Cooperative Law Congress Oct 25-27, Miami FL

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After Coimbra (2008) and Geneva (2009), “III International Forum of Legal Aspects” will be held in Miami, United States. Don't miss this timeless opportunity to interact with high profile speakers on International law and have access to innovations, updates and developments of methods and concepts. The program includes social and business events where delegates will gather for networking, learning and debate.

3days with big names on international law. High profile speakers on International Law together in Florida for an exclusive debate focused on the cooperative movement.
III Forum of Legal Aspects
International Module Miami – USA
October 25 – 27, 2010
Target Public Venue: University of Miami
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Part of the IX Forum of Legal Aspects
Tim Huet
Arizmendi Association
of Cooperatives
Lottie Cohen
Co-operative Lawyer
Ian MacPherson
ICA (International
Co-operative Alliance)
José H. Galhardo
OCESP's General
Director (Organization
of Cooperatives of the
State of Sao Paulo)
Paul Hazen
NCBA CEO
(National Cooperative
Business Association)
Edivaldo Del Grande
OCESP's President
(Organization of
Cooperatives of the
State of Sao Paulo)
Markus Wagner
Law Professor
University of Miami
Day 25 Day 26 Day 27
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Stamp Scrip in the Great Depression: Lessons for Community Currency for Today?

International Journal of Community Currency Research Vol 14 (2010) A 29-45
29
INTERNATIONAL JOURNAL OF COMMUNITY CURRENCY RESEARCH
Vol 14 (2010) A 29 - 45
STAMP SCRIP IN THE GREAT DEPRESSION:
LESSONS FOR COMMUNITY CURRENCY FOR TODAY?
Jonathan Warner
Quest University, Canada.
jonathan.warner@questu.ca
ISSN 1325-9547

ABSTRACT
The Great Depression of the 1930’s led to considerable monetary experimentation.This paper, drawing mainly on examples from the American state of Iowa, examines the rise and fall of one of these experiments – stamp scrip. This was a self-liquidating currency: special stamps had to be affixed to the scrip certificate that financed a fund that would redeem the scrip once a sufficient number of stamps had been attached. Although the results of many stamp scrip experiments were disappointing, the best schemes provided some communities with benefits during the worst of the Depression. In the exceptional circumstances of a major financial meltdown, therefore, stamp scrip might conceivably be able to assist a community in reducing the effects on economic activity of such a shock.

INTRODUCTION: STAMP SCRIP IN CONTEXT
Community or local currencies are not a new phenomenon. Whenever a perceived need for an alternative to the prevailing medium of exchange is identified, conditions are ripe for the development of some form of alternative. In 17th century England, for example, shortages of low-value coins led to the minting of various kinds of copper tokens (by both merchants and local town councils) to provide the means of making change (Whiting, 1971; Rowe, 1966).

Prisons and concentration camps have long used cigarettes as currency (see Radford, 1945). More recently, authors such as Margit Kennedy (1995), Bernard Lietaer (2001), and Thomas Greco (2009) have advocated for the development of community currencies as a more sustainable and equitable alternative to bank-issued credit. Today, the Transitions Towns movement is seeking to reduce human-induced climate change by various means, including the use of local community currencies to encourage the localisation of business transactions.

Peter North’s recent guide written for the Transition Towns movement reviews the more recent history of community currencies (North, 2010). This paper reviews the history of stamp scrip – its origins, development, successes and failures, and then assesses the potential for its use today. The next section gives an overview of the history of stamp scrip and its varieties. This is followed by an analysis of the problems that emerged as stamp scrip was used. Finally, the potential relevance of stamp scrip for today is discussed.

A Short History of Stamp Scrip
America in 1932 was in crisis. Faced with declining tax revenues and increasing calls on their meagre resources to support the poor and destitute, local governments looked for alternative ways of financing. Self-redeeming stamp coupons, stamp scrip, offered a possible way out.

Two types of innovative self-liquidating community currencies emerged. Transactions stamp scrip addressed the cash shortage problem. Each time the scrip was used a special stamp, purchased from the issuer of the scrip, had to be affixed to the scrip certificate. When the scrip had changed hands a sufficient number of times, there would be enough money raised from the sale of stamps to redeem the scrip at par. For example, a one-dollar certificate requiring fifty transactions would pay for itself if each stamp was sold at two cents.

Time-based stamp scrip, by contrast, required that a stamp be affixed to the scrip certificate every week (or fortnight, or month), regardless as to whether it had been used (or how many times it had been used) in the interim. There was also a hybrid version that combined the two: a stamp had to be affixed for each transaction, but if the scrip were not used by a the specified date, a stamp had to be stuck on to maintain its validity.

The idea of financing poor relief through the means of transactions stamp scrip appears to have originated in Anaheim, California, in 1931-32. A service station manager, Joe Elliott, devised a plan whereby the unemployed of the city would be given jobs on make-workschemes, and paid with special dollar certificates. They could spend this at the shops of participating merchants, who would then put a special four-cent stamp on the back of the certificate, before passing it on to their employees or customers. Each time the certificate was used, the receiving business was responsible for adding an extra four-cent stamp, until the certificate had 25 such stamps on the back, when there was enough money in the kitty to redeem the stamped coupon for cash.

The idea initially worked well. In January 1932 first twenty-five, and ultimately 157 men were working for the scrip. However, when the experiment came to an end after three months, there was too much scrip in issue, and too few stamps had been sold to redeem it. Elliott made up the shortfall, at a personal cost of $1800, around $30,000 in today’s money (Warner, 2008).

Charles Zylstra, a businessman from Hawarden, in Northwest Iowa, probably read about these Californian experiments, and suggested a remarkably similar plan to his local Chamber of Commerce. His plan replaced the Californian 4c stamp with a 3c stamp, to be used every time the scrip was used, and requiring 36 stamps for redemption. This gave the issuer, the city council, a total of $1.08 in stamp revenue to redeem the $1 certificate. The extra 8c covered the cost of publicity and printing. In practice, merchants would keep a stock of the 3c stamps on hand, and either sell them to a purchaser for cash, or accept the dollar certificate in exchange for 97c-worth of goods and affix the stamp themselves.

The Hawarden scheme launched in October 1932, with an initial issue of 300 one dollar certificates paid to male heads of household for works of social value around the town. A syndicated newspaper article (Clifton 1932) that described the use of scrip in Hawarden rapidly disseminated the idea around the country, and brought considerable publicity, and a Pathé news camera crew, to the little town. With modifications to the value of the certificate, the value of the stamps and the number that were required, Zylsta’s experiment with transactions stamp scrip was widely copied. Zylstra himself was elected to the Iowa Legislature in November 1932, and piloted a bill into law that gave Iowa’s 99 counties the right to issue state-sanctioned stamp scrip as a way of providing poor relief.

Largely as a result of all the publicity generated, Hawarden’s scheme was a magnificent success. A second issue of scrip followed hot on the heels of the first. Many visitors who came to town followed Clifton in buying a piece as a souvenir. As fully-stamped scrip started to come in, one collector offered to buy all the redeemed pieces at face value. The net result was that Hawarden was able to pay for all its poor relief at no cost to itself. Elsewhere in Iowa, things did not go so well for the Zylstra plan. Newspapers in many communities reported exhortations from the city clerks, or whoever issued the scrip, that it be used more readily. Some communities, worried about the slow rate of turnover, and that, with the arrival of more Government funds through the RFC or New Deal programmes, scrip was becoming an irritant, decided to redeem their scrip early. Madison, South Dakota, seems to have been panicked in its decision to redeem its scrip (after less than six months in issue); in other communities the businesses accepting scrip decided they would rather take a loss quickly, and contribute to a redemption fund, rather than having the scrip lie around for many more months. Occasionally there were successes (see Gatch, 2004 for an account of scrip schemes in Oklahoma).

Only three counties availed themselves of the Zylstra Act, and the largest such scheme, in Polk County (which includes Des Moines, the state capital), embarrassingly collapsed in less than a year.

The alternative form of stamp scrip, based on transactions, was advocated by Yale economist Irving Fisher. Fisher was one of Hawarden’s many visitors, and he exchanged letters with Zylstra, but was at pains to stress the fundamental difference between his plan and Zylstra’s transactions stamp scrip.

