March 17, 2010

Democratic Dignity

Dear Friends,

Local currencies are designed to encourage trade at locally owned businesses.   At the same time their very design can reflect and honor the history and culture or an area. This is true of BerkShares.


On the 20 BerkShare note, for example,  you find Herman Melville, novelist, essayist, poet, and mariner.  Melville is best known as the author of one of the greatest of all American novels, “Moby Dick” (1851). Written at his Arrowhead farmhouse in Pittsfield, Massachusetts, it places Melville amongst a prestigious host of literary figures to emerge from the Berkshire area.


An excerpt from “Moby Dick” follows, capturing its universal appeal.


This Saturday at 7PM, author and historian David Boyle, a senior fellow at the New Economics Foundation of London, will speak for BerkShares.  The title of his talk is “Money Changers:  Local Currencies and the New Economics.”  David will draw from his experience with a number of British towns that have replicated BerkShares for their communities.  Please join us at the First Congregational Church of Stockbridge to welcome David Boyle.  Admission is 5BerkShares or $5.  


Best wishes,

Susan Witt, Stefan Apse, Kate Poole

Staff of the E. F. Schumacher Society transitioning to the 

New Economics Institute

www.smallisbeautiful.org

www.neweconomicsinstitute.org


Board of Directors:  Gar Alperovitz, Jessica Brackman, Neva Goodwin, Hildegarde Hannum, Eric Harris-Braun, Dan Levinson, Richard Norgaard, David Orr, Connie Packard, Will Raap, Gus Speth, Stewart Wallis, and Peter Victor.


******************************

In the passage below Melville, as the narrator, has just praised the character of Starbuck, the first mate.   But Melville anticipates that Captain Ahab's madness will ultimately dominate even Starbuck's best self and this man of valor will lose courage to stand for what is right in face of the stronger personality.  Melville is reluctant to show this weakness in Starbuck.  He debates this in the passage.


“ . . . it is a thing most sorrowful, nay shocking, to expose the fall of valor in the soul.  Men may seem detestable as joint stock-companies and nations; knaves, fools, and murderers there may be; men may have mean and meager faces; but man, in the ideal, is so noble and so sparkling, such a grand and glowing creature, that over any ignominious blemish in him all his fellows should run to throw their costliest robes.  That immaculate manliness we feel within ourselves, so far within us, that it remains intact though all the outer character seem gone; bleeds with keenest anguish at the undraped spectacle of a valor-ruined man.  Nor can piety itself, at such a shameful sight, completely stifle her upbraidings against the permitting  stars.  But this august dignity I treat of, is not the dignity of kings and robes, but that abounding dignity which has no robed investiture.  Thou shalt see it shining in the arm that wields a pick or drives a spike; that democratic dignity which, on all hands, radiates without end from God; Himself! The great God absolute! The centre and circumference of all democracy!  His omnipresence, our divine equality!”


Rather amazing this sentiment at a time in our political history where commentators vie to criticize the character of a leader rather than let shine the best.  But it is a true sentiment to our own inner impulses -- we

are happier when we can praise and rejoice in the noble in each other.

February 23, 2010

A New Economics for a New Environmentalism

Dear Friends,

James Gustave Speth has devoted much of his professional life to care of the environment.  He is the Sara Shallenberger Brown Professor in the Practice of Environmental Policy at Yale where he served as Dean of the Yale School of Forestry and Environmental Studies from 1999 to 2009. Dean Speth was Administrator of the United Nations Development Programme and chair of the UN Development Group, founder and president of the World Resources Institute, chairman of the U.S. Council on Environmental Quality, and senior attorney and cofounder of the Natural Resources Defense Council.

As a long time environmentalist, he is concerned.   He, as others, sees that all the increased professionalism, all the resources, all the sophisticated techniques, all the advances of the modern environmental movement have failed to save our fragile ecosystems.  He has come to realize that the elephant in the room raising havoc with our climate and waters and soil quality and biodiversity is the current economic system fed on excessive consumption and growth.  He argues that if environmentalists are to achieve their goals, they must join with social activists, cultural innovators, and neighborhood advocates in creating a New Economics -- one that shares wealth, encourages diversity and decentralization of production, is responsible to the environment, and puts community accountability ahead of profits.  

This New Environmentalism is as much a political movement as an economic one.  It will take rethinking policies at the national, state, and local levels to encourage a "sustaining" economy.  It can be done.  At least Gus Speth feels we have no choice but to make the effort.  This passion has put him at the head of multiple initiatives to define a New Economics and implement a New Economy.

We are delighted to welcome Gus Speth to the board of the E. F. Schumacher Society as the organization transforms into the New Economics Institute.  His lecture "A New American Environmentalism and the New Economy" delivered in January to the National Council for Science and the Environment is excerpted below for your interest.  The full text may be read at:

http://www.smallisbeautiful.org/publications/speth10.html

Best wishes,

Susan Witt, Stefan Apse, Kate Poole

Staff of the E. F. Schumacher Society transitioning to the

New Economics Institute

www.smallisbeautiful.org

www.neweconomicsinstitute.org

Board of Directors:  Gar Alperovitz, Jessica Brackman, Neva Goodwin, Hildegarde Hannum, Eric Harris-Braun, Dan Levinson, Richard Norgaard, David Orr, Connie Packard, Gus Speth, Joseph Stanislaw, Stewart Wallis, and Peter Victor.

*     *     *     *     *     *     *    

Excerpts from:

A New American Environmentalism and the New Economy

copyright by James Gustave Speth

The 10th Annual John H. Chafee Memorial Lecture

National Council for Science and the Environment

Washington, D.C., January 21, 2010

To begin, I would like to invite you to join me in a journey of the imagination. I want you to join me in visiting a world very different from the one we have today.

            As the new decade begins in this world, the President, early in his first term, stands before Congress to deliver his State of the Union address. He says the following:

            "In the next ten years we shall increase our wealth by fifty percent. The profound question is – does this mean that we will be fifty percent richer in a real sense, fifty percent better off, fifty percent happier?...

            "The great question… is, shall we make our peace with nature and begin to make reparations for the damage we have done to our air, our land and our water?

            "Restoring nature to its natural state is a cause beyond party and beyond factions. … It is a cause of particular concern to young Americans – because they more than we will reap the grim consequences of our failure to act on programs which are needed now if we are to prevent disaster later….

 "The program I shall propose to Congress will be the most comprehensive and costly program in this field ever in the nation's history.

"The argument is increasingly heard that a fundamental contradiction has arisen between economic growth and the quality of life, so that to have one we must forsake the other. The answer is not to abandon growth, but to redirect it…

"I propose, that before these problems become insoluble, the nation develop a national growth policy. Our purpose will be to find those means by which Federal, state and local government can influence the course of … growth so as positively to affect the quality of American life."

And Congress acts. To address these challenges, it responds with the toughest environmental legislation in history. And it does so not with partisan rancor and threats of filibusters but by large bipartisan majorities. 

In this world that we are imagining, the public is aroused; the media are attentive; the courts are supportive. Citizens are alarmed by the crisis they face. They organize a movement and issue this powerful declaration: "We, therefore, resolve to act. We propose a revolution in conduct toward an environment that is rising in revolt against us. Granted that ideas and institutions long established are not easily changed; yet today is the first day of the rest of our life on this planet. We will begin anew."

