Co-operatives in a Post-Growth Era

Creating Co-operative Economics

Tom Webb, Sonja Novkovic, Tom Webb, Sonja Novkovic

• Publisher: Zed Books
• Year: 2014
• Print ISBN: 9781783600786
• eBook ISBN: 9781783600809
• Edition: 1
• Topic: Business
• Subtopic: International Business
• Index: Business

For the past three decades, neoclassical doctrine has dominated economic theory and policy. The balance of power has shifted to protect private interests, resulting in unprecedented damage to the environment and society, with no solution in sight as more austerity and less government continues to be posited as the answer to the oncoming waves of crisis. It doesn't have to be this way. Featuring a remarkable roster of internationally renowned critical thinkers, Co-operatives in a Post-Growth Era presents a feasible alternative for a more environmentally sustainable and equitable economic system - specifically, the co-operative business model. With more than 100 million people working in co-operatives and more than a billion members around the world, the time has never been better for co-operatives everywhere to recognise their potential to change the economic landscape. An essential book for students, policymakers and concerned citizens looking for a practical way to change the current stagnant economic paradigm.

PART ONE

WHAT IS THE NEW ECONOMY AND WHY DO WE NEED IT?

1 | THE WORLD ON A COLLISION COURSE AND THE NEED FOR A NEW ECONOMY¹

Manfred Max-Neef

Preamble

In October 2008, at the same time as the Food and Agriculture Organization of the United Nations (FAO) was reporting that hunger was affecting 1 million people, and estimated that US$30 million annually would suffice to save those lives, the concerted action of six central banks (USA, EU, Japan, Canada, the United Kingdom and Switzerland) poured US$180 billion into the financial markets in order to save private banks. The US Senate approved an addition of US$700 billion. Two weeks later another US$850 million were approved in the United States. That not being enough, the rescue package continued to grow, reaching an estimate of US$17 trillion by September 2009.

Faced with such a situation, we are confronted with two alternatives: to be a demagogue or to be a realist. If, based on the law of supply and demand, I say that there is a greater demand in the world for bread than for luxury cruises, and much more for the treatment of malaria than for haute couture apparel, or if I propose a referendum asking the citizens if they prefer to use their monetary reserves to save lives or to save banks, I will be accused of being a demagogue. If, on the contrary, I accept that it is more urgent, more necessary and more convenient and profitable to all to avoid an insurance company or a bank going bankrupt, instead of feeding millions of children, or giving aid to victims of a hurricane, or curing dengue fever, it will be said that I am a realist.

That is the world in which we are – a world accustomed to the fact that there is never enough for those who have nothing, but there is always enough for those who have everything. The obvious question arises: where was that money? For decades we have been told that there are not enough resources to overcome poverty, yet there are more than enough resources to satisfy the wants of speculators. US$17 trillion divided by the US$30 billion the FAO estimates as enough for overcoming world hunger, instead of saving private banks, could generate 566 years of a world without hunger. Would not a world without misery be a better world for everyone, even for the banks?

What are we facing in our world today?

The quadruple convergence²

1 Exponential increase of human-induced climate change affecting all regions of the world.

2 The end of cheap energy, with dramatic effects on societies.

3 Extensive depletion of key resources basic to human welfare and production, such as fresh water, genetic resources, forests, fisheries, wildlife, soils, coral reefs and most elements of local, regional and global commons.

4 The gigantic speculation bubble that is fifty times larger than the real economy of exchange of goods and services.

The root causes are:

1 the dominant economic paradigm, which poses rapid economic growth at any cost and stimulates corporate greed and accumulation;

2 the uncontrolled use of fossil fuels to feed that obsessive economic growth;

3 the promotion of consumerism as the road to human happiness;

4 the decimation of traditional cultures, in order to impose conventional economic industrial models, which determines the loss of cosmovisions, languages and values that differ from those of the dominant culture;

5 disregard of planetary limits in relation to resource availability, consumption, waste generation and absorption; and

6 overpopulation: the population’s eventual growth beyond the capacity of the Earth to sustain it.

Consequences The conditions mentioned above may bring about unprecedented and dangerous environmental and social costs:

1 Climate chaos and global warming imply a loss of much productive land, storms, rising sea levels, massive dislocation, desertification and economic and social problems, especially in poorer countries.

2 The depletion of inexpensive oil and gas supplies has a direct impact the world over, threatening future industrial development. This will make industrial food systems and urban and sub-urban systems increasingly difficult to sustain, as well as many commodities that are basic to our accustomed way of life, such as cars, plastics, chemicals and refrigeration. This is all rooted in the assumption of an ever-increasing inexpensive energy supply.

3 There will be shortages of other resources, such as fresh water, forests, agricultural land and biodiversity; we are facing the possible loss of 50 per cent of the world’s plant and animal species over the next decades.

Crisis or crises?

It should be stressed that what we are facing today is not simply an economic and financial crisis, but a crisis of humanity. Probably never before in human history have so many crises converged simultaneously to reach their maximum level of tension. Rather, what used to happen was one crisis followed by another. Now we have them all together, which represents a monumental challenge.

Apart from the aspects already mentioned, we can add increasing political, economic, religious and sports corruption; the consolidation of greed as a fundamental value; gigantic enterprises exclusively concerned with their own benefits; judicial systems that forget justice; obsession with growth at any cost; the destruction of nature and disdain for planetary limits; decadence of the school and health systems; hyper-consumerism; hyper-individualism; global warming; climate change; eagerness for power; and disdain for life – colossal convergences that can only result in equally colossal outcomes.

