Voting with Our Wallets

Crowdfunding is the practice of funding a project/idea by raising many small amounts of money from ordinary people usually via the Internet. It was firstly introduced in 1997 by a British rock band, which funded their reunion tour with donations from their fans. Following this successful idea, in 2000 ArtistShare became the first crowdfunding website, focusing solely in music.

Since 2000 this innovative financing practice has greatly increased and nowadays there are many crowdfunding websites available and dedicated not only to music but to many other areas, such as technology, art, social causes, and business and entrepreneurship. According to Massolution’s 2012 report, social causes are the most popular category in crowdfunding, having almost 30% of share, and surpassing business and entrepreneurship with 17% of share.

Most of the participants of crowdfunding do not invest large quantities of money. These people are a group of tiny investors, who most of the times do not expect anything back from their investments besides the satisfaction of helping others or being excited about a possible project. In the individualistic and capitalistic society, where we live, it is very unusual to witness such a compassionate attitude towards other people’s problems and business dreams, such as crowdfunding. In addition, this alternative financial system demonstrates how small individual actions do matter to improve, help, or change society somehow.

In the article “Shift Happens: Social Impact of Crowdfunding and Why You Matter” the author, Victoria Silchenko, raises a very interesting question on “how the federal budget structure would look like if not the Congress, but the crowd instead would “vote” with its wallets...” Based on crowdfunding participants’ investment motivations, it seems reasonable to say that they would be more than willing to raise capital for their country’s education, healthcare, infrastructure, and other government spending. The crowd would not only help others and assist future projects but also benefit themselves by investing in causes they consider relevant to their country’s future and consequentially to their own future.

This kind of “government crowdfunding” does not exist yet, but there is a similar category called civic crowdfunding. In this case Internet users help to raise funds for government projects or any kind of project, which produce shared goods that have value to communities. In the city of Central Falls, Rhode Island, for example, the government had just declared bankruptcy and was locked in a court-mandated spending plan. In order to raise money, they launched a crowdfunding campaign, which proposed to beautify and clean up the city’s landmark park. Within weeks it had raised $10,000 to buy new bins designed by local artists.

Civic crowdfunding, however, is limited to small amounts of money. Most of the donations are some thousands of dollars and cannot finance large projects. It is reasonable that people are not always eager to spend on a government project, when their tax dollars should cover it. In addition, one of the major civic crowdfunding researches, Rodrigo Davies, states that despite the crowd helps financing a project, it is not accountable for future costs, thus the project might eventually disrupt.

Following Victoria Silchenko’s idea of “voting with our wallets”, people would be already using their taxes as a crowdfunding investment. In addition, the projects would be able to raise large amounts of money and continually be maintained, since we all have to constantly pay taxes. Furthermore, laws and economical regulations could be established to guarantee the efficiency of finance and prevent the misallocation of resources. For example, 50% of taxes should be designated to the congress and the other half to “government crowdfunding”.

This idea is excessively speculative. Nevertheless, it would still be interesting to study the possibilities and the limits of crowdfunding in such a major institution as the government. In addition, there is an intriguing relationship between crowdfunding and the government in terms of democracy. In a capitalistic society would the government be more democratic, once people vote with money?