Creating Wealth Read online

  Yet this corporate personhood took on new dimensions in industrial America, as companies grew and people started to challenge the roles and resources they claimed. Courts have not always addressed the issue of whether corporations are persons in the same way as individuals are, but a large and growing body of law does afford corporate plaintiffs and defendants many of the same rights and privileges. As recently as 2008, when the mercenary firm Blackwater sued the City of San Diego, California, to get the city to issue a certificate of occupancy for their training center when the firm had not followed the correct procedure for obtaining land use permits, the judge ruled in Blackwater’s favor on the basis of the firm’s constitutional right to due process.16 Another more recent example of this is the ruling in 2010 on the rights of corporations to add almost unlimited money to the electoral process in the US. A Supreme Court case — Citizens United v. Federal Elections Commission — upheld a corporately funded nonprofit organization’s First Amendment right to invest in and publicize a political documentary targeting then-presidential candidate Hilary Clinton.

  One of the important differences between legal entities like corporations and real people is that real people have an innate ability (barring some kind of mental disorder) to recognize their interdependence with other people and with nature. Legal entities which are established to make a profit are organized instead around overly narrow goals and ignore the imperatives of an interdependent web of life and society. The bottom line for for-profit corporations in the United States is the profit that is returned to shareholders, a phenomenon also known as shareholder primacy, and this mandate requires that corporate leaders behave in sometimes completely inhuman and unnatural ways that ultimately undermine society’s (and even the company’s) longer-term interests in return for short-term gains.

  Further, if policies incorporating the precautionary principle were implemented in concert with incentives for investment that enhanced human, social and ecological, we would succeed in curtailing further innovations that cause harm and introducing beneficial practices to repair the damage that’s been done. Imagine US Sugar unveiling a long-term investment plan that would repair the damage that overdevelopment has caused in the Everglades because it’s in their corporate interest. Or if Freeport-McMoRan Copper & Gold Inc., the owners of Climax Mine in Colorado, restored the mountains in the Freemont Pass area to their original pristine state, it would be a massive long-term investment for ecological systems restoration that would dwarf the original profits made from strip mining molybdenum in the 1900s.

  On an operational level, policies such as life cycle accounting and employee ownership stock options would help the structure of corporate decision making change so that it is systematically more accountable to all the social and ecological systems which support it and to the employees that make it work. This would be one way to help change the narrow, short-term focus that undermines community life in favor of profit for distant investors.

  Monetary Reform

  Attempts to change the national money system in the US have a long history described in The Lost Science of Money by Stephen Zarlenga, the founder of the American Monetary Institute.17 In our time, members of Congress such as Dennis Kucinich, a former presidential candidate, are also pushing for monetary reform at the national level. This would have an enormous impact on the public spending that can be done and on our effective tax rates. Estimates have been made that the invisible money tax we pay to cover the interest costs of the money we use adds several thousand dollars to the average tax bill each year.

  There are alternatives to the private monopoly on money which banks have enjoyed since the creation of the Federal Reserve System in 1913. A public and democratic debate on the alternatives would certainly illuminate what for most USA citizens is unknown territory. There have been two times in US history, in fact, when this kind of private, debt-based money was not the main currency in use. During Colonial times, notes known now as Colonial Scrip were used for most transactions. These notes were issued by the Colonies based on the level of economic activity they anticipated. The system worked so well, in fact, that it undermined the profits and taxes collected by the British, and it was outlawed in 1764. Many scholars attribute both the Boston Tea Party and the American Revolution more to the British prohibition of Colonial Scrip than to any of the factors taught in grade school history class.

  During the US Civil War, the costs of the war also made it imperative for the government to issue notes that weren’t borrowed from private banks. These were known as greenbacks; they were subsequently discredited as the government returned to the gold standard and the banks regained control of the money creation process.

  Another attempt to change the monetary system in the US, the Chicago Plan, was made in the wake of the Great Depression. This plan would have divided demand deposits from savings deposits and required a 100% reserve on demand deposits. Bank bonds would cover the reserve requirement, and the federal government would issue the currency and all moneys as needed. It was introduced in the House and Senate in 1934, but it never made it out of committee. People haven’t forgotten the plan, and in our time economists such as Milton Friedman have been its advocates.

  Any plan for monetary reform would need to consider three basic objectives:

  1. Ending practices that have proven harmful to the common good

  2. Curtailing further innovations that would add to the harm that’s already been done

  3. Adding new practices that bring our financial system into congruence with the human, social, and ecological systems that support life

  The practices that have now proven harmful to the common good are the constellation of forces which foster and exacerbate the endless boom and bust business cycle whereby wealth is consolidated into fewer and fewer hands. Monopolistic control of money is at the root of this system. For this practice to end, we need to rethink our money system. We are not, however, recommending a solution that would reproduce the flaws of a monopolistic money system by simply replacing a bank monopoly with a government monopoly.

