Draft Manuscript. Not for Quotation Or Attribution

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Draft manuscript. Not for quotation or attribution.

6 Curtis St., Salem, MA 01970. Home office 978-594-1096.

Owning Our Future:

The Emerging Ownership Revolution

Journeys to the Generative Economy

By Marjorie Kelly

Author, The Divine Right of Capital

Slight revised draft manuscript – September 7, 2011

“When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall … dare to assess the money-motive at its true value. The love of money as a possession … will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease….”

n Economist John Maynard Keynes, “The Future,” Essays in Persuasion.

“The design principles of our future social institutions must be consistent with the principles of organization that nature has evolved to sustain the web of life.”

n Physicist Fritjof Capra, The Hidden Connections.

Table of Contents

62,200 words (without footnotes)

Foreword – by Jeffrey Hollender

1. Introduction – The journey ahead (6,800 words)

Part I – The Evolution of Ownership: Home (30,400 words)

From dwelling on the land to tangled in debt

2. Debt, Inc.: Extractive design (3,760 words)

3. The Community Bank: Generative design (4,000 words)

4. The Faux Community Bank: Capital formation (2,200 words)

5. Wall Street: Financial alchemy (5,700 words)

6. Acceleration: Ownership for a nanosecond (2,500 words)

7. Overload: Extraction in extreme (3,600 words)

8. Derivatives: Losing touch with reality (3,900)

9. Collapse: Erosion from below (4,700)

Part II – The Turning Point: The Commons (15,800)

Beginning the world anew

10. Waking Up: No separate systems (5,200 words)

11. The Island: Beyond growth (5,300)

12. Bringing Forth a World: The ecosystem of generative design (5,300)

Part III – The Design Challenge Ahead: Enterprise (9,400)

Living companies for a generative economy

13. The Employee-Owned Store: Social boundaries (3,600)

14. The Mission-Controlled Corporation: Governance (3,100)

15. Finance Revisited: Capital (this chapter yet to come)

16. The Farmer-Owned Dairy: Networks (2,700)

17. Coda: Next. (not yet written)

Chapter One: Introduction – The Journey Ahead

What comes next?

In the great book of the industrial age, what kind of turn in the plot can possibly lie ahead, at this moment when things keep going so frighteningly, freakishly awry? If we were to take all the plots and subplots of our day and weave them together into some enormous novel, it would be one of those outlandish potboilers that simply strain credulity. No one would believe it. That’s the book we seem to be trapped in. The twist and turns in the plot that we confront, month by month, are so improbable as to be absurd: 100-year floods that come every 10 or 15 years, millions thrown out of work and out of their homes, hurricanes and tornados more virulent and frequent than ever before, riots on the streets of London, multiple banking crises rippling across the globe, planetary oil reserves running low, food prices rising, species disappearing, stock markets gyrating, and more. Turn the page and then, what?

That’s the infuriating part. The next page is blank. It hasn’t been written yet – although many seem pretty sure where the plot is heading. I remember a conversation I had with my thirty-something nephew, Dimitri, at a family wedding a few years back. He was at the time a Ph.D. student in political science, and like many other well informed people, he was convinced that damage to the biosphere was irreversible, and there was no chance of turning aside from catastrophe.

“In my future work,” he told me, “I’m going to document the demise of our civilization.”

There was no humor in his voice when he said this, as we huddled together over coffee before a family wedding.

“When were you born?” I asked him.

“1979,” he said.

It struck me that Dimitri had grown up in the era of 1984 – an Orwellian time not unlike the dystopian novel of that title. He’d come to adulthood through 30 long years of virtually unbroken conservative hegemony, when the progressive agenda had been reduced to one of hobbled accommodation to conservative dominance. The election of Barack Obama in the U.S. had inflated then dashed the hopes of many in Dimitri’s generation. The revolutions in the streets of Egypt, Syria, Bahrain and elsewhere did much the same. There were moments of hope – like brilliant flares in a night sky – then the return of a kind of sullen despair, reinforcing the conviction that real change was, and would remain, impossible.

This is a book about change. It’s a letter to Dimitri about hope. It’s about the economy – about the real possibility that a fundamentally new kind of economy can be built, that this work is farther along than we suppose, and that it goes deeper than we would dare to dream. It’s about economic change that is fundamental, enduring, and real: not greenwash or all the other false hopes flung in our faces for too long. The change I’m talking about is already bubbling up, all over the world, yet remains surprisingly invisible. In this book I aim to shine a light on it. It’s change that is fundamental, and enduring, and real because it involves alternative kinds of ownership. That is to say, it represents not the legislative or presidential whims of a particular hour, but a permanent shift in the underlying architecture of economic power.

The power of ownership isn’t something most of us think much about. We tend to think of ownership as a fact, and fail to recognize it has design. There are different ways of designing and using ownership that go far beyond the tired dichotomy of private vs. state ownership, which underlies the old paradigm of capitalism vs. communism. The alternative kinds of ownership taking shape are generally about private ownership – but private ownership designed to serve the common good. Consider a few stories I’ve found in the journeys I’ve made writing this book.

