Ethical Markets - R Reforming Global Finance, Community Development Solutions, Crowdfunding

By Hazel Henderson  © 2012

Excerpts forthcoming at Interpress Service

We at Ethical Markets Media supported the provisions in the Jumpstart Our Business Startups Act (JOBS Act), signed by President Obama, April 4th, 2012, and one of its key proponents Sherwood Neiss, our Florida neighbor in Miami.

Yet, on the way to passage, the JOBS Act, originally intended to help startups, was loaded with provisions pushed by Wall Street lobbyists to include “small” companies capitalized at up to $1 billion.  Relaxing SEC reporting and disclosure for such large companies perverted the Act and also weakened their Sarbanes-Oxley compliance.

As an old Washingtonhand in science policy circles, I witnessed many such distortions of good legislation at the bidding of powerful special interests.  However, on balance, opening capital-access to startups is needed, especially the many focused on social problem-solving typical of those featured on websites including Kickstarter, GOOD and others formerly denied conventional loans and venture financing.  The internet-based crowdfunding of such startups and non-profits is part of the social media revolution that disrupts incumbent industries and technologies, lowering costs, democratizing access, allowing information-sharing and ushering in the open-source, volunteerism, sharing sectors described by Don Tapscott in Macrowikinomics (2010).

This IT-based revolution has changed newspapers, mainstream media, retailing and threatens centralized energy, medicine and agribusiness.  It was only a matter of time before IT changed TBTF banks and elite finance.  Even though Wall Street’s grip on Washington politicians distorted the JOBS Act, key sponsors, Congress members Peter Welch (D-VT) and David Schweikert (R-AZ) have publicly vowed on MSNBC’s Dylan Ratigan Show to amend its provisions favoring billion-dollar companies and closing loopholes on disclosing and compliance they and others can exploit.

The IT open-source community that promotes responsible transparent crowdfunding is also gearing up to make sure the JOBS Act does not lead to further opportunities for the fraud and corruption that has decimated the trust of retail investors since Wall Street blew up the real economy in 2007-8.  Indeed, it was this widespread distrust and anger toward Wall Street’s predations on Main Streetbusinesses, homeowners and small investors that led to their revolts and efforts to bypass Wall Street.  These arrogant gatekeepers forgot that they do not “provide capital” but are simply intermediaries between producers and savers and people who can re-deploy these savings most productively.

Like so many other middlemen, financiers and centralized finance are being dis-intermediated by the radical flattening of old hierarchies allowed by the internet.  I have documented this trend toward local currencies, time banking, neighborhood sharing of appliances, cars, credit systems, peer-to-peer lending.  Such creative responses increase wherever central banking, policy-makers and financiers squeeze real economies, imposing “austerity” through ideology, stupidity, power plays or greed.  All financial “crises” produce these counter-movements of cooperation and local sharing, barter and scrip currencies, as we saw in Argentina in 2002 and recently in EU countries in the grip of financial dictatorships imposed by “technocrats” such as President Papademos in Greece, Prime Minister Mario Monti in Italy and Mario Draghi at the ECB (all alumni of Goldman Sachs).

This crowdfunding movement is both a response to central banks’ incompetence, perversion of responsible finance on Wall Street and in the City ofLondonand the new opportunities for bypassing such centralized control through the myriad social networks allowed by the Information Age.

We applaud the reformers of Wall Street and Washington notably Professor William Black of the UniversityofMissouri, Gretchen Morgenson of the New York Times and all their exposes.  Yet, their condemnation of the JOBS Act need not blind them to the IT revolution bypassing the defunct financial centers they decry.  Fears expressed by these reformers, including Simon Johnson, MIT; Robert Reich, University of California-Berkeley; John Coffee, Columbia University; David Martin, chairman of M-CAM, University of Virginia, see crowdfunding as leading to a new round of bucket-shops, pump and dumpers, fraud, fleecing of unsophisticated investors and loss of trust in US financial markets.

Sadly, this trust has already been violated and lost.  The Wall Street perpetrators go unpunished while the real USeconomy continues to suffer with millions of evicted homeless, long-term unemployed and pervasive fear and desperation.  Which is worse?  The continued printing of free money showered on Wall Street banks by the gullible Ben Bernanke and on European banks by the equally bemused ECB’s Mario Draghi?  Or, possible fraud in efforts to bypass these malfunctioning financial centers through crowdfunding and local initiatives?  The politics of money-creation and credit-allocation is now spreading as I forecast in “The Politics of Money,” 2005.  The insanity of high-frequency algorithmic trading now gripping Wall Street andLondon is evident in its perversion of markets and misusing of computerized communications platforms funded by taxpayers!  Trading has become an addiction worse than gambling! I prefer to take my chances with crowdfunding, digital trading and exchange, complementary local currencies and homegrown economies.

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Hazel Henderson, author, global futurist, is president of Ethical Markets Media (USAandBrazil), creator of the Green Transition Scoreboard®, co-creator of the Calvert-Henderson Quality of Life Indicators.