The intellectual history of time-based stamp scrip can be traced back to Silvio Gesell (1958). He argued that holders of money held an unfair advantage over holders of goods: as goods depreciated in value, or their sellers needed money to pay their suppliers, holders of cash could drive prices down, forcing the goods-sellers to make distressed sales. A market trader(or supermarket grocery, for that matter) needs to sell perishable produce by the end of the day – by holding off purchases until the end of the day, buyers can force sellers to sell at low prices. Particularly in a deflationary economy (such as Japan’s during much of the past twenty years) consumers have an incentive to hold off purchases until prices fall – which in itself contributes to further deflation. So Gesell wanted a form of money that would decline in value if it were not used.

It would be possible to have the value of the money itself depreciate (so that a pound note would be worth only 98p next week, and 96p the week after, perhaps), but an easier method of achieving the same result would be to require that a stamp be affixed to the note every week (or so) in order to maintain its value at !1. This would take away any incentive to hoard money, and so reduce what Gesell saw as an unfair advantage that buyers had over sellers. Fisher revived Gesell’s proposal, but with a rather different motive: to generate economic activity by speeding up the velocity of circulation of money, so that more transactions would take place, requiring more goods and more employment. He advocated a nation-wide plan that would require a US postage stamp to be affixed to a certificate every two weeks, a proposal that floundered in Congress.

A few communities adopted Fisher’s version of stamp scrip, which would be virtually guaranteed to circulate rapidly. In Iowa, only Red Oak did so, but another town, Greenfield, issued transaction stamp scrip in early March 1933, then changed over to requiring one stamp per week in mid-April. The outstanding certificates were redeemed at par value in August.

Later in the 1930’s Robert Nobel’s “Ham and Eggs” movement in California revived the idea of time stamp scrip to finance old age pensions, and in Canada Alberta’s Social Credit government launched a province-wide scrip scheme. Both these plans failed badly. Roosevelt’s decision to print more U.S. dollars rather than promote scrip killed the bill.

dair County Free Pres articles 2nd and 9th March; 13th April, 10th August 10th 1933. Hawarden did issue timed scrip (requiring one stamp per month) in April 1933, but this was designed largely to overcome the temporary problem of a shortage of cash because of funds held in blocked accounts. It was expected that the City would put on most of the stamps itself: the real purpose was to encourage those who received it to pay their bills to the city promptly.

South Haven, Michigan, used time-based stamp scrip to stimulate business. Shoppers received scrip for free, which they could then use to purchase goods in the town. Restaurants, for example, could claim the arrival of the one-cent meal: all that was necessary to use the scrip was that the customer paid the cent for the stamp that needed to be attached. Although most of the South Haven scrip was fully used, and succeeded in stimulating business, a similar scheme in Howell did not work nearly so well (Prassic, 1978).

Combining transactions and time-based stamp scrip was tried in a number of Iowa communities. In Rock Rapids, a stamp was required every five days if the scrip had not beenused in the interim; Mason City (the largest successful Iowa scheme) required a stamp each week, or when the scrip was used, whichever came first.

ANALYSIS OF STAMP SCRIP
Why would anyone wish to use stamp scrip? It is prima facia unattractive as the cost of the stamp made it inferior to real money. But if there is no real money available, then stamp scrip is better than nothing as a means of generating business activity.

As with community currencies today, a belief that the scrip provided social benefits helped with persuading people to use it. Zylstra (1933) realised that a certain degree of community cohesion, a concern for one’s suffering neighbour, or what we now call social capital, was necessary for his plan to work. He was adamant that his idea would work only if the community were committed to accepting it. He wrote, [I] will say that the plan is not guaranteed to work out satisfactory unless it has the wholehearted support of everyone in the community. If we approach it from a cold
personal profit basis and insist on doing our business in the same old way, regardless of the consequences it probably would fail to work.

When people did agree to play by the rules, the results could be significant. Scrip was generally paid to unemployed male heads of households to do work of public benefit, such as clearing snow, cleaning out culverts, chopping wood or road work. Mason City’s Chamber of Commerce got community buy-in by inviting proposals for a suitable project: projects involving road building, to show off the type of concrete material being produced in the town, were the most popular.

Zylstra’s original Hawarden scrip was emblazoned with the legend, “By using this coupon in your transactions you promote employment and an early return to prosperity. Your 3-cent stamp makes this possible.” Stores that accepted the scrip displayed notices explaining the use of scrip, and a sign saying, The 3-cent redemption stamp represents a 3% discount on that part of our transactions done with coupons. This coupon would not have been here except through the hands of an unemployed member of the community. All new business so created also directs 36 times this amount of business to be done in our city and 3% is therefore a reasonable amount spent for advertising.

The notion of helping the unemployed, and providing for public works of value within a city or county, was sufficient incentive to have the scrip idea adopted, and for people to be willing to accept it. Helping one’s fellow man was deemed to be worth three cents on the dollar.

Sometimes concerns were expressed that there was nothing backing the scrip, notwithstanding its self-liquidating nature. This meant that partial backing of scrip would make the issue more likely to be used. Zylstra suggested that scrip issued should be underwritten by a line of bank credit – with the belief that the existence of this lifeline would inspire confidence, meaning that it would never have to be used.9 Sometimes an issue of scrip was partially backed by some commodity, which had a similar effect, increasing its acceptability. Pilot Rock, Oregon issued stamp scrip based on wheat: the 50c coupon required only 20 1c stamps to be affixed: the rest of the value was obtained from the wheat against which the scrip had been issued.

$400 of Red Oak’s time-based scrip was given to farmers in exchange for produce, at a 20% premium on the market price of their goods, an idea also used in Norfolk, Nebraska. The 9 Similar arguments were made for the desirability of bank deposit guarantees – if people believe that their money is safe in the bank because it is insured, the probability of a bank run is greatly reduced, and the insurance fund rarely, if ever, has to pay out.

Congestion and Slow Circulation
Even so, as Elliott had discovered, encouraging people to use scrip was problematic. It tended to circulate far more slowly than had been hoped. The unemployed were indeed grateful for work and the chance to earn something that would allow them to buy the necessities of life, but the sellers of such necessities, the grocery stores, tended to end up with much of the scrip, and with little opportunity to pass it out to their customers. These twin problems – scrip piling up in certain places, and circulating slowly – were the two largest problems that stamp scrip faced.

Zylstra’s bill, which became the 1933 Iowa County Scrip Act, allowed the maximum issue of scrip to be $1 per head of population per year. The assumption was that the scrip would turn over at least once a week, and so be redeemed approximately one year after it had been issued. This assumption seemed to have some validity: in Adel, a small town west of Des Moines, the first piece of stamp scrip to be issue was redeemed after only four days in circulation, having done $36-worth of business in that time.11 This was widely reported in newspapers that were in favour of scrip issues.

But Adel’s rapidly-circulating scrip was newsworthy precisely because it was so unusual. More often, scrip circulated slowly and tended to pile up with certain merchants (usually grocery stores, where the original recipients spent much of it). When C. C. Clifton of the Des Moines Register visited Hawarden in early December 1932, about six weeks after the scrip was first issued there, he found that the coupons were concentrated in the hands of just a few traders: Within a few minutes with the aid of a local map, $202 worth of the coupons – or twothirds of the total in circulation – was located by your correspondent in the hands of nine men. A lumberman had $40, and a general storekeeper also had $40, qualifying as the largest holders of the medium. Boukans, the clothier, had $37 left after he sold me one. A coal dealer had $30; a grocer had $25; a druggist had $16; another druggist had $6; a filling station had $6, and a newspaper man had $4. (Clifton, 1932)

Zylstra had therefore proposed a clearing-house mechanism to deal with the problem of “congestion” – scrip piling up at certain businesses, which were unable to pass it out to reluctant customers in change, nor to their employees or suppliers. His proposal was that banks would buy the scrip at 95c, and then sell it on, without the need for an extra stamp, at 96c. Both the bank and the customer would make 1c each on this, leaving only the merchant unfortunate enough to suffer from congestion carrying the loss. In the event, the banks were reluctant to get involved, and congestion was often a significant issue, unless an alternative congestion-busting mechanism could be found.

