Forum Post: The Union National Cooperative
Posted 11 years ago on June 22, 2013, 8:53 a.m. EST by LeoYo
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The Union National Cooperative
The Union National Cooperative is the establishment of the nationwide cooperative for uniting all Americans in a mutually beneficial financial community. The Union National Cooperative is composed of the Union National Credit Union and the Union National Mutual Insurance Company providing facilitation for the Union National Employee Cooperative Plan and the Union National Cooperative Employment Service. Both the Union National Credit and the Union National Mutual financial institutions can be patronized through direct membership or indirectly through membership in a credit union or mutual insurance company that has elected to join the respective national institutions. Patronization of Union National Mutual can be further increased through an incentives program in which any person who is a member of both Union National Credit and Union National Mutual can pay 1% less on their premiums in the next year for every new member they are responsible for recruiting to the same type of insurance. If a person recruits 10 people for the auto insurance, that person will pay 10% less on their auto insurance in the next year. If a person recruits 103 people for the health insurance, that person will pay nothing on their health insurance premium in the next year and 3% less in the following year. These one year discounts on premiums will not only slightly ease a member’s financial burdens but will also provide the incentives for member recruitment and becoming patrons of both financial institutions thereby enabling larger loans and better coverage for the cooperative community.
The Union National Employee Cooperative Plan allows the members of Union National Credit to have deductions applied to their paycheck deposits for contribution to a cooperative fund enabling employed members to either become the worker-owners of their current workplaces or to become the worker-owners of new cooperative businesses.
The Union National Cooperative Employment Service is the 501(c) 4 organization that would assess the skills of the unemployed individuals to patronize it and match them with a suggested cooperative business plan. Upon acceptance or rejection of the plan for an alternative plan, the Union National Cooperative Employment Service would facilitate the crowd funding of the new cooperative business. Alternatively, cooperative businesses could be pursued without crowd funding through the formation of Business Management Cooperatives that would contract with business owners to staff and manage their businesses for an equal share of the profits. In either case, with the nationwide establishment of the Union National Cooperative Employment Service, the unemployed of each city would be consistently channeled into either newly or already established worker-owner cooperatives modifying the economic well-being of society at a fundamental level.
Union National Cooperative Municipal Economic Initiatives
The Union National Cooperative Municipal Economic Initiatives invites the non-partisan political involvement of the cooperative community at the municipal level to protect their local economies from the ravages of corporate exploitation. Each of the following proposed ordinances can be adapted to suit the particular needs of a community and even be supported at the state level in any of the 24 ballot initiative states where citizens possess the democratic right to determine their state’s legislation. Other initiatives for establishing municipal banks, municipal hospitals, and municipal universities, should also be pursued for the general welfare of the local public.
No public service shall be under the management of a private sector entity.
No formula business outlet shall exceed the size of the largest local business outlet of the same category.
The number of business outlets for any formula business shall be limited to one outlet per every 50,000 inhabitants of the local municipal population.
All municipal businesses shall have local bank accounts in which their profits shall be retained within the municipality and not be exported to anyplace outside of the municipality.
All offshore exports to the municipality shall derive from foreign retail companies owned by natural born citizens of those countries.
Trans-Partisan Cooperative Voting: Establishing Political Accountability
As a cooperative community in support of the ideals of direct democracy, individual members of the Union National Cooperative can support voter public control through the application of Free Democracy Affidavits http://occupywallst.org/forum/freeda-template/ or FreeDA as the solution to bringing about political accountability under conditions in which ballot initiatives, referendums, and recalls, are not an option. For a people to be free, politicians must be legally bound to serving the specific interests of the People rather than the interests of the corporations. By refusing to vote for any candidate who doesn't sign an affidavit legally committing that candidate to supporting the will of the People, voters will be able to exercise their democratic power to hold the candidates who do sign and are elected, legally accountable. However, VOTERS MUST REMAIN UNITED ACROSS PARTY LINES IN THEIR AGREEMENT ON THE AFFIDAVITS AND IN THEIR REFUSAL TO VOTE FOR CANDIDATES WHO WON'T SIGN THE AFFIDAVITS. This trans-partisan cooperation is essential to the success of bringing about permanent political reform. As such, the greatest support shall come from the participation of independent voters willing to forego partisan voting whenever partisan candidates are unwilling to sign an affidavit. If, initially, no candidates are willing to sign in the election in which the affidavits are first presented, it will only be a matter of time before both partisan and non-partisan willing candidates emerge from among the FreeDA supporters in subsequent elections. In accordance with amendments 6, 7, 8, and 9, of the proposed FreeDA Liberty Bill http://occupywallst.org/forum/free-democracy-amendment/ , the FreeDA signers would also be signing on to affirmations of not accepting campaign contributions from corporations and non-profits, not accepting gifts from special interests once in office, making all communication with lobbyists open to the press and the public, and not having an account with a private bank. In support of such candidates, a FreeDA 501(c) 4 PAC would receive contributions to fund ads for all of the FreeDA signers collectively.
What if an elected FreeDA signer declines to uphold an affirmation of the affidavit and the justice system declines to enforce the law? Since the elected official had the majority of the voters' support to win the election, the action to take place in response to a failure of justice will be by that same voting majority as well as by other FreeDA supporting voters from throughout the state. The action that these voters take will have to result in the total shut down of their state capitol along with a demand of the appropriate legal penalties to be enforced against the state attorney general for declining to prosecute the affidavit violator on the grounds of perjury. It is a battle for justice that must be won as the outcome will establish the precedent for all future outcomes. Civil disobedience, a general strike among the non-legal profession employees of the state justice department, and other non-violent tactics will have to be well planned in advance on a scale rivaling that of the 2011 Wisconsin protests to see the battle through. This voter solidarity across party lines in the use of affidavits and the demand for justice will be a people's revolution that either establishes democracy in America, setting an example for people of similar political situations to follow around the world, or fails and establishes the official American acceptance of the tyranny of corporate rule.
Through trans-partisan cooperative voting in support of the FreeDA Liberty Bill and ballot initiative voting at the state and local levels, the Union National Cooperative can form an effective non-partisan voting block capable of supporting widespread economic reforms for the prosperity of the cooperative community and the nation at large. The Liberty Bill amendment for a Union Reserve Bank in particular can be publicly pursued to form an interstate cooperative of public banks that utilize Union Reserve Notes instead of Federal Reserve Notes thereby allowing the state economies of the affected public to be independent of the corporate owned Federal Reserve Bank. Apart from political involvement, financial benefits alone make the Union National Cooperative a worthwhile endeavor for improving the lives of millions through non-predatory home loans, financing for employees pursuing worker-owner business opportunities, crowd funding for the unemployed to start their own worker-owned businesses, and adequate, affordable, health insurance that, in conjunction with either public or cooperative hospitals, can provide a viable substitute for universal health care. As an inclusive cooperative providing intrinsic benefit from the mere membership of its patrons, the Union National Cooperative can be the foundation of a brighter future for all Americans and a positive model for people around the globe.
Solidarity Economics, a Forgotten Practice of the Black Radical Tradition: An Interview With Jessica Gordon Nembhard Wednesday, 09 April 2014 09:23
By Laura Flanders, Truthout | Interview
http://www.youtube.com/watch?feature=player_embedded&v=_TVIghQMkBg
2014 0409flanders Main
Collective Courage: A History of African-American Economic Thought and Practice (Image: via Penn State University Press) Cooperative economics and civil rights don't often appear together in our history books, but they should. From the mutual aid societies that bought enslaved people's freedom to the Underground Railroad network that brought endangered blacks to the north, cooperative structures were key to evading the repression of white supremacy. And there was a vicious backlash when black co-ops threatened the status quo.
"The white economic structure depended on all of these blacks having to buy from the white store, rent from the white landowner. They were going to lose out if you did something alternatively," Jessica Gordon Nembhard, author of Collective Courage: A History of African-American Economic Thought and Practice, tells GRITtv's Laura Flanders.
In her book, Nembhard traces the forgotten history of economic cooperation and the civil rights movement. The book comes out next month. Laura Flanders sat down with her for a sneak preview.
http://www.truth-out.org/news/item/22986-solidarity-economics-a-forgotten-practice-of-the-black-radical-tradition-an-interview-with-author-jessica-gordon-nembhard
The Underground Railroad Was One of America's First Co-Ops: A Black History Tour of Cooperative Economics
Sunday, 20 April 2014 09:17
By Laura Flanders, Yes! Magazine | Video Report
http://www.truth-out.org/news/item/23188-the-underground-railroad-was-one-of-americas-first-co-ops-a-black-history-tour-of-cooperative-economics
http://www.youtube.com/watch?v=_TVIghQMkBg&feature=player_embedded
Also see: Solidarity Economics, a Forgotten Practice of the Black Radical Tradition: An Interview With Jessica Gordon Nembhard
From slavery to Jim Crow to cities today, African-Americans have been leading the cooperative movement.
Cooperative economics and civil rights don't often appear together in history books, but they should. From the mutual aid societies that bought enslaved people's freedom to the underground railroad network that brought endangered blacks to the north, cooperative structures were key to evading white supremacy. And there was vicious backlash when black co-ops threatened the status quo.
"The white economic structure depended on all of these blacks having to buy from the white store, rent from the white landowner. They were going to lose out if you did something alternatively," Jessica Gordon Nembhard, author of Collective Courage: A History of African-American Economic Thought and Practice, told Commonomics correspondent Laura Flanders this week.
For more on co-ops in the black community, read our latest piece on late Jackson Mayor Chokwe Lumumba's vision. This piece was reprinted by Truthout with permission or license.
What Then Can I Do? Ten Ways to Democratize the Economy
Tuesday, 24 September 2013 10:01 By Gar Alperovitz and Keane Bhatt,
http://truth-out.org/opinion/item/18908-what-then-can-i-do-ten-steps-toward-transforming-the-system
The richest 400 Americans now own more wealth than the bottom 180 million taken together. The political system is in deadlock. Social and economic pain continue to grow. Environmental devastation and global warming present growing challenges. Is there any path toward a more democratic, equal and ecologically sustainable society? What can one person do?
In fact, there is a great deal one person working with others can do. Experiments across the country already focus on concrete actions that point toward a larger vision of long-term systemic change - especially the development of alternative economic institutions. Practical problem-solving activities on Main Streets across the country have begun to lay down the elements and principles of what might one day become the direction of a new system - one centered around building egalitarian wealth, nurturing democracy and community life, avoiding climate catastrophe and fostering liberty through greater economic security and free time.
Margaret Mead famously observed: "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has." Some of the ten steps described below may be too big for one person to take on in isolation, but many are exactly the right size for a small and thoughtful group committed to building a new economy, restoring democracy and displacing corporate power.
As the history of the civil rights movement, women's movement, and gay-liberation movement ought to remind us, it's precisely actions of this sort at the local level that have triggered the seismic shifts of progressive change in American history.
Put your money in a credit union - then participate in its governance. Credit unions are commonplace financial institutions that typically facilitate loans for everyday purchases like homes and cars. But behind their unexciting veneer lie transformative possibilities. Unlike the large commercial and investment banks responsible for the 2008 financial crisis, credit unions are nonprofit cooperatives that are member-owned and controlled. These democratized, one-person-one-vote banks already involve more than 95 million Americans as participant-owners. They lend to minorities and low- and moderate-income families to a far greater extent than do commercial banks. Taken together, they hold roughly $1 trillion of assets - the equivalent of one of the largest US banks, knocking Goldman Sachs out of the top five.
Credit unions' direction of capital to community-benefiting endeavors has a long lineage. The Bronx's Bethex Federal Credit Union, founded in 1970 by Joy Cousminer and the "welfare mothers" in her adult education class, is a good example: it now serves more than 9,000 members, has $16 million of deposits and continues to empower local residents with a wide range of services and loans for students and businesses.
Hope Credit Union of Jackson, Mississippi, has generated more than $1.7 billion of financing for more than 130,000 individuals in the Delta region. Half of its loans go to minorities and women. More than a third of its members were unbanked before joining. Hope's CEO explicitly states that one of the credit union's purposes is to ensure that "no one is victimized by the predatory lenders that prey on vulnerable, minority, low-income and elderly residents." Alternatives Federal Credit Union, in Ithaca, New York, lends to cooperatives, worker-owned enterprises, small businesses and community groups and offers microloans to self-employed residents.
While many older credit unions have become quite cautious, it is also clear that collective efforts to direct capital in their communities can work. In Washington, for example, activists from the small town of Vashon formed an organizing committee that was able to get three seats on the board of the Puget Sound Cooperative Credit Union (PSCCU) then worked to open a branch for Vashon. PSCCU was "willing to cede substantial control in exchange for new members and deposits," wrote the LA Times. And, according to the activists, the credit union was "already doing the most aggressive energy conservation lending in the state," including home weatherizations - a good fit for their vision for a coal-free Vashon. PSCCU supported the idea of nonprofit groups using their own savings to guarantee microlending on community projects. And in its first year, the Vashon branch enrolled 16 percent of the population, with local deposits totaling almost $20 million.
These examples point to an opportunity for activists to build a nationwide, democratic, localized, nonprofit alternative to corporate finance - and, where possible, begin to deprive it of the wealth that has become a stranglehold over our political system.
If you don't already have your money in a credit union, move it! And if your local credit union isn't living up to its potential as a democratically owned, community-based financial institution, get involved and organize members to take it in a new direction!
Help build a worker co-op or encourage interested businesses to transition to employee ownership and adopt social and environmental standards as part of their missions.
Worker-owned co-ops bring democracy and democratic ownership into the economy and into community life. Several older and newer co-ops show what can be done. Equal Exchange's 100-plus worker-owners, for instance, generate $50 million of annual sales while pursuing an innovative agenda to make international trade in coffee and other food products more ethical. The WAGES-incubated green housecleaning worker cooperatives in the Bay Area provide critical job security for the immigrant women who work in and own them. In Chicago, the New Era Windows Cooperative is saving the jobs of workers who famously occupied their factory on Goose Island. And the United Steelworkers, working with the Mondragón Corporation, has proposed a nationwide effort to create unionized worker-owned co-ops that is beginning to bear fruit in Cincinnati, Pittsburgh and elsewhere.
The most common form of worker ownership is the Employee Stock Ownership Plan (ESOP). Although there have been difficulties with some ESOPs, research has shown that workers in ESOPs are much less likely to be laid off than those who are not. Furthermore, ESOPs tend to be more profitable, more productive and more efficient - especially with training in self-management - than comparable firms. An ESOP works like this: a company sets up a trust on behalf of the employees, into which it directs a portion of its profits. The trust uses that money to buy the owners' shares for the workers, either all at once or over time. Currently, there are 10,000 ESOP firms successfully operating in virtually every sector - 3 million more individuals are now worker-owners of their own businesses than are members of unions in the private sector.
In the next decade, millions of business owners born during the baby boom will retire. And if they sell more than 30 percent of the company to the employees, the owner may defer capital gains taxes (provided that the proceeds are invested in US companies). This incentive could have an enormous impact on America's business landscape. Advocacy for such conversions could be a powerful strategy for building more stable, vibrant worker-owned businesses and economies.
Consider the case of Fort Collins, Colorado-based New Belgium Brewing Co., America's eighth-largest brewery. When chief executive and co-founder Kim Jordan sold the enterprise to its more than 400 employees in 2012, she considered the conversion to 100 percent worker ownership a rare opportunity to "have multigenerational impact." Soon afterward, the worker-owners met to discuss cutting into the company's near-term profits to power their entire facility with wind energy. "Within a minute or so, we had decided as a group to become the world's largest single user of wind power," said Jeff Lebesch, a co-founder.
New Belgium is committed to open-book management, whereby all employee-owners can review finances and provide feedback. It also became certified as a B Corp, which enshrines in the firm's bylaws both social and environmental goals as well as profits.
Conversions to worker cooperatives also confer tax benefits to business owners who decide to sell to their employees. Among employee-owned institutions, co-ops allow for the most democracy. Namasté Solar in Boulder, Colorado - a $15 million-plus-a-year solar energy services firm - converted to an employee-owned cooperative at the beginning of 2011. Its workers own the firm equally and manage its operations on a one-vote-per-person basis. Having also certified itself as a B Corp, Namasté's mission consists of creating "holistic wealth for ourselves and our community." Its worker-owners in their mission statement declare, "We choose co-ownership over hierarchy, democratic decision-making over centralized leadership, sustainable growth over aggressive expansion, and collaboration over competition." They benefit from transparency of all company information, a 4-to-1 cap on the ratio of highest-to-lowest pay, and six weeks of paid vacation.
If you are in a union, you can encourage your union to promote worker ownership, as some already have done. Within the world of ESOPs and co-ops, the potential for organized labor should not be underestimated.
The Massachusetts-based architectural lighting manufacturer Litecontrol is a 100-percent worker-owned ESOP, and 60 percent of its workforce is unionized through the International Brotherhood of Electrical Workers. Industrial brush manufacturer and supplier Maryland Brush Company, also totally employee-owned, allows United Steelworkers union representatives three seats on its board of directors - the same number of seats as management. Recology of San Francisco, a fully worker-owned business, is the largest ESOP in the solid waste industry and is 80 percent unionized through the International Brotherhood of Teamsters.
Cooperative Home Care Associates (CHCA) of the Bronx, New York, is the country's largest worker co-op (and certified B Corp), consisting of more than 2,000 mainly Latina and black home health care providers. CHCA collaborated with the Service Employees International Union (SEIU) to unionize its workforce, with the broader aim of raising the wages of home-care workers throughout the industry (thereby raising the payroll costs of its competitors to measure up to CHCA's higher wages). The United Steelworkers proposal for "union co-ops," which combine principles of worker ownership and labor solidarity, also represents a major step forward in assembling the building blocks of a new economy.
Worker-owned companies deserve your support; the more commonplace they become, the easier they become to launch. Help stimulate the development of worker-owned co-ops and work to encourage retiring owners to sell their companies to their employees.
Organize your community so that local government spending is determined by inclusive neighborhood deliberations on key priorities. Participatory budgeting, pioneered in the Brazilian city of Porto Alegre in 1989, is a bottom-up process through which community members collectively decide how their local tax money is spent. While Porto Alegre's initiative involved up to 50,000 people and 20 percent of the city's annual budget, participatory budgeting (PB) has been adapted to the differing contexts of 1,500 other municipalities worldwide, from small towns in Europe and Africa to bustling metropolises like Buenos Aires and São Paulo.
And PB has now arrived in the United States. In 2009, committed organizers partnered with Chicago Alderman Joe Moore to institute the country's first PB initiative. Following the example of other cities around the world, Chicago residents brainstormed ideas, developed them into proposals with the help of volunteer delegates, voted on the various proposals, and were then able to direct more than $1 million of the ward's discretionary funds toward their top projects. In New York City, communities and local government officials have followed suit, committing $10 million in taxpayer money to the process. In 2012, the City Council of Vallejo, California, instituted the first citywide process of this kind in the country.
You too can help propel this empowering approach and reconnect politics to concrete human needs like housing, schools, infrastructure and jobs. As the Participatory Budgeting Project argues, the process contributes to more robust self-governance, greater transparency, better-informed citizens, more equitable access to decision making and spending, and real community building in the neighborhood - a central organizing unit of democratic life. And as such efforts grow, the idea of democratic, larger-scale planning undoubtedly will become less peculiar and remote and could evolve over time to manage mass transit, high-speed rail and regional economic development - and beyond.
Lawmakers who have embraced participatory budgeting have found it to be enormously popular with their constituents across the U.S. and the world, so educate and encourage your city council member to take the plunge into direct democracy!
Make nonprofit institutions like universities and hospitals use their resources to fight poverty, unemployment, and global warming. Hospitals and universities are increasingly recognized as important "anchor institutions" in their local communities. Unlike other large economic actors, they are geographically tethered to their localities. Their missions, invested capital, nonprofit status or public ownership, and other relationships contribute to their permanence. By encouraging anchors to play a responsible role in their local communities, activists often can influence and partner with them to solve social, economic, environmental and health issues.
Higher education as a sector employs a workforce of nearly 4 million, enrolls 21 million students, retains more than $400 billion of assets, and contributes $460 billion of annual activity to the US economy. Universities, spurred by student involvement, can leverage that economic power to go far beyond narrow academic missions. Over the years, university students have won remarkable victories from their institutions - divestment from apartheid South Africa and the cancellation of contracts with retailers engaged in sweatshop production, for example - but there is much more work to be done to push for proactive and positive investment of assets, as organizations like the Responsible Endowments Coalition have argued. There are also opportunities to work with groups like 350.org in the effort to push for fossil fuel divestment on campuses across the country. In such campaigns it's essential to have a clear idea of where university endowments and other resources should be directed; namely, to investments that support not only green energy but healthy local economies.
If you are a student or a member of the surrounding community, you can help organize campaigns to deploy university assets toward local job and wealth creation, education, housing and the provision of healthy food for low-income residents in the area. Promising examples of university engagement are emerging throughout the country. Community investment of university endowments is a crucial field for activist involvement. Schools like Duke University in Durham, North Carolina, for instance, have taken important first steps. By supporting Durham's Latino Community Credit Union and Self-Help Credit Union with a total investment of $12 million, Duke is aiding the credit unions in their efforts around affordable housing and neighborhood revitalization.
Nationally, nonprofit hospitals report annual revenues of more than $650 billion and assets of $875 billion and can be powerful allies in addressing the social, economic and environmental factors that lead to poor health outcomes in the first place. Bon Secours Baltimore Health System is one of the largest employers in West Baltimore, in a neighborhood where life expectancy hovers in the low- to mid-60s. In 1995, George Kleb, executive director of housing and community development, made a commitment to residents that "there were no longer going to be unilateral decisions: Everything else moving forward will be done in partnership with the community." A process that involved the input of hundreds of neighborhood residents now guides Bon Secours' efforts - which have run the gamut from developing more than 650 units of affordable housing and repurposing more than 640 vacant lots into green spaces to getting rid of rats and trash.
You can work in your community to seize on an important provision of the Affordable Care Act (often referred to as Obamacare) - Section 9007 - which requires every nonprofit hospital to complete a Community Health Needs Assessment every three years, to engage the local community regarding its general health problems and to explain how the hospital intends to address them. Health is connected intimately to economic conditions. Given that hospitals must now reach out to the community, especially underserved populations, residents can push for community-based economic strategies that fight unemployment, improve educational achievement, foster community safety and build stronger social service networks.
The integration of hospitals, universities and other anchors into a long-term vision for a community-sustaining economy is a significant development. In the University Circle area of Cleveland, for example, such institutions spend $3 billion on goods and services a year. None, until recently, purchased from the immediately surrounding neighborhoods facing high unemployment and exclusion. An integrated group of worker-owned companies has been developed, supported in part by that purchasing power. The Cleveland co-ops offer laundry and solar services and run the largest urban greenhouse in the United States. The aim is to create new businesses, year by year, as time goes on.
The goal is not simply worker ownership but the democratization of wealth and community building in general. Linked by a community-serving nonprofit corporation and a revolving fund, the companies cannot be sold outside the network; they also return 10 percent of profits to help develop additional worker-owned firms. Organized community members can interact with anchors, municipal government and conveners like community foundations, to adapt aspects of the Cleveland model and an economic development strategy that uses the power of the anchors and builds from the bottom up. Numerous other cities are exploring efforts of this kind, including Atlanta; Pittsburgh; Amarillo, Texas; and Washington, DC. If your community is suffering while big nonprofit institutions enjoy generous tax breaks or are recipients of public funding, get organized to push these institutions to use their economic power to benefit the community, following models now emerging in many parts of the country. If your university is investing in fossil fuel companies, organize to bring about a major change in investment priorities.
Build community power through economic development and community land trusts.
Unlike corporate developers, a variety of nonprofit organizations manage the ownership of real estate in ways that promote inclusive and sustainable use. The structure and mission of community development corporations, community land trusts and housing co-ops allow them to democratize the stewardship of land.
Community Development Corporations (CDCs) are community-based organizations that anchor capital locally, usually in low-income areas, through the development of residential and commercial property, ranging from affordable housing to shopping centers and even businesses. Roughly 4,600 CDCs operate in all 50 states and the District of Columbia, and they have created tens of thousands of units of affordable housing and millions of square feet of commercial and industrial space a year. Although many are smaller in scale, there are efforts like New Community Corporation in Newark, New Jersey, which employs 600 local residents, manages 2,000 housing units, has roughly $500 million of assets and owns businesses whose proceeds go toward underwriting such social programs as day care and medical support for seniors. Also important: as a neighborhood-based, 501(c)(3) nonprofit, at least one-third of the CDC board is composed of community residents, allowing for the possibility of direct, grass-roots participation in decision-making. Community Land Trusts (CLTs) are nonprofit entities that operate in more than 200 communities and have helped produce close nearly 10,000 housing units of low-cost housing nationwide by taking land off the market and placing it in a trust. Most CLTs lease homes to residents. And by retaining the majority of the home equity gained over time, the trust is able to continue to make homes available to new members at affordable, below-market prices. Like CDCs, land trust boards are typically composed of at least one-third land-trust residents.
