Ownership Matters|Issue 14
Kelso’s Legacy; Fireside on Funding the Revolution; LEAF Fund
- Editorial: Who Was Louis Kelso?
- Daniel Fireside on Funding the Revolution — Part 1
- Fund Profile: LEAF Fund
- Books: Mariana Mazzucato
- Learning in ICCM’s Co-op Identity Course
- South Bend’s New Story
- Canadian Worker Cooperatives Conference
- Doughnut Economics Event
- Arizmendi International Gathering
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share this segment by right‑clicking icon to copy linkWho Was Louis Kelso?
People are hungering for property — for a secure, permanent and independent link with spaceship earth that ownership represents and which only ownership can protect or defend. It is humiliating to possess nothing, to own nothing, and hence to produce nothing and to count for nothing.— Louis O. Kelso and Patricia Hetter, Washington Post, June 18, 1972
We want to change the system and yet we know that change has to occur at scale — large scale. Looking at history, projects like rural electrification, agricultural cooperatives, or credit unions brought change through both broad grassroots membership as well as governmental enabling via legislation.
Perhaps the last such broad-gauge victory for the cause of shared ownership was the Employee Stock Ownership Plan (ESOP), the brainchild of a bow-tied Republican attorney named Louis Kelso. His good idea has grown to scale, with some 6,000 ESOPs in operation, benefiting around 10 million participants.
A native Coloradan and graduate of the University of Colorado (Boulder) law school, Kelso’s legal practice led him to notice something about how rich people made money: they almost never risked their own. Overcoming our two different economic systems, he learned early, would require widening access to capital.
Kelso, a man in the grip of an idea (or several, actually), knew that he needed a champion on the floor of the U.S. Congress, someone who also feared this country becoming (as Kelso put it) “a nation of industrial sharecroppers.”
That person turned out to be Sen. Russell Long, a centrist Louisiana Democrat with a populist streak, who bought into Kelso’s vision. (Long was the son of the famous Louisiana governor, Huey P. Long, assassinated in 1935.)
Moreover, Long shepherded the ESOP idea into legislation via the ERISA Act (1974), a tax and labor law that established minimum standards for corporate pension and employee benefit plans. Thus jobs and wages alone would become less critical to workers because their ownership stakes would supply additional capital.
Kelso’s goal was to help bring the capitalist economy down to human scale, as he put it, giving every worker a capital stake, not just a wage or salary.
Interestingly, Kelso believed in financial innovation as part of his larger campaign to restructure democratic capitalism generally. Another building block in his proposals was a CSOP — a consumer stock ownership plan — which he tested in California with an agricultural purchasing co-op’s membership.
Then there was his idea for the Capital Diffusion Reinsurance Corp, a kind of Freddie Mac / Fannie Mae entity which would help create a market for this kind of mass lending. His EOTs (employee ownership trusts) would offer more flexibility than ESOPs.
I echo here Nathan Schneider’s question: how do we develop post-ESOP structures which can learn from the co-op experience? ESOPs are moving toward practices like open book management, as he has noted, a more participatory form of governance, even though there’s no legal requirement.
Can the co-op and the ESOP model converge? How can companies go deeper in their commitment to employee ownership, even encoding social purpose in their ESOPs? This line of inquiry isn’t new. (Of possible interest: The Journal of Participation and Employee Ownership.) That the big tech platform companies, perhaps surprisingly, are talking lately to the SEC about user ownership schemes is new, however. Let’s hope Louis Kelso’s ideas are about to catch a second wind.
share this segment by right‑clicking icon to copy linkDaniel Fireside on Funding the Revolution
Daniel Fireside is the founder of Uncommon Capital Solutions, a board director at Namaste Solar, an advisor to the Main Street Phoenix Project, and Fundraising Coordinator for Downtown Crenshaw. He was the Capital Coordinator for Equal Exchange for just under eleven years, beginning in 2010.
You’ve got an interesting mix in your background, including your role in some co-ops with a political consciousness — Equal Exchange notably. Where did your politics come from?
When my mom was pregnant with me, my parents were hiding out Father Daniel Berrigan when he was a fugitive from the FBI for his anti-war activism. My personal political awakening began in the 1980s, with the Central American solidarity movement. I ended up spending quite a bit of time in Latin America — in Guatemala, in Peru, looking at structural issues with global inequality and questions of development.