Meanwhile, the nation's leading environmental scholars and practitioners, and even some economists, are asking whether measures such as those in the Congress will be enough, and whether deeper changes are not needed. GDP and the national income accounts are challenged for their failure to tell us things that really matter, including whether our society is equitable and fair and whether we are gaining or losing environmental quality. A sense of planetary limits is palpable. The country's growth fetish comes under attack as analysts see the fundamental incompatibility between limitless growth and an increasingly small and limited planet. Advocacy emerges for moving to an economy that would be "nongrowing in terms of the size of the human population, the quantity of physical resources in use, and [the] impact on the biological environment." Joined with this is a call from many sources for us to break from our consumerist and materialistic ways – to seek simpler lives in harmony with nature and each other. These advocates recognize that, with growth no longer available as a palliative, "one problem that must be faced squarely is the redistribution of wealth within and between nations." They also recognize the need to create needed employment opportunities by stimulating employment in areas long underserved by the economy and even by moving to shorter workweeks. And none of this seems likely, these writers realize, without a dramatic revitalization of democratic life.

Digging deeper, some opinion leaders, including both ecologists and economists, ask, "whether the operational requirements of the private enterprise economic system are compatible with ecological imperatives." They conclude that the answer is "no." Environmental limits will eventually require limits on economic growth, they reason.

"In a private enterprise system," they conclude, "[this] no-growth condition means no further accumulation of capital. If, as seems to be the case, accumulation of capital, through profit, is the basic driving force of this system, it is difficult to see how it can continue to operate under conditions of no growth." And thus begins the thought: how does society move beyond the capitalism of the day?

You can see that the world we are imagining is one of high hopes and optimism that the job can and will be done. It is also a world of deep searching for the next steps that will be required once the immediate goals are met.

Now, at this point, I suspect there may be a generational divide in the audience. Those of you of my vintage have probably realized that this is not an imaginary world at all. You do not have to imagine this world – you remember it. It is the actual world of the early 1970s. That is really what President Nixon said to the Congress in 1970. Congress really did declare that air pollution standards must protect public health and welfare with an adequate margin of safety and without regard to the economic costs. The revolutionary Clean Water Act really did seek no discharge of pollutants, with the goals of restoring the physical, chemical and biological integrity of the nation's waters and making our waters fishable and swimmable for all by the mid-1980s. Many scientists, economists and activists supported the longer term thinking about growth and consumerism that I just mentioned, and they recognized the ties to social equity issues. They saw the challenge all this posed to our system of political economy. I have quoted John Holden, Paul and Anne Ehrlich and Barry Commoner, opinion leaders in this era, but there were many others, including Kenneth Boulding who famously noted, "Anyone who thinks exponential growth can go on forever in a finite world is either a madman or an economist."

It was in many respects a great beginning. Not perfect, not to be romanticized, but still a remarkably strong start. And now four decades have passed. So let us fast forward to the present and take stock. What do we find today?

*     *     *     *     *     *

We opted to work within the system and neglected to seek transformation of the system itself. 

*     *     *     *     *     *

And it is here that we arrive at the central issue – the paradox which every U.S. environmentalist must now face. The environmental movement – we still seem to call it that – has grown in strength and sophistication, and yet the environment continues to go downhill, fast. If we look at real world conditions and trends, we see that we are winning victories but losing the planet, to the point that a ruined world looms as a real prospect for our children and grandchildren. And the United States is at the epicenter of the problem. So, a specter is haunting U.S. environmentalists – the specter of failure. The only valid test for us is not membership, staff size, or even our victories but success on the ground – and by that test we are failing in our core purpose. We are not saving the planet. We have instead allowed our only world to come to the brink of disaster. Some who look at the latest science on climate change and biodiversity loss would say we are not on the brink of disaster, but well over it.

*     *     *     *     *     *

The size of the world economy doubled since 1960, and then doubled again. World economic activity is projected to quadruple again by mid-century. At recent rates of growth, the world economy will double in size in two decades. It took all of human history to grow the $7 trillion world economy of 1950. We now grow by that amount in a decade! We thus face the prospect of enormous environmental deterioration just when we need to be moving strongly in the opposite direction.

*     *     *     *     *     *

It seems to me one conclusion is inescapable. We need a new environmentalism in America. The world needs a new environmentalism in America. Today's environmentalism is not succeeding.

*     *     *     *     *     *

We must build a new environmentalism in America. And here is the core of the new environmentalism: it seeks a new economy. And to deliver on the promise of the new economy, we must build a new politics. 

*     *     *     *     *     *

But the new environmentalism will not get far if it is focused only on greening the economy, as important as that is. As David Korten, John Cavanagh and I and others in the New Economy Working Group are saying, the old economy has actually given rise to a triple crisis, and they are tightly linked. The failure of the old economy is evident in a threefold economic, social, and environmental crisis.

*     *     *     *     *     *

. . . the new economy – the prime objective of the new environmentalism – must be about more than green. We need a broader, more inclusive framing of our goal. We need to answer the probing question posed by John de Graaf in his new film: What's the economy for anyhow? The answer, I believe, is that we should be building what I would call a "sustaining economy" – one that gives top, over-riding priority to sustaining both human and natural communities. It must be an economy where the purpose is to sustain people and the planet, where social justice and cohesion are prized, and where human communities, nature, and democracy all flourish. Its watchword is caring – caring for each other, for the natural world, and for the future. Promoting the transition to such an economy is in fact the mission of the New Economy Network, which I'm now working with many others to build. It will be a broad, welcoming space for all those pursuing diverse paths to these goals.

To build the new economy we need innovative economic thinking and new models. There is today wide-spread dissatisfaction with much of current economic orthodoxy. Enter the New Economics Institute, which is now being launched in the United States. The new economy needs a new economics.  The new economy also needs a journal to focus our attention beyond problems to solutions, and I applaud Bob Costanza for launching the new journal Solutions

*     *     *     *     *     *

Beyond the generalities, it is fair to ask for more on how this new economy might look. As an early step in building a new economy, I believe we must begin to question the current centrality of economic growth in our economic and political life, what Clive Hamilton has called our "growth fetish." With recent books like Peter Victor's "Managing Without Growth," Tim Jackson's "Prosperity Without Growth," and the New Economics Foundation's "The Great Transition," this is no longer as quixotic a cause as it was when I wrote my "Bridge" book just a few years ago. Peter Brown's wonderful book, "Right Relationship," also deserves mention in this context. 

*     *     *     *     *     *

.   .  .  . The new environmentalism must be about more than green. Mainstream American environmentalism to date has been too limited. In the current frame of action, too little attention is paid to the corporate dominance of economic and political life, to transcending our growth fetish, to promoting major lifestyle changes and challenging the materialistic and anthropocentric values that dominate our society, to addressing the constraints on environmental action stemming from America's vast social insecurity and hobbled democracy, to framing a new American story, or to building a new environmental politics. The new environmentalism must correct these deficiencies.

*     *     *     *     *     *

I have concentrated [in the full lecture] mostly on needed policies, I suppose because that is my background. But there is another hopeful path into a sustainable and just future. This is the path of "build it and they will come" and "just do it." One of the most remarkable and yet under-noticed things going on in our country today is the proliferation of innovative models of "local living" economies, sustainable communities and transition towns and for-benefit businesses which prioritize community and environment over profit and growth. The work that Gar Alperovitz and his colleagues are doing in Cleveland with the Evergreen Cooperative is a wonderful case in point. An impressive array of new economy businesses has been brought together in the American Sustainable Business Council, and a new Fourth Sector is emerging, bringing together the best of the private sector, the not-for-profit NGOs, and government. The seeds of the new economy are already being planted across our land.

