An Economy Turned Upside Down

Shareable : Work & Enterprise

An Economy Turned Upside Down

By Mira Luna

08.15.11, 1:55pm

While mainstream America is hoping for federal economic reform, some social justice organizations have a radically different idea, and are organizing low-income communities to build a new economy from the grassroots up. Tired of asking for change from the top down, they are taking their economy into their own hands. Social justice organizations, having a strong membership base rooted in community, are ideal spaces to cultivate alternative economic projects, as relationships of trust and solidarity have been nurtured over time through education and a history of taking action for justice. Here are some exciting examples of grassroots alternative economy projects for social justice.

Social Justice and Alternative Economics

Photo of the Greenfield Gardens housing coop via ADP.

Alliance to Develop Power (ADP) is social justice organization based in Massachusetts with a membership of 10,000 low-income African Americans and Latinos. According to Sally Kohn of the Nation, ADP has stated that “at the end of every issue campaign, our goal is to create an institution that our members control.” This a lofty goal for an organization that fights for basic necessities, like housing, on a regular basis. ADP is creating a 1,200 unit tenant-owned housing cooperative, a worker coops to provide landscaping, construction, building maintenance and weatherization for the homes, as well as four volunteer-run food coops for local health food access.

In what appears to be an emerging trend, San Francisco's PODER (People Organizing to Demand Environmental and Economic Rights) expresses similar goals. Oscar Grande, Community Organizer for PODER, said they “aspire to be ADP when they grow up.” Every year, PODER fights to get City Hall to allocate funding for its economically disadvantaged community. It's a battle that consumes most of its energy, and in the end the community rarely gets what it needs. This year, PODER moved beyond reactive social justice campaigns to explore the uncharted territory of proactive alternative economics with its members. It leveraged a strong community base to get funding to plan a work force development center in the neighborhood with the membership’s input. Based on members' interests, PODER is developing an exchange group through BACE Timebank, which members hope will help support their Semillero worker coop incubation project. And the organization is investigating participatory budgeting as a tool to shift power to its membership in the municipal budget-making process in order to fund more community-driven initiatives, like worker coop training programs.

Self-Employment for the Working Class

La Cocina photo by Jun Belen.

A common path to a living wage and dignified job is self-employment through starting a small business, but this avenue is rarely available to working class women. Catering to this demographic, San Francisco's nonprofit La Cocina provides food business planning and development, as well as access to costly resources such as a licensed commercial kitchen, a fancy retail space at the Ferry Building, professional advertising, and more. La Cocina incubates a wide variety of small businesses from packaged food producers to food carts, catering companies to restaurants. With an industry average failure rate of 60% even in a good economy, La Cocina gives struggling first-time entrepreneurs crucial support to get a business going without taking a huge risk many of them can not afford.

Worker Cooperative Incubation and Development

Meanwhile, a more communal twist to entrepreneurial development is popping up across the country: worker cooperative incubation programs for low-income folks. Third Coast Workers for Cooperation, a new nonprofit in Austin, is helping start-ups through a through a mentoring and 16 week training program, the Cooperative Business Institute and Co-op for Community Development program. In their first year, it helped incubate a women's catering cooperative called Yo Mamas, a food cart coop in Houston, and the Workers Defense Project, a construction coop. Operating on a shoestring budget, TCWC uses volunteer but experienced worker-owners and professionals with technical skills to give these new coops a much needed boost.

Green Worker Cooperatives is another social justice organization “dedicated to incubating worker-owned and environmentally friendly cooperatives in the South Bronx.” Their website states, “Our approach is a response to high unemployment and decades of environmental racism. We don’t have the luxury to wait for new alternatives. That’s why we’re creating them.” Green Worker Cooperatives offers an aggressive 80 hour coop boot camp, which includes a combination of training, coaching, and technical support like legal incorporation, graphic design, and website development. IDEPSCA, an immigrant and worker rights organization in the Los Angeles area also incubates green worker cooperatives such as Magic Cleaners, a green home cleaning service, and Native Green, a sustainable landscaping service focused on native plants.

The Cooperative Association Model

Photo courtesy of the Arizmendi Association of Cooperatives.