* * *

Denmark today generates one-fifth of its electric power from wind – more than any other nation. And many observers credit that success to the grassroots movement for community ownership that jump-started the Danish wind industry. I was flying into Copenhagen Airport not long ago, the plane banking low over the harbor on its approach, when I saw a powerful symbol of community wind below me: seven wind turbines standing there in the waters offshore, their white blades gleaming in the sun, turning in syncopation. It was Lynneten Wind Farm, with an ownership architecture as innovative and hopeful as its physical architecture. Three of these turbines are owned by a local utility, four by a wind guild. Denmark’s wind guilds were created by small investors joining together to fund and own wind installations, with no corporate middleman.

In late 2008, I remember waking one morning to news on the radio that global stock markets were in freefall, the heart-stopping 42 percent plunge that markets saw that year was not yet at bottom. The funk that the international economy remains in today was then descending like a black mood, like a hangover after a drinking binge, like the tingly shock of opening a credit card bill after a spending spree. That was the day I caught the No. 4 bus to the Seaport World Trade Center in Boston to attend the annual meeting of the Community Land Trust Network. Community land trusts (CLTs) are ownership designs in which individual families own their homes, while a community nonprofit holds title to the land beneath a group of homes. It’s a design that reduces and stabilizes the price of homes, while it prohibits speculative ownership. CLTs, I discovered, had foreclosure rates one-quarter those of other homes. As attorney David Abromowitz told us that day at the conference, “It’s like a bomb went off and all the houses have been flattened, but there’s one well-built house still standing.” Community land trust homes had been left unscathed because of an ownership design that melded private ownership and community ownership in an effective new hybrid.

When Congress considered solutions to problems with mortgage giant Fannie Mae and why it lost its way in the housing crisis, one idea on the table was turning Fannie Mae partially into a cooperative. In its original design, Fannie Mae was a government-sponsored enterprise (GSE) created by Franklin Roosevelt in 1938 to give more families a chance to own their homes. Americans for many decades had Fannie Mae (and partner Freddie Mac) to thank for the 30-year mortgage – rare in other nations – and for low interest rates. The story behind this company is a fascinating one, and too little understood. It was initially financed by the U.S. Treasury, but over time its ownership was shifted into investor hands. Yet Congress retained control of its legal charter (its operating manual). This company bought mortgages issued by other banks, which made it the glue holding together the housing market. Ultimately, Fannie and its sibling controlled half the $11 trillion U.S. mortgage market. But the siren song of enormous executive pay lured Fannie’s CEO into focusing on growth and profits, and losing sight of the original social mission. Fannie Mae did not cause the housing crisis. But had it stayed true to its founding intent – and refused to purchase abusive mortgages – the housing crisis might not have occurred. Had this one company been better designed to preserve social mission (had its charter, for example, prohibited the use of stock options and capped executive pay), the well-being of millions of homeowners might have been protected. The long global economic downturn could possibly have been prevented.[1]

One brisk fall day when I was visiting Dimitri in Madison, Wisconsin, I made the drive to nearby LaFarge, to visit the headquarters of Organic Valley and meet its pony-tailed C-E-I-E-I-O, George Siemens, who keeps his own 2,500 hens down the road. The purpose of that $560 million company, he told me, is to save the family farm. One farmer who’s benefiting is Travis Forgues. In the farming household in Alburg Springs, Vermont, where he grew up, it had always been a struggle to make ends meet. When Travis came of age and took his turn at farming, it was at a time when Organic Valley was reaching out to help farm families go organic, to meet the growing consumer demand for organic milk. The Forgues Family Farm joined that cooperative. Today the farm supports two families with relative ease, because of the high, stable price Organic Valley pays its farmers for milk, cheese, and eggs. While other companies aim to pay suppliers as little as possible, this company aims to pay its suppliers as much as possible. The reason is it’s a farmer-owned cooperative.

When Leslie Christian first told me of her idea for a new kind of corporation – later called a benefit corporation – it was on a long walk we took together at the foot of the Rockies. A former Wall Street bond trader, Leslie had left that world and taken a post as president of a socially responsible investing firm, Portfolio 21 Investments in Portland, Oregon, hoping to use finance as a tool for building a more humane economy. As part of her work there, she’d created a subsidiary with a new purpose baked into its bylaws. It said the company’s purpose was to serve many stakeholders – including employees, the community, the environment, and stockholders. Inspired by her, a group of young entrepreneurs started the project B Lab to promote aspects of her model. Within a few years, more than 420 companies had signed up to be B Corporations. Laws for B Corporations recently passed in five states, and seven other state laws are now in the pipeline.[2]

Last year [2011], attorneys in every state of the U.S. began filing lawsuits aiming to have the atmosphere declared a public trust, deserving special protection. The suits were filed on behalf of young people, arguing their future was threatened by climate change. If they achieved victory in even one case, it might create a ripple effect like that seen with gay marriage, where state after state follows. This might create leverage for new legislation reining in greenhouse gas emissions. The effort represents a bold attempt to harness the common law of property as a tool to serve the common good.[3]

A personal odyssey

Ours is a liminal time, one that find us standing on the threshold of great change – between the failure of old models and the emergence of the new. It’s a time of deep yearning for trustworthy institutions, for companies and investments that are reliable and ethically sound. It’s no surprise this is a time of ferment and innovation in ownership and financial design for the common good. (Finance, when you get right down to it, is the handmaiden of ownership; it’s about the ownership of assets, and assets are nothing more than the liquid value of tangible things. I’ll say more on this in Chapter 4.)