Thursday, November 3, 2011

Bank Transfer Day, Populism, and the Strategy of the Credit Union Movement

After 27 year-old LA gallery owner Kristen Christian created the virally spreading "Bank Transfer Day" Facebook event in early October as a response to some infuriating experiences with her bank, a fascinating conversation has been taking place within the credit union movement. On the one hand, many are quite excited to see the burst of positive media attention that the event instigated. They eagerly hope that, in the short term, the tens of thousands of people who have RSVPed on Facebook will follow through on their intentions and deliver a wave of new members to credit unions. From a longer, more strategic perspective, the aspiration is that, by spreading awareness of the credit union model, the event will contribute to fundamentally and positively advancing the movement's place in the world of financial services.

On the other hand, some credit union people have expressed skepticism and even concern about the event's potential impact. The Financial Brand blog recently published a post entitled "Four Reasons Why 'Bank Transfer Day' is Silly," which essentially takes the nascent movement to task for not having been developed by a marketing professional. While a useful publicity stunt, the writer concludes that "[i]f something like Bank Transfer Day were to ever really take off in the credit union industry, it would need the support of trade associations like CUNA. But alas, the credit union lobby group has its hands tied; they can’t be associated with anything that could be interpreted as trying to spark a run on banks — that would be bad political juju." Furthermore, a number of figures have argued in the pages of Credit Union Times that the big banks have been using their fees to drive away their least profitable customers, so the influx of new members might even turn out to be a net negative for the movement's bottom line.

Though these conflicting views have emerged through discussion of the issue of the day, the flow of credit union history suggests that the debate is not rooted in the particulars of "Bank Transfer Day." Instead, it should be seen as the latest manifestation of the tension between professionalism and populism that has been present in the credit union movement since its very earliest days.

Up until the 1940s, the credit union movement can be understood as having a strongly populist character. The new institutions were not simply viewed as a way to get a bit better off financially, but were tied into the larger goals of fighting usurious loan-sharking in poor communities and contributing to a cooperatively based economy that was referred to by credit union pioneer and CUNA co-founder Roy Bergengren as "economic democracy." During this period, the movement's newsletter covered such topics as cooperative stores, and its growth was driven by volunteer organizers and "field men," whose exhausting schedules and extremely meager compensation was off-set by the moral fervor they had for the cause. This spirit was captured by the term the Bergengren used to describe his vocation; it was not a job - it was a "crusade."

As the movement grew and institutionalized, however, a second perspective became increasingly prevalent: that of professionalism. While not opposed to the moral mission of the credit union movement, the priority for "professionalists" tended to be the movement's "nuts and bolts." For such people, success was to be primarily measured through statistics of membership and asset growth, rather than through the far more subjective judgment of the movement's effectiveness at achieving its populist goals of reducing poverty and promoting economic democracy.

The growing influence of this latter perspective in the early 1940s culminated in Roy Bergengren's forced retirement (after a contentious struggle) from the leadership of the Credit Union National Association in 1945. Strong populist feelings persisted for several more decades in the movement's lower echelons, but the trend was, for a number of reasons, inexorably towards greater professionalization. The watershed decade seems to have been the 1970s. Before then, most credit union leadership and staff came from within the movement, for whom credit union work was often a second job or career. By the 1980s, however, experience in financial services was quickly becoming a primary metric for judging potential hires, and the movement became increasingly run by people for whom credit unions were a career choice, not a crusade.

Many in the retiring old guard bemoaned this transformation as a threat to the soul of credit unionism, and it was the source of some controversy in the late 1970s and early 1980s. However, consistent growth of the movement under the professionalist program and the retirement of the last of the credit unionists who had cut their teeth in the Bergengren era meant such criticisms quieted down by the early 1990s.

The dominant narrative as to the reason for this transformation put forward by the leading scholars of credit unionism is a developmental one. Whether looking at the work of Ferguson and McKillop or Ian MacPherson, the basic idea is that populism is a characteristic of an immature credit union movement. As it grows, consolidates, and forms institutions such as trade associations, the movement requires an increasingly skilled work-force, and the populist energy that drove its initial burst of growth is replaced by increasing rationalization and professionalization.

