Socially Responsible Business Archive


Don’t Just Kick Back & Relax, Get Active: It’s Labor Day

Monday, September 3rd, 2012

Happy Labor Day! We sincerely hope if you’re reading this, that it’s not at work, but at home, at rest or among friends, or doing something you love — fermenting food, making some cheese or working on a few home projects to boost your resiliency and reduce your ecological footprint.

Or, maybe you’re just grilling. Or, maybe there is still such a thing as a Labor Day parade in your community — one that actually celebrates workers.

In 1884, Congress passed a law making the first Monday of every September “Labor Day,” a day set aside to celebrate the social and economic achievements of the everyday worker, especially union workers. Workplace safety regulations? An eight-hour workday? Paid sick and vacation days? Weekends? Yeah, thank those early labor unions — not vulture capitalists, bankers or the 1 percent.

We at Chelsea Green have a lot to celebrate this labor day, and want to invite you to share in our good cheer.

As many of you know, in late June the company sold control of its stock to its employees by creating an ESOP (Employee Stock Ownership Plan).  Essentially, that means that now close to 80 percent of the company’s stock is held by its employees. The remainder of the stock remains in the control of Ian and Margo Baldwin, who founded Chelsea Green in 1984 on the South Green in Chelsea, Vermont. Margo Baldwin is currently the company’s president and publisher and will maintain that role for the foreseeable future.

Around the same time as the ESOP was created. Chelsea Green was recognized by ForeWord Reviews as its 2011 Independent Publisher of the Year, in which the company was recognized for its “significant contributions in the categories of politics and sustainable living.” This year (to date) we’ve also landed our fourth book  on The New York Times bestseller list, with Sandor Katz’s The Art of Fermentation landing at number 14.

This doesn’t happen without a lot of hard work from all us grasshoppers here at Chelsea Green.

Given the company’s long-term mission of publishing ideas to help communities remain resilient and businesses sustainable while connecting to their sense of place, making the move to an employee-owned model is an example of the company practicing what it publishes.

“Ian and I are thrilled that the company has taken this important step and look forward to working with our employees to advance the mission and to create an even more successful and profitable company in the years to come,” added Margo Baldwin. National studies have shown ESOPs to outperform their private sector counterparts in terms of overall profitability, productivity, employee retention and employee earnings.

To celebrate, we’re putting a handful of our key labor-focused and sustainable business and economic books on sale. They include Les Leopold’s fantastic biography of Tony Mazzocchi, a major figure in the modern labor movement and John Abrams’ inspirational book on workplace democracy and equality, Companies We Keep.

And, if these books aren’t of interest, check out the forthcoming books that will soon arrive in a bookstore near you (in fact, some may have already).

So, enjoy – and seriously, don’t work too hard. But, if you do, work toward this vision of Tony Mazzocchi’s as explained by his longtime friend and biographer Les Leopold:

“Tony’s big ideas led to Tony’s big actions—and both differentiated him from nearly every other modern labor leader. He built bridges from the often insular labor movement to all of the other major movements of his time—feminism, environmentalism, antiwar, civil rights. He was instrumental in building the occupational health and safety movement, the environmental health movement, and labor-environmental alliances, as well as in creating a new generation of worker-oriented occupational health professionals. Thousand of workers’ lives were spared as a result.

He was anti-corporate to the core. He thought that the drive for every-increasing profits was in fundamental conflict with public health, workers health and safety, and a sound environment. He feared that growing corporate power could lead to authoritarianism. The antidote was growing democratic unions with an active rank and file. Most of all, he thought we had it all backward: The purpose of life was not to toil until we dropped to enrich someone else. Rather it was to live life to its fullest by working less, not more.”

A wise man. Happy Labor Day.

SUGGESTED BOOKS

Meet the New Owners of Chelsea Green Publishing: The Employees!

Monday, July 2nd, 2012

WHITE RIVER JUNCTION, VT — Independent book publisher Chelsea Green announced today that it has become an employee-owned company, with close to 80 percent of its stock to be held by its employees.