*     *     *     *     *     *

The new environmentalism must work with this progressive coalition to build a mighty force in electoral politics. This will require major efforts at grassroots organizing; strengthening groups working at the state and community levels; and developing motivational messages and appeals — indeed, writing a new American story, as Bill Moyers has urged. Our environmental discourse has thus far been dominated by lawyers, scientists, and economists. People like me. It has been too wonkish, out of touch with Main Street. .  .  . Now, we need to hear a lot more from the poets, preachers, philosophers, and psychologists.

And indeed we are. The world's religions are coming alive to their environmental roles – entering their ecological phase, in the words of religious leader Mary Evelyn Tucker. And just last year, the American Psychological Association devoted its annual gathering to environmental issues. The Earth Charter text and movement are providing a powerful base for a revitalization of the ethical and spiritual grounds of environmental efforts. The Charter's first paragraph says it all: "We stand at a critical moment in Earth's history, a time when humanity must choose its future. As the world becomes increasingly interdependent and fragile, the future at once holds great peril and great promise. To move forward we must recognize that in the midst of a magnificent diversity of cultures and life forms, we are one human family and one Earth community with a common destiny. We must join together to bring forth a sustainable global society founded on respect for nature, universal human rights, economic justice, and a culture of peace. Toward this end, it is imperative that we, the peoples of Earth, declare our responsibility to one another, to the greater community of life, and to future generations." 

*     *     *     *     *     *

The new environmental politics must be broadly inclusive, reaching out to embrace union members and working families, minorities and people of color, religious organizations, the women's movement, towns and cities seeking to revitalize and stabilize themselves, and other groups of complementary interest and shared fate. The "silo effect" still separates the environmental community from those working on domestic political reforms, a progressive social agenda, human rights, international peace, consumer issues, world health and population concerns, and world poverty and underdevelopment, but we are all in the same boat.

And the new environmental politics must build a powerful social movement. . . .– demanding action and accountability from governments and corporations, protesting, and taking steps as citizens, consumers and communities to realize sustainability and social justice in everyday life. 

*     *     *     *     *     *

And, finally, remember that most of the ideas I have sketched this evening are not new. As we saw, they actually take us back to where we began, in the 1960s and 1970s. They gained prominence then and they can again. Perhaps they are now, belatedly, ideas whose time has come. We can't recreate the 1960s and the 1970s; we shouldn't even try. But we can learn from that era and find again its rambunctious spirit and fearless advocacy, its fight for deep change, and its searching inquiry.

Thank you. 

*     *     *     *     *     *

Gus Speth may be reached at gus.speth@yale.edu

*     *     *     *     *     *

To support our transition to the New Economics Institute, send a tax-deductible donation to E. F. Schumacher Society, 140 Jug End Road, Great Barrington, MA 01230 with NEI in the memo line, or donate online at:

https://www.smallisbeautiful.org/donation_form.html

February 16, 2010

A Great Transition

February 11, 2010

Dear Friends,

There is no doubt that the number of new ideas emerging in the field of humane, sustainable economics is accelerating.  But complete blueprints are still pretty few and far between.  Even so, our British colleagues, the New Economics Foundation (nef), have tested the waters with exactly that.

Their outline is impressive and hopeful.  It still requires the econometric framework for a sustainable model of the economy and it requires a translation to a North American setting, but those are projects we will work on together.  Their blueprint offers a coherent foundation on which to build a future economics. They have called it "The Great Transition."

All of us at the E. F. Schumacher Society look forward to collaboration with nef as we undertake our own transition to become the New Economics Institute. David Boyle, a senior research fellow of nef, and his family have joined us in the Berkshires to further that organizational transformation.

At the end of this email David shares his thoughts on nef's Great Transition report for your information.  The full document is at www.neweconomics.org.

Warm wishes,

Susan Witt, Stefan Apse, and Kate Poole

Staff of the E. F. Schumacher Society

140 Jug End Road

Great Barrington, MA 01230

www.smallisbeautiful.org

www.neweconomicsinstitute.org

*     *     *     *     *     *     *

The Great Transition

The main question we need to know about any vision of the future is what it is that has driven the change.  In the case of The Great Transition, it is the rising costs of going back to ‘business-as-usual’, the huge cumulative cost of climate change (they estimate this at $3.75 trillion in the UK by 2050) and the cumulative cost of high levels of inequality (they estimate this at $6.75 trillion for the UK in 2050).

Drivers of change are often uncomfortable, and this one is no exception.  What is exciting about The Great Transition is that it sets out a believable path whereby Britain can take big, radical steps toward a society and economy that delivers long, happy and equitable lives and fits within the planet’s carrying capacity.

It means that the UK's conventional GDP will fall by a third.  This is offset by making better use of what they have, and by an economic boost from increasing social and environmental value.  The costs of climate change can be partly avoided and the costs of social breakdown can be avoided too.

New Economics Foundation policy director Andrew Simms put it like this.  “For years we have been told that there is no alternative to an economy that wrecks the environment and worsens inequality.  We’ve been told that we live in a time of prosperity, when really we’re no happier than we were thirty years ago.  We’ve been told that crashes, bubbles and recessions are all part of the ‘natural cycle’ of economies.  But faced with potentially irreversible climate change and corrosive inequality, these are dangerous fairy tales. The Great Transition shows we have a chance of a better reality.”

The point is that, as we know, GDP is a very poor measure of progress: the revenues skimmed off the financial system by traders in the City of London as they built a pyramid of ‘toxic’ derivatives added to GDP.  So does cleaning up the effects of pollution and paying the costs of high rates of crime increases. This isn’t just an academic point: what we measure ends up driving what we do. The Great Transition proposes a move beyond GDP, to start measuring the things which really produce value, for our communities, our societies and our environment.

The report sets out seven main interventions.  These include:

·      A Great Revaluing to make sure that prices reflect true social and environmental costs.

·      A Great Rebalancing that sets out a new productive relationship between markets, society and the state.

·      A Great Economic Irrigation that helps money and investment flow to where it is most needed. 

But how do we get there?  The Great Transition suggests a universal Citizen’s Endowment of between £40,000 and £50,000 to give every adult an equal chance in life and the opportunity to invest in education, a business or local productive assets.  This would be funded by a phased rise in inheritance tax on all estates up to 67 per cent and would go a long way to reducing the massive inequalities of inherited wealth in the UK.

Community land trusts are also central to The Great Transition.  The report also proposes redistributing working time by setting out a four-day working week for everyone that would cut GDP by a third without a major loss of jobs.

There would be a major reorganisation of business, with publicly listed companies progressively transferring shares to their staff, giving them real control over the companies where they work.  This would lead to the creation of a series of co-operatives, operating in regulated markets, and subject to competition from new companies.  This is designed to change power relations within workplaces, creating a form of economic democracy.

There would be new variable consumption taxes, replacing income tax, reflecting the social and environmental costs of goods. A windfall tax on the profits of fossil fuel companies, for example, could channel funds into clean energy projects.  There would be government lending for large-scale green energy and transport projects, channelled through a national Green Investment Bank.  There would be a new national Housing Bank, more along the lines of those in the USA, offering people the opportunity to transfer a portion of their mortgage debt into equity and paying social rent on the balance.

There would be new regulations on the reserve requirements of private banks, which would be related to the social and environmental value of their investments.  This is intended to engineer a ‘race to the top’, avoiding the more familiar race to the bottom, at the same time as reducing speculation and credit bubbles.

