They Stood Up to the Banks

The American people stood up, and the bailout package went down.

Like other moments in U.S. history when the robber barons or the big banks went too far, the American people reined them in this week, refusing to hand over billions of dollars that would put themselves and their children and grandchildren into debt to pay off the collapsing fortunes of some over-sized and under-regulated banks. In the face of predictions of economic calamity, they said "no" to more help for the super-rich. They told their representatives in Washington they'd had enough.

This group of people from across the red-blue spectrum is exactly the group we feature in the current issue of YES! magazine, Purple America. They are being squeezed by sharply higher costs for the basics, like medical care, food, energy, and housing. They are not getting a share of their increasing productivity on the job, so their wages have stagnated. And as good-paying jobs have fled abroad, many have struggled just to keep a roof over their heads. Those who were lucky enough not be be hit by big medical bills or be scammed by sub-prime mortgage lenders survived by working longer hours, having more members of the household work, and going deeper into debt.

Now, in spite of having no national party and no big popular spokesperson to bring them together, these American populists have said enough! The scare tactics didn't convince them. I spoke to a Senate staff person, who told me the phone had been jammed all last week with people calling opposing the bailout.

So what now? The market Tuesday recovered much of Monday's 777 point drop. Most world markets held steady over night. How bad would it be to just say "no" to the big banks?

Maybe not so bad at all. The 200 economists who signed a letter against the deal say we've got time to think before we jump.

Dean Baker of the Center for Economic Policy and Research says in a recent op-ed that the banks are essentially holding a gun to their own heads and saying, "Bail us out or we pull the trigger." The immediate crisis, according to Baker, centers on the fact that the banks don't trust each other, so they are refusing to loan money to each other.

But there are other ways to resolve this besides throwing the cash equivalent of 5 percent of the U.S. economy their way. The U.S. Treasury, the Federal Reserve, and the banks themselves have a variety of tools available to help make it through this immediate crisis without taxpayers borrowing billions more from China and the Middle East. In a Washingtonpost.com op-ed, James K. Galbraith shows how we could use these tools.

In fact, as Baker points out, if the U.S. goes that much further in the hole we may create far more serious problems. Where, for example, will we find the money to cope with the next crisis -- many analysts believe the credit card companies will be the next ones lining up for a bail out. How much further can the U.S. government go into debt before our credit rating and the value of the dollar go down the toilet?

And where will we get the money to stimulate the real economy, the economy of Main Street, of real goods and services that meet real needs and provide regular people with jobs? This real economy is in trouble because real Americans, the ones being squeezed, are running out of purchasing power and options.

It's important to be clear that Wall Street is not the economy. In fact, as author and YES! board chair David Korten points out in his column, "Main Street Before Wall Street," Wall Street has been preying on the real economy of Main Street. The speculative financial sector has grown many times larger than the real economy through exotic financial instruments that create new "assets" out of nearly nothing, which are then leveraged and traded to create still more new assets. If this was just a casino outside town, then by all means, let them play. When they lose their chips on bad debts, let them pick up the pieces. But of course the speculative money games are built on real assets, like mortgages and loans to businesses, and this process undermines real jobs, real communities, and (this part usually gets left out) real ecosystems.

The trouble with the bailout package, besides its breathtaking size and poor overall design, is that it asks those in the real economy -- now and indefinitely into the future -- to once again prop up the speculative system that is concentrating wealth and power at the top.

So what do we do instead of a bailout? Three principles proposed by the Institute for Policy Studies stand out as good guidelines:

• "Wall Street and speculators should pay now for the mess they created." The only way the American people will accept government involvement is if Wall Street and those who have benefited from the wild speculative blow-out now foot the bill.
  
  
• "Instead of borrowing from the super-wealthy beneficiaries of the casino economy, we should tax them." This is not only fair, it also begins to address the structural causes of the breakdown. If every stock and currency trade carried a small tax, it would discourage speculation, and turn the market back towards its original purpose -- providing capital for the production of goods and services in the real economy. Radio host and author Thom Hartmann has a great piece on this.
  
  
• "Any bailout should stimulate the real economy with investments in Main Street, not just Wall Street." And to take that one step further, our taxpayer investments should build a sustainable foundation of a 21st century economy. Such an economy will have to be climate friendly with investments in smart energy generation and efficiency and job training for green-collar employment. Anything less, and we'll simply be putting off more crises for the not-so-distant future.

