economics

Muddling Toward Frugality – Part 2 of 2


From Warren Johnson
Covelo, Mendocino County
Muddling Toward Frugality -1978- Sierra Club
Extensive excerpts, with permission of the author
Part 1 | Part 2

More and more, the key to economic survival will be to learn how to get by with less income. There are many opportunities to make a modest income; they will become economically viable opportunities to the first people that are able to get by on the small income generated. It is frugality that has allowed the Briarpatch network, a group of small independent entrepreneurs doing what they want to do on reduced incomes, to flourish in the San Francisco Bay Area. It is also what has allowed the Amish to thrive and expand on small farms all during the period when most small farms were going out of existence. A low income is the heart of frugality.

It takes a highly motivated and creative person or family to undertake the risk of developing his own work while getting by with less and learning how to become more self-sufficient. For the first pioneers, it can be lonely and difficult work in unfamiliar territory. The frequently heard criticism that says these people are “dropouts,” and that they do not contribute their skills and energies to solving society’s problems, is totally wrong. They are doing a task that is essential for our future, developing new skills and ways of living that will provide models for others as necessity pushes more of us in that direction. Nothing could be more important. The pioneers are opening up new economic territory where subsequent settlers can join them.
~

The commune movement was a discouraging one, on the whole. The best that can be said for it is that it demonstrated a good deal about what was practical and what was not. It showed, most significantly that it is not possible to have the best of all possible worlds—combining togetherness, sharing, and simplicity with complete freedom in personal relationships and sexual matters, and asking for no sense of duty to stick out the hard times or to be on good terms with one’s neighbors. That vision of the good life, in which there were to be huge benefits at practically no cost, has, at least for the time being, been put to rest…

A better basis than communes for decentralized groups would seem to be communities—for example, a community organized under the auspices of an established organization. A community based on a known organization, philosophy, religious faith would be more apt to receive financial support and local acceptance. Bureaucracy has its usefulness too. Established organizations could better assure the continuity of the community and would be more likely to attract members from all parts of society than just the affluent young, the main group involved with the communes. The Black Muslims and CORE, the Congress of Racial Equality, have both developed cooperative economic activities in the south, since they concluded a long time ago that northern cities would never provide a good life for poor blacks. Cooperatives are also an attractive alternative to what is often experienced as the lonely and threatening world of commercial competition. Individuals with land or economic enterprises could work them cooperatively, if they felt strongly enough about the particular philosophical basis on which the cooperatives were organized.

Any alternatives that might evolve, whatever their form or function, will make a major contribution to the economy and to the choices available to people. If their numbers were to increase substantially, it is possible that the shortfall in jobs could be reduced, greatly easing the adjustment to scarcity. But whatever their numbers, successful communities will be valuable additions to the range of models available to others in the future. New communities may have to struggle for a long time before getting firmly established, but this should not be held against them; it is characteristic of the muddling process. Such tasks are not easy and straightforward.
~

Keep reading Muddling Toward Frugality – Part 2


Cooperative Business


From Dave Smith
Ukiah

The Mondragón cooperatives of Spain combine credit unions and service cooperatives such as grocery stores with industrial manufacturing cooperatives, research centers, and a university — all as one intergrated unit. As a cooperative corporation, they are “an association of persons rather than an association of capital.” That means one person, one vote rather than votes apportioned to the amount of capital invested. It also means that the individual workers own and control the company they work in. They are the largest worker-owned cooperative in the world, doing many billions of dollars in sales. They own and operate thousands of supermarkets, a travel agency with hundreds of units, and gas stations. They also manufacture automotive parts, domestic appliances, bicycles, and bus bodies.

Although cheap energy has allowed organizations to balloon into huge monoliths that will now have to breakup and scale down into decentralized pieces, it is instructive how well the cooperative model can adapt to financial environments and serve its members. As our giant governments, banks, and corporations flounder trying to save a way of business that will have to change drastically in the years ahead, the cooperative model, along with small-scale private businesses, is a way local communities, such as ours, can adapt to the coming “mandates of reality.”

The Mondragón cooperative model can be compared to the corporate structure as follows:

· Owner-workers are valued as people. Management professionalism, product excellence, and customer satisfaction matter more than the rapid growth of profits.