The move makes Chelsea Green unique among book publishers in an industry dominated by investor-driven, multinational corporations. Only a handful of independent book publishers can claim employee-ownership status, and of those Chelsea Green will be near the top in terms of the percentage controlled by employees.

The transaction, completed on June 29, allows a minority portion of the company’s privately held stock to be held by Ian and Margo Baldwin, who founded Chelsea Green in 1984 on the South Green in Chelsea, Vermont. Margo Baldwin is currently the company’s president and publisher and will maintain that role for the foreseeable future.

“Selling to our employees was the only way we could ensure the company could remain independent and stay in Vermont,” said Margo Baldwin. “The only one real way to repay investors, traditionally, is to sell. Our investors have been very patient over the years and this offered a way in which they could be repaid and allow Chelsea Green to continue its important role in the marketplace as an independent publisher.”

Chelsea Green was recently recognized by ForeWord Reviews as its 2011 Independent Publisher of the Year, in which the company was recognized for its “significant contributions in the categories of politics and sustainable living.” It also recently landed its fourth book  on The New York Times bestseller list, with Sandor Katz’s The Art of Fermentation landing at number 14.

Given the company’s long-term mission of publishing ideas to help communities remain resilient and businesses sustainable while connecting to their sense of place, making the move to an employee-owned model is an example of the company practicing what it publishes.

“Ian and I are thrilled that the company has taken this important step and look forward to working with our employees to advance the mission and to create an even more successful and profitable company in the years to come,” added Margo Baldwin. National studies have shown ESOPs to outperform their private sector counterparts in terms of overall profitability, productivity, employee retention and employee earnings.

Chelsea Green joins a growing list of Vermont employee-owned companies, such as King Arthur Flour, Gardener’s Supply, PC Construction, and Carris Reels, among others.

Chelsea Green continues to buck the trend in the publishing industry in other ways — closing out yet another profitable year in 2011 with increased sales from the previous year. Unlike others in the industry, Chelsea Green has remained focused on publishing strong content that is valued by its readers—an active community that Chelsea Green is in continual engagement through the active use of social media and author appearances.

In 2012, so far, Chelsea Green has been adding staff in an effort to expand its digital offerings, and improve its existing online presence as well as provide greater outreach and publicity support for its authors.

Two Cheers for the JOBS Act – Michael Shuman Weighs In

Monday, April 23rd, 2012

Originally published on The Huffington Post .

For nearly a century local investing has been essentially illegal, and Wall Street has monopolized all the investment options for the average investor. Thanks to the JOBS Act that President Barack Obama recently signed into law, local investing in job-creating small businesses is now legal.

Unfortunately, there has been a tremendous amount of misinformation spread about this Act, much of it by liberals I usually admire. They should be the people most eagerly embracing this bill for what it does — giving people a chance to revive Main Street economies across America.

Jim Hightower, for example, condemns the bill for “deregulating Wall Street.” In fact, the bill spells the end of Wall Street as we know it. It allows the 99% of us who are not wealthy (“unaccredited investors”) to put our money in the local businesses we love by removing what were once impossibly difficult and expensive legal hurdles. Those barriers were so targeted against small business and small investors that they resulted in almost none of our long-term savings — now totaling $30 trillion — being invested into the local half of our economy. The JOBS Act ends this misallocation of capital for good.

To me it’s ironic, and disappointing, that folks like Hightower, Robert Kuttner, and Eliot Spitzer were committed to the status quo and to maintaining Wall Street’s monopoly on capital. How could such great thinkers get this issue so wrong? Here are my top five reasons:

First, the critics misunderstand who promoted this bill. Kuttner, for example, blames Obama for being “always eager to curry favor with Wall Street donors…” Wall Street lobbyists played, at most a peripheral role, it was small business owners and “makers” like Woody Neiss and Paul Spinrad who led the charge. Innovative thinkers in the White House, like Doug Rand at the Office of Science and Technology Policy, played a pivotal role in shaping the president’s views about entrepreneurship. Non-Wall Street insiders like IndieGogo, a crowdfunding web site, and the nonprofit Sustainable Economies Law Center, pushed hard as well.