Inspired by the Mondragon Cooperative Corporation of Spain, the Arizmendi Association of Cooperatives in the San Francisco Bay Area focuses specifically on one type of replicable restaurant. Their successful chain-like model is responsible for 125 jobs and $12 million in annual sales. Each Arizmendi Coop is autonomous, but receives training and substantial start-up funding from previous restaurants. In return, once the restaurant turns a profit, it returns some of the proceeds to the Association to seed more worker cooperatives. The restaurants share recipes, accounting, legal and other services, similar to corporate chains. True to their social justice mission, Arizmendi hired 4 out of 15 new worker-owners for their new Mission location from PODER's membership and other Latinos from the neighborhood.

Clementina Paramo, a founding member of Emma's Eco-Clean in Redwood City. Photo courtesy of WAGES.

WAGES, a nonprofit that started with the mission of “promoting the social and economic wellbeing of low-income women” organizes low-income women of color to collectively own green cleaning businesses in the San Francisco bay area. Over 100 cleaners earn “50-100% more in hourly wages than before” with benefits and business equity, according to Deborah Warren and Steve Dubb in the study Growing a Green Economy for All [PDF]. As former director Hilary Abell clarified in a recent GEO article, WAGES operates on a chain model with a year-long startup phase and three years of significant nurturing. While managed intensively by WAGES in the beginning (governance, finance, administration, recruitment, training and business management) chains become more autonomous over time, allowing workers to focus on providing good service and supporting their families. They remain connected and share professional services after spinning off, and seed new coops from the profits of the collective.

WAGES Training Group. Photo courtesy of WAGES.

With support from the City of Cleveland, University of Maryland, the Cleveland Foundation and $5.8 million dollars in grants and loans, Evergreen Cooperatives created three large worker coops focused on solar energy, industrial green laundry, and urban farming. Evergreen intentionally hires from economically disadvantaged neighborhoods, in particular people coming off welfare, recently out of jail, or having other barriers to employment. The wages are good for the laundry industry and worker-owners are expected to build equity in their businesses, which could yield $65,000 over eight years of investment. One of Evergreen's coops, Green City Grower Cooperatives, has acquired 10 acres of urban farmland, a packing building, offices, green energy, and the “largest urban food-producing greenhouse in the country” in an area that could be called a health food desert. Crucial to the success of their cooperative start-ups is a revolving loan fund, the Evergreen Cooperative Development Fund, supported by 10% of their cooperatives' annual pretax profits, reports Warren and Dubb. Being part of a larger, successful association also helps secure business loans, which can be difficult for coops.

Worker Coops for Local Job Creation

Other cities with skyrocketing employment such as Richmond, California are showing interest in emulating Evergreen and Mondragon. The Mayor of Richmond recently went to Spain for a study tour of Mondragon and hired a Coop Developer for her office. Worker coops are increasingly seen by legislators as being a serious avenue for long-term, local job creation.

Since worker coops are owned and managed by workers, there's no worker exploitation, excessive executive pay, or outsized investor payouts. Therefore, worker coops can provide more stable, living wage jobs with benefits and equity than conventionally-modeled businesses, according to the Canadian Ministry of Industry and Commerce. Coops can adjust salaries in lean years, typically have flexible and favorable long-term financing, and are less likely to lay off or close up shop for the sake of profits. They are also more likely to take care of the local environment and their patrons because they need community support to survive.

However, as PODER's members quickly realized, without initial support from nonprofits, government or foundations, starting a worker coop can be an overwhelming, almost impossible challenge. The long-term benefits of these social justice missions are clear. Local governments and community foundations need to step up to the plate and support these social justice organizations' new and innovative job creation model.

Nonprofit Co-production

On the nonprofit side of the economy, co-production — a philosophy and practice that incorporates cooperative principles — is being integrated into service provision. Co-production refers to the inclusion of service recipients in the design, decision-making and delivery of nonprofit services. Normally, there exists a chasm between a privileged class of professional service providers and their clients.

St. Louis' Member Organized Resource Exchange (MORE) thinks and does things differently. MORE is “shaped and operated by the...same individuals it exists to help,” reported Louis Wright in a Case Study of MORE. Residents of East St. Louis are trained to help provide community childcare, education, eldercare, healthcare and social work support to each other while being paid in Time Dollars and then train others to do the same. As one resident put it, “finally, I can ask for help without feeling like I'm asking for charity, because I earned it. I helped somebody else and now I can buy service with my Time Dollars.” Residents provide community needs assessments, offer direct services, serve as community resource people for neighbors on their blocks, and design new service programs with the support of staff, sometimes becoming staff themselves.

Local Government Participatory Budgeting

Photo of the Chicago participatory budgeting vote by Austin Smith, courtesy of Gapers Block.

