What, specifically, can we do to engender an economic environment that makes Main Street more prosperous instead of simply resurrecting the Dow Jones Industrial Average by any means necessary?
Sure, it would help if anyone in government could see past their fealty to their corporate donors to help — or at least not to actively block any such efforts. The best thing they could actually do straightaway is reverse the tax code. We currently reward capital gains with low taxes, and punish earnings and dividends with much higher rates. This not only advantages passive shareholders over people actually creating value, but it incentivizes businesses to grow at all costs. The resulting addiction to growth isn’t the solution to economic resilience, as its proponents argue, but the very cause of our frailty.
Still, we can’t depend on government to implement any of such reforms from the top-down, anyway. The refusal of the administration to step up and take charge in the face of this crisis can serve as an inadvertent “tough love” lesson to states and local communities that we’re on our own — and better start finding solutions and building prosperity from the bottom up.
Most of the legislative help comes from local politicians, anyway, like New York Assemblyman Ron Kim, Mayor John Reed of Fairfax, California, or New York City Council member Brad Lander. The best they can do for us, however, is stall regulations designed to favor extractive would-be monopolies like Uber, Airbnb, General Foods, Amazon, or Walmart over locally run, small and family enterprises — while also educating their constituents how to create networks of small businesses that support one another through credit unions, barter exchanges, and even local currencies.
We, the people, may struggle ourselves, but we’re in it together. The mantra for a post-Covid economy must be “make everyone rich.” The scorched earth practices of a Walmart, Amazon, or Uber, succeed only in squeezing their employees, suppliers, and partners dry. Everyone becomes one paycheck or purchase order away from bankruptcy — which renders the whole system brittle. Instead of pushing everyone into a corner and forcing them to take an unprofitable deal (that’s Trump’s The Art of the Deal, in a nutshell), companies should try to make everyone in their marketplace as prosperous as possible. It may seem counterintuitive, but the more wealth there is in a business’s ecosystem, the better that business does, more sustainably — and the more other businesses want to work with it.
Instead of competing with local suppliers, the biggest retailers should partner with them. Walmart can create an entire aisle in every store for locally produced goods. The sales of such products would recirculate at least some revenue through these devastated communities, rather than simply sucking it all up and away. Amazon could do the equivalent with an algorithm. And neither Walmart nor Amazon need to feel so terrible about helping these smaller, local businesses make a profit. Their owners and employees will simply have more money to spend with them, too.
For their part, small businesses devastated by Covid-19 and looking for ways to dig out from debt or bankruptcy need to consider alternatives to crippling bank loans. They can move instead toward any one of the new models of employee ownership, from Employee Stock Ownership Plans to full Platform Cooperatives. During the last financial crisis, workers of New Era Windows occupied their factory which was being shuttered by the parent company. In a spontaneous act of solidarity, Chicago police refused to arrest them. Eventually, the workers purchased the company — some through sweat equity — and now run it as a co-op. Needless to say, when workers own their company, they are less likely to ruin the communities in which they operate, because they live there. They’re also less likely to consider themselves expendable when the next crisis hits.
The only ones who initially do worse in such an economy are the banks. As money circulates more freely throughout a community, less new capital is needed to keep things going. Since businesses are no longer required to grow in order to survive, they can focus instead on honing their operations, better serving their communities, and using any efficiencies to generate more wealth for everyone. Such businesses won’t be borrowing as much money, which means banks may earn less interest. But that’s not a bad thing, either. Interest is an expense — a form of drag on real business activity. We don’t want our cars to use more fuel than necessary, either.
The main principle at play here is what I’ve come to call “bounded economics.” Instead of optimizing our economy and businesses for growth and the extraction of capital, we optimize them for the velocity of money and the circulation of value. In other words, instead of earning $10 once and taking it off the table, we seek to earn one dollar, 10 times. My favorite example of this practice is when the AFL-CIO came up with the great idea of investing their retirement fund in real estate development deals that hired their own union’s construction workers. They made back their own money as salary, while also earning investments in the projects. Eventually, they got the bright idea to invest in the building of retirement communities for their own parents. Triple play.
That’s the way an economy is supposed to work. Just like the circulatory system of a living being, the money needs to be kept moving. Widespread prosperity is not a form of charity or welfare, but the surest sign of a thriving, resilient economy. Unfortunately, the economy so many seem desperate to return to is based on the opposite principles. Yet that dream of infinite, exponential growth ends only in apocalypse or escape to Mars. The wealthiest among us are preparing for both.
The restoration of local, bottom-up production and commerce based in mutual prosperity is also a chance for Trump and Bernie supporters to realize they’re on the same side. Freed of top-down political ideologies and frameworks, we can get down to the actual work of growing food, patching roofs, healing wounds, and teaching arithmetic. Local resilience need not be left or right.
It’s just a way to return to health.