Free money

Should money be as free as speech? After all, it is also a form of communication.

In the past year, the internet has spawned a few companies aimed at helping individuals borrow and lend without bothering to involve a bank or credit agency. Zopa, based in the UK, aggregates individuals into groups for the purpose of making small loans, with a socially conscious slant. In the US, Prosper just launched a sleek, well-designed person-to-person lending site. Borrowers can also form groups on Prosper, for the sake of leveraging better interest rates. I also know of at least one nascent project, Bruce Boston's Quid St., which aims to aggregate individuals for the purpose of making capital investments (as opposed to loans).  I met Bruce recently, and he mentioned what an influence gaming had on his view of how to build an online marketplace. Which put me in mind of the Park Paradigm, a blog about digital markets whose authors think future finacial markets may evolve out of sports book and gambling sites. And not entirely unrelated note, Paypal made it possible just this week for people to send each other money anywhere, via cell phone.

Lots of internet companies entering a "hot" development space usually means that there is about to be a battle for dominance. But I do not think this another instance of a "crowded" field, like Ajax word processors or online file storage solutions, where everyone is trying to bring the killer app to market and knock the others out of the running. What we are witnessing here, I think, is the creation of a new and diverse international capital market.

But we already have an international capital market, you say. Well, yes and no. When it comes to lending and investing and otherwise redistributing capital, we make do with a rudimentary, feudal system that has never really caught up with our momentum toward the free flow of other types of currency--cash, ideas, information, energy, goods and services, even political will. We have developed extremely liberal mechanisms for exchanging these forms of dynamic and stored energy, but capital remains over-managed, its governance, distribution and oversight resting in the hands of a select few.

The invention of a truly open and free capital market will be as significant a development as the invention of the printing press, affecting the free flow of wealth and opportunity much the way that invention affected the free flow of intellectual capital. 500 years after Gutenberg, it's hard to imagine a world without cheap, plentiful and ungovernable words. One hundred years from today, it will be just as hard to remember a world where capital flowed through banks and currencies were government-issued.

Capital, and as a consequence personal wealth, will exist in a much more fluid and dynamic state than it now does, and all our discussions about wealth, wages and income will take place in an entirely new financial language. We may not end up solving poverty, so much as rendering it obsolete, all because of the technology-driven privatization of capital that is just now beginning.

Cross-posted on Samizdata.net.

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But we already have an international capital market, you say. Well, yes and no.