Change is brewing on the local government front too. While residents of other municipalities around the country complained about city budget cuts this year, Chicago's 49th Ward let its residents directly vote on their Ward's capital budget. Residents, including undocumented people and youth, held neighborhood assemblies, formed issue committees, created proposals and directly voted on budget proposals. It’s a drastic departure from corrupt back-room business deals and poor people left begging for crumbs from a budget that's already been decided. Even the process of designing the participatory budgeting process is controlled by the residents themselves from the bottom up.

When describing his experience of participatory budgeting to San Francisco legislators, Chicago's 49th Ward Alderman showed what his budget looked like before and after the process. The budget graph showed an astounding increase in diversity and creativity of funded projects with community participation. Through this process, he realized he only had a tiny piece of the picture of what his community needed and what they could come up with through collaboration. Bottom-up budgeting processes may be slower, but if they get the right results, they are surely worth the time and effort.

A New Path to Economic Freedom

Folks at the bottom of the economic pyramid are not only finding ways to individually climb the path to realizing the American Dream. They are building ladders for others and organizing to flatten the pyramid, sharing a collective dream in which no one is left out and everyone is happier because of it. It is also becoming increasingly obvious that for most poor folks, the only way up is together. What would the economy look like turned upside down? As these experiments demonstrate, it might look a lot greener, more cooperative, participatory and fair.

Tags: alternative currencies, coops, economic recovery, non-profits, social change, timebank

Be Subversive: Sing with Your Neighbors

The Sweet Pursuit

Be Subversive: Sing with Your Neighbors

8/17/2011 5:27:00 PM

by Margret Aldrich

Tags: community, community singing, singing, activism, war, MN Community Sings, MinnPost, Margret Aldrich

Community singing—gathering with a group of acquaintances and strangers to belt out songs from across the eras—was a big deal in the Twin Cities in the first half of the 20th century, drawing crowds of up to 25,000 people to local parks. Today community singing does not, necessarily, sound relevant or revolutionary. In fact, it might seem completely schmaltzy. But singing together has more political and personal impact than first impressions reveal.

Minnesota Community Sings director and activist Betty Tisel is heading up a community singing revival, reports Jim Walsh in MinnPost, and her motivations go far beyond warming hearts. “Doing this work has meant my doing less political activism, but I feel OK about this because the payoff for community singing is that people get refueled for the struggles we have to keep working on together,” she tells Walsh. Tisel continues:

If we’re going to draw others into the work of building a just, sustainable world, that world’s gotta look like a place we would also like to live in. We need joyful, local, participatory culture….This is eat local, buy local, sing local. It helps me “keep on keepin’ on,” and people who have attended the sings tell us that it helps them a lot, too.

The gathering I attended at MLK Park in Minneapolis last night was nothing if not joyful, inclusive, and connecting, and it didn’t have a drop of unintended schmaltz. The 150 people in attendance (a smaller crowd due to stormy weather, Tisel says) ranged from toddlers to the elderly, and whoever sat next to you became your newest, dearest friend. Consummately lead by Minnesota Community Sings executive director Bret Hesla and artistic director Mary Preus, we sang American standards like “This Little Light of Mine;” international songs in Arabic, Italian, Spanish, and Swahili; and antiwar songs including “Tenting Tonight,” which was sung by soldiers on both sides during the Civil War. The lyrics hold up after 150 years:

Many are the hearts that are weary tonight

Wishing for the war to cease;

Many are the hearts that are looking for the right

To see the dawn of peace.

Before the event, which was my first community-sing experience, I invited another uninitiated friend to join me. Her jaded, if good-natured, two-word reply was: Hells no. After participating with the smart, ardent crowd in South Minneapolis, I enthusiastically say: Community singing: Hells yes!

If you’re still not convinced of the power of the community sing, watch the ever-cool Odetta talk about her love of singing with others:

Source: MinnPost

Image from Library of Congress.

Read more: http://www.utne.com/The-Sweet-Pursuit/Be-Subversive-Sing-with-Your-Neighbors.aspx#ixzz1VmePdK9j

How to Start a Housing Co-op

Shareable Community

How to Start a Housing Co-op

By Mira Luna

11.15.10, 5:36pm

The Comunidad Cambria Coop (photo by Allan Heskin).