Solutions Solutions imply new models that, above all else, begin to accept the limits of the carrying capacity of the Earth and a move from efficiency to sufficiency and well-being. Also necessary is the solution of the present economic imbalances and inequities. Without equity, peaceful solutions are not possible. We need to replace the dominant values of greed, competition and accumulation, for those of solidarity, co-operation and compassion.

This paradigm shift requires us to turn away from economic growth at any cost. The transition must be towards societies that can adjust to reduced levels of production and consumption, favouring localised systems of economic organisation. We need again to look inward.

We need, however, to understand why the dominant economic model has become so strongly ingrained in our world and in our everyday life. We shall see that its strength rests on mythology.

The myths that sustain the dominant model³

Myth 1: Globalisation is the only effective route to development Between 1960 and 1980 the majority of developing countries, especially in Latin America, adopted the principle of ‘import substitution’, which allowed for significant industrial development. During that period, per capita income in Latin America grew 73 per cent and in Africa 34 per cent. After 1980, economic growth in Latin America came to a virtual halt, increasing, as an average, not more than 6 per cent over twenty years, while growth in Africa declined by 23 per cent.

The period from 1980 to 2000 annihilated import substitution and replaced it with deregulation, privatisations, elimination of international trade barriers and full openness to foreign investments. The transition was from an inward-looking economy to an outward-looking one. The results indicate that the poorest countries went from a per capita growth rate of 1.9 per cent annually in the 1960–80 period, to a decline of 0.5 per cent a year between 1980 and 2000. The middle group of countries did worse, dropping from annual growth of 3.6 per cent to just under 1 per cent after 1980. The world’s richest countries also showed a slowdown.

Countries such as South Korea and Taiwan, frequently given as examples to be emulated, achieved their development through trade barriers, state ownership of the big banks, export subsidies, violation of patents and intellectual property, and restrictions to capital flows, including direct foreign investment. It would be absolutely impossible for any country to replicate these strategies today without severely violating the regulations of the World Trade Organization (WTO) and the International Monetary Fund (IMF).

Myth 2: Greater integration into the world economy is good for the poor Poor countries must adapt to a number of rules and restrictions established by international organisations. The result is that poor countries divert human resources, administrative capacities and political capital away from more urgent development priorities such as education, public health and industrial capacity.

In 1965, the average per capita income of the G7 countries was twenty times that of the seven poorest countries. In 1995 it was thirty-nine times larger, and today it is over fifty times larger. In practically all developing countries that have adapted to rapid trade liberalisation, income inequality has increased, and real incomes have declined between 20 per cent and 30 per cent in Latin America.

Today, more than eighty countries have a lower real per capita income than one or two decades ago. The paradox is that precisely the more marginal countries are the ones that have integrated themselves more completely into the global economy.

Myth 3: Comparative advantage is the most efficient way to ensure a prosperous world One of the unquestioned principles of modern politics is the need for global free trade. To doubt its benefits is an act of heresy. However, in spite of its supposed greater efficiency, compared with other systems of economic organisation, global free trade is notoriously inefficient in real terms. By giving greater priority to large-scale production for export purposes, instead of to small- and medium-scale production for local needs, and by generating competitive pressures that confront communities the world over, the prices of consumer products may decrease, but at an enormous social and environmental expense.

There is still a dominant belief about the benefits of adhering to comparative advantages. However, according to the model of David Ricardo (creator of the concept), the system functions as long as there is no transnational mobility of capital. Internally, capital searches for the most adequate niche that gives it the comparative advantage. However, when capital is granted full transnational mobility, it will look for absolute advantages in countries that allow for lower salaries, lower taxes and fewer environmental regulations. As noted by John Gray (1998):

When capital is (transnationally) mobile it will seek its absolute advantage by migrating to countries where the environmental and social costs of enterprises are lowest and profits are highest. Both in theory and practice, the effect of global capital mobility is to nullify the Ricardian doctrine of comparative advantage. Yet it is on that flimsy foundation that the edifice of unregulated global free trade still stands.

Take an example: Nike Corporation (makers of footwear), in order to remain competitive, needs to reduce its standards. So it moves to Indonesia, where, through independent contractors, the shoes are made by young girls who are paid around 10 to 15 US cents per hour. As David Korten (1995) comments:

Most of the outsourced production takes place in Indonesia, where a pair of Nikes that sells in the United States and Europe for $73 to $135 is produced for about $5.60 by girls and young women paid as little as fifteen cents an hour. The workers are housed in company barracks, there are no unions, overtime is often mandatory, and if there is a strike, the military may be called to break it up. The $20 million that basketball star Michael Jordan reportedly received in 1992 for promoting Nike shoes exceeded the entire annual payroll of the Indonesian factories that made them.

Myth 4: More globalisation means more jobs According to the International Labour Organization (ILO), one-third of the world’s working force was unemployed or underemployed in 2000. The situation, as noted by the ILO, tends to deteriorate further.

Outsourcing, as described in the previous section (myth 3), is a necessity of the big corporations in order to remain competitive. It goes without saying that such a process generates unemployment in the place of origin, and underemployment in the country of arrival.

Myth 5: The World Trade Organization is democratic and accountable

Many decisions...

Table of contents

• Cover
• About the Author
• Title
• Copyright
• Contents
• Tables and figures
• Introduction: Co-Operative Economics, Why Our World Needs it
• Part One | What is the New Economy and Why Do We Need it?
• Part Two | Co-Operatives and the New Economy
• About the contributors
• Index