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From AlterNet
By Tara Lohan, AlterNet
Posted on May 21, 2012

As our political system sputters, a wave of innovative thinking and bold experimentation is quietly sweeping away outmoded economic models. In New Economic Visions, a special five-part AlterNet series edited by economics editor Lynn Parramore in partnership with political economist Gar Alperovitz of the Democracy Collaborative, creative thinkers come together to explore the exciting ideas and projects that are shaping the philosophical and political vision of the movement that could take our economy back.

In September 2011, two Appalachian women traveled to Delaware to deliver a petition to the state's Attorney General Beau Biden. Betty Harrah and Lorelei Scarbro represented thousands who believed that the business charter for coal-mining company Massey Energy should be repealed. The company, mostly operating in Appalachia but incorporated in Delaware, has violated the Clean Water Act 60,000 times. An investigation commissioned by the governor of West Virginia found Massey could have prevented the explosion that claimed the lives of 29 miners, among them Harrah's brother, at the Upper Big Branch Mine in 2010.

Massey, they contended, was simply too dangerous to be in business. But their pleas fell on deaf ears. The company plugs along, despite its shoddy environmental and safety records, churning out profits for its parent company, Alpha Natural Resources.

To many, Massey is not simply one bad apple, but part of an economic system heavy with rotten fruit. Companies like Lehman Brothers, Bank of America, Countrywide, BP, and Walmart epitomize the relentless drive of corporations to maximize profit above everything else, including safety, fair working conditions, clean air and water, healthy communities, and common decency. In doing so, the very word "corporation" has become a dirty word.

Forget bad apples, perhaps we should just raze the entire orchard, right? 

Our economy, like our environment, is in trouble. Limitless growth that drives the profit-hungry corporate model today is ecologically impossible. We simply cannot sustain business as usual and the cracks in our system are showing.

"You look at the Arab Spring ... what looked like very stable regimes across the Arab world were suddenly shown to be completely vulnerable and brittle and I think that we may see the same kind of thing in our economy," said Marjorie Kelly, a fellow at the Tellus Institute and author of the new book Owning Our Future: The Emerging Ownership Revolution. "What looks massive and permanent and invulnerable, may show itself quite suddenly to be brittle."

Maybe this doesn't sound heartening but it should. The corporate model we have today hasn't always been around and it doesn't need to remain the dominant way we do business. There is no reason we should be swabbing the decks of a sinking ship -- alternatives already exist and they are flourishing.

"What's underway is an ownership revolution. It's about broadening economic power from the few to the many and about changing the mindset from social indifference to social benefit," Kelly writes. "We're schooled to fear this shift, to think there are only two choices for the design of an economy: capitalism and communism, private ownership and state ownership. But the alternatives being grown today defy those dusty 19th-century categories. They represent a new option of private ownership for the common good. This economic revolution is different from a political one. It's not about tearing down but about building up. It's about reconstructing the foundation of ownership on which the economy rests."

Better Business

A common complaint in today's world is one of disconnection. Our industrialized world has resulted in less contact with community -- we don't know our neighbors or who grows our food. In the same way that we've lost touch with a deeper sense of belonging and place, many of us have become disconnected from the soul of our work. The corporation-worker structure today is a master-servant relationship. We're slaves to the company, working longer hours for less wages.

"Now mass layoffs to boost profits are the norm, while the expectation of a career with one company is long gone," William Lazonick wrote. "This transformation happened because the U.S. business corporation has become in a (rather ugly) word 'financialized.' It means that executives began to base all their decisions on increasing corporate earnings for the sake of jacking up corporate stock prices. Other concerns -- economic, social and political -- took a backseat. From the 1980s, the talk in boardrooms and business schools changed. Instead of running corporations to create wealth for all, leaders should think only of 'maximizing shareholder value.'"

Our economy is dominated by a monoculture business model, Kelly says, driven largely by publicly traded corporations that have built in pressure from Wall Street for maximum short-term earnings. But a healthy, living economy needs biodiversity. We can find this if we begin to look around -- across the U.S. and the world -- where there are businesses designed not for maximum profit, but with a mission-driven social and economic architecture. One of these models is the "social enterprise."

