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Economics for the Future

How's the economy looking to you?

Of course, none of us has ever seen "the economy," since the term is just an abstraction. But it is an abstraction that covers such a broad range of activities that we probably need a few new words to cover them all.

If you're poor, the economy doesn't look too good. Worse, there are many people with power who don't have your best interests at heart. The US House is flirting with reductions in food stamps of up to $135 billion (while keeping subsidies for already wealthy mega-farmers).    

Cynically, state legislatures are denying the poor the opportunity to receive health care coverage under ObamaCare. In Michigan, for example, working parents now must be below 64% of the federal poverty line to receive Medicaid; jobless parents must be below 37%; and childless adults are ineligible altogether. With Medicaid expansion (a provision of ObamaCare that the Supreme Court ruled each state could make its own decisions about), people in each of these groups would be eligible if their incomes were below 133% of the Federal poverty line. Yet the Michigan Senate is unsure if will allow this, although the federal government will cover more than 90% of the cost for the next decade.

On the other hand, the economy looks pretty bright for those with the smarts -- make that connections -- to benefit. Thomson Reuters has come under scrutiny for packaging the University of Michigan-produced consumer confidence index for the benefit of high-frequency traders who pay to receive it two seconds before it is released more widely -- a window in which hundreds of thousands of trades are executed and millions of dollars made by understanding consumer sentiment just a shade in advance of other stock traders.

Legal or not (there is some question), and ethical or not (ditto), this kind of economy has been designed for the exclusive benefit of the wealthy. Despite claims of creating more efficient markets, there is nothing in this kind of activity that resembles the economic activity that benefits, and that we can "see," on Main Street.

That economy -- the real economy -- is defined by jobs, actual goods and services, and enduring relationships -- not milliseconds. As Marjorie Kelly explains in Owning Our Future, this economy can be structured for sufficiency (genuinely meeting a community's needs, over a long period) rather than efficiency (trying to make as much money and profit as quickly as possible). The key is developing means of ownership that create genuine wealth, whether that ownership is in the hands of employees, communities, or mission-driven organizations.

Just one example, which Kelly mentions: Evergreen Cooperatives in Cleveland provide jobs and opportunities for low-income residents. Its employee-owned green laundry, solar/energy efficiency, and hydroponic gardening businesses contract with major Cleveland organizations including the Cleveland Clinic, University Hospital, and Case Western Reserve University to provide needed services. The revenues from these businesses stay within Cleveland to create community wealth rather than wealth for absentee owners, mainly supporting residents with household incomes below $19,000 (the federal poverty line for a family of four is $4,500 more than that). An institution that received much deserved recognition at the recent BALLE conference, Evergreen businesses allow employees to purchase an ownership stake in the company after six months of employment (which it helps finance), entitling them to vote on all issues (one vote per owner), to receive health insurance, and to expect $65,000 in equity from profits in eight years of employment.

This kind of economy has many different manifestations. What unites them is the vision of a stable, inclusive community, striving for sufficiency, honoring the needs of people and respecting the natural world. An economy built to endure, not live its life in seconds.

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Biomimicry and Cities

I have found my community -- actually, one of several, but a special one.

I attended the BALLE conference (no, not in Bali, but in Buffalo this year), an event focused on more enlightened, more powerful forms of business.  BALLE -- the Business Alliance for Local Living Economies -- emphasizes the primacy of local over global; employment over profit; we over me.

Among the many highlights of the conference, I want to mention this:

Janine Benyus, who is at the forefront of the biomimicry movement, described a type of communitarian "mutualism" in natural ecologies. More simply: A healthy tree requires healthy soil and other healthy plant- and animal-life to survive. Moreover, the only way for a healthy tree to ensure its progeny also have the opportunity to grow and thrive is for their growth to take place under the same, healthy conditions. Thus, through an intricate system involving other plants, animals, and fungi operating in highly mutually supportive ways, a single tree may help restore and replenish the environment of which it is part for its own survival, for the survival of its offspring, and for the survival of the other living organisms that comprise the ecosystem of which it is a part.

I have long admired Benyus' brilliance, and the ways she combines facts, passion, and beauty to convey her overriding message: Nature has been solving many of the same problems that we are trying to solve in modern society; only it has been doing it considerably longer: 3.8 billion years compared to 200,000 years for us (homo sapiens sapiens). So, it is has developed much better solutions. 