Second, the critics, who are justifiably skeptical of wholesale deregulation, don’t like to concede that any form of regulation has been a failure. But any honest assessment of the history of securities law would observe that we essentially regulated local finance out of existence while permitting Bernie Madoffs to operate freely. For decades, the SEC has held annual meetings where small business owners have urged reforms — modest deregulations that could open up capital to small companies, such as allowing small-dollar, local investments to be exempted from securities filings. The SEC never implemented any of those suggestions — even a recommendation that $100 investments be exempted.

Third, the critics have tremendously exagerrated the dangers of fraud. The casual reader of the liberal critiques might conclude that the sale of fraudulent securities is now legal, and that “boiler room” operations will be set up to bilk grandma of her life savings. Yet state and federal laws against securities fraud remain in effect. In fact, the JOBS Act adds a number of new provisions for preventing fraud, by requiring that crowdfunding offerings only be made through registered intermediaries.

Why, moreover, should anyone be banned from spending, investing, or donating a couple of hundred dollars any damn way they please? Every American, irrespective of income, is allowed to lose their life’s fortune on lotteries and casinos. Why not allow more reasonable risk tasking on building community economies? If grandma is not wealthy, the JOBS act limits her risk in any one business to the lesser of $2,000 or 5% her assets.

Fourth, the critics do not appreciate that there are other approaches to preventing fraud. E- bay has all but eliminated fraud through consumer and business evaluations of one another. So have other crowdfunding sites in the United Kingdom. In other words, the SEC’s premise — that the only way to prevent fraud is by banning unaccredited investors from making their own judgments — is flat out wrong.

Perhaps the critics’ most appalling misunderstanding is the fraudulence of the status quo. Every day the SEC allows investment advisers on AM radio to hawk the stock market, promising 10-20% annual returns, when in fact the returns — once inflation and compounding are taken out — are closer to 3%. These misrepresentations have convinced Americans that putting 100% of their savings into Fortune 500 companies is safer and provides a better return than investing in local business. In reality, the stock market is becoming an increasingly dangerous and unregulated casino where trades are done by computers that cause flash crashes when they malfunction. The JOBS Act will allow local businesses to begin to compete for a fair market share of investment dollars and provide returns that are equal to, if not slightly greater than, the true returns provided by Wall Street.

I agree, the bill is imperfect. I’m not thrilled with the deregulations of larger companies. And the bill legalizes all kinds of crowdfunding, local and nonlocal. But we can make it better. We should start educating the public about the importance of favoring local investment over abstract ones hundreds or thousands of miles away. Knowing the business in which one invests — knowing the products, the entrepreneur, the workforce, etc. — is the best way to prevent fraud.

It’s worth adding that after the bill was signed, 25 of the people who were most instrumental in passing the bill — none from Wall Street, by the way — got together to discuss ways we could create internal checks and balances on the marketplace, to improve quality control and help identify hucksters. I hope similar groups form in every community to create an honor roll of local businesses they know and trust — perhaps businesses that embrace open-book accounting — and that they then encourage residents to prioritize their crowdfunding.

Like it or not, Wall Street’s stranglehold on investment is over. We now have a new legal landscape that we can play a pivotal role in shaping. Everyone who cares about the vitality of Main Street needs to step up, not out.

Michael Shuman is the author of Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity (Chelsea Green Publishing, 2012) . He is research director at Cutting Edge Capital, and a fellow of the Post Carbon Institute. He attended the Rose Garden bill signing ceremony.

Strengthening Local Economies: Michael Shuman on Investing in Small Businesses

Monday, April 2nd, 2012

Earlier this month Michael Shuman participated in a web event with Orion magazine, and explained the massive shift toward local investment that he outlines in his new book Local Dollars, Local Sense.

If you missed it, you can still listen to the whole thing on Orion‘s website, or on the newly launched Resilience.org, run by the Post Carbon Institute. Local Dollars, Local Sense is the first book in the Community Resilience Guide series, a joint effort of PCI and Chelsea Green, so stay tuned for the next books in the series!