The purpose of The Great Transition is to inspire debate.  It was designed for the UK not the USA.  Many of the measures will be controversial.  Some will be wholly unacceptable to people who are already steeped in sustainability.  But it is a bold and coherent vision, with details and figures – using the skills of novelists, as much as the skills of economists, to create a believable world.  And it suggests that other kinds of economic worlds are possible.  That, in itself, represents hope.

Tellus Institute and the Stockholm Environment Institute have made significant
 contributions to defining a Great Transition (www.greattransition.org). More
 research and discussion is ahead. 

David Boyle may be reached at:

davidboyle@smallisbeautiful.org

 

December 30, 2009

Small Change/Big Impact

Dear Friends, 

"Lowly, unpurposeful, and random as they may appear, sidewalk contacts are the small change from which a city's wealth of public life may grow."  --Jane Jacobs from "The Death and Life of Great American Cities."


One of the features of BerkShares, the local currency circulating in the Southern Berkshire region of Massachusetts, is that it fosters this wealth of sidewalk contacts (www.berkshares.org). 


Use of BerkShares, a paper currency, requires face to face economic exchange.  The citizen/buyer must meet the merchant/owner and enter into conversation about the item purchased.  In the course of these multiple transactions an understanding begins to grow of the nature of the business, how it fits in the streetscape of the town, the working conditions of its employees, availability of locally made goods, the impact of new regulations, the necessity to respond to the changing tastes of consumers, the hurdles to prosperity, the many roles the merchant plays in the community as volunteer ambulance squad member, school board official, community theater player.

When purchasing directly from a producer with BerkShares the information shared may be even more deeply sourced in the local landscape.  You may learn how to detect the first signs of a blighted maple tree plaguing the maple syrup industry, or learn how heavy spring rains kept bees from pollinating the apples blossoms, resulting in fewer apples to market. 


BerkShares are a "slow money" to borrow a term coined by Woody Tasch.  It takes more time to process a transaction, time for graciousness, time for building connection with community of place. 


"Inconvenient," some will say.  Yes, when compared to the hastiness and anonymity of an internet purchase.   But rich with information needed for conducting public life.  A democracy only thrives when its citizens are informed and engaged by public issues. 


Slow money is not sleepy money but awake to the flow of economic life pulsing through a region, shaping its future, providing warning signs and creating options for public policy and private initiative.  Perhaps the greatest task of concerned citizens in the twenty-first century is to reclaim responsibility for the consequences of our economic transactions--personally, institutionally, and in public spending.  Slow money is the start of this process.


The function of money is to serve as an abstraction for real economic exchange.  This is both its flaw and its almost mystical power. 

If we did not have the tool of money, we would be we left with direct barter, limited to what we could trade at a particular place and time--carrots for cordwood.  Without the carrots I could not acquire the cordwood.  Money stands for a value created at a different time, stored, and used to exchange for goods needed in the present time.  Money allows values to be collected together and applied to an entirely new type of venture in the future.  This accumulation allows the entrepreneur to organize human initiative and raw materials and create some before-unrealized product for healing the sick, producing energy, transporting goods.  Quite wonderful.


However this tendency in money to abstract actual exchange can rapidly escalate unchecked, so that ultimately money begets money through sheer movement of capital.  The living consequences of the working of capital--the conditions of laborers, the processes used in manufacturing, the effect on eco-systems to obtain raw materials, the fossil fuels used in transportation of goods to consumers, the pockets of accumulation--all tend to be obscured.  Our private discussion and public debate accordingly narrows to cost of goods and return on investment--shaping personal habits of consumption and public policy that drive a global economic system unimpeded by environmental, social, or cultural concerns. 


Slow money again makes us conscious of the impact of our economic transactions--not just as purchasers, but as tax-payers, investors, and philanthropists.    


Last December BerkShares, Inc. took out a full page ad in a local paper listing the seventy-one non-profit organizations that would accept year-end donations in BerkShares.  These ranged from the volunteer fire department, to arts groups, to social service agencies, to the plethora of environmental organizations in the Berkshires. By accepting BerkShares, these groups were committing to re-circulate the BerkShares back in the community by purchasing needed goods and services locally.


A woman in the area, known for her generous support of many different initiatives, called to ask exactly how would someone make a donation in BerkShares.  We explained that you would walk or drive to the project's office, call staff together, look them directly in the eyes, tell them what important work they were doing for the community, explain that you wished to thank them for this good work, and hand them an envelope with a big stack of BerkShares. To calculate the tax value of your gift, you would use the BerkShares exchange rate with federal dollars--10 BerkShares equals $9.50.


Such direct acknowledgement of good work exponentially increases the value of the gift by inspiring staff.  Slower, yes.  It would take more time to deliver the BerkShares in person than to simply write a check.  Inconvenient, yes.  In the short run that is, or so it seems.

I recall the wonderful scene in "The Little Prince" by Antoine de Saint-Exupéry in which the prince encounters a salesman extolling the benefits of a pill to quench thirst.  The salesman explains that by not having to collect water for drinking, people will have more time to do other things.  The prince responds by saying that if he had more time there is nothing he would rather do then locate a well from which to draw water to quench his thirst.  


As residents of the Southern Berkshires shift to trade in slow money, they are at the same time re-imagining their local economy.  It is fair to say that everyone in the Southern Berkshires knows what BerkShares are—that they are in fact a currency that can be spent only in the region.  And it is fair to say that at least fifty percent of the people in the Southern Berkshires have already engaged in long conversations about BerkShares in coffee shops and other "sidewalk contacts."  BerkShares have ignited a community discussion about local businesses and their problems, about local trade and the reasons for it, about the economic role of non-profits, about local currencies in general and their importance, about the role of local banks, about establishing import-replacement business, about economic sovereignty, about changing deeply engrained financial habits, and about a sustainable future. 


These small/slow exchanges are balancing the abstract tendency of money by reconnecting financial transactions with the people, culture, and landscape of a particular place, while at the same time building the community wealth which is the foundation for a newly imagined economic system.


As the year comes to a close, consider the staff members of your favorite organizations and take time to acknowledge their good work.  


Like other non profits, the E. F. Schumacher Society welcomes financial support of its programs. Your tax-deductible donations in BerkShares or federal dollars may be delivered or mailed to:


E. F. Schumacher Society

140 Jug End Road

Great Barrington, MA 01230


Or made online by credit card at:

https://www.smallisbeautiful.org/donation_form.html


Best wishes for the New Year,


Susan Witt, Sarah Hearn, Stefan Apse, and Kate Poole

Staff of the E. F. Schumacher Society

www.smallisbeautiful.org 

www.neweconomicsinstitute.org


Board of Directors: Gar Alperovitz, Jessica Brackman, Neva Goodwin, Hildegarde Hannum, Eric Harris-Braun, Dan Levinson, Constance Packard, Will Raap, Gus Speth, Joseph Stanislaw, and Stewart Wallis.

December 11, 2009

An Economics Informed by Salmon

Imagine leading economists spent time in the wilderness. Perhaps the chair of the Federal Reserve could spend an afternoon standing at the mouth of the Tsiu River on central Alaska's little explored lost coast, as the sleek bodies of silver salmon everywhere swelled upstream pushing against him.

Andrew Kimbrell, driven by his personal experience of the Coho salmon on the Pacific Coast, is on a quest for an economic ecology, a consideration of our economic system as subservient to and informed by nature. As a result of that afternoon in the river, he "began to imagine a world where the economist knows the salmon." For Kimbrell, the salmon embodies the qualities of nature abandoned and ignored by our competitive free market system, namely redistribution, reciprocation and gift-giving.