The Social Enterprise Alliance defines these organizations as "businesses whose primary purpose is the common good. They use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas." And one of the defining characteristics is that "The common good is its primary purpose, literally 'baked into' the organization's DNA, and trumping all others."

Here's an example. Remember Working Assets? Starting out as a progressive-minded credit card company in the '80s, it added phone service -- first long-distance in the '90s, then cellular in 2000 -- and now it has created the subsidiary CREDO Mobile. The company operates as a for-profit business, which is privately owned, with most of the employees owning the stock, so it doesn't have to bow to Wall Street pressures. They use their profits to help support causes they believe in -- so far the amount of money donated is $70 million and counting.

Social enterprises can also be nonprofits, like Goodwill Industries, which last year turned donations from 79 million people into revenue that provided job training to 4.2 million people. And by reselling donated clothing, furniture and household goods, they divert an estimated 2 billion pounds from landfills every year.

The idea of social enterprises is catching on in the business world in the U.S. with the emergence of Benefit Corporations, also known as B Corps, which are designed, "to create a new sector of the economy which uses the power of business to solve social and environmental problems." B Corps are all for-profit companies that have legal structures mandating that the company is designed to work not for maximum shareholder gain, but for the good of society and the environment.

Currently there are more than 500 companies that have become approved B Corps and legislation has been passed in seven states (Maryland, New Jersey, Vermont, Virginia, California, Hawaii and New York) making them official entities. Some are larger corporations, such as Method Products and Patagonia, but many are also smaller companies and business-to-business operations.

B Corps are similar in design to another kind of company called L3Cs. "The L3C is a hybrid between the nonprofit and for-profit models in that it is essentially a profit-generating entity with a socially beneficial mission," writes Ashley Holmes for GreenBlue. "Like an LLC corporation, L3Cs have the same liability protection and are not tax-exempt; however L3Cs have access to forms of capital that traditional corporations don't qualify for, all in order to further social and environmental goals. Americans for Community Development describe the L3C as a company that 'combines the best features of a for-profit LLC with the socially beneficial aspects of a nonprofit... the for-profit with a nonprofit soul.'"

It's About the Workers

B Corps and L3Cs create a legal foothold for a more sustainable kind of business. But other models get to the heart of the new economy as well and take up the important ideas of ownership and governance. Who gets to make decisions about how our companies are run and who gets to share in the wealth that's created?

The U.S. helped create a system in post-war Germany for works councils, where workers are elected from companies to help manage how the business is run. "That means the councils help determine core issues, like when to open and close the store or office, who gets what shift, and who gets laid off or fired," wrote Jeremy Gantz in a review of Thomas Geoghegan's book Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life. Germany also has co-determined boards, which give workers a voice in governance -- companies with more than 2,000 employees have half of their boards composed of workers.

Empowering employees has proved a successful business model elsewhere. The John Lewis Partnership has been around in the UK since 1920 and has grown to over 30 department stores and more than 200 supermarkets, with a revenue of $13.4 billion. The business is employee-owned -- all workers get to share the profits and vote for the governing council and company's board.

"This firm has a written constitution, printed up and publicly available, which states that the company's purpose is to support 'the happiness of all its members,'" wrote Kelly. "Now, let me pause and note: this is the only major corporation I've found that declares its purpose is to serve employee happiness. This is so, at JLP, not because it boosts returns for shareholders. At the John Lewis Partnership, employee happiness isn't a path to some other goal. It is the goal."

Employee-owned companies aren't just a British anomaly. "In the United States, the National Center for Employee Ownership reports that there are 11,300 employee-owned firms, with some 14 million participants," Kelly found. "And in Europe, large companies have nearly 10 million employee-owners. Employee ownership has been increasing in such countries as Spain, Poland, France, Denmark, and Sweden."

Organizations can be run with employee owners or other kinds of members. The London Symphony is owned by the musicians who play in it. Barcelona FC soccer team and the Green Bay Packers football team are community-owned. Mutual insurance companies are owned by policy holders and credit unions are owned by depositors.