Organized communities can incorporate CLTs into their broader vision for economic justice. Take the Dudley Street area of Roxbury - one of the poorest neighborhoods in Boston. Residents of the predominantly black and Latino neighborhood convinced Boston city officials to grant the community the power of eminent domain over 1,300 parcels of abandoned land - an unprecedented step - then promptly established a land trust. Today, the highly democratic CLT Dudley Neighbors Inc. (DNI) ensures "community land ownership, permanence and affordability," having rehabilitated many of those parcels into hundreds of high-quality affordable homes, along with community centers, new schools, a community greenhouse, parks, playgrounds and other public spaces. John Barros, executive director of DNI (and, at this moment, a candidate running for mayor in Boston), says the initiative counters the narrative of "economic development from the standpoint of a singular individual." In communities of color, he said, "We need advocacy for collective wealth building," not simply "individual wealth building."
You might also build on the some of the lessons learned from another low-income, largely minority community that formed a housing cooperative. The Alliance to Develop Power (ADP) in Springfield, Massachusetts, began as a small nonprofit fighting local displacement - until its members decided: "We want to own stuff too, not just fight people who own stuff." The organization mobilized renters in a large-scale campaign and bought 1,200 units of housing from private owners, making it the largest block of tenant-controlled housing in the United States. The democratically governed, multimillion-dollar organization subsequently embarked on an effort to build a "community economy," leveraging its ownership over property to anchor and incubate businesses whose surpluses go back into ADP's programming - including advocacy on behalf of the whole community.
As communities attempt to carve out holistic economic development, they are incorporating the interests of tenants, homeowners, businesses, workers and families. As ADP Executive Director Tim Fisk writes, "We are attempting to not just push back and improve individual and community standing within an unequal world, we are attempting to build the world as it should be. A world framed by our own definition of community values and shared prosperity."
Get involved in your local CDC, CLT or housing co-op, and encourage them to leverage their assets to support inclusive economic development. Connect activist struggles for economic and housing justice to institution-building strategies to build up long-term power for such work.
Organize to use public finances for community development. In the wake of the 2008 financial crisis, some cities in Oregon responded to organized constituents and set in motion an effort to keep municipal money circulating locally in ways that help build the local economy. Until this point, cities could make federally insured deposits only up to $250,000 in credit unions. A state-led program now provides regular oversight and insurance, allowing local governments to deposit more than $250,000 safely. Cities such as Portland and Beaverton already have started shifting their money. In total, ten area credit unions have accepted deposits of more than $27 million since the program began in April 2013 - all of which can be reinvested in the local economy under the purview of community-based democratic participation. Oregon's treasury holds credit-union securities as collateral, monitors them monthly, and can sell them to recover any funds in case of financial-institution failure. "It makes sense for local governments to move some of their money from Wall Street to Main Street," observes John Trull of the Northwest Credit Union Association, who helped facilitate the program.
Over the longer term, grass-roots momentum is beginning to build around the ideas of shifting state finances away from for-profit banks through the development of public state banks. Activists have been pushing for legislation in many states that would replicate key features of the Bank of North Dakota, a successful public bank founded in 1919. The bank leverages $5 billion of deposits from taxes and public funds, and partners with and backs local banks, which then offer loans to small businesses, farmers and college students. In times of economic hardship, the Bank of North Dakota injects credit into the state economy, providing a countercyclical cushion; it also returns millions of dollars of profit annually to North Dakota's general fund.
Vermont State Sen. Anthony Pollina is championing the effort to create such a bank for his home state. Pollina, quoted in The American Prospect, expressed frustration regarding the for-profit financial institution that currently receives the state of Vermont's deposits, TD Bank: "They charge us fees; they lend our money wherever they want to lend it," but "they don't do that much lending in Vermont anymore."
In California, organizations like the Public Banking Institute (PBI) have begun to advocate North Dakota-style public banking options as well, given that the state's taxpayers pay millions in interest on bonds and loans for their infrastructure needs. PBI's Marc Armstrong observes that if "California had had a state bank, we could have used the state bank credit to fund virtually all of that debt at very low cost."
Many experts believe that it's only a matter of time before the next financial crisis hits - and when it does, a different solution to bailouts for reckless for-profit banks may well be possible at the national level. In a sense, public banking is a very conservative as well as progressive concept: Public banks and credit unions weathered the last crisis much better than private banks, benefiting the communities they served as well. There is a role for action at every level, and especially through institution building at the local level and organized advocacy for state-level democratization of finance.
To build a financial sector that works for the public good, start organizing at the city, county and state level to make sure public money flows through community or publicly owned banks - get involved with one of the many groups dedicated to these efforts around the country.
Get your workplace to offer more retirement-plan opportunities for responsible investment.
If you have retirement savings, chances are that they are currently being invested in Wall Street and are thus being invested in ways that work against workers and communities. As British historian and sociologist Robin Blackburn has observed, the "boring world of pension provision now fuels the glamorous world of high finance, property speculation, rogue traders, media and technology mergers, and stock exchange bubbles." However, socially responsible investing (SRI) is now an important and expanding realm and can increasingly be applied to pension plans. Pushing your employer for more SRI options, and in particular supporting the community-investing sphere of SRI can lead to important impacts on the national and local economy.
Firms and employees in the private and public sectors can learn from the positive experiences with community investing of some state pension funds. Since 1990, for example, Alabama's somewhat unusual public pension system has invested 10 percent of its resources within the state (including in worker-owned businesses) to enhance economic development, and a 2012 study found that returns on that investment were greater than if they had been put into traditional investment vehicles. California's state pension fund, CalPERS, has similarly directed almost 10 percent of its investments, or $23.5 billion, to community-building efforts in the state rather than handing them over to Wall Street. Private pension programs also can follow the lead of Illinois-based General Board of Pension and Health Benefits of The United Methodist Church, which in 2012 invested more than $750 million of its assets in affordable housing and other community-development facilities.
The potential for impact through directing worker pension funds in support of workers' priorities is enormous, and some have even called for a 21st-century New Deal financed by working people themselves. A Green New Deal leveraging the $4.5 trillion in public pensions and private-sector-union pensions could help maintain public ownership of critical infrastructure and protect workers' rights while creating well-paid jobs. Such a realignment of workers' capital would transform power relationships in local communities by creating alliances between state and local governments, public workers and labor unions. The effort could help lay the groundwork for a different pattern of political economy that could address deeper systemic challenges, as union pension funds also could be used to help develop worker-owned, unionized co-ops.
If you have an SRI option at work, use it! If you don't, have a conversation with your co-workers about demanding investment options that support an economy that you'd prefer to live in. Push public officials to use public pension funds to help change ownership in general.
Get involved in public and cooperative utilities to fight climate change. Public utilities always have been important in providing energy to US homes. In fact, more than 2,000 public utilities supply power to tens of millions of Americans. On average, their customers pay 14 percent less than customers of private utilities. One obvious reason: they get pretty much the same work done for far less. CEOs at investor-owned utilities earn on average almost 25 times more than their counterparts at public power companies. State and local governments benefit more too. Although public utilities do not pay taxes like traditional private utilities, they transfer to state and local governments a greater percentage of their median revenues than the median taxes paid by private energy firms.
Public utilities are subject to citizen pressure and involvement and can be recruited to play a powerful role in building a greener economy. In California, the Sacramento Municipal Utility District - one of the ten largest public utilities in the United States - now supplies more than 24 percent of its retail energy sales from renewable sources and expects to reach its goal of 37 percent by 2020. In Texas, Austin Energy provides about 15 percent to 17 percent of its power from renewable sources - primarily wind - and expects to reach 30 percent to 35 percent renewable energy by 2020. Electricity cooperatives also serve tens of millions of customers. They are one-person-one-vote institutions owned collectively by their consumer-members. Employing more than 120,000 and generating $45 billion a year in revenues, co-ops are also able to demonstrate the innovative possibilities of green energy. Co-ops in Kentucky and South Carolina are retrofitting homes at no up-front cost to customers, reducing electric bills while conserving energy use dramatically. Others are involved in upgrading their distribution systems to "smart grids." In Tennessee, one co-op makes direct stakes in a new solar farm available to its members, and a Montana co-op helped rebuild a municipal hydroelectric plant. "Investor-owned utilities are legally required to prioritize shareholder profits," observes journalist Brooke Jarvis, but electricity co-ops "are required to maximize value for their members. That makes a cooperative potentially more willing to try out a program with an as-yet-unproven effect on the utility's bottom line, but with the immediate potential to help member-owners and wean the region off fossil fuels."
Active member participation in co-ops can redirect their priorities dramatically. Philadelphia residents created The Energy Co-op as a simple cost-saving measure to buy heating oil in bulk. Through the vision of its members channeled into the co-op's democratic processes, the company added sustainability to its institutional mission in the 1990s. Today, The Energy Co-op offers its members 100-percent renewable electricity and has developed Southeastern Pennsylvania's largest biodiesel distribution business. Using a closed-loop process, the biodiesel is produced, sourced, distributed and used within the state. Regular electronic polls answered by member-owners also guide the company's long-term policies and everyday practices.
Community engagement in municipal energy can have a tremendous impact on the fight against climate change as well. In Boulder, Colorado, grass-roots activists and the local nonprofit New Era Colorado Foundation have been campaigning to create a new public utility for the city so as to pursue renewable options more aggressively and reduce carbon emissions. In November 2011, two ballot measures narrowly passed that would allow for "municipalization" - the legal process whereby the city can form its own public utility company and purchase the infrastructure of the existing private provider, Xcel Energy - all in spite of Xcel's massive efforts to stymie that process. This year, Xcel Energy pushed new ballot measures to reduce government debt, limiting Boulder's effort to move forward with the process. In response, residents have turned to supporters across the country and the world through a crowd-funding campaign that has generated massive solidarity for their precedent-setting effort. "If we can do it, maybe other communities will start wondering what the millions they pay in profits to their power provider can do in their city," concludes the nonprofit. "If we win, we trigger a national model that can be replicated across the country."
Cooperatives and municipal utilities already account for more than 25 percent of the nation's total electricity, representing an enormous arena for democratic involvement and growth. In addition to politically helping achieve greater environmental sustainability, local control can allow these firms to serve as anchor institutions that can support local economies through their procurement, employment and banking decisions. An expanding, democratized energy sector that provides citizens with ever-greater renewable energy can serve as a driving force for the national policies needed to address climate change and keep fossil fuels in the ground.
Participate in your utility co-op's elections to push for innovative green strategies like those taking place across the country. Organize in your area to press your local government to municipalize private energy. Campaign to make your local public utility provide more renewable energy and use its economic power to benefit the local economy.
Get your religious organization to move its money to a local financial institution involved in community development.
Religious groups and faith-based organizations, often strongly tied to local communities, have been pioneers in the field of community development. Black churches have long been involved in equitable neighborhood development, and much community investing as it is understood today is a consequence of earlier efforts by Catholic women's religious orders that tied the stable retirement of nuns to investment in nonprofit food banks, affordable housing and community land trusts. Today, congregations of the Sisters of Mercy, through their Mercy Partnership Fund, invest directly in nonprofits like women's and day care centers, as well as cooperative business. The potential to leverage the capital of faith-based institutions committed to economic justice is immense. The Interfaith Center on Corporate Responsibility's 300 faith-based investor members boast more than $100 billion of combined assets. More and more religious institutions are beginning to dedicate "1% or More in Community Investing," as encouraged by the Social Investment Forum, a membership organization advocating responsible finance.
Moving a portion of your religious organization's investments to a community financial institution involved in improving low-income neighborhoods is a straightforward alternative to patronizing profit-chasing banks. Jewish Funds for Justice (JFSJ), for example, invests $7.5 million in Community Development Financial Institutions (CDFIs) - banks with an explicitly nonprofit, community-development mission, often involved in affordable housing, small-business creation and financial services for underserved areas. JFSJ also links its investment to educational efforts, such as field trips for students to participate in and learn from exemplary community-finance initiatives around the country. The effort also offers the nation's Jewish community "a way to participate in community investment with only a $1,000 minimum." Additionally, JFSJ, Dignity Health and the Unitarian Universalist Association all invest in Hope Credit Union's valuable work in the Mississippi Delta region.
The long history of American religious institutions serving as economic and financial bedrocks for their neighborhoods, especially in minority communities, suggests broader possibilities. Consider the Mondragón cooperatives in Spain. Founded in 1956 in the wake of the devastation of Spanish Civil War by Catholic priest Jose Maria Arizmendiarrieta, one cooperative in the oppressed Basque region with five employee-owners making paraffin stoves laid the foundations for a modern multibillion-euro network of firms employing more than 80,000 community members involved in everything from construction to supermarkets to financial services to high-tech equipment and advanced research. Partlyh the result of community-anchored economic engine of Mondragón, the Basque Country's unemployment is much lower than in the rest of Spain.
Resources abound for getting a conversation started with your congregation about building a new economy. These conversations can then help you build support for putting your religious institution's money where it can do more good - and less harm.
Fight unemployment by joining the fight against work Even in economic hard times, the United States already has an economy that produces the equivalent of over $190,000 for every family of four. At some point we must ask when enough is enough. Although the economy has steadily been producing more goods and services in less time with less effort, most workers' wages have largely stagnated and work hours have increased for the past four decades. The long-term solution is not a dash for growth, imposing a greater ecological toll on the planet. Rather, it is redirecting an already-productive economy toward redistribution and community needs. Also, as sociologist Juliet Schor has argued, one key step toward such a shift is to encourage more leisure time. This can also include taking advantage of opportunities to share work, and - where possible - to work less, discouraging excessive overtime, and pushing employers and legislators for a reduced workweek.
One practical way to get started is by exploring the possibility of work-sharing. The program works as follows: rather than fire one employee, a business can opt to reduce the workweek of five employees by one day each, thereby retaining their skills and the ability to quickly ramp up production in the future. But the employees working four days instead of five will retain 90 percent - not the expected 80 percent - of their wages, because unemployment insurance steps in to cover that gap. In fact, there are already 24 states, including the District of Columbia, that have work-sharing programs of this kind.
In Rhode Island, state officials have promoted their program aggressively to employers and credit it with preventing 16,000 layoffs from 2007-11. As of 2012, according to economist Dean Baker of the Center for Economic and Policy Research (CEPR), fewer than 40,000 workers nationwide were participating in shorter work programs, mainly because of lack of awareness. "To increase this number," he writes, "states will first have to publicize the system. Many employees don't even know that the program exists." And even states that don't currently offer such measures "could also receive federal money to establish short work programs," he added. Companies facing slower demand throughout the country should consider the policy. It can reduce local unemployment and offer more free time to families.
The long-term importance could be tremendous: if we Americans grow increasingly accustomed to working less for only modestly less pay, there could be greater political momentum for guaranteed time off and, over time, for slowly relegating work to a receding portion of life. Questions of leisure, community building, and political engagement may one day emerge as feasible for an increasingly larger portion of society. Furthermore, work sharing can be a potent tool in the fight against climate change. "The calculation is simple," says CEPR economist David Rosnick. "Fewer work hours means less carbon emissions, which means less global warming."
Seek out feasible opportunities for work sharing. As you try to make space in your own life for the critical practice of democracy and community building, continue to challenge the unhealthy dilemma of overwork or unemployment imposed by the current economic system.
And There's More
There are many additional practical precedents to build on, refine and adapt. The examples outlined above aim to encourage thinking about how we move beyond partial experiments toward greater publicly benefiting democratization over time. For many others, see Community-Wealth.org and What Then Must We Do? Straight Talk About the Next American Revolution, by Gar Alperovitz. But all of this hinges on the strategic and self-conscious decision to adopt a sustained course of institution-changing action - one linked to movement-building politics and explicitly understood as a way to begin laying the necessary groundwork for something more. Learn how to use this article to start a conversation in your community about organizing for a new economy.
Copyright, Truthout.
Bad feelings over the bailouts and extortionary bank fees have driven millions of Americans into the arms of local credit unions. But instead of luring them back with better customer service, Big Banks are using their lobbying might to kill off credit unions, attempting to destroy a crucial tax exemption that credit unions need to survive.
Big Banks sucked up over a trillion dollars in the bailouts, but now they’re claiming that credit unions are the biggest problem to the national deficit. Banks say that credit unions cost the government $1.5 billion in lost tax revenue, but if the banks get their way, it will cost us over ten billion dollars each year in higher fees and rates.
Congress gets back from recess this week, and banks are about to kick off a big lobbying push for the fall. The banks are trying to kill consumer-friendly credit unions so that they can raise rates with impunity -- but we aren’t going to let them.
Tell Bank of America and its cronies to stop their crusade against credit unions.
We can’t afford a future without credit unions. If we show the banks just how much this desperate gamble will backfire, the threat of bad publicity and another banking scandal will cause the banks to rethink their pricy lobbying push. Large-scale protests have forced banks to change their tune before, and once word gets out about the banks’ incredible greed, the backlash should send them packing.
Anytime that regulation is mentioned, bankers like to cry out about free-market principles. But banks use an army of lobbyists to shape legislation as they see fit. This time, they’ve gone too far in trying to take out the competition. If we all step up today, we can stop this in its tracks, and save consumer-friendly credit unions from extinction.
Tell the Big Banks to back off their bullying tactics and stop trying to kill the credit unions.
http://action.sumofus.org/a/bank-of-america-credit-unions/?sub=fb
Banks pushing for repeal of credit unions' federal tax exemption
http://articles.latimes.com/2013/jul/06/business/la-fi-credit-union-taxes-20130706?ak_proof=1
Bankers say the tax break is an unfair advantage for large credit unions. Now they see an opportunity to get rid of it as lawmakers begin work on a major overhaul of the tax code.
July 06, 2013|By Jim Puzzanghera
WASHINGTON — Credit unions have been snatching customers from banks amid consumer frustration over rising fees and outrage over Wall Street's role in the financial crisis.
Now banks are fighting back by trying to take away something vital to credit unions — their federal tax exemption.
With fast-growing credit unions posing more formidable competition to banks, industry trade groups are pressing the White House and Congress to end a tax break that dates to the Great Depression.
"Many tax-exempt credit unions have morphed from serving 'people of small means' to become full-service, financially sophisticated institutions," Frank Keating, president of the American Bankers Assn., wrote to President Obama last month.
"The time has come to abolish this exemption," Keating said in the letter, which was part of a blitz that included print and radio ads in the nation's capital.
Bankers long have complained the tax break is an unfair advantage for large credit unions. Now they see an opportunity to get rid of it as lawmakers begin work on a major overhaul of the tax code that is aimed at eliminating many corporate exemptions and lowering the overall tax rate.
The exemption cost $1.6 billion this year in taxes avoided and would rise to $2.2 billion annually in 2018, according to Obama's proposed 2014 budget.
In a 2010 report on tax reform, the President's Economic Recovery Advisory Board said eliminating the exemption would raise $19 billion over 10 years and remove the credit unions' "competitive advantage relative to other financial institutions" in the tax code.
Credit unions said the effort to take away their tax exemption was simply an attempt to stifle competition and remove one of the only checks on bank fees for consumers.
And it comes as some in Congress are pushing to loosen regulations on credit unions so they can expand their business further, including legislation that would lift a cap on the amount of money they can lend to businesses.
The tax exemption is crucial to credit unions, which by law can't raise capital through public stock offerings the way that banks can, said Fred R. Becker Jr., president of the National Assn. of Federal Credit Unions, a trade group with about 3,800 federally chartered members.
"They'll have to convert to banks, which is what the banks want," he said. "Then they'd have, for lack of a better term, a monopoly."
A 2012 economic study commissioned by the trade group found that removing the tax exemption would cost consumers about $10 billion a year through higher fees and interest rates on loans, as well as lower interest rates on savings.
That loss of income would end up costing the federal government $1.5 billion a year in lost tax revenue, the study said.
Under a 1934 law, Congress exempted credit unions from federal income taxes as long as they were nonprofit businesses, organized without capital stock and operated for the benefit of their members.
For decades, most credit unions were small operations, usually serving employees of individual businesses and government agencies.
The industry has grown significantly since the 2008 financial crisis, boosted by outrage over Bank of America's 2011 plan to impose a $5 monthly fee for debit card use.
Bank of America ditched the plan after protests from customers, lawmakers and the White House. But the controversy led consumer groups to launch an effort to get customers of big banks to switch to smaller institutions, such as credit unions. And the effort helped.
By the end of March, credit union membership surged to 95.7 million, an increase of 2.7 million from the start of 2012, according to SNL Financial. The growth in those five quarters was more than in the previous 11 quarters combined, the trade publication said.
Navy Federal Credit Union, the nation's largest, increased its membership 10.2% to 4.3 million in the year ended March 31. according to SNL. Such large credit unions, which have ramped up their advertising to lure new members, worry bankers.
"The banking industry has no problem with competition. We have problems with competition when it's on an un-level playing field," said James Ballentine, the American Bankers Assn.'s executive vice president of congressional relations.
"Credit unions have grown into … tax-exempt banks," he said.
The bankers' group said 200 credit unions hold more than $1 billion in assets each.
"We have no interest in going after smaller credit unions because they've stuck to their mission," Ballentine said. "For those who have gotten outside their mission, who have grown beyond recognition, they would be in the cross hairs."
But credit unions simply have been adapting to changing times, Becker of the National Assn. of Federal Credit Unions said. Those serving factories that closed had to find new members to survive. And others, such as Navy Federal, have offered debit cards and other new services in response to their members' needs, he said.
Credit unions fight back against tax repeal efforts
http://www.miamiherald.com/2013/09/08/3612236/credit-unions-fight-back-against.html?ak_proof=1
By GEORGE JOSEPH
Special to the Miami Herald
At the moment, it’s a war of words, but very soon the debate to tax credit unions will hit the streets.
This week, credit union supporters from South Florida and throughout the country will descend on Washington, D.C. to “Hike the Hill” and meet with lawmakers to stress the importance of keeping in place the federal tax exemption for credit unions.
The debate is nothing new. For years, the big banks have lobbied Congress to repeal the tax exemption status. This time around, they declared war.
Earlier this year, the American Bankers Association began advertising its anti-credit union message throughout Washington, and last month ABA executives wrote letters to President Barack Obama and Congress requesting a repeal of the tax exemption status. The ABA and their lobbyists complain that the growing financial stature of credit unions throughout the country proves that they should be taxed like banks. They even refer to the tax exemption as a government “expenditure,” which they claim should be eliminated as part of a larger tax reform and budget reduction package.
What the bankers fail to mention was that credit unions only hold 6 percent of all the financial assets in the United States while banks hold 93 percent. They also fail to mention that 96 million Americans are satisfied members of credit unions, and that for every dollar in new taxes the government might gain, it would be eliminating $10 of credit union member benefits.
The Federal Credit Union Act of 1934 established the tax-exemption status of credit unions because the structure and goals of credit unions are far different from traditional banks. All credit unions are designated as not-for-profit, which means any and all profits made are redistributed back to credit union members in the form of higher interest rates on savings accounts and reduced fees. They offer loans at the lowest possible interest rates because their mandate is to cultivate community development by assisting working families, low income households, small businesses and the middle class.
Banks operate very differently. Led by small groups of shareholders who seek to maximize return on their investment, they raise fees regardless of how much profit they accumulate. They offer loans at the highest possible interest rate because their mandate is to make money, not to assist anyone, including and especially the middle class. (It wasn’t long ago we learned this the hard way as predatory banks helped fuel the Great Recession.)
The truth is, big banks want one thing and one thing only: to get bigger. They want to merge and grow and rack-in record profits so they can grow even bigger. Credit unions are the only thing standing in the way of an oligarchy of a few major banks from controlling all of the deposited funds in the country. Their pursuit to tax credit unions is aimed at eliminating their only competition so they can be free to charge as much interest and fees as they wish without restraint.
Credit unions, while offering an alternative to banks, also offer an important financial backstop for low income families. Despite what the big banks may profess, there’s a tremendous need for the lower fees and higher deposit rates of credit unions. For example, a recent report from Pew State and Consumer Initiatives found that approximately 12 million borrowers spend $7.4 billion on payday loans each year, saddling themselves with exorbitant interest payments that often drive them deeper into debt. Many people in our country still struggle and credit unions are a worthy option.
