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Synthesis/Regeneration 22   (Spring 2000)

Thinking Economically

A Political Analysis of Michael H. Shuman's Going Local: Creating Self-Reliant Communities in a Global Age

by Howie Hawkins, Syracuse Greens

Michael H. Shuman, Going Local: Creating Self-Reliant Communities in a Global Age, 1998. 309 pages. New York: Free Press, $19.

Michael Shuman focuses on what communities can do now to begin creating community-based economies. He suggests that rather than trying to directly take on American's ideological commitment to capitalism's supposed virtues, we should start by taking concrete steps to increase community self-reliance, in particular by anchoring wealth in communities with new ownership structures that limit capital's mobility. These steps are not fully socialist, but they do impinge on one of capitalism's key conditions.

Since the early 1970s, decisions by corporations to move operations to another state or abroad have cost US workers and communities some 75 million jobs. Most of these jobs were in the better paid manufacturing sector, with the bulk of the remaining jobs lost being backroom operations that support service and retail firms. Capital mobility is thus a major reason why 80% of US households have seen their incomes stagnate or decline over this same period.

Going Local is a manifesto for communities that want to take on corporate mobility and corporate power generally through community action and municipal political power. The author, Michael Shuman, is co-director of the Institute for Policy Studies, a progressive think tank based in Washington, DC. For Greens in, or aspiring to, local public office, this book is essential reading.

Shuman's platform for creating self-reliant communities can be summed up in three planks:

1. Import Substitution—Increase the share of the local economy based on local production for local use;

2. Community Corporations—Replace corporate absentee ownership with local ownership and community control of investment; and

3. Power, Not Pork—Demand general revenue sharing from the federal government, not more dependence-creating federal grants programs.

Although all three planks are critical to Shuman's platform, I am going to focus on the second plank: anchoring wealth to communities through community corporations.

Community Corporations

As Shuman defines community corporations, their ownership and control is institutionally bound to local people. Not surprisingly, Shuman includes municipal public enterprises, worker and consumer cooperatives, credit unions, and community-based non-profits in the category of community corporations. What is more novel is his advocacy of another type of community corporation: the for-profit corporation with a residential restriction on stock ownership. This locally-owned for-profit community corporation is one where voting shares are restricted to local residents and where no one interest can own more than a small proportion of the shares and votes. Its big advantage is that it limits the capital mobility that has devastated so many communities in recent decades.

This locally-owned for-profit community corporation is one where voting shares are restricted to local residents...

Probably the most famous example of this form is the Green Bay Packers. Although it is a non-profit, not a for-profit, shareholding corporation, it illustrates how restrictions on ownership transfers can keep control local and prevent runaway corporations. With about 97,000 people, Green Bay, Wisconsin has kept an NFL franchise in its community when any other privately-owned team would have moved to a larger market to make more money. The Packers could have used the threat of moving to blackmail the city into building them a new stadium. Instead, people in Green Bay, not a profit-seeking owner, control the Packers. All the Packers need under this ownership structure is a positive rate of return, not a maximum rate.

Shares in the Green Bay Packers Corporation entitle owners to vote in elections of the board of directors, but not to annual dividends or capital gains upon resale. 1,915 shareholders held 4,624 shares in 1998 and 60% of the shareholders lived right in Green Bay. Shareholders can trade their shares only among family members or sell them back to the Packers for $25. Nobody can own more than 20 shares. This ownership structure has made the Green Bay Packers essentially community property.

Shuman suggests that the Packer example can be generalized by creating for-profit stock-held corporations with residential restrictions on share ownership. He notes that most of the corporations chartered in the early days of the United States had residency restrictions on who could own shares, as well as restrictions limiting the proportion of shares any one individual could own. Many states explicitly allow such restrictions in their corporate laws. In other states without explicit statutes, the courts tend to hold as a matter of common law that such limits on share transfer rights are permissible.

He suggests that non-profit corporations, which account for 5% of the US economy, are not necessarily accountable to the community. For example, many urban universities and hospitals, with self-perpetuating boards of directors, are notorious land speculators and slumlords. Even community-based non-profits like Community Development Corporations are often co-opted by the system of government and foundation grants and contracts. They often serve as little more than apprenticeships for staff who move on to private enterprise. Non-profits also have serious impediments to being efficient producers of goods or services: more hands-on boards that occupy inordinate staff time; legal barriers to accumulating assets and hence collateral for financing expansion; social missions that often compel them to pay more for unproductive workers than private firms would, and high turnover of the most productive staff.

Shuman finds fewer faults with public enterprise. He reviews the more commonly discussed problems that public enterprises may face: the conflict of interest between government regulating an industry and itself being in the industry; the potential for corruption and patronage; and the ambiguous results of studies comparing the efficiency of public agencies vs. private contractors in delivering public services. But then he raises a problem less often discussed:

...there is a fundamental problem with public enterprise that cannot be overcome: A healthy democracy will experience wide ideological swings over time, and even the most progressive electorate will occasionally swing conservative. The swiftness and ease with which neoliberal governments in Russia and Mexico are selling off at bargain prices assets built up over generations should give pause to even the most committed advocate of public ownership. (p. 100).
Worker-owned firms also have their problems for Shuman. While worker-owners are local residents in most cases (not all; think of United Airlines), they still face the same competitive pressures as conventionally-owned firms.