Web Event Summary: Not even 1 percent of Americans’ long-term savings are invested locally, largely because it’s just not possible under the current system. But what would our towns look like if a larger fraction of this $30 trillion were in local economies? Local businesses account for half of the jobs and economic output in the U.S., so the effect could be important. During Orion‘s latest live web event, Michael Shuman, author of the new book Local Dollars, Local Sense, discussed innovative ways that citizens can improve their local economies while growing their own bank accounts.

Right click to download

Local Dollars, Local Sense: Discussion with Michael Shuman, March 22

Thursday, March 8th, 2012

Orion magazine is hosting a discussion with Michael Shuman, author of Local Dollars, Local Sense on March 22, and you’re invited! Register for this free event here.

Wouldn’t you rather put money into your Main Street instead of Wall Street? Not even 1 percent of Americans’ long-term savings are invested locally, largely because it’s not possible under the current system. But what would our towns look like if a larger fraction of this $30 trillion was in local economies? Join a free live discussion featuring popular author Michael Shuman, on how to shift your money from Wall Street to Main Street, March 22nd at 7 PM Eastern, 4 PM Pacific.

Shuman is the author of the important new book, Local Dollars, Local Sense, which details how local investing can be done, using a variety of approaches from cooperatives to local exchanges. Exploring these options is increasingly important: the big multinational banks that hold the majority of the country’s savings mostly do not act in the interest of the places where their depositors and shareholders live.

But local businesses do care, and they comprise more than half the economy by output and jobs, so shouldn’t we try to make them bigger and better? Plus, increasing evidence suggests that local businesses are remarkably profitable and competitive, so it makes good investment sense, too.

This unique opportunity will allow you to hear about the rules that preclude 99 percent of Americans from investing locally, the alternatives, and ask your own questions of Shuman. It is free to join, will be moderated by Orion staff, and is open to all readers and friends.

Registration is required, so hop on over to Orion’s site and sign up!

Date:     Thu, Mar 22, 2012
Time:     07:00 PM EDT
Duration:     1 hour
Host:     Erik Hoffner

About Michael Shuman

An economist, attorney, author, and entrepreneur, Michael Shuman has authored, co-authored, or edited seven books, including The Small Mart Revolution: How Local Businesses Are Beating the Global Competition (Berrett-Koehler, 2006) and Going Local: Creating Self-Reliant Communities in the Global Age (Free Press, 1998). He is research and public policy director for Business Alliance for Local Living Economies (BALLE), and he holds an A.B. with distinction in economics and international relations from Stanford University and a J.D. from Stanford Law School.

His new book Local Dollars, Local Sense is the first in the Community Resilience Guide series from the Post Carbon Institute, published by Chelsea Green. A national book tour begins this month.

Presenting the Community Resilience Guides, a Partnership with the Post Carbon Institute

Tuesday, March 6th, 2012

Reposted from Post Carbon Institute.

We’re excited to announce the publication of our first Community Resilience Guide: Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity by PCI Fellow Michael Shuman. This book series will be part of a larger new effort we have launched—the Community Resilience Initiative. Use discount code LOCAL to pick up your copy directly from the publisher.

As you know all too well (and if you don’t, the Post Carbon Reader will bring you up to speed), we face a set of interconnected economic, energy, and environmental crises that require all the courage, creativity, and cooperation we can muster. These crises are forcing us to fundamentally rethink some of our most basic assumptions, like where our food and energy come from, and where we invest our savings.

While national and international leadership are key to navigating the bumpy road ahead, that leadership thus far is sadly wanting. And, in any case, many of the best responses to these challenges are inherently local.

Thankfully, a small but growing movement of engaged citizens, community groups, businesses, and local elected officials are leading the way. These early actors have worked to reduce consumption, produce local food and energy, invest in local economies, and preserve local ecosystems. While diverse, the essence of these efforts is the same: a recognition that the world is changing and the old way of doing things no longer works.

Post Carbon Institute is producing this series of Community Resilience Guides to detail some of the most inspiring and replicable of these efforts.

Why community resilience?

Community because we believe that the most effective ways to work for the future we want are grounded in local relationships—with our families and neighbors, with the ecological resources that sustain us, and with the public institutions through which we govern ourselves.

Resilience, because the complex economic, energy, and environmental challenges we face require not solutions that make problems go away but responses that recognize our vulnerabilities, build our capacities, and adapt to unpredictable changes.

