Mutuality 2.0

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= a new form of financial system that offers mutuality in the old sense of the term, together with feasible opportunities for participation and supervision, but avoiding further layers of regulation, or further levels of hierarchical control.


Report: Tony Bryant. Mutuality 2.0



Tony Bryant:

"The argument can then be established to propose new forms of mutuality at the very least as a transposition between market-led and state-controlled models. A recent article in Forbes Magazine, surely a candidate for the in-house magazine of the super-rich with its motto ‘The Capitalist Tool’, puts forward the case for mutuals as the basis for ‘a banking system we can trust’.

The authors, Laurence Kotlikoff and Edward Learner, argue for what they term ‘limited purpose banking’ being offered in the form of mutual funds. In effect these new institutions would be broadly similar to UK building societies prior to demutualization. They would be severely constrained in terms of what they could do, with the result that they could never fail as their prime and sole purpose would be financial intermediation. This is very much Mutuality 1.0 or perhaps 1.1, in the sense that it resurrects the old model of mutuality that has existed since the 18th century.

In fact it is more a case of reinvigoration, since mutuality along these lines never disappeared and has continued, albeit in diminished form, in many economies despite the unbridled encroachment of the market. The key issue for Kotlikoff and Learner is that these institutions would be seen as trustworthy, something which no longer applies to traditional banks.

A further move – let’s call it Mutuality 1.5 – is exemplified by Zopa which offers what it terms ‘social lending’; using the internet to link potential lenders with borrowers, thereby cutting out intermediaries – i.e. banks. Zopa, together with Wonga have been described as offering ‘banking for the Facebook generation’, also as the eBay banking model. It remains to be seen whether or not these sorts of on-line institutions become popular, challenging if not displacing the pre-existing and now largely decrepit banking institutions. There is no reason why the two forms should not co-exist, along lines similar to the way in which Amazon shook up the retail book trade, with both now existing alongside each other. Moreover if such innovations can also meet the demands of being trustworthy, then that is likely to prove an important factor in their becoming successful.

Although these forms of banking are important, they do not necessarily deal with some of the key issues that have arisen from the credit crunch, liquidity crisis, and general economic meltdown. In particular issues such as deregulation, globalization of finance, trans-national corporations, and other forms of financial transaction that operate above and beyond the level of individual states or other jurisdictions. The question then is the extent to which a bazaar-type approach to mutuality might be effective." (

More Information

  1. Mutual Building Societies
  2. XBRL, open standard for transparency in financial reporting