During college, I lived at a 32-member student housing cooperative where I had more fun there than I did in all my other years of college combined and met lifelong friends. I saved money by living there so I didn’t need to work through school, as the coop was owned by a nonprofit (consequently rent would get cheaper relative to inflation). The activists, artists and thinkers who lived there brewed new ideas which planted seeds in me that sprouted years later. We seized the opportunity to use common spaces for political and arts events that as regular tenants we would have never been able to host. The house created a vessel for whatever passion we wanted to manifest.

On the downside, I found it incredibly difficult to study there. The work of being a contributing coop member was a drain on my work time and there was too much drama to focus on school. The coop had structure and rules but with little follow through, meaning chores and maintenance didn’t get done and conflict was common. We had an application process, but let everyone in regardless of their ability to cooperate, as well as people with drug and other mental health problems that needed more support than we could offer. New members weren’t trained in consensus decision-making, creating heated and way-too-long meetings over trivial issues. I learned a lot about what not to do.

Years later, volunteering for a nonprofit that develops cooperative (coop) housing, I discovered that when done properly, resident-owned coops can offer an affordable and more convivial alternative to single family housing. Coops save money by cutting out landlords’ profits, sharing common spaces, lowering operating costs, and receiving public subsidies for affordable housing. Studies show that coops provide other benefits, like greater social cohesion and support, reduced crime, increased civic engagement & sustainability, better quality and maintenance of housing, and resident stability.

Housing cooperatives are defined primarily by their legal structure: coop members own the housing collectively through shares in an organization, rather than individually, as with a condo. Residents also govern the housing democratically, either directly or through elected representatives. Not just for students, coops can be home to support groups of low income families, artists, elderly, disabled, and people with a common purpose. Over 1.5 million homes in the US are part of a cooperative housing organization.

There are several different kinds of coops:

• Rental or leasehold coops are democratically run organizations of tenants that equitably share costs of renting or leasing a building owned by someone else. Rental coops may share part of the management responsibility and often have more power collectively than single renters leasing from a conventional landlord. Nonprofits can also buy a building and rent it out to lower income folks who might not be able to afford shares. Sharing a house can offer big savings and can help people avoid foreclosure.

• Market rate coops are houses, apartment buildings or other groups of housing units that are organized under a democratically managed corporation in which residents purchase shares at a market rate. Shares cover the costs of a blanket mortgage, rainy day reserves, maintenance and other operating costs, insurance, tax, etc. Units are resold at market rate.
  
• Limited- or zero-equity affordable housing coops receive grants and government subsidies to make coop shares more affordable to low-income people. They keep the housing permanently affordable through legal restrictions on the amount of gain on a future sale of the coop share. Often these are organized groups of low-income tenants that agree to collectively buy the building they already rent through a nonprofit, usually a land trust that holds title to the land and takes it off the speculative market. It’s a great way to make permanent gains in the fight against gentrification.

The Columbus United Cooperative (photo by SF Community Land Trust)

A successful limited-equity model is Columbus United Cooperative, a 21-unit apartment building in San Francisco. The San Francisco Community Land Trust (SFCLT) worked closely with the low-income, Chinese-American family tenants who were fighting eviction and demolition. With public subsidy, tenants purchased their units as part of a coop for little more than their controlled rent in an area where home ownership is half the national average due to cost. In Los Angeles, Comunidad Cambria went from a gang war zone and drug supermarket slum to a model of peaceful, affordable cooperative housing with the help of coop housing activist Allan Heskin and several Latina women in the complex. The community rallied to protect its new coop against threats from gangs and drug dealers to burn the building down, remediated a toxic dump in its basement, and created a vibrant community center. Sunwise Coop is a rental cooperative, owned by Solar Community Housing Association, with a mission to provide eco-friendly, low-income housing in Davis, CA. The house uses solar water heating, photovoltaic panels, passive solar design, and composting to reduce their ecological footprint. They also grow their own veggies for shared vegetarian/vegan dinners and raise chickens and bees. Monthly shares or rental costs at affordable housing coops are often half or less of the market cost.

Coop housing rentals are a relatively easy first step to implement. Coop ownership can sometimes be a long, difficult process, but with much more substantial and long-term benefits. If you are thinking about starting your own housing cooperative, here is a basic plan for coop ownership, much of which applies to rentals as well:

• Find a potentially willing community of people who want to live together long-term. Some community cohesion and individual social skills are very helpful. If there isn’t already a community, holding dinners or other regular bonding events can lay a good foundation.
  
• Find a mentor through another successful coop, a nonprofit that helps develop housing coops (like a local land trust or the California Center for Coop Development), and/or a coop-friendly lawyer. Read the Coop Housing Toolkit.