The Community Resilience Guides will cover these four elements, so critical in creating thriving, resilient communities:

  • Investing in the local economy.
  • Growing local food security.
  • Producing local, renewable energy.
  • Planning locally for an uncertain future.

Local Dollars, Local Sense is the first in this series, and the series is just one element of a bigger effort: the Community Resilience Initiative. Stay tuned for more announcements, and ways you can participate.

These are challenging times. But they are also full of opportunity. We hope Local Dollars, Local Sense and the slew of other resources we’ll provide through the Community Resilience Initiative will inspire you, and help you build resilience in your community.

In solidarity,

Asher

We Have a Love of Money, Why Not a Money of Love?

Monday, February 20th, 2012

Hazel Henderson, author of Ethical Markets: Growing the Green Economy, is mentioned in this interesting article on how love affects the economy. Like many feminist thinkers, Henderson points out the staggering amount of unpaid, un-valued work that is done by homemakers (men included).

What would our economic stats look like if we included this, and other work done out of love, instead of ignoring it?

From JustMeans, by Reynard Loki.

Love may be a hot commodity, but we don’t recognize its true economic value. We are the poorer for it

The average person celebrating Valentine’s Day will spend $126.03, the highest in the 10-year history of the Valentine’s Day Consumer Intentions and Actions survey, conducted by BIGinsight for the National Retail Federation (NRF). With an increase of 8.5 percent over last year, total spending on our “better halves” is expected to hit $17.6 billion.[1] That’s more spending in a single day than the GDP of nearly 100 nations, including Afghanistan, Uganda and Zambia.[2]

“As one of the biggest gift-giving holidays of the year, it’s encouraging that consumers are still exhibiting the desire to spend on discretionary gift items, a strong indication our economy continues to move in the right direction,” said NRF President and CEO Matthew Shay. “Anticipating high foot traffic in the coming weeks, retailers have replenished their inventories and will entice eager shoppers with great deals on everything from special menu items at restaurants to clothing to flowers and, of course, chocolates.”[3]

PUTTING A PRICE ON THE ULTIMATE SOCIAL BOND

But while the commodity of love has been crystallized in the West on a single day of the year, love’s true intrinsic value to society is not part of the economic system. In our fundamentally market-based economy, value is placed on goods and services. But love — in the form of caring and emotional support — is not part of this equation, though ultimately, it is the glue of society. From dyadic partnerships to family groups, from neighborly love to community bonding, from a love of country and ultimately a love of all mankind and nature, this emotion — and all the ways it is manifested — is critical to keeping society intact. Yet somehow it remains outside our economic life, only to pop up in dramatic fashion in the world of retail — primarily on Valentine’s Day, but also on Mother’s Day, Father’s Day, birthdays and funerals.

From credit derivatives to reinsurance, from carbon credits to soybean futures, Wall Street has figured out how to place an economic value on just about everything, including many “things” that aren’t things at all, but purely ideas, like loan defaults. But love, which actually provides a real service to humanity (even, arguably, in its most licentious forms), is left outside the purview of financial markets.

VALUES BUILT TO LAST ARE OFTEN BUILT AT HOME

While parents in some countries may benefit from tax credits, society has placed no actual investable value on unpaid household work. We are quick to say that values begin at home, yet we place no financial worth on the work-hours expended to instill those values. As any dedicated parent knows, raising children, preparing them for a productive life in society, teaching them how to be good citizens, all the while being an emotionally supportive husband or wife is exceedingly hard work — and society as a whole is clearly better for it. Shouldn’t there be a way to place an economic value on all that blood, sweat and tears?