Appended to this email you will find a selection from Kimbrell's "Salmon Economics (and other lessons)" E. F. Schumacher Lecture pamphlet. The section, titled "Return to Sanity," provides an outline of the salmon's natural economy and its core principles.

The pamphlet goes on to address the crises the salmon are facing due to environmental degradation, bioengineering, and the forces of the competitive market, and then he shows how these crises are our own. Kimbrell offers persuasive arguments about the deleterious effects of the commodification of land and labor, nature and man. He shows how the salmon offer inspiration for living well: "The salmon teach a different lesson. For them there is no linear progress or search for perfection; instead, they seek and fight doggedly to complete their cycle of life."

Salmon returning from the sea to the precise river inlet in which they were spawned bring with them nutrients from the ocean. This vital gift-giving represents an essential part of the economy of all living systems. Kimbrell writes how: "Unlike the self-interest of the market, embodied in legal contracts, gift-giving affirms a sense of community, charity, reverence, and a spontaneous sense of the relationship between humans and the natural world."

As the year comes to close and many gift-giving opportunities arise, we urge you to consider giving the gift of visionary voices, like Andrew Kimbrell's. For twenty-nine years the E. F. Schumacher Annual Lectures have been a forum for new economic thinking. The lectures are edited and published in pamphlet form and sold for $5 each or 5 BerkShares, including postage. A full publication list and order form are available online or on request. We would be pleased to include a gift card with your name in your order.

The full text of Andrew Kimbrell's "Salmon Economics (and other lessons)" is available as a pamphlet or can be read in its entirety here.

Best Wishes for the Holiday Season,
Susan Witt, Sarah Hearn, Stefan Apse, Kate Poole, and Jasmine Stine
Staff of the E. F. Schumacher Society

* * * * * * * * * * *
The Return to Sanity
“To live on the land we must learn from the sea.”
George Sumner

What can the salmon offer that will move us toward a new paradigm in economics? Can their homeward journey help us rid ourselves of the obsolete, dangerous, and somewhat pathological market mentality? To answer these questions we will need to look more closely at the “economy” of the salmon’s life cycle.

When the Pacific salmon return to the rivers of their birth, they carry in their bodies a number of nutrients, including nitrogen and phosphorous garnered from their ocean sojourn. In fact, isotopic analyses indicate that riverside vegetation near spawning streams receives 22 to 24 percent of its nitrogen—the nutrient that most commonly encourages plant growth—from salmon. As a result, trees on the banks of salmon-stocked rivers grow more than three times faster than their counterparts along a salmon-free river. Alongside spawning streams Sitka spruce (Picea sitchensis) have been found to take eighty-six years instead of the usual three hundred to reach 50 cm. in thickness. Research also shows that at least one-fifth of the nitrogen in the needles of Sitka spruce trees and other plants near spawning sites comes from the ocean via Pacific salmon carcasses. These same trees that have been fertilized by the carcasses enhance the quality of breeding and rearing habitats for the fish by providing shade, sediment and nutrient filtration, and large woody debris.

It is not just the vegetation that profits from these nutrients. Muscle samples taken at these riversides from vertebrate herbivores (deer mice, voles, shrews, and squirrels) show increased levels of nitrogen compared with samples taken from animals farther away. The animals eating the salmon also help with the spread of these nutrients. It has been estimated that 70 percent of a black bear’s annual protein comes from salmon. During a 45-day spawn each black bear catches about seven hundred fish and leaves half of each carcass in the forest. At 2.2 kg. per fish, this amounts to 120 kg. of nitrogen fertilizer per hectare of land. British Columbia’s 80,000 to 120,000 bears could be transferring, through salmon carcasses and the bears’ dung, as much as 60 million kg. of salmon tissue into the rainforest, accounting for half of the nitrogen fixed by old-growth trees

Salmon are also the principle source of food for the brown bear. And analysis of hair from grizzly bears, who became extinct in Oregon’s Columbia River Valley in 1931, has shown that 90 percent of their diet came from salmon. Additionally, the salmon’s eggs and carcasses are the major source of food for sea otters and several trout species. The carcasses also provide critical nutrient resources for aquatic invertebrate scavengers, detritivores, and aquatic microbes—organisms that in turn help enrich the nutrient capital of the wetland itself. And perhaps most crucial of all, 50 percent of the nutrients that young salmon receive comes from their dead parents.

In contemplating this “salmon economics” we find no trace of the self-interest and laws of supply and demand endemic to the human market mentality. What alternative economic values are taught by the cohos’ life cycle and final journey? One value is redistribution. The riches of the ocean are redistributed to the wetlands and the rivers. It is an intricate, diverse, and egalitarian redistributive system, extending to the needles of the Sitka spruce, the muscles of the vole, the intertidal microbes, the bodies of the fry, and then even to the bear dung that becomes fertilizer for the trees farther inland.

We do, course, have redistribution in our current economy. Through taxation, for example, we redistribute wealth to aid those in need, whether the unemployed, elderly, disabled, or poverty stricken. But these programs are constantly under attack by free-market advocates and are often eliminated under the rubric of tax relief. Unfortunately, those defending these programs never amplify and undergird their argument by pointing to the natural and ecological archetype of redistribution as found in the salmon cycle and throughout nature. Redistribution is not only altruistic or an expression of largesse, it is the fundamental element in successful and sustainable natural economies. In sum, redistribution is the way nature survives and thrives. It is a kind of natural law. By contrast, the purported free-market laws of supply and demand are recent intellectual constructs with no foundation in nature.

Then too, the salmon teach us about the value of reciprocity. There is a complex reciprocal relationship between the salmon and future animal and plant generations. As noted, the salmon’s nutrients help the growth of riverside vegetation, which in turn provides shade, protection, and nutrients for the growing parr and smolts, preparing them for their ocean journey and the repeating of the cycle. Moreover, the nutrients given to the animals help fertilize the trees, whose roots in turn protect the rivers and streams from erosion. Overall, it would be virtually impossible to comprehensively describe the entire reciprocal interaction between the salmon and the life around them, from microbes through mammals.

As with redistribution, our current economy also contains many reciprocal elements. We pay our taxes so that we can have roads, schools, and other basics that will be there for us. We participate in civic associations, on zoning boards, or in local governments, with the assumption that our time spent will benefit us, our families, and future generations. But perhaps more importantly, the vast majority of Americans’ work is based on reciprocity. My research indicates that more than 70 percent of us get up every morning to take care of something or someone, not to make a profit by selling something for more than we paid to produce or buy it.

This is what I term “the care economy,” which I contrast with “the profit economy.” Teachers, doctors, nurses, firemen, policemen, social workers, and all those working in government and the public-interest community, including those protecting our fellow creatures and the natural world, will not make more or less profit depending on how much they produce. They are the care economy and are paid a flat-rate salary for their service. Firemen will not pick one house to save and turn down another based on making a profit for saving the more expensive house. Teachers will not pick one child to teach over another because they will be paid more for teaching the richer child. After a natural disaster, animal rescuers save mutts and purebreds with equal energy without wondering whose owner will pay more.

The tragedy of September 11, 2001, provided a graphic contrast between the profit and care economies. During and after the terrorist attacks Wall Street closed down, and there was a virtual halt in trading for days as brokers looked to foreign investment until they could assess whether it was safe and profitable to invest once again in America. Meanwhile, from the very first the care economy was fully invested. Emergency workers, police, and fire personnel worked tirelessly and under great personal risk for days and weeks as did health professional, government, and nonprofit organizations. Everyone seemed to grasp intuitively the reciprocal nature of this sacrifice, to understand that the greater community can function only when each of its members gives in this way, knowing that it would will be reciprocated should tragedy strike elsewhere. The fate of each is wedded to the care and skills provided by the other.