The issue now lies in the hands of Congress. This week, credit union supporters will make their case and tell lawmakers directly that they do not want their credit unions taxed. Citizens must reach out to their representatives and call on members in both houses of Congress to join the fight against repealing the tax exemption status of credit unions.
George Joseph is president and CEO of Dade County Federal Credit Union: 305-471-5080 or www.dcfcu.org. Any individuals who feel strongly about the taxation issue are encouraged to visit http://www.dcfcu.org/notax/ and sign the “Don’t Tax My Credit Union” petition.
Read more here:
http://www.miamiherald.com/2013/09/08/3612236/credit-unions-fight-back-against.html?ak_proof=1#storylink=cpy
Even if the banks should succeed in getting the non-profits, beginning with the credit unions, to be taxed, a democratically controlled bank will still be the best alternative and uniting them into a Union National Credit institution will still deliver a crippling blow to the banks. Combined with the establishment of public banks throughout the country, the blow would be fatal.
The banks are only powerful because they are nationally organized. The People can win this if they only organize nationally to support the public/cooperative option.
Good to see this petition getting so much circulation on the forum - I hope it is getting circulated - as well - on other sites.
Making the World Safe for Banksters: Syria in the Crosshairs
Wednesday, 04 September 2013 12:54 By Ellen Brown, Web of Debt Blog | News Analysis
http://truth-out.org/news/item/18604-making-the-world-safe-for-banksters-syria-in-the-crosshairs
Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the crosshairs. Why? Here is one overlooked scenario.
In an August 2013 article titled “Larry Summers and the Secret ‘End-game’ Memo,” Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization.
The “end-game” would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and “usury” – charging rent for the “use” of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don’t need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.
Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a $700-plus trillion pyramid scheme. Highly leveraged, completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net.
These countries were not all Islamic. Forty percent of banks globally are publicly-owned. They are largely in the BRIC countries—Brazil, Russia, India and China—which house forty percent of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules. This was not true of the “rogue” Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military.
Here is some data in support of that thesis.
The End-game Memo
In his August 22nd article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then Assistant Secretary of International Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the Treasury. Geithner referred in the memo to the “end-game of WTO financial services negotiations” and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided.
The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors’ funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws. The “endgame” was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:
Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas. The new rules ginned-up by Summers and the banks would force all nations to accept trade in “bads” – toxic assets like financial derivatives. Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”
And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.
The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.
WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo; but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis. As for the others: The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade. Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.
The Holdouts
That was the fate of countries in the WTO, but Palast did not discuss those that were not in that organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven countries were named by U.S. General Wesley Clark (Ret.) in a 2007 “Democracy Now” interview as the new “rogue states” being targeted for take down after September 11, 2001. He said that about 10 days after 9-11, he was told by a general that the decision had been made to go to war with Iraq. Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.
What did these countries have in common? Besides being Islamic, they were not members either of the WTO or of the Bank for International Settlements (BIS). That left them outside the long regulatory arm of the central bankers’ central bank in Switzerland. Other countries later identified as “rogue states” that were also not members of the BIS included North Korea, Cuba, and Afghanistan. The body regulating banks today is called the Financial Stability Board (FSB), and it is housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be bound by rules imposed by the FSB, ostensibly to prevent another global banking crisis. Its regulations are not merely advisory but are binding, and they can make or break not just banks but whole nations. This was first demonstrated in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to 8%. The result was to force a drastic reduction in lending by major Japanese banks, which were then the world’s largest and most powerful creditors. They were undercapitalized, however, relative to other banks. The Japanese economy sank along with its banks and has yet to fully recover. Among other game-changing regulations in play under the FSB are Basel III and the new bail-in rules. Basel III is slated to impose crippling capital requirements on public, cooperative and community banks, coercing their sale to large multinational banks.
The “bail-in” template was first tested in Cyprus and follows regulations imposed by the FSB in 2011. Too-big-to-fail banks are required to draft “living wills” setting forth how they will avoid insolvency in the absence of government bailouts. The FSB solution is to “bail in” creditors – including depositors – turning deposits into bank stock, effectively confiscating them.
The Public Bank Alternative
Countries laboring under the yoke of an extractive private banking system are being forced into “structural adjustment” and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted “rogue nations.” Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people.
Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care.
Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.
As for Larry Summers, after proceeding through the revolving door to head Citigroup, he became State Senator Barack Obama’s key campaign benefactor. He played a key role in the banking deregulation that brought on the current crisis, causing millions of US citizens to lose their jobs and their homes. Yet Summers is President Obama’s first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has proven he can manipulate the system to make the world safe for Wall Street; and in an upside-down world in which bankers rule, that seems to be the name of the game.
This piece was reprinted by Truthout with permission or license.
A Safer, Saner, More Equitable Model
Interestingly, Lansing Mayor Virg Bernero, Snyder’s Democratic opponent in the last gubernatorial race, proposed a solution that could have avoided either robbing the pensioners or scaring off the bondholders: a state-owned bank. If the state or the city had its own bank, it would not need to borrow from Wall Street, worry about interest rate swaps, or be beholden to the bond vigilantes. It could borrow from its own bank, which would leverage the local government’s capital into credit, back that credit with the deposits created by the government’s own revenues, and return the interest to the government as a dividend, following the ground-breaking model of the state-owned Bank of North Dakota.
There are other steps that need to be taken, and soon, to prevent a cascade of municipal bankruptcies. The super-priority of derivatives in bankruptcy needs to be repealed, and the protections of Glass Steagall need to be restored. While we are waiting on a very dilatory Congress, however, state and local governments might consider protecting themselves and their revenues by setting up their own banks.
http://truth-out.org/news/item/17996-the-detroit-bail-in-template-fleecing-pensioners-to-save-the-banks
Green Light for City-Owned San Francisco Bank
Wednesday, 31 July 2013 00:00 By Ellen Brown, Web of Debt | Op-Ed
http://truth-out.org/opinion/item/17895-green-light-for-city-owned-san-francisco-bank
When the Occupiers took an interest in moving San Francisco’s money into a city-owned bank in 2011, it was chiefly on principle, in sympathy with the nationwide Move Your Money campaign. But recent scandals have transformed the move from a political statement into a matter of protecting the city’s deposits and reducing its debt burden. The chief roadblock to forming a municipal bank has been the concern that it was not allowed under state law, but a legal opinion issued by Deputy City Attorney Thomas J. Owen has now overcome that obstacle. Establishing a city-owned San Francisco Bank is not a new idea. According to City Supervisor John Avalos, speaking at the Public Banking Institute conference in San Rafael in June, it has been on the table for over a decade. Recent interest was spurred by the Occupy movement, which adopted the proposal after Avalos presented it to an enthusiastic group of over 1000 protesters outside the Bank of America building in late 2011. David Weidner, writing in the Wall Street Journal in December of that year, called it “the boldest institutional stroke yet against banks targeted by the Occupy movement.” But Weidner conceded that:
Creating a municipal bank won’t be easy. California law forbids using taxpayer money to make private loans. That would have to be changed. Critics also argue that San Francisco could be putting taxpayer money at risk.
The law in question was California Government Code Section 23007, which prohibits a county from “giv[ing] or loan[ing] its credit to or in aid of any person or corporation.” The section has been interpreted as barring cities and counties from establishing municipal banks. But Deputy City Attorney Thomas J. Owen has now put that issue to rest in a written memorandum dated June 21, 2013, in which he states:
A court would likely conclude that Section 23007 does not cover San Francisco because the City is a chartered city and county. Similarly, a court would likely conclude that Article XVI, section 6 of the State Constitution, which limits the power of the State Legislature to give or lend the credit of cities or counties, does not apply to the City. . . . [A] court would likely then determine that neither those laws nor the general limitations on expending City funds for a municipal purpose bar the City from establishing a municipal bank.
A court would likely conclude that the City may own stock in a municipal bank and spend City money to support the bank’s operation, if the City appropriated funds for that purpose and the operation of the bank served a legitimate municipal purpose.
A number of other California cities that have explored forming their own banks are also affected by this opinion. As of June 2008, 112 of California’s 478 cities are charter cities, including not only San Francisco but Los Angeles, Richmond, Oakland and Berkeley. A charter city is one governed by its own charter document rather than by local, state or national laws.
Which Is Riskier, a Public Bank or a Wall Street Bank?
That leaves the question whether a publicly-owned bank would put taxpayer money at risk. The Bank of North Dakota, the nation’s only state-owned bank, has posed no risk to depositors or the state’s taxpayers in nearly a century of successful operation. Further, in this latest recession it has helped the state achieve a nationwide low in unemployment (3.2%) and the only budget surplus in the country. Meanwhile, the recent wave of bank scandals has shifted the focus to whether local governments can afford to risk keeping their funds in Wall Street banks.
In making investment decisions, cities are required by state law to prioritize security, liquidity and yield, in that order. The city of San Francisco moves between $10 billion and $12 billion through 133 bank accounts in roughly 5 million transactions every year; and its deposits are held chiefly at three banks, Bank of America, Wells Fargo and Union Bank. The city pays $2.7 million for banking services, nearly two-thirds of which consist of transaction fees that smaller banks and credit unions would not impose. But the city cannot use those smaller banks as depositories because the banks cannot afford the collateral necessary to protect deposits above $250,000, the FDIC insurance limit.
San Francisco and other cities and counties are losing more than just transaction fees to Wall Street. Weidner pointed to the $100 billion that the California pension funds lost as a result of Wall Street malfeasance in 2008; the foreclosures that have wrought havoc on communities and tax revenues; and the liar loans that have negatively impacted not only real estate values but the economy, employment and local and state budgets. Added to that, we now have the LIBOR and municipal debt auction riggings and the Cypress bail-in threat.
On July 23, 2013, Sacramento County filed a major lawsuit against Bank of America, JP Morgan Chase and other mega-banks for manipulating LIBOR rates, a fraud that has imposed huge losses on local governments in ill-advised interest-rate swaps. Sacramento is the 15th government agency in California to sue on the LIBOR rigging, which Rolling Stone’s Matt Taibbi calls “the biggest price-fixing scandal ever.” Other counties in the Bay Area that are suing on the LIBOR fraud are Sonoma and San Mateo, and the city of Richmond sued in January. Last year, Bank of America and other major banks were also caught rigging municipal debt service auctions, for which they had to pay $673 million in restitution. The question is, do taxpayers want to have their public monies in a bank that has been proven to be defrauding them?
Compounding the risk is the reason Cyprus “bail in” shocker, in which depositor funds were confiscated to recapitalize two bankrupt Cypriot banks. Dodd-Frank now replaces taxpayer-funded bank bailouts with consumer-funded bail-ins, which can force shareholders, bondholders and depositors to contribute to the cost of bank failure. Europe is negotiating rules imposing bail-ins for failed banks, and the FDIC has a U.S. advisory to that effect. Bank of America now commingles its $1 trillion in deposits with over $70 billion in risky derivatives, and has been pegged as one of the next banks likely to fail in a major gambling mishap.
San Francisco and other local governments have far more than $250,000 on deposit, so they are only marginally protected by the FDIC insurance fund. Their protection is as secured creditors with a claim on bank collateral. The problem is that in a bank bankruptcy, state and local governments will fall in line behind the derivative claimants, which are also secured creditors and now have “super-priority” in bankruptcy. In a major derivatives calamity of the sort requiring a $700 billion bailout in September 2008, there is liable to be little collateral left for either the other secured depositors or the FDIC, which has a meager $25 billion in its insurance fund. Normally, the FDIC would be backstopped by the Treasury – meaning the taxpayers – but Dodd-Frank now bars taxpayer bailouts of bank bankruptcies caused by the majority of speculative derivative losses. The question today is whether cities and counties can afford not to set up their own municipal banks, both to protect their money from confiscation and to take advantage of the very low interest rates and other perks available exclusively to the banking club. A government that owns its own bank can keep the interest and reinvest it locally, resulting in government savings of an estimated 35% to 40% just in interest. Costs can be reduced, and taxes can be cut or services can be increased. Banking and credit can become public utilities, sustaining the local economy rather than mining it for private gain; and banks can again become safe places to store our money.
This piece was reprinted by Truthout with permission or license.
Banking on the Public: Going Postal, North Dakota and Other Finance Alternatives
Thursday, 04 July 2013 12:10 By Abby Scher, Dollars & Sense | Report
http://truth-out.org/news/item/17388-banking-on-the-public-going-postal-north-dakota-and-other-finance-alternatives
Hundreds of people seeking a roadmap for remaking the banking system gathered north of San Francisco in early June at Public Banking 2013: Funding the New Economy, a conference held at Dominican University, whose Green MBA program was a cosponsor. It was the second annual gathering sponsored by the Public Banking Institute (PBI)—the California-based nonprofit that is popularizing the idea of a North Dakota-style public bank.
A handful of fans of rightwing populist Ron Paul mingled with Occupy Finance folks, grizzled leftists, and middle-class suburbanites whose eyes were opened to the dysfunction of the financial system as they or their neighbors were foreclosed upon. According to PBI, 20 states currently have legislative advocates for state banks, a reform also backed by the think tank Demos, the Center for State Innovation in Madison, the Institute for Local Self-Reliance, and Gar Alperovitz, the author of America Beyond Capitalism who was a keynoter at the conference. The North Dakota bank, formed in 1919 after the farmer-backed Nonpartisan League took over the state legislature, holds the deposits of municipalities and the state government, and collaborates with small banks in the state on loans for small businesses and farmers. During a period when too-big-to-fail banks dismiss smaller loans as being unprofitable, this partnership gives community banks important backing, and indeed, North Dakota has more community banks than any other state. The public bank also generates a surplus that supports the state treasury.
Researchers from PBI, Demos, Institute for Local Self-Reliance and CSI all point out that North Dakota weathered the last bust better than most states not only because it is in the midst of an energy boom but because its public bank provides countercyclical support. The public bank operates on a longer time horizon, and ensures that public deposits are invested close to home, unlike public monies placed in Wells Fargo or JP Morgan Chase. Many governments use these larger banks because smaller community banks don't have the capacity to handle their relatively large deposits. The state bank solves that problem.
Postal banks got a big boost at the conference when James Sauber, the chief of staff of the National Association of Letter Carriers announced that both his union and the American Postal Workers Union will partner with PBI in a campaign to reinstate simple checking and savings accounts in post offices. The U.S. Postal Service offered simple affordable banking services used by many working class people from 1911 to 1967 when the system was dismantled. “In the 1940s, 4.2 million American had accounts at the post office,” Sauber said. In other countries, postal banks remain important institutions, most notably in Germany, Britain, New Zealand (launched in 2002), Brazil (launched in 2000) and Italy, although Japan is beginning to privatize its postal bank, the largest in the world. The U.S. postal workers are intrigued not only by postal banks' potential to offer social inclusion—28% of Americans don't have full access to banking services—but also by the revenue generated that supports the postal system as a whole. “Don't dismantle this institution—reinvent it,” he said.
The conference boasted another major announcement: The city of Reading, Pennsylvania is redirecting its deposits from big corporate banks and channeling them to local banks that will invest locally by working with a financial intermediary that will handle the relationship. This strategy was promoted by public banking activists in the state and Tom Sgouros, a progressive policy consultant and journalist based in Rhode Island, following PBI's conference in Philadelphia last year.
The state bank idea faced a setback when the Boston Federal Reserve issued a report dismissing the idea after the Massachusetts legislature agreed to explore it. But with successful public banks operating around the globe, activists in California, Oregon and Vermont in particular are not letting naysayers slow them down. The conference organizers apparently made it their aim to build left-right alliances. PBI President Ellen Brown's 2008 book The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free—won an audience among Tea Partiers with her analysis even while defending a government-run bank. The eclecticism—and at times wrong-headedness—was on display at the podium. After a Green Party leader opened the conference, Bill Still, who ran for the Libertarian Party nomination for U.S. president, told the crowd, “We need to get rid of the government's ability to borrow...You need to reissue sovereign money.” His film, The Money Masters: How International Bankers Gained Control of America, was praised by W. Cleon Skouson, the John Birch Society-aligned writer championed by Glenn Beck.
Some activists also appear to believe that the public banks will push corporate banks out of operation. Occupy Finance member Julia Willebrand, the Green Party candidate for NYC comptroller, was sporting a “Break Up Big Banks” button, and was challenged by a PBI staffer who said the government wouldn't have to do that because the state banks would remake the system. Of course, Germany has a whole system of public and cooperative banks that live quite happily without threatening Deutsche Bank and big finance. Indeed, after the recent crisis, Germany's Left Party proposed a scheme for reducing the power of the corporate banks in favor of public and cooperative banks, acknowledging that it will be a long struggle.
In his plenary, Gar Alperovitz warned against “projectism,” falling into the trap that one initiative—for a public bank, say—can transform the system. “Can we get our heads around the notion that people like us...can transform and build an entirely new economy?” Those championing banking as a public utility cheered their answer.
Sources: Axel Troost and Philipp Hersel, How a Socialization of the German Banking System Might Look Like, (New York: Rosa Luxemburg Stiftung, October 2012); Ellen Brown, The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free (Third Millenium Publishers, 2008); Amy Rapoport, The People's Bank, American Prospect, April 1, 2013; Doug Henwood, Web of Nonsense, Left Business Observer, July 2009; Arthur MacEwan, “Should We Blame ‘Fractional Reserve' Banking?” Dollars & Sense, May/June 2013.
This piece was reprinted by Truthout with permission or license.
There Are Co-Op Options for Health Care, but Major Insurers Don't Want You To Know
Thursday, 13 March 2014 09:51 By Crystal Shepeard, Care2 | Report
http://truth-out.org/news/item/22441-there-are-co-op-options-for-healthcare-but-major-insurers-dont-want-you-to-know
One of the primary goals of the Affordable Care Act was to make health insurance more affordable for the millions of Americans who had to get insurance on the individual market. The changes in the new law required plans to have better coverage and by requiring everyone to have insurance, spread the risk across a broader spectrum of people to help lower costs. While these changes would help more people be able to get health insurance, the architects of the bill knew that competition within the industry would be a necessary component to help ensure affordability.
During the contentious debate during the creation of the law, there was a big push to include a public option. The most popular idea was to have a "Medicaid for all" type of program which would be one of the choices on the insurance exchange along with other private health insurance plans. In between the shouts of death panels and anti-government sentiment, there was little support for such a plan. Still, the Senate tried to create some form of competition and was able to come up with a compromise option.
A Consumer Oriented and Operated Plan, or Co-Op, is a non-profit health insurer designed to offer individuals and small businesses more affordable, consumer-friendly and high quality health insurance options. They are run by boards that are voted on by their members – the consumers. They are licensed by the state(s) in which they operate, and may operate locally, statewide, or in more than one state. Created specifically for the purpose of enhancing competition, they can offer insurance to individuals and small businesses. Beginning with the launch of open enrollment in October 2013, plans offered by co-ops were available as an often less expensive option for consumers in 23 states.
Often focused on smaller groups of people, co-ops can take many different forms. They can consist of farmers, freelancers or started by hospitals and healthcare providers. The provider networks are smaller, and in some cases the providers are salaried, helping to keep costs lowers. Co-ops also try different cost sharing plans, such as eliminating co-pays for doctor visits and rewarding providers that focus on preventative health.
However, many consumers still aren't aware of them.
Co-ops are offered both on and off the insurance exchanges, but their entrance into the market has been very difficult. Based on the input of commissioned insurance agents and actuarial experts, early drafts of the law included $10 billion dollars in grants. This would help fund startup costs, such as setting up administrative and provider networks, as well as ensure that the co-ops had the necessary solvency funding to handle claims as they built their membership networks. By the time the time open enrollment began, cuts in funding and rigid rules of operation severely reduced the number of co-ops originally planned.
All of which was orchestrated by the for-profit health insurance industry.
As word of the provision spread, the health insurance lobby worked overtime to water it down. Claiming it was unfair competition, they convinced Congress to convert the federal grants to loans and reduced them from the originally recommended amount. The loans are structured so that they must begin paying the startup loans within five years and the solvency loans within fifteen. The tight repayment schedule saddles them with a high burden to overcome in a market where they are already the underdog. Furthermore, the original $10 billion dollars recommended had been reduced to $2 billion by January 2013, making it impossible to fund all of the 40 planned co-ops.
Already hampered by the financial constraints at the national level, many had to face hurdles at the state level. With funding in place with federal loans, they still had to get additional funding from private sources prior to accepting members. As these were a new kind of insurer, state licensing requirements had to be created and were more stringent. Before open enrollment even came around, two co-ops had folded due to being unable to get state approval.
Nevertheless, 23 co-ops have been able to make it onto the market and are selling plans. The bumpy rollout of the Healthcare.gov website rollout slowed enrollment for them, which has hurt the bottom line. Provisions in the law prevents them from using federal loan money for marketing, nor are they allowed to participate in the large employer market.
In other words, they can't spend money to let consumers know they exist, or participate in the most lucrative insurance market.
As we enter into the final two weeks of open enrollment, co-ops are looking for innovative ways to get the word out about their existence. Some are going door to door, resorting to old fashioned street marketing. Some have gotten private funding for marketing costs. The federal agency in charge of overseeing the co-ops, the Centers for Medicare and Medicaid Services (CMS), has relaxed some regulations in order to help. They can use some of the federal money to educate consumer about their companies, but cannot highlight specific plans. They are also allowed to have one-third of their policies in the large employer market.
Due to these obstacles, co-ops are still a long shot at being a true competitive force in the health insurance market. A recent report shows that at least nine are at risk of financial trouble. Still, preliminary evidence shows that when they are allowed to operate as they should, they can make a difference. In states where successful co-ops are running, costs of policies are averaging about 9 percent lower than states without. They are often the lower priced options on the exchange and have had a comparable share of policies as the other major insurers.
Sometimes the free market does work — which is exactly what for-profit health insurers are trying to stop.
This piece was reprinted by Truthout with permission or license.
US Postal Service Inspector General Proposes Launching Low-Fee Public Bank
Monday, 10 March 2014 10:51 By Jessica Desvarieux, The Real News Network | Video Interview
http://truth-out.org/news/item/22360-us-postal-service-inspector-general-proposes-launching-low-fee-public-bank
http://www.youtube.com/watch?feature=player_embedded&v=MGr5KMcmggE
More at The Real News
TRANSCRIPT:
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore.
The inspector general of the U.S. Postal Service released a white paper in January that proposes the post office provide basic banking services. The proposal gained widespread attention after it was endorsed by Senator Elizabeth Warren.
Now joining us to discuss all of this is our guest, Mike Konczal. Mike is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy.
Thanks for joining us, Mike.
MIKE KONCZAL, FELLOW, ROOSEVELT INSTITUTE: Thanks for having me.
DESVARIEUX: So, Mike, can you just provide for us an outline of how the Postal Service can offer basic banking services? And who would it serve, really?
KONCZAL: Absolutely. So right now there's roughly 10 million Americans who have no formal banking account, checking or savings account, and there's about--a huge number, I mean, about 50 or 60 million, which is, to put it in context, about one in four households who are under-banked, which have a very precarious situation with banks. And, you know, you need banks to get, you know, checks cashed, to get new checks, to, you know, engage in basic financial services.
Now, historically, the post offices, you know, for much of the 20th century offered basic banking services. Also, many countries internationally, especially OECD countries, countries in Europe, tend to have banks in their country. The postal services offer basic banking services.
So what the post office proposed is it could do one of a couple of different things. One is that could it offer something called a postal card, which is, you know, like, a nice little joke, but the actual consequences would not be funny. They would be, actually, very serious. You know, the post office could offer people a basic debit card, which could be topped off with money, which would have low fees and good consumer protections, and that you could use to, you know, cash checks to purchase things, to pay bills. They also offer proposals where they could perhaps engage in short-term loans like a credit card and so on and so forth. So it's a very interesting proposal which I think could do a lot of good work as a public policy mechanism.
DESVARIEUX: Alright. And the government already has sort of a program already like that with debit cards to recipients of Social Security and federal disability, and it's called Direct Express. Mike, can you just speak to how does Direct Express work, and how does it differ from similar services provided by private banks? Has the program at all been successful?
KONCZAL: Sure. So I wrote a piece for Al Jazeera America just recently about the Direct Express program, which tried to argue that, you know, there's often been public options like this in banking, where the government, you know, instead of just the free market determining what kind of services people get, or even a weird system of regulations that often don't work very well, the government goes out and directly ensures that people have access to safe and affordable banking products. And the biggest case of this is a program that started in 2008 called Direct Express, which is essentially a debit card. It's issued by a private bank called Comerica.