In his 1977 book The Household Economy, Scott Burns observed that “the hours of work done outside the money economy rival those done inside and will soon surpass them.”[4] “We give absolutely no economic recognition to the importance of the one single institution responsible for the day-to-day care and maintenance of human beings. The household — the family — is an institution that tends our hearts, minds and bodies. No other institution has such clear or complete charge or such enormous responsibility. At best, every program of social care and welfare is compensation for deficiencies in some households, and there is no institution, public or private, that could be expected to assume even a small portion of the responsibility that belongs to the household.”[5]

THE LOVE ECONOMY

Perhaps love has no place within the “money economy.” The late Canadian economic philosopher Samuel Edward Konkin III, author of the New Libertarian Manifesto, proposed the development of a “counter-economics” in which peaceful and decidedly transparent transactions would occur in the “agora,” the Greek term for open space that typically meant a public market. His term “agorism” encapsulated the concept of a black or grey market that was outside the regulatory and taxable reach of the corporatocratic state. In such a counter-economy, which might feature local exchange trading systems (LETS) and barter economies, love would be more likely to carry its true weight as a financial commodity as the agora is community-, not state-, focused. Localized production and trade encourages social contact — and that means nurturing the love quotient.

Economist Hazel Henderson, a former Regent’s Lecturer at the University of California at Santa Barbara who also held the Horace Albright Chair in Conservation at the University of California at Berkeley, says all this missing value is part of the unpaid “love economy,” what she describes as “all the caring, sharing, parenting, volunteering, bartering, reciprocity and mutual aid that buttresses the official GNP-measured sectors of all societies.”[6]

In her most recent book Ethical Markets: Growing the Green Economy, she writes, “While economists still count homemakers and stay-at-home moms and dads as ‘unemployed and not economically active,’ the 1995 United Nations Human Development Report found that this and all other unpaid work amounts to $16 trillion missing from the official global GDP figure of $24 trillion. Represented women’s unpaid work was $11 trillion and $5 trillion for that of men. Even today, global economic statistics still exclude two-thirds of the world’s output.”[7]

COMING OUT OF THE HOUSE: CAREGIVERS

The actual work carried out by the care industry (i.e., daycare, eldercare, home helpers, counseling services, etc.) was once primarily the dominion of unpaid women caring for their families. Today, these are multibillion-dollar industries. In 1997, long-term elderly care annual expenditures in the United States was $115 billion. According to the Kaiser Commission on Medicaid and the Uninsured, that number is projected to triple by 2040, reaching $346 billion.[8]

“Millions of women who used to provide these services free in the home have already moved into the job market to obtain recognition and income,” writes Henderson in her 1998 essay “Toward Holistic Human Relationships.” “Thus, the monetarizing of formerly unpaid caring work will continue to be the fastest growing services sector, even though…this adds no ‘productivity’ to the economy, but rather recognizes formerly unaccounted productivity which subsidized the official money-denominated, GNP-measured sector.”[9]

THE UNSUSTAINABILITY OF RETAIL LOVE

Whether or not society will ever be able to put a proper value on love, it’s clear that the way we have commodified love isn’t sustainable. The vast majority of the chocolates that will be purchased for Valentine’s Day, for example, are not fair-trade: a mere 0.1 percent of all chocolate has such certification.[10]

Cut flowers are particularly bad for the environment due to their massive carbon footprint. The majority of them are grown in the Netherlands, Colombia, Ecuador, Ethopia, Kenya and India, and then flown in refrigerated airplanes, driven in refrigerated trucks and stored in refrigerators at your local florist, all waiting to wilt. According to a 2008 report by Food & Water Watch and the Council of Canadians, the rise of Kenya’s floriculture industry has resulted in “a number of serious ecological problems for Kenya’s rivers and for [Lake Naivasha], including loss of water, an unsustainable increase in the population because of the laborers they have attracted, and the overuse of pesticides and fertilizers.”[11]

KILLER ROSES, BLOOD DIAMONDS

Every rose has its thorn, and in some cases, it can kill. “[T]he flower industry is so important to the Kenyan economy that in the face of such instability the army and police put most of their resources into guarding flower shipments instead of local people — so that the Valentine’s Day delivery could reach European buyers in time,” writes Pat Thomas on TheEcologist.org. “Since 2007, your Kenyan roses have come at a cost of more than 100 deaths and the displacement of more than 300,000 people.”[12]

And of course, who can forget that unsustainable Valentine’s Day mainstay — diamonds, or more accurately, “blood diamonds” and other conflict minerals that have financed wars in Africa for decades. Rebels in Sierra Leone and Liberia financed the Sierra Leone Civil War by trading diamonds for arms. Between 1992 and 2002, around 50,000 people were killed.