In Iowa’s Winneshiek County, the County Treasurer acted as a clearing house, but soon found himself overwhelmed. Limiting the times at which scrip could be cashed, or insisting that a certain number of new stamps needed to be added between visits to the Treasury served largely to irritate the businesses, who threatened to stop accepting the scrip. Hawarden hit upon a solution somewhat by chance: the City Council agreed to accept scrip in payment for electricity bills – which meant that businesses were guaranteed a way of disposing of their scrip each month.

Transaction stamp scrip addressed the problem of cash shortages, but not the problem of cash hoarding. As there was no penalty on hoarding the scrip, and the penalty of paying the cost of the stamp to use it, it tended to circulate even more slowly than cash. Pella’s Chamber of Commerce was still debating how to remove its stamp scrip from circulation four years after it was originally “put to work”, eighteen months after it was supposed to have been redeemed. It is probably the initial flurry of interest in Hawarden that led to most similar stamp scrip plans of 1933-34, from California to Oklahoma to South Carolina, to use the transactions version, which both theory and practice suggest is inferior to a time-based scheme.

Even with time stamp scrip, the congestion problem still remained: this version did not eliminate the need for a clearing house mechanism. Merchants would find a large influx of scrip just before the stamping deadline; as well as paying for the stamp, they then had to find ways of disposing of it well before the next deadline. Rather like a game of musical chairs, no-one would want to be holding the scrip when stamping day came around. (Of course, Musical Chairs-type strategies, such as refusing to accept scrip close to the deadline, could upset this plan, but at the risk of causing the whole scrip scheme to collapse.)

However, the hybrid form of stamp scrip, combining the time and transactions plans did seem to work. In this version, there is no way to avoid paying for the stamp by spending the scrip just before the deadline, as whenever it is used, a stamp is necessary. This meant that merchants would not end up with a lot of scrip requiring stamps in the hours before the deadline. Both Mason City and Rock Rapids operated until the scrip was fully stamped. Although it took a fair degree of arm-twisting in Mason City (forcing teachers to accept scrip as part of their pay, for example), the issue was fully redeemed on time.

Resolving other issues
Although time-based or hybrid schemes were an improvement on the transactions-based model, stamp scrip in whatever form faced other challenges that reduced its effectiveness. The one dollar face value of most scrip certificates was probably too much for the scrip to circulate easily: $1 in 1932 represents around $13 in purchasing power today, or perhaps 12- 20% of an average weekly wage back then. Some towns, such as Rock Rapids, wisely issued 50c certificates (which may or may not have been illegal – but there is no record of any action being taken to suppress them), and tended to be more successful with their schemes.
Today’s community currencies are generally first issued in low denominations, which
experience from the 1930’s suggests is a wise move.

There were also minor technical problems with the scrip. The paper used for printing it (often provided by the local newspaper) was often not strong enough to bear the amount of turnover required. Stamps fell off, and some people took advantage of this by “forgetting” to attach stamps when required. Many towns issued “reminders” of the need to attach a stamp, but evasion remained a problem. Having people initial the stamps was a partial solution to temporary amnesia, but collusive non-stamping was not unknown. Technology has advanced in the last 75 years: using better-quality paper and better gum would solve the problem of stamps that fall off. But collusive amnesia remains as a potential problem. Although the scrip would still be working, concerns about fairness might well undermine confidence in the scrip.

CONCLUSION: IS STAMP SCRIP RELEVANT TODAY?
Good times come and go, and when prolonged local economic hardship occurs, thoughts turn to ways of trying to insulate local businesses from the worst effects. Michael Linton’s original LETS scheme was inspired by the closure of a major business in the Comox Valley of Vancouver Island in the 1980’s.The current economic downturn, the “Great Recession” of 2008-2010, replicates some of the problems of the Great Depression, albeit in a much less severe form. Coinciding with this, the Transitions Towns movement has promoted local currencies as a way of fighting climate change by keeping business local and so reducing the emissions that come from transporting goods over vast distances. Many of these experiments have failed: some fail to get off the ground, others languish for a few years, suffering from slow circulation and then die; others start as successful experiments, but end up costing more than they benefit the community. A small minority achieve some kind of cult status, and thrive as their notes and (more rarely) coins become collectors’ items. But would
stamp scrip be a viable alternative to the more conventional complementary currencies?

In the circumstances of the Great Depression, the major virtue of stamp scrip was that it was self-financing, in that the sale of stamps guaranteed to raise enough money to redeem the scrip. This self-liquidating feature made stamp scrip attractive to cash-strapped organizations that were trying to assist the poor and unemployed or trying to promote business. But even in the somewhat similar circumstances of the Great Recession it seems unlikely that stamp scrip will make a come-back. Cash-strapped local and state governments in the United States have resorted to post-dated cheques to finance their spending. The biggest issue of special cheques was in California; as that plan worked well (all the cheques were honoured before their due
dates), there is little likelihood of anyone turning to stamp scrip for this purpose, at least as long as the recipients of these special cheques believe that the cheques will be honoured.

An alternative reason for using stamp scrip might be to finance some form of community investment, where the self-financing nature of stamp scrip would be an attractive feature. The scrip issue would in effect be a community loan for development, as happened with Frank Tortoriello’s “move the Deli” idea. This was accomplished without the need for stamps, though: Mr Tortoriello paid off his debt in sandwiches. Today one bank in Brazil has developed a scrip-based microfinance project – but as there is adequate legal currency, backing of the scrip there is no need for finance through stamps.

Mr Tortoriello sold scrip coupons to his customers at $8, to raise money to move his delicatessen when he was unable to obtain a bank loan. The coupons were exchangeable for $10-worth of sandwiches after the Deli had moved. What makes this example interesting is that the coupons began to be traded around Great Barrington, Massachusetts, acting as a de facto local currency (Crawford, 1991). But there was no suggestion that a self-liquidating mechanism (other than Mr Tortoriello’s sandwich sales) was necessary.

As credit crises occur though, the potential of locally-issued stamp scrip to provide an alternative to scarce loans would be worthy of further research (see Warner, 2009 for a possible application). Otherwise, except in exceptional circumstances, increasing the costs of making transactions is unlikely to facilitate the generation of business. Adding the need for a stamp reduces the attractiveness of a community currency to its potential users, and so it seems unlikely that self-liquidating stamp scrip will ever reappear on a large scale. At present, issuers of community currencies would therefore be advised to follow the prevailing model of Lewes and the other Transition Towns, and not ask their supporters to deal with stamps.

But, arguably, at the present we are living through a set of exceptional circumstances. Deflation, a general decrease in prices, is worrying policy-makers more than the threat of inflation. A repeat of the high unemployment and prolonged deflation of the Great Depression, squeezing local government tax revenue and increasing demands for welfare, might provide the spur for a re-appearance of stamp scrip. Until late 2008, it was generally thought that such an inauspicious set of circumstances was impossible: now there is somewhat less certainty on this. Two years on, would another issue of post-dated cheques from insolvent American states be as well received? Perhaps, after all, Gesell, Fisher and Zylstra have something to teach us. Some knowledge of what was tried, and what worked, in communities up and down America during the Great Depression is potentially important.

Fortunately, there are a few examples that could still be instructive. Disciples of Gesell in Germany continue to issue time-based stamp scrip, despite the welfare costs involved (Schroeder, 2006; Rösl, 2006). Recently, the Stroud pound has adopted a similar approach. Although in these cases the aim is not to make the scrip self-liquidating, should the need arise, a Fisherian version (needing more frequent stamping) could easily be developed, drawing on their experience.

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Richmond’s Green Party Mayor Signs ‘Letter of Intent’ with Spain’s Mondragon Coops

The Mondragon Cooperative Experience:
A Model for Richmond, California?
Sept. 23, 2010
By Gayle Mclaughlin
From Solidarity Economy.net

Imagine a world where businesses derive their power from the people who work there and capital is used as a tool to serve the people, instead of the other way around, as is the case with conventional corporations. A world of true workplace democracy, where each worker has an equal say in how the business is run. A world where workers pool and leverage their resources to start new businesses and create new jobs. A world where top managers earn no more than 6-7 times the salary of the lowest paid workers and everyone has a secure and decent standard of living. A world where education, training and innovation are abundant. A world without lay-offs.