But the Treasury went to Comerica and they had an open bidding process, which Comerica won, and said, you know, we want to offer debit cards for people who are on Social Security, who are on disability, and who are on certain other federal benefit programs, and we want to make sure that they can get their money without having to go through check cashing or payday loans or other places that offer really high predatory fees and have very unstable banking practices. You know, we want to make sure people essentially have access to decent banking services.
So Comerica came up with a schedule that was a fee schedule, or, essentially, a fee structure, that was very strong. They were able to do this because Treasury was--instead of each person going out in the market and trying to get their own best offer, Treasury essentially bargained for 5 million people and said, we have this, you know, 5 million people who really need banking services, and we will work hard, you know, we will make sure that these payments go through.
So, you know, the program has very high favorable rates. Like, 90, 95 percent of people on the program enjoy it or recommend it to other people, which is sort of unheard of. And it's miles beyond what many of these people who are, you know, poor or have, you know, very, very precarious economic situations were able to get on their own on the private market.
DESVARIEUX: So if I'm Bank of America or, I don't know, Chase Bank and I'm hearing this and this option of having debit cards through the government, I'd be a little concerned, 'cause this is competition, isn't it?
KONCZAL: Absolutely. And, you know, a lot of the major banks, a lot of the big-name banks that have really nice buildings and very, you know, solid reputations are often the same corporate structure as a lot of the payday lenders, a lot of the check-cashing places, a lot of the places that have kind of sprout up in very poor communities. So even if not necessarily the fancy part of the corporate structure that does all the high-end banking or investment banking might not be directly affected, there's some part of it that would actually--you know, that profits off all this poverty.
You know, there's a really high cost of being poor in this country, and doing things like--and as the post office pointed out, you know, a lot of people getting by on $15,000 or $20,000 a year will spend 10 percent of their income accessing financial services, which is outrageous, given the precarity and the lack of savings that a lot of these households have. So there's a very useful and positive role.
Also, with the government kind of setting a lower standard by saying, here is a debit card we will ensure people get, it moves businesses from having a business model where their goal is to kind of see what they can suck out of people, like, and see what they can kind of rip people off or be very predatory, towards a better business model where they're like, so how do we actually deliver real goods and services, customer service, good values, as opposed to this kind of low-road, predatory model.
DESVARIEUX: Alright. Mike Konczal, fellow at Roosevelt Institute, thank you so much for joining us.
KONCZAL: Thank you for your time.
DESVARIEUX: And, of course, as you know, you can get the latest at The Real News. Follow us on Twitter @therealnews. And you can also send me questions and comments @Jessica_Reports.
This piece was reprinted by Truthout with permission or license.
Prove it: Bank blocking some customers from making large withdrawals without ‘evidence’ of spending need
http://news.yahoo.com/blogs/sideshow/prove-it--bank-blocking-customers-from-making-large-withdrawals-without--evidence--of-spending-need-222425920.html
By Eric Pfeiffer17 hours agoThe Sideshow
HSBC said it's trying to protect its U.K. customers with a new cash withdrawal policy (Reuters)
If you bank at HSBC in England, don’t plan on making any large cash withdrawals. At least not without a good explanation. Or, maybe even a permission slip.
That’s because a previously unannounced change in banking policy is blocking some customers from making large withdrawals without “evidence” explaining why they need the money from their accounts .
The policy affects customers attempting withdrawals for amounts as little as £5,000 ($8,253).
HSBC says it’s all done in the name of customer protection.
"The reason being we have an obligation to protect our customers, and to minimize the opportunity for financial crime,” HSBC said in a statement. “However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologize to any customer who has been given incorrect information and inconvenienced."
The change in approach comes after the BBC aired reports from multiple HSBC customers who said they were denied in their recent attempts to make cash withdrawals.
Banking customer Stephen Cotton says he attempted to withdraw approximately $11,000 to repay a loan from his mother but was blocked from doing so.
"When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for,” he told the BBC. “They wanted a letter from the person involved."
Cotton says the bank wouldn’t even tell him how much he was allowed to withdraw under the new policy, which was not announced to customers when taking affect last November.
"So I wrote out a few slips. I said, 'Can I have £5,000?' They said no. I said, 'Can I have £4,000?' They said no. And then I wrote one out for £3,000 and they said, 'OK, we'll give you that.' "
In the U.S. there have been rumors of similar restrictions that major banks such as Citibank have denied. After the massive security breach at Target retail stores in December, JP Morgan did place a temporary limit on how much cash customers could withdraw from Chase ATM’s at Target stores and how much they could spend on their debit cards at one time. But that limit has since been removed.
A Conservative member of the British Parliament said the change in policy “infantilizes the customer.” However, the head of retail at the British Bankers Association defended the policy.
"I can understand it's frustrating for customers,” Eric Leenders told the BBC. “But if you are making the occasional large cash withdrawal, the bank wants to make sure it's the right way to make the payment."
Beyond Reform: It's Time to Shut Down the World Bank
Saturday, 25 January 2014 11:20 By Cyril Mychalejko, Toward Freedom | News Analysis
http://truth-out.org/news/item/21440-beyond-reform-its-time-to-shut-down-the-world-bank
Recent conflicts surrounding World Bank-supported projects in Honduras demonstrate that the World Bank is beyond reform, and needs to be shut down.
The World Bank came under fire again last week when its ombudsman revealed that the bank’s investment in a palm oil project in Honduras worsened human rights abuses and violent conflicts.
The World Bank’s Compliance Advisor Ombudsman (CAO), the independent auditor for the International Finance Corporation (IFC), the bank’s private sector arm in charge of providing investments in developing countries in order to spur private sector growth, investigated a $30 million loan (half of which has been released thus far) to Corporación Dinant, a Honduran palm oil and snack food giant. The loan to Dinant was made just five months after a 2009 military coup in the country removed President Manuel Zelaya, a democratically-elected president seeking moderate labor and land reforms. Zelaya was replaced by a de-facto dictator who used the country’s military and security apparatuses to violently oppress social movements and political opposition.
Such investment on the part of the World Bank has further undermined democracy in the country and empowered Honduran elites profiting from recent political turmoil.
The CAO report suggests that there is an institutional culture of indifference at the World Bank that incentivizes staff “to overlook, fail to articulate, or even conceal potential environmental, social and conflict risk” in order to streamline the approval of loans, while failing to follow its own policies and procedures to prevent such things.
“The IFC loaned millions of dollars to a project, even though it was known that its operations were already enmeshed in killings and other violence... the Dinant case should serve as a warning about the pitfalls of investing without proper oversight,” said Jessica Evans, senior international financial institutions researcher and advocate at Human Rights Watch.
The CAO cited reports by human rights groups which documented the murder of 102 people associated with peasant movements in the Bajo Aguán Valley of Honduras, where Dinant’s operations escalated decades-long land disputes. Most of the deaths are blamed on death squads composed of Dinant’s private security working in concert with US-backed Honduran military forces. The company refuses to accept any responsibility.
The IFC has denied many of the CAO’s findings. However, it stated that it would work with Dinant to reform its security operations, along with environmental and social management procedures, even though a company spokesperson told Al Jazeera that its security forces were not responsible for any violence surrounding land disputes—and in fact were victims, while suggesting a number of the CAO’s other allegations were “unfounded.”
Kris Genovese, senior researcher at the Centre for Research on Multinational Corporations, called the IFC’s response “totally inadequate” and that any future funding should be suspended.
“The CAO notes that Dinant was not in compliance with the IFC’s policies on the day the loan was made, and over five years later, continues to be out of compliance. An Action Plan that makes the same commitments that have gone unfulfilled this whole time holds little promise,” Genovese explained.
The CAO is also investigating the IFC’s investment in Ficohsa, a Honduran bank with a long relationship with Dinant. Peter Chowla, coordinator of the UK-based Bretton Woods Project, told the Financial Times, “The IFC was wildly irresponsible in investing in a private commercial bank, Ficohsa, in 2011 despite knowing that the bank’s third-largest client was Dinant and the IFC being well aware of the allegations of human rights abuses surrounding Dinant’s palm oil plantations. It highlights yet again IFC staff’s recklessness towards the impacts of its investments on poor people, while ensuring their corporate partners profit.”
The IFC’s investments with third party lenders such as Fichosa have been a long-standing problem; the relationship was audited by the CAO in February 2013. The Inter Press Service noted that a majority of the IFC’s third party lenders “failed to improve their environment and social practices following IFC investment” and that the IFC’s “oversight mechanisms include no capability to assess whether that lending...is helping or harming local communities and overall development indicators.”
The World Bank’s history of investing in projects resulting in murder and human rights abuses suggests that efforts to reform the bank is a fool’s errand. During the early 1980s, in neighboring Guatemala the World Bank lent hundreds of millions of dollars for the Chixoy Hydroelectric Dam project during the bloody military dictatorships of Fernando Romeo Lucas García and Efraín Ríos Montt. One of the results of the World Bank’s project was a series of planned massacres that left 440 Mayan Achi men, women, and children murdered.
A little over 20 years later the World Bank lent Canadian mining giant Goldcorp (then Glamis Gold) $45 million for an unpopular gold mine in Guatemala which not only spilled more indigenous blood, but was also an investment marred byviolating indigenous rights and the improper evaluation of the project’s environmental impacts.
Around the world, from Ethiopia to Indonesia and Peru, the World Bank finds itself embroiled in controversies surrounding human rights violations, environmental destruction, and social discord. NGO’s for years have been calling for sweeping reforms at the World Bank, but to no avail.
It’s time to recognize that the World Bank is an institution incapable of reform, and is indeed unworthy of reform efforts. The only humane option is to focus efforts to close the bank immediately and to start building alternative financial institutions that promote local, community-led development projects guided by the principals of sustainability and solidarity rather than free market doctrine.
Otherwise, the pile of corpses will continue to grow in the name of progress and development—and reform.
This piece was reprinted by Truthout with permission or license.
Public Banking in Costa Rica: A Remarkable, Little-Known Model
Tuesday, 12 November 2013 09:11 By Ellen Brown, Web of Debt Blog | News Analysis
http://truth-out.org/news/item/19973-public-banking-in-costa-rica-a-remarkable-little-known-model
In Costa Rica, publicly-owned banks have been available for so long and work so well that people take for granted that any country that knows how to run an economy has a public banking option. Costa Ricans are amazed to hear there is only one public depository bank in the United States (the Bank of North Dakota), and few people have private access to it.
So says political activist Scott Bidstrup, who writes:
For the last decade, I have resided in Costa Rica, where we have had a “Public Option” for the last 64 years.
There are 29 licensed banks, mutual associations and credit unions in Costa Rica, of which four were established as national, publicly-owned banks in 1949. They have remained open and in public hands ever since—in spite of enormous pressure by the I.M.F. [International Monetary Fund] and the U.S. to privatize them along with other public assets. The Costa Ricans have resisted that pressure—because the value of a public banking option has become abundantly clear to everyone in this country.
During the last three decades, countless private banks, mutual associations (a kind of Savings and Loan) and credit unions have come and gone, and depositors in them have inevitably lost most of the value of their accounts.
But the four state banks, which compete fiercely with each other, just go on and on. Because they are stable and none have failed in 31 years, most Costa Ricans have moved the bulk of their money into them. Those four banks now account for fully 80% of all retail deposits in Costa Rica, and the 25 private institutions share among themselves the rest.
According to a 2003 report by the World Bank, the public sector banks dominating Costa Rica’s onshore banking system include three state-owned commercial banks (Banco Nacional, Banco de Costa Rica, and Banco Crédito Agrícola de Cartago) and a special-charter bank called Banco Popular, which in principle is owned by all Costa Rican workers. These banks accounted for 75 percent of total banking deposits in 2003.
In Competition Policies in Emerging Economies: Lessons and Challenges from Central America and Mexico (2008), Claudia Schatan writes that Costa Rica nationalized all of its banks and imposed a monopoly on deposits in 1949. Effectively, only state-owned banks existed in the country after. The monopoly was loosened in the 1980s and was eliminated in 1995. But the extensive network of branches developed by the public banks and the existence of an unlimited state guarantee on their deposits has made Costa Rica the only country in the region in which public banking clearly predominates.
Scott Bidstrup comments:
By 1980, the Costa Rican economy had grown to the point where it was by far the richest nation in Latin America in per-capita terms. It was so much richer than its neighbors that Latin American economic statistics were routinely quoted with and without Costa Rica included. Growth rates were in the double digits for a generation and a half. And the prosperity was broadly shared. Costa Rica’s middle class – nonexistent before 1949 – became the dominant part of the economy during this period. Poverty was all but abolished, favelas [shanty towns] disappeared, and the economy was booming.
This was not because Costa Rica had natural resources or other natural advantages over its neighbors. To the contrary, says Bidstrup:
At the conclusion of the civil war of 1948 (which was brought on by the desperate social conditions of the masses), Costa Rica was desperately poor, the poorest nation in the hemisphere, as it had been since the Spanish Conquest.
The winner of the 1948 civil war, José “Pepe” Figueres, now a national hero, realized that it would happen again if nothing was done to relieve the crushing poverty and deprivation of the rural population. He formulated a plan in which the public sector would be financed by profits from state-owned enterprises, and the private sector would be financed by state banking.
A large number of state-owned capitalist enterprises were founded. Their profits were returned to the national treasury, and they financed dozens of major infrastructure projects. At one point, more than 240 state-owned corporations were providing so much money that Costa Rica was building infrastructure like mad and financing it largely with cash. Yet it still had the lowest taxes in the region, and it could still afford to spend 30% of its national income on health and education.
A provision of the Figueres constitution guaranteed a job to anyone who wanted one. At one point, 42% of the working population of Costa Rica was working for the government directly or in one of the state-owned corporations. Most of the rest of the economy not involved in the coffee trade was working for small mom-and-pop companies that were suppliers to the larger state-owned firms—and it was state banking, offering credit on favorable terms, that made the founding and growth of those small firms possible. Had they been forced to rely on private-sector banking, few of them would have been able to obtain the financing needed to become established and prosperous. State banking was key to the private sector growth. Lending policy was government policy and was designed to facilitate national development, not bankers’ wallets. Virtually everything the country needed was locally produced. Toilets, window glass, cement, rebar, roofing materials, window and door joinery, wire and cable, all were made by state-owned capitalist enterprises, most of them quite profitable. Costa Rica was the dominant player regionally in most consumer products and was on the move internationally.
Needless to say, this good example did not sit well with foreign business interests. It earned Figueres two coup attempts and one attempted assassination. He responded by abolishing the military (except for the Coast Guard), leaving even more revenues for social services and infrastructure.
When attempted coups and assassination failed, says Bidstrup, Costa Rica was brought down with a form of economic warfare called the “currency crisis” of 1982. Over just a few months, the cost of financing its external debt went from 3% to extremely high variable rates (27% at one point). As a result, along with every other Latin American country, Costa Rica was facing default. Bidstrup writes:
That’s when the IMF and World Bank came to town.
Privatize everything in sight, we were told. We had little choice, so we did. End your employment guarantee, we were told. So we did. Open your markets to foreign competition, we were told. So we did. Most of the former state-owned firms were sold off, mostly to foreign corporations. Many ended up shut down in a short time by foreigners who didn’t know how to run them, and unemployment appeared (and with it, poverty and crime) for the first time in a decade. Many of the local firms went broke or sold out quickly in the face of ruinous foreign competition. Very little of Costa Rica’s manufacturing economy is still locally owned. And so now, instead of earning forex [foreign exchange] through exporting locally produced goods and retaining profits locally, these firms are now forex liabilities, expatriating their profits and earning relatively little through exports. Costa Ricans now darkly joke that their economy is a wholly-owned subsidiary of the United States.
The dire effects of the IMF’s austerity measures were confirmed in a 1993 book excerpt by Karen Hansen-Kuhn titled “Structural Adjustment in Costa Rica: Sapping the Economy.” She noted that Costa Rica stood out in Central America because of its near half-century history of stable democracy and well-functioning government, featuring the region’s largest middle class and the absence of both an army and a guerrilla movement. Eliminating the military allowed the government to support a Scandinavian-type social-welfare system that still provides free health care and education, and has helped produce the lowest infant mortality rate and highest average life expectancy in all of Central America.
In the 1970s, however, the country fell into debt when coffee and other commodity prices suddenly fell, and oil prices shot up. To get the dollars to buy oil, Costa Rica had to resort to foreign borrowing; and in 1980, the U.S. Federal Reserve under Paul Volcker raised interest rates to unprecedented levels.
In The Gods of Money (2009), William Engdahl fills in the back story. In 1971, Richard Nixon took the U.S. dollar off the gold standard, causing it to drop precipitously in international markets. In 1972, US Secretary of State Henry Kissinger and President Nixon had a clandestine meeting with the Shah of Iran. In 1973, a group of powerful financiers and politicians met secretly in Sweden and discussed effectively “backing” the dollar with oil. An arrangement was then finalized in which the oil-producing countries of OPEC would sell their oil only in U.S. dollars. The quid pro quo was military protection and a strategic boost in oil prices. The dollars would wind up in Wall Street and London banks, where they would fund the burgeoning U.S. debt. In 1974, an oil embargo conveniently caused the price of oil to quadruple. Countries without sufficient dollar reserves had to borrow from Wall Street and London banks to buy the oil they needed. Increased costs then drove up prices worldwide. By late 1981, says Hansen-Kuhn, Costa Rica had one of the world’s highest levels of debt per capita, with debt-service payments amounting to 60 percent of export earnings. When the government had to choose between defending its stellar social-service system or bowing to its creditors, it chose the social services. It suspended debt payments to nearly all its creditors, predominately commercial banks. But that left it without foreign exchange. That was when it resorted to borrowing from the World Bank and IMF, which imposed “austerity measures” as a required condition. The result was to increase poverty levels dramatically.
Bidstrup writes of subsequent developments:
Indebted to the IMF, the Costa Rican government had to sell off its state-owned enterprises, depriving it of most of its revenue, and the country has since been forced to eat its seed corn. No major infrastructure projects have been conceived and built to completion out of tax revenues, and maintenance of existing infrastructure built during that era must wait in line for funding, with predictable results. About every year, there has been a closure of one of the private banks or major savings coöps. In every case, there has been a corruption or embezzlement scandal, proving the old saying that the best way to rob a bank is to own one. This is why about 80% of retail deposits in Costa Rica are now held by the four state banks. They’re trusted.
Costa Rica still has a robust economy, and is much less affected by the vicissitudes of rising and falling international economic tides than enterprises in neighboring countries, because local businesses can get money when they need it. During the credit freezeup of 2009, things went on in Costa Rica pretty much as normal. Yes, there was a contraction in the economy, mostly as a result of a huge drop in foreign tourism, but it would have been far worse if local business had not been able to obtain financing when it was needed. It was available because most lending activity is set by government policy, not by a local banker’s fear index.
Stability of the local economy is one of the reasons that Costa Rica has never had much difficulty in attracting direct foreign investment, and is still the leader in the region in that regard. And it is clear to me that state banking is one of the principal reasons why.
The value and importance of a public banking sector to the overall stability and health of an economy has been well proven by the Costa Rican experience. Meanwhile, our neighbors, with their fully privatized banking systems have, de facto, encouraged people to keep their money in Mattress First National, and as a result, the financial sectors in neighboring countries have not prospered. Here, they have—because most money is kept in banks that carry the full faith and credit of the Republic of Costa Rica, so the money is in the banks and available for lending. While our neighbors’ financial systems lurch from crisis to crisis, and suffer frequent resulting bank failures, the Costa Rican public system just keeps chugging along. And so does the Costa Rican economy.
He concludes:
My dream scenario for any third world country wishing to develop, is to do exactly what Costa Rica did so successfully for so many years. Invest in the Holy Trinity of national development—health, education and infrastructure. Pay for it with the earnings of state capitalist enterprises that are profitable because they are protected from ruinous foreign competition; and help out local private enterprise get started and grow, and become major exporters, with stable state-owned banks that prioritize national development over making bankers rich. It worked well for Costa Rica for a generation and a half. It can work for any other country as well. Including the United States.
The new Happy Planet Index, which rates countries based on how many long and happy lives they produce per unit of environmental output, has ranked Costa Rica #1 globally. The Costa Rican model is particularly instructive at a time when US citizens are groaning under the twin burdens of taxes and increased health insurance costs. Like the Costa Ricans, we could reduce taxes while increasing social services and rebuilding infrastructure, if we were to allow the government to make some money itself; and a giant first step would be for it to establish some publicly-owned banks.
This piece was reprinted by Truthout with permission or license.
Mondragón and the System Problem
Friday, 01 November 2013 09:04 By Gar Alperovitz and Thomas M Hanna, Truthout | Op-Ed
http://truth-out.org/news/item/19704-mondragon-and-the-system-problem
As America moves more deeply into its growing systemic crisis, it is becoming increasingly important for activists and theorists to distinguish clearly between important projects and "institutional elements," on the one hand, and systemic change and systemic design, on the other. The recent economic failure of one of the most important units of the Mondragón cooperatives offers an opportunity to clarify the issue and begin to think more clearly about our own strategy in the United States.
Mondragón Corporation is an extraordinary 80,000-person grouping of worker-owned cooperatives based in Spain's Basque region that is teaching the world how to move the ideas of worker-ownership and cooperation into high gear and large scale. The first Mondragón cooperatives date from the mid-1950s, and the overall effort has evolved over the years into a federation of 110 cooperatives, 147 subsidiary companies, eight foundations and a benefit society with total assets of 35.8 billion euros and total revenues of 14 billion euros.
Each year, it also teaches some 10,000 students in its education centers and has roughly 2,000 researchers working at 15 research centers, the University of Mondragón, and within its industrial cooperatives. It also actively educates its workers about cooperatives' principles, with around 3,000 people a year participating in its Cooperative Training program and 400 in its Leadership and Team Work program.
Mondragón has been justly cited as a leading example of what can be done through cooperative organization. It has evolved a highly participatory decision-making structure, and a top-to-bottom compensation structure in a highly advanced economic institution that challenges economic practices throughout the corporate capitalist world: In the vast majority of its cooperatives, the ratio of compensation between top executives and the lowest-paid members is between three to one and six to one; in a few of the larger cooperatives it can be as high as around nine to one. Comparable private corporations often operate with top-to-median compensation ratios of 250 to one or 300 to one or higher.
Although it has been criticized for violating its cooperative principles through somewhat "imperial" control of some of its foreign operations, for its use of non-cooperative labor, and for a less-than-active concern with environmental problems, in recent years Mondragón has begun to address deficiencies in these areas.
Bankruptcy for Fagor Electrodomésticos
Mondragón Corporation's historically most important unit is Fagor Electrodomésticos Group, which makes consumer appliances - "white goods" such as dishwashers, cookers and other related household items. It is the fifth-largest manufacturer of such products in Europe. It employs roughly 2,000 people in five factories in the Basque region and has and additional 3,500 in eight factories in France, China, Poland and Morocco. Its direct predecessor (ULGOR) was the first-ever Mondragón cooperative - established in 1956 by five young students of José María Arizmendiarrieta, the spiritual founder of Mondragón cooperative network.
Mondragón recently announced that Fagor was failing and that the company would be filing for bankruptcy protection. Ultimately, Fagor was unable to find financing to pay off debts of around $1.5 billion related to a 37 percent slump in sales since 2007 that resulted from Spain's economic crisis and housing market collapse. Under Spanish law, the company now has four months to negotiate with its creditors - which include the Basque government, banks and others - and formulate a restructuring plan.
As part of any restructuring or liquidation, Mondragón will provide jobs and income security for a certain period for some its workers in Spain. This is one of the cooperative network's great advantages. It has announced that its internal insurance company Lagun Aro will pay 80 percent of the cooperative member's salaries for two years and the corporation will strive to relocate as many employees as possible to other cooperatives in the network.
The fate of the roughly 3,500 non-Spanish wage laborers (i.e. not cooperative members) in other countries, however, is unclear.
http://truth-out.org/news/item/19704-mondragon-and-the-system-problem
Coming Soon? An Occupy Wall Street Debit Card
http://finance.yahoo.com/news/coming-soon--an-occupy-wall-street-debit-card-152716057.html
New York Times Colin Moynihan 22 hours ago
To mark the second anniversary of the Occupy Wall Street movement last month, an assortment of protests, marches and rallies were held, to support or oppose mostly predictable causes.
