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A New Economy: Democratized Capital and Sustainability

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‘The New Economy’ is striving to make capitalism local, moral, and green. Three main tenets will take us there, according to the New Economy Working Group: ecological balance, equitable distribution, and a living democracy.

The movement sees its efforts as a course correction to an economy that has become unstable through environmental destruction, concentration of wealth, and political corruption.

The prescription offered by the new economy is to shift toward democratized capital and environmental and social sustainability.

Recent market pressures have made sustainability practically unavoidable for businesses. Reducing waste, energy efficiency, and pressure from consumers has pushed sustainability as a growing trend in business.

The most sustainable business in 2014, as ranked by Corporate Knights, is WestPac, an Australian banking company.  They were evaluated on waste productivity, CEO-to-average-worker pay ratio, leadership diversity, and employee turnover.

Jacqueline Smith, of Forbes.com, asked the editor-in-chief of Corporate Knights, Toby Heaps, what being a sustainable business means. He explained:

“It means creating more wealth than we destroy. It means that a company is on balance increasing our overall stock of wealth, grounded in human, produced, financial, natural, and social capital. Sustainable firms are those doing the best job at creating net wealth–economic, social, and ecological–as compared to their peers.”

Corporate Knights has been ranking sustainable businesses since 2005. Tech companies and hospitals make up the bulk of their list.

Profitability? Toby Heaps says the results speak for themselves.

Companies on their list outperformed their competitors by 3.21 percent, through a murky economy. He concluded that the companies benefit from “the growing investment relevance of core sustainability themes, including water scarcity, rising energy prices, and growing competition for human capital.”

Sustainability is a growing trend on its own, but it may not be effectively addressing the growing wealth gap or community degradation in the U.S.

The new economy movement seeks to ‘anchor’ wealth in the community by decentralizing financial and political economic power.

The Democracy Collaborative, an organization at the forefront of new economy research and strategies, asserts that:

“Rooting capital locally by democratizing it—whether through cooperative or community ownership, or some combination of the two—is a powerful strategy for helping low-income communities build wealth.”

Sustainability is a growing trend on its own, but it may not be effectively addressing the growing wealth gap or community degradation in the U.S.
It has been so with Cleveland’s Evergreen Cooperative, launched in 2008 in partnership with The Democracy Collaborative. The initiative is focused on the Greater University Circle, an area of the city with ‘anchor institutions’ like the Cleveland Clinic hospital, and Kent State University.

The initiative has spawned three employee owned co-ops in the area: Ohio Cooperative Solar; Evergreen Cooperative Laundry; and the urban farm, Green City Growers. The co-ops and anchor institutions voluntarily serve each other, keeping dollars in the community.

Ted Howard, of the Cleveland Foundation and also a co-founder of The Democracy Collaborative, relays how individuals join and benefit from the Evergreen cooperatives. Members are hired for a probationary 6 to 12 months, after which they can be voted in.

Once a member, employee-owners are given a raise, and can start buying shares. Profits are divided at the end of the year equally to members through their capital accounts.

The Evergreen Cooperative has given economic power and personal confidence to some of the 43,000 citizens living in the Greater University Circle, who, on average, make less than $18,500 per year.

“Democratically owned businesses are a great way to make sure that money invested in low-income communities stays in those communities, multiplying the impact of the invested and helping build much-needed assets.” – The Democracy Collaborative

The movement into collaborative capitalism is not new. Food co-ops and employee-owned businesses have been around for a while.

Louis Kelso, an economist from the 1950s, encouraged Employee Stock Ownership Programs, or ESOP’s. His theory was that capital “is an input factor on the production side of the free market equation, and thus performs work and earns income just as human labor does.”

The 7 Rochdale Principles of co-operatives were developed in the mid 1800s, and are still used by cooperatives today.

Adam Smith, the architect of modern capitalism, expected the principle of morality to act as a balance in our economy. In his Theory of Moral Sentiments, he states:

“The rich…are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society…”

Smith also states, “By acting according to the dictates of our moral faculties, we necessarily pursue the most effective means for promoting the happiness of mankind.”

Eamonn Butler concludes in his Incredibly Condensed Version of The Theory of Moral Sentiments:

“To Smith, morality is a matter of social psychology. Certain rules of action generate a well-functioning society. When they are followed, society prospers, and when they are not, it is destroyed. Smith was writing a century before Darwin, but he is trying to express an evolutionary view: nature has endowed us with conscience and morality because it helps us to survive.”

The tenets of the emerging New Economy are not new.

Maybe society is finally materializing the wisdom set in motion by economic leaders in our history; a natural evolution that forces reconciliation between the dark and enlightened sides of self-interests.

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