Don’t Boo. Vote!
On the morning of Wednesday November 9th, I was more proud and galvanized than ever to work for Kiva.org, leading our incredible team in empowering small business owners here in America with 0% interest, crowdfunded loans. The last two weeks (and the last 12 months) have brought forth a kaleidoscope of thoughts and reactions, but here are two that stand out for me: Firstly, huge swathes of the country are economically hurting, and it’s getting worse. And secondly, there are deep, disturbing divisions in American society, and they are getting worse. My dream is that Kiva’s U.S. lending can help to tackle both of these challenges head on.
It’s the economy, stupid!
Income inequality is getting worse in America, and has been for decades. Since 1978, CEO pay has increased by 997%. The typical worker’s pay has increased by 11%. And while the income situation is bad, the wealth situation is even worse. Since 1983, the net wealth of the top 10% of American households increased by 87%. The median household’s net wealth increased by only 2%. And the bottom 10% of household’s net wealth declined from positive $702 to negative $2,050. These stats are staggering, depressing, and almost historically unprecedented.
I live in the heart of Silicon Valley, in the era of technological revolution. I look around me and see affluence unparalleled in the history of the world. The U.S. economy continues to grow, and the stock market is the highest it’s ever been. But millions and millions of people, and entire communities, are not only failing to benefit from this economic progress, they are actually going backwards. I had a history professor at Cambridge who asserted that the reason why the Communist revolution stalled was because poor people started getting washing machines, cars and TVs. There’s less incentive to man the barricades of the revolution when your job is secure and your kids are well-fed. If you look at the span of human history, the poor have been getting richer and richer. And if you look around the globe today, that same positive story holds true. Hundreds of millions of people in China, India and Latin America have been lifted out of poverty over the last half-century — it’s wonderful. But in America, the poor have been getting poorer over the last few decades. And on November 8th, many of them took to the barricades in revolutionary protest against an “establishment” that they believe has economically betrayed them.
There are no easy answers to this deep, structural problem of wealth inequality. And we need action on many fronts — education, healthcare, the criminal justice system, etc. For our part at Kiva, we believe that one important pillar of the solution is a vibrant small business sector, especially among those people and communities that have been financially excluded from economic progress. Small business owners are two and a half times wealthier than non-small business owners, and as Andrew Yang, the CEO of Venture for America, put it: “Today, two-thirds of new net jobs in the U.S. are being created by new firms that are less than five years old. If you want to ease income inequality, what you want are more new firms starting up and seeking employees”. But unfortunately, as the first chart shows, entrepreneurial activity has been declining for decades now, and in the years following the Great Recession of 2008, fewer firms have been starting up than closing down for the first time in half a century.
Again, there are many reasons for this reduction in small business startup rates, but one of them is the challenge that small and early-stage businesses have in accessing capital, as demonstrated by the second chart. When President Bill Clinton launched Kiva Little Rock in March 2013, he said that “we have gotten ourselves in a situation now, where the only people that can get real money, are the people that don’t need to borrow it.” And that’s the same for businesses. Large businesses can access capital cheaply and easily. Small businesses cannot. Over the years, we have put in place a taxation system that is (at least in theory) progressive — i.e. rich people pay a higher % tax rate than poor people. But our finance system is egregiously regressive. Poor people (and microbusinesses) pay much more (in fees, interest rates, etc.) than rich people (and large corporations) to access capital, when they can access it at all.
At Kiva, we don’t just aspire to level this playing field, we’re trying to invert it. And it’s fun!
Through technology, crowdfunding, and the kind of social-underwriting-based innovations that Mohammed Yunus won the Nobel Peace Prize for with Grameen Bank in Bangladesh, we want to make it a little easier for the little guys — the Vietnamese immigrant with the best pho recipe in Oakland; the Native American artisan in rural Minnesota; the small, family farmer in rural Wisconsin; the veteran in Waterloo, Iowa; and the African American momtrepreneur hustling hard in inner-city Baltimore.