At the same time, a far more surprising undertaking began with far less fanfare: creating a prepaid Occupy debit card.
The idea, led by a group that includes a Cornell law professor, a former director of Deutsche Bank and a former British diplomat, is meant to serve people who do not have bank accounts, but it also aims to make Occupy a recognized financial services brand.
On Sept. 17, the day of the anniversary, the group, known as the Occupy Money Cooperative, began raising money to pay for initial operating expenses. The group’s Web site invites visitors to “join the revolution,” suggesting that using the card might represent a “protest with every purchase.” That language evokes the spirit of the sprawling encampment of tents and tarps that briefly took over Zuccotti Park in 2011, and several people who were familiar figures there have endorsed the mission of the card, which its founders have described as “low-cost, transparent, high-quality financial services to the 99 percent.”
But not everyone associated with the Occupy movement likes the idea; the notion of the Occupy name emblazoned on a financial product, even one made by people with some connection to the movement, has prompted questions about who controls the name and message.
“Too much blood, sweat and tears have been going into Occupy to have that turned into a piece of plastic,” said Bill Dobbs, a longtime Occupy participant. “This is a very odd fit, and for the project’s sake and Occupy’s sake, they ought to go on separate paths.”
From its beginning, Occupy’s participants were protective of the group’s name and image, rejecting association with political parties. Protesters invaded the set of a “Law & Order: S.V.U.” episode that was based on the movement, and lashed out at Jay-Z when he sold Occupy-themed T-shirts.
The idea for a debit card sprouted more than a year ago, said Carne Ross, a cooperative member who resigned from the British foreign service in 2004 to protest the Iraq war. Mr. Ross was also a member of the alternative banking working group established by Occupy’s General Assembly.
“There is no profit here,” said Mr. Ross, adding that once the cooperative raised about $900,000, it would make the cards available to anyone who signed up on the group’s Web site. “The only revenue we want is to make the thing sustainable and eventually expand our range of services.”
There will be no upfront cost for the card, Mr. Ross said, but there will be fees, including $1.95 for A.T.M. withdrawals and 99 cents for balance inquiries.
The card appears to intentionally avoid high fees that other debit cards have imposed, said Dean Baker, an economist and co-director of the Center for Economic and Policy Research. “In general terms they are trying to have a very low-cost card,” he said.
But when Mr. Ross participated in an “ask me anything” forum on the social media Web site Reddit in August, he was peppered with skeptical questions. Some of the most pointed criticism came in an article printed in Tidal, a magazine that examines the theories and tactics that formed Occupy and similar movements, which was headlined “Help Support Better Stronger Neo-Liberalism With the Occupy Money Cooperative.”
The cooperative has also drawn criticism over its plan to establish a relationship with Visa, which some activists condemn because the company declined to process donations to WikiLeaks, the international organization known for publishing leaked information, much of it classified.
Mr. Ross said he respected the objection to Visa. But he said his group had no choice but to do business with that company or a similar one in order to produce a debit card that could be widely accepted.
Eventually, Mr. Ross said, the cooperative hopes to offer loans and other services that would benefit millions of people who do not use traditional banks, often because they cannot afford the fees.
While some organizers acknowledged that the debit cards could be put to good use, they said the term “Occupy Card” wrongly implied that the project had been vetted and approved by the movement as a whole. And several organizers framed their reservations as a question of legacy, saying they were disturbed by the possibility that a debit card could end up being the most lasting artifact of the movement.
“Occupy has always been a consensus-based movement,” said Patrick Bruner, an organizer who was present on the first day of the protests. “And there’s no consensus on this issue.”
The Armageddon Looting Machine: The Looming Mass Destruction From Derivatives
Wednesday, 18 September 2013 09:28 By Ellen Brown, Web of Debt Blog | News Analysis
http://truth-out.org/news/item/18907-the-armageddon-looting-machine-the-looming-mass-destruction-from-derivatives
Increased regulation and low interest rates are driving lending from the regulated commercial banking system into the unregulated shadow banking system. The shadow banks, although free of government regulation, are propped up by a hidden government guarantee in the form of safe harbor status under the 2005 Bankruptcy Reform Act pushed through by Wall Street. The result is to create perverse incentives for the financial system to self-destruct. Five years after the financial collapse precipitated by the Lehman Brothers bankruptcy on September 15, 2008, the risk of another full-blown financial panic is still looming large, despite the Dodd Frank legislation designed to contain it. As noted in a recent Reuters article, the risk has just moved into the shadows:
[B]anks are pulling back their balance sheets from the fringes of the credit markets, with more and more risk being driven to unregulated lenders that comprise the $60 trillion “shadow-banking” sector.
Increased regulation and low interest rates have made lending to homeowners and small businesses less attractive than before 2008. The easy subprime scams of yesteryear are no more. The void is being filled by the shadow banking system. Shadow banking comes in many forms, but the big money today is in repos and derivatives. The notional (or hypothetical) value of the derivatives market has been estimated to be as high as $1.2 quadrillion, or twenty times the GDP of all the countries of the world combined.
According to Hervé Hannoun, Deputy General Manager of the Bank for International Settlements, investment banks as well as commercial banks may conduct much of their business in the shadow banking system (SBS), although most are not generally classed as SBS institutions themselves. At least one financial regulatory expert has said that regulated banking organizations are the largest shadow banks.
The Hidden Government Guarantee that Props Up the Shadow Banking System
According to Dutch economist Enrico Perotti, banks are able to fund their loans much more cheaply than any other industry because they offer “liquidity on demand.” The promise that the depositor can get his money out at any time is made credible by government-backed deposit insurance and access to central bank funding. But what guarantee underwrites the shadow banks? Why would financial institutions feel confident lending cheaply in the shadow market, when it is not protected by deposit insurance or government bailouts? Perotti says that liquidity-on-demand is guaranteed in the SBS through another, lesser-known form of government guarantee: “safe harbor” status in bankruptcy. Repos and derivatives, the stock in trade of shadow banks, have “superpriority” over all other claims. Perotti writes:
Security pledging grants access to cheap funding thanks to the steady expansion in the EU and US of “safe harbor status”. Also called bankruptcy privileges, this ensures lenders secured on financial collateral immediate access to their pledged securities. . . . Safe harbor status grants the privilege of being excluded from mandatory stay, and basically all other restrictions. Safe harbor lenders, which at present include repos and derivative margins, can immediately repossess and resell pledged collateral.
This gives repos and derivatives extraordinary super-priority over all other claims, including tax and wage claims, deposits, real secured credit and insurance claims. Critically, it ensures immediacy (liquidity) for their holders. Unfortunately, it does so by undermining orderly liquidation.
When orderly liquidation is undermined, there is a rush to get the collateral, which can actually propel the debtor into bankruptcy. The amendment to the Bankruptcy Reform Act of 2005 that created this favored status for repos and derivatives was pushed through by the banking lobby with few questions asked. In a December 2011 article titled “Plan B – How to Loot Nations and Their Banks Legally,” documentary film-maker David Malone wrote:
This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies . . . allowed a whole range of far riskier assets to be used . . . . The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get [their] money back before anyone else and no one could stop them.
Burning Down the Barn to Get the Insurance
Safe harbor status creates the sort of perverse incentives that make derivatives “financial weapons of mass destruction,” as Warren Buffett famously branded them. It is the equivalent of burning down the barn to collect the insurance. Says Malone:
All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.
The collapse of . . . Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those institutions suddenly stopped trading and ‘looted’ them instead.
The global credit collapse was triggered, it seems, not by wild subprime lending but by the rush to grab collateral by players with congressionally-approved safe harbor status for their repos and derivatives.
Bear Stearns and Lehman Brothers were strictly investment banks, but now we have giant depository banks gambling in derivatives as well; and with the repeal of the Glass-Steagall Act that separated depository and investment banking, they are allowed to commingle their deposits and investments. The risk to the depositors was made glaringly obvious when MF Global went bankrupt in October 2011. Malone wrote:
When MF Global went down it did so because its repo, derivative and hypothecation partners essentially foreclosed on it. And when they did so they then ‘looted’ the company. And because of the co-mingling of clients money in the hypothecation deals the ‘looters’ also seized clients money as well. . . JPMorgan allegedly has MF Global money while other people’s lawyers can only argue about it.
MF Global was followed by the Cyprus “bail-in” – the confiscation of depositor funds to recapitalize the country’s failed banks. This was followed by the coordinated appearance of bail-in templates worldwide, mandated by the Financial Stability Board, the global banking regulator in Switzerland.
The Auto-Destruct Trip Wire on the Banking System
Bail-in policies are being necessitated by the fact that governments are balking at further bank bailouts. In the US, the Dodd-Frank Act (Section 716) now bans taxpayer bailouts of most speculative derivative activities. That means the next time we have a Lehman-style event, the banking system could simply collapse into a black hole of derivative looting. Malone writes:
. . . The bankruptcy laws allow a mechanism for banks to disembowel each other. The strongest lend to the weaker and loot them when the moment of crisis approaches. The plan allows the biggest banks, those who happen to be burdened with massive holdings of dodgy euro area bonds, to leap out of the bond crisis and instead profit from a bankruptcy which might otherwise have killed them. All that is required is to know the import of the bankruptcy law and do as much repo, hypothecation and derivative trading with the weaker banks as you can.
. . . I think this means that some of the biggest banks, themselves, have already constructed and greatly enlarged a now truly massive trip wired auto-destruct on the banking system.
The weaker banks may be the victims, but it is we the people who will wind up holding the bag. Malone observes:
For the last four years who has been putting money in to the banks? And who has become a massive bond holder in all the banks? We have. First via our national banks and now via the Fed, ECB and various tax payer funded bail out funds. We are the bond holders who would be shafted by the Plan B looting. We would be the people waiting in line for the money the banks would have already made off with. . . .
. . . [T]he banks have created a financial Armageddon looting machine. Their Plan B is a mechanism to loot not just the more vulnerable banks in weaker nations, but those nations themselves. And the looting will not take months, not even days. It could happen in hours if not minutes.
Crisis and Opportunity: Building a Better Mousetrap
There is no way to regulate away this sort of risk. If both the conventional banking system and the shadow banking system are being maintained by government guarantees, then we the people are bearing the risk. We should be directing where the credit goes and collecting the interest. Banking and the creation of money-as-credit need to be made public utilities, owned by the public and having a mandate to serve the public. Public banks do not engage in derivatives.
Today, virtually the entire circulating money supply (M1, M2 and M3) consists of privately-created “bank credit” – money created on the books of banks in the form of loans. If this private credit system implodes, we will be without a money supply. One option would be to return to the system of government-issued money that was devised by the American colonists, revived by Abraham Lincoln during the Civil War, and used by other countries at various times and places around the world. Another option would be a system of publicly-owned state banks on the model of the Bank of North Dakota, leveraging the capital of the state backed by the revenues of the into public bank credit for the use of the local economy.
Change happens historically in times of crisis, and we may be there again today.
This piece was reprinted by Truthout with permission or license.
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A Co-op Story: Milk Not Jails
Sunday, 25 August 2013 11:17 By Laura Flanders, GritTV | Video Report
http://truth-out.org/news/item/18387-a-co-op-story-milk-not-jails
Things are changing in the prison system. On Monday, the country’s top law enforcer - Attorney General, Eric J. Holder Jr. -- said he would order all of his prosecutors to avert mandatory minimum sentences for low-level drug offenders.
“Too many Americans go to too many prisons for far too long, and for no good law enforcement reason,” Holder told the American Bar Association. And two days later, (this Wednesday), the world’s largest association for correctional officers passed its own resolution to “eliminate” mandatory minimum sentences.
“ACA’s members know from long and first-hand experience that crowding within correctional systems increases violence, threatens overall security within a facility, and hampers rehabilitation efforts,” American Corrections Association President Chris Epps said in a statement accompanying the resolution.
Change is clearly afoot. What is making that change? While clearly economics, budgets and the long, sad, experience of over-sentencing have contributed to the sense of disatisfaction with the decades-long status quo, activists such as Lauren Melodia, co-founder and co-organizer of the grassroots organization Milk Not Jails, have been ahead of the game. The U.S. spent $80 billion dollars on incarceration in 2010; the New York State prison system spent $3.5 billion. As Melodia points that’s just not sustainable:
“New York state’s prison system is too big...it’s bigger than the department of education, the department of agriculture, and the department of transportation,” Melodia told GRITtv in this special report, this summer. The system has also bitterly divided the population along race lines, swelling incarceration rates disproportionately among Black and Latino Americans without reducing, say, drug addiction.
Milk Not Jails was founded in 2010 and seeks to throw a wrench in the wheels of the prison economy. How? By investing in New York state’s agricultural industry. The prison system in New York employs over 30,000 people, mostly in rural towns. Those residents depend largely on prison jobs as a form of income. Through forming a strategic alliance with dairy farmers Milk Not Jails wants to end rural dependency on the prison economy.
“Our ideal vision for the Milk Not Jails social enterprise is that it be a producer and worker-owned business so that the farmers...and our sales, marketing and distribution for us in the city are all invested, all making decisions for it and figuring out what to do with the profits,” Melodia says.
Milk Not Jails employs the formerly incarcerated: some of the same people who may have been held in those upstate prisons mere months or years before. In a job market that is inhospitable to people who have been imprisoned, one hope of Milk Not Jails is to give those with a criminal record more economic agency. In a system that often fails, Milk Not Jails is building a new base for opportunity.
This piece was reprinted by Truthout with permission or license.
It sounds like what you are advocating here are worker co-ops as an alternative to our current system. Is that correct?
If so, I agree.
However, in order to get it to work and revolutionize society, government should provide the funding. The Fed currently invests $80 billion per month to keep capitalist firms afloat. They should invest the same amount in democratic firms.
The advocacy goal should be to get the govt to require the fed to invest whatever amount is necessary to launch enough new co-ops to fully employ everyone who wants to work in one.
And all these federally funded co-ops should all be part of a common cooperative so that companies have a greater chance of success. They will be immediately plugged into a system with built-in customers.
Also, in order to eliminate income inequality, your pay should be based on your job performance and the performance of the company you work at, but the amount you get paid should be based on the revenue of the entire network of co-ops not just based on the revenue your firm produced. Otherwise, the owners of the local deli co-op will still be poor and the owners of the viral software co-op would be super wealthy.
In other words, you have democratic say in the company you work at and responsibility for the success of that company, but you have equal ownership in the entire network of co-ops.
If, for example, we limited differences in income where the top worker can only make 4 times more than the bottom, we would be able to pay workers from $115k to $460k per year as I explain in this post.
Since this would likely increase the average worker's income by 400%, we should be able to get a significant amount of workers to support this idea, enough people to pressure congress to pass a bill that funds co-ops.
Is this sort of what you advocate?
Yes, I'm advocating worker co-ops in general as an alternative to the current system but the specific focus I'm proposing is a financial cooperative that can unite everyone whether they're in a worker cooperative or not. This would protect people from the abuses of the banks and insurance companies while pooling everyone's financial resources together to achieve whatever endeavors are deemed worthwhile. And although the biggest private financial institutions could continue to thrive from the patronage of the wealthy alone, they will nevertheless be reduced from the lack of everyone else's patronage.
The most that government has been willing to do is to start the National Cooperative Bank http://en.wikipedia.org/wiki/National_Cooperative_Bank http://ncb.coop/ thus a national institution independent of government support though open to its contribution is needed.
"This would protect people from the abuses of the banks and insurance companies"
What specific abuses are banks and insurance companies committing against their customers that you want to avoid?
Why is this more important than working to create an economy based on worker co-ops?
.
"The most that government has been willing to do is to start the National Cooperative Bank"
The govt does whatever the voters tell it to do.
If the public was informed that working at a co-op would increase their income 4-fold and they voted in candidates who will get the fed to fund co-ops as much as it funds capitalism, that's what govt would do.
Do you think creating a private bank is a better way to build a democratic economy than getting the govt to fund co-ops?
Predatory loans, opportunistic banking fees, high premiums for inadequate coverage, etc. Customer fairness in financial institutions will only be ensured by customer ownership of their financial institutions. Such an ownership is something that can be achieved immediately in contrast to the creation of worker-owner cooperatives that require a lot of planning and training that will nevertheless benefit from the backing of a national cooperative financial institution.
"If the public" is just that, "If". The public is already doing what it's going to do which is continue to vote for corporate serving Republicans and Democrats while wishing for something to be done in the public's interests. "If" the public wanted to, it could support the Municipal Economic Initiatives enumerated above. "If" the public wanted to, it could come together across party lines to engage in Trans-Partisan Cooperative Voting to get the legislation they agree upon. "If" the Union National Cooperative existed, the involved public would be easily informed of the benefits of worker-owner cooperatives and of any candidates in support of funding their creation. The bottom line is that the public is already doing what it's going to do until a viable alternative exists that doesn't require an activist involvement from them. The best way to build a democratic economy is to facilitate the means for people to provide their own funding rather than relying upon a government they don't control to do it for them. When the people choose to control the government, they can choose to have the government fund whatever endeavor they choose. Until then, only the people who choose to pursue such an endeavor can choose to facilitate the means by which others can join them in that pursuit.
Elizabeth Warren's Post Office Proposal
Friday, 14 March 2014 11:29 By Ellen Brown, Web of Debt | News Analysis
http://truth-out.org/news/item/22478-warrens-post-office-proposal-palast-aims-at-the-wrong-target
Investigative reporter Greg Palast is usually pretty good at peering behind the rhetoric and seeing what is really going on. But in tearing into Senator Elizabeth Warren's support of postal financial services, he has done a serious disservice to the underdogs – both the underbanked and the US Postal Service itself.
In his February 27 article "Liz Warren Goes Postal," Palast attacked her support of the USPS Inspector General's proposal to add "non-bank" financial services to the US Postal Service, calling it "cruel, stupid and frightening" and equating it with the unethical payday lending practices it seeks to eliminate.
After "several thousand tweets by enraged liberals," he wrote a follow-up article called "Brains Lost in Mail—Postal Bank Bunkum," in which he contends, "the Postal Governors are running a slick, slick campaign" to "use federal property to run illegal loan-sharking shops." He says they would "team up with commercial banks to cash in on payday predation," exempting themselves from Warren's own consumer protection regulations.
His first article concludes:
While the USPS wants to "partner" with big banks, why not, instead, allow community credit unions to use post offices as annexes to provide full, complete, non-usurious neighborhood banking services? This is the type of full-service "postal banking" successful in Switzerland and Japan that is envisioned by Ellen Brown, not the payday predation proposed by the USPS.
I obviously agree with him on the full-service postal banking alternative, but that is not something Congress appears ready to approve. Palast has not looked closely at the white paper from the Inspector General's office relied on by Senator Warren, or at the research on payday lending and the inability of credit unions to service that market. The IG's proposal, rather than fleecing the poor, would save them from being fleeced by offering basic financial services at much reduced rates. And that makes it a very good start.
The Straits and Strictures of the USPS
In analyzing the proposal, we need to consider the stressed circumstances and limitations of the Postal Service. It is fighting for its life, after the nefarious 2006 Postal Accountability and Enhancement Act (PAEA) rendered it insolvent. Apparently intended to force the privatization of the post office, the Act required the prefunding of postal retiree health benefits for 75 years into the future. That means funding workers not yet born, an onerous burden no other public or private company is required to carry.
Worse, as the white paper notes:
The 2006 Postal Accountability and Enhancement Act (PAEA) generally prohibits the Postal Service from offering new nonpostal services. However, given that the Postal Service is already providing money orders and other types of non-bank financial services, it could explore additional options within its existing authority.
Given the hostility among conservatives in Congress to postal expansion of any sort, full-service banking (involving deposits, checking and savings accounts, and home and business loans) is unlikely to be authorized any time soon. But the proposed prepaid Postal Cards would simply be an electronic 21st century extension of paper money orders, and short-term Postal Loans could be construed as advances on those cards. According to the white paper, the proposed Postal Card would cost users less than half what they pay for prepaid cards now, and Postal Loans would cost them less than one-tenth the cost of a payday loan, a substantial savings for the poor.
It sounds good, but where will the post office get the money for the loans if it cannot branch into taking deposits? And where will it get the capital to back the loans when it is insolvent? The white paper states:
Electronic payment products like Postal Cards might be a wise entry point, and would expand upon existing services like paper money orders. . . . The right partners could bring much needed startup cash to the table as part of the deal, overcoming the Postal Service's current funding limitations.
The white paper also suggests partnering with banks for the back-end network and expertise necessary to deal with a national or global card system. But the RIGHT partners are emphasized:
One important note of caution: the Postal Service should be very mindful to ensure that no partnership damages its reputation. The level of trust the Postal Service has earned from the public is an unmatched asset, and one that should not be jeopardized.
Billions More for the Poor
The white paper notes that more than a quarter of all US households do not have a bank account, or use costly services like payday loans and check-cashing exchanges just to make ends meet. People who filed for bankruptcy in 2012 were on average just $26 per month short of meeting their expenses, so even modest savings would make a major difference to them:
The average underserved household has an annual income of about $25,500 and spends about $2,412 of that just on alternative financial services fees and interest. That amounts to 9.5 percent of their income. To put that into perspective, that is about the same portion of income that the average American household spends on food in one year. In 2012 alone, the underserved paid some $89 billion in fees and interest.
Banks are closing branches all over the country, mostly in low-income areas; but post offices are still to be found everywhere. They could offer affordable financial services that would save the underserved billions of dollars in exorbitant fees and interest.
Postal Loans could be made for less than a tenth of the fees charged for a typical payday loan of the same size. The example is given of a $375 loan paid off in 5-1/2 months. A typical payday lender would charge annual interest of 391%, for a total of $520 in interest and fees. For a comparable Postal Loan, the borrower would pay a $25 upfront loan fee and 25% interest, making the total for interest and fees a mere $48 across the life of the loan. The white paper concludes:
If even one-tenth of the 12 million Americans who take out a payday loan each year got this hypothetical Postal Loan instead, they could collectively save more than half a billion dollars a year in fees and interest. And that is to say nothing of the benefits Postal Loans could bring to the 10 million unbanked U.S. households which cannot even get payday loans.
The proposed Postal Loan could save these marginal borrowers about $100 per month, potentially saving them from bankruptcy:
If this helped decrease personal bankruptcies by just 5%, it would not only help more than 50,000 people a year avoid the lasting stigma and financial effects of bankruptcy, it would also potentially keep some $10 billion a year in loans and other debts from being dragged through bankruptcy court, where much of it would be canceled at tremendous expense to creditors (most of whom are financial institutions). That would be good for American families, for banks, and for the entire country.
The Questionable Credit Union Alternative
Palast argues that his credit union can give the same loan for 10%, but this is doubtful. In a fall 2012 article titled "Are Payday Lending Markets Competitive?", Victor Stango shows that credit unions, despite their claims, are generally not able to offer competitive payday loans. Few credit unions even offer them, because both credit unions and borrowers themselves find the credit union version unattractive. Stango's survey found that borrowers actually preferred the higher-priced payday loans, because they had fewer restrictions.
Banks do not generally make small personal loans, even to creditworthy borrowers, because they are not cost-effective for the bank; and the underserved often cannot get credit cards because they have bad or nonexistent credit histories, making them a high credit risk. They therefore turn to payday loans, on which credit unions do offer lower rates; but they can offer them only by being more restrictive on approval and repayment terms and by adding fees. More restrictive terms mean credit union payday loans have lower default risk; but risk-adjusted prices on standard payday loans, says Stango, may actually be no higher than those on credit union payday loans.
The National Credit Union Administration now allows an APR of 28% on short-term small loans. Lenders can't really afford to do it for less, because there are so many defaults.
As for big banks licking their chops at getting in on the USPS' 25% short term loans, this hardly seems likely either. Big banks, including Wells Fargo, Bank of America and JPMorgan Chase, are already major funders of payday lenders—the ones in the 391% bracket. The USPS returns will seem paltry by comparison.
Profits to the People
Postal Loans and Postal Cards are only two of a suite of non-bank financial services proposed in the white paper that could result in substantial savings for the poor, while at the same time generating much-needed profits for the struggling Postal Service itself. Postal profits serve the public by keeping the Pony Express running and postage stamps affordable.
The Inspector General's white paper concludes, "As the Postal Service continues to look for new ways to serve the citizens of the 21st century, non-bank financial services may be the 'killer app' for diversifying its revenue base."
It may also be the killer app for keeping both the poor and the Postal Service itself out of bankruptcy.
This piece was reprinted by Truthout with permission or license.