  If supply and demand drive the invisible hand of the market, bank-debt money keeps the invisible foot on the accelerator of the growth imperative.

  As with agriculture, a monoculture crop has the effect of making everything dependent on its health and well-being. If you grow only one crop, you are more susceptible to the ravages of insects and blight. The same is true of the monetary system we have adopted. Textbooks state that there are several functions that money serves — it is a means of exchange, a store of value, a unit of account. As history and current experience conclusively prove, all of these functions do not need to be covered by the same instrument. Our economy would be more resilient to big changes and would have fewer disruptions if there were more diversity in the ways in which we make exchanges, store value and keep our accounts.

  The Vortex of Urbanization

  While the economic roller coaster appears to go up and down — the business cycles, the fluctuations in the stock market — the roller coaster itself is heading inexorably into a centralized and concentrated vortex, like matter and energy being sucked into a black hole in space. The patterns of behavior visible in the economy produce similar forms in other human endeavors, most notably in the cities around the world.

  On the physical level, the roller coaster is leading to urbanization on an unprecedented global scale. As stated earlier, the United Nations claims that for the first time in history, more than half the world’s population lives in cities. Furthermore, many of these cities in turn are becoming megalopolises at a remarkable rate. Megacities of more than 10 million people were rare 20 years ago (there were only nine in 1985, most of them with familiar names — Paris, London, New York, Beijing, Istanbul, Moscow); now the world has 25 of them. Karachi, Dhaka, Manila, Jakarta, Lagos, Shenzhen and Cairo are some of the newer members of the megacity club. Some cities grow by over 10,000 people per month and are completely incapable of providing the necessary i
nfrastructure and services fast enough to serve the new populations.18 This explosion of urban population has left millions of people living in dangerous and unhealthy slums.

  Cities growing at extraordinary rates have no choice but to abandon most rational ideas about urban planning — there is no way to describe the resulting urban environments except as gigantic experiments, accidents of human migration. Whole neighborhoods share one filthy portalet, if they’re lucky. There are human settlements that live on and in landfills, their sole economy scavenging the waste of others for their livelihood. Homes made of found materials — cardboard, tin, plastic tarps — are the only shelter for over one billion of Earth’s human inhabitants today. No running water, no sanitation, rampant disease, constant hunger, violence, crime and oppression are a way of life. If the current situation continues unabated until 2020, one out of every five human beings on Earth — over 2.5 billion people — will live in a slum.19

  Cities, Democracy and Economic Change

  For all their difficulties, cities are the level of government closest to the people, and they provide people with the largest number of critical services — everything from education to wastewater treatment. They are collectively the largest government on Earth, dwarfing state and national governments in public service budgets and employees. While in some parts of the world, city budgets come directly from national government, cities still need to be the ones providing the services; it is the only way to effectively and efficiently serve the majority of the population.

  This makes cities the logical nexus for increased democratic practice in government and more democratic economic systems. New England cities and towns in the US, for example, have something that is closely akin to direct democracy, where their budgets, ordinances and other city actions need to be ratified by voters. In the Town Meeting form of government, the registered voters make up the city legislature every year and deliberate and vote on all city matters.

  Cities need to deepen their mandate for real democratic and economic change. To do this, they need to involve their residents in government more effectively — four stories of how cities have done this are included in Chapter 13. Cities need to understand how each of their economies work and where there are opportunities for making economic improvements. They can do this by conducting an inventory of their assets and identifying where they have unmet needs and underutilized resources. Cities can also design and sponsor new ways of making exchanges and providing incentives to match their assets and resources with the needs of their residents. Examples of some of the ways local currencies have mobilized people and improved economic conditions are offered in Part II. To start projects and identify the kinds of currencies which might be most useful, city leaders can follow the directions offered in the Appendix.

  Cities can and will change the world as they absorb and accommodate the majority of the world's population. The choice city leaders have to make is whether to let the forces of globalization and population mobilization overtake them, or whether to take the initiative to consciously and deliberately plan for a vital and dynamic local economy. The building blocks for taking this initiative are the subject of the next chapter.

  CHAPTER 3

  Community Capitalism

  I believe totally in a Capitalist System,

  I only wish that someone would try it.