Employee-owned businesses and cooperatives have emerged in the green business world with great success, as well. Community-owned forests in Mexico support indigenous people, protect the environment and prevent illegal logging. In Denmark community-owned wind farms have jumpstarted wind energy, supplying 20 percent of country's power. In Minnesota, Minwind is a farmer-owned wind development company that's grown to 350 members.

A New Vision

There are different legal and social structures that can help to feed this growing new economy. In Quebec, a "solidarity" or "social economy" was created to help nonprofits and cooperatives, and it gets popular and government support. Spain is home to Mondragon Cooperative Corporation, which is a network of more than 100 cooperatives, employing 100,000 workers. This cooperative model helps support new business ventures. If a firm is struggling in its first few years, interest rates are lowered to help it instead of flagging the business as high risk and then jacking up interest rates like we do here, says Kelly.

Supporting these new ventures is important, but so is holding the companies accountable to their missions. For cooperatives and employee-owned companies, like the John Lewis Partnership, where members get a vote and can elect those who make governing decisions (or run for the positions themselves), there is more power to make sure the company is keeping its word. With privately held businesses, accountability can be much harder. The B Corp certification process is one way that helps get around the blind spots -- certified B Corps have to prove themselves to a third-party organization -- creating accountability and transparency.

So what can we do in the U.S. to spur the development of socially and ecologically conscious business? "I used to think we needed new federal legislation and corporate chartering and that we could drive change with state and federal law," Marjorie Kelly said. "And I do think we do need an articulation of what a company ought to be in law." But we have to go beyond that, she insists.

"A teacher at Schumacher College posed a question: What kind of economy is suited for living inside a living being?" Kelly said. "It's not an endlessly expanding economy, it's not an economy that's designed to serve the few, at the expense of the many, it is an economy that is generative; that is life-serving in its purposes. How do we generate the conditions for life to continue and to thrive?"

The answer will likely be not one thing, but a compilation and diversity of different business models that are consistent with supporting workers, protecting the environment, and serving the broader social good.  

Tara Lohan is a senior editor at AlterNet and editor of the new book Water Matters: Why We Need to Act Now to Save Our Most Critical Resource. You can follow her on Twitter @TaraLohan.

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As the economies around the world teeter once again, with many already having slipped into "Growth Recession" if not outright technical recession, and with many more looking at the real possibility of outright recession in 2012 and 2013, "the recession" in 2011 was seeming mild by way of comparison to what could be lurking just around the corner.

Will "Recession 2012" look as bad as "The Great Recession" of 2007-2009? Could we skirt by this time without a full-on economic death spiral? Will the economy get better by election day? Or will Obama lose the election for economic reasons? (Presidential elections are usually won or lost for base economic reasons in this country, after all).

Stay tuned. I think it's fair to say that it is going to continue to be a pretty wild ride for the world economy for some time to come. Recession 2013? Recession 2014? Did the Great Recession ever really end in the first place? Many think not!

ECRI Weekly Leading Index
Has a moderate lead over cyclical turns in U.S. economic activity. Data begins in 1967.

Recent Data

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Jun 29 '12 121.9 -2.9
Jun 22 '12 121.7 -3.2
Jun 15 '12 121.5 -3.2
Jun 08 '12 122.1 -2.8

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State Coincident Index
3-Month Change

Is your state essentially in expansion or recession?
Lt Green-Dark Green: Growing-Faster.
Gray: No growth.
Pink-Dark Red: Contracting-Faster.

What is the
definition of recession?

According to the laypress, and even many economists, a recession is defined as two consecutive quarters of negative GDP (Gross Domestic Product). While this very simple definition is usually the case during recessions, it is not always so.

Most experts now acknowledge that GDP alone is an insufficient determinant of recession.

For one, GDP is often revised several quarters - even years - later, as more complete information becomes available that changes the components of the earlier, initial GDP estimates in what can be very substantial ways.

For another, not all serious downturns exact as serious a toll on GDP. Often, the decline is much more pronounced in GDI (Gross Domestic Income) and/or employment. If the income or employment of a nation is undergoing a pronounced, pervasive and prolonged decline even if for whatever various reasons its GDP may be holding up, is it not foolish to deny that a recession is underway?