• Educate community members about the entire process. Do an assessment to see if your community has the motivation, finances and skills needed to follow through. (If they don’t, you may want to recruit or train people that can help, especially with accounting, legal, organizing and maintenance tasks.) Make a decision whether or not to move forward.

• Work with a nonprofit or form an independent housing corporation. Form a Board of Directors from the residents’ community with membership, finance, maintenance and operations/management committees. Create bylaws for organizational procedure, including new member selection, orientations, decision-making, Board and committee elections, regular communication/meetings and conflict resolution processes. You can use another coop’s bylaws as a model.
  
• Develop a realistic budget with reserves, then research financing options. If your community is low income, it may be eligible for foundation grants, public subsidies from HUD or municipal affordable housing programs, and loans from Community Development Financial Institutions. Try working with banks that have already funded coops, it will be a much easier pitch and process.
  
• Select the dwelling that you want to buy, convert or construct and make sure the seller is willing to sell to a coop.

• Secure a loan and buy the building with the community through a blanket mortgage. This is much easier to secure when working with a nonprofit that has a track record of successful coop development.
  
• Complete any rehabilitation or upgrades that are needed in advance of moving in. This can be a fun way to build group cohesion in advance of all living under the same roof.
  
• Find ways to build community feeling through shared common space, childcare, dinners, group projects or other regular events. Develop relationships with the surrounding community through volunteering programs.

Although problems can come up as in any housing situation, the issue most likely to destroy the coop is internal conflict. Finding the right people and teaching others willing to learn how to get along is key.

For more info on how to share housing and other stuff as part of a cooperative, see The Sharing Solution, a book by Janelle Orsi and Emily Doskow, visit the National Association of Housing Cooperatives website and any of the linked websites above.

The Sunwise Coop family (photo courtesy by Sunwise)

Tags: Co-Ops, Community Building, community land trusts, DIY, house sharing, housing, housing coops

Matt Damon for president

Matt Damon for president? In US politics, they have seen crazier scripts

The line between Hollywood fame and political power is often blurred, so suggestions that the liberal actor might run can't be dismissed

• Paul Harris in New York
• The Observer, Sunday 14 August 2011
• Article history

Actor Matt Damon is being suggested as a contender for the US 2012 presidential race. Photograph: Stan Honda/AFP

Even in the increasingly wild world of American politics, it seemed an especially crazy idea: Matt Damon for president? After all, the handsome actor, whose boyish good looks belie the fact that he has just turned 40, is still best known for his early role in Good Will Hunting, where he played a working-class Bostonian.

Since then, he has won plaudits in Hollywood for solid work in films ranging from action flicks to Invictus, which told the story of post-apartheid South Africa's rugby World Cup triumph.

So why is Damon's name being mentioned in the context of the 2012 race for the White House and a possible liberal challenge to Barack Obama? The simple answer is to blame leftwing firebrand Michael Moore.

Moore, in a discussion with the liberal politics blog Firedoglake, raised the issue as he talked about his frustration with Obama, who many American leftists see as ignoring them while compromising with the Republican party. Moore called Damon's political stances in recent years courageous and urged him to run, despite there being no hint from the actor himself that he would care to. In a nod to the acting past of two-time Republican President Ronald Reagan, Moore said: "The Republicans have certainly shown the way that when you run someone who is popular, you win. Sometimes even when you run an actor, you win."

The suggestion quickly spread across the media, generating a lot of chuckles as well as predictable outrage from conservative pundits. But the suggestion showed two things that are not so easily dismissed. First, quietly and with impressive charm, Damon has emerged as an eloquent and fierce spokesman for a slice of liberal America. On everything from the Iraq war to education policy, he has been happy to take a stand and, rather than praise the president, he has come out publicly to say Obama has "mishandled his mandate".

Second, it showed that America, more than any country in the world, has a fluid boundary between the worlds of entertainment and politics.

From Reagan to Clint Eastwood, Sonny Bono to Arnold Schwarzenegger and Al Franken and many more, the list of US actors and performers turned politicians is lengthy and even distinguished. "The kind of character that pursues an acting career in America is often the same kind of character that pursues a political career. You have to stand up and make people like you and be good on TV," said Professor Robert Thompson, a popular culture expert at Syracuse University. So, Matt Damon for president? In 2012, almost certainly not. But one day? You never know.

Damon is certainly no shallow celebrity, long on good looks but short on brains. The Massachusetts native may have chosen Hollywood as a career, but he is not an actor picking causes with carefully staged press conferences on subjects that no one could dislike, such as stopping African famine.