I had the opportunity to immerse myself in just such a world last week in the Basque region of Spain, where I attended an intensive five-day seminar at the Mondragon Cooperative Corporation, along with 25 worker cooperative enthusiasts and practitioners from all over the US and Korea. The first Mondragon cooperative started 56 years ago with a few people under the visionary guidance of Jose Maria Arizmendiarrieta, and it has grown into an extensive network of 120 industrial, financial, retail and education cooperatives with over 16 billion euros in sales and employing about 100,000 people.


There is a great deal of collaborative and cooperative spirit in Richmond, and numerous residents and City staff have indicated to me their interest in exploring the possibility of starting worker-owned cooperatives here. Given the need to think outside the box in addressing our high unemployment rate, Richmond could provide fertile ground for implementing this model of job creation along with other strategies.
At the conclusion of the seminar, Mondragon's Director of Cooperative Dissemination, Mikel Lezamiz, and I signed a letter of intent and endorsement (cut and pasted below) to pave the way for initiating conversations with stakeholders in Richmond and beyond. I want to share with you what I learned and also hear your ideas.
To this end I would like to invite all who are interested to a presentation and discussion on Mondragon and the potential for worker cooperatives in Richmond. The same presentation will be given on two dates to accommodate diverse schedules (call 620-6502 for more info):


Tuesday, October 12, 7:00-9:00 pm in the Whittlesey Room of the Richmond Library

Thursday, October 14, 1:00-3:00 pm in the Multi-Use Room, 440 Civic Center Plaza

Sincerely,
Gayle McLaughlin
Mayor, City of Richmond

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September 17, 2010
Letter of Intent and Endorsement

Mayor Gayle McLaughlin of Richmond, California attended a 5-day seminar in Mondragon, Spain in September 2010 to learn about the Mondragon Cooperative Corporation's model of worker-owned cooperatives as a strategy for worker empowerment-based economic development and job creation. Based on this seminar and the considerations listed below, a commitment to explore possibilities for future collaboration emerged.

· The Mondragon worker-owned cooperatives in manufacturing, retail, financial services and education have flourished for over 50 years in the Basque region of Spain, bringing prosperity and social equity to a region that had been stricken by high rates of poverty and unemployment.

· Mondragon collaborated with non-profits, foundations, and city officials in Cleveland, Ohio to assist in the successful 2008 launch of the Evergreen Cooperative Initiative aimed at stabilizing and revitalizing low income neighborhoods in Cleveland.

· Mondragon and the United Steelworkers signed an agreement in 2009 to collaborate in the United States/Canadian marketplace by adapting collective bargaining principles to the Mondragon cooperative model and worker ownership principles.

· Mondragon provided inspiration to community organizers in recently establishing Austin Polytechnic High School in Chicago, which is designed to prepare students in low-income neighborhoods to start cooperative high tech manufacturing enterprises along the Mondragon model after graduating.

· Richmond, California's commitment to promoting financial health, social well-being, education and training, and innovation (particularly in the green business sector) corresponds to the four pillars on which Mondragon's cooperatives are built.

· Formation of worker-owned cooperatives could be the next logical step, building on existing job training programs, to address persistent problems of poverty and unemployment in Richmond.

Mayor Gayle McLaughlin of Richmond, California and Mikel Lezamiz, Director of Cooperative Dissemination of Mondragon Cooperative Corporation, affirm the shared values of cooperation, participation, social responsibility and innovation as well as the common goal of creating sustainable jobs that support stronger communities and sustainable environmental practices.

Mikel Lezamiz furthermore endorses Mayor McLaughlin's intent to explore how the Mondragon model of worker-owned cooperatives can be applied in Richmond, California and to initiate conversations and facilitate collaboration among potential worker owners, labor unions, community organizations, local funders and City officials in Richmond.


Gayle McLaughlin, Mayor Mkel Lezamiz, Director of Cooperative Dissemination
City of Richmond, California Mondragon Cooperative Corporation

Contact Information

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

phone: (510) 237-1456 begin_of_the_skype_highlighting (510) 237-1456 end_of_the_skype_highlighting

email: Gayle@MayorGayle.net

website: www.MayorGayle.net

Address: Gayle McLaughlin for Mayor 2010

PO Box 5284

Richmond, CA 94805

Want the Good Life? Your Neighbors Need It, Too

New research shows that, among developed countries, the healthiest and happiest aren't those with the highest incomes but those with the most equality. Epidemiologist Richard Wilkinson discusses why.

from YES! magazine
by Brooke Jarvis
posted Mar 04, 2010

Outside a cathedral in Moldova, wedding guests walk by a panhandler. According to Richard Wilkinson's research, inequality within a society erodes mental, physical, and community health.

We live in a world of deep inequality, and the gap between the rich and the poor is widening. We in the rich world generally agree that this is a problem we ought to help fix—but that the real beneficiaries will be the billions of people living in poverty. After all, inequality has little impact on the lives of those who find themselves on top of the pile. Right?

Not exactly, says British epidemiologist Richard Wilkinson.

For decades, Wilkinson has studied why some societies are healthier than others. He found that what the healthiest societies have in common is not that they have more—more income, more education, or more wealth—but that what they have is more equitably shared.

In fact, it turns out that not only disease, but a whole host of social problems ranging from mental illness to drug use are worse in unequal societies. In his latest book, The Spirit Level: Why More Equal Societies Almost Always Do Better, co-written with Kate Pickett, Wilkinson details the pernicious effects that inequality has on societies: eroding trust, increasing anxiety and illness, encouraging excessive consumption.

The good news is that increased equality has the opposite effect: statistics show that communities without large gaps between rich and poor are more resilient and their members live longer, happier lives.

YES! Magazine web editor Brooke Jarvis sat down with Richard Wilkinson to discuss the surprising importance of equality—and the best ways to build it.

Richard Wilkinson

Epidemiologist Richard Wilkinson is the author, with Kate Pickett, of The Spirit Level: Why More Equal Societies Almost Always Do Better.

Brooke: You've studied the impact of inequality on public health for a long time. Did any of your recent findings surprise you?

Richard: Oh, all of them. In fact, the relationship is weaker for health than for many other problems—we looked at life expectancy, mental illness, teen birthrates, violence, the percent of populations in prison, and drug use. They were all not just a little bit worse, but much worse, in more unequal countries. If I'd known how strong those connections would be, I would have looked for them a decade earlier. In fact, I'm still surprised that no one did look at them earlier.

There's nothing complicated in what we've done. Epidemiologists and people working in public health have been doing this work for some time, not only controlling for relative poverty, but for all the income levels within, for instance, an American state. So once you know the relationship between income and death rates, for example, you should be able to predict what a state's death rate will be. Actually, though, that doesn't produce a good prediction; what matters aren't the incomes themselves but how unequal they are. If you're a more unequal state, the same level of income produces a higher death rate.

In fact, in more unequal societies, these problems aren't higher by ten or twenty percent. There are perhaps eight times the number of teenage births per capita, ten times the homicide rate, three times the rate of mental illness. Huge differences. If social mobility were a perfect sorting system and everyone was sorted by ability, that wouldn't make the number of problems in the society greater. It wouldn't change the overall IQ of the population; it would just change the social distribution of IQ. We know from the findings that it's the status divisions themselves that create the problems. We're not making a great leap to say that this is causal. We, I think, show that it's almost impossible to find any other consistent explanation.

Brooke: It seems possible that this link hasn't been explored because we're so used to thinking of these problems as linked to poverty. To find out that they're tied not to the level of income but to the stratification of income—it's sort of an unexpected conclusion.

Richard: We show that these problems aren't affected by rich countries getting still richer. There are problems that we think of as problems of poverty because they're in the poorest areas of society, but a country like the U.S. can be twice as rich as Greece, Portugal, or Israel—the poorer of the rich, developed countries we look at—and the problems are no better even though Americans are able to buy twice as much of everything as the poorer developed societies. That doesn't make any difference; it's only the gaps between us that matter now. And that's really quite a striking thing to learn about ourselves and the effects of the social structure on us.