While such models provide a fairly accurate sense of the way in which credit union movements developed in the 20th century, the "Bank Transfer Day" phenomenon adds a new wrinkle to the otherwise neat tale. Within those models, since populism is a characteristic of an early stage movement, a resurgence of populism might be viewed as a regressive phenomenon. Indeed, such a viewpoint is implicit in the Financial Brand piece's assertion that any truly successful pro-credit union action necessarily requires the backing of the professionals who staff the movement institutions.

However, there is another way of understanding what's going on. Instead of viewing a populist orientation as simply an ahistorical precondition for the initiation of a credit union movement, it might instead be understood as a reflection of the economic conditions of the moment. In times of relative economic stability, the urgency of the movement's larger socio-economic mission fades into the back-ground, and credit unions compete in the marketplace on essentially the same terms as banks (with a slightly abnormal ownership structure).

An economic crisis, however, changes the game. Historically, crises have always been times great growth for the cooperative movement, whether one looks at the economic dislocations of the late 1840s, the Populist surge of the 1890s, or the Great Depression of the 1930s. In such times, the dual economic and social character of cooperatives provides them with a decisive advantage over for-profit firms. While such for-profit banks can only hope to stay afloat by using the same tactics they use when business is good (marketing, price competition, etc.), credit unions can offer their members not only competitive services, but also the opportunity to participate in building a better world. As such, the underlying philosophical mission of the credit union movement should not be written off as an anachronism of a bygone era, but might instead be seen as an essential component of the movement's character that waits in the wings during times of prosperity, but moves to center stage whenever a crisis hits.

Strategically, this idea has several interesting implications. First, in order to maximize the over-all long-term growth and success of the movement, it means that credit unions should be consciously prepared to behave in fundamentally different ways depending on the economic situation. In good times, when the whole economic "pie" is growing, most people (due to feeling secure) are not interested in devoting much energy to building a better world. As such, the movement should approach promotion in the way it has over the last few decades; through professional marketing that appeals to the self-interest of consumers in a way that is no different than any other bank. By doing so, we can gradually increase the size of our "slice" of "pie," but we cannot expect to significantly shift the distribution of power and market-share in the financial services sector. Instead, flush economic conditions should be seen as the time for credit unions to grow and gather strength.

The time to deploy that strength most effectively is in periods of economic crisis. When unemployment is high and faith in the status quo low, issues that are of little interest to people in flush times, such as the structure of financial service providers, suddenly becomes the urgent center of attention. In such an environment, instead of competing on the same terms as banks, credit unions can gain decisive advantage by riding the waves of populist anger, linking up with other social movements, and advocating for the credit union idea as a key component to the crisis' just resolution.

Doing so, however, requires that credit unions be able to recognize when to hold back and when to attack, and adjust their tactics and staffing accordingly. In good times, when they are engaged in normal competition with banks, a professional marketing staff is essential. However, in order to take full advantages of the opportunities presented by an economic crisis, the focus should shift from marketing to organizing. Bank Transfer Day has demonstrated that an amateur activist with nothing but a Facebook account can create more buzz, awareness, and defections than a multi-million dollar traditional advertising campaign by plugging the credit union idea into a vibrant social movement. By deploying organizers in times of crisis to strengthen and deepen the relationships between such movements and credit unions, the potential exists to spark the mass shift of whole communities out of banks. Extensive marketing in good times often accomplishes little more than keeping credit unions on par with their competitors; organizing during crises, on the other hand, provides the movement with the once-in-a-generation opportunity to fundamentally re-shape the economic landscape.

When considering the overall "grand strategy" of the credit union movement, it is vitally important to remember the ultimate purpose: building economic democracy. The movement will not have actualized its full potential until every person has access to financial services through a member-owned cooperative bank, and credit unionists have been striving tirelessly towards that goal since Alphonse Desjardins founded the first North American caisse populaire in 1900. Given the dynamics identified in this essay, the process by which the cause will be advanced seems to have two phases: holding the line in good economic times, and going on populist offensives in bad. With the Occupy Wall Street movement nearing the two month mark, the European Union in crisis, and consumer confidence hanging near record lows, we are clearly in a moment of great opportunity; it would be a shame to let it go to waste!


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