The care economy, though it represents a solid majority of us and we all depend on it, is not privileged in our society. Even progressives often call it the “service” economy, which is more suggestive of entry-level restaurant workers than of the vast majority of Americans who are part of this care economy. Instead, America is often portrayed as the land of “entrepreneurs,” where “the business of America is business.” Never do we hear in defense of reciprocation that it is a fundamental principle of natural economic life and has the imprimatur of eons of successful natural economies behind it, whereas the market system with its profit mandate is just over two hundred years old and is already unsustainable.

Along with redistribution and reciprocation, the salmon teach yet another a third economic value—gift-giving. Unlike the self-interest of the market, embodied in legal contracts, gift-giving affirms a sense of community, charity, reverence, and a spontaneous sense of the relationship between humans and the natural world. In a way it is the antidote to the market system. As ethicist Thomas Murray explains:

Gifts create moral relationships that are more open-ended, less specifiable, and less contained than contracts. Contracts are well suited to the marketplace, where a strictly limited relationship for a narrow purpose—trading goods or services—is desired. Gifts are better for initiating and sustaining more rounded human relationships, where future expectations are unknown, and where the exchange of goods is secondary in importance to the relationship itself.

Salmon provide the ultimate relational gift—a gift for the otters, the bears, the rainbow trout, their own offspring, and a gift for all of us who witness and learn from them. This gift is an eternal promise, always kept if not sabotaged by the intrusion of humans and their technology. It is an intrinsic aspect of the very being of the salmon, not given in calculation of receiving something in return. There are so many in our society who give without looking for a return: the teacher staying late to help a student, the neighbor helping the elderly couple next door, those millions giving their time, work, and money to help in a cause they believe in or to help others more needy than themselves. This generosity represents a major sector of our economy but is usually marginalized as exceptional altruism instead of being understood for what it is—an essential part of the economy of all living systems.

One additional and critical economic lesson of the salmon I will mention is the profound importance of the local. Salmon provide remarkable instruction about the fundamental value of place. Father Thomas Berry has spoken about the importance of the “smell of home,” the odor of place. No creature better embodies this teaching than the salmon. An Alaskan Fish and Wildlife study found that just one drop of water from the home stream of salmon added to 250 gallons of water will take these salmon in the direction of that water. It is impossible not to be astonished by the great odyssey of the salmon and their uncanny ability to ultimately find the exact stream or even rivulet of origin and to mate there, with all the redistribution, reciprocation, and gift-giving going to that local place and its environs.

Every Thanksgiving, when tens of millions crowd the airplanes and jam the roads, we catch a glimpse of the homing instinct, however alienated, that survives in each of us. Mobility is prized and privileged in our society (just think of the automobile, which embodies the glorified values of autonomy and mobility—ergo “auto-mobile”). And this is a necessary attribute of the supply-and-demand market economy, which may cause extreme dislocation many times in our lives as we—purported human commodities—move about, often involuntarily, to find work, economic survival, or increased opportunity. Although this dislocation corresponds to the logic of capital, it is not what most of us seek. Reminiscent of the salmon’s journey is the yearning we still carry for home, place, and community.

Moreover, in economic terms the idea of the local is becoming ever more important. For millennia human economics was local, but over recent decades we have seen a massive expansion in the global economy. Now transnational corporations—obeying the call of the market, whose only motive is profit and their own self-interest—roam the world in search of resources and markets for their products. They forcibly bring down trade barriers and any protections that localities might have against this economic onslaught. Corporate-led globalization brings a corresponding contraction, and destruction, of the local economies it replaces. The corporate enclosure of these local communities and eco-systems devastates the natural world, homogenizes cultures, disrupts communities, and deprives their members of any meaningful control over their lives.

How is this process to be halted and reversed? The salmon give us the answer: local production for local consumption. Note that the salmon travel freely as they grow and become mature but always ultimately return to provide their local community with what it needs. I like to think of this as a kind of internationalism based in the local as opposed to the homogenizing juggernaut of market-based globalization. Internationalism allows each of us to travel and learn from all peoples and cultures and geographies, but unlike globalization it understands that the purpose of this travel is to return and nourish the local with a diversity of knowledge and experience.

Fortunately we are beginning to see a rebirth of the local around the world in food and energy production, local currencies, and emphasis on local governance. To those who inevitably will state that this localization is contrary to the ersatz laws of free trade and the market we need only point to the salmon and note that localization corresponds with the laws of nature.
Over recent decades there has been a growing interest in the field of ecological economics, a field that infuses certain ecological realities into current economic thinking. Much good work has been done in this area, but perhaps it is time to reverse the adjective and noun in ecological economics and call it economic ecology, not privileging thereby human economy but recognizing that our economic needs fit into the larger ”economy” of our eco-systems. The tendency in ecological economics can be to “greenwash” capitalism or socialism, By contrast, an earth economics would base the allocation of resources primarily on ecological principles, including those so beautifully embodied in the salmon life cycle and other of the earth’s living systems. It is a call for the economist to truly meet and learn from the salmon, a call for an economics of earth that is based not on the abstractions of thinkers but on the study of, and wonder at, its creatures.

This new and important discipline is not without its precedents. Indigenous societies were never based on market economies but on a mix of reciprocal service and exchange, redistribution of resources, and gift-giving in local situations. These societies based their economic behavior—redistribution, reciprocation, gift-giving, and localization—on the archetypal patterns of the natural systems around them. To survive we must follow their lead, and without delay. We must learn and integrate the great economic lessons of the salmon.

December 3, 2009

Currency Recirculation Equals New Jobs

Dear Friends,

The Christian Science Monitor quotes Schumacher Society on currency recirculation as a jobs development tool.

Best wishes,
Staff of E. F. Schumacher Society
www.smallisbeautiful.org

http://features.csmonitor.com/economyrebuild/2009/12/01/‘buy-local’-movement-gives-new-life-to-corner-stores/

‘Buy local’ movement gives new life to corner stores
Communities urge residents to think and spend locally in a bid to boost area businesses.

By G. Jeffrey MacDonald | Correspondent/ December 1, 2009 edition

AMESBURY, MASS.

This working-class town of 18,000 on Boston’s North Shore has a plan for revitalizing its industrial sector, which long ago bade goodbye to textiles, carriage manufacturing, and a hat factory. It starts with an unlikely target: residents’ spending habits.

Local merchants’ “Amesbury First” campaign, due to launch early next spring, aims to get downtown bustling again by inspiring residents to do more shopping there – and less at chain stores in nearby New Hampshire. As more cash moves among local businesses, town boosters say, Amesbury will grow more prosperous and become a destination for shoppers and manufacturers alike.

“The initial goal is to get everybody – business owners, residents – spending money in their town,” says Stefanie McCowan, executive director of the Amesbury Chamber of Commerce. “Then the more people hear ‘Amesbury’ [as a place for business], it becomes natural for somebody to want to move their large industrial business here or bring operations that are going to help support our tax base.”

As recession gives way to the prospect of a slow recovery, communities are increasingly giving traditional development a turbo boost. In addition to courting outside businesses to get more wages and money flowing into their local economies, they’re also looking to increase the local money flow in hopes it will create jobs – and perhaps even lure outside businesses. This practical, two-pronged strategy is taking hold in Canada and the United States, involving entire provinces, like Saskatchewan, as well as small cities and towns in states as diverse as Vermont and North Carolina.