If, through the generosity of our global community of 1.6 million individual lenders, and valued community partners like Local Initiatives Support Corporation, the Barra Foundation and Google.org, we can expand access to 0% interest microloan capital for the 28 million microbusinesses that constitute the economic backbone of this great nation, perhaps we can help to reinvigorate the small business sector, create wealth in communities that are increasingly at risk of being left behind, and light up a brighter economic future.
It’s a Wonderful Life
In 1960, 5% of Republicans and 4% of Democrats said they would mind if their kid married someone of the opposing party. In 2010, those numbers were 49% and 33%.
American society is deeply divided right now. Platforms like Facebook have the potential to build bridges of connection between people, but they can also become echo chambers, hopelessly devoid of any empathy whatsoever, and redrawing the battle lines in ever-increasingly hostile ways.
I worry that our finance system reinforces this lack of empathy. In the film “It’s a Wonderful Life,” the good banker George Bailey has close relationships with the people in his town. But our finance system has moved away from this community-based banking model over the last century. Today, borrowers are reduced to numbers in a spreadsheet, and financial relationships are transactional and anonymous. When I save money in my bank account, that money is being lent to help someone else buy a house or open up a small business. There is a connection happening there. But I never see it.
At Kiva, we want to help people to see it. When you lend $25 on Kiva, you can see the picture of the entrepreneur whose business you are helping to get off the ground. You know their name. You can read their personal story, and the dreams they have for their business. You can connect with them on Facebook, or follow them on Twitter. Over the last five years I have got my hair cut by a borrower whose barbershop I made a loan to, bought honey from a beekeeper whose hives I helped him purchase, and had my house cleaned by a lady whose Kiva loan enabled her to buy a used car, rather than carry her vacuum cleaner around town on the bus. I now know these small business owners. It’s harder to financially screw over someone you know. And it’s easier to empathize with someone you know.
Every day on Kiva, thousands of Democrats lend to Republican small business owners. And thousands of Republicans lend to Democratic small business owners. Men lend to women, Muslims lend to blacksmiths in Milwaukee, immigrants lend to veterans, the elderly empower entrepreneurs in their teens, Alabamans lend to New Yorkers and us hippies in San Francisco lend to farmers in Arkansas.
If, in some small way, our finance system can be a mechanism for highlighting the inter-connections between people that it is built upon, then perhaps it can help to bring those people together, rather than driving them apart, and emphasize that we are all humans who want the best for our children, before we are Clinton voters or Trump voters.
Kiva represents a democratic approach to finance. (And to be abundantly clear, that’s democratic with a small d!). Rather than lending decisions being autocratically made by a centralized institution or loan officer, they are democratically made by a community of citizens directly participating in building a fairer economy.
But for democracy to work, people have to stand up and vote.
You can do your democratic duty, and cast a vote on Kiva by making a $25 interest-free loan to a U.S. small business owner who promises to pay you back. As you get your money paid back into your account, you can withdraw it if you want to, but most people just use it to cast another $25 vote. I am not an American citizen, so I couldn’t vote in the Presidential Election, but I have cast 824 votes for inspiring entrepreneurs over the last few years. And there is no age limit in the Kiva Election either — my ten-week-old daughter has cast 2 votes already. There are many boxes that you can choose to check on the voting form, and I promise that you’ll feel happy after you cast your vote! You can even help others to get to the polls — by sharing Kiva on social media, or starting a Kiva lending team!
If you are reading this, and you are already a Kiva lender, thank you! Truly. Thank you for helping us empower entrepreneurs to chase their dreams, and usher in a more hopeful and more equitable economic future for their families and their communities. And thank you for helping us reimagine a financial system based on human relationships and emotional empathy, rather than anonymous, heartless transactions. Thank you for voting!
A version of this blog post was originally posted on the LISC blog here. Kiva is proud to partner with LISC in empowering entrepreneurs throughout America. Over the last year, LISC has cast over $110,000 in votes to 70 small business owners throughout the country.