[Removed]
Vermonters Want to Try a New Way of Banking
Wednesday, 12 March 2014 13:03 By Kevin Mathews, Care2 | Report
http://truth-out.org/news/item/22429-vermonters-want-to-try-a-new-way-of-banking
Vermont is currently considering massive changes in the way it conducts banking by instituting a public bank of its own.
The proposal would give Vermont Economic Development Authority a banking license and allocate it 10% of taxes collected by the state, rather than the current scenario where large banks outside of the state hold (and use) Vermont’s money. With Vermont in control of its own finances, the state could use the money to fund projects that benefit the state and local economies, including granting loans to Vermonters.
More than 20 Vermont towns met this month to weigh the merits of public banking and the response was extremely favorable. By a margin of about 2:1, Vermonters advocated for public banking.
Unfortunately, as usual with politics, it’s never that easy. Each town’s votes only serve as an endorsement to their elected officials for what they would like to see happen. If state politicians were indeed committed to representing their constituents interests, then the legislation would pass with flying colors. Instead, private interest is lobbying hard to block the idea, so their corporate money and clout could prove more influential to legislators.
In fact, that’s why supporters of public banking turned to the town meetings in the first place. The idea was to show that when Wall Street’s money and connected politicians were removed from the debate, most Vermonters do want public banking. At least now, politicians with ties to the banking industry cannot pretend not to know the will of the people.
Preliminary calculations conducted by Vermonters for a New Economy indicate that public banking would be a boon for the state. The group estimates that the program would create more than 2,500 jobs and generate about $350 million annually. Considering that Vermont is a state with only 600,000 citizens, that’s a 1.26% boost in overall growth.
Vermont citizens also liked the idea of severing ties with Wall Street banks. For example, many Vermonters are disappointed to learn that their money is held by banks that are currently lobbying for the Keystone Pipeline, a project understandably opposed by residents in one of the nation’s greenest states. Additionally, though the bank would turn big profits, that wouldn’t be the sole motivation. For that reason, the state bank would not make risky, economy-crashing investments like the big-name corporate banks.
“A public bank for Vermont would create jobs and allow Vermonters to take control over our financial destiny at a time when everyone agrees that Wall Street’s corporate commercial banking model is deeply flawed at best,” said Rob Williams, a Vermont resident who supports the proposal.
Those afraid of whether public banking will actually work need look no further than North Dakota. The Peace Garden State is a pioneer in public banking, first establishing the institution 99 years ago. The Bank of North Dakota exists to help the state fund large projects, as well as offer inexpensive loans to students, businesses and farmers. Between 2000-2009, the bank pushed $300 million in earnings back to the state’s treasury. The financial stability and cushion that public banking affords the state has been credited with making North Dakota one of the states to best weather the recession in the past five years.
This piece was reprinted by Truthout with permission or license.
A Call to Develop a Worker Cooperative Sector in New York City: How the City Can Create Jobs and Address Inequality at Its Roots
Sunday, 23 February 2014 00:00 By John W. Lawrence, Truthout | News Analysis
http://truth-out.org/news/item/22000-a-call-to-develop-a-worker-cooperative-sector-in-new-york-city-how-the-city-can-create-jobs-and-address-inequality-at-its-roots
Co-op business development pioneers in New York City recently shared their successes and discussed their needs in building infrastructure and planting the seeds of a democratic work movement.
On January 30, the Co-op business development pioneers in New York City recently shared their successes and discussed their needs in building infrastructure and planting the seeds of a democratic work movement. Federation of Protestant Welfare Agencies (FPWA), a 90-year-old nonprofit with the mission to "strengthen human service organizations and advocate for just public policies," hosted a standing-room-only conference titled "Worker Cooperatives: Jobs for New York City's Future." The conference brought together leaders of New York City's nascent worker cooperative movement to discuss how to grow the sector in NYC. The conference also celebrated the release of a report entitled "Worker Cooperatives for New York City: A Vision for Addressing Income Inequality, authored by FPWA's Senior Policy Analyst, Noah Franklin, which is a blueprint for developing a strong worker co-op sector in NYC.
Worker cooperatives are democratic, worker-owned, worker-managed businesses. Worker co-ops have the potential to address many of the immoral and inefficient shortcomings of capitalist workplaces. In worker cooperatives, democratic worker-owners own and manage their own enterprises so they are highly motivated to create successful businesses in which the work is fulfilling, sustainable and meets the economic needs of both the worker-owners and their community. Jobs in worker co-ops are usually higher paying, more stable and have better benefits than comparable jobs in traditional businesses. Worker co-ops tend to be both good stewards of the environment and vested in their community. Moreover, though challenging, workers like to be their own boss.
Steven Greenhouse, The New York Times labor and workplace reporter and author of The Big Squeeze: Tough Times for American Workers opened the conference with an overview of the current precarious predicament of the US working class. He stated, "There is a growing realization that something is seriously broken in the economy. Prosperity is not flowing to the nation's workers." Median household income in the United States has fallen 11 percent since 2000. Successful companies such Boeing and Caterpillar are not sharing their prosperity with workers. In fact, they are demanding concessions from workers under the threat of plant closings. The most common jobs in the United States are now service sector jobs at companies like Walmart and McDonalds. Service sector jobs tend to be poorly paid, part-time, and have no health or retirement benefits. In addition, a worker's schedule and the number of hours she works often changes from week to week. Thus, for many service workers, both their families' finances and schedules are unstable and unpredictable. In NYC, the gap between rich and poor is tremendous. According to recent Census data, the mean annual income of the bottom fifth of households is $8,993 and the highest fifth make on average $222,871 a year.
Conference participants described concrete examples of worker cooperatives creating stable, relatively high-paying jobs with benefits in which workers control the implementation of work.
Conference participants described concrete examples of worker cooperatives creating stable, relatively high-paying jobs with benefits in which workers control the implementation of work. Greenhouse described Cooperative Home Care Associates (CHCA), the largest worker cooperative in the United States, located in the South Bronx. CHCA has over 2,000 home health-care workers, two-thirds of whom are worker-owners. CHCA home health workers have salaries 20 percent higher than the industry average, retirement benefits and health insurance. Moreover, the standard in the industry is to require workers to pay for their own training. CHCA, on the other hand, provides a four-week training course for free and guarantees certification and employment upon completion of the course.
Yadira Fragoso, of the Si Se Puede! (Yes We Can!) Women's Cooperative, described how being a worker-owner of a worker cooperative transformed her life. Si Se Puede! is a "women-run, women-owned, eco-friendly housecleaning business" in Sunset Park, Brooklyn. Yadira stated that she had spent her working career going from one low-wage job with no benefits to the next, with no opportunity to advance. Since joining with her coworkers to create the Si Se Puede! business, Yadira's hourly salary has gone from $10 to $25. She said that this has helped create an economic foundation for her family. Moreover, she described how being a worker-owner and entrepreneur has taught her new business and cooperative skills. She also noted the importance of the Si Se Puede! community in her life. The co-op is now in the process of developing environmentally friendly cleaning products.
The heart of the conference was a discussion about how to grow the worker cooperative sector in NYC. At present there are 22 worker cooperatives across NYC. Greenhouse mused, "If worker cooperatives are so great, why aren't there more of them?" Panelists discussed four necessary components for growing the worker cooperative economy: increasing technical and legal expertise available to start-up co-ops; better access to capital to start and grow businesses; a legal framework that encourages co-op development; and the development of a culture of support for democratic workplaces.
There are currently three worker co-op incubators in the NYC area: the Center for Family Life; Green Worker Cooperatives; and The Working World. These organizations provide training and technical support to help workers organize and start new worker co-ops. Vanessa Bransburg of the Center for Family Life stated that the center has helped organize four worker co-ops, including Si Se Puede! in Sunset Park, Brooklyn, which have earned over $5,000,000. The Center for Family Life, a neighborhood-based family and social services organization, started co-op development with the goal of partnering with the immigrant workers they serve to create stable quality jobs. Green Worker Cooperatives, located in the Bronx, not only provides technical support for worker co-ops but also runs a Co-op Academy," a 16-week training and support program for teams of entrepreneurs seeking to establish worker-owned green businesses."
Brandan Martin, founder of the The Working World, describes the organization as a "solidarity financial organization." The Working World has a revolving loan fund from which they provide start-up capital for new and expanding worker cooperatives. In addition, they provide technical support for the co-ops they work with. The Working World is currently assisting Si Se Puede! in their new product development. Perhaps, most famously, The Working World helped workers from the former Republic Windows and Doors, who captivated the nation in 2008 when they occupied their factory and converted their workplace into a new worker co-op, New Era Windows Cooperative.
Omar Freilla, founder of Green Worker Cooperative, stated that there is a need for more professional co-op developers to mentor new worker-owners on how to start and run their businesses. One possibility to meet this need is for co-op developers to start their own businesses to cater to worker co-ops. However, the co-op sector is currently not big enough to sustain cooperative business developers in their own businesses. Consequently, financial support from the nonprofit and government sectors is needed to expand the availability of worker co-op technical and legal support.
Two nonprofit organizations provide legal support for worker co-ops in NYC, the Urban Justice Center and the Community & Economic Development Clinic at CUNY School of Law. These institutions work with legal partners in the community to provide pro-bono (free) legal services for start-up co-ops. Developing sustainable, full-time co-op incubators is a priority for building a worker co-op sector.
Co-ops need access to capital to start and maintain business. Banks and other financial institutions such as insurance companies are reluctant to do business with worker co-ops. Linda Levy, CEO of the Lower East Side People's Federal Credit Union (LESPFCU) explained that credit unions are financial co-operatives and have a natural inclination to lend to worker co-ops. However, current regulations make lending to work co-ops difficult. She stated the regulator of the LESPFCU is reluctant to approve loans to worker co-ops because in worker co-ops there is not one specific person who is responsible for the loan. The Workers World has created a unique revolving credit line for worker co-ops; however, they are limited in their ability to pay interest to depositors. The co-op sector needs banking institutions, such as credit unions, with the mission of lending to worker co-ops.
At the conference, the excitement about the potential of a cooperative sector was palpable. In a previous interview with "Grassroots Economic Organizing" Newsletter, The Working World's Brendan Martin and Ethan Earle stated that what is needed is the development of "a culture of belief" in worker cooperatives. The co-op development pioneers at the conference are building the institutional infrastructure and planting the seeds of a democratic work movement. As co-op successes multiply, more people will want to replicate those successes in their own new worker-owned businesses. The co-op developers' shared dream is that at some point the process of co-op development can become dynamic and self-expanding. This is not a pipe dream. There are examples of vibrant worker co-op sectors in Basque Regions of Spain (Mondragon Corporation), Bologna, Italy (Legacoop) and Quebec, Canada (Canadian Work Co-op Federation).
How do we get to this take-off point? In the FPWA Report on Worker Co-ops, Noah Franklin discusses the importance of the continued development of worker cooperative and solidary economy associations such as NYC Network of Worker Cooperatives and Solidarity NYC. However, these grassroots organizations are volunteer-lead and do not have the financial resources to jump-start co-op development.
Franklin calls on the governments of New York city and state to play a proactive role in worker co-op finance and development. Franklin made specific recommendations:
• First, he points out that agencies such as the New York City Economic Development Corporation and the Department of Small Business Services already aid traditional businesses. He argues that the mission of these agencies should include growing the worker co-op sector.
• Second, New York city and state governments could directly fund co-op incubators. Franklin points out that much of the success of the worker co-op sector in Quebec is attributable to government funding of co-op technical support.
• Third, the government could provide grants and low-interest financing for worker co-ops.
• Fourth, New York City already provides funds for workforce development. In this context, some workforce development programs could be turned into co-op incubators, helping the unemployed form worker co-ops.
• Fifth, Franklin notes, "The city could make worker co-ops into a preferred contractor of city agencies." Thus, city contracts could provide a base of demand with which a co-op could grow a business. This is a common model in the corporate world. For example, steady military contracts enabled the civilian airplane business to get off the ground.
• Sixth, the state and city can also change laws to facilitate the growth of a cooperative financial industry, which can cater to worker co-ops.
• Seventh, government should also fund training for the legal and business community to work with worker co-ops.
• Finally, government can promote the worker co-op model through promotional activities such as Worker Co-op Week.
We are living in a time of grotesque inequality and environment degradation. However, real examples of a "better world" exist. One of those, democratic worker co-ops, is an important puzzle piece in creating a more just and sustainable society. The worker co-op pioneers at the FPWA conference have laid out a next-step to-do list for growing workplace democracy in NYC and the United States. Now, we need to organize to realize these goals.
Copyright, Truthout.
Enough Is Enough: Fraud-Ridden Banks Are Not LA's Only Option
Thursday, 30 January 2014 09:32 By Ellen Brown, Web of Debt Blog | Op-Ed
http://truth-out.org/opinion/item/21544-enough-is-enough-fraud-ridden-banks-are-not-las-only-option
“Epic in scale, unprecedented in world history.” That is how William K. Black, professor of law and economics and former bank fraud investigator, describes the frauds in which JPMorgan Chase (JPM) has now been implicated. They involve more than a dozen felonies, including bid-rigging on municipal bond debt; colluding to rig interest rates on hundreds of trillions of dollars in mortgages, derivatives and other contracts; exposing investors to excessive risk; failing to disclose known risks, including those in the Bernie Madoff scandal; and engaging in multiple forms of mortgage fraud.
So why, asks Chicago Alderwoman Leslie Hairston, are we still doing business with them? She plans to introduce a city council ordinance deleting JPM from the city’s list of designated municipal depositories. As quoted in the January 14 Chicago Sun-Times:
The bank has violated the city code by making admissions of dishonesty and deceit in the way they dealt with their investors in the mortgage securities and Bernie Madoff Ponzi scandals. . . . We use this code against city contractors and all the small companies, why wouldn’t we use this against one of the largest banks in the world?
A similar move has been recommended for the City of Los Angeles by L.A. City Councilman Gil Cedillo. But in a January 19 editorial titled “There’s No Profit in L A. Bashing JPMorgan Chase,” the L.A. Times editorial board warned against pulling the city’s money out of JPM and other mega-banks – even though the city attorney is suing them for allegedly causing an epidemic of foreclosures in minority neighborhoods.
“L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.
It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?
The Tiny State That Broke Free
There is a place where they don’t bow. Where they don’t park their assets on Wall Street and play the mega-bank game, and haven’t for almost 100 years. Where they escaped the 2008 banking crisis and have no government debt, the lowest foreclosure rate in the country, the lowest default rate on credit card debt, and the lowest unemployment rate. They also have the only publicly-owned bank.
The place is North Dakota, and their state-owned Bank of North Dakota (BND) is a model for Los Angeles and other cities, counties, and states.
Like the BND, a public bank of the City of Los Angeles would not be a commercial bank and would not compete with commercial banks. In fact, it would partner with them – using its tax revenue deposits to create credit for lending programs through the magical everyday banking practice of leveraging capital.
The BND is a major money-maker for North Dakota, returning about $30 million annually in dividends to the treasury – not bad for a state with a population that is less than one-fifth that of the City of Los Angeles. Every year since the 2008 banking crisis, the BND has reported a return on investment of 17-26%.
Like the BND, a Bank of the City of Los Angeles would provide credit for city projects – to build bridges, restore lakes, and pay bills – and this credit would essentially be interest-free, since the city would own the bank and get the interest back. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.
Awesome Possibilities
Consider what that could mean for Los Angeles. According to the current fiscal budget, the LAX Modernization project is budgeted at $4.11 billion. That’s the sticker price. But what will it cost when you add interest on revenue bonds and other funding sources? The San Francisco-Oakland Bay Bridge earthquake retrofit boondoggle was slated to cost about $6 billion. Interest and bank fees added another $6 billion. Funding through a public bank could have saved taxpayers $6 billion, or 50%.
If Los Angeles owned its own bank, it could also avoid costly “rainy day funds,” which are held by various agencies as surplus taxes. If the city had a low-cost credit line with its own bank, these funds could be released into the general fund, generating massive amounts of new revenue for the city.
The potential for the City and County of Los Angeles can be seen by examining their respective Comprehensive Annual Financial Reports (CAFRs). According to the latest CAFRs (2012), the City of Los Angeles has “cash, pooled and other investments” of $11 billion beyond what is in its pension fund (page 85), and the County of Los Angeles has $22 billion (page 66). To put these sums in perspective, the austerity crisis declared by the State of California in 2012 was the result of a declared state budget deficit of only $16 billion.
The L.A. CAFR funds are currently drawing only minimal interest. With some modest changes in regulations, they could be returned to the general fund for use in the city’s budget, or deposited or invested in the city’s own bank, to be leveraged into credit for local purposes.
Minimizing Risk
Beyond being a money-maker, a city-owned bank can minimize the risks of interest rate manipulation, excessive fees, and dishonest dealings.
Another risk that must now be added to the list is that of confiscation in the event of a “bail in.” Public funds are secured with collateral, but they take a back seat in bankruptcy to the “super priority” of Wall Street’s own derivative claims. A major derivatives fiasco of the sort seen in 2008 could wipe out even a mega-bank’s available collateral, leaving the city with empty coffers.
The city itself could be propelled into bankruptcy by speculative derivatives dealings with Wall Street banks. The dire results can be seen in Detroit, where the emergency manager, operating on behalf of the city’s creditors, put it into bankruptcy to force payment on its debts. First in line were UBS and Bank of America, claiming speculative winnings on their interest-rate swaps, which the emergency manager paid immediately before filing for bankruptcy. Critics say the swaps were improperly entered into and were what propelled the city into bankruptcy. Their propriety is now being investigated by the bankruptcy judge.
Not Too Big to Abandon
Mega-banks might be too big to fail. According to U.S. Attorney General Eric Holder, they might even be too big to prosecute. But they are not too big to abandon as depositories for government funds.
There may indeed be no profit in bashing JPMorgan Chase, but there would be profit in pulling deposits out and putting them in Los Angeles’ own public bank. Other major cities currently exploring that possibility include San Francisco and Philadelphia.
If North Dakota can bypass Wall Street with its own bank and declare its financial independence, so can the City of Los Angeles. And so can the County. And so can the State of California.
This piece was reprinted by Truthout with permission or license.
bank fraud destroys money's credibility
Economic Prosperity and Economic Democracy: The Worker Co-Op Solution
Sunday, 12 January 2014 00:00 By Richard D Wolff, Truthout | Op-Ed
http://truth-out.org/opinion/item/20991-worker-coops-and-left-strategy
Workers' self-directed enterprises (WSDEs) are a response to capitalism's failure to deliver economic prosperity and socialisms' failure to deliver economic democracy.
Among factors impeding formation of an organized, politically effective new left in the United States are deep frustrations among activists interested in doing that. The decline since the 1970s (and since 2008 especially) of capitalism's ability to "deliver the goods" to most citizens has opened many minds to question, criticize and challenge the capitalist system. The remarkable Pew Research Center poll of December 2011 showed large percentages of Americans favorably disposed toward socialism. Many more would agree today. Yet left activists are increasingly frustrated by their lack of a viable systemic alternative that could attract those disaffected from capitalism.
Leftists are further frustrated because the traditional socialist alternatives fail to inspire the public or even mobilize leftists themselves. The implosions of Soviet and eastern European socialisms, coupled with major shifts in China and beyond, have fueled that frustration. So too, in different ways, did western European socialist parties' embraces of neoliberalism since the 1970s and austerity policies since 2007-2008. The Greek socialist party's collapse and likewise serious declines in electoral support for the German and other socialist parties reflect frustrations with the traditional socialisms they advocate.
Traditional socialist programs of major government economic intervention (via varying mixtures of regulation of enterprises and markets, state ownership and operation of enterprises, central planning, etc.) no longer rally much support. When sometimes they seem to (e.g., France's last presidential and legislative elections), traditional socialism proves thinly rhetorical and symbolic. Because French socialists failed to define or pursue a genuine alternative to a deeply unpopular capitalism, their support melted quickly.
Audiences offered traditional socialist visions have increasingly responded with skeptical indifference translatable as "been there, done that." Many have formed the judgment that traditional socialisms, where achieved, exhibited too many shortcomings, were unsustainable, or both. Provoked by the capitalist crisis since 2008, rapidly rising public interest in alternatives to capitalism has confronted falling confidence in traditional socialism.
The frustration of the left, given this exhaustion of traditional socialisms' appeal, arose from having no other broadly agreed-upon vision of an attractive alternative to capitalism. The left could not provide what mass audiences craved as they deepened their criticisms of capitalism's longer-term decline and short-term crisis.
Enter the notion of workers' cooperatives or, better, the awkward but more specific term: workers self-directed enterprises (WSDEs). This centuries-old idea has been revived, redesigned and applied to go well beyond traditional socialism. The result is a new vision of an alternative to capitalism that could help to mobilize a new left.
WSDEs replace hierarchical, top-down capitalist enterprises run by major shareholders and the boards of directors they select with a democratic enterprise directed by all its workers. The latter, collectively and democratically, make all the key decisions of what, how and where to produce. Most importantly, they decide how to use the enterprise's net revenue.
Governments' dependence (at municipal, regional and national levels) on enterprise tax payments thereby becomes dependence on the people as workers. No longer will a separate interest - capitalists within enterprises - use taxes or any other distributions of net revenues to shape government policies against workers or citizens. Enterprise decisions on what, how and where to produce will likewise no longer be capitalists' decisions, but instead will reflect enterprise workers' democratic choices.
The importance of such micro-level transformations of enterprises into WSDEs cannot be overstated. Because it had located key economic powers in state hands (regulating or owning enterprises and imposing planning above or in place of market exchanges), traditional socialism usually accumulated too much power in the state alone or in the state together with the major capitalist businesses it "regulated." Far too little real, institutionalized countervailing power resided with the workers inside enterprises. As a result, accountability and transparency were absent from economic life, as was economic democracy. That in turn undermined real political democracy.
WSDEs could solve that problem. In economies where WSDEs prevail, key financial resources of the state - its taxes on and/or borrowings from enterprises - represent distributions of those enterprises' net revenues made by their workers. Likewise, the use of any enterprise's net revenues to fund political parties, politicians, lobbying efforts and think tanks would reflect its workers' democratic decisions. A key structural feature of capitalism - capital's dictatorship inside enterprises - always generated the incentives and provided the resources for capitalists to bend government to the service of capital against labor. In contrast, a WSDE-based economy would abolish that dictatorship and thus its political effects.
By establishing democracy inside the enterprise, WSDEs make government responsible and accountable to the people as workers. Political democracy remains merely formal when governments' direct dependence on people as voting citizens is not matched by governments' direct dependence on people - in large part the same people - as workers. Real political democracy requires its integrated partnership with economic democracy as envisioned in economies where WSDEs prevail. Traditional socialisms' over-emphases on macro-level differences from capitalism (substituting state-regulated or state-owned for private property and state planning for market exchanges) would be radically corrected by the micro-level transformation of enterprise organization from capitalist to WSDE.
Of course, democratized enterprises would need to share powers with democratic, residence-based political structures at all government levels (municipal, regional, and national). The political consequences of enterprise decisions, like the enterprise consequences of political decisions, would require that decision-making at both social sites (enterprise and residential community) be co-respective and interdependent. Enterprise-based democracy would co-determine with residence-based democracy the full spectrum of social decisions, including any state apparatus's functions and policies.
Transforming capitalist enterprises into WSDEs in this context would radically change workplaces, residential communities, and hence, the daily life of virtually everyone. It could realize the systemic change that traditional socialisms pointed toward but never achieved: a viable and attractive alternative preferable to capitalism. It offers leftists a means to overcome their frustrations and a focus around which to regroup, existing, as well as building, new left movements and organizations.
Copyright, Truthout.
Why Can't We Access the Fed's Free Money?
Monday, 09 December 2013 13:23 By Ellen Brown, Web of Debt | Op-Ed
http://truth-out.org/opinion/item/20527-amend-the-fed-we-need-a-central-bank-that-serves-main-street
December 23rd marks the 100th anniversary of the Federal Reserve. Dissatisfaction with its track record has prompted calls to audit the Fed and end the Fed. At the least, Congress needs to amend the Fed, modifying the Federal Reserve Act to give the central bank the tools necessary to carry out its mandates.
The Federal Reserve is the only central bank with a dual mandate. It is charged not only with maintaining low, stable inflation but with promoting maximum sustainable employment. Yet unemployment remains stubbornly high, despite four years of radical tinkering with interest rates and quantitative easing (creating money on the Fed’s books). After pushing interest rates as low as they can go, the Fed has admitted that it has run out of tools.
At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman.