Benyus' description of an ecology of mutualism has gotten me considering how our cities can be similarly oriented. More to the point, how can social enterprises be seeded to provide not only single social benefits (such as better healthcare), but to help provide additional capability to support other social enterprises that are, only apparently, distinct from it? 

Benyus described how precise marking and tracing of carbon molecules shows that carbon that is absorbed in the upper canopy of a forest may be found in low-lying plants half a mile away. This movement of nutrients is biologically elegant and its purpose appears clear: carbon that is captured, shared, and redistributed creates a healthier environment for all plant-life in an ecology -- including the tallest trees that capture and might otherwise consume it all just to serve its own, immediate needs.

Here's to cities re-designed to do the same.

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What does electoral emergence look like? 

Consider: We just re-elected a Democrat President who will need to work with a Republican House and Democrat Senate. Or viewed differently: the people have said that they want a divided government (as Speaker Boehner suggested), not an unimpeded move towards a more progressive agenda.

Or did they?

The Presidency is the only national office that we vote for. Even so, it's hard to imagine that the popular vote would have been same if, say, states like Vermont (67 percent Obama) or Utah (73% Romney) got the same attention as Ohio.

The House results were even more affected by artifacts of our electoral system. With all 435 House seats contested, Democrats received almost half a million more votes, but the Republicans won a majority of the seats. Why? Because of the way congressional districts are drawn, which itself is strongly influenced by which party is in power in the states. As the Washington Post pointed out, in states where Republicans controlled redistricting, Democrats almost uniformly performed far worse in elections for the House than for the Presidency. Examples: in Ohio, Obama won 51% of the vote, but Democrats won only 25% of House seats; or South Carolina, where Obama won 45% of the vote, but Democrats won 14% of house seats. 

In the Senate this year, 23 of the 33 seats being contested were held by Democrats, making it difficult for Democrats to hold on to their 53-47 (those numbers again!) margin, if the nation were voting in a party-neutral, 50-50 ways. Yet, rather than losing 6.5 seats net and losing Control of the Senate, as statistics would suggest, Democrats gained two seats, by winning 25 of the 33 contests, while winning the popular vote across these Senate races by nearly 13 million votes.

The divided political situation we now face results from an electoral chemistry that combines any number of influences, from Article II of the Constitution, which created the Electoral College (originally conceived to produce results in elections dictated neither by political parties nor by national campaigning); to the most recent census and its influence on congressional re-districting; to someone with a cell phone recording Mitt Romney's "private" thoughts; among many, many others.

Together, these influences produce an "emergent" picture of a national electorate. Emergence is a characteristic of a system where what is apparent outwardly arises from any number of smaller features that may be hard to detect and whose interaction looks little like these features in isolation.

So, is John Boehner right in saying that there "is a mandate for both parties to find common ground and take steps together to help our economy grow and create jobs, which is critical to solving our debt"? 

My position is that to figure out what is on the nation's mind, it is best to look at outcomes most reflective of overall, versus local, views. Or: look at the popular vote for President, the House, and the Senate. Democrats won each of these races, by margins of 3 million, half a million, and 13 million votes respectively. To paraphrase the cognitive scientist Douglas Hofstadter: Although a green fence is made up of atoms and atomic particles, none of them is green. To see the color of the fence, just open your eyes.

The popular vote for the Presidency, the House, or the Senate are not perfect indicators of our national desires. But they suggest that the people want the country to go in a direction Democrats have suggested: investmenting in education, health, infrastructure, a greener planet. 

And greater inclusivity.
You know the saying: lies, damn lies, and statistics. Now add: political statistics.

Friday's jobless rate is either good news, terrible news, or made up news (shameful, Jack Welch).

I decided to do a bit of fact checking to see what I could come up with.

To put things in a bit of historical context, economists backdate the recession to 2007, but the collapse of Lehman Brothers and the too-big-to-fail crisis began almost exactly four years ago.

What do Bureau of Labor Statistics data tell us about ten countries? (Aus is Australia.)