Shuman does not argue that for-profit community corporations with residential restrictions on ownership are problem-free. He says, "Let a thousand experiments unfold" (p. 99). Different forms will be more suitable for different functions: a non-profit might be best for a child care center, a municipal enterprise for a cable TV system, a consumer cooperative for a grocery store, a worker cooperative for a bike repair shop, and a for-profit with restricted local ownership for an auto parts manufacturer.

Part of the reason Shuman is so high on locally-owned for-profits is that "Americans are unlikely to hitch their future to these unconventional corporate forms [cooperatives, non-profits, and public enterprises]....The nation's ideological commitment to private property and the profit motive, reinforced by the mythology of the rugged individual, are too deeply etched into our collective psyche." (p.99).

"The nation's ideological commitment to private property and the profit motive… are too deeply etched into our collective psyche."

Shuman believes that local political coalitions for community prosperity through self-reliance must see local businesses as allies, not enemies. He argues that local business people are as threatened by giant national and transnational industrial, financial, service, and retail corporations as working people are.

Elsewhere in the world, advocates of social change have developed a far more nuanced relationship with business. For more than a generation the Democratic Party of the Left (formerly the Communist Party) has governed the city of Bologna in Italy. Party leaders unambiguously rejected state socialism of the Soviet and Chinese varieties, and instead pursued a decentralized vision of development rooted in worker-owned cooperatives. The key to transforming the local economy, they felt, was not to combat business but to remake it. Today, more than 1,800 cooperatives in the Emilia-Romagna region, where Bologna is located, employ 60,000 workers. Many of these small businesses export high-tech products that compete internationally. The Left's probusiness strategy, creatively blending public-private partnerships with worker ownership, transformed a once impoverished agricultural area into the fastest-growing part of Italy, with the tenth highest per capita income among the 122 official regions in the European Community. (p. 84).

Shuman's locally-owned for-profit does not eliminate the exploitation of labor. It does not avoid the competitive market forces that encourage firms to scrimp on worker safety and environmental standards. Nor does it solve the problem of the inefficient redundancies and irrational imbalances that the blind forces of market allocation frequently produce. But it does squarely address the serious problem of capital mobility.

The Inherent Radicalism of Community-Based Economics

Can local communities and municipal governments really carve out economic self-reliance for themselves in the face of predatory mega-corporations and world market rules enforced by a World Trade Organization? Shuman believes they can begin to take steps toward that goal:

Few local governments in the world enjoy the powers that American communities have... US mayors and city-council members have a policy tool chest that enables them to invest, contract, zone, tax, lobby, and police. They have the ability to spend public funds on almost anything. While these powers are not unlimited, it's fair to say that the problem facing US local governments is not the absence of powers, but the absence of political will to exercise them.

Over 500,000 local elected officials govern over 3,000 county governments and about 36,000 municipalities. Local government thus offers the political space as well as legal authority for a grassroots Green political movement to begin a democratic restructuring of political and economic institutions from the bottom up, creating a grassroots counterpower to corporate power.

"Few local governments in the world enjoy the powers that American communities have."

Will the capitalists let communities impose this condition of doing business in their communities? When the Left Labour Metropolitan Councils in the UK in the early 1980s began to take the kinds of measures proposed in Going Local, the Conservative government of Margaret Thatcher simply abolished them. If a movement in US cities begins to transform their economic development policies to replace corporate welfare giveaways with local production for local use by community-owned corporations, we can also expect resistance from the corporate rulers. At that point, will we submit quietly as the Labour Party in UK cities did? Or will we resist, take direct action, and push on to completely replace corporate power with community power?

At first corporate resistance could take the form of lowered municipal bond ratings and an investment strike by big capital in the jurisdictions going local. This could be accompanied by a smear campaign in the corporate media with scandalous stories about how the municipal reformers are ruining the local economy. If that did not make the reformers back off, the state or federal government could attempt to take over administrative functions from the radical municipalities. If the movement can defeat attempts at state or federal preemption of powers, then violence against the movement by government-linked right-wing vigilantes, police, and intelligence agencies could be unleashed. If corporate rulers employ such violence against small countries that try to protect their national economies with tariffs or nationalizations of vital industries, is there any reason to believe they would not employ similar methods here at the center of their empire?

What makes Going Local radical is neither anti-capitalist rhetoric (which it does not have), nor the immediate measures it proposes in themselves. What makes it radical is the underlying goal of shifting power from rootless corporations to people in communities. While the first localized reforms may seem to pose no threat to the system, if they develop into a popular movement and spread across the country, they will provoke heavy corporate resistance and, if the movement does not back down, a revolutionary crisis. At that point, peaceful coexistence between the corporate economy and the community economy will end and there will be a struggle over which form will prevail.

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