Democratic Ownership In The Works

In the course of her research as a fellow at the Tellus Institute and her work as co-founder and president of Business Ethics magazine, Kelly has observed a new pattern of economic success stories. As she explained to her audience in Belmont, she categorizes these new developments as part of a “generative economy,” because they contribute to conditions beneficial for life, such as cooperation, fairness, and ecological sustainability.

In Kelly’s analysis, building generative qualities into the fundamental framework of the economic system could remedy major global crises of inequality and ecological ruin.

The Occupy movement “has been hugely influential in giving cultural legitimacy” to protest, Kelly told the Occupier. “[Occupy] has been the precursor. It looks to Wall Street wealth and says ‘Hey, this is not right.’ And that shifts the ground that institutions stand on and makes real change possible.” As part of this vital transformation, Kelly said, our industry needs to sustain healthy “ethical networks,” rather than continuing to develop chaotic “commodity networks.”

Kelly shared several encouraging examples of the generative economy in action. Together these examples illustrate how the ethical trend is spreading both locally and internationally.

For instance, have you ever wished to fire your boss? An impossible fantasy, you might answer. But circumstance would be different if you worked at the John Lewis Partnership in the U.K., she noted. There, along with the partners with whom you would routinely make democratic decisions, you could hold your boss accountable if he or she proved unfit for duty.

John Spedan Lewis

After all, why should one CEO idly rake in cash while crowds of laborers toil unpleasantly just to survive? John Spedan Lewis posed this question early in the 20th century. But he did more than ask. He also started a company rooted in the principle of fairness. Today the John Lewis Partnership purveys clothing, cosmetics, housewares, and food, and is considered an enormous success –– both financially and morally   –– according to Kelly’s research and the first-hand testimony she gathered. Its governing purpose, she explained, is “to serve employee happiness.” At least 81,000 “partners” share the responsibilities of ownership, such as managing day-to-day duties or making a democratic decision to donate to a certain charity. They then share the benefits and profits collectively earned through their work.

Next consider wind turbines. Kelly explained that the town of Hull, Mass. harnesses energy from wind. But rather than permitting a corporation to control and profit from the enterprise without vested interest in the community, citizens of Hull directly own the energy they produce and use. Many communities in Europe likewise lead in this mode of innovation. Wind now powers 20 percent of Denmark’s electricity, for which the Danes can thank scores of community-owned “wind guilds.” These produce power without imposing systemic risks upon the biosphere. The same, of course, cannot be said for the global oil and nuclear industries that taxpayers enormously subsidize.

Banking is another industry rife with taxpayer subsidies and corporate ownership. But, Kelly attests, the Beverly Cooperative Bank on Massachusetts’ North Shore provides a good example of a lending institution that did not commit fraud or rely on a bailout from ordinary people. This may be because the bank functions in a way seldom seen these days. It is a “mutual bank,” a type found mostly in New England that is member-owned, and whose success is linked with the success of the entire local community. The bank structures its lending to help, not victimize, the citizens of Beverly.

Organic Valley offers another instructive example. The farmer-owned cooperative has grown to encompass 1,700 family farms. Most of these farmers previously “struggled to make ends meet,” Kelly notes, but they now tend to lead “self-sufficient, satisfying lives.” The business model helps farmers transform their land to meet organic certification standards. Moreover, it ensures they benefit from the company’s financial success. “We don’t have any need for profits much over 2 percent,” Kelly quotes CEO George Siemon, “We’d rather give it to the farmers.” Indeed, Siemon has routinely turned down buyout offers. Instead of devoting energy to amassing stockholder profit, he finds comfort and joy laboring on behalf of  “a worker cooperative that serves a whole community of stakeholders.”

Organic Valley also keeps its produce local. When one consumes an egg in Vermont, it is an egg laid by a Vermont bird. Milk squeezed from cows in New York is distributed within that state, and so on.

Kelly reasons that the generative economy bases itself in the age-old concept of “trust.” An enterprise that can’t be trusted to work for the environment and the community, rather than against them, represents a problem that needs fixing. The structure of such institutions requires transformation at their root. Kelly distinguishes this from merely “regulating a flawed institution.”

But what would the transition away from an anti-democratic economy look like? Would it risk economic loss or even violence?

When asked by an audience member, Kelly admitted, “The transition is likely to be turbulent. Even very sophisticated people have not begun to face reality.” However she anticipates the need for such a transition is unavoidable. Obviously there are “limits to finance” if, as a structural rule, “finance must grow every quarter.”

By way of analogy, Kelly offered an anecdote that brought the conversation back to nature. Her sister Valerie had studied the Mount St. Helens volcano as a graduate student after its 1980 eruption. “According to pre-blast ecological theory, the land should have been rendered virtually sterile,” Kelly said. But scientists found “microzones” all over the mountain that were “protected from the blast” and that gradually “extended out to meet one another.” After the turbulent crisis there grew many new lakes and streams, and animals “took up a robust new life before their predators recovered.”

Kelly’s lesson: as the crises of the predatory economy continue, we can “take refuge by organizing ourselves around serving the needs of life.”