Other’ Banks In conventional banks, the few guide the decisions regarding the collective deposits of the many; in contrast, here we describe different types of banks that self-organize in order for the collective to occupy the seat of power. Consider credit unions and public banks, both being alternative banks designed to offer lower credit costs. Organized around the common bond of association, credit unions emphasize mutual aid and collective well-being, serving as financial solidarity spaces for groups of the same occupation, the poor, and those excluded from mainstream banks or by institutional racism. Credit unions are owned by members who each have one vote regardless of the size of their deposit and have the means (through the board of directors they elect and are elected to) to control any surplus which is distributed back to the membership community and invested in its interests. Public banks, in contrast, are state owned and controlled banks (e.g. Sparkassen in Germany, or the Bank of North Dakota in the USA), disbursing credit for the social good and financing a variety of private sector and public sector projects. Public banks are like credit unions in the sense of having a specific mission or purpose which mark them as different. They both also disburse loans at lower than market interest rates. But public banks are different than credit unions in the types of loans they may originate, effectively expanding allowable categories of debt to include ‘community lending’ and emergency loans (Simpson 2018). And they can play a stabilizing role by facilitating counter-cyclical credit expansion. Rotating savings and credit associations are another kind of credit arrangement much more popular in the majority world, and certainly active in immigrant communities around the EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 340 The handbook of diverse economies world. These zero-interest funds are constituted by members who each contribute a saved amount which is pooled and then allocated to members of some community sharing a religious, ethnic or racial social bond (see Chapter 39 by Hossein in this volume). Borrowers repay but with zero interest, which actually amounts to a negative return for the lender if the locale experiences any inflation whatsoever. Zero-interest lending is fundamentally organized as the opposite of conventional banks since it involves a redistribution of value from the lender to the borrower, precisely because that is where social need lies as determined by communities. Profit-sharing finance as opposed to fixed or adjustable interest rates in the conventional sector, is yet another kind of banking arrangement that fundamentally addresses the share of surplus going to the financier (analysed by Dodds and Pollard as they examine different Islamic financial instruments in Chapter 38). It requires relational lending rather than ‘arm’s length’ distance preferred by conventional capitalist lenders who prefer the ‘objectivity’ of unrelated borrowers and lenders. In principle, profit-sharing finance redistributes risk; risk is to be shared by borrower and lender, not placed entirely on the borrower’s shoulders under conventional banking arrangements. If the profits are lower than anticipated, the lender receives less since the overall pie shrinks; if profits are higher, so is the amount earned by the financier. In practice, profit-sharing arrangements, to remain competitive, tend to offer rates of return on investment to lenders that are comparable with interest-bearing banking and the fees, commissions and penalties levied by these banks may tend to function effectively as interest (Kuran 1995, p. 161). Nevertheless, at least in principle, to the extent that profit-sharing finance has the potential to turn the lender into a stakeholder, there is room for rethinking it through a framework of ‘class justice’ that takes a stakeholder approach towards surplus (DeMartino 2003; Özselçuk and Madra 2005). What would it look like for a lender to receive a stake in the surplus, and what is a fair share? Right now, interest rates are set by markets, which makes this stake non-negotiable, but what would it mean to fairly negotiate that which is fixed, taking into account the needs and abilities of both lenders and borrowers? And, more importantly, what would be the legal, economic and social conditions of sustainability of such arrangements under the competitive pressures of mainstream finance? Finance beyond Debt Diverse banks and banking arrangements encircle a justice-based negotiation between the needs and abilities of borrowers and lenders, which becomes perhaps most startlingly obvious when we turn to arrangements which either do not involve money at all, or engage in complex equivalencies between money loans and non-monetary repayment (Biewener 2001). ‘Debt for nature swaps’ (when countries put land aside into land conservation trusts) are only one example of loan repayment taking place through environmental conservation, which arose in the 1980s as environmental conservationists’ response to the debt crisis in Latin America. Costa Rica is often cited as a successful case, whereas Ecuador is a failed one (Isla 2015; Muradian et al. 2013). Despite the thorough critiques of these swaps – that they have dropped in occurrence per year, that effects were not concentrated in countries experiencing rapid deforestation like Brazil, that debt relief did not necessarily free up more resources for conservation expenses, etc. – there is a kernel here that must be retained: debt need not be repaid with money. Many possibilities immediately arise, accompanied by interesting questions on equivalency: how might debt be repaid with labour? with environmental measures? with EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use Framing essay: the diversity of finance 341 improvement of commons infrastructures such as