Brooke: How does thinking about these problems in terms of inequality rather than poverty change how we grapple with them?

Richard: I think people have been worried by the scale of social problems in our societies—feeling that though we're materially very successful, a lot of stuff is going wrong, and we don't know why. The media are always full of these social problems, and they blame parents or teachers or lack of religion or whatever. It makes an important difference to people to have an analysis that really fits, not only in a sort of academic way, but also that fits intuitions that people have had. People have intuited for hundreds of years that inequality was divisive and socially corrosive. In a way, that's all the data shows. It shows that that intuition is much truer than any of us expected.

Brooke: Your findings related to crime and imprisonment rates seem to be particularly illustrative of the way inequality can lead to social corrosion.
If you grow up in an unequal society, your actual experience of human relationships is different. Your idea of human nature changes: you think of human beings as self-interested.

Richard: We quote a prison psychiatrist who spent 25 years talking to really violent men, and he says he has yet to see an act of violence which was not caused by people feeling disrespected, humiliated, or like they've lost face. Those are the triggers to violence, and they're more intense in more unequal societies, where status competition is intensified and we're more sensitive about social judgments.

We also found very big differences in the proportion of the population that's in prison in different countries and American states. But the differences aren't driven by the amount of crime, they're driven by the fact that people in unequal societies have more punitive attitudes about crime. It may have to do with fear across classes, lack of trust, and lack of involvement in community life. If you've got to go to prison, go to prison in Japan or one of the Scandinavian countries. You might get some rehabilitation. If you go to prison in some of the more unequal countries, you are very likely to come out a good deal worse than you went in.

Brooke: When I first heard about your work, I expected the book to deal with the material impacts of inequality. But your focus is different.

Richard: Yes. This is about the psychosocial effects of inequality—the impact of living with anxiety about our feelings of superiority or inferiority. It's not the inferior housing that gives you heart disease, it's the stress, the hopelessness, the anxiety, the depression you feel around that. The psychosocial effects of inequality affect the quality of human relationships. Because we are social beings, it's the social environment and social relationships that are the most important stressors. For individuals, of course, if you're going to lose your home, or if you're terribly in debt, those can be more powerful stressors. But amongst the population as a whole, it looks as if these social factors are the biggest stressors because so many people are exposed to them.

Brooke: What psychological impact does living in an unequal society have on people who are at the top of the scale?

Richard: Status competition causes problems all the way up; we're all very sensitive to how we're judged. Think about Robert Frank's books Luxury Fever or Falling Behind, or the great French sociologist Bourdieu—they show how much of consumption is about status competition. People spend thousands of pounds on a handbag with the right labels to make statements about themselves. In more unequal countries, people are more likely to get into debt. They save less of their income and spend more. They work much longer hours—the most unequal countries work perhaps nine weeks longer in a year.

If you grow up in an unequal society, your actual experience of human relationships is different. Your idea of human nature changes. If you grow up in a consumerist society, you think of human beings as self-interested. In fact, consumerism is so powerful because we're so highly social. It's not that we actually have an overwhelming desire to accumulate property, it's that we're concerned with how we're seen all the time. So actually, we're misunderstanding consumerism. It's not material self-interest, it's that we're so sensitive. We experience ourselves through each other's eyes—and that's the reason for the labels and the clothes and the cars.

Brooke: What's the effect of inequality on the way we perceive our communities—and how does that perception affect how they function?

Richard: Inequality affects our ability to trust and our sense that we are part of a community. In a way, that is the fundamental mediator between inequality and most of these outcomes, through the damage it does to social relations. For instance, in more equal countries or more equal states, two-thirds of the population may feel they can trust others in general, whereas in the more unequal countries or states, it may drop as low as 15 percent or 25 percent.

What is Real Wealth?

We've been measuring happiness in all the wrong ways. What's the pathway to true quality of life?

by John Robbins
posted Aug 31, 2010
from YES! magazine

When I was 21, I told my father that I didn’t want to work with him any longer at the ice cream company he co-founded, Baskin-Robbins, and I didn’t want to depend on his financial achievements. I did not want to have a trust fund or any other access to or dependence on his money. I wanted to discover and live my own values, and I knew that I wasn’t strong enough to do that if I remained tethered, even a little, to my father’s fortune.

I left Baskin-Robbins and the money my father had made selling ice cream because I didn’t want to live a life of affluence based on a product that could harm people’s health. I also recoiled at the idea of inheriting a life of privilege while so many others had to struggle for their basic livelihood.

I didn’t take the steps I did because I thought money is bad. On the contrary, I believe money is good and important. Without it, it’s impossible to thrive in the modern world and difficult even to survive. But money isn’t a god. It’s something to use. Not something to crave or to worship, and certainly not something that should rule our lives.

There seem to be two schools of thought about the relationship between money and happiness: On the one hand, there are those who say money isn’t that important. “You can only become truly accomplished at something you love,” writes Maya Angelou. “Don’t make money your goal. Instead, pursue the things you love doing, and then do them so well that people can’t take their eyes off you.”

In her camp is the environmental advocate John Muir, who once said that he was better off than the billionaire E. H. Harriman. “I have all the money I want,” Muir explained, “and he hasn’t.”

On the other hand, there are those who say that money is essential, and that there is something spiritually pretentious and elitist about pretending otherwise. It’s not the love of money that is the root of all evil, they would say, but the lack of money. Maybe money can’t directly buy happiness, but it certainly can buy lots of things that contribute tremendously to happiness. While it is possible to be happy with less, it is far easier to be happy with more. They would argue that those who believe money is not important have probably never watched their children go hungry.

I believe there is truth in both camps. Up to a certain point, money is vital to happiness for almost everyone. It can buy food, clothing, and housing and provide for other basic needs. Once a person’s basic needs are met, though, money takes on a different meaning.

Despite lower income levels, Guatemalans are happier than people in the United States.

For a family barely scraping by, $500 could be the difference between paying the rent or being evicted—between having a place to sleep and being homeless. To someone more affluent, $500 might simply mean a few hours spent shopping for clothes, or that much more financial security and increased savings.

But what does science tell us about the relationship between money and happiness? A vast amount of research about the question has been conducted globally in the last few decades. As more and more scientists have become involved, the studies, experiments, and forms of research have become increasingly sophisticated. No longer must scientists simply rely on what people tell them. What people say can be verified. Well-being can be assessed by various empirical measures with high consistency, reliability, and validity.

This research has consistently pointed to a conclusion that might surprise some: Money brings happiness only insofar as it lifts people out of poverty. Once that point is clearly passed, the link between monetary wealth and happiness is actually very small.
Why money is like beer


Take, for example, the people of Denmark and Sweden, who have consistently been found to be among the happiest in the world. These prosperous societies score at or near the top of most measures of quality of life, happiness, and social well-being. What makes things interesting, though, is that the people of Costa Rica, according to these same studies, are actually happier, even though the per capita gross domestic product (GDP) of Costa Rica is only one-fourth that of Denmark and Sweden.
Surveys of the richest Americans show happiness scores identical to those of the Amish.

Similarly, Guatemalans are happier than people in the United States, despite income levels only a tenth as high. And the people of Honduras are as happy as those of the United Kingdom, even with a per capita GDP that is only 12 percent as great.

In fact, the more you look at the data comparing people’s monetary wealth with their levels of happiness, the harder it is to see any correlation at all once you get past the poverty line. Surveys of the richest Americans, for example, show happiness scores identical to those of the Amish, a people who intentionally live almost entirely without cars or telephones.

Of course, the lowest life-satisfaction scores come from the world’s most destitute people. The happiness numbers for homeless people in Calcutta, India, for example, are among the lowest ever recorded. But, according to research by psychologists Robert Biswas-Diener and Ed Diener, when these people have enough money to move off the street and into a slum, their levels of happiness and satisfaction rise and become nearly equivalent to those of a sample of college students from 47 nations.

Psychologist David Lykken, summarizing his extensive studies on the subject, says that “people who go to work in their overalls and on the bus are just as happy, on the average, as those in suits who drive to work in their own Mercedes.” How about the ultra-rich? According to a study by Ed Diener and his colleagues, the Forbes 100 wealthiest Americans are barely happier than the average person. The happiness scores of the richest Americans, in fact, are only slightly higher than those of Masai tribesmen, a semi-nomadic African people who live without electricity or running water.