· Owner-workers participate in management, with salary difference limited to a three-to-one ratio, rather than just being used at the whim of a grossly overpaid management class.

· The social contract commits everyone involved to the development of the business, with member-owner security and partnership with capital, rather than confrontation between labor and capital.

· Profits and losses are shared among all proportionally, rather than profits being internalized and costs being externalized irresponsibly.

Mondragón’s Community Bank, a credit union that serves as the core of its financial system, is owned and controlled by the member-owners of the cooperative. Without their own banking sytem, the cooperative would have failed. The bank invests in the development of new enterprises under the motto “Savings or Suitcases,” meaning members can either invest in their own community or watch their money leave their community to work elsewhere and enrich others. The cooperative also operates their own social security facility, which provides unemployment insurance, medical services, and medical insurance.

The Mondragón consumer cooperative grocery chain, with 264 stores, is run by a general assembly composed of an equal number of consumer-members and worker-members. The assembly elects a board that is similarly balanced, with six employees and six consumer-members, with a chairperson who is always a consumer.

Mondragón principles include (1) openness to all, regardless of ethnic background, religion, political beliefs, or gender; (2) the equality of all owner-workers and democratic control on the basis of one member, one vote; (3) the recognition of labor as the most essential, transformative factor of society and the renunciation of wage labor in favor of the full power of owner-workers to control the co-ops and distribute surpluses; (4) a definition of capital as accumulated labor, necessary for development and savings, with a limited return paid on that capital; (5) cooperation, defined as the development of the individual with others, not against others, to self-manage (managers are elected by the workers) and develop training and skills; and (6) wages that are comparable to prevailing local standards.

According to Don José María Arizmendiarrieta, the founder of Mondragón: “Cooperation is the authentic integration of people in the economic and social process that shapes a new social order; the cooperators must make this objective extend to all those that hunger and thirst for justice in the working world.”

Greg MacLeod, author of From Mondragón to America, writes: “The Cooperative Corporation itself is a moral entity having responsibility at three levels: (1) towards the individual employees, (2) towards the cooperative corporations which make up the Mondragón family, and (3) towards the general society of which it is the basic unit. As a microcosm of the general society, the enterprise must practice all the virtues demanded of the total society such as respect for the members, personal development and educational programs, social security and distributive justice.”

This successful alternative to the classic, top-down corporate model allows thinking outside the box store. Bottom-up democracy works and is the next step in bringing meaning into our work as well as our politics. Some of our politicians love to constantly spout off about bringing democracy to other nations, even if it takes our bombers and infantry to preemptively force it on them. Politicians who love democracy should not stop with politics. Let’s take them at their word, in our own local communities where the action will be in the future, and ask them to help us complete the American revolution by bringing democracy into our workplaces and our economies.


Bad Faith Economics – Krugman


By Paul Krugman
NYT

As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending.

Some of these arguments are obvious cheap shots. John Boehner, the House minority leader, has already made headlines with one such shot: looking at an $825 billion plan to rebuild infrastructure, sustain essential services and more, he derided a minor provision that would expand Medicaid family-planning services — and called it a plan to “spend hundreds of millions of dollars on contraceptives.”

But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers. So as a public service, let me try to debunk some of the major antistimulus arguments that have already surfaced. Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.

First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.

It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)

The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 — and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.

Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.

Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.

The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created (see the previous fraudulent argument) — because a large fraction of any tax cut will simply be saved.

This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.

Finally, ignore anyone who tries to make something of the fact that the new administration’s chief economic adviser has in the past favored monetary policy over fiscal policy as a response to recessions.

It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero.

That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject — and therefore has no business weighing in on the debate — or is being deliberately obtuse.

These are only some of the fundamentally fraudulent antistimulus arguments out there. Basically, conservatives are throwing any objection they can think of against the Obama plan, hoping that something will stick.

But here’s the thing: Most Americans aren’t listening. The most encouraging thing I’ve heard lately is Mr. Obama’s reported response to Republican objections to a spending-oriented economic plan: “I won.” Indeed he did — and he should disregard the huffing and puffing of those who lost.

[Action: Fill the internet with emails, and the phone system with calls to our representatives. Don't let utterly failed policies or roadblocks screw America over again... -DS]


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