irrigation systems, anti-erosion measures, and schools?4 If we valorize these as socially important measures and actions, then why would a socially constructed banking system not accept these as repayment for loans? The basic understanding of debt is loosened further in considering debt cancellation or debt forgiveness in either historical or contemporary jubilee movement campaigns. Michael Hudson (2018a) writes that debt jubilees routinely occurred in all major Bronze Age Mesopotamian civilizations. ‘Clean Slate Proclamations’ were made by dynastic rulers both upon ascension to the throne, or after crop disasters or wars, wiping out entire categories of debt (Hudson 2018a). The point of reference was not what would happen in case debt was forgiven (i.e. the unavoidable anger of nobility as assets of wealthy creditors were reduced), but what potentially catastrophic and destabilizing conditions might have arisen if debt was not wiped out. ‘This was not a utopian act, but quite practical, especially on ascending the throne. What the king lost in immediate payment, he got back in encouraging a land holding peasantry, who could pay future taxes and provide the backbone of the army’ (Hudson 2018b). Clean slate proclamations were part of the community’s self-preservation, and Hudson argues a similar process needs to be reinstated today when it comes to the onerous debt obligations of students, homeowners, and entire countries. In the contemporary era, the Jubilee 2000 Campaign resulted in approximately US$100 billion in debt cancellation for countries in the majority world. Catholic and Protestant groups from 40 countries united to press countries in the minority world to take action based on biblical reference to a jubilee year in which ‘slaves are freed and debts are eliminated’. They successfully lobbied the G8 to engage in this debt cancellation, combining grassroots organization (e.g. resulting in the world record for a hand-signed petition of 21 million people) and the outreach of prominent international ambassadors such as Muhammad Ali and Bono. On a localized basis in the USA, a ‘Rolling Jubilee’ was initiated as a project of Strike Debt, an offshoot movement/campaign of Occupy Wall Street in 2012. Declaring itself a movement of debt resisters fighting for economic justice and democratic freedom, they have purchased $32 million of medical and student debt, and then ‘abolished’ or retired it permanently. Both movements did not reach their goals (Jubilee 2000 aimed at abolishing all ‘third world’ debt, and retired a portion; Strike Debt aimed to abolish all predatory debt, and affected about 3700 medical debtors and 12 000 student debtors to date). However, through their functioning they seek to draw attention to the possibility for a politics of debt resistance and debt forgiveness. Debt forgiveness or cancellation is one thing, but disbursing funds without the idea of debt ever even entering the picture is obviously beyond debt altogether. Even though that seems too fantastic, we argue finance as a gift is ubiquitous. Gifting is mobilized through aid, donations and grants given out by states, organizations, communities, households and individuals. Gifting is done by the poor and the rich, and in fact evidence shows that the poor give a larger proportion of their incomes than the wealthy do, even though the latter make splashy headlines (Daniels and Narayanswamy, 2014). Gifting is both deeply relational and anonymous: it is what we do for loved ones, and for people we don’t know and will never know, as when people donate money for social or political causes or disaster relief. Mauss (1990) famously described the trio of obligations that make up the gift: to give, to receive, and to return. In some communities, gifting can mean the difference between life and death: millions of migrant households send money to families in countries of origin (remittances), some of whom could not survive without those infusions. Official remittances actually exceed all overseas development aid, and rival other international financial flows such as foreign direct investment (Safri EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 342 The handbook of diverse economies and Graham 2010). Gifting is everywhere, done by everyone, and yet the ‘iceberg effect’ sets in and veils this (Community Economics Collective 2001). Financing Postcapitalist Politics The debates around the regional Democratic Economy project of the Kurdish municipality-based democratic autonomy movement in Southeastern Turkey can be instructive about the necessity of non-capitalist forms of finance for practising postcapitalist politics at multiple scales (Madra 2016). During the short-lived ‘peace negotiations’ window of 2013–14, the Kurdish movement, to defend its autonomy in the face of the colonization of Kurdistan under the ‘capitalist modernity’ of the Turkish state, wanted to construct, using municipalities, a regional democratic economy around the leadership of a solidarity economy comprising consumer and producer cooperatives (both in urban and rural sectors). The strategy was to articulate a democratic community economy bloc around the vanguard solidarity economy by organizing an extensive and diverse sector comprising peasants, independent producers, shopkeepers, artisanal producers, small-scale family businesses and even ‘patriot’ Kurdish capitalist classes. The diverse and complex class composition of the Kurdish autonomy movement necessitated the adoption of sufficiently flexible economic politics that could accommodate the heterogeneity of institutional forms and factional interests. The project had many endogenous impediments but what ultimately prevented it from realizing its objectives was the collapse of the peace negotiations. One endogenous impediment important for our purposes here became clear quite early: the construction of a democratic economy, especially