Appealing to the Crowd: Public Sector Crowdfunding in the Caribbean

It’s often said about a citizen’s relationship with government, that ‘nothing in life is certain except death and taxes’. This saying political scientists point to regularly as not only offering a whimsical take on society’s operation but also a (sometimes) bitter truth about the inevitability of seeing good, hard-earned money spent easily and foolishly. It’s long been this way but things may now be changing thanks to the emergence of crowdfunding in the public sector, with the online arena providing a path for stronger public dialogue, alongside direct funding and commissioning of public works and spending. 

But is public sector crowdfunding really the way of the future? And could it be utilised around the Caribbean? Let’s look in-depth now.

Going All-in On Crowdfunding

Crowdfunding has found considerable popularity within the United States in recent years. Thanks to its emergence, bike lanes have been paid for in Denver, a youth garden has sprung up in Philadelphia, and a downtown park now exists in Royal Oak, Michigan. In the latter especially, the potential for crowdfunding to create a new avenue for public investment has been pioneered. Operating on a ‘dollar for dollar’ matching principle, Michigan has enabled citizens, via its “Public Spaces & Community Places”, to donate to not-for-profits that they are most interested in seeing prioritised. Then, once a certain threshold is reached, the government matches the money put forward by the general public.

The benefits of this approach are often very easy for taxpayers to identify when bulldozers and construction crews are brought in. But when it comes to the delivery on critical services, those who point to the positives of crowdfunding ask us to look over many hurdles ahead, and to change how we’ve viewed for centuries the relationship between taxpayer and tax department.

Dollars and Sense

While crowdfunding offers some real advantages, there are some considerations that are inescapable. Though it’s fair that governments are critiqued for how they spend money (and sometimes the waste and poor spending decisions are indeed shameful) ultimately they collect tax and reinvest it into the running of a country with the understanding that it is part of a ‘social contract’.

Just as it’s a citizen’s obligation to pay taxes to ensure that essential services are maintained, it’s the government’s obligation to formulate effective economic policy that sees those services delivered. This is more complex than simply raising or lowering taxes, and can involve a whole host of economic factors and decisions.

Ultimately, any rise in crowdfunding that relieves government of the expectation is not so much a good thing as a way for them to ‘get off the hook’. After all, though Saint Lucians would surely welcome greater injection of capital into road, schools and hospitals, none would welcome any announcement that the government was bowing out of providing them. However popular crowdfunding may become, government’s role as society’s chief investor must remain.

A Taxing Issue

Similarly, when it runs in the ideal way, public sector crowdfunding could be an avenue for citizens to directly fund essential services to a higher level, and speed up commencement of critical infrastructure well ahead of a slow government roll-out. In these circumstances it’s easy to look upon the growth of crowdfunding, from the citizen’s side of the fence, as a positive.

But this perspective must also recognise that comparatively few citizens in any country are so affluent as to be in a position to pay tax, and then readily pay even more thereafter to ‘pick up the tab’ on what the government isn’t paying. Particularly so because many people for a variety of reasons – whether due to being too young, retired, having special needs, or otherwise perhaps earning an amount lower than the mandatory tax-paying threshold – may not pay taxes at all.

Then there’s the reality that many high net worth individuals (HNWIs) and high-earning businesses engage in global tax minimisation strategies that governments increasingly view not as minimisation, but evasion. They are unlikely to be at the front of the queue in advancing a crowdfunding model, but instead find new ways to drag their feet in the process.

Obligations and Evasions

While undoubtedly a shift to a model of raising public funds via crowdfunding would see some positive stories emerge, it would also create an issue of equality in spending. Presently a national government will receive tax centrally, and then reinvest the money across the country, depending on a variety of factors. A public sector crowdfunding model that allows citizens to invest directly could be tremendous, but also grows the risk that affluent communities prioritise spending locally whereas less affluent locales struggle to get sufficient funds to retain local services.

On this basis, a government seeking to utilise a crowdfunding model could find greater civic engagement and participation as a result; and that is surely a positive. But, like most interactions between citizens and government, it would ideally come with some boundaries. For example, interactions that allow a citizen to put forward capital for better roads or schools or hospitals would show the treasury where money should be allocated, but government would do so on a national level exclusively, avoiding the ability for communities to separate funding and grow unequally.

Making It a Private Matter

While the current issues with crowdfunding in the public sector are unlikely to disappear anytime soon, the private sector across the region has previously been flagged as one that’s opportune for future growth and investment.

The World Bank’s innovation and entrepreneurship programme, infoDev, has cited the achievements in recent years in Barbados, with VisionFunder and Pitch & Choose, and in Jamaica, with JN Bank’s iSupportJamaica and Jamaica Diaspora Connect portal, making these countries leaders in the region. These operations may evidence that crowdfunding has a natural home in the private sector, but government certainly still has an important role to play.

By promoting, regulating and securing the crowdfunding industry so that citizens invest with greater confidence, and by pursuing these reforms with the on-hand expertise surrounding its already established financial industry, Caribbean nations can pursue a ‘best of both worlds’ strategy, one that seeks to see crowdfunding thrive, and sees government reap the rewards in additional revenue.

The growth in crowdfunding won’t solve all public sector issues in Caribbean nations, but promoting its growth, alongside implementing more effective taxation, could be a win-win for all.