After analyzing more than 150 studies on wealth and happiness, Diener and his colleague Martin Seligman, two of the world’s top experts on the science of happiness, wrote: 
“Although economic output has risen steeply over the past decades, there has been no rise in life satisfaction... and there has been a substantial increase in depression and distrust.”

Money, it seems, is a little like beer. Most people like it, but more is not necessarily better. A beer might improve your mood, but drinking 10 beers not only won’t increase your happiness tenfold, it might not increase it at all.

Yet we keep thinking that having more of the things money can buy will make us happier. Despite our current economic problems, we still have bigger homes, more cars, more appliances, and more possessions than any people have ever had at any time in history.

But has acquiring all this stuff been worth the costs? While we’ve been on this multi-decade shopping binge, our rates of depression, obesity, heart attacks, divorces, and suicides have skyrocketed. Antidepressants are now the most commonly prescribed drugs in the United States. As a nation, we consume two-thirds of the global market for drugs prescribed to combat chronic sadness and hopelessness. One study found that today, the average American child experiences higher levels of anxiety than did the average child under psychiatric care in the 1950s. And yet, when Americans were asked in a survey what single factor they believed would most improve the quality of their lives, the most common answer was “more money.”

Maybe we’re caught in ancient fears of not having enough to make it, primal fears of not having what we need to survive. Maybe we’re stuck believing that nothing is ever enough, that true satisfaction is impossible because danger lurks around every corner. Maybe we’ve been bombarded from an early and vulnerable age with the message that money and the things it can buy are our only ticket to happiness. And maybe we’ve been hampered, as a people, by the fact that the primary index we have created to measure our economic well-being is absolutely guaranteed to get everything wrong.
Pointing us in the wrong direction

The primary index we have created to measure our economic well-being is absolutely guaranteed to get everything wrong.

For the past 75 years, the Gross Domestic Product (GDP) has been the fundamental measure of a nation’s economic progress. The reason the United States is considered the world’s most prosperous nation is because it has the largest GDP. Economists, politicians, and other leaders take for granted that the higher a nation’s GDP is, the better off are its people.

Unfortunately, using the GDP (and its nearly identical twin, the GNP) to measure well-being and genuine progress makes about as much sense as using a fork to eat soup: It’s the wrong tool for the job. Two months before he was assassinated, Robert F. Kennedy explained why:

Our gross national product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors, and the jails for the people who break them. It counts the destruction of the redwoods, and the loss of our natural wonder in chaotic sprawl. It counts napalm, nuclear warheads, and armored cars for the police to fight the riots in our cities. Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.

How can we develop a healthy relationship to wealth and to genuine economic progress when our most fundamental gauge to assess societal well-being is so askew? The GDP, like the GNP, simply adds together all monetary expenditures. The GDP does not care one whit what it is we’re consuming, about how equitably distributed a country’s wealth might be, nor whether the money we spend is ours or is borrowed from future generations. It is entirely possible for the nation with the world’s highest GDP to also have the world’s highest poverty rate and the world’s highest level of national debt.

The GDP rises whenever money changes hands. When families break down and children require foster care, the GDP grows, but not so when parents successfully care for their children. People who max out their credit cards buying things they don’t need make the GDP look good. People who save their money and live sensibly don’t. Seen through such a lens, the most economically productive people are cancer patients in the midst of getting a divorce. Healthy people in happy marriages, in contrast, are economically invisible, and all the more so if they cook at home, walk to work, grow food in a home garden, and don’t smoke.
By counting the depletion of natural resources as current income rather than as the liquidation of assets, the GDP “violates both basic accounting principles and common sense.”

In recent years, the GDP has gotten substantial boosts from toxic spills such as the Exxon Valdez disaster and the boom in prison construction. Meanwhile, natural resources such as rivers and oceans, topsoil and forests, the ozone layer and the atmosphere, are seen as essentially valueless—unless, of course, they are exploited and converted into revenue. But even then, the GDP measures the resulting economic activity in a manner that is fundamentally misleading. As economist Mark Anielski points out, by counting the depletion of natural resources as current income rather than as the liquidation of assets, the GDP “violates both basic accounting principles and common sense.”
Alternatives to the GDP


One of the reasons the current financial crisis took so many economic experts by surprise is that the systems we use to measure our economic well-being failed us. They did not register that the euphoric growth performance of the world economy prior to the 2008 downturn was, in fact, utterly unsustainable. It is clear now that much of the then-heralded economic growth was a statistical mirage, based on real estate and stock prices that had been grossly inflated by bubbles. If we had had a better measurement system, would we have seen the problems earlier? Would governments have been able to take precautionary measures to avoid or at least minimize the present turmoil?

As long as we continue to rely on the GDP, our leaders will lack a timely and reliable set of wealth accounts—the “balance sheets” of the economy. Fortunately, many efforts are underway to develop economic indexes that are far more reliable measures of genuine wealth and progress than the GDP. Amartya Sen is a Nobel laureate in economics from Harvard who has received more than 80 honorary doctorates for his work in understanding the underlying mechanisms of poverty, famine, and gender inequality. He is also one of many leading economists who recognize that, as he put it in 2008, “the gross domestic product is very misleading and something must be done to get better measures of well-being.” Professor Sen and another Nobel laureate in economics, Joseph Stiglitz, are co-chairmen of the Commission on the Measurement of Economic Performance and Social Progress, established in 2008 by French president Nicolas Sarkozy to develop an alternative to the GDP.

The government of China, similarly, is increasingly recognizing that the nation’s torrid economic growth has come at a growing ecological and social cost. Anielski, author of a groundbreaking book on alternatives to the GDP, The Economics of Happiness: Building Genuine Wealth, is working with the Chinese government on how to adopt “green GDP accounting.” The goal is to take quality of life and the environment into account when measuring the country’s economic health.

There are many other alternatives under development, including one being created by the Organisation for Economic Cooperation and Development, an international consortium of 30 countries that are committed to democracy and the market economy.

I’m heartened to see the many efforts under way to develop alternatives to the GDP that take into account the health of our lives, the strength of our communities, and the sustainability of the environment. And yet it is no simple task to develop a monetized system that can measure the real determinants of happiness and well-being and do justice to the vast complexities of modern economic life. It may be that no single alternative index will emerge to entirely replace the GDP, and we will come to rely on a variety of indexes, each with its own perspectives, to provide us with as complete a picture as possible of the real state of our economic affairs and our societal well-being. And then perhaps we will be able to develop policies that lead to our ultimate goal—a sustainable prosperity shared by all.

John Robbins is the author of the million-copy best-seller Diet for a New America, which became a PBS series, and the founder of the nonprofit organization EarthSave International. This essay is adapted from his new book The New Good Life.

Coops help low-wage workers

Utopianism behind them, co-ops seek new strength helping low-wage workers

By Mineko Brand
SF Public Press
Sep 9 2010

Worker-owned cooperatives are growing as an alternative business model that puts the people who do the work in control. And they are getting a lot more organized than in the recent past, turning local networks into regional and national organizations.

With the Bay Area still grappling with high unemployment rates and a weak economy, co-op advocates say they have a solution that is gaining momentum.

Membership in the United States Federation of Worker Cooperatives has grown 25 percent a year for the past two years, said Melissa Hoover, executive director of the San Francisco-based group, which recently hosted a national conference for co-op businesses in Berkeley.

She said the majority of growth is in worker cooperatives developed to meet social, economic and community needs, and that the dire nature of the economy and limited government intervention available to help distressed workers have left people looking for grassroots solutions.

Whereas the co-op movement of the 1960s and 1970s had a more utopian, separatist bent, Hoover said, increasingly what she sees are workers excited about cooperatives as a way to be a part of the economy on their own terms. “People are really open to new ideas,” Hoover said, “and they’re looking for hope.”
Small but growing

Dave Karoly, an organizer with the Network of Bay Area Worker Cooperatives, said the group is trying to compile statistics to document local co-op employment trends. (Poonam Whabi, who works at Design Action Collective and is a key organizer with the Network of Bay Area Worker Cooperatives, said she and her colleagues are worker-owners with full-time jobs, so in most cases advocacy and research efforts have to be done in their free time.)

