Rules for a “deadly weapon”

Aug 10, 2018 by

Money is considered a goal in our current financial system. The mechanisms of the “free” financial market make it easy for banks to accumulate a lot of it, due to the absence of an international supervisory authority, no size for the limit of banks, the free movement of capital as well as private money creation. Therefore, banks have a lot of power. They are able to influence political decision-making in their own benefit so that maximising profit gets as easy as possible. At the same time, apart from participating in a NGO or similar organization, the power of the people is limited to the option to elect the representatives of their governments. This “old paradigm” is one of the reasons why it is so hard to implement alternatives in the social, economical and political systems, to make the whole framework of society more just, sustainable and solidary. So what can be done to create banks that serve the common good?

This was the main topic of the lecture during the AEMS Summer School with Christian Felber, founder of the “Economy for the Common Good”, and Oskar von Homeyer from the GLS Bank, the first social and ecological financial institute of Germany. They introduced a new paradigm which does not consider money as a goal, but as a means that serves the common good. “Money can in many ways be a deadly weapon, so it needs to be regulated consciously”, Felber explained to the participants of the lecture. He believes, to limit the power of banks, that rules must be implemented towards a more democratic style of banking, that means for example that investments should follow certain ecological and social values. These rules must be shaped not only by a small elite of powerful actors, but by all agents of the society, to reach a more balanced form of democracy, a “sovereign democracy” as Felber called it.

To define these rules, he proposes a voting system which does not aim for affirmation, but for resistance: During a vote, if you feel strong resistance against a certain proposal, you raise two arms, if you recognize only a bit of opposition you lift one arm and if you do not feel any pushback at all both arms stay down. Moreover, Felber suggests that there should be more than just two options to vote on. The reason why: It is harder for companies to lobby in favour of a certain outcome which fits their interests best. The answer to a question of “yes” or “no” can be manipulated easier. As an example for an alternative voting style, Felber presented the following statements:

  1. There shall be no size limit for banks.
  2. There shall be a limit for banks.
  3. One global public bank.

If there would be the least resistance for the second option, another, more specific vote would follow: How big, in terms of capital, should a bank be allowed to be? By this method, a convention about the rules on which democratic banking should work can be reached. How these regulations will look like in the end and which will come to a vote in the first place must be agreed upon by the people, a huge step towards a “sovereign democracy”. Felber himself did not propose specific guidelines in the lecture.

Anyway, to give an idea about how a democratic banking could work, Oskar von Homeyer then introduced the principles of the GLS bank. “I do not see the problem in profitability but in the hierarchy of goals”, he said in front of the audience. Normally, only liquidity, risk and return are taken in account when it comes to investments. The GLS Bank also pays attention to meaning and purpose when considering a loan and uses different criteria to make a decision for or against it. By the end of 2017, the loan portfolio of the GLS bank was composed of renewable energy (33%), sustainable agriculture (7%), housing (24%), education & culture (12%), social affairs & healthcare (17%) and sustainable economy (7%). In general, the bank sees itself as a financial intermediary between people, a much more traditional understanding of banking in comparison to today’s fixation on private money creation.

Personally we appreciated Felbers approach to go for resistance instead of aiming for affirmation. Strong lobbying is one of the biggest problems that prevents democracy from being shaped by the people. Since it is hard to work against the financial power of lobby unions and a mandatory lobby register is not in sight, it is necessary to find other solutions to solve this problem. Furthermore we liked Felbers suggestion to give the people more than just two options to vote on. Thereby the capability of them to make political decisions ist emphasized. The act of voting is not reduced anymore to elect certain representatives.

Written by: Josep Lluís Marí Cervera and Laura Grages

Based on the lecture by: Christian Felber and Oskar v. Homeyer (“Democratic banking”)