Instead, Damon has lent his high profile name to the distinctly unfashionable cause of the Working Families Party. The WFP is an obscure leftwing political party that exists as a sort of pressure group in New York state on Democrats and leftists in order to pursue progressive ideals. Attaching your name to the WFP is about as far from trendy as any Hollywood celebrity could get. Yet Damon has been a passionate advocate for the party, appearing in a 2010 campaign video for them in which he urged New Yorkers to shun the Democrats and vote for the WFP as a genuine leftwing alternative.

Damon has won the hearts of many liberals by criticising Obama over policy issues, and standing up for teachers. Speaking at a recent Save Our Schools march in Washington, DC, he angrily denied a reporter's suggestion that teachers were cosseted. "A teacher wants to teach. I mean, why else would you take a shitty salary, and really long hours, and do that job, unless you really love to do it?" he fumed. A video of the encounter went viral, with Damon being hailed a hero by teachers' groups.

Damon, like Sean Penn with Haiti and George Clooney with Darfur, is one of the few big names who can genuinely say they are activists, not just celebrity brands attached to a good cause. He founded the H2O Africa Foundation, which later became Water.org and which aims to bring clean water to disadvantaged people. He has been involved with Darfur. "Matt Damon seems like a real person on these things. He's running that whole water issue. That actually takes up a lot of his time," said Richard Laermer, a celebrity expert and author of the book 2011: Trendspotting. On a host of issues Damon has eloquently and publicly spoken on subjects dear to liberal hearts. He has slammed the recent debt-ceiling deal struck by Obama and the Republicans and called for rich people like himself to be taxed more. He has spoken against the Iraq war.

Perhaps one should not be surprised; Damon is highly educated. Though he eventually dropped out to pursue an acting career, he went to Harvard, where he studied English. His mother – who introduced him at the teachers' rally – is an education professor.

But, experts say, Hollywood has given him what is needed most: name recognition. "An actor has a precious thing in politics. People know who they are and they will pay attention when someone puts a microphone in front of them," said Syracuse's Thompson.

Indeed, that power can make a political career out of the unlikeliest of raw material. Look at how former pro wrestler Jesse Ventura became governor of Minnesota, or how comedian Franken became a senator from the same state and – perhaps most bizarre of all – how Schwarzenegger went from playing a killer robot from the future to being governor of California and responsible for one of the biggest economies on Earth.

The road between Hollywood and politics has also produced notable successes. Franken, a former stalwart of Saturday Night Live, has won plaudits for his seriousness as a politician. Schwarzenegger was seen as a joke when first elected, but he easily won a second term and became known for cutting-edge environmental policies. Most successful was Reagan, who went from a B-movie actor to being one of the most influential Republican presidents of the 20th century. Indeed, while most stars who dabble in public life are seen as "Hollywood liberals", some of the most successful, such as Reagan and Schwarzenegger, have been conservatives.

But the road to political power is not always easy for an actor. On the liberal side of the aisle, Warren Beatty was mentioned as someone who might run for president but never did. And among Republicans, the name of Fred Thompson stands as a salutary lesson in the limits of power. Few people have blurred the lines between acting and politics as much as Thompson, who combined his acting career with becoming a senator from Tennessee. He has played a US president on TV but when he ran for the Republican nomination in real life in 2008, his attempt was a disaster.

So, while Americans are tolerant of actors who want to be politicians, they do not write them a blank cheque. "Celebrity can be a blessing or a curse. You are able to get people to listen to you, but you need to have something they want to hear," said Robert Thompson.

Redistribution in property-constrained economy: raising the minimum wage or lowering effective rents?

Julian Sayarer, 6 July 2011

Subjects:

• Equality
• Economics
• England
• redistribution

Rising rents in the UK are making hardship harder, while low interest rates transfer wealth from the have-not's to the have's. Can we be doing something more sensible?

About the author

Julian Sayarer writes at thisisnotforcharity.com.

Two competing ideas dominate debate of how to improve quality of life at the wrong-end of society, and though both find immediate sympathy with progressive thinking, they are, alas, somewhat opposed to one another. The first idea, steadily gaining traction, is improved wages for low-skilled work, whilst the other, yet to receive any great clamour for change, is the need for serious interventions to reduce the cost of housing. With rent expenditure reckoned to account for 35% of income to the poorest households, and rising as high as 80% amongst students, although some might see higher wages and lower rents as different methods for skinning the same cat, the reality is a little different. If reduced rents can be said to get to the bottom of the problem, higher wages are the palliative that allow us to forget the problem for a little while longer.