These are sort of things I’ve been grappling with intellectually and then trying to be an active participant in. I went to grad school in international planning at Cornell where they allowed me to do research on coffee farmers in Guatemala, which was actually my big introduction to co-ops as a tool for economic justice.
During this time the global coffee price was at an historic low. It was insane, like pennies on the dollar, due to the collapse of a global coffee cartel that actually had the support of the consuming countries. It was probably the only commodity cartel that had participation of both consumers and producers, being very intentionally ideological — i.e., to ward off communism. It lasted from 1961, right after the Cuban revolution, to 1989. [ Ed. Note: the date of the fall of the Berlin Wall, the symbolic collapse of the U.S.S.R. ]
When that cartel ended, it was just a crazy market free-for-all and the coffee farmers were just cast aside.
So the free market arrived but it didn’t deliver freedom for the growers.
Right, and that was a puzzle to me. How can you have this product, an addictive plant-based stimulant — it can’t get better than that — with inelastic demand, where consumers are ready to pay a premium — and the farmers are getting poorer with every crop they pick?
So starting in 2001, I spent about two years researching and then interviewing hundreds of farmers. Actually, I talked to everybody in the coffee trade, from the farmers to the head of the Guatemalan Coffee Association, USAID people and tons of coffee executives.
I came away with this very deep appreciation for the role of co-ops after interviewing hundreds of farmers both who were in the system, in the fair trade cooperative system and those who were not. And the difference between how well the co-op farmers were doing and the others was very dramatic. They hadn’t needed to pull their kids out of school, for example. It wasn’t that they were living a life of luxury but they had a safety net which the government wasn’t providing. They were getting agricultural extension services, they were getting price supports.
share this segment by right‑clicking icon to copy linkFund Profile: LEAF Fund
This conversation was with LEAF Fund’s Josh Glickenhaus, Director of Lending and Operations.
Boston-based LEAF Fund, a subordinate organization under the ICA Group, is one of only three CDFIs nationally with a specific focus on worker cooperatives, including community-owned natural food cooperatives that create high quality jobs and provide access to healthy food in urban and rural communities; low-income cooperative housing developments; and worker-owned firms and other community-based businesses and social enterprises.
Since its founding over 30 years ago, LEAF (Local Enterprise Assistance Fund) has invested and leveraged over $122 million, resulting in the creation or retention of more than 10,300 jobs.
In addition, LEAF provides capital advisory services and other technical assistance to small businesses in the Greater Boston Area.
contact : leaf [ at ] leaffund.org
Total assets under management
Active loan portfolio
Areas of focus
- community-owned natural food cooperatives
- low-income housing cooperatives
- worker-owned firms
- other community-based businesses & social enterprises
Josh, when did you arrive at LEAF Fund and what’s your background?
I began at LEAF in 2019 with a background in the CDFI sector, working with one group which aimed to be a bridge between CDFIs and institutional investors, to bring more of that kind of funding into the CDFI space. So social impact investing has been my background, along with a couple of years in grad school for city planning.
I think co-ops are something that has always interested me because they align with my political values. In grad school, it was housing and land co-ops, land trusts, limited equity co-ops that really caught my interest as a promising solution to address gentrification and the other externalities affecting cities. Such as Philadelphia, where I was living at the time before relocating to Boston. LEAF had always been on my radar as one of the few groups at the intersection of community development, finance, and co-op development. Luckily for me, they had an opening right around the time my family moved to Boston.
Were you already aware of the good work going on in Boston — the Dudley Street Initiative and so on?
They were actually a case study in my planning course because of their novel model for an urban land trust. And now it’s a pleasure that I get to work with some of these folks on a regular basis after having read about them.
LEAF has always had a focus on food co-ops, correct?
LEAF was originally founded in 1982 as an affiliate of the ICA Group, one of the leading national co-op developers. Our current executive director came in about 15 years ago to keep the core focus on worker co-ops but to extend our involvement with food co-ops and housing co-ops, for example. Today food co-ops are the biggest single segment of our portfolio, with worker co-ops and small businesses a fairly close second. Housing co-ops and land trusts rank third in our mix but also the fastest-growing.
share this segment by right‑clicking icon to copy linkFour Reasons to Read Mariana Mazzucato
If you want to understand the new economy we so badly need, then you’ll want to read people like Elinor Ostrom on the commons, Silvia Federici on the history of women’s work, Esther Duflo on the importance of empirical trials in poverty-fighting, Kate Raworth on the “doughnut model” of planetary sustainability, Carlota Perez on the ills of financialization, Hilary Cottam on the need for social design — and Mariana Mazzucato. Notice anything about this list?