“If you asked what they’re doing to grow their economies, historically they would have said: ‘We’re recruiting business,’ ” says Billy Ray Hall, president of the North Carolina Rural Economic Development Center in Raleigh. “Now they’ll talk about: ‘We’re growing our existing businesses [in part by recirculating funds locally], and if we have an opportunity to recruit a business, we will aggressively pursue that, too.’ ”

To make the transition, communities have to measure their economies in new ways, notably their “leakage” – the amount of local money that moves to faraway hubs of commerce. Successful towns and cities minimize leakage by making sure most dollars spent locally recirculate to other area businesses. Less successful ones have plenty of leakage as dollars get spent once locally, then disappear.

Local merchants in New Orleans, for example, spend 32 percent of their revenues locally, twice as much as a typical chain retailer would, according to a study released in September by Civic Economics, a consulting firm with offices in Austin, Texas, and in Chicago. That’s largely because independent stores spend more of their profits locally and use local service providers, such as printers and marketing agencies, instead of corporate staffers based in other cities. The same study projected New Orleans residents could pump $235 million into their economy just by shifting 10 percent of their spending from national chains to locally owned businesses.

Other studies have projected similar results elsewhere. With a 10 percent shift, Kent County, Mich., could add 1,600 jobs that pay nearly $60 million in additional wages, according to a Civic Economics 2008 study.

“That’s really something,” says Civic Economics principal Dan Houston. “If somebody came to some town in western Massachusetts and said, ‘We would build a plant with 1,600 jobs and a $60 million payroll,’ what would that town do? They would roll over for that proposal and subsidize the daylights out of it.”

Recirculating currency entails more than a switch in consumer spending patterns, according to proponents of the strategy. To blunt leakage in the long term, communities need to focus on producing more of what they currently import from other geographic areas, according to Michael Shuman, author of “The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition.” That means creating new businesses and, sometimes, new industries.

For a model, Mr. Shuman points to Hardwick, Vt. There, businesspeople have focused on supplying more of the region’s local food needs by creating new markets for area farmers. Entrepreneurs have built infrastructure to turn local soybeans into tofu, for instance, and to age cheese for area cheesemakers. Such enterprises, along with growing businesses in related trades, account for as many as 100 new jobs in this remote town of 3,000.

Other towns could take similar steps to depend less on imports from faraway places, Shuman notes, but financing is often a challenge. He argues that if regulations were changed to allow small investors to buy stakes in local private enterprise, then businesses could more easily grow operations to meet communities’ existing needs.

States and provinces are trying the same idea. The Saskatchewan Economic Development Authority this year launched a “virtual incubator” – an Internet clearinghouse to help firms source as much of their inputs as possible from other Saskatchewan-based businesses. Rhode Island state government has expanded RI Nexus, a Web-based forum where the state’s high-tech professionals find one another and do business.

Back in Amesbury, businesses are a long way from growing new industries to make the town or region more self-sufficient, but they are making a point of keeping money moving locally. Five local restaurants buy produce from Amesbury’s 145-acre Cider Hill Farm and tout their locally grown ingredients on menus. Cider Hill co-owner Glenn Cook, in turn, raises particular varieties of lettuce to suit the color preferences of Flatbread, a downtown pizzeria. He also makes a point to put money back into the economy by contracting, for instance, with Amesbury’s R.E. Kimball & Co. to turn his peaches into jellies. Sometimes local businesses charge more than others might, he says, but he finds the extra costs worthwhile.

Higher costs present a recurring challenge in the quest to stem leakage. Companies in many industries work with distributors that aren’t used to using local suppliers. Nonlocal suppliers sometimes beat local prices with high-volume shipments from other states or countries, where input costs are lower. To grow a vibrant local economy, businesspeople and consumers must accept that they’re going to carry higher expenses as a consequence, according to Susan Witt, executive director of the E.F. Schumacher Society, a Great Barrington, Mass.-based advocacy group for strong local economies.

“It’s changing our thinking from home economics to community economics,” Ms. Witt says. “When we do that, the home economics will be stronger because our neighbors, [schools, arts, and social services] will be stronger. That will come back to make our lives richer.”

Changing shoppers’ habits is a challenge, says Ms. McCowan of the Amesbury Chamber, even when local merchants charge competitive prices.

“Trying to convince people to not stop at Lowe’s on their way home – and instead to make sure that they run down to Amesbury Industrial [Supply Co.] on Saturday morning to get what they need – it’s a really long road in educating people,” McCowan says.

Some don’t concede that higher costs necessarily come with the territory of fighting leakage. Mr. Hall in North Carolina says consumers and businesses can grow their local spending sometimes just by finding deals that suit their needs. Even then, he says, towns need to recognize that local spending alone isn’t an economic panacea.

“Turning dollars around locally [through recirculation] will help to limit the amount of dollars flowing out of the region and be a stabilizing influence,” Hall says. “But it’s when you sprinkle entrepreneurship into the mix and have a commitment to grow businesses locally that you have a sustainable base.”

Mondragon: Reclaiming Regional Production Capacity

Dear Friends,

Judith Schwartz's article on the Mondragon Cooperatives was posted today at Miller-McCune.

The loss of productive capacity and skills leaves regional economies vulnerable. Mondragon provides an example of how to reverse that trend and create new jobs.

Best wishes,
Staff of E. F. Schumacher Society
www.smallisbeautiful.org

http://www.miller-mccune.com/business_economics/this-import-might-preserve-a
merican-jobs-1634

This Import Might Preserve American Jobs
Might a cooperative model that arose from ashes of a civil war serve the Rust Belt economies of America's Midwest?

By: Judith D. Schwartz | December 03, 2009 | 05:00 AM (PST) |

The Mondragón Corporation, a cooperative that arose from ashes of a civil war, may be a model that could serve the Rust Belt economies of America's Midwest.Konstantinos Kokkinis

As the U.S. unemployment breaches the 10 percent mark — with manufacturing sector rates even higher — policymakers and industry representatives in the Midwest are seeking strategies to keep the Rust Belt from getting even rustier. In this war for economic survival, groups in cities like Cleveland, Detroit and Chicago, as well as the million-plus-members-strong United Steelworkers Union, have turned to a model borne of another war-torn region: the Mondragón Corporation in the Basque area of Spain.

The Mondragón Corporation (MCC) is a multilayered organization with worker-owned cooperatives and participatory governance at its core. The corporation is a group of cooperatives and cooperative members, a seat of governance as well as planning, researching and generating funding for new businesses — a kind of meta-cooperative.

The network is comprised of more than 250 distinct, independently run businesses across several industries; more than 100 are worker-owned cooperatives. Some 90,000 people work under the Mondragón umbrella. Taken together, MCC's companies are the seventh largest corporation in Spain and rank among Europe's leading providers of appliances and industrial equipment.

Mondragón has long been a mecca for Americans interested in worker cooperatives. This is in part for the democratic values — shared financial stake in business' success without the threat of outside ownership; one-worker, one-vote governance; and an ethos that values people over profit — but also because of its success. Last year, while Spain's economy languished, Mondragon Corp.'s income rose 6 percent, to 16.8 billion euros. During the 1980s, when Spain's unemployment hit 27 percent, Mondragón's hovered below 1 percent.

Brownfield Development
In 1941, Catholic priest Jose Maria Arizmendiarrieta found a Basque community — Arrasate, as Mondragón is known in Basque — where the striking mountain vistas and picturesque medieval architecture couldn't hide the ravages of the recently concluded Spanish Civil War, rampant unemployment and a once-thriving manufacturing infrastructure in disrepair. Two years later he opened a polytechnic school. And in 1956, the first cooperative, a stove factory, was launched. A bank and credit union soon followed and new cooperatives sprung up in electronics, tools, bicycles and on.

