Stemming the Trickle-Up Effect
HomeECONOMY-US:Stemming the Trickle-Up Effect
Abra Pollock
WASHINGTON, Oct 10 (IPS) - 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.
Abra Pollock
WASHINGTON, Oct 10 (IPS) - 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 US economy.
"Recent trends like globalization, 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 US 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 US citizens, experts explained.
"Saying that the majority of the country's economic gains in recent years have gone
to the top 1% 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% of US citizens earn as much as the bottom 33% together (about
100 million people), according to Ted Howard, executive director of the
Democracy Collaborative at the University of Maryland.
While the US economy grew 160% between 1973 and 2005, those in the top
0.01% income bracket saw their income levels rise by 250%. During this same
period, the average real income for the bottom 90% actually dropped 11%.
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 in assets. The average retirement account for
employees at ESOP firms, according to Howard, is now in the range of $64,000
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%.
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 US
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 US solidarity economy movement arose out of a series
of meetings held at the US Social Forum in Atlanta, Georgia last June.
While the SEN in the US 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 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 US," 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 US-based global justice coalition.
"I think that there is a lot of potential behind a solidarity economy network [in the
US]," 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 US 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."
(FIN/2007)