Negative interest would mean that banks would charge the depositor for holding his deposits rather than paying interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This would make it impossible to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.” He concluded:
. . . Summers’ speech is a reminder to all liberals that he is a brilliant economist who grasps the long-term issues of monetary policy and would likely have made an exemplary Fed chair.
Maybe; but to ordinary mortals living in the less rarefied atmosphere of the real world, the proposal to impose negative interest rates looks either inane or like the next giant step toward the totalitarian New World Order. Business Week quotes Douglas Holtz-Eakin, a former director of the Congressional Budget Office: “We’ve had four years of extraordinarily loose monetary policy without satisfactory results, and the only thing they come up with is we need more?”
Paul Craig Roberts, former Assistant Secretary of the Treasury, calls the idea “harebrained.” He is equally skeptical of quantitative easing, the Fed’s other tool for stimulating the economy. Roberts points to Andrew Huszar’s explosive November 11th Wall Street Journal article titled “Confessions of a Quantitative Easer,” in which Huszar says that QE was always intended to serve Wall Street, not Main Street. Huszar’s assignment at the Fed was to manage the purchase of $1.25 trillion in mortgages with dollars created on a computer screen. He says he resigned when he realized that the real purpose of the policy was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.”
A Helicopter Drop That Missed Its Target
All this is far from the helicopter drop proposed by Ben Bernanke in 2002 as a quick fix for deflation. He told the Japanese, “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.
But there has been no cloudburst of money raining down on the people. The money has gotten only into the reserve accounts of banks. John Lounsbury, writing in Econintersect, observes that Friedman’s idea of a helicopter drop involved debt-free money printed by the government and landing in people’s bank accounts. “He foresaw the money entering the economy through bank deposits, not through bank reserves which was the pathway available to Bernanke. . . . [W]hen Ben Bernanke fired up his helicopter engines he took the only path available to him.”
Bernanke created debt-free money and bought government debt with it, returning the interest to the Treasury. The result was interest-free credit, a good deal for the government. But the problem, says Lounsbury, is that:
The helicopters dropped all the money into a hole in the ground (excess reserve accounts) and very little made its way into the economy. It was essentially a rearrangement of the balance sheets of the creditor nation with little impact on the debtor nation.
. . . The fatal flaw of QE is that it delivers money to the accounts of the creditors and does nothing for the accounts of the debtors. Bad debts remain unserviced and the debt crisis continues.
Thinking Outside the Box
Bernanke delivered the money to the creditors because that was all the Federal Reserve Act allowed. If the Fed is to fulfill its mandate, it clearly needs more tools; and that means amending the Act. Harvard professor Ken Rogoff, who spoke at the November 2013 IMF conference before Larry Summers, suggested several possibilities; and one was to broaden access to the central bank, allowing anyone to have an ATM at the Fed.
Rajiv Sethi, Barnard/Columbia Professor of Economics, expanded on this idea in a blog titled “The Payments System and Monetary Transmission.” He suggested making the Federal Reserve the repository for all deposit banking. This would make deposit insurance unnecessary; it would eliminate the need to impose higher capital requirements; and it would allow the Fed to implement monetary policy by targeting debtor rather than creditor balance sheets. Instead of returning its profits to the Treasury, the Fed could do a helicopter drop directly into consumer bank accounts, stimulating demand in the consumer economy.
John Lounsbury expanded further on these ideas. He wrote in Econintersect that they would open a pathway for investment banking and depository banking to be separated from each other, analogous to that under Glass-Steagall. Banks would no longer be too big to fail, since they could fail without destroying the general payment system of the economy. Lounsbury said the central bank could operate as a true public bank and repository for all federal banking transactions, and it could operate in the mode of a postal savings system for the general populace.
Earlier Central Bank Ventures into Commercial Lending
That sounds like a radical departure today, but the Fed has ventured into commercial banking before. In 1934, Section 13(b) was added to the Federal Reserve Act, authorizing the Fed to “make credit available for the purpose of supplying working capital to established industrial and commercial businesses.” This long-forgotten section was implemented and remained in effect for 24 years. In a 2002 article on the Minneapolis Fed’s website called “Lender of More Than Last Resort,” David Fettig noted that 13(b) allowed Federal Reserve banks to make loans directly to any established businesses in their districts, and to share in loans with private lending institutions if the latter assumed 20 percent of the risk. No limitation was placed on the amount of a single loan.
Fettig wrote that “the Fed was still less than 20 years old and many likely remembered the arguments put forth during the System’s founding, when some advocated that the discount window should be open to all comers, not just member banks.” In Australia and other countries, the central bank was then assuming commercial as well as central bank functions.
Section 13(b) was eventually repealed, but the Federal Reserve Act retained enough vestiges of it in 2008 to allow the Fed to intervene to save a variety of non-bank entities from bankruptcy. The problem was that the tool was applied selectively. The recipients were major corporate players, not local businesses or local governments. Fettig wrote:
Section 13(b) may be a memory, . . . but Section 13 paragraph 3 . . . is alive and well in the Federal Reserve Act. . . . [T]his amendment allows, “in unusual and exigent circumstances,” a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions.
In 2008, the Fed bailed out investment company Bear Stearns and insurer AIG, neither of which was a bank. Bear Stearns got almost $1 trillion in short-term loans, with interest rates as low as 0.5%. The Fed also made loans to other corporations, including GE, McDonald’s, and Verizon.
In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill:
Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”
What programs have “broad-based eligibility” is not clear from a reading of the Section, but it isn’t individuals or local businesses. It also isn’t state and local governments.
No Others Need Apply
In 2009, President Obama proposed that the Fed extend its largess to the cash-strapped cities and states battered by the banking crisis. “Small businesses and state and local governments are having serious difficulty obtaining necessary financing from debt markets,” Obama said. He proposed that the Fed buy municipal bonds to cut their rising borrowing costs.
The proposed municipal bond facility would have been based on the Fed program to buy commercial paper, which had almost single-handedly propped up the market for short-term corporate borrowing. Investors welcomed the muni bond proposal as a first step toward supporting the market.
But Bernanke rejected the proposal. Why? It could hardly be argued that the Fed didn’t have the money. The collective budget deficit of the states for 2011 was projected at $140 billion, a drop in the bucket compared to the sums the Fed had managed to come up with to bail out the banks. According to data released in 2011, the central bank had provided roughly $3.3 trillion in liquidity and $9 trillion in short-term loans and other financial arrangements to banks, multinational corporations, and foreign financial institutions following the credit crisis of 2008. Later revelations pushed the sum up to $16 trillion or more.
Bernanke’s reasoning in saying no to the muni bond facility was that he lacked the statutory tools.. The Fed is limited by statute to buying municipal government debt with maturities of six months or less that is directly backed by tax or other assured revenue, a form of debt that makes up less than 2% of the overall muni market.
The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. It is their own private club, and its legal structure keeps all non-members out. A century after the Fed’s creation, a sober look at its history leads to the conclusion that it is a privately controlled institution whose corporate owners use it to direct our entire economy for their own ends, without democratic influence or accountability. Substantial changes are needed to transform the Fed, and these will only come with massive public pressure.
Congress has the power to amend the Fed – just as it did in 1934, 1958 and 2010. For the central bank to satisfy its mandate to promote full employment and to become an institution that serves all the people, not just the 1%, the Fed needs fundamental reform.
This piece was reprinted by Truthout with permission or license.
Welcome to Commonomics: How to Build Local Economies Strong Enough for Everyone
Thursday, 10 October 2013 00:00 By Laura Flanders, Yes! Magazine | Report
http://truth-out.org/news/item/19313-welcome-to-commonomics-how-to-build-local-economies-strong-enough-for-everyone
Chokwe Lumumba was an unlikely candidate for high office in Mississippi. But last June, the former Black Nationalist and one-time attorney to Tupac Shakur was elected Mayor of Jackson. He’s now in hot pursuit, not of big box stores or the next silver bullet solution to what ails the state’s capital city. He wants to create worker-owned cooperatives and small-scale green businesses and to invest in training and infrastructure. It’s the program of change he ran on in the election: local self-reliance. Jackson’s population is 80 percent black, 18 percent white, and the rest largely immigrant, with heavy concentrations of Indians, Nigerians, and Brazilians.
“Without question, the ideas of economic democracy that we want to propose come from the Southern context,” says Kali Akuno, a member of the Malcolm X Grassroots Movement and a coordinator of special projects for the Lumumba administration.
That Lumumba won the election came as a surprise to some, but not to Akuno: “There exists an audience in the black community that is way more willing than others to experiment with distribution.” Self-reliance “is in our history. It’s had to be,” he continues. “People know about Fannie Lou Hamer organizing black voters to fight segregation, but do they know she also helped to start cooperatives with retail distribution across Mississippi that are still around today?” Far from Mississippi, on the Pine Ridge Reservation, indigenous entrepreneur Mark Tilsen has just begun the process of turning ownership of his local food products company over to his workers. Tilsen founded Native American Natural Foods with his partner Karlene Hunter in 2006. Five years later, they won a Social Innovation Award from the Social Venture Network. Today, they’re innovating again: joining a cohort of Native American leaders in a program to strengthen the local economy by democratizing wealth and ownership. The program has been developed by the Democracy Collaborative and the Northwest Area Foundation.
Tilsen and I talked via cellphone in August, as a hailstorm pelted down on the reservation. For many years, Pine Ridge has ranked as this nation's poorest place according to the U.S. Census. Eighty percent of the residents are unemployed; 49 percent live below the poverty line. In 2007, life expectancy was estimated at 48 for men and 52 for women. “Why co-ops?” I asked.
“The goal of our company is wealth creation and self-determination on the Pine Ridge Reservation, so we want our employees to own the wealth they’re creating. We didn’t make this company to sell or flip it,” answered Tilsen. “In tribal communities, traditional methods of production were based on ‘tiospaye’—the Oglala word for extended family structures,” Tilsen explained. “That’s how we survived and how we took care of one another, organizing points of production in a cooperative way. It’s nothing foreign.”
Tilsen hopes to have Native American Natural Foods in employee hands by June, 2014.
Commonomics
Welcome to “Commonomics,” a new collaboration between YES! Magazine and GRITtv. Starting this month, we’ll be traveling the country asking the question: what makes for a strong local economy? It's not a question that produces easy answers. Farmer-philosopher Wendell Berry defines economy this way: “I mean not economics but economy, the making of the human household upon the earth; the arts of adapting kindly the many, many human households to the earth’s many eco-systems and human neighborhoods.”
By now, we know the signs of a "household" that’s been hollowed out. We’ve seen the food deserts and the chronically vacant homes, the ghostly downtown storefronts and the municipalities in hock to the last sweet-talking corporation to suck up public subsidies and then run away. We’re familiar with the tension in a city where the only thing the rich and poor districts have in common is a subway line. We know what it’s like to be close, everywhere, to the same chain coffee shop and two hours away from the “local” hospital. We’ve seen the sprawl that ate the woodlands and the floodwaters that steadily rose.
In Commonomics we’re going to look at communities that have had enough of all that; places where, by choice or by crisis, people are trying to figure out how to transform what they’ve known into something better for all.
There’s no consensus on the meaning of “local,” let alone agreement on what makes an economy “strong.” Ask 25 people with expertise in the topic, and you'll hear 25 different answers. (I know because that's what I did.) But there is history here, and a breadth of experience we can draw on if we pay attention, especially to those for whom “self-reliance” is not a lifestyle choice.
Wealthy communities, let’s face it, aren’t famous for their embrace of togetherness and sharing. The wealthiest “local” economies are surrounded by locking gates. In Commonomics, we’re going to talk with some of the people and groups who, when it comes to sustainability and localism, have often been excluded from the policymaking and the debate, and yet who may have the most rooted and innovative ideas for building strength.
I’m reminded of the words of J. Bob Alotta, executive director of the Astraea Lesbian Foundation for Justice, referring to the disproportionately low-income LGBT groups she funds: “To be unsafe inside your own skin can be isolating but it is also a value proposition…It begets the possibility of building community in ways that may seem old fashioned.”
Nevertheless, even the best community builders need structural support. Policymakers and economic developers typically fall into two camps: “hunters” and “gatherers.” The former look to tempt big businesses from elsewhere to move to where they are by showering them with tax breaks and benefits that simultaneously siphon money out of a local area. Commonomics will focus on the gatherers, those who are working to foster economic growth from within. We’ll be asking what’s working, what isn’t, and by what standard are our local economies to be judged? Environmental health, unemployment, social mobility; there are many relevant metrics. We’ll prioritize poverty reduction and quality of life.
Beyond GDP: Measuring What Matters
Aggregate counts of economic activity like gross domestic product, or GDP, give all activity equal value. The cultivating of an urban farm, which may involve little paid work and consume few bought materials, is less “productive,” in GDP terms, than paving that farm over.
“When grain prices go up, that’s good for GDP but terrible for hunger," says Joshua Farley, a professor in community development and applied economics at the University of Vermont. "GDP is an excellent measure of cost; a terrible measure of benefit.”
To even start a new conversation, we need new measurements. As the Business Alliance for Local Living Economies (BALLE) puts it, it’s time to start “measuring what matters.”
Farley’s been involved in studies of Burlington, Vt., using a Genuine Progress Indicator, a version of the Index of Sustainable Economic Welfare that looks at a community's overall well-being. There are many variations of these alternative indicators. Though most still equate value with consumption and growth, some include factors that GDP leaves out—like the value of unpaid household and volunteer work—and factor in the cost of pollution, depletion of resources, and the consequences of uneven distribution of wealth.
We don’t yet measure the real costs of these problems in the United States, because, for example, we tend to underprice energy, transportation, and education, and pay no tax on environmental pollution.
According to Robert Reich, former U.S. Labor Secretary and a professor at the University of California, Berkeley, “A true tally of all that might reveal the value of being more local."
What is a local economy, anyway?
"Local" has become a buzzword. There’s “Eco-localism,” local food and local farming, local media movements, and regional, state, and even national ad campaigns urging us to “eat local," "buy local," and "put local first." Local's gone global, but what exactly does it mean?
I bought the desk I’m writing on on eBay. I’ve saved a pretty antique from the dump and spared the environment the cost of a bit of fresh manufacturing. I’ve helped some eBay merchant’s “local” economy. But compared to the closest furniture factory, is that nice eBay seller in Oklahoma contributing more or less in terms of jobs and taxes? The mind boggles.
Stacy Mitchell, director of independent business and community banking initiatives at the Institute for Local Self-Reliance, says “local” varies (CLICK TO ENLARGE) by sector of the economy. http://www.truth-out.org/images/images_2013_10/2013_1010-2-chart1.jpg
Retail and banking businesses can be considered local if the owners are within a certain geographic area. But every village is not going to start making its own jet aircraft. “Talking manufacturing, you may need to be talking regional or statewide,” says Mitchell.
Geography matters less than goals, she continues: “The goal is having community-led, community-controlled economies where the decision-making is by those who are feeling the effects of the decisions that are made. [We need] humanly scaled systems both in economics and politics.”
At the American Sustainable Business Council, David Levine talks about the “triple bottom line” of social, environmental, and economic impacts.
“Within that frame, local by itself is not enough,” he says. Levine does not want people buying “local first” from a locally owned sweatshop or toxic chemical plant. To avoid that, what’s important to business owners and consumers alike, he says, is that there be “transparency around values.”
“The so-called local economy is really best understood as a regional transaction,” says Anthony Flaccavento, a family farmer, community leader, and small-business owner from Abingdon, Va. “You need to think regionally. What does your region support ecologically and where are the markets? The hyper-local focus, within five or 100 miles is foolish. Most goods travel 2,000 miles. If you can build something [to substitute] within 500 miles you’ve made a major impact.”
To Flaccavento, who built a nationally recognized nonprofit, Appalachian Sustainable Development, a critical indicator of a strong local economy is what he calls “synergy”—how much one positive action ignites another. A few large employers help anchor a community’s economy, for sure, but when a community is depending on one or two entities to keep a place ticking over, it’s vulnerable to devastation should that single employer move out. That company may get a better deal somewhere else in tax breaks or community services.
(CLICK TO ENLARGE) Buying local is not enough—we have to change the rules http://www.truth-out.org/images/images_2013_10/2013_1010-2-chart2.jpg
To make the substantial shifts that we need, it’s going to take more than consumers buying local, says Michael Shuman, research director of the Business Alliance for Local Living Economies (BALLE). It’s going to require tilting the policy landscape toward local businesses. Rather than simply lecturing consumers on buying local, government will have to lead by doing likewise. The government’s purse is a whole lot more powerful than Joe and Jane Consumer’s. There are many things cities and states already do to benefit business—like offering subsidies, grants, and loans. Cities are experimenting with different ways to direct those public benefits to locally owned businesses that benefit the public, and through government contracting and procurement. Some, like Cleveland, award extra points in the contract bidding process to businesses that are locally owned, or green, or pay prevailing wages, or hire local workers, or all of the above. But so far, policymakers have generally been reluctant to cut the multinationals off. Charging discrimination, internationally owned firms have been known to challenge local preference rules under international trade law and the fear of lawsuits puts an effective chill on legislators.
But, says Flaccavento, “If you’re promoting downtown revitalization and supporting small business, you can’t simultaneously build a big box development on the outskirts of town. One will undermine the other."
Shuman wants government to move its money—all of it, “including everything that requires city staff time and energy, from non-local business and refocus it instead—laser-like—on local business.”
Who is part of a strong local economy?
Which brings us back to Wendell Berry’s idea of the “household.” There’s not a lawmaker in America who thinks he has more money than his community needs. Deploying that public purse is all about making choices. How are you going to manage the household? And who’s seen and heard in your economic “house”? The human household is a many-faceted thing, not to mention multinational, which can make the language of “local” contentious. Can disparaging non-local businesses spill over into discriminating against non-local workers? Just whom do we call a “local” anyway and do they have to speak our language?
Local arts ...
“It’s important to do the right kind of asset mapping,” says Sam Miller, director of the Lower Manhattan Cultural Council. Communities with robust local economies create environments where artists can thrive and work. Artists “hire workers, rent space, make stuff, sell it,” says Miller. Good arts policy is good development policy, and vice versa. Don’t fetishize artists, fund them: “When you’re defining a economic cluster, do you include artists in the same way you’d include web developers?”
... and local media.
The strongest local communities have local independent media—think Berkeley, Boulder, Tampa (all are community-radio rich). “People need to be well informed about what’s happening where they live and how it relates to what’s going on around them. People need to get to know each other and be shown a way to respond to the challenges they face,” says Jo Ellen Kaiser, executive director of The Media Consortium, a collaborative organization of independent media outlets (both GRITtv and YES! are members). Put an independent media center in your downtown development district and you give it voice.
Artisanal crafts and local produce are attractive. But if you're going to serve everybody, scale matters. Wealthy communities can afford to do a lot of sexy things that poor communities cannot because no money is coming in. That’s why Dan Swinney believes manufacturing needs to be part of the strong local economy too. A former machinist who established Manufacturing Renaissance in Chicago, Swinney works in communities that have become job-poor due to globalization and the closure of local businesses for lack of next-generation owners and managers. “A lot of people ignore the material aspect of things,” he said.
“You can have jobs that build people or destroy people but you need an employment base.” Swinney would prefer ownership of his company be local and democratic. He's all for ESOPs (Employee Stock Ownership Plans) and is in favor of co-ops with worker ownership and worker control. But, he says, “There’s a sequence from lower to higher value.” Swinney’s first priority is on getting people into jobs.
Getting institutions on board
What’s exciting about getting people engaged in local community-building is getting people engaged in how their community works. But if and when people want to change that, “locals” need not just local shops and arts, but institutions that influence policy.
The U.S. Chamber of Commerce is, at last, no longer the only business group at most negotiating tables. “I think it’s fair to say there’s a blossoming of alternative economic development models and business associations,” says Greg LeRoy, of Good Jobs First, a group that debunks what it calls the business lobby’s “pseudo-science” around what’s good for the “business climate." There's also—among many others—BALLE, the Independent Business Alliance, the Main Street Alliance, and the American Sustainable Business Council.
“There’s much broader thinking now, more rooted in the local community, that’s able to weigh in on development debates such that the Chamber doesn’t have a monopoly any more,” LeRoy says. On the worker side, “a strong local economy would have to have collective organizing of workers in order to be fully democratic,“ says Michael Lighty, policy director of National Nurses United, based in Oakland, Calif. “Unions are the key institutions that give individuals collective power.”
Still, “The new economy for us is not simply about peppering the landscape with groovy models, but is part of broader economic justice organizing and political action,” says Sarah Ludwig, founder and co-director of the New Economy Project in New York. Unless there's broad institutional change—breaking up big banks, effecting some semblance of corporate accountability, getting money out of politics, "you know, just for starters," Ludwig says—"The creation of model institutions will take us only so far."
The most participatory local budgeting process isn’t going to stop the crisis in public schools as long as the budget the community’s participating in is an austerity budget. Which brings us to the question of power.
So how do ordinary people get power in this economy?
From Mississippi to Pine Ridge, allies abound for policymakers, entrepreneurs, and those who want to build strong local economies. But how do those potential allies build power enough to have an influence?On the Gulf Coast of Louisiana, Saket Soni works with guest workers. Arriving in New Orleans in the aftermath of Hurricane Katrina, he saw firsthand the decimation of an entire local economy and the eradication of local control—and he watched, up close, the consequences.
“The logic of the corporate model after Katrina was to create a predatory community that could funnel local people into low-wage work with a revolving door to deportation or prison without creating a single stable job or career path for the most vulnerable," says Soni. Guest workers from other countries were brought in on temporary visas with virtually no rights in a labor supply chain that left local workers out. Antagonism between groups grew just as plans for the area’s reconstruction were being decided, and low-income communities suffered as a result. Over time, immigrant and local reconstruction workers organized together, and started demanding of Congress that the labor abuses be stopped. After some of their demands were met and fines were levied by government, some of those same organizations got involved in housing and local development planning too.
“The other side [of the crisis]," Soni says, "was that at the center of the ruin, a core of resilient people, who were in crisis long before the recession, had the vision and relationships to make a set of economic demands and organize to win them.”
What holds people back from doing more themselves is need, he adds. The low-wage workers he organizes don’t plan their lives more than a week or two in advance. They’re not allowed to by the economy. “They don’t know their next shift, their next job, even the industry they’ll be working in next week.”
In Soni’s world, the measure of a strong and rooted local economy lies in families' and communities' ability to imagine, and plan for, their future. That affects everything, including organizing, he says.
“No one wants a sustainable future and a shareable economy more than the low-wage workers we organize.”
You’ll be seeing more reports, from Jackson, New Orleans, Pine Ridge, and other frontlines of the “strong local economy” movement right here in Commonomics. And we hope you’ll contribute your news and ideas.
This piece was reprinted by Truthout with permission or license.
As I have pointed out in some past posts, there are many groups of people who have suffered the consequences of neoliberalism long before white, middle-class has. The truth is most of us were not there for them then, so because of that, it should not be surprising that there is an understandable resentment that persists to this day. When we are able to heal these divides and we will, we will become a formidable foe to the corrupt elite.
It is very common for the neoliberal system to use crisis situations to expand their sphere of influence with the help of corrupted politicians.This was very evident after Katrina when people who had little damage to their homes/apartments were not allowed to move back in, as their properties were confiscated for the purpose of building corporate owned hotels or the like.
All this and more was brought out in the parody-like documentary, The Yes Men. And on my first demonstration in Occupy in October 2011 called, We Got Mail For You (letters to the banks from current & past home-owners), I received a DVD (for having done some extra stuff) from one of the actors in that movie, who helped organize that protest in mid-town Manhattan.
As you implied, the resistance to the corrupt status quo is growing, and it is manifesting itself in a plethora of ways. As more and more people become involved, they will become emboldened all the more. That's my hope anyway.
Why lie, Odin?
You believe that I am that great poster, Odin....the dude who writes all those thoughtful posts?!
WOW...I'm honored GF!!
Let me save you the trouble of replying to me, OK?....what a sack of shit you are Odin..you douche-bag you....why don't you go buy a blow-up doll?!....lol
How'd I do? Did I miss anything?? ;-)
A few mentions of cock roaches, libertopia and teathuglicans- whatever the hell that is, never really thought of these weak ass politicians as thugs- ...
That should just about be a wrap!!
What a nice little group we all are. We should all sit down for Thanksgiving together some day.
Hey it's the original douche bag, how ya doin' Jeremy? Whose payroll are you on now? Did you come here to pretend that you are all about Occupy? Maybe you can lash out at the general public again.
Will you carve the turkey? :)
Why do you lie?