Karoly estimated that network members generate $80 million a year in revenue — and as much as $100 million including co-ops that are not members and members that aren’t technically cooperatives, such as the Berkeley Free Clinic.

Though this represents a tiny fraction of the Bay Area economy, some national organizations have produced numbers that demonstrate growth. The largest 100 cooperative businesses in the country earned $209 billion in 2008, an increase of 157 percent from 1991, according to a report from NCB, formerly National Cooperative Bank.

The bank noted that cooperatives have diverted much of that profit to their communities, raising millions for charitable works such as fighting hunger and building homes in New Orleans.

While cooperatives represent a sliver of the economic pie, they have drawn increasing interest. The United Nations has declared 2012 the International Year of Cooperatives; Michael Moore made co-ops the heroes of his 2009 film, “Capitalism: A Love Story”; and Naomi Klein produced a documentary in 2004, “The Take,” about spontaneously formed factory cooperatives in financially chaotic Argentina.

“There are some huge gaps that capitalism has created and that the government has let get larger,” Hoover said. “Cooperatives can meet a lot of those needs.”

Hoover said cooperatives have weathered the economic downturn better than conventional businesses because they tend to provide essential goods and services, such as groceries, bikes, books or house cleaning. Also, they are inclined to be more conservative with their money and borrow infrequently. Borrowing to finance expansion, mergers and acquisitions caused many corporate businesses to fail in the late 2000s.
New focus: service workers

A number of Bay Area businesses have shown staying power in sustaining an alternative economic model that involves traditionally poor, disenfranchised workers.

Worker-owners from across the country convened in July at the U.C. Berkeley Clark Kerr Campus for the third National Worker Cooperative Conference, bringing together co-op advocates eager to talk about social and economic justice and present big plans for the future of the movement.

The aim of the conference was to address weaknesses in existing cooperatives and to teach workers how to start their own businesses. Veterans of older cooperatives combined with younger members to impart decades of experience. Hoover said the cooperative model was appealing increasingly to new demographic groups. “Over 25 percent of the attendees here are Spanish-speaking primarily, and coming from social justice organizations.”

John Curl is a historian of cooperatives and communalism, and author of “Memories of Drop City” and “For All the People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America.” He said workplace activism has become more important in the co-op movement: “Nonprofit organizations which have a social justice mission have been turning more and more to funding and promoting and organizing worker cooperatives.”

Curl, who is as a woodworker and a member of the Heartwood Cooperative Woodshop in Berkeley, cited two nonprofit groups started in the last three years as incubators designed to combat high local rates of unemployment and poverty: the Green Worker Co-ops in the South Bronx and the Evergreen Cooperatives in Cleveland.

Locally, two nonprofit organizations have reached prominence by organizing service workers — primarily immigrant women who clean houses — into cooperatives. La Colectiva is a democratically run, eco-friendly house cleaning nonprofit for immigrant women. Women’s Action to Gain Economic Security, which incubates co-ops like Natural Home Cleaning and Home Green Home, has increased its members by 45 percent over the last two years.

La Colectiva has launched an ambitious media campaign telling the stories of historically undervalued and underpaid workers who are often exposed to toxic chemicals (among other occupational hazards) without receiving access to safety training or medical care.

Some 81 percent of domestic laborers do not make enough money to meet basic family living expenses, even though more than half are primary earners, according to a 2002 study of immigrant women produced by Mujeres Unidas Activas and the San Francisco Day Labor Program Women’s Collective of La Raza Centro Legal. A slew of billboards, leaflets, bus ads, radio interviews and marches have all served to herald the cleaners as professionals deserving respect.
Natural Home Cleaning members have on average doubled their earnings, increasing their family incomes by 72 percent, according to a Women’s Action study comparing members’ 2009 income with their earnings prior to joining. Home Green Home, launched in 2009 at the depths of the recession, had sales 30 percent higher than any other previous Women’s Action startup.
Long hours, little clout
The conversation at the Berkeley conference diverged significantly from the movement’s utopian origins. Much of the discussion surrounded the tough work of surviving under the pressures of an economic model often ignored by financial institutions.


One workshop focused on addressing burnout, another on how to talk to a lender. Others covered large-group conflict resolution, how to read a balance sheet and preventing oppression within the workplace.

Similar to many nonprofit organizations, co-op members tend to work longer hours and be highly invested in their work. Despite the displays of optimism, some participants struggled to express the mental overload they were experiencing on the job.

Unlike other worker-owned cooperative advocates, Dan Thomases of Box Dog Bikes and the Bay Area network said co-ops are far from reaching the mainstream. He pointed out that many co-op businesses are by nature self-limiting, especially in a weak economy.

Hilary Abell of Women’s Action sees it as a sign of strength that, rather than growing larger, many cooperatives are more likely to start a new business, thus creating more jobs and spreading the wealth among the community.

“I think that being a worker cooperative we’re trying to think a little bit more clearheadedly about how we grow and if we grow,” Thomases said. “Are we really serving the communities? And does that mean growing or does that mean providing human needs at a rate that’s more sustainable?”

How to Barter, Give, and Get Stuff

from Shareable.net
By Janelle Orsi
08.31.10

There are things we do for money and things we do for free. And then there is everything in between. In that between-space, there is a growing and exciting world of barter, work exchange, gift circles, mutual aid societies, time banks, local currencies, and other modes of transacting that don’t use regular money. These transactions form a huge component of the “sharing economy,” the “third economy,” the “sustainable economy,” or whatever you may call this “new economy.”

I thought it would be a fun and important project to sort out the tax, business, and labor law implications of these “in between” transactions. However, when I got knee deep into the research, I found that things got rather soupy.

Explaining legal concepts in an interesting and vivid way can be a challenge, which is why I’ve chosen to construct this article around a more familiar concept: soup. There are a couple ways of making soup that fit clearly into defined legal frameworks:

* Soup for Money: If I were to own a gourmet soup restaurant, the tax, business, and labor law questions are fairly straightforward. The income I make would be taxable and sales tax would apply (in most states). I would be subject to health and safety laws, permitting requirements, and other business regulations. The people who help out in my kitchen would be legally considered employees, and I would be obligated to pay them minimum wage, obtain workers compensation insurance, pay payroll taxes, and so on.

* Soup for Me: On the other hand, when I make a pot of soup at home for myself and my partner, neither I nor my partner pay tax on it. (The value of the soup we create ourselves is what’s called “imputed income,” but the IRS doesn’t ask us to pay tax on it.) I don’t need special business permits, and when my partner helps chop veggies, she does not become my employee.

But once we go beyond these straightforward examples, making soup is definitely not cut and dry. I should warn that having a vast body of laws and regulations doesn’t mean that we actually know how to interpret them. Courts wrestle with the meaning of laws on a case-by-case basis, and that’s where we learn how to interpret laws. When things end up in court, it’s generally because there’s a lot of value at stake, like in a car accident lawsuit or major tax evasion case.

Truth is, the IRS doesn’t very often bring people to court over tax owed on a free guitar lesson received in exchange for babysitting. Definitely not often enough for us to have much case law to go on, or to know how to interpret the rules. The rules more or less say that barter is taxed and gifts are not. (For details, see Treas. Reg. § 1.61-1; IRS Publication 525; and 26 USCS § 102.) But in an informal economy, there are infinite ways to give and receive, and the line between barter and gifting could be unclear.

Furthermore, it’s hard to know how far the taxing of barter income actually extends. The IRS rule on barter, as written, appears to tax any good or service you receive in exchange for any other good or service. In practice, however, it’s probably not such a blanket rule. The IRS doesn’t seem to concern itself with one-time, casual, non-commercial exchanges of goods or property. Administratively, it would be a hassle both for taxpayers and the IRS to report the plums I gave my neighbor in exchange for his figs. Unfortunately, it’s hard to say at what point a barter arrangement has become sufficiently formal, commercial, or regular to be something that you should report.

There are also gray areas in designating what, exactly, is a business and what is an employee. As the informal economy begins to flourish, we may be surprised to sometimes find ourselves, unintentionally, operating a business, or, unintentionally, employing someone.

