Institutions of the Solidarity Economy

Geoff Gilbert –

In my first post, I introduced the framework for solidarity economy political economy power that grassroots social justice movements are building around the world and in the US. This post will elaborate how solidarity economies actually work.

Democratic Land

Community land trusts (CLTs) facilitate community ownership and control of land, and land banks allow communities to democratically redistribute land. Movement groups are hard at work building CLTs and land banks, which, when combined with broader changes to property rights associated with land, like the creation of a land value sales tax, help us imagine the beginnings of a land system designed for human use, as opposed to the status quo design for financial profit.

Community land trusts are nonprofit corporations that: 1) enter into covenants to not sell land for a specified period of time, typically up to 99 years; and 2) are controlled by boards comprised of members who use or live near land. By covenanting to not sell the land for a long period of time, CLTs tie the cost of using the land to the cost of purchasing and maintaining the land and the structures it contains, and thereby divorce the cost of using the land from the ever-increasing market price of the land. Detaching the land from its market price can insulate land from the gentrifying forces – such as rising rents, rising property taxes and irresistible offers to individuals to sell land to the highest bidder – that are displacing working class people, and disproportionately people of color, in cities throughout the world. Democratic governance of the CLT by members who live on, use, and/ or live near the land facilitates democratic land use decision-making.

The Dudley Street Neighborhood Initiative (DSNI) in Boston, Massachusetts is an example of an existing CLT. DNSI operates a land trust that has turned 30 acres of vacant land, acquired in part through eminent domain authority, into 225 affordable homes and extensive public community space, including a 10,000 square foot community greenhouse and an urban farm. Aside from growing food, the DSNI employs high school kids as community organizers, operates a youth mentorship program, and provides other after school and technical programming for neighborhood youth. And through the DSNI, the community organizes and advocates for community needs, like ensuring that resident minority and women owned businesses are represented on neighborhood construction projects.

City governments can authorize land banks, which currently exist in multiple US cities, to acquire city-owned land, tax delinquent properties, and land owned by absentee landlords. The Baltimore Housing Roundtable and Philadelphia’s Campaign to Take Back Vacant Land are two examples of activists groups trying to create community-controlled land banks. Land banks with eminent domain authority can purchase land, with funds from city budgets or from public banks at market or below-market prices. Land banks can then transfer land to community land trusts that are democratically governed by people who live near and use the land. Communities, by controlling the land banks that can acquire land and the community land trusts that own and govern land use, can then coordinate with each other across the city and regional levels to democratically decide how to use land in ways that fit people’s’ needs.

CLTs and land banks, combined with a land value tax, begin to form the outlines of local democratic systems for owning and controlling land. A land-value tax, argued for by the economist Henry George over a century ago, would de-commodify land by taxing 100 percent of any gain on the sale of land at the point of sale. A land-value sales tax could be made law at any level of government and would apply to the land located in that level of government’s jurisdiction. Rather than raising revenue, such a tax would likely discourage investors from treating land as a financial commodity because, under a land-value sales system, an investor could only sell land for a price that recovers their investment — any profit is taxed away. Making land a less attractive financial asset can lower the price of acquiring land. Taking away the right to sell land from landowners – in that landowners can sell land, but they cannot keep the profit from the sale – is, as Janelle Orsi explains, an unpacking of the ‘bundle of rights’ that our current laws attach to land ownership. Eliminating land as a vehicle for financial speculation — which benefits primarily, if not exclusively, landowners — removes the main tool through which landowners control land use and can clear the way for a system of land use that reflects a broader variety of human needs, including housing, enjoyment and use for production of goods and services.

 Democratic Labor

Worker cooperatives and other hybrid forms of cooperatives allow people to democratically control their labor and the production of goods and services. Cooperatives, as Jessica Gordon Nembhard explains, provide rights to governance to all members — workers, consumer members, community members or some combination of both — on a one person, one vote basis. Profits, or what cooperatives call “surplus,” are typically distributed to member-owners in proportion to the amount of work they put in to the business. The University of Wisconsin Center for Cooperatives estimates that, in the US, roughly 30,000 cooperatives own more than $3 trillion in assets and employ more than 2 million people – however, most of these cooperatives are consumer coops, producer coops, and credit unions, while only a few hundred worker cooperatives are in operation in the US.

Employee Stock Ownership Plans (ESOPs) are a closely-related institution that provide for (often relatively limited) employee ownership typically without employee rights to governance. The National Center for Employee Ownership estimates that, in the US, 6,669 ESOPs exist, which hold assets of nearly $1.3 trillion and cover over 14 million employees.

Cooperatives can replace corporations and LLCs as the dominant business entity form in all sectors of the economy. The government could greatly enhance the reach of cooperatives and worker cooperatives within the US economy by favoring them through government procurement practices and by expanding use of public finance through programs like the government job guarantee. The wide variety of existing worker cooperatives in the world and in the US demonstrate the potential for making cooperatives a more dominant feature of the political economy, over either the near and long term.