No, I'm going to buy the post cards with your rotting corpse located on the side of the road and send them out as Xmas cards. :)
The comments on the right were all nice, and educating.
Then 30 minutes ago it all changed.
Nice job wrecking ball.
Why do you lie?
Yes I would like that, to all sit down for Thanksgiving dinner one day, but maybe not too close to GF 'cause if I did something stupid, which I have a propensity to do, she might dump the cranberry sauce on my head! lol
On a more serious note; GF is a very intelligent young lady, and although we all know of her fiery rep (especially you!;-) on here, she is at her best when she writes thought-provoking posts.
Why lie?
Oh.........you're that other fucking piece of shit multiple ID cockroach. Either way, why the fuck do you lie? You don't have anything to do with Occupy. Never have. You're a fraud.
So, why spend so much time with your pathetic libertopia?
It does not take a person of your intelligence to figure out that you have some deeply-rooted anger. Just keep in mind that it is very unlikely that it was caused by a person like me. And I think deep-down you know that to be true... For your own good, do your best to get rid of that anger, or at least rechannel it.
I dislike liars and frauds. You happen to be both. For your own good, straighten up, become truthful, and stop selling out the American people.
[Removed]
Cast him into Malebolge!
Let's start by throwing your ass in first.
I've already been darned.
Well, without the smell of your burning flesh then it just hasn't been done right or would that be well done?
Did you happen to catch Wolff's June update? I watched the June 2012 one right after. Now that's the way I like to spend my Friday late night dish washing sessions!
No, I didn't happen to catch it but I may seek to now that you've mentioned it to me.
Cool. I recommend catching each "economic update". I could hear his shit all night.
LY.... I see no comments yet.... I think its a Great thread .... Thanks ...I'll study it more later tonight ;)
Thanks. From now on, whenever I come across an article on cooperatives or on public banking, I'll be posting them in this thread instead of at the FreeDA thread as I've done previously.
Can Union Co-ops Help Save Democracy?
Thursday, 04 July 2013 09:17 By John Clay, Democratic Promise | News Analysis
http://truth-out.org/news/item/17381-can-union-co-ops-help-save-democracy
A new wave of cooperatives is emerging in the US, and a big part of the inspiration is coming from what might seem an unlikely source: the United Steelworkers International Union (USW), which describes itself as North America's largest industrial union, with 1.2 million active and retired members.
In 2009 the USW joined with Mondragon Inc. of Spain and Kent State University's Ohio Employee-Ownership Center (OEOC) to start a discussion on bringing the successful Mondragon model of employee-owned cooperatives to the US. Mondragon was founded in 1956 and today includes some 260 enterprises, many of them cooperatives, in more than forty countries, with annual sales of 24 billion dollars. OEOC brings to the effort 25 years of institutional expertise in the development of employee-owned businesses. The collaboration with the USW was announced in the national media in 2009, and in 2012 the three organizations followed up with the release of a how-to guide called "Sustainable Jobs, Sustainable Communities: The Union Co-op Model."
The core goal of any employee-owned cooperative, a model dating back to the 18th century, is to organize business democratically. The people who do the work jointly run the business, all have a say, one-person one-vote, and all share in the profits. Mondragon has spent decades perfecting the model in Europe, and the addition of collective bargaining through a union committee is a new twist that can bolster democracy and garner additional resources for launching and sustaining cooperatives.
Union partnership with employee-owned co-ops is part of a philosophical ebb and flow within the US labor movement, as the tide turns alternately toward negotiating the status quo of the corporate economy or toward reforming it.
In the 1860s, National Labor Union leader William Sylvis boldly declared "The time has come when we should abandon the whole system of strikes and make cooperation the foundation of our organization and the prime object of all our efforts."
The Knights of Labor made employee-owned co-ops a priority in the 1870s, and union leader Terrence Powderly later wrote "My belief that cooperation shall one day take the place of the wage system remains unshaken."
Proponents of today's union co-ops may not be seeking to overthrow the wage system, but they do believe the model will help people to create more employee-owned co-ops, and more profoundly democratic ones. And they promote union co-ops as a solution to several deficiencies of the US workplace at the micro level of the single company: lack of democracy, wage disparity between highest- and lowest-paid employees, and job insecurity.
Some also hope these micro-level solutions might someday transform the US political economy at the macro level, helping solve problems like the growing wealth disparity between the 1 percent and the 99 percent and its strain on democracy, stagnant for the US workforce, and the community instability and drag on net job growth caused by downsizing and by off-shoring of jobs.
The prospects for these micro and macro goals are worth examining more closely. But first, just what is the Union-Co-op initiative?
The union co-op initiative
The first thing to understand is that the initiative is not a centrally-directed program one just plugs into. There is no central hub. The initiative is better understood as an agreement among the USW, Mondragon, and OEOC to develop and share out a model which strengthens the traditional employee-owned cooperative through a new partnership with labor unions. And, in equal share, the initiative consists in the response of interested workers, business owners, unions, non-profits, and local communities who have heard of the model and are now talking with each other, and with the USW, Mondragon, and OEOC, about starting new co-ops.
"The response to the initial press release in 2009 was overwhelming," says Rob Witherell of the USW, "and people keep coming to us to learn more."
The "Union Co-op Model" how-to guide (available at www.usw.org/our_union/co-ops) explains the Mondragon model and how the union co-op improves on it. It lays out the vision and principles that are the moral foundation for the model and also describes the mechanics of governance, ownership, financing, compensation, and collective bargaining. There are even a couple of short case studies. Even as thorough as the document is, it is a guide, not an instruction manual, and there are many specifics which, as Chris Cooper of OEOC explains, "employee-owners will have to decide for themselves."
And employee-owners are doing just that. The Cincinnati Union Cooperative Initiative (CUCI) and local partners are already putting the union co-op model into practice. A local food growing, distribution, and retail cooperative called Our Harvest, whose workers are organized by the United Food and Commercial Workers Union, was launched in 2012 and is preparing to expand. CUCI is now helping lay the groundwork for another union co-op, organized by the Greater Cincinnati Building and Construction Trade Council, to improve the energy-efficiency of aging commercial buildings. There is also a project to recruit a Mondragon cooperative, the Danobat Group, to open a union co-op railway manufacturing plant in Cincinnati organized by the USW.
"Today there are projects underway in Cleveland, Cincinnati, Pittsburgh, New York, Seattle, Denver, and new ones starting all the time," says Michael Peck of Mondragon USA.
Some employee-owned cooperatives which developed independently of the union co-op model have nonetheless helped inform the new model. A few recent examples:
The Evergreen Cooperatives in Cleveland, Ohio are not organized as union co-ops but are demonstrating the viability of the Mondragon model in the US. Evergreen currently operates three employee-owned enterprises: Evergreen Energy Solutions, started in 2008, installs solar panels and provides energy efficiency services; Evergreen Cooperative Laundry, started in 2009, is an industrial laundry serving institutional customers; and Green City Growers Cooperative, started in 2013, is an urban organic farm.
In New York City, Cooperative Home Care Associates evolved gradually into a union-organized cooperative. Launched as an employee-owned cooperative in 1986, CHCA invited the Service Employees International Union to organize its worker-owners in 2003, and finally established a labor-management council in 2007 which, though not identical to the union committee of the union co-op model, can be seen as a precursor.
Creating more employee-owned cooperatives
Out of 5.7 million firms the Census Bureau finds in the US, fewer than 300 are employee-owned cooperatives, according to the US Federation of Worker Cooperatives (USFWC) in San Francisco. Phrased optimistically, that's a lot of room for growth.
Proponents say the union co-op model can help worker-owners fill the gap. That's because pairing a start-up cooperative with a labor union instantly adds financial resources and community support. A unionized workforce typically can access more affordable group health insurance or retirement plans through the labor union, allowing the new business to affordably offer the benefits that attract high quality employees. And a labor union serves as a community ally who can advocate to local civic leaders on behalf of the start-up cooperative as it seeks funding or other support.
In fact starting up, rather than surviving, seems to be the challenge for employee-owned co-ops, because surprisingly, indirect evidence suggests that sustaining an employee-owned co-op is no more challenging than sustaining any business. They might even have better survival rates.
"Worker-owned co-ops have to accomplish everything any business does—a good product, a viable market, the right pricing," says Michael Peck of Mondragon USA. "And we do all that better by giving people ownership of the work they do."
There are anecdotal examples of decades-old employee-owned co-ops still running today. The USFWC points to the examples of Rainbow Grocery, San Francisco, founded in the mid-1970s; Alvarado Street Bakery, Petaluna, California, founded in the mid-1980s; Equal Exchange, Boston, founded in the early 1980s; and Isthmus Manufacturing, Madison, Wisconsin, founded in 1980. Anecdotes are not statistical data, though, and a few stories of success tell us no more than would a few stories of failure.
But survival rates for US cooperatives, employee-owned or otherwise, are hard to come by. The US Department of Commerce does not distinguish co-ops from other businesses, so its voluminous statistics shed no light. "We've been aware for a while of this gap in the data," said Anne Reynolds, assistant director of the Center on Cooperatives at University of Wisconsin-Madison. The center is preparing a five-year longitudinal study to track the longevity of US co-ops, including employee-owned co-ops, in a range of economic sectors. And the USFWC started this year to track the longevity and number of worker-owners of every known US employee-owned cooperative.
Until direct data is available, indirect evidence can be gathered from two sources: studies of Canadian cooperative longevity, and studies of the longevity of US employee-owned companies, mostly those with Employee Stock Ownership Programs or ESOPs.
Canada finds that cooperatives can be less risky than conventional business start-ups. The data does not distinguish between types of cooperatives—employee-owned, consumer, or producer—but can serve as a starting point for understanding cooperative viability in general.
A study called "Co-op Survival Rates in British Columbia" published in 2011 by the Canadian Centre for Community Renewal found a 5-year survival rate of 66 percent for cooperatives, compared to 38 percent for British Columbia's conventional businesses and 43 percent for all of Canada's conventional businesses.
Similarly a 2008 study by Québec's Ministry of Economic Development, Innovation and Export found Québec cooperatives had a 10-year survival rate of 44 percent compared to 20 percent for conventional businesses.
For reference, the 5-year survival rate of all US private sector businesses established in 2007 is 46 percent, and the 10-year survival rate of those established in 2002 is 34 percent, according to the US Bureau of Labor Statistics. This means that US cooperatives could score nearly 20 points below Canadian cooperatives' 5-year survival rate and 10 points below their 10-year rate and still score equal in survival to US businesses as a whole.
Meanwhile the paper "Effects of ESOP Adoption and Employee Ownership," by Steven Freeman of the University of Pennsylvania, surveys 30 years of research and finds "not only that employee-owned firms are more profitable and productive, but that they also survive longer." The paper looks at US companies with employee stock ownership programs, not employee-owned cooperatives, but the relevant finding is a correlation between employee ownership and enhanced company longevity.
The paper cites, for example, a study by Blasi and Kruse (2007) which shows a 70 percent survival rate over 11 years for privately held employee-owned companies, compared to a rate of only 55 percent for similar non-employee-owned companies.
Regardless of whether the survival of employee-owned co-ops is better than or equal to that of conventional businesses, the added resources and support which the union co-op model brings to start-ups could be expected to enhance longterm survival as well, helping to increase the number of US employee-owned co-ops over time.
Micro-level goals for a more balanced workplace
Proponents suggest that the union co-op model can create cooperatives which are more profoundly democratic. Although by definition the employee-owned cooperative already is governed democratically—one worker, one vote—some argue that democracy requires more than just a chance to vote at the annual meeting. Especially in larger co-ops, the exercise of power by worker-owners in management roles can overrun the general body of worker-owners, according to Chris Cooper of OEOC. "As the cooperative grows in size," Cooper says, "democratic participation can suffer." Gar Alperovitz, professor of political economy at the University of Maryland and author of a new book "What Then Must We Do?" echoes the concern: "Everything I've seen suggests that without [special] mechanisms in place, a worker-owned firm can fall apart or become indistinguishable from a traditional capitalist enterprise." Mondragon found a solution. Just as America's founders developed a system which, beyond voting, also relies on a separation of powers among the branches of government, so Mondragon found that creating a social council of worker-owners to serve as a voice for the general body of workers helps to restore balance between workers and managers. "In a democracy, redundant protections are good," notes Kristen Barker, director of CUCI.
The union co-op model starts from Mondragon's innovations and then further protects the balance between workers and management first by allowing all non-supervisory workers to organize as labor union members and second by transforming Mondragon's social council, which has power to advise but not enforce, into a union committee with the power to negotiate and enforce collective bargaining agreements. As Alperovitz puts it, the union committee is "tasked with making sure the cooperative lives up to its ideals." Adding collective bargaining to the mix is all the more important because sometimes not all workers at employee-owned co-ops are owners. "There is typically a candidacy period of six months to two years for new employees," says Melissa Hoover, USFWC executive director. During this waiting period an employee prepares for membership through trainings in finance and cooperative decision-making.
Moreover, some workers simply choose not to join. "Some are satisfied with decent wages and don't want to share the risk, or don't want to attend meetings and trainings," says Hoover, who points out that only 50 percent of workers must be owners to meet "sub-chapter T" federal tax requirements for cooperatives, though many employee-owned co-ops set higher ownership goals.
Whatever the reasons and however small in number, non-owner employees are a reality, and collective bargaining under the union co-op model ensures that all workers have a voice, even those who are not owners.
Proponents of union co-ops, like proponents of employee-owned cooperatives generally, also hope that bringing more democracy to the workplace will lead to fairer pay and better job security.
In a conventional corporation officers wield authoritarian control over employees and are accountable only to shareholders. These shareholders are investors who might reside anywhere in the world and whose stake in the corporation is simple: a high return on their investment. They can reap profit from the "cost savings" of employee pay-cuts and layoffs without ever feeling the human consequences. And although some employees might own shares in the conventional corporation, shareholder voting power is not the democratic one person, one vote. Instead it is one share, one vote, so that those who can afford to buy the most shares—high-paid executives, wealthy external investors—always win.
The result in the conventional corporation is a circle of ever-increasing consolidation of wealth and power in the hands of a few. It is little surprise then that CEOs of conventional corporations in the US earned 231 times more than typical employees in 2011, according to the report "CEO Pay and the Top 1 Percent" by the Economic Policy Institute (EPI) in Washington, DC.
In the employee-owned co-op, the employees all hold equal voting power—one worker-owner, one vote—in selecting board members and making decisions at the annual meeting. And these voters tend to be socially and emotionally invested in the company's fairness, success, and stability because typically they are the very workers whose lives will be affected by the decisions. And in the union co-op, even workers who are not owners have a voice through union representation.
The result ideally is a workplace where employees enjoy working democracy: They can vote to diminish disparity in pay between top and bottom, and during hard times they can vote for practical alternatives to layoffs, such as temporarily reduced hours, thus improving job security.
And although the roles of the manager and the managed still occur in employee-owned co-ops, especially larger ones, the very fact of shared ownership mitigates against a strong top-down culture and leaves more room for, yes, cooperation.
Macro-level goals for a more balanced society
Some proponents also hope that employee-owned cooperatives, and especially union co-ops, might someday transform the US at the macro-level, helping solve problems like the growing wealth disparity between the 1 percent and the 99 percent and its strain on democracy, stagnant wages for the US workforce, and the community instability and drag on net job growth caused by downsizing and by off-shoring of jobs.
Recognizing that a balance in decision-making power and wealth holding in the economy is crucial to sustaining a balance in political power among the people, some scholars call these macro-level reforms "economic democracy."
Thad Williamson, a political scientist at the University of Richmond, defined the term in his paper "The Relationship Between Workplace Democracy and Economic Democracy" as the idea that "meaningful self-governance over the conditions and institutions which shape our lives—the core ideal of political democracy—requires not just democratic control over political institutions, but also extending norms of democratic self-governance to economic life."
Alperovitz, Williamson, and others identify a range of institutional forms which could help build economic democracy, and employee-owned cooperatives, including today's union co-ops, are one of them. If at the micro level cooperatives restore democracy through the governance structure of one worker, one vote, what are the mechanisms by which they would restore democracy at the macro level?
One mechanism is simply habit. The anthropologist Mary Douglas observed that people often think and act by analogy. People can of course invent new ideas and practices, but for efficiency as well as for coordination, they typically look to existing ideas and practices and develop new ones by analogy with the old. If more Americans are practicing daily democracy by working at employee-owned co-ops, instead of practicing toeing the line at conventional, authoritarian corporations, then perhaps more Americans will be acquiring the habits and skills needed for effective participation in civic and national democracy.
"We do not learn to read or write, ride or swim, by being merely told how to do it, but by doing it," wrote the nineteenth century philosopher John Stuart Mill, cited in Alperovitz’s recent book, "so it is only by practicing popular government on a limited scale, that the people will ever learn how to exercise it on a larger."
Tim Huet, co-founder of the Arizmendi Cooperatives, declared in a 2004 manifesto: "You cannot say that a society is truly democratic if its adults spend the majority of their waking hours in undemocratic workplaces."
Another mechanism by which cooperatives can strengthen democracy is by rebalancing raw power and influence in society, resulting in more balanced election funding and policymaking. Today the 1 percent hold far more wealth and more ability to influence politicians than the 99 percent.
Two strategies which conventional corporations have used to boost profits have also led to the growing disparity in wealth and power. These are downsizing employment by replacing people with machines or making fewer people work harder and faster, and sending jobs overseas where wages are lower. The lower the wage bill, the greater the profit left over for executives and shareholders. Under these strategies, the US economy has not created enough jobs. From one job seeker for every one job in 2000, the ratio of job seekers to job openings rose in 2003 to 3-to-1, where it remains today after spiking to 7-to-1 during the Great Recession, according to EPI's "The State of Working America."
Beyond downsizing, the US job market has been gutted by the offshoring of jobs due to the high value of the US dollar, which makes US labor and products relatively expensive, thus discouraging US exports and encouraging imports. EPI's briefing paper "The China Toll" reports that trade with China alone cost US workers more than 2.7 million jobs between 2001 and 2011. The high dollar is largely a result of policy choices, says Dean Baker, economist and director of the Center for Economic and Policy Research (CEPR) in Washington, DC, and is favored by powerful corporations in finance, manufacturing, and retail.
When job seekers outnumber job openings due to downsizing and offshoring, it's a buyers' market in which employers can bargain down the wages they offer for labor. It is not surprising then that real wages for most American workers have remained essentially flat since the 1970s even as pay at the top has risen. According to "The State of Working America," between 1979 and 2007, the top 1 percent of US households received more income growth than the bottom 90 percent combined.
Meanwhile, US corporate profits nearly doubled from $434 billion in 1990, to $819 billion in 2000, and doubled again to $1.6 trillion in 2010, according to the April 2011 "Survey of Current Business." The imbalance in wealth and power generated by shareholder corporations throws American democracy out of balance because one community—large corporate shareholders—has the clout to overwhelmingly influence public affairs. In 2010 corporate interests spent more than a billion dollars on political contributions in the US, nineteen times more than labor unions spent, according to the Center for Responsive Politics.
Promoting a company governance structure like that of union co-ops, which carries incentives for sustaining jobs and broadly sharing profits rather than cutting jobs and funneling profits to the top, would help balance wealth and, with it, political influence.
Employee-owners who have a one-person one-vote say in how a successful cooperative is run, and especially those bolstered by a union co-op's collective bargaining agreement, can be expected to see fairer wages and more job security than workers in a conventional company. Employee-owners simply don't have the same incentives as conventional shareholders to cut wages or cut jobs. And they certainly don't have the same incentive to close plants and move to Asia or Latin America for the sake of cheaper labor and higher profits.
"Cooperatives are more rooted in the local community," says Chris Cooper. "They are not going to be offshoring their own jobs."
"We see union cooperatives as a way to stabilize wages and benefits by taking them out of competition with lower-paid workers in China," adds Rob Witherell.
If union co-ops can increase as a share of all US employers, then the effects would be multiplied throughout the economy. Even employees of conventional companies could eventually benefit from what economists call the "spillover effect" in which other employers raise median and low-end wages to compete for hires.
So the question becomes a matter of proportion: Assuming employee-owned co-op wages are more fairly balanced than wages in conventional corporations, what share of the US workforce would have to be employed in these co-ops in order to have a measurable impact on US wage disparity?
According to Dean Baker of CEPR, "If you could get 4 to 5 percent of the workforce in real co-ops, then it would make a difference, especially if they act politically self-conscientious."
The report "Research on the Economic Impact of Cooperatives," published by the University of Wisconsin Center for Cooperatives in 2009, shows that US co-ops maintain about 856,000 full-time equivalent employees. This is less than one percent (0.65 percent) of all US non-farm employees, according to Current Employment Statistics. So cooperative employment needs to increase by seven times to start having a measurable effect on US wage inequality. Baker's qualifier "real co-ops" intensifies the challenge, if this means co-ops that actively pursue shared prosperity and family-supporting wages. The only type of cooperative that, by definition, demands shared prosperity for workers is the employee-owned coop, and the number of persons employed in these co-ops is just 2,380, or 0.002 percent of all US non-farm employees.
And what share of US jobs would have to be employee-owned co-op jobs in order to stem offshoring enough to measurably reduce the drag on US net job growth?
Baker suggests that if cooperative employees do not act politically, then their employment as a share of all US employment would need to be even larger than 4 to 5 percent to measurably stem the offshoring of US jobs. "You will need some really huge share to affect outsourcing, because this is a function of economic incentives driven by policy like the high dollar," Baker explains. "If we get all our steelworkers in co-ops, but you can get steel for half the price from the developing world, then no one will buy the steel from the US co-ops."
And what about that curious booster effect which Baker calls "politically self-conscientious" action?
A matter of culture
Culture could ultimately be the factor that decides the power and fate of employee-owned cooperatives, both at the micro and macro levels. People create a culture of shared practices and beliefs as a simple effect of each one seeking to meet their own need for effective social and economic transactions and a coherent worldview. So argued Mary Douglas in her 1986 treatise "How Institutions Think." Humans are driven toward shared culture for the simple reason that working with someone is easier if you see and do things the same way, harder of you don't. Getting in sync typically is not a conscious process. It is a result of gradual poking and prodding, urging us toward the path of least resistance.
Of course our practices don't always match our beliefs. But according to Douglas, when they do match, then ad hoc associations and arrangements are transformed into lasting and effective institutions.
At the micro-level, that tells us that putting some deliberate effort into understanding worker cooperatives and grasping the deeply held beliefs that bring people together to form one can be very important. When the internal culture is strong, members have the will to say no, for example, to conventional pressures to use excessive executive pay as a recruiting technique or pressures to solicit investment from venture capitalists at odds with cooperative values.
"When starting a new employee-owned coop, taking time to study together is invaluable," says Kristen Barker. She and the other co-founders of CUCI functioned as a highly-focused book club for about two years, reading about worker coops, watching documentaries, and discussing it all together. Although Barker and her partners were putting together an advisory organization rather than a cooperative per se, their studious method is an example to anyone starting a cooperative. "Especially when a project is embracing new norms and building a new kind of social institution, it's important to make sure to get things right," notes Gar Alperovitz.
The catch is that overlapping communities may have differing cultures. Members of an employee-owned co-op can build a strong internal culture. But they simultaneously are members of, or need to coordinate with, other socio-economic communities which might have different cultural tendencies—conventional business culture, for example.
In an era when shareholder corporations dominate not only the American economy but culture as well, an employee-owned co-op, as it seeks to build relationships with suppliers, retailers, and investors, can start feeling its internal culture poked and prodded toward the anti-democratic beliefs of larger, more powerful cultures. Beliefs that democracy is too inefficient, that discipline is the best motivator for those at the bottom and money for those at the top, that the people at the bottom can't be trusted and the people at the top can, that government is a burden not an aid—might start to seep in. That tells us that it may be crucial for cooperative proponents to begin identifying and investing in large political-economic communities whose cultures are decisively supportive of cooperatives' democratic ideals. To be effective, these communities themselves must show a strong mesh of economic transactions and worldview; they must be politically well-organized, share a sense of who they are and what kind of world they want, and hold considerable economic power. Labor unions are one such community who, as Witherell observes, "already share a lot of ideals in common with cooperatives, a sense of fairness and solidarity." If employee-owned cooperatives can band together and build culture and wealth, and continue to build alliances like the budding alliance with labor unions, then they might just beat Baker's daunting odds and help America build democracy in the workplace and in the broader economy.
This piece was reprinted by Truthout with permission or license.
Big post, it is good article of economic knowledge. here all detail is given in very brief
Thank you.