When it Comes to Money and Housing—Who Can We Trust?

When it Comes to Money and Housing—Who Can We Trust? Our Neighbors, Ourselves

By Jesse M. Keenan, Managing Editor, Housing.com

The ongoing controversy surrounding alleged manipulation of the London Interbank Offering Rate (LIBOR) raises the question as to who can we trust with our money. The very face of our currency suggests a holy delegation of trust and authority on par with the raison d'être of medieval monarchies. But, the fact is that we put an awful lot of faith into the LIBOR—about $800 trillion dollars of faith. Considering the entire net household wealth in the U.S. is roughly $54 trillion, there is plenty of trust to go around. Assuming we can no longer trust the epistemological foundation of the market—and those charged with regulating it—who can we trust? Can we trust our neighbors or even ourselves?

According to our liberalized consumer regulatory environment, few people and institutions have any fiduciary responsibility to our financial well-being. At best, we might get a disclosure as to conflicts of interest among a proliferated class of certificated financial experts who more often than not are steering products without regard to our best interests. Considering the relative lack of financial literacy and low savings rates, one could raise the proposition that we can barely trust ourselves to make rational financial decisions.

Now may be the time we might have to trust our neighbors again. Throughout history we have turned to our communities and to our neighbors for shaming us into patterns of modest consumptions as a means of survival. It has only been in recent history that this shame was manipulated by psychologically attuned marketing campaigns for the purpose of increasing and not decreasing consumption. In a related context, shame is at the core of how microfinance works across the globe. Microfinance banks lend to small groups of people (mostly women) who borrow money on a joint and several basis. If one of the borrowers doesn’t pay-up, the group and the village shame them into debtor status. Social ostracization is many times worse than a pesky collections company when you rely on your neighbors for de facto insurance against casualty and starvation.

Cooperatives in one form or another are quickly becoming an organizational preference of a new generation of entrepreneurs who value the risk sharing dynamic. Cooperatives have been most well known in the public discourse, as a historical housing phenomenon in urban areas where first generations of immigrants pool their resources and attempted to preserve their culture. Over time these groups assimilated into a broader distributed housing stock. The accelerated decline of housing cooperatives ultimately came with the arrival of the Fair Housing Act, which made it more difficult for affinity groups to congregate, as well as a targeted application of Section 8 vouchers in the 1970s which was intended to preserve rents in aging buildings. The policy interventions were well intentioned, but ultimately had significant deleterious effects in promoting the decline of the existing housing stock. Today, condominium property regimes have largely merged with cooperatives and a variety of similar types of housing arrangements are on the rebound. Even on the extreme end of the spectrum, co-housing communities—which are a formally pure application of cooperatives—are on the rise in the U.S. with over 300 active communities.

Whether it is housing, food, office or technology cooperatives, the model is making a comeback in America. Recently, the journalist David Broncaccio has masterfully documented the value of time banks, cooperatives and other alternative economic arrangements in the documentary, Fixing the Future (2012). Time banks are particularly useful as they are lawfully outside of the tax system because they are denominations of time and not money. What is to stop us from creating an online community which acts as a clearinghouse for transfers of time from everything from daycare to doctors’ visits? Not a thing, according to the IRS.

But, are cooperatives really good for business? Over two million workers in the U.S. who work for a cooperative would say so. They account for $650 billion in annual revenue with 304 million memberships outstanding, according the University of Wisconsin. In looking at a map of cooperatives in the U.S., the deep South has its utility cooperatives and the urban coasts have their social service cooperatives; but, the middle of the country has a concentration of for-profit business cooperatives which goes back to the days of northern European settlement by those who were simply carrying forward a business model many centuries in the making. It is no wonder that the states with the highest concentration of business cooperatives have been most resilient in the current downturn. Ironically, with the decline of the unions, the collective spirit of America may still be alive, but in a form which is more inclusive in its representation as a cooperative type structure.

In this sense, the conversion of American financial behavior is not so much attributed to cyclical conservative fiscal values, as it is a reversion to a proto-democratic structure of economic autonomy, which is equally as critical to free will as is political autonomy. A recent announcement of a pending anti-trust case against the credit card companies highlights the declining financial autonomy of the American consumer. The last straw is when the payment system itself is rigged with hidden expenses. To the contrary, recent iterations of cooperatives and other alternative economic aggregations are built upon a more contemporary technological application of transparency which is at the core of minimizing unnecessary transactional and monopolistic costs.

With 2012 being the Year of the Cooperative at the United Nations, the occasion marks the resurgence globally as citizen consumers draw further connections between political and economic autonomy in the name of a cooperative model. Whether it is hipsters and their food co-ops or Tea Party activists living outside the tax system with time banks, cooperatives have never before been so ideological diverse in their applications. With the momentum here and abroad, cooperatives, time banks and other alternative economic structures might overcome the bar required for the brand loyalty necessary to effectuate a parallel system which is accountable and transparent. An alternative system which internalizes the flow of capital to our own neighborhoods, factories and stores might just be the answer to the inherently anti-democratic dispersions of unregulated global capital. Right now a bunch of old guys in London sitting around a table deciding a metric that impacts our day-to-day lives feels surrealistically out of touch with the values of our day. In the interim, governments can start to earn our trust again by putting those responsible in jail.

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