Monday, June 18, 2012

Kickstarter Recession? Yeah, I Highly Doubt That.

Slate has an article up from Matthew Yglesias about potential negative impacts of Kickstarter's growth. Let's just say I'm not sold on the author's arguments.
- Yglesias seems to focus on the idead that "the government can’t tax psychic returns" without acknowledging that psychic returns won't pay the bills of a less than profitable Kickstarter project creator in the long run either. If the projects kickstarter funds are as financially unsound as the Yglesias suggests (and I'd agree the majority probably are) then they won't provide the kind of income that would rob the economy of bus drivers and nurses. Far more likely is that we'll just have nurses and bus drivers with Kickstarter funded projects they work on during the weekend.

- The premise that Kickstarter and similar future crowd funding sources wielding enough financial influence to slow the economy in any significant way seems highly unlikely given that it's the shrinking middle class that (presumably) make up the vast majority of those donating. Let me get this straight, a group of people with shrinking financial influence will be donating enough of their income to chip away at the banking industry's influence? Highly unlikely. Much more likely is that the banking industry will just assimilate some of Kickstarter's ideas into their process in the future such as increased online pitches to banks, though those pitches would obviously include credit checks and the like.

-Even if Yglesias is given the benefit of the doubt and crowd funding becomes a challenge to the banks and US tax structure this is at least in some part due to the bank's failure at their own jobs. We are not very far removed from the biggest economic downturn in decades, brought about by poor allocation of capital by the banks. As a result many people are left unable to secure loans for even legitimate ventures. If people are unable to secure funds from banks Kickstarter is evidence that they will find try to find another way. If by some unlikely chance those creative funding options eventually come back to bite the banks it will be problem partly created by the banks themselves.

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