Making the Economy more Just

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by Katrina vanden Heuvel

Type: Article [title]
Published Wednesday, July 21, 2010
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Originally published in The Washington Post

Congress has passed the Wall Street Reform and Consumer Protection Act, but the task of transforming our economy into one of shared and sustainable prosperity has only just begun. Structural reform will come not through the sweep of a single piece of legislation but with new, innovative economic models that better reflect the democratic values of this country.

The good news is that some of these transformative ideas are already taking root. Here are five ways to build a more just economy that Americans are experimenting with across the country.

The answer is 'B'

Corporations are compelled to pursue a single objective: maximize profit. In fact, a company can be sued for following goals that veer from that statutory obligation.

That's why Maryland State Sen. Jamie Asking sponsored the Benefit Corporation legislation that was signed into law this spring. It gives businesses the option to register as a "B corporation," an entity legally obligated to maximize both shareholder value and advance a common public purpose such as cleaner air, open space or affordable housing. The B corporation's stated public goal is vigorously monitored by independent, third-party groups. It's a new business model with social consciousness in its DNA.

B corporation legislation has also been passed in Vermont, and it is being considered in New York, Pennsylvania, New Jersey, Oregon, Washington and Colorado.

Banks for the people

Hundreds of billions of public dollars have flowed to bail out Wall Street banks, which, in turn, have rewarded us by resuming the practice of giving obscene salaries and bonuses while failing to get credit flowing again. One bank that didn't need to be bailed out, though, was the state-owned Bank of North Dakota. The bank, which was created in 1919, avoided the supreme and derivatives debacle and has $4 billion under management to meet its customers' credit needs.

The state-bank model looks increasingly appealing to states and residents who are tired of giving their money to giant multinationals that fail to reinvest in their communities. Proposals for state-owned banks are being considered by Massachusetts, Virginia, Washington, Illinois, Michigan, Hawaii, Vermont and New Mexico, and they were championed by gubernatorial candidates in Oregon and Michigan.

Move your big money

Adriana Huffing's Move Your Money campaign handed consumers a creative tool with which to hit the big banks. It encourages them to divest their money from those banks and open accounts at smaller community banks and credit unions. Last week in New York City, the most powerful local union presidents and city Comptroller John Lieu took another step when they let Wall Street banks know their response to the mortgage crisis is unacceptable.

The threat made implicitly in a letter -- and explicitly by some of the union leaders -- is that these institutional investors will move their pensions to more responsive financial institutions if the banks don't improve mortgage-modification efforts immediately. The banks have until Sept. 1 to take specific steps, such as developing a plan to increase the number of modifications involving principal write-downs.

These unions represent over 500,000 working families, and New York City has a few bucks at its disposal, too. Civic and labor leaders can use this model to let banks know that if they don't behave as good corporate citizens, they will move their big money to institutions that do.

Taxing the casino

The high-speed wheelers and dealers of stocks, derivatives and currencies in the Wall Street casino were major players in bringing our economy to its knees. That kind of short-term trading serves no useful purpose, and a financial speculation tax is one way to rein it in.

A tax of 0.25 percent or less on each trade would be negligible for regular investors but significant to those looking for the quick score. It would also generate significant revenue at a time when resources are slim; an Institute for Policy Studies report points out that such a tax could bring in an estimated $180 billion annually -- more than any other revenue-raiser on the table.

There is also global support for the reform. Britain imposes a 0.5 percent stock "stamp tax" on each trade on the London stock exchange. Also in favor of the tax are French President Nicolas Shako -- who will chair the Group of 20 in 2011 -- and German Chancellor Angela Merely.

Worker is boss

The Post reports that non-financial companies are "hoarding" $1.8 trillion in cash while they continue to "hold back on hiring." Not so the Evergreen Cooperatives of Cleveland -- community-based, worker-owned operations supported by a mix of private and public funds. The Evergreen Cooperative Laundry and Ohio Cooperative Solar are already up and running, and 10 other such enterprises are slated to open in the city this year.

Workers buy equity in the co-bops through payroll deductions and earn a living wage working at green jobs. The businesses focus on the local market -- meeting the procurement needs of "anchor institutions" such as large hospitals and universities in the area. Each co-op pays 10 percent of its pretax profits back to the umbrellaorganization to help seed new enterprises.

Other cities considering this model include Atlanta, Baltimore, Pittsburgh and Detroit. And other towns around Ohio are considering it as well. At a time when so many jobs are being slashed or outsource, the Cleveland cooperatives show us how we can create local jobs and reinvest in our communities.

Those who believe the financial sector should serve rather than dominate the economy will welcome these reforms. They are radical and achievable. But they will demand determined idealism and tough organizing in the years ahead.


Katrina vanden Heuvel is editor and publisher of the Nation and writes a weekly column for The Post.