The case for higher wages has been boosted recently, with the London Living Wage increased last month by 5%. Now at £8.30, the wage, which is received by one-in-six low-paid Londoners, embodies the irrefutable argument that wages should do more than merely allow people to live-on in poverty. More recently, the Institute for Public Policy Research (IPPR), last week released its report, ‘Getting What We Deserve?’, which demonstrates broad support for wage increases to the lowest paid. With statistics showing that bosses in FTSE 100 companies received 88 times the UK median wage in 2009 (even as recently as 2000, the amount was ‘only’ 47 times greater), it is hard to dispute both the validity and the rightness of a call for change.

Housing rents have also come in for attention of late, with the Halifax Bank labelling ‘Generation Rent’ as the current demographic of 20-45 year olds, of which only about 5% are given a realistic chance of eventually owning a house. Though there exist sound arguments in favour of Britain moving away from a model of home-ownership, with frequent nods towards the preference for renting elsewhere in Europe, until the cost of renting is reduced, Britons are undoubtedly getting a raw deal – the advantages of housing flexibility but at the full cost of ownership. Despite this, whilst the living wage campaign gathers a degree of groundswell in its favour, the story of UK renting reads more like a ‘how high can it go’ horror story. New statistics show 7.8% increases in London rents, average rises of 6.3% across the east Midlands and north-east, and landlords pocketing an average £6152 from their tenants annually, additional, of course, to ownership of the house itself. Whereas rent increases in London and the south-east are traditionally brushed-aside with arguments for crowding and supply-and-demand economics, comparable rises elsewhere in the country belie not just benign demographic changes, but the broader picture of a skewed market.

The imbalance of power between landlords and tenants is compounded not only by direct exchange of wealth, but indirectly by steadfast refusal from the Bank of England to raise interest rates from 0.5%. What ensues is an implicit, low-interest subsidy to mortgage-holders, whilst the consequences, namely a 4.5% rate of inflation, means every £100 saved by aspiring home-owners will only be worth £91 in two year’s time anyway. In the face of this massive movement of capital from have-nots to haves, there is precisely nothing on the horizon to ameliorate matters.

And, somewhat tragically for such a noble cause, wage increases will ultimately exacerbate the problem, they represent the equivalent of giving blood to a patient bleeding to death, rather than repairing the severed artery. With all evidence pointing towards rent as an egregiously high proportion of people’s essential outgoings, the more obvious solution is to right the fundamental wrong, rather than tamper with the numbers entered into a machine already some way past broken.

Nothing could illustrate this more clearly than the fate of the 5% increase in the London Living Wage. With the raise already down to 0.5% after inflation, by the time the 7.8% rise in London rent is accounted for, workers are likely to have experienced marginal decreases in their real wages. Moreover, in this we see a housing model subsidised not only by a devaluation of our monetary supply, but subsidised a second time by a tax on productive business, whose increased wage bill is immediately appropriated, not by workers, but by landlords. As if this were not already bad enough, increased wages, once fed back in to market prices, contribute to the very inflationary process that inflicts disproportionate harm upon the very poor they seek to help. With both the unemployed and pensioners bypassed by wage rises but clobbered by inflation, we are left, excuse the continuing metaphors, throwing water on a chip pan fire. Not just economically harmful, wage increases pay homage to the very financial mechanisms that are widely accepted as disempowering the socially vulnerable. With headline inflation forecast to reach 5% even before increases in the UK’s current 2% rate of wage inflation, it is a no-brainer as to whether the poor will be better served by higher numbers of monetary units soon to be devalued by market forces, or by steps to liberate the human right of housing from those forces. If an austerity beset Westminster has political capital in it for one significant act to benefit the working poor, make no mistake that wage increases should not be it.

And yet, whereas David Cameron has dubbed the living wage ‘an idea the time for which has come’, try finding a peep out of government on the subjects of land and property ownership, or taxes on rental incomes. A handful of companies have made positive efforts to tap the inefficiencies of the property market, renting empty premises at low rates, and so providing tenants with cheap accommodation whilst saving landlords the security and maintenance costs of an empty building. The social enterprise, Dot Dot Dot, estimate that a million premises lie empty in the UK at any one time, and although this newly-launched venture seems to have all the best intentions, more established competitors, such as Camelot and Ad Hoc, have seen rents and deposits creep towards normal market rates. The situation drifts further from ideal when considering that tenants are left with the insecurity of two weeks eviction notice, and average residencies lasting just eight months. Although such ventures make the most of a bad situation, it is hard not to feel that the situation itself demands improvement.