For these reasons and others, the NBER (National Bureau of Economic Research), the official arbiter of recessions and expansions in the United States, determines whether or not the US has fallen into recession using a much more holistic approach.

As the NBER explains it:
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER's recession dating procedure?

Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009. The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.

Q: Why doesn't the committee accept the two-quarter definition?

The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.

Q: How does the committee weight employment in determining the dates of peaks and troughs?

In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date. The peak date at the end of 2007 coincided with the peak in employment. We designated June 2009 as the trough, six months before the trough in employment, which is consistent with earlier trough dates in the NBER business-cycle chronology. In the 2001 recession, we found a clear signal in employment and a mixed one in the various measures of output. Consequently, we picked the peak month based on the clear signal in employment, as well as our consideration of output and other measures. In that cycle, as well, the dating of the trough relied primarily on output measures.

Q: Isn't a recession a period of diminished economic activity?

It's more accurate to say that a recession–the way we use the word–is a period of diminishing activity rather than diminished activity. We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when economic activity is contracting. The following period is an expansion. As of September 2010, when we decided that a trough had occurred in June 2009, the economy was still weak, with lingering high unemployment, but had expanded considerably from its trough 15 months earlier.

What is a
"Double Dip Recession"?

In the most general sense a Double Dip Recession occurs when an economy falls back into contraction for at least a couple of months (usually at least six) after a relatively brief expansion.

By this definition, the recession of 1981-82 which followed a year-long expansion after the very short, two quarter's long 1980 recession, seems to qualify. Also by this broad definition, the 1937 recession that occurred four years after the end of the 1929-1933 recession also qualifies. While each of those were technically "new" recessions, they happened so soon after their predecessors that many people tend to think of the separate 1980 & 1981-82 recessions as one nasty, long recession. Similarly, most people think of the 1929-1933 & 1937 recessions as encompassing "The Great Depression."

Another definition of a "Double Dip Recession" would be that of a recession which technically has not ended, and was only punctuated by a quarter or twos worth of head-fake rise in GDP. Many recessions throughout history have had such false hopes, only to swoon back down into contraction, until they finally came to an end.

List of Recessions:
Post-1900 US Recessions

Mo/Yr Started Duration
Sep 1902 - 23 Months
May 1907 - 13 Months
Jan 1910 - 24 Months
Jan 1913 - 23 Months
Aug 1918 - 7 Months
Jan 1920 - 18 Months
May 1923 - 14 Months
Oct 1926 - 13 Months
Aug 1929 - 43 Months
May 1937 - 13 Months
Feb 1945 - 8 Months
Nov 1948 - 11 Months
Jul 1953 - 10 Months
Aug 1957 - 8 Months
Apr 1960 - 10 Months
Dec 1969 - 11 Months
Nov 1973 - 16 Months
Jan 1980 - 6 Months
Jul 1981 - 16 Months
Jul 1990 - 8 Months
Mar 2001 - 8 Months
Dec 2007 - 18 Months

What is
Gross National Happiness (GNH)?

An alternate measure of a nation's wealth was conceptualized several decades ago as a means of cutting through the overemphasis on materialism of traditional wealth measures, and seeing the bigger picture.

According to GNHUSA.Org

  Gross National Happiness (GNH) is an indicator developed in Bhutan in the Himalayas, based on the concept elaborated in 1972 by the then King Jigme Singye Wangchuck. Since then, the kingdom of Bhutan, with the support of UNDP (UN Development Program), began to put this concept into practice, and has attracted the attention of the rest of the world with its new formula to measure the progress of a community or nation.

GNH is based on the premise that the calculation of "wealth" should consider other aspects besides economic development: the preservation of the environment and the quality of life of the people. The goal of a society should be the integration of material development with psychological, cultural, and spiritual aspects - all in harmony with the Earth.

The Four Pillars of GNH

  • the promotion of equitable and sustainable socio-economic development
  • the preservation and promotion of cultural values
  • the conservation of the natural environment, and
  • the establishment of good governance.


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