The Institute for Policy Studies is promoting these principles among lawmakers, along with specific ways of implementing them.

But policies are only part of the solution. As investment advisor Leslie Christian says in a column on the YES! website, we can also in our own lives support the real economy by supporting the local economy -- local sustainable businesses, farms, banks and credit unions, that exist to serve real people within the constraints of local ecosystems.

European Social Forum wraps up with march and calls for action

People came from every country of Europe, and every continent of the world to attend the European Social Forum this week in Malmo, Sweden. On Saturday, for the first time, it was possible to see them all in one place when 15,000 marched through the streets of Malmo, Sweden.

As with all social forums, the topics covered ranged widely from the dangers of climate change to trade union issues to strategies for countering growing European arms trade and involvement in foreign wars.

Participants called for a global day of action on climate change on December 6 to coincide with the next round of international climate talks, and especially, to prepare to turn out in large numbers at the Copenhagen talks scheduled for the following year.

There is a call for action to counter the growing militarization of Europe, where the arms trade has been growing rapidly during the 2000s. Many speakers questioned Europe's involvement in NATO, and called for an end to the military association with the U.S.

Europe's fraying social safety net was a key topic, with the European Union -- responding to neoliberal globalization in the same way as so many other countries -- cutting social spending and security, increasing work hours, reducing work security.

The social forum media center is closing down now that the forum is over. I will post more from Malmo soon.

European Social Forum under way...

The European Social Forum opened Wednesday – the cobble-stoned central square in the small Swedish city of Malmo had a steady stream of people pulling roller suitcases from the train station. Charter buses arrived, one after another, to the nearby registration center. Some arrived by bicycle, with gear loaded on the back. These events generally draw about 20,000 people, but I haven’t yet heard how many have registered for this event, which is being held for the first time in Scandinavia.

Latin America and Asia are strong presences here, and we spent this afternoon, prior to the official opening, at two film showings, both from India. One, entitled “Bullshit,” featured the work of Vandana Shiva, sustainability activist and author. Her opponents gave her the “Bullshit” Award saying she is worsening poverty, not improving it. But the film turns this “award” on its head, showing how cow manure is used by village people in sustainable, and even beautiful, ways.

Beyond that, the film shows a woman deeply engaged in protecting and developing the indigenous know-how of the people of India. How do you assure you can feed people in a time of climate change? A wide diversity of seed stocks, adapted for a wide variety of local micro-climates could be key, especially when farmers have an opportunity to trade seed stocks as the climate shifts. In particular, local strains of millet and other grains that require very little water to thrive, and are loaded with nutrients, could be life savers. Monsanto prefers to promote seed stock it genetically modifies and thus “owns,” along with the quantities of chemicals needed to keep the plants alive. There is clearly more money to be made by this practice, but the film shows not only gleaming headquarters of the company but also the widows in Indian villages grieving from losing their husbands to suicide. The debt that comes purchasing all these high-priced farm inputs has lead to a rash of suicides among the small farmers who just don’t have the means to repay the loans.

Development means building on the indigenous know-how, and protecting farmers’ rights to their seeds, not promoting the expensive chemicals and genetically modified seed stock that may enrich Monsanto, but devastates Indian farmers.

The “tribal” people of Orissa, India, are at the center of the second film and workshop we attended. These are people being pushed off their land to make way for Bauxite mining and dams, to feed the aluminum production that makes possible all those shiny juice and soda pop cans we use so readily in rich countries. The film, “Earth Worms, Company Man,” was produced by two brothers who live in that region, whose grandfather was a follower of Gandhi. One quit his job at BBC to work on this project.

The film is intended to build understanding about the devastation caused by aluminum production – the huge use of electricity, which leads to dam construction that floods vast areas, the mining, and the toxic legacy left behind by both mining and processing. But it is also a movement-building tool, said Samarendra Das, one of the two brothers, after the film showing. The filmmakers took the film to villages who were in the pathway of these bulldozers, projecting the film against whitewashed mud walls, with a battery to power the projector. Villagers had a chance to witness the resistance of other villagers, some of whom lost their lives in battles with police. And the film centered on the voices of the tribal people themselves, who are more often treated as objects (of aid, pity, police violence) if they are seen at all, and who seldom are seen as principle actors or spokespeople. The power imbalance that makes possible the rape and pillage of the land these tribal people have been protecting and using for generations, is also the power imbalance that shows up often in well-meaning attempts to better their lives through charity or “development.” Samarendra Das made it clear that only when people have the power to determine their own future can you have sustainability.