A land tax is one obvious solution, annual levies on property ownership representing a disincentive to buildings kept empty for purposes of cashing-in on economic upturns. That such upturns are generally driven by government spending and business innovation, and rarely by the parasitic activity of property speculation, adds an extra justice to the proposition. A land tax would also mean that simply holding land without putting it to productive use would be expensive, and would therefore encourage an increase in the supply of new build – an important part of the solution, ultimately, to housing costs in the South East.

It is a great shame, therefore, that rents and property have failed to capture the media and third-sector imagination to quite the same extent as wages. Though none could doubt the integrity of living wage campaigns run by Citizens UK, nor the good intentions of IPPR recommendations, the focus on wages leaves rents as the enormous elephant that nobody wants to shove out of the room.

Across the board, such is the tone of media and politics. The Guardian has condemned Tory plans for a £26,000 cap on benefits, with ‘high rents’ accepted at face value as one reason why government and taxpayer must continue to stump-up the money for people who cannot, independently, afford to be alive in twenty-first century Britain. The Salvation Army voiced dismay when the government announced that those on jobseekers allowance would receive a 10% cut in housing benefit after an initial twelve-month period. The charity receives in excess of £20million of housing benefit annually (plus service charges deducted from other benefits received by residents, plus a further £20million from the housing-related Supporting People Fund), and with only 3200 UK beds, that leaves the organisation in receipt of more than £6200 per bed in annual housing benefit alone, no better than commercial rent, and in some parts of the country, far worse.

Housing benefit arguably represents the most insulting component of the rental farce, with profiteering landlords long-able to charge average local rents for sub-standard properties, safe in the knowledge that taxpayer-backed benefit payments would blindly deliver anything up to that average. Changes from the coalition government, whereby housing benefit will now only cover approximately two thirds of average local rent, are a blanket measure that will reduce the profits available to this practice, but also disadvantage many claimants without wholly eradicating the problem.

The lunacy of the debate reached a zenith with last year’s spat between the government and Boris Johnson. The London Mayor, himself a living wage supporter, voiced concerns about ‘social cleansing’ in areas of the capital where poor people, suffering reduced benefits entitlements, would no longer be able to afford to live. Here we were faced by a disagreement, not about exorbitant rents across significant parts of the capital, but about whether the taxpayer should pay exorbitant rents on behalf of people across significant parts of the capital, one further transfer of public capital to private landlords. At the time, Johnson’s comments were welcomed as a sign of both his supposed progressive tendencies, and his support for social diversity. Stripped to their bones, however, what we see are only the romanticised dribblings of the upper class, a notion that poor people should be funded to live beside the wealthy, like some exotic exhibit in our social zoo, and in denial of the unjust inefficiencies our property-led economy continues to nurture. The problem is not in our paycheques but under our feet, increased wages are a poor antidote to the illness with which we have been stricken.

Social Security: The People's Pension

ABOUT THE PEOPLE'S PENSION

What is Social Security?Americans have been watching for three decades now as members of their political and financial elites attempt to redefine the most successful social program in U.S. history by downgrading and ultimately privatizing benefits, all in the name of fiscal responsibility. (But what about the people who depend upon it?)

What is Social Security? It’s an old-age income program for American workers. It’s disability insurance for injured workers. It’s survivors’ benefits for the families of deceased workers. It’s a social insurance system that belongs to every American working person who pays payroll taxes. That means it’s also a form of mutual aid: the way human beings cooperate to fulfill each other’s needs and desires.

“It’s not just a program,” presidential candidate George W. Bush said in 2000. “It’s your property.” He was right. But it’s a collective possession, not a wad of money stuffed into an investment account. I started this blog to help people following the Social Security debate keep it all in perspective: What Social Security is. What it does. And who it’s supposed to benefit.

Who am I? I’m an independent journalist who’s been covering political and financial news for more than a quarter-century. I’ve been studying and writing about Social Security for more than 15 years. I’m the co-author, with Seth Tobocman and Jessica Wehrle, of Understanding the Crash (Soft Skull Press/Counterpoint, Spring 2010). I recently completed a history of the Social Security debate, The People’s Pension: The War Against Social Security from Reagan to Obama (AK Press, Spring 2012).