Although women reportedly make up about one-quarter of the economics profession, it’s striking how many are thought leaders in the work of building up the solidarity economy. Which brings us to Mazzucato.
An Italian-American with dual citizenship, Mazzucato has degrees from Tufts and the New School and has taught at NYU, the University of Denver, the London Business School, and is now a professor at The Open University. A specialist in the economics of innovation, she has advised the EU, the British Labour Party, and the OECD and is a member of the UN’s Sustainable Development Solutions Network Leadership Council.
The first reason to read Mazzucato — I’ll focus here mostly on her 2018 book, The Value of Everything — is for her critique of our extractive economy, particularly the way it confuses value creation (the transformative research from Xerox Parc in the early 1970s) with value extraction (cash-heavy corporations buying back their own stock in order to reward stockholders and execs instead of investing in innovation or other value creation).
A second reason: her revisionist history of our changing ideas about the nature of value of economic “rent” (unearned income) — which is the principal means by which value is extracted. (Adam Smith believed a genuinely free market was one free of rent, while David Ricardo considered landowners who merely collected rents without improving the productivity of the land to be “parasites.”)
Reason number three: her stunning analysis of the scope and impact of the financialization of the real economy over the last several decades. Starting with Milton Friedman’s famous 1970 NY Times Magazine article on shareholder value, Mazzucato unpacks the damage that the MSV (maximizing shareholder value) movement has wreaked: “short-termism” and its speculative dimensions, the retreat of patient capital, rapacious financial engineering extending now to social providers and public utilities such as water companies, and a distortion of incentives around investment generally.
And finally, reason number four: her eye-opening analysis of our compulsive undervaluing of the contributions of the public sector. In addition to their recent history of mismeasuring value, economists and now the public, in Mazzucato’s view, have disastrously failed to appreciate the role of government as innovator.
She cites the iPhone as an example of a product whose success depended much less on our notions of heroic, usually male, risk-takers and much more on public funding via the Defense Advanced Research Projects Agency (for the Internet, SIRI), the U.S. Navy (GPS systems), the CIA (touchscreen technology), and Xerox PARC (the GUI itself).
(Although Mazzucato doesn’t comment on the fact, the Cold War / Defense Department origins of Silicon Valley as the foundation of its stunning ascent as a global center of power are now becoming more evident with the rise of surveillance capitalism.)
Mazzucato’s latest book, Mission Economy, takes up this theme of authentic public-private collaboration to argue for restructuring capitalism, not solely in a program of redistribution but in the spirit of a NASA program driven by innovation. Let’s hope her ideas — and those of the other women mentioned above — not only get a hearing but bring action.
share this segment by right‑clicking icon to copy linkLessons Learned at the ICCM’s Co-op Identity Course
Everyone is pondering co-op identity this year, including the International Centre for Co-operative Management (Saint Mary’s University), whose terrific two-day course on “Operationalizing the Co-operative Identity” we attended on October 20–21. (The course was offered via the NCBA / CLUSA’s Impact Conference system.)
The two-day event was aimed at “seasoned decision-makers and emerging leaders from any sector or type of co-op.” Its goal was to help attendees deepen their sense of the links between the values of their own businesses and the ICA’s Statement on the Cooperative Identity. And a deep dive it was!
Given the widely divergent nature of co-ops, we liked one mantra which emerged at the outset: “Co-ops are fractals.”
The conversation between co-op veterans Erbin Crowell (Neighboring Food Co-op Association) and Martin Lowery (National Rural Electric Cooperative Association) surfaced insights about the Rochdale Pioneers and their aim of creating not just a store but a cooperative commonwealth. The speakers noted that the Pioneers were part of an international movement in early nineteenth-century Britain. Perhaps surprisingly, they did not themselves operate via formal principles but instead referred to their “operating rules.”