  USA       CAN   AUS   JAP    FRA   GER   ITAL     HOL   SWE  UK            
2007 4.6 5.2 4.4 3.6 8.1 8.7 6.2 3.6 6.1 5.4
2008 5.8 5.3 4.3 3.7 7.5 7.6 6.8 3.1 6.1 5.7
2009 9.3 7.3 5.6 4.8 9.2 7.8 7.9 3.8 8.3 7.7
2010 9.6 7.1 5.2 4.8 9.5 7.1 8.5 4.6 8.3 7.9
2011 8.9 6.5 5.1 4.2 9.4 6.0 8.5 4.5 7.5 8.1
2012 Q2     8.2 6.4 5.1 4.0 9.8 5.7 10.7 5.2 7.4 8.1

Unemployment Rates, adjusted to U.S. Concepts

What jumps out to me: 
  • Since 2007, every country but Germany has a worse unemployment rate. This is a global--not a national--problem. The group of European countries, whether we consider the EU-27 or only those that have adopted the Euro as their currency, have seen unemployment increases each year since 2008. Those groups are not explicitly represented in the BLS data.
  • Since 2009, just after Lehman Brothers hit the fan, through the second quarter of this year, four of these ten countries the BLS cites for comparison have seen their unemployment rise.  The United States is not one of them.
  • From 2011 to the second quarter of this year, only one country has seen its unemployment rate drop by 0.5% or more. That country is the United States.
 Unemployment, seasonally adjusted, March 2011-August 2012.

The overarching lessons, which we should all remember but don't (or won't):
  • We--all countries--are in this mess together. Too big to fail might describe banks. Too interconnected to stand alone describes national economies.
  • No leader has the ability to magically restore the economy of his nation.
  • All things considered, the United States is faring fairly well.
Oh yeah: and for the first time in the Obama's presidency, unemployment is under 8.0%

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Presidential Debate: Focus on Inclusivity

If I were hosting the upcoming presidential debate on domestic policy, what questions would I ask?

They would center on inclusivity:

  • How can we challenge the economic beliefs that are holding back our economy?
  • How can we include the poor as a source of resourcefulness, innovation, and business opportunity?
  • How can we better identify and support local (social) entrepreneurs?
  • What urban centers are taking the lead in creating sustainable, inclusive communities?
  • What innovative approaches to education are working and can prepare students for meaningful careers?
  • How does social wellness use existing resources to create more inclusive health for us all?
  • What does inclusive leadership look like?
These broad questions deserve our unwavering attention. No matter how you keep score--99 to 1, 53 to 47, or something else--too many are struggling to have decent life. 

What if I were asked these questions--how would I answer them?

Glad you asked: In my new book Inclusivity: Will America Find Its Soul Again (written with Christian Sarkar, who also created paintings for the book), we tell fifty stories about those who are taking giant strides in tackling these issues. These vignettes tell of entrepreneurs leading a resurgence in Detroit, Tony Hsieh (founder of Zappos) reinventing Las Vegas and David Orr (a leader in the environmental movement) creating the most sustainable community anywhere in the US, the midwest community of Oberlin, Ohio. We tell how poor kids--in our inner cities or equally poor rural areas--are being given new educaitonal opportunities and are rising to the occasion. We tell how doctors are writing prescriptions for food, how struggling high school students become devoted and successful tutors, and how a national entrepreneur identification and training program in South Africa could become a model for the United States.

More inclusive education and health care would go a long way towards fully using the talents of our populace and creating expanded opportunity for everyone--wealthy and poor alike. More inclusive places to live coupled with more inclusive economics would create not just a fairer, but a stronger, country. Those blazing the trail of inclusivity exhibit a kind of leadership that is uncommon--creating value for others first. But it is within the reach of us all.

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Americans Love Socialism

The Atlantic just ran a nice article in which it reported an interesting survey it had conducted. In the survey, respondents (only Americans) were shown two nations' wealth distributions--one like Sweden's (but even more equitable); and one like the United States's--and asked to choose which country they'd rather live in. Respondents preferred the country with the Swedish distribution.

Well, the survey was mostly conducted like this. An important detail is that respondents didn't know the names of the countries they were judging, just the level of wealth of the different population segments within them. 

The US distribution looked like a pie with five very uneven slices: the smallest piece (shared by the poorest 20% of the country) was only 0.1% (1/100th) of the pie; the next was 0.2% (1/50th), the middle two pieces were 4% and 11% respectively; and the largest 84%. In contrast the "Swedish" pie, had five considerably more equal slices: 11%, 15%, 18%, 21%, and 36% respectively. (A perfectly "equitable" pie would have five 20% slices.)


The "Swedish" distribution was favored regardless of one's outward political orientation: Democrats preferred it, and so did Republicans. The wealthy preferred it and so did the poor. The young and old, too. The voting was not even close, with 92% of all respondents preferring the equitable distribution to the one that prevails in the United States.

Another thing: respondents had no idea that the United States distribution of wealth was so lopsided. They thought the poorest 40% of the country had about 9% of the wealth (vs. only 0.3%). They thought the top 20% controlled 59% (vs. 84%).  The latter means, of course, that the vast majority of the country--everyone except those in the top 20%--has only 16% of the country's wealth.