“Love is not some complex, mystical abstraction,” argued the late Leo Buscaglia (a.k.a. “Dr. Love”), a professor of Special Education at the University of Southern California and the author of several best-selling books on the subject. “It is something accessible and human that we learn through our everyday experience.” Buscaglia, known for being a powerful motivational speaker, may have been sugar-coating reality a bit in order to prime the love-in pump. Because as long as something so fundamentally human remains outside the economy — and the way we have commodified it remains unsustainable, childish and in some cases, deadly — it’s clear that it will take a lot more than everyday experience to teach us the true value of love.

Reposted from JustMeans.

5 Ways to Make Your Dollars Make Sense – By Michael Shuman

Friday, February 17th, 2012

This excerpt originally appeared on Yes! Magazine’s website.

Concerned about Wall Street’s devastating impact on communities? Then invest in yourself—the most local investment of all.

Americans’ long-term savings in stocks, bonds, pension, life insurance, and mutual funds total about $30 trillion. But not even 1 percent of these savings touches local small businesses, the source of half the economy’s jobs and output. Is it possible to beat Wall Street’s 5 percent long-term performance by investing in your community? The answer is a resounding yes!

Co-op members who lent to the Weaver Street Market in North Carolina and to the Seward Co-op in Minneapolis earned well over 5 percent per year. Many outside investors who bought preferred shares of the Coulee Region Organic Producers Pool, a co-op of organic farmers, are still receiving an annual dividend of 6 percent. Equal Exchange has paid a dividend to its preferred shareholders averaging above 5 percent for 22 years. Investors who participate in New Markets Tax Credits automatically get a tax credit equal to 5 percent of their capital for each of the first three years and 6 percent for the next four—even if the investment generates no real return whatsoever. Burt Chojnowski’s returns have been good enough to convince outside investors to put more than $300 million into his local companies and projects over 25 years in Fairfield, Iowa. Most of LION’s deals in Port Townsend, Washington, are paying between 5 and 8 percent returns per year. Microlenders on Prosper.com are averaging an annual return of 10.4 percent. Jeff Haugland has paid the local shareholders of Community Grocers in Mount Ayr, Iowa, an annual dividend of 5.25 percent.

All of these profitable initiatives proceeded within existing securities laws. If, however, national or state governments were to implement sensible, simple, zero-cost reforms, the number, variety, and promise of local-investment opportunities could expand dramatically. The many examples in this book— and the thousands of others out there, some of which may be happening in your community right now—suggest that the universe of local investment is expanding faster than financial astronomers like myself can possibly keep track of it.

Not every local company, of course, will beat the 5 percent rate of return from existing markets. Betting on any one or two businesses, just like betting on any one or two NASDAQ stocks, is very risky. No one should read this book as suggesting that we each should pull all our money out of the stock market and put it all into our neighborhood diners or bookstores.

As models for local investment proliferate, the focus will shift to the quality of each investment and the quality of your local-investment portfolio. The country is about to travel up a steep learning curve to discern the best local businesses from the fraudsters and grifters, and how to build a local-economy infrastructure in our communities—replete with local purchasing, entrepreneurship programs, local business alliances, and public policy reforms—that will increase the probability of local businesses succeeding and local investments paying off. One modest step might be to move 5 percent of your money from Wall Street to Main Street each year. By the time you get to 100 percent in twenty years, the nation should have a thriving network of regional stock exchanges and local mutual funds.

But another vexing question about local investment I puzzle over is this: Does it make sense to invest in anyone else’s business, bank, project, or fund until I have thoroughly invested in . . . myself? Might I get a better than 5 percent annual rate of return investing in my own bank account, my home, my own energy-efficiency measures, and my education? Most of us ultimately have a significant portion of our wealth in these intimately close items. Getting these investments right might be the single best way to invest locally.

To beat Wall Street, investments in yourself must achieve not a 5 percent annual rate of return but a 7 percent rate. That’s because most of the options could not qualify for tax-deferred IRA or 401(k) investments, and the extra 2 percent … approximates the lifetime benefit of tax deferral.

