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Civic crowdfunding and the future of government and taxation

Crowdfunding is central to my interests in understanding the future. My background in capital markets and long-standing perspective of the living networks has made it a natural space for me, in looking at new ways our collective financial resources can yield the greatest economic and social benefit.

I was recently named one of the top 30 influential thought leaders in crowdfunding in the world (of which there are only 2 outside the US). I think it’s fair to say that’s an exaggeration of my prominence, however as I am increasingly focusing on the future of crowdfunding I hope the insights and perspectives I am currently developing will have a significant reach.

One of the most obvious ways in which crowdfunding can have a far broader impact than it does today is in playing a role alongside government, by allocating funds to benefit citizens. The “civic crowdfunding” space, focused on funding local community projects such parks, community centers, festivals, and education, has thrived, with platforms such as Spacehive and Neighborly doing well, and strong enthusiasm from cities such as Bristol.

MIT researcher Rodrigo Davies has written a very interesting 173 page report Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place as part of his studies.

Rodrigo compiled data from major crowdfunding platforms, including specialist civic crowdfunding platforms as well as general platforms such as Kickstarter which are also used for civic projects, showing the dramatic rise of the space.

civiccrowdfunding
Source: Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place (CP = Civic Platforms – civic crowdfunding only; GP = Generic Platforms – multi-category crowdfunding)

Very interestingly, the 81% success rate of civic projects on Kickstarter is higher than that of any defined category on the site, as Kickstarter does not specifically have a civic category.

Many projects are low budget and ones that local citizens see value in supporting, such as local gardens or events, however there is a very diverse range of kinds of civic projects.

civiccrowdfundingcategories
Source: Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place

The report is rich in scope, going into some edge-case examples of civic crowdfunding, examining some theoretical frameworks for understanding the space, and looking at how government can best engage with crowdfunding.

Crowdfunding and the future of government

This goes to the broader point of the role of crowdfunding in the future of government and society. From my perspective, civic crowdfunding begins to blur the role of government and citizens. Democratic governments are effectively agents of citizens, acting on their behalf for their good. Yet now we have tools that allow citizens to take that role for themselves, choosing directly how they allocate their financial contributions to society.

There are a variety of possible responses from governments, with as noted in the report Hawaii referring to civic crowdfunding in new legislation for school maintenance, while other governments essentially ignore their citizens’ efforts.

As I noted in a recent keynote I gave on the future of crowdsourcing in government, there are clear principles that allow governments to engage successfully with their citizens’ contributions.

Could crowdfunding ultimately replace taxation? It is doubtful, but as a futurist I would like to explore how far that may be possible.

Perhaps citizens could have some element of control over aspects of budget spending or discretionary allocations. Certainly the increasing financial challenges of governments globally suggests that citizens may often need to support worthy initiatives that would otherwise go unfunded.

Civic crowdfunding is very early in its development, but will definitely play an increasingly important role in government and community.

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  • René Rohrbeck

    You clearly make an interesting point here. Can all roles of the government be financed and “voted for” by endorsing the initiative with your money?
    When looking at the portfolio og governmental services, ranging from basic security (police force military) to education I would be doubtful that sufficient support can be gathered. Particularly services characterized by high cost and low probability for the need to arise I would expect it to be difficult. Who would in small European country, which feels safe be interested in supporting military spending, when faced with the choice to invest the money rather in educating ones children?
    However in many areas such als local infrastructure (e.g. the garden/parks from the study above) I would expect that the ability to make good choices could be higher with crowds than with the politicians.
    In any case it will be interesting to experiment more with crowd funding for prioritizing governmental services.

    • http://www.rossdawsonblog.com Ross Dawson

      Thanks René, yes we’re thinking on similar lines.

      Perhaps part of the ‘core’ services would be government controlled, whereas other domains could be subject to personal allocations if individual citizens chose to override the ‘default’ choice of the government budgets.

      Another key issue is local vs regional vs national budgets – civic crowdfunding clearly works at a local community level but it may need to be adapted to work for larger populations.

      • René Rohrbeck

        Yes, these dimensions seem to be quite powerful for differentiating where crowed funding can be applied and where it would be less successful.

        From an European perspective it has also always been amazing to see how in the US the gap left by lacking governments social security systems have been filled to a large extent by private charity.

        That might give raise to the hope that a tightly networked society would step in to fund services in areas where the governments reduce their funding role…

  • http://pragmatarianism.blogspot.com/ Xerographica

    Great article! I posted it to the reddit group for civic crowdfunding.

    Regarding the future…I agree that it’s not very likely that civic crowdfunding will replace taxation. But the more successful it becomes…the more likely it is to lead to tax choice.

    The basic trend is to facilitate input. If it weren’t for disqus, for example, then I probably wouldn’t have left a comment. Disqus makes it that much easier for me to share my input. It doesn’t seem likely that the public sector can avoid this trend for very long. If I’m going to pay taxes anyways…then why can’t I use my taxes to share my input?

    The primary concern is that people will share the wrong input. But if the majority is sharing the wrong input…then at least the minority can share the right input. That’s not possible with our current system. Plus, tax choice would incentivize the correctly informed minority to do a better job of sharing their information.

  • jhold

    Excellent article! I’m part of an equity crowdfunding startup and come from a public policy background, so this is exactly the sort of discussion I’ve been hoping for. You mention citizens using crowdfunding to support worthy initiatives that would otherwise go unfunded. What if these initiatives took place at a national level? What if instead of creating sweeping legislation (full of earmarks and pork-barrel naturally) to benefit small businesses, private citizens could finance small businesses in their local communities, or startups in industries they have expertise in. Could you see this being the way crowdfunding rises to threaten the current taxing and spending structure? It seems to me that the argument that big, expensive legislation is the only way to provide new businesses with the capital and mentoring they need to have a shot is growing increasingly stale.

    • http://www.rossdawsonblog.com Ross Dawson

      Thanks Jhold.

      In short, yes it may be feasible and we must start thinking about how this might work. It will be a long journey, but if we can first conceive of and effectively communicate the idea, we can then explore the steps on the way…

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Ross Dawson is globally recognized as a leading futurist, entrepreneur, keynote speaker, strategy advisor, and bestselling author. He is Founding Chairman of AHT Group, which consists of 3 companies: consulting, publishing, and ventures firm Advanced Human Technologies, future and strategy firm Future Exploration Network, and events company The Insight Exchange.

Ross is author most recently of Getting Results From Crowds, the prescient Living Networks, which anticipated the social network revolution, the Amazon.com bestseller Developing Knowledge-Based Client Relationships, and Implementing Enterprise 2.0. (click on the links for free chapter downloads). He is based in Sydney and San Francisco with his wife jewellery designer Victoria Buckley and two beautiful young daughters.

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