Government and Institutions

How crowdfunding could make public finance more democratic

In 1850, the merchants, bankers and traders of the City of London held a crisis meeting. The original private contract to stage the Great Exhibition had to be scrapped. There was no public funding available. Was this extraordinary, visionary project – to share the wonders of modern arts, industry and commerce – going to have to be cancelled?

The financiers needed a new idea. And with the ingenuity of desperation, they came up with a plan B, a funding plan just as cutting edge as the idea of the Crystal Palace itself. They would appeal to the people of the country directly. The motion was proposed and seconded “to rest the success of the proposed exhibition entirely upon public liberality”. The Great Exhibition would be crowdfunded.

Today, funding for all kinds of public projects is hard going. The need to do something about our ballooning national debt has tightened the government’s purse-strings, even as London’s economic success keeps expanding its population.

And once again, crowdfunding can provide an alternative.

Today’s crowdfunding is a long way from the Victorian system of local committees coordinating subscriptions by hand.

The power of the internet has turbocharged the old model and just in time because the old model of industrial-scale giving is increasingly out of touch with our personal, digital world.

People want more transparency. We worry about fancy offices, well-paid CEOs and sadly, in some cases, over-politicisation. We don’t want our money to just disappear into a big pot. We want more control.

Enter crowdfunding. Charity in your own backyard. Dozens of online platforms allow ordinary people to lend or donate money, collectively financing projects that would otherwise have been impossible. Kickstarter’s users fund experiments in creativity. users back original scientific research. Kiva lets an entrepreneur in the developing world find a pool of backers living in wealthier countries. And here at home, crowdfunding’s potential to support social enterprise is at last beginning to be taken seriously.

Since its launch in 2009, Kickstarter alone has helped raise over $2.5 billion, successfully financing over 110,000 projects. Kiva has provided over $880 million in small loans. Imagine for a moment that this type of micro financing was available for projects currently funded within the public sector.

How much more could we achieve if citizens and community governments worked together to fund and prioritise what matters most to local residents?

The Purley Youth Project had its council funding cut. So they too looked for a plan B in crowdfunding. They are using CrowdPatch right now to raise £3,000 so they can continue to take children on educational trips throughout the year. If you want to contribute, the campaign is running until November, and they have more than a third raised already thanks to public generosity.

Right now, there are crowdfunding platforms for everything from publishing to venture capital. But so far we don’t have one that specialises in raising funds for better local infrastructure. Wouldn’t it be great if there was a platform for local community groups and organisations where they could propose capital projects to improve their neighbourhood? For the first time, people will have a hub where they can find and contribute to projects that are important to them.

Imagine wanting a screen showing the upcoming bus arrival times at your nearest bus stop. If that monitor is important to your community, contributions from nearby businesses and other users could make the project happen, fast. You can cut out a long and uncertain wait for government help that may never turn up.

And for larger projects – renovating a school or extending a line of public transportation into your neighbourhood – agreements may be made with district councils to partially fund these developments. Londoners would then only make up the difference where government funding isn’t enough.

What if Redbridge Council wants to renovate a park, but it comes up short on funds? The council could use a crowdfunding platform to reach out to its constituents to make up the shortfall. Because when you ask people directly, they support the projects that matter to them. And especially if you can promise it will happen if enough of their fellow citizens agree.

Take Grange Park in Old Coulsdon. The playground was outdated, so a group of locals called ‘Friends of Grange Park’ took it upon themselves to raise £100,000 to develop a fully inclusive playground. They crowdfunded, receiving funds from the BIFFA award, national lottery and other businesses, all looking to support the local community. It was an incredible effort from the community. Let’s make it easier for other groups to follow in their footsteps.

Crowdfunding, as the organisers of the Great Exhibition saw back in 1850, is democracy in action. When we are all directly involved in prioritising spending, we make our government far more accountable. Today, an activist group can tell its district council that there is wide support for the building of a new library, but unless there is an easy way to demonstrate that support, it is too easy to overlook those claims.

And for council members and political parties, crowdfunding is a new tool to reach out and hear from citizens. You will know in real-time about your constituents’ budget priorities. And there will be a greater incentive to be responsive to those priorities as they change. Through many small contributions, citizens send a clear message: this is what we care about.

No, crowdfunding is not a long-term solution for financing in the public sector. For that, we need smart tax reform. We need to give local government greater control. We need to bring decisions about tax and how to spend it closer to local communities. Given that this great decentralisation of state spending could take years to achieve, what can local communities do now?

In 1850, the great liberal economist Frederic Bastiat marvelled at the Great Exhibition’s funding model. And he wrote about the spirit it expressed in it: “Our adversaries consider, that an activity which is neither aided by supplies, nor regulated by government, is an activity destroyed. We think just the contrary. Their faith is in the legislator, not in mankind; ours is in mankind.”

London’s population will hit 9 million by 2020 and 10 million by 2030. It’s time to have faith in the crowd. Crowdfunding has the potential to bring together people from all backgrounds and beliefs to work as a community for the common good. It’s about making sure good ideas happen, together.

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