at a regional scale, and with the objective of rationalizing and socializing production and consumption required funds for various purposes: it was necessary to create distribution networks for small farmers and cooperative farms alike; similarly for farmers involved in husbandry, municipalities required resources to create hubs for refrigeration; and municipalities needed credit to undertake the various social service and public goods projects they needed to implement to improve the living conditions of their electorate. This necessity, when combined with a strong ethical concern about and a political distaste for being subordinated to capitalist forms of finance, made the absence of a non-capitalist finance a real problem. The problem of non-capitalist finance emerges for social movements and actors not only in Kurdistan, but all around the world – in Jackson MI, Paris, Kerala, and so on. Then what does non-capitalist finance look like? There is a long history of using finance to facilitate alternative economies. An important yet ultimately failed model was the wage earner funds (Löntagarfonderna) that were established in Sweden in 1980s (Pontusson and Kuruvilla 1992). The importance of this model emanated from the fact that it was seen as a logical extension of the Keynesian drive for socialization of investment towards economic democracy. A wage earner fund, financed through taxes on excess profit, was used to purchase the stocks of companies above a certain size with the objective of gradually transferring their ownership to workers. The failure of the initiative could be read as an indication of the limits of a Keynesian programme – the moment it reached the thorny issue of the transfer of the ownership of the means of production, the social democratic ‘deal’ between capital and labour breaks down. Yet, it could also be seen as a vindication and crystallization of Marx’s point which we discussed earlier, on the inherently collective (yet privatized and monopolized) nature of capital. The historical conjuncture of the early 1990s (global neoliberal revolution at its peak) and the balance of social forces in Swedish society at the time may have made the EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use Framing essay: the diversity of finance 343 wage earner fund a non-starter. But this doesn’t mean that it is impossible to revisit the model today (Gowan and Viktorsson 2017). Sweden’s wage earner fund was a component of a Keynesian macroeconomic vision. Yet, finance-as-commons can be used to promote postcapitalist politics at meso- and microeconomic levels as well. Consider the case of the Mondragón Cooperative Complex in Spain, where a group of cooperatives and companies are organized around a bank, Caja Laboral Popular. The latter provides the cooperatives in the Complex access to capital as well as monitoring, guidance and support through the ups and downs of the life cycle of each enterprise (Gibson-Graham 2006). Given its scale and institutional sprawl (financing a university, schools, social security system, research and development lab), Mondragón presents itself as a regional economy that puts patient capital in the service of incubating the growth of non-capitalist practices. Italy’s Marcora Law (1985) combined a variation on the Swedish wage earner fund model with the Caja Laboral model of the Mondragón experience. The law provides an opportunity for redundant workers to use up to a maximum limit of three years’ worth of unemployment benefits to start up a cooperative firm. In this regard, it is more timid compared to the Swedish model where the fund was financed directly from surplus value through a tax on excess profit tax. But on the other hand, this scheme was supported by a rigorous institutional framework where two different funds provide not only matching funding but also monitoring, training and support for the fledgling cooperatives. Even though the programme was suspended in the 1990s, it was revitalized during the 2000s and today it functions as an important exemplar for other social movements of economic justice around the world (e.g. the Labour Party in the UK). CONCLUSION It is easy to relate to and make sense of finance as an extraction of the common. It resonates with what we hear in the news with regards to the economic and political power of financial corporations; it corresponds in a twisted manner to the image that finance tries to project about itself: global, instantaneous, powerful, universal; it echoes in the scale and the size of financial wealth that has been created by financialization since the 1970s. In contrast, it is very difficult to imagine finance as a commons, as a form of accumulated and redeployable (alienable) assets that doesn’t have to belong to any particular person or entity and that can be used by anyone regardless of their relationship to it. Yet finance is both a constellation of mechanisms of extraction and concentration of alienated value and a process of resistance in which people mobilize their alienated and abstracted wealth against the financialization of life and for experimentation and building up a new way of life. NOTES 1. 2. One relevant distinction between banks and bonds is that banks work on a fractional reserve system, bonds do not. One relevant issue is that because workers are paid after working for two or four weeks, their employer can actually use that value (rightfully belonging to the worker) as a form of credit for the business in the meanwhile. But this also means that the worker must somehow survive, and in the EBSCOhost - printed on 9/10/2020 2:21 PM via CORNELL UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 344 3. 4. The handbook of diverse economies case of payday loans, we can see that the worker is paying a very high price for extending credit to his employer. 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