More from the ICCM, please!
share this segment by right‑clicking icon to copy linkSouth Bend’s New Story
With a poverty rate of 24%, South Bend (population 100,000) is a small and struggling city. But in the last few years, it has been quietly spreading ownership through a strategy probably less well-known to many here: creating a platoon of small-scale developers based in its city neighborhoods.
With the full buy-in of city government, a broad coalition of forces here is attempting to create and support a new ecosystem — made up almost entirely of people of color — who develop and own their own residential and commercial places. And amazing things are happening.
A cohort of small developers [Ed. note: many people of color, especially women] representing over 100 properties in poor, disinvested neighborhoods are, if taken collectively, the largest developer in the city. And they didn’t get there by competing with each other for opportunities, but by creating opportunities for each other.
Furthermore, they’ve done it essentially without subsidy. In the process, they’ve often provided below-market rents and commercial space, and space for community-serving activities.”
Upcoming : Nov. 16–18
share this segment by right‑clicking icon to copy linkCWCF Conference: “Building Better Together”
If you’re an American wanting to see a country in which the social and solidarity economy has been underway for many years, you don’t have to go far. Just across the Canadian border, in fact.
Going back to Alphonse Desjardins and his founding of the first North American credit union in Quebec in 1900, or to the Antigonish movement of co-ops and credit unions in Nova Scotia of the 1930s, or forward to today’s burgeoning social economy in Quebec, it is Canada which offers a glimpse into the economy we need.
For a deep dive into the world of Canadian co-ops, you could hardly do better than the upcoming (virtual) conference of the Canadian Worker Co-op Federation, November 16–18. Key presenters will include:
- Esteban Kelly, Executive Director, USFWC, Philadelphia
- Colin MacDougall, Sustainability Solutions Group Workers’ Cooperative
- Isabel Faubert, Executive Director, Coordinator of Advisory Services, Réseau, Montreal
- Susanna Redekop, Local Food and Farms Co-op Network and Master’s student, Toronto
- Lucenia Ortiz, Multicultural Health Brokers Co-op, Edmonton
- Bernard Ndour, MCE Conseils and CWCF Fund Investment Committee, Montreal
- Kelly Storie, Executive Director, La Siembra Co-op, Ottawa
Upcoming : Nov. 19
share this segment by right‑clicking icon to copy linkDoughnut Economics and Enterprise Design
What would a healthy economy look like? Would the image of a doughnut (British spelling!) come to mind?
It all started with U.K. economist Kate Raworth’s very readable 2017 blockbuster Doughnut Economics, an argument for a new economics shaped by social and planetary boundaries. Now her ideas have crystallized a downscalable City Portrait strategy, picked up last year by places like the City of Amsterdam.
And then there’s the Doughnut community hub, called the Doughnut Economics Action Lab or DEAL.
At noon ET on Nov. 19, DEAL Business and Enterprise Lead Erinch Sahan will be speaking about the innovations needed in enterprise design if we are to see human prosperity in the 21st century. Registration and event are on Crowdcast.
Upcoming : Monday, Nov. 29
share this segment by right‑clicking icon to copy linkArizmendi International Gathering 2021
Who was Fr. Josemaria Arizmendi and what was his “secret” in founding the Mondragon cooperatives? Are there Mondragon-inspired organizations working successfully today? Was he one of the precursors of today’s social / solidarity economy?
Save the date for a special online event celebrating the memorial day of Fr. Josemaria Arizmendi with a mix of presentations, videos, and commentary. Among the multiple sponsors are Solidarity Hall, Zebras Unite, and the Francesco Collaborative.
Two teams of cooperators are creating two separate events — one focused on the Americas and the other on Australia / Asia. The website for the Australia / Asia team is here.
Scheduled for noon–2:30 PM ET on Nov. 29, the Americas team is creating a program to include presentations and videos on:
- Arizmendi’s ideas (readings from the new translation of his Reflections),
- Arizmendi’s achievement (Mondragon-inspired projects, including the Comparte network in Latin America), and
- Arizmendi’s legacy (as seen in the social and solidarity economy movement worldwide).
Coming in Issue 15, November 16
- Discovering Quebec's social economy
- Dan Fireside interview, part 2 — Namaste Solar, Organic Valley, Downtown Crenshaw
- Co-investing with Black churches
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