Crowdfunding is a process in which a lot of people contribute small amounts of money to raise a large sum of money geared towards a particular cause. This cause can be social, medical or business. Crowdfunding has enabled a lot of people to continue their good work in many fields. It has also enabled a lot of medical treatment. But we often misconstrue crowdfunding as a force of good unfettered by the market. Crowdfunding is not a socialist enterprise. At best, it is one of the lesser evils of capitalism. At worst, it is just a band-aid, maybe even an opium of the masses.
So why is crowdfunding not socialist? Does it not involve people and help the underprivileged? Maybe. But first, let us look at its history. The rise of crowdfunding is directly related to the rise of the internet economy which is one of the freest forms of the market. For example, you do not have any borders to cross, limited regulations to bother about and there are very few people who understand this process. The earliest crowdfunding efforts can be traced to 2000 and by 2007, Indiegogo was operational. Kickstarter opened its doors in 2009, shortly after the recession. Why did so many of these arise around this time?
With the recession in full swing, startups found it very difficult to raise money from large businesses. People quickly realized that there was a market for investing in small businesses. As a result, crowdfunding firms catering to smaller businesses were set up. These firms saw an opportunity and seized it. The implication was that not much money could be made out of large businesses anymore, smaller businesses and smaller investments were the future, at least for a decade at least.
I hear you ask, has not crowdfunding democratized investment? Has it though really? Fundraising in India at least continues to be highly limited to banks and investing remains limited to mutual funds at best and post office deposits at worst. Who invests in crowdfunding then? Investors in crowdfunded ventures in India are often the ones who have money to spare and can afford to invest in a venture risking failure. They may not be super rich, but they are at least middle class. Crowdfunding, instead of being a radical new way of raising money, is another tool in the hand of the bourgeois.
But crowdfunding has made many medical treatments possible? Yes, it has. But that is not a reason to call it socialist or radical. If you look at how crowdfunding platforms operate, you will realize that many of these actually grade their campaigns according to importance. These details are never really revealed. Moreover, there has been considerable conjecture over the “go viral or die waiting” phenomenon where only certain campaigns get to raise a lot of money and others are not able to. Moreover, only 35% of the campaigns on Kickstarter reach their goal amount. Fundraising in India is divided according to the sector but the flourishing of the medical sector is due to the lack of any good government policy on health care. A socialist way of thinking holds the state responsible for essential services like healthcare and education, not the charity of specific individuals. In fact, concepts like “donation”, “kindness”, “pity”, “thanking the contributor” do not exist in the socialist parlance.
As far as NGO crowdfunding is concerned, I would like to point out that there are two kinds of NGOs – activist and non-activist. Non-activist NGOs are the ones that do not engage in political activity. Needless to say, non-activist NGOs are far more likely to do better with online crowdfunding, than others due to their mass appeal.
Crowdfunding exists very much within a capitalist framework which drains people of their resources. Crowdfunding sites in India depend on the labor of the campaigner to run the campaign, at least partially. In practice, crowdfunding is very much a band-aid over an already rotten.