At MCC, the resources of all the cooperatives are pooled in the corporation, which gives small and upstart companies financial ballast and economies of scale. A portion of each worker's earnings is retained as "the patronage dividend," which gathers interest; another portion goes to a collective account of the cooperative, as an investment in the business' future. Workers pay membership fees but receive a percentage of revenues, plus higher interest on their accounts when businesses show a profit. Worker-owners are guaranteed employment; should one enterprise fail — and the failure rate is extremely low — jobs will be found in another cooperative.

The bulk of profit is reinvested into the cooperative network: to an education fund, to research and development, to cover potential losses, etc.; a percentage is directed to regional cultural institutions, maintaining vibrant community life. In order to promote economic equality, there are only five pay scales; in a given firm, the highest-paid employee earns no more than eight times the salary of a beginning worker. (The average Fortune 500 CEO's compensation is more than 400 times what his employees make.)

While the very word Mondragón has evoked an "if only" longing for many co-op watchers, the model hasn't taken root in the United States, even if the broader idea of the cooperative has. Michael Peck, the North American delegate for the Mondragón Corp., noted, "There are over 29,000 cooperatives in the U.S., and 80 to 100 million Americans belong to them." These range from small food purchasing co-ops to large credit unions, and account for $3 billion a year in assets.

But new developments in the industrial Midwest may broaden this. In inner-city Cleveland, the Evergreen Cooperative Laundry opened late last month, the first in a projected consortium of three cooperatives run according to the Mondragón template. On Oct. 27, the United Steelworkers and MCC announced an agreement to team up in forming Mondragón-style manufacturing cooperatives in the U.S. and Canada. Civic leaders in Detroit have consulted with Mondragón representatives and in southwest Wisconsin, plans are underway for the Mondragón-inspired Driftless Foods Co-op, beginning with an agricultural processing plant.

Meanwhile, on Chicago's West Side, Austin Polytechnic Academy is into its third year of offering high school students a combined college-prep and technical training curriculum. In September, a group of Austin Polytech students traveled to Spain and spent four days in Mondragón.
"The school is training the next generation of manufacturing leaders," explained Dan Swinney, executive director of the Center for Labor and Community Research, which helped develop the school. He said that the polytech, part of an effort to revive manufacturing in the now downtrodden Austin neighborhood, is "modeled in part on the Mondragón Polytechnic."

While Mondragón has a business presence in the U.S. — upwards of $200 million a year in mostly industrial products — the Steelworkers agreement marks the first time the Spanish cooperative has joined forces with a North American group.

"The general idea is that, in light of today's economic problems, there's much interest in trying to figure out a way to create jobs that are sustainable and accountable to the workers," said Rob Witherell of the Steelworkers. "This is certainly a step in the right direction." He did not specify a timeline.

Mondragón's Peck said that the disconnect between Wall Street profits and Main Street layoffs has created a hunger for new business structures. "People are beginning to understand that workplace ownership is just as valuable as home ownership," he said.

The newly-opened Evergreen Cooperative Laundry, a state-of-the-art commercial laundry designed for LEED Silver certification, is the culmination of extensive preparation and research on the Mondragón model among several organizations: The Cleveland Foundation; the Democracy Collaborative; ShoreBank Enterprise and the Ohio Employee Ownership Center at Kent State University. Many business ideas were floated, among them a laundry that would serve the local health care community, which includes the Cleveland Clinic, University Hospitals, and the Veterans Administration Medical Center.

"The University Circle area has wealthy anchor institutions that are part of the history of the city's industrial past," said Jim Anderson, who will function as Evergreen Laundry's CEO and is program coordinator at the Ohio Employee Ownership Center. "The neighborhood that surrounds The Circle is poor and underserved, with an average household income of $18,500. We asked: Is there a way to enhance community wealth by employing folks from the neighborhood in worker cooperatives and, at the same time, for them to provide a service to these institutions? Of the nearly $3 billion spent on services and procurements, only about 10 to 15 percent is spent right here in northeast Ohio. We saw in this the opportunity for a for-profit enterprise. The anchor institutions are going to stay here, so why don't' we get jobs that are anchored with them?"

Rather than thriving despite their surroundings, business leaders have an investment in helping the surrounding neighborhood thrive. "We needed to create businesses that would sustain themselves," Anderson says. "These had to be real jobs that would keep people working for the long term."

In fall 2008, a group of a dozen community leaders, professionals and leaders from several universities traveled to Mondragón, which generated yet more enthusiasm about the project, Anderson noted. Alas, this was when the financial system began to unravel. "When we got off the plane, we learned that the bank we were dealing with was sold to a bank in another state," he recalls. "But, still, we got up and kept this process moving — and got here. It's a model we're convinced is replicable, city to city."

Oliver Henkel, chief external affairs officer at the Cleveland Clinic, just returned from a follow-up trip to Mondragón. "These neighborhoods are a base of employment for us, and we prefer to draw on services close by for environmental as well as economic reasons," he says. "While here in Cleveland we can't replicate this model down to the last detail, elements are particularly attractive. In Mondragón, I saw a workforce secure in their jobs working as teams with extraordinary results, plus the security that enhanced wealth creates."

Mondragón is not without its critics. The corporation has subsidiaries in more than 20 countries and so far, these do not have the same cooperative framework. Their retail company, Eroski, has grown rapidly — it operates the largest Spanish-owned food chain — and has more employees than worker-owners. But the company is planning to offer membership to the 40,000 people who work for it.

And no business model can insulate workers from a global economic slide. But worker-members can choose how to confront it and, as has happened, vote to take a temporary pay cut of, say, 8 to 10 percent, to ride out a downturn rather than trim any staff. And, boosters say, the results speak for themselves.

Like many from the U.S. who travel to Mondragón, Susan Witt, executive director of the E.F. Schumacher Society, was struck by the lack of economic disparity when she visited in 2007. "You could tell that no one was wealthy — but everyone was well off," said Witt. Beyond the sense of worker equity she observed, what makes her hopeful about bringing the Mondragón model stateside is the chance to build a resilient production sector. "A huge concern of mine is the loss of production in this country," she said. "The outsourcing of production skills makes us so vulnerable; the memory of production is disappearing. Mondragón shows that there's a dignity and potential in production. That's the lesson to bring here."

The Evergreen Cooperative Laundry is now humming, processing 1,000 to 2,000 pounds of laundry a day from three health care customers. Edward Cole is one of the six workers who run the machines. Cole, 59, learned of Evergreen while living and working at a homeless shelter and was assisted in the application process through Cleveland's Towards Employment program. "It's really great here. It's a good team," said Cole, a Vietnam combat vet who spent 10 years in prison for a crime he says he did not commit. He likes that he has been trained in the use, mechanics and maintenance of every machine.

"If I'm going to become an owner, I want to know what I'm owning." For Cole, the worker-owner model sends a powerful message that he is valued, plus that he can build personal wealth.

Said Evergreen CEO Anderson, "If we're right — and we've been conservative because we've felt obligated not to let this fail — the worker-owners will have in their patronage account $60,000 in eight or nine years. That can help someone buy a home, send a child to college."
"My dream is to own part of this company," Cole said. "Now I have the dreams but don't have the nightmares," he says, referring to longstanding problems with PTSD. "This place is putting that dream in me. I can walk down the street and say, 'That's my company.'"