Free Banking

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Description

From the Wikipedia:

"Before any form of enterprise, whether a conventional business or an autonomous workers' collective, can produce goods or services, it must obtain items such as premises, tools and raw materials. This involves an up-front cost which is incurred before the enterprise starts. Under capitalism, this up-front cost is traditionally met by investing capital with the aim of making a profit. Anarchists, like communists, are opposed to investing capital for profit because of the exploitation of workers it entails, so another mechanism must be found to cover the up-front costs. "Free banking" is one possible mechanism. A new autonomous workers' organisation borrows the up-front cost from supporters or existing organisations. This can be by means of a loan in conventional or alternative currency, by borrowing the items needed such as tools, or a combination of the two. In time, this loan is either repaid to the lender, or lent on to another new organisation creating a revolving loan fund.

In this context, the word "free" indicates that the borrowing organisation is free of takeover threats from the provider of capital which form part of the traditional capitalist model. The loan may be interest free (similar to the Scandinavian JAK members bank model of agricultural finance) or a limited rate of interest may be charged. There may also be other charges e.g. to cover administration costs or to cover against bad debts.

Small-scale practical examples of anarchist free banking initiatives exist in various countries, but banking laws make it hard for them to operate. In most countries they are not allowed to describe themselves as banks unless they are legally registered as such, and some banking laws do not allow a collectively-run organisation to be a bank. Nevertheless, such initiatives sometimes show a much lower bad debt rate than conventional banks, because they are based on solidarity, and failing to repay a loan from a free banking initiative may be seen as culturally equivalent to stealing from friends. The reverse can however also be true, as a trust-based system is open to abuses of that trust. To safeguard completely against such risks would involve a level of cultural vetting more intrusive than anything traditionally done by credit rating agencies." (http://en.wikipedia.org/wiki/Anarchist_economics)