May 21, 2012 |
As our political system sputters, a wave of
innovative thinking and bold experimentation is quietly sweeping away
outmoded economic models. In New Economic Visions, a special five-part AlterNet series
edited by economics editor Lynn Parramore in partnership with political
economist Gar Alperovitz of the Democracy Collaborative, creative
thinkers come together to explore the exciting ideas and projects that
are shaping the philosophical and political vision of the movement that
could take our economy back.
In September 2011, two Appalachian women traveled to Delaware to
deliver a petition to the state's Attorney General Beau Biden. Betty
Harrah and Lorelei Scarbro represented thousands who believed that the
business charter for coal-mining company Massey Energy should be
repealed. The company, mostly operating in Appalachia but incorporated
in Delaware, has
violated the Clean Water Act 60,000 times. An
investigation
commissioned by the governor of West Virginia found Massey could have
prevented the explosion that claimed the lives of 29 miners, among them
Harrah's brother, at the Upper Big Branch Mine in 2010.
Massey, they contended, was simply too dangerous to be in business.
But their pleas fell on deaf ears. The company plugs along, despite its
shoddy environmental and safety records, churning out profits for its
parent company, Alpha Natural Resources.
To many, Massey is not simply one bad apple, but part of an economic
system heavy with rotten fruit. Companies like Lehman Brothers, Bank of
America, Countrywide, BP, and Walmart epitomize the relentless drive of
corporations to maximize profit above everything else, including safety,
fair working conditions, clean air and water, healthy communities, and
common decency. In doing so, the very word "corporation" has become a
dirty word.
Forget bad apples, perhaps we should just raze the entire orchard, right?
Our economy, like our environment, is in trouble. Limitless growth
that drives the profit-hungry corporate model today is ecologically
impossible. We simply cannot sustain business as usual and the cracks in
our system are showing.
"You look at the Arab Spring ... what looked like very stable regimes
across the Arab world were suddenly shown to be completely vulnerable
and brittle and I think that we may see the same kind of thing in our
economy," said
Marjorie Kelly, a fellow at the Tellus Institute and author of the new book
Owning Our Future: The Emerging Ownership Revolution. "What looks massive and permanent and invulnerable, may show itself quite suddenly to be brittle."
Maybe this doesn't sound heartening but it should. The corporate
model we have today hasn't always been around and it doesn't need to
remain the dominant way we do business. There is no reason we should be
swabbing the decks of a sinking ship -- alternatives already exist and
they are flourishing.
"What's underway is an ownership revolution. It's about broadening
economic power from the few to the many and about changing the mindset
from social indifference to social benefit," Kelly writes. "We're
schooled to fear this shift, to think there are only two choices for the
design of an economy: capitalism and communism, private ownership and
state ownership. But the alternatives being grown today defy those dusty
19th-century categories. They represent a new option of private
ownership for the common good. This economic revolution is different
from a political one. It's not about tearing down but about building up.
It's about reconstructing the foundation of ownership on which the
economy rests."
Better Business
A common complaint in today's world is one of disconnection. Our
industrialized world has resulted in less contact with community -- we
don't know our neighbors or who grows our food. In the same way that
we've lost touch with a deeper sense of belonging and place, many of us
have become disconnected from the soul of our work. The
corporation-worker structure today is a master-servant relationship.
We're slaves to the company, working longer hours for less wages.
"Now mass layoffs to boost profits are the norm, while the
expectation of a career with one company is long gone," William
Lazonick
wrote.
"This transformation happened because the U.S. business corporation has
become in a (rather ugly) word 'financialized.' It means that
executives began to base all their decisions on increasing corporate
earnings for the sake of jacking up corporate stock prices. Other
concerns -- economic, social and political -- took a backseat. From the
1980s, the talk in boardrooms and business schools changed. Instead of
running corporations to create wealth for all, leaders should think only
of 'maximizing shareholder value.'"
Our economy is dominated by a monoculture business model, Kelly says,
driven largely by publicly traded corporations that have built in
pressure from Wall Street for maximum short-term earnings. But a
healthy, living economy needs biodiversity. We can find this if we begin
to look around -- across the U.S. and the world -- where there are
businesses designed not for maximum profit, but with a mission-driven
social and economic architecture. One of these models is the "social
enterprise."
The
Social Enterprise Alliance
defines these organizations as "businesses whose primary purpose is the
common good. They use the methods and disciplines of business and the
power of the marketplace to advance their social, environmental and
human justice agendas." And one of the defining characteristics is that
"The common good is its primary purpose, literally 'baked into' the
organization's DNA, and trumping all others."
Here's an example. Remember Working Assets? Starting out as a
progressive-minded credit card company in the '80s, it added phone
service -- first long-distance in the '90s, then cellular in 2000 -- and
now it has created the subsidiary
CREDO Mobile.
The company operates as a for-profit business, which is privately
owned, with most of the employees owning the stock, so it doesn't have
to bow to Wall Street pressures. They use their profits to help support
causes they believe in -- so far the amount of money donated is $70
million and counting.
Social enterprises can also be nonprofits, like
Goodwill Industries,
which last year turned donations from 79 million people into revenue
that provided job training to 4.2 million people. And by reselling
donated clothing, furniture and household goods, they divert an
estimated 2 billion pounds from landfills every year.
