Protesting With Your Money: Does It Work?

By Peter Cherewyk | February 08, 2011 AAA
Protesting With Your Money: Does It Work?



You have more power than you think when you protest with your wallet rather than your feet. An individual might have very little influence, but an organized group can pool (or take away) their resources for a common cause. Going to the streets and placing yourself in physical danger is not always an option that many people feel they have or would even consider. But there is a cleaner way to get your voice heard without yelling, and people do it every day. These people use their buying power and money rather than holding a physical protest. (For a related reading, see Protest Divestment And The End Of Apartheid.)

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Take Your Money Out of the Bank
One effective way to make your message heard is to hit 'em where it hurts - the bank. The idea is to reduce the available funds to lend out and thus stifle economic growth. Economic growth is measured by gross domestic product (GDP), among other metrics. One way the government can speed GDP up is to make it easier for people and businesses to borrow. If it is harder to borrow, however, businesses don't expand as much, people don't buy as much and the economy slows down. This is what removing your money could potentially do. By removing funds the bank can't lend as much out and thus the economy slows down.

A European soccer star, Eric Cantona, famously suggested this as an alternative to violent protests in France. The "Bank Run 2010" was set to start on December 7, 2010, when protesters would withdraw their money. It looks to have fizzled out due to lack of involvement. One potential problem is what the protesters did with their money after they took it out. People generally spend more when they have cash lying around, meaning much of the withdrawn money would eventually go back into the banks as merchants made deposits.

Banks typically only keep 10% of your money, the rest is lent out as part of a process called fractional-reserve banking. Theoretically, the money multiplier suggests that taking $1,000 out of a bank with a 10% reserve requirement actually removes $10,000 out of the economy. If three million people do this, it's equivalent to removing $30 billion dollars from the economy. There are measures in place to prevent this strategy from succeeding. Since the bank runs of the Great Depression, both institutions and governments have procedures meant to slow withdrawals and pump in liquidity.

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Boycott
Financial protests often use one of two common tactics: to not give them money (boycott) or to take their money away. Both strategies are effective but, as with any protest, organizing and motivating the group is the most important and difficult task.

Protesting a specific company or organization using your buying power can be very effective. In 2003, for example, Terra Boots ran a racy ad in Canada with sparsely clad women wearing their boots. Various trade and labor unions threatened to boycott the company, resulting in a quick takedown of the ad. Boycotts can be carried out by simply refusing to buy a product or visit a company unless they adjust their policies. The company usually responds immediately and may even use the opportunity to turn a bad situation into free advertising. If a certain group takes offense to an advertising campaign, often just the mention of it will get a company to change course and make a positive statement in favor of the offended group. (For more, check out Extreme Socially Responsible Investing.)

Make Them Pay
Protesting through the creation of costs will only be an option in certain situations. As opposed to the boycott, where you don't spend money, you usually need to pay a little to make the other person spend more. Take photo radar as an example - in theory, if every person fought every ticket, the costs would outweigh the benefits of keeping the service. Of course, getting every person on the same page is not really realistic in this example, but it demonstrates the concept very well. Each protester would need to spend their own money or time, but the city's court time and legal costs per ticket would not justify the $70 ticket. Group legal suits or running a PR campaign demanding an environmental cleanup can effectively make your voice heard. This only works in certain situations with the right conditions. Organizing a large enough group and the necessary capital to make a difference is essential.

Donations
You can always use your money to support a cause you believe in or donate money to help others do the same. Your money can be put to use in two ways. First, you can donate your money to a worthy cause. The donation is tax deductible, which lowers your taxable income if you itemize it and it is a qualified organization. This money helps further that organizations cause and can provide the funds needed to allow passionate advocates to dedicate themselves full-time to your cause, even though you cannot. This option is not as frowned upon as other forms of financial protests, and is easy to do. Second, you can influence situations by funding opposition - "an enemy of my enemy is my friend." So if you are protesting the agenda of a certain candidate, you might want to think about donating to the opposition candidate. (For more, see Deducting Your Donations.)

Purchase the Problem Away
You don't want a rainforest cut down? Buy the land. This is an option worth mentioning, but it is tougher to carry out. If you know of a landmark about to be bulldozed, you could organize the community to pool their resources and bid on the land. Again, the organization and mobilization of the community is the hardest part. Without enough funds to make a competitive bid, the corporations usually have their way.

For example, the Ohio Theater in Columbus Ohio was saved from demolition in 1969, before a local development company could tear it down and build an office tower. Organizers and members of the community pooled their resources to purchase the property. The nonprofit Columbus Association for the Performing Arts (CAPA), along with others, helped restore the historic site to once again house performances.

Ways Protesting With Money Doesn't Work
Protesters with the best intentions sometimes use their wallets, but don't use their heads. If you are protesting a product, do not organize a "purchase and destroy" campaign. Take the protest against France in 2003 that led some to purchase French wine and break the bottles in the gutters. Aside from the mess in the streets, there are two good reasons you shouldn't buy wine made in France and then break it in the streets to protest a French policy decision. First, purchasing a product is what the company wants you to do. Second, wine accounts for less than 3% of the over $34 billion worth of products the U.S. imports from France. If anything, boycott it. Finding out the major profit drivers of an organization and targeting those with a boycott is much more effective than symbolic destruction.

The Bottom Line
Street protests can be dangerous. Making signs, yelling and chaining yourself to large objects may not be the most efficient way to hit the companies where it hurts. Think about the power of your money because, while a corporation might not care about yelling, it always cares about the bottom line. (For more, check out Social Finance Careers: Creating A Better World.)

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