Finance in an Age of Austerity
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Finance in an Age of Austerity

The Power of Customer-owned Banks

Johnston Birchall

This is a book in search of an alternative to the discredited investor-owned banks that have brought the rich countries into crisis and the world economy into a long period of austerity. It finds customer-owned banks – credit unions, co-operative banks, building societies – have hardly been affected by the crisis and continue to operate according to their organisational DNA: low-risk, close to the customer, underpinned by real savings, and still lending to SMEs to protect jobs and local economies. They are big business – in some countries with over 40% of the market – but networked in smaller, democratic societies whose origins go back to 1850s Germany.
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Chapter 10: What motivates members to participate?

The Power of Customer-owned Banks

Johnston Birchall


Are we really cooperators or are we self-motivated individuals who are just pursuing our interests through cooperatives? To answer these questions we need to review the evidence about cooperation provided by behavioural scientists. Then, to sharpen the analysis so as to understand what makes people cooperate in some activities but not others, we need to switch to the more active concept of participation and review the evidence about what motivates people to participate in governance of cooperatives. Twenty years ago it would have been difficult to get started answering these questions, because the experts were better at explaining why people do not cooperate than why they do. Their basic mistake was to begin from a very limited set of premises: that humans are rational, self-interested individuals looking to maximise their own utility, who calculate in every situation whether it is worth cooperating. Political scientists were wedded (many still are) to a rational actor model of participation that predicted people would not vote; the argument was that one vote counted for very little and the cost of voting would always make it rational for people to stay at home. Nor would they take part in collective action, because again it was more rational not to participate: people would realise that in a large group it was possible to ‘free-ride’ on other people’s actions while sharing the results.

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