The idea of social enterprises is catching on in the business world
in the U.S. with the emergence of Benefit Corporations, also known as
B Corps, which are
designed,
"to create a new sector of the economy which uses the power of business
to solve social and environmental problems." B Corps are all for-profit
companies that have legal structures mandating that the company is
designed to work not for maximum shareholder gain, but for the good of
society and the environment.
Currently there are more than 500 companies that have become approved
B Corps and legislation has been passed in seven states (Maryland, New
Jersey, Vermont, Virginia, California, Hawaii and New York) making them
official entities. Some are larger corporations, such as Method Products
and Patagonia, but many are also smaller companies and
business-to-business operations.
B Corps are similar in design to another kind of company called L3Cs.
"The L3C is a hybrid between the nonprofit and for-profit models in
that it is essentially a profit-generating entity with a socially
beneficial mission," writes Ashley Holmes for
GreenBlue.
"Like an LLC corporation, L3Cs have the same liability protection and
are not tax-exempt; however L3Cs have access to forms of capital that
traditional corporations don't qualify for, all in order to further
social and environmental goals. Americans for Community Development
describe the L3C as a company that 'combines the best features of a
for-profit LLC with the socially beneficial aspects of a nonprofit...
the for-profit with a nonprofit soul.'"
It's About the Workers
B Corps and L3Cs create a legal foothold for a more sustainable kind
of business. But other models get to the heart of the new economy as
well and take up the important ideas of ownership and governance. Who
gets to make decisions about how our companies are run and who gets to
share in the wealth that's created?
The U.S. helped create a system in post-war Germany for works
councils, where workers are elected from companies to help manage how
the business is run. "That means the councils help determine core
issues, like when to open and close the store or office, who gets what
shift, and who gets laid off or fired,"
wrote Jeremy Gantz in a review of Thomas Geoghegan's book
Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life. Germany
also has co-determined boards, which give workers a voice in governance
-- companies with more than 2,000 employees have half of their boards
composed of workers.
Empowering employees has proved a successful business model elsewhere. The
John Lewis Partnership
has been around in the UK since 1920 and has grown to over 30
department stores and more than 200 supermarkets, with a revenue of
$13.4 billion. The business is employee-owned -- all workers get to
share the profits and vote for the governing council and company's
board.
"This firm has a written constitution, printed up and publicly
available, which states that the company's purpose is to support 'the
happiness of all its members,'" wrote Kelly. "Now, let me pause and
note: this is the only major corporation I've found that declares its
purpose is to serve employee happiness. This is so, at JLP, not because
it boosts returns for shareholders. At the John Lewis Partnership,
employee happiness isn't a path to some other goal. It is the goal."
Employee-owned companies aren't just a British anomaly. "In the
United States, the National Center for Employee Ownership reports that
there are 11,300 employee-owned firms, with some 14 million
participants," Kelly found. "And in Europe, large companies have nearly
10 million employee-owners. Employee ownership has been increasing in
such countries as Spain, Poland, France, Denmark, and Sweden."
Organizations can be run with employee owners or other kinds of
members. The London Symphony is owned by the musicians who play in it.
Barcelona FC soccer team and the Green Bay Packers football team are
community-owned. Mutual insurance companies are owned by policy holders
and credit unions are owned by depositors.
Employee-owned businesses and cooperatives have emerged in the green
business world with great success, as well. Community-owned forests in
Mexico support indigenous people, protect the environment and prevent
illegal logging. In Denmark community-owned wind farms have jumpstarted
wind energy, supplying 20 percent of country's power. In Minnesota,
Minwind is a farmer-owned wind development company that's grown to 350
members.
A New Vision
There are different legal and social structures that can help to feed
this growing new economy. In Quebec, a "solidarity" or "social economy"
was created to help nonprofits and cooperatives, and it gets popular
and government support. Spain is home to
Mondragon Cooperative Corporation,
which is a network of more than 100 cooperatives, employing 100,000
workers. This cooperative model helps support new business ventures. If a
firm is struggling in its first few years, interest rates are lowered
to help it instead of flagging the business as high risk and then
jacking up interest rates like we do here, says Kelly.
Supporting these new ventures is important, but so is holding the
companies accountable to their missions. For cooperatives and
employee-owned companies, like the John Lewis Partnership, where members
get a vote and can elect those who make governing decisions (or run for
the positions themselves), there is more power to make sure the company
is keeping its word. With privately held businesses, accountability can
be much harder. The B Corp certification process is one way that helps
get around the blind spots -- certified B Corps have to prove themselves
to a third-party organization -- creating accountability and
transparency.
So what can we do in the U.S. to spur the development of socially and
ecologically conscious business? "I used to think we needed new federal
legislation and corporate chartering and that we could drive change
with state and federal law," Marjorie Kelly said. "And I do think we do
need an articulation of what a company ought to be in law." But we have
to go beyond that, she insists.
"A teacher at Schumacher College posed a question: What kind of
economy is suited for living inside a living being?" Kelly said. "It's
not an endlessly expanding economy, it's not an economy that's designed
to serve the few, at the expense of the many, it is an economy that is
generative; that is life-serving in its purposes. How do we generate the
conditions for life to continue and to thrive?"
The answer will likely be not one thing, but a compilation and
diversity of different business models that are consistent with
supporting workers, protecting the environment, and serving the broader
social good.
Tara Lohan is a senior editor at AlterNet and editor of the new book
Water Matters: Why We Need to Act Now to Save Our Most Critical Resource. You can follow her on Twitter @TaraLohan.
