Stemming The Trickle-Up Effect: Finding Alternative Economies

by Abra Pollock

Washington - When he took office last year, U.S. Treasury Secretary Henry Paulson said he was increasingly concerned about the widening gap between the nation's rich and poor.

That gap has since shown few signs of narrowing -- quite the opposite, in fact -- and a growing number of experts are urging the adoption of unconventional measures to address the problem.

The promotion of employee-owned companies, community land trusts, and various forms of social enterprise could provide some of the keys to a more equitable society, according to dozens of economists, social scientists and political activists who convened here last weekend to reevaluate the priorities of the U.S. economy.

"Recent trends like globalisation, widening wealth inequality, and climate change have made it crystal clear that an economy's success cannot be measured by traditional statistical indices like Gross Domestic Product (GDP) or the Dow Jones Industrial Average," economist Nancy Folbre told members of the conference, titled, "What is the Economy for, Anyway?"

"We economists have a responsibility to think more broadly about what a healthy economy might do for its participants. We need new metrics and new models," she said.

While U.S. macroeconomic statistics have generally shown a robust economy over the past quarter century, economic inequality is one area that has caused growing alarm. Positive growth and its corresponding economic benefits have been strictly limited to the highest income percentage of U.S. citizens, experts explained.

"Saying that the majority of the country's economic gains in recent years have gone to the top 1 percent of the income ladder understates the trend," said Heather Boushey, a senior economist at the Centre for Economic and Policy Research.

Indeed, the top 1 percent of U.S. citizens earn as much as the bottom 33 percent together (about 100 million people), according to Ted Howard, executive director of the Democracy Collaborative at the University of Maryland.

While the U.S. economy grew 160 percent between 1973 and 2005, those in the top 0.01 income bracket saw their income levels rise by 250 percent. During this same period, the average real income for the bottom 90 percent actually dropped 11 percent.

With an economic status quo that doesn't "work" well for anyone but the very rich, other practices that may seem less conventional can bolster and protect the livelihood of the rest, experts explained.

Employee stock ownership plans (ESOPs), for example, do exactly what they sound like they do: ESOPs transfer ownership of a company from an individual proprietor or group to the employees who work in that company. One such firm is W.L. Gore & Associates, the company that produces Gore-Tex material, among other products.

"Thirty years ago, if we were sitting around talking about workers owning the companies that they work in, this would have been a radical socialist question -- workers owning the means of production!" Howard said. "Today, ten million workers work in over ten thousand companies that are organised through employee stock ownership plans."

Such firms own over 600 billion dollars in assets. The average retirement account for employees at ESOP firms, according to Howard, is now in the range of 64,000 dollars per person -- markedly higher than most retirement plans for non-ESOP companies.

In addition to employee stock ownership plans, community land trusts can help ensure affordable housing for people across the country who don't happen to have membership in the top 0.01 percent.

In community land trusts, such as in Irving, California, where there are 10,000 units of land trust housing, individuals and families still purchase their homes, but a non-profit corporation owns the land on which the homes are built. The price of the home remains affordable since equity on the home can only increase a certain amount each year. Houses are then sold at a much lower rate to the next owner.

Another institution that builds economic leverage in an arena that typically does not accrue significant wealth is social enterprise for non-profit organisations and low-income communities. Community Development Corporations (CDCs), which exist in many cities across the country, are the most well-known form of social enterprise.

CDCs focus primarily on supporting the needs of a municipality's low- and moderate- income populations, and usually provide a wide range of services, including economic development, education, and real estate development. The Newark CDC in the state of New Jersey is the second-largest employer in the entire city, employing 1,500 people and managing enterprises ranging from a supermarket to daycare centres and a trucking company.

"Underneath what we think of as the economy -- what you read in the New York Times business pages, what you see on the evening news, or see on CNN -- there is in fact a growing constellation of wealth-creation institutions all over America that are employing people, that people are owning, and they're beginning to have a big impact," Howard said.

In light of this trend, progressive economists and activists are launching a U.S. Solidarity Economy Network that would coordinate a nationwide movement for promoting these practices. The purpose of the Solidarity Economy Network (SEN) is to build "economic alternatives grounded in principles of social solidarity, cooperation, egalitarianism, sustainability, and economic democracy," explained Emily Kawano, director of the Centre for Popular Economics in Amherst, Massachusetts.

The impetus to organise a U.S. solidarity economy movement arose out of a series of meetings held at the U.S. Social Forum in Atlanta, Georgia last June.

While the SEN in the U.S. is only months old, other countries around the globe have solidarity economy groups that have made major advances. Both Brazil and Canada have solidarity economy networks with national policy platforms, and Canada's network has won 132 million dollars in government funding for "investment, capacity building, research, and training," according to Kawano.

There's even an international group, the Intercontinental Network for the Promotion of the Social Solidarity Economy (RIPESS) which, at its 2005 meeting in Dakar, Senegal, brought together over 1,200 organisers and activists from six continents.

"The solidarity economy movement is very strong in other parts of the world. There are networks in other countries, networks in other regions, there's an international network. And there's this great big blank in the U.S.," Kawano said -- until now.

This network can be an effective means by which ordinary people can begin to think about social justice in our own backyard, according to Ruth Castel-Branco of 50 Years is Enough, a U.S.-based global justice coalition.

"I think that there is a lot of potential behind a solidarity economy network [in the U.S.]," Castel-Branco said. "Examples of a solidarity economy that exist in people's lives can be a lot more compelling and personal than thinking about confronting international financial institutions."

Launching a U.S. Solidarity Economy Network, and promoting practices that build community wealth in the face of widening inequalities, are the most viable means of reducing the income gap and reorienting the economy towards social justice and quality of life priorities, experts agreed.

Building awareness and support for these ideas is the first step. As a Seattle community planner, Milenko Matanovic, put it, "A precondition for a healthy society is to have an articulated image of the 'other future' -- that tension between where we are now, and where we could be."
© 2007 Inter Press Service