  FRANK LLOYD WRIGHT

  If you look up the definition of capitalism in the dictionary, it will say something like this: “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”1 In that context, the term community capitalism sounds a bit peculiar — are we going to talk about community expropriation of private property in this chapter? The answer is emphatically no. Yet there are many forms of capital which are not entirely in private ownership, or that benefit from services, infrastructure and other public capital, so this chapter will help you understand how a community manages all its forms of capital to create real wealth for its residents.

  If you look at the community as an enterprise and its citizens as the owners, the capacity the community has to create real wealth and well-being can be characterized as the community capital used to produce that wealth. One definition of the word has been assets available for use in the production of further assets. The word’s origin comes from caput, the head of a cow, from a time when pastoral civilizations counted the livestock they owned to determine their wealth. If assets are examples of the real wealth we have to meet our needs, then community capital represents the capacity to create this real wealth on an ongoing basis for the benefit of the community and its members.

  This generative nature of capital is of particular interest for community leaders. Community capital — the generative capacity of a community — forms the foundation of the economy. A thousand boards are assets that might be enough to build a house, but managing a forest for sustainable yield and operating a sawmill will help insure that many more houses get built. The forest and the sawmill are the capital base. Their combined capacity to continue to produce lumber, along with the forest’s capacity to produce oxygen, to absorb carbon dioxide, to provide habitat for wildlife and to serve as a critical part of the water cycle, will help insure a healthy and sustainable human community can continue to live nearby.

  Competent capitalists know that in order to produce the items that make it possible to earn a profit and create wealth, they need to maintain their capital in good working order. This means continually reinvesting in upkeep and maintenance of the assets, keeping on top of the latest technology and minimizing the costs of production. The accounting and taxation systems that are prevalent in North America and Europe systematically account for the capital reinvestment needed — through depreciation schedules that estimate what investment is needed to maintain the capital’s current value by compensating for the loss in value over time, as an asset is used up.

  To begin a local community economic development program that will create long-term wealth, it is important to start to think like a community capitalist — to know all the local sources of real wealth and to have a plan for their ongoing care and maintenance. It is equally important to know their generative capacity over time — the conditions needed to insure that the community capital can continue to produce the assets the community needs. In the case of the forest, the conditions might be adequate rain and sunlight and a conservative management plan that attends to the life cycle regeneration of the trees and their ecosystem. In the case of the sawmill, it might be regular maintenance on the machinery along with a replacement schedule for the major equipment. The long-term capital plan will also include the conditions for the employees — training, wages, opportunities for growth and development. An additional consideration will be the impact of operations on the community — if the sawmill is routinely filling the surrounding environment with emissions and waste, this will obviously work against the neighborhood’s quality of life.

  Ten Types of Community Capital

  What are the different types of community capital we need to achieve real wealth creation? The community systems and the asset inventory give us insight into the community capital we have, and the resulting productive, or generative, capacities are important enough to highlight when considering the strategy for our community enterprises. Looking at these different systems, the types of community capital they use to create assets follow.

  Infrastructure

  1. Natural Capital

  Natural capital is the stock of environmental assets that produces more assets; for example, a healthy forest produces trees, habitat, carbon sequestration, erosion control, beauty, recreation and water purification if the natural capital base — its essential regenerative capacity — is maintained. Clearcutting the forest might produce some monetary income for a short period of time for a limited number of people, but
it is spending down the region’s capital, just as if you start to use the principal of the savings account that you have in the bank instead of taking the interest income to pay for your expenses. If spending capital goes on for too long, you won’t have any money left. Strengthening our natural capital involves finding ways to protect and enhance those natural systems that provide the environmental services we need — air, water, climate, soil, food, waste assimilation, beauty, recreation, materials — without undermining their capacity to continue to provide the services in the future.

  2. Built Capital

  Built capital in a community includes the buildings, the physical infrastructure (e.g., roads, electric generation and transmission, pipes, wires, cables, water and wastewater treatment plants), housing, parks and recreational facilities, commercial and industrial facilities and other constructed elements of community life. Strengthening the built capital involves standard capital planning, as well as a thorough review of how the existing built capital is meeting the range of needs that have been identified. A very important and problematic aspect of the built capital, of course, is the land use patterns that result from its development. Sprawl, unserviced areas, squatter settlements . . . all these represent dysfunctional side effects of badly developed and poorly maintained built capital. The new approach is to build the infrastructure needed for community well-being and real wealth.

  A Sustainable Energy Plan should also be part of the built capital plan. Revolutions in energy markets and technologies are happening because of the global ecological crisis and peak oil, so sustainable energy systems are becoming more cost-effective. This means that communities will benefit from a coherent, whole-system approach to energy that hasn’t been required in the past.