Respondents weren't even asked about those at the very top where things are really lopsided. The wealthiest 1% controls 35% of the nation's wealth. The top 5% controls 62%.

In plain and encouraging terms, these results mean that US citizens want a more equitable distribution of wealth. We may fight about the wisdom of taxes, the deficit, the debt, the role of government -- but in many ways those are mechanisms, and wealth (and opportunity that goes along with it) is an outcome. An outcome that we agree about as a nation.

That does leave for debate the means for getting there; and the politics, which would be messy, all too likely would obscure what the vast majority of the country wants (remember: 92% prefer Sweden-on-steroids to the USA; and when respondents "constructed" an ideal wealth distribution rather comparing two that they had to choose between, they constructed one that was more equitable than any country on earth).

But, if we remember the goal that we all agree on--one of equality and inclusivity, not inequality and exclusion--it can unite us and guide constructive policy and actions.

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Sandwiches against Madness

I'm in London before heading tomorrow to Oxford for a colloquium on social entrepreneurship. I stopped at a British food shop, PrĂȘt a Manager, which offers advice about addressing hunger that is as eloquent as any paper I'm likely to read at the Oxford gathering. Simple advice of the kind we'd all be much better off following. 

PrĂȘt a Manager is a chain of shops that serve sandwiches, salads, and coffee; plus porridge and a few other items that seem very English. The ingredients they use are fresh; the food is chemical- and additive-free. And it's tasty. All good things.

The walls have a bunch of sayings you might find in a yoga studio: "To feel full of life, don't eat too much, don't eat too little." And other things about what (not) to put in our bodies. This all might seem too new age-y, but their napkin tells a different, very practical story:

At the end of each day we give our unsold sandwiches and salads to local charities and shelters working with the homeless. We don't do this because we're "nice people." We do this because throwing good food (and hard work) in the bin is madness."

We're in an age of madness, don't you think, where simple truths are getting drowned out by loud voices with tons of money and by all-"facts"-deserve-an-equal-airing news coverage?

Sometimes it's not so hard to see who needs help and how we can help them. When we see this, throwing these ideas in the bin is just madness.

Diamonds, Dimons, and Our Money

Driving on the highway, I saw a bumper sticker surely announcing that the political season is upon us:  R  omney--the R being a flaggy, red and blue affair set off from the rest of the name. Not a big leap to create an anagram: R money, and from that Our money.

Which brings up the Libor mess.  Confession: I don't understand the situation fully at all. (Do you?). But what is clear is that another of the too-big-to-fail banks--this time Barclays--played games with Our money.

Our money? Yes, although the Libor regulates the rates at which banks loan each other money, it affects Our money, too. Our mortgages, Our CD rates--every aspect of Our banking and Our financial lives is tied to the Libor.

So, when Barclays, and the other banks that likely will be cited soon along with Barclays, manipulate the Libor to their advantage, it's not an accounting trick, it's not something they can get away with by claiming it was done to help stimulate the economy (yeah, right; like banks couldn't have simply made more loans to help individuals and businesses), and it's not legal.

The half billion dollars in fines Barclays will pay is insignificant in comparison to the profits the banks made through their manipulations and the $800 trillion the Wall Street Journal estimated are tied to the Libor  

It's Our Money, damn it.

On the other hand, I recently had the pleasure of taking to Don Shaffer, President and CEO of RFS Social Finance.   His institution--he describes it as a combination of a charitable foundation and a bank--looks at banking completely differently. 

It invests in local businesses, not mathematical equations at the foundation of complex banking schemes that have already pushed us into the great recession.

It brings together lender-investors with borrower-businesses to meet each other in person and jointly negotiate loan terms that each party (and RFS) finds fair: Quite a difference from selling unsuspecting banking clients mortgages that the bankers know they can't afford or understand. 

It invests a fixed sum in a pool of businesses, and allows them to talk among themselves to determine how to split the sum: Quite a difference from banks thinking they're the smartest guys in the room, or planet, and you've got to play by their rules.

This is the kind of bank the country needs for OUR money. A bank that supports building communities and lives. That is not too big to fail, And that, above all, is honest.

Do you think Robert Diamond  (Barclays) and Jamie Dimon  (JPMorgan) care about OUR money? Or are they are singing another song song:  MY MONEY?  