Italy's co-ops form a different sort of economy

During this week when Wall Street has registered the biggest bankruptcy in history and the largest single-day drop the Dow since 2001, I've been visiting cooperatives in the northern Italian region of Emilia Romagna. Residents were surprised we'd be interested, since the co-ops are so much a part of everyday life here. But for someone from the U.S., where people are losing their homes to foreclosures brought about by speculative finance, where millions can't get access to health care, where jobs can leave town at the drop of a hat (or when a union is being formed), the cooperative model is worth a long look.

It's not perfect. The system has its critics who say that some of the larger cooperatives are hard to distinguish from transnational corporations. But taken as a whole, co-ops make a big difference in the life of Emilia Romagna. The region, devastated in World War II, is now one of the most prosperous in Italy. Co-ops provide jobs that don't go off-shore, and they support the quality and economy of local food, the arts, and social services.

In Bologna, if you're looking to buy a house or some groceries, you'll likely go to a co-op. If you need day care for your children or a rest home for aging parents, social cooperatives offer both.

Co-ops serve the middle class who are looking for life insurance or a reliable, local bank. They serve the poor who are looking for work. They serve tourists in search of some of the best cheese in the world, a bottle of great red wine, and a night out at the theater.

One co-op we visited sells houses to members at 15 percent below market price (since they have no need to generate profits for shareholders). They incorporate the most energy-efficient design and selection of materials in home construction, including widespread use of solar panels.

Relatively small co-ops form networks, as needed, to do large manufacturing projects that can compete in the globalized marketplace while retaining a human scale and a democratic, bottom-up structure.

Networks of farmers get market access for small-scale production, and assure that the quality of their products is recognized in the price they receive.

More recently "social cooperatives" are taking the place of government bureaucracies and for-profit businesses, providing services in ways that are compassionate, flexible, and deeply rooted in concern for the well-being of those typically excluded by society. The members of these co-ops are made up of social workers and staff, or those receiving social services, or both. As a result, groups of people who are among the most powerless—a homeless person or a housekeeper in a nursing home—become powerful players in setting the terms of their work lives and resolving the pressing issues they face.

The scale of the cooperative economy is extraordinary. In the town of Imola, near Bologna, 60 percent of the economy is in the cooperative sector. More commonly in this region, the co-op sector accounts for around 30 percent of the economy.

A mixed economy is what makes the most sense, according to Stefano Zamagni, economics professor at Bologna University and founder of an advanced program in cooperative management. If you appreciate democracy, freedom, solidarity (caring for others), and human development, of course you would want a strong cooperative sector, he says. But there is no reason you can't have cooperatives and capitalist companies operating side-by-side in a market economy.

As my week in this region draws to a close, I've been encouraged by the fact that, in the U.S., have a growing cooperative movement.

The current issue of YES! has an article about low-income women forming cooperatives that provide them with a dignified and sustainable livelihood - and some control over their collective futures. Land trusts, like the one in Burlington, Vermont, also build on the cooperative spirit, although their legal structure is different. Earlier, we featured Omar Freilla, founder of the Green Worker Cooperative in the South Bronx, who is bringing the co-op model to a neglected area of New York, where low-income people are creating their own sustainable economy.

The corporate finance economy is showing increasing signs of instability, and even at its best, it concentrated wealth, removed land and resources from people with little power and transferred it to those with the most power, transformed vital natural resources into profits plus garbage, then rolled on to new green fields with fresh resources to exploit.

Cooperatives are different at their core, according to Professor Zamagni. They are structured to distribute profits and to build-in democracy. And because they are rooted in place, they have a long-term commitment to the health of the natural environment.

The cooperative model may make the most sense for meeting our needs and sustaining our natural environment for the long term. We'll especially want to have some diverse, flexible, and resilient alternatives at hand if the corporate economy continues to falter.