All across the country, and around the world, the seeds of a new economy are sprouting. Through worker-owned businesses, community land trusts, local currency and local investment projects, participatory budgeting and public bank initiatives, community supported production, and sharing projects of all kinds, communities are experimenting with the building blocks of economic networks that can meet needs and support thriving communities better than our old economy does.
There are many different names out there for these experiments and the next system they aim to seed. Solidarity economy. Community wealth building. Democratic ownership. The pluralist commonwealth. Or simply, the new economy. What they have in common is a focus on relationship building, participatory democracy, and the rooting of ownership broadly in the community.
And we need a new economy. Our old economy has failed. Or perhaps better said, it has reached the end of its useful life, its core principle now doing more harm than good.
Our industrial capitalist economy has been based on one very simple prime directive: streamline the channeling of savings into productive investment. Before the industrial revolution, and the innovations in finance that preceded it, wealth was held mostly in land. This wealth conveyed the power to extract what the land could produce — and to manage the lives of those who lived and worked on it — but there were limited opportunities to invest any savings that might be accumulated. And so, outside of some slow improvements in agricultural technology, there was no ongoing, year-over-year economic growth Iike we have become accustomed to.
For the first time, anyone who could afford a share could now become an investor.
With the rise of European global trading in the late 1500s, the joint stock venture — previously used sporadically to fund improvements at mills and mines — became an increasingly popular way to finance overseas trading voyages. The joint stock approach allowed many subscribers to pool funds in a risky venture and split any payoffs. The Dutch East India Company took it to the next level in 1602, opening what became the Amsterdam Stock Exchange, where their shares could be traded publicly. And instead of dissolving after a single voyage was complete, they paid out periodic dividends to shareholders from all their pooled proceeds. For the first time, anyone who could afford a share could now become an investor. The Company became the first global mega-corporation in the process (and brought slavery, war, exploitation, and disease to the places they traded with.)
As industrial technology began transforming European manufacturing, the joint stock approach was used to fund this new, capital-intensive mode of production. The result was an explosion of economic growth unlike anything seen before in human history, along with an explosion of new wealth that undermined the existing land-based political order. This process of turning savings into investment into growth has remained the engine of our economy ever since. To the extent that the industrial capitalist economy has produced good jobs and widespread well-being, it has been as a byproduct of the profit-driven growth that is its sole priority. Ongoing labor, civil rights, and community organizing have been necessary to secure and maintain these benefits.
For a time, in the middle of the twentieth century while manufacturing was still exploding, a deal of sorts was reached: a small number of people became fabulously wealthy, while lots of others got jobs good enough to allow them to purchase all of the items being produced. Of course, who had these good jobs varied with race, gender, national origin, religion, and other markers of discrimination, so that the economy remained systematically unequal even as it grew. Nonetheless, for a time, almost everyone got more of almost everything in each generation. But that deal has been disintegrating for several decades now, and I don’t believe it’s possible, or even desirable, to reinstate it.
For most of the nineteenth and twentieth centuries, while we still suffered more from problems of scarcity than from those of abundance, while we still needed more, could absorb the environmental impacts of more, and could credibly appear to be distributing the benefits of more widely enough to continuously broaden well being, an economic strategy of growing first and sorting out meeting community needs second could be defended, even perhaps applauded. But none of these are true anymore.
Producing more and hoping people’s lives will be improved is no longer a functional strategy.
The economy has figured out how to provide opportunities for investment and wealth growth without producing good jobs as a byproduct. Globalization, automation, and a concerted, multi-generation political effort have broken the the power of organized labor and re-concentrated the economy’s gains in fewer and fewer hands. And the sheer size and material throughput of the economy have put us on a collision course with physical planetary limits. It is clear that simply producing more and hoping people’s lives will be improved is no longer a functional strategy. We need an economy that broadly spreads wealth and the ability to care for ourselves as its inherent feature, not a partial and precarious redistribution after the fact.