The existence of advanced industrial cooperatives in Spain and Italy demonstrates the potential for worker cooperatives to produce capital intensive goods that require high-skill labor. Located in Spain’s Basque Region, the Mondragon Cooperative Corporation is a network of 102 federated cooperatives – connected by the cooperative network’s own bank, Caja Laboral – that employs over 73,000 workers and produces advanced industrial and consumer goods for sale in Spain and in world markets. Mondragon has built relatively widely shared wealth in the region – Mondragon managers cannot make more than 6 times a firm’s lowest paid employee – and its commitment to expanding employment has helped insulate the region from the worst of the past decade of European government austerity policies.

The Emilia Romagna region of Italy contains around 4.5 million people, around two-thirds of whom are cooperative members. The region was one of the poorest and generally most devastated regions in Europe following the Second World War, while, today, it’s among the ten richest of the European Union’s 122 regions. Together, Emilia Romagna’s cooperatives, most of which are small businesses, produce roughly 30 percent of the region’s Gross Domestic Product (GDP). The region has created highly specialized manufacturing firms—a ‘flexible’ manufacturing network—that work together, supported by the regional government’s economic development agency (Emilia-Romagna Valorizzazione Economica del territorio, ERVET) to bid for and fulfill government contracts and orders from larger firms.

Cooperative Home Care Associates (CHCA) – the largest worker-owned cooperative in the US, with over 2,300 employees, over 1,100 of whom are worker-owners – demonstrates that worker cooperatives can deliver real benefits for the most marginalized of workers in the lowest paying sectors of the economy. CHCA, a home health care company, is over 90 percent owned by women of color, in a low-wage industry considered very difficult to organize into traditional labor unions.  Workers at CHCA, which has grown from a business with around 500 workers in the late 1990s to one with over 2,300 employees today, become owners by purchasing a $1,000 equity stake over time. CHCA’s workers make $16 an hour including benefits – almost twice the industry standard – while averaging around 36 hours per week, compared to an industry standard between 25 and 30. The company’s CEO-to-minimum-wage-worker ratio hit its peak in 2006 at 11:1, whereas the average CEO-to-minimum-wage-worker in US businesses is estimated at somewhere between 296:1 and 373:1.

Democratic Money

The solidarity economy vision aims to create a banking system comprised of city-owned banks subject to local democratic control. Public banks exist in countries throughout the world, including India, Japan, Germany, Canada, New Zealand, and many others.

Public bank control of the system for creating money would significantly change the process by which money is created and allocated for use. By allowing investor-owned banks to create money, the government effectively allows investor-owned banks to privatize the public good of money creation. With local democratic control of money creation, people can also more easily organize to prioritize allocating money to people who have historically been excluded from accessing the land and other material goods that they have needed in order to live with dignity, among them, Indigenous people, people of color, women and LGBTQ people. It could also democratize decisions about who banks should serve and how they do so. City-owned public banks can coordinate to allocate creation of the economy’s money. They can finance targeted investment programs like a Green New Deal to create a just transition to a renewable energy economy, and, more generally, they can finance production of life necessities.

Precedent exists within the US context for public bank control of money creation.

North Dakota established our country’s only state-owned bank in 1919. The Bank of North Dakota deposits the $6 billion of state tax collections and federal transfer payments it receives annually in the state-owned bank, which then re-deposits the funds in credit unions and community banks throughout the state. The bank currently has close to $7 billion in assets, and over the last 21 years, it has generated nearly $1 billion in profit for the state, $400 million of which has been transferred into the state’s general fund, reducing the tax burden for state citizens and providing support for education and other public services. Not unrelated, the state has the most locally-owned banks per capita and maintains a low unemployment level relative to other states. The key element of North Dakota’s state-owned bank is that the value of the money it creates is backed by the state’s full faith and credit.

The Reconstruction Finance Corporation (RFC) offers another historical precedent. The RFC financed the New Deal without using any tax revenue and without any spending appropriation from Congress. Congress created by statute the RFC, which issued bonds that the Treasury Department purchased with money that it created – the process was very similar to the Federal Reserve’s policy of quantitative easing, through which it created trillions of dollars from nothing in order to purchase toxic mortgage-backed securities from the big banks in an attempt to restart bank lending in the aftermath of the 2008 financial crisis. The RFC borrowed over $51.3 trillion from the Treasury and a little over $1 billion through bonds sold to the public, and it used this money to spend for public purposes. A similar model could help answer persistent questions about how to pay for the Green New Deal. With the creation of public banks, we can again create the capacity for money creation for public purposes.

To conclude, solidarity economy institutions are local democratic institutions that function  together to build a democratic political economy. Through solidarity economy institutions, local communities are creating the beginnings of a democratic political economy in which everyone controls together the systems that provide the things we need to live meaningful and joyous lives.

Geoff Gilbert is a Legal Fellow with The Working World.