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Back in the saddle, writing this blog after more than a month away. (NOTE to self: see if blogging saddles are the next great investment.)

What's been going on?

1. Drafted a new book on creating Inclusivity in the United States.  

The aim is see how we can create better, and more inclusive, health, education, economics, and more--right here at home. Kind of a manifesto for dismantling BOP-USA--the system which keeps too many Americans at the Bottom Of the economic Pyramid while stacking the deck to favor the very few.  

My co-author on this effort, Christian Sarkar, and I are now making this book more bite-sized--un-writing it, so to speak--so that its message passes through more eyes, reaches more minds, and leads to more action. 

Stay tuned: this is ready to "pop."

2. Been thinking "local."  

I attended my first-ever BALLE conference in Grand Rapids, Michigan. Don't let that sentence fool you into thinking I'd been contemplating attending a BALLE event for a while: I had never heard of BALLE until Paul Saginaw, of Zingerman's and a BALLE board member, recently told me about it. Once I attended, it felt like my crowd, and I was amazed that it had been hidden (from me), but in plain view.

This conference rearranged a few pieces in my mental jigsaw puzzle of how best to create change, causing me to re-think some ideas and giving me evidence to reinforce others that had been looking for support.

3. Still on the trail doing interviews.

It's been my privilege to talk to amazing changemakers.  I think I've become addicted.

Many are in Detroit, but the roster is truly international. The more I listen (and learn), the more optimistic I become--whether about innovative approaches to health in Detroit (thanks, Bobby Smith of En Garde Detroit) or about piggybacking on cell phone technology to light up Africa (thanks, Lesley Silverthorn Marincola of Angaza Design).

These interviews form the backbone of two works well underway: 
  1. What I Wish I Knew Then: Becoming a Social Entrepreneur, a book with Cynthia Koenig of Wello and 
  2. a study of entrepreneurship and renwal in Detroit, with Neesha Modi.

My technology (which is not always the latest and greatest--I'm still holding out against smart phones) tells me Summer starts tomorrow.  What does your technology say?

Goals for the rest of Summer include keeping the ol' blog galloping along (better make that trotting) to let you know about the new books and Detroit-based activities, and to share stories, ideas, and lessons learned from the cool folks kind enough to share their experiences with me so that I have something truly of value to share.  Oh, and to avoid saddle sores.

Happy trails!

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Awethu: Imported to Detroit?

As anyone reading this space knows (anyone? anyone? I can read your comments if you click the "(No) Comments" link above, you know), I've been thinking a lot about Detroit. And I think it's fair to say that, once foreign cars began to arrive in the United States, and then gain wide acceptance for being affordable, high quality vehicles, Detroit was in trouble. Imports have not been kind to Detroit.

But here's one that could be.

I met Yusuf Randera-Rees several weeks ago at the Skoll World Forum and talked to him on the phone a few days ago.  His organization, the Awethu Project, is creating vibrant businesses where they rarely exist: South Africa's townships, or what we would call slums.

The Awethu Project conducts brief trainings for those in the townships on how to create a business and then tells them to think up a business idea and put it into practice in their community. A month later, those who have created the most profit (with records to back up their claims) begin a more extended period of training. They receive support both for personal development and formalizing their business ideas, being taught "hard" topics like time budgeting and record keeping as well as "softer" topics including personal discipline. Those who excel become part of Awethu's business accelerator, where Awethu helps move them from being small, isolated business towards becoming what Awethu really expects of them: to become business that are as good as the top businesses in the world and to link up, as appropriate, with that business ecosystem. Awethu also invests in these businesses, so their success benefits Awethu, further reinforcing the relationship and Awethu's desire to see them excel.

The idea behind Awethu is simple: identify gifted entrepreneurs in under-resourced communities, and provide them with the training and resources needed to compete with the world's best. The underlying premises, of course, is that there is a latent pool of such individuals everywhere who lack the opportunity, but not the inherent skills, to launch world-class businesses.

And if those potential world-beaters are everywhere, then they are certainly in the poorer parts of Detroit.

Yusuf is well educated, optimistic, and idealistic. And his efforts produce: he has developed a model of business talent identification in the township of Alexandra that has been noticed by the South African national government, which is now funding the project. In the coming year, Awethu will identify and put through its business accelerator program 1,000 entrepreneurs with world-class talent. As Awethu expands, Yusuf expects to take this idea across the country and then across the African continent.  

You've heard Chrysler's new slogan: Imported from Detroit. This is an idea Detroit (and the US) need to import themselves. Now.

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