Perhaps it seems fanciful or impractical to suggest creating a new economy? Consider that the industrial capitalist economy is itself only something like three hundred years old, and has gone through almost continuous waves of transformation during its short lifespan. The new economy will emerge just like the old one did — in bits and pieces, here and there, as people find they can do better for themselves another way. Of course, alternatives to capitalist economic relationships have always existed alongside and within capitalism, in family, community, cooperative, and other sharing- and reciprocity-based relationships, both formal and informal, waning and waxing in density and organization as the capitalist economy has been more and less able to meet people’s needs. In the wake of the 2008 financial crisis, collaborative economy strategies are once again gaining momentum in communities across the country.
Several communities — including New York City, Rochester, NY, Cleveland, OH, and Jackson, MS — are nurturing the growth of worker-owned cooperatives, businesses that are owned and managed directly by their workers. Such worker-owned businesses have been shown to be more productive, more resilient, and more likely to stay rooted in the community than businesses without worker ownership. Worker ownership has the potential to transform rapidly growing sectors of the economy — everything from advanced manufacturing, to professional contract services, to traditionally low wage service work, such as home health care and cleaning. And with a wave of baby boomer business owners entering retirement, selling their businesses to their workers may be the best transition strategy for many. Cities are using strategies including investment in targeted business development support, anchor purchasing commitments, and grassroots community organization to nurture ecosystems of cooperative businesses, their customers, and their suppliers.
In the housing sector, too, strategies for democratic community ownership — including community land trusts, land banks, limited equity cooperatives, and resident-owned communities — are being used to prevent displacement of residents in rapidly changing communities and create better control over living conditions. (We have several such projects here in the Hudson Valley.) In the energy sector, communities are democratizing and re-vitalizing the municipal utilities and rural cooperatives that serve more than a quarter of US homes and are starting new cooperatives to expand access to solar power, energy efficiency, and renewable fuels. Across sectors, these developments are financed by a growing range of community development financial institutions (CDFIs), peer financing networks, impact and mission-related investing, direct public offerings, and community capital funds. A burgeoning public banking movement aims to further strengthen local capacity to support community investment.
Today the region’s 8000 cooperatives produce more than 40 percent of its GDP.
Can these tiny efforts create a whole new economy? Many of them are inspired by two coop-rich regions in Europe where cooperative development has transformed the local economy, over the course of several decades. Most famously, in Mondragon, Spain, a network of worker cooperatives begun in 1956 as a homegrown self-help economic development movement is now the tenth largest company in Spain, with more than 100 worker-owned cooperatives owned by more than 70,000 worker-owners. Less well-known is the Emilia-Romagna region of Italy, where federated networks of cooperatives rebuilt an economy devastated by World War II. Today the region’s 8000 cooperatives produce more than 40 percent of its GDP. The region has one of the lowest unemployment rates and highest median incomes in Italy.
Collaborative economy strategies are making a tangible difference in people’s lives today, creating good, locally-rooted jobs, securing housing for long-time residents against displacement, and rebuilding local commons. But over time, they do far more than this. They build people and communities. Every worker who becomes a business owner develops financial, management, and strategic planning skills that most jobs never grow. Every person who participates in managing their community land trust or housing cooperative deepens their ability to dialog across differences and collaboratively solve problems and test solutions. Collectively, these projects build relationships and create skill-rich communities ready to tackle more ambitious efforts. And if we are able to perceive these efforts as a movement, nurture connections between them, and set up supportive policies and community-level institutions, we can begin to weave the fabric of a new system, just as capitalism slowly emerged and solidified while feudalism was failing.
Community organizing movements of recent decades have created fertile ground for community economic mobilization.
This is likely to be a multi-generational process. Indeed, one could say that it has already been going on for a several generations. Previous waves of cooperative development in the US bought electricity to rural areas, became the backbone of the agricultural supply and distribution infrastructure, and supported self-sufficiency and mutual aid in countless vulnerable communities. The civil rights, human potential, social healing, and community organizing movements of recent decades have created fertile ground for community economic mobilization. And the environmental, economic justice, and local economy movements have created consciousness about the need and needed direction for change.
The time is ripe for the next wave in this unfolding process of transformation. Frustration with our current system is high and growing, and our technologies and resources give us an opportunity to cooperate in unprecedented ways. In these troubled times, the dread that we near the end of a story about things falling apart can be hard to resist. An equally compelling, and much more empowering story is that we are smack in the middle of a very exciting process of cultural evolution, right at a key pivot point. Because we become the stories we tell ourselves, I suggest we tell that story as hard as we can.