Sound confusing? Perhaps some examples and an extended metaphor will help. Let’s look at how all these rules play out using other scenarios in which I make soup:

* Soup Parties: What if I started throwing a fabulous monthly soup party for my friends? It’s all for fun and for free, although my friends sometimes show their appreciation by inviting me over for dinner, or by bringing dessert to my party. For the most part, these activities fall under the category of “gift,” and there will be few legal issues to worry about. I haven’t become a restaurant and the dessert my friend brings probably won’t be taxable to me as “income.” (However, even while this seems like an unregulated realm, I’ve been surprised to learn that in some cities there are laws that limit how many people you are allowed to feed for free.)

* Gift Economy Soup: Now what if I start having weekly soup parties and my friends start doing things for free too? As the spirit of giving and generosity grow, friends might offer free massage, gardening, computer help, handy work, or other favors. Other friends hold weekly salad nights, curry nights, or cook-out nights, and I get free dinners every day of the week! In this circle of giving, no one is obligated to give or receive anything, and no one is officially keeping track of who gives what and how it should be valued. What are the legal implications here? Since the giving occurs among friends and comes from a place of generosity, shouldn’t it be tax free? And because there are no contractual expectations of compensation and because people aren’t bargaining for things at a market prices, these activities aren’t commercial, are they? I would say that’s probably right, but it’s hard to answer these questions with complete certainty. Slight variations in the above scenario could cause it to look more like example #3 (Barter Soup) or #6 (Soup Enterprises), which probably are taxed and regulated as businesses.

* Barter Soup: Now what if my accountant offers to prepare my taxes in exchange for coming to five of my famous soup nights? Deal! But what does it mean legally? This example differs from the above Gift Economy example, because now we have a direct exchange that we’ve bargained for, and we have a binding verbal contract for barter. As discussed above, it’s not clear to me that all barter is taxed, but this arrangement is something the IRS would want us to report. Another question to ask here is: am I now accidentally operating a soup business? Since I have a binding and bargained for agreement to receive valuable services as “payment” for my soup, I’ve essentially sold soup to my accountant. Regulation of business comes from all kinds of agencies – health departments, planning departments, state tax boards, and so on. In the eyes of some agencies, selling soup even one time is not acceptable. Since the law varies from place to place, and from agency to agency, the main thing to remember is: be careful and do your research before you accidentally find yourself in business.

* Time Bank Soup: To continue expanding on the soup scenarios, my next project could be going to the homes of elderly and disabled to help with cooking. Because they and I are part of a local time bank similar to the Japanese Furaei Kippu (“Caring Relationship Tickets”) system, for each hour that I spend helping out, I am credited a “time dollar” through an online accounting system. Later on, I could redeem each “time dollar” for an hour of someone else’s time. In three rulings, the IRS has given some vague indication that they aren’t interested in taxing exchange of services like this. They give at least two reasons: 1) The exchanges are informal, meaning that I get no contractual right to have my favor returned. 2) The exchanges are non-commercial, meaning that they aren’t bargained for at market rates; whether I spend an hour cooking soup or an hour providing legal advice, my hour is valued at the same rate, and all transactions are an-hour-for-an-hour. Those tax rulings are not supposed to be relied on as precedent, and there is disagreement about how they should be interpreted. Still, they provide some of our only clues about what the IRS views as being outside the realm of taxation.

* Soup for Hire: Next, my landlord, who lives downstairs from me, learns of my superb soup and asks me to become a personal chef for her family, in exchange for allowing me to live rent free. I begin cooking two meals a day for her family, and at her pleading, learn to make things other than soup. The value of my free rent should be reported as income on my tax returns, and the value of my cooking services should be reported on her tax returns as rental income. It’s quite possible that I should now be classified as her employee, since I work for her regularly and take some direction from her about what to cook. Knowing whether a household worker is an employee or an independent contractor is critical. If you misclassify a household worker, you can end up with heavy fines. (Then, when you run for public office, you can end up with “nannygate.”)

* Soup Enterprises: Moving on with my soup scenario, now my soup has become so popular that I make multiple pots of soup every day, invite people over to share it, or put it in mason jars for people to pick up on my door step. No one ever pays me U.S. dollars for my soup, but I have been able to use soup to “pay” for most of what I need. I now get “free” health care, bike repair, fresh produce, and many other necessities and perks in exchange for soup. Even with no money changing hands, chances are that I’ve suddenly found myself in the soup business, and should pay tax on the value of most of what I receive in return. I will need a business license and various food-related permits. Also, as crazy as it sounds, when my friends come over to hang out in my kitchen and help me chop veggies, the law says I should be paying them minimum wage.

* Soup Bucks: Finally, I can take my soup operation one step further and start creating soup gift certificates. If I “buy” things with soup, it might be more convenient to give people a certificate that they can redeem for soup when they need it or which they could give to someone else. In fact, the U.S. Dollar came about in a similar way, except that it was backed by gold, not soup. If my “Soup Bucks” start circulating within my local community, they essentially become a local currency. Each certificate has value not only because it can be exchanged for soup, but because it can be exchanged with anyone who is willing to accept it. The success of Soup Bucks as a currency will be based on the community’s trust in my ability to keep on making soup. Starting your own currency and printing paper money is a legal and legitimate thing to do in all but two states, and with some limitations. But if you plan to back the currency with a guarantee of particular goods or services, then it’s possible that the currency also meets the definition of a gift certificate, which is a form of contract and has various regulations attached.

I Can See Clearly Now the Money’s Gone

Even with all the annoying legal grey areas and hurdles, transacting without regular money is one of the most important things we can do to transform our economies. But why should we even delve into this world beyond money? After all, hasn’t our national currency been a useful and efficient tool for transacting with one another? Yes, in theory.

But, in practice, dollars aren’t always there when we need them, and whole communities suffer from the scarcity of dollars. To begin to understand how our money and banking systems play a role in actually creating scarcity, I’d recommend watching the movie “The Money Fix.”

The scarcity of money could actually be our good fortune if it forces us to see that value remains even when money does not. In reality, we have a wealth of valuable people, skills, goods, time, and potential in our communities. This value is highly unrecognized and underutilized because we’ve all had a lifelong dependence on transacting almost exclusively with our national currency.

Transacting through barter, gifting, time banks, and other creative means will instantly open up potential for strong, localized, and sustainable economies. While you can’t use “Soup Bucks” to shop at Target or Safeway, you may be able to use Soup Bucks to support local crafts people, micro-farmers, small manufacturers, and friends who can help you meet your needs. Rather than struggling to compete with multimillion-dollar companies, a new generation of micro-entrepreneurs will thrive on new kinds of transactions.

The new economy comes hand-in-hand with more connected and supportive communities – neighborhoods where people know each other, circles of acquaintances who actively support each other, and more widespread use of cooperatives as a way to feed, house, and provide for ourselves and others. The new economy not only gives as a means to survive; it gives us a great way to live.

This is the first in a series. Tomorrow, we’ll look more closely at the legal nuts and bolts of the gift economy….

since people were coming and going, we focused on free stuffCredit: Shira Golding

Caveats

This article was an attempt to give readers at least some sense of orientation in relatively unsettled or uncharted legal territories. When legal definitions are unsettled, the best that we can do is 1) gain as much understanding as we can, by reading laws, regulations, tax rulings, and court cases, and 2) based on that information, make good faith and reasonable determinations about how to classify our activities. Sometimes, you may get the answer wrong, which means dealing with the consequences when the IRS, Department of Labor, or other agencies come calling. It’s up to you to decide what risks are worth taking.

Please keep in mind that the information in this article is not legal advice. Legal information is not the same as legal advice, which is tailored to an individual's specific circumstances and relies on the lawyer knowing all the relevant facts.

Acknowledgments

This article was made possible by my recent inspiring and helpful conversations with: Mira Luna, Edgar Cahn, Aumatma Binal Shah, Erin Byers, Nicolas Barry, Jenny Kassan, Mike Leung, Alpha Lo, Arno Hesse, and Guillaume P. Leblau. And the soup mania may have been partially inspired by attending Soup Stone last year.