Remarkably, though, the 7 percent goal is achievable—and in so many ways that many Americans, perhaps most, might never need to think about retirement accounts again.

1. Become Your Own Banker

There is one absolutely guaranteed place where you can get a rate of return well over 7 percent —in fact, often over 15 percent or 20 percent. Pay off the damn credit cards and stay out of debt! As the Sage of Omaha, Warren Buffett, says, “Nobody ever goes broke that doesn’t owe money.” Besides being expensive and self-destructive, credit card debt winds up sucking money out of your community and into the hands of distant banks, back offices, and collection agencies.

Here are some sobering facts about Americans’ relationship with credit cards. In 1990, the average American household had about $3,000 in credit card debt. It has since more than quintupled to $15,300. By the end of 2010, total credit card debt was expected to exceed $1.1 trillion. According to a recent survey by Consumer Reports, a third of Americans don’t have credit cards at all, but most of these folks are poor and therefore vulnerable to even worse depredations from payday lenders and loan sharks. About half the population pays its cards off every month. The rest of us have a problem—albeit one that can easily be fixed in a way consistent with the goals of a local living economy.

Another consideration underscoring the value of keeping a modest reserve of cash is that we are entering turbulent times. In the last few years, both the stock market and the housing market have tanked and many serious analysts fear that both could crash again, perhaps even more catastrophically. Some predict a perilous period of deflation ahead, where falling prices convince consumers to delay spending and trigger deep recessions. Others fear inflation, given the enormous size of the U.S. deficit and rising oil prices. In either case risk-averse lenders might cut off loans or credit cards, raise rates, or both. Since Sam doesn’t like to gamble, he will create a hedge against uncertainty so he can control in his own federally insured bank account.

This proposal is hardly original. Listeners to AM talk shows may have heard about a similar scheme, called “Bank on Yourself,” which encourages you to invest in a specialty life insurance policy that also can serve as your low-risk bank. Frankly, since your savings have to live somewhere, whether it’s under your mattress, in a money market account, or embedded in a gold stockpile, these options are all worth considering. But given the importance of keeping your money close to home and supporting local businesses, you should probably put your cushion in a locally owned bank or credit union, not a distant insurance company.

The bottom line is this: If you create a slightly larger cushion than you think you’ll need, you’ll never need to worry about credit cards or consumer loans again. What wouldn’t millions of Americans (including me!) do to redo their early years with this kind of approach. At some point, you then could move into the next level of investing. That would not be going into the global stock market. It would be buying your own home.

2. Become Your Own Landlord

Investing in your own home strengthens your community. While the evidence has been debated in recent years, the degree of home ownership in a neighborhood does seem to correlate with many other quality-of-life indicators, such as educational achievement, low crime, civic participation, public health, and property values. This led recent presidents as diverse as Bill Clinton and George W. Bush to push for “an ownership revolution” in the housing market. And if you are diligent about getting your mortgage through a local bank or credit union, where you’ll find the most competitive rates anyway, you can rest assured that your interest payments will be recycled through your community through additional local loans.

A home purchase really delivers two different kinds of valuable rewards. One is that you’ve got a place to live. Hey, you have to live somewhere! Instead of paying a landlord every month, you effectively become your own landlord. Yes, you enter a debt with your mortgage (hopefully, again, with your local bank), but as you pay it down, you grow an asset that ultimately eliminates rent payments for the rest of your life. The second reward is that you now have an asset that you can draw upon for your retirement. At some point, if you need the cash, you can sell your home and move into a smaller one. Or you can enter a “reverse mortgage” with a local bank that pays you an income stream and gradually works you out of ownership. The reality is that most Americans use their homes as their piggy banks for retirement anyway.

Once you’ve saved enough for a down payment, investing in your local home is unquestionably a smarter investment than investing in the nonlocal stock market. Working in your favor is the quirky federal tax code, which allows you to claim a tax deduction for interest on your mortgage. If your federal tax rate is 21 percent, then every dollar of interest you pay can be discounted by 21 percent. This especially helps you in the early years of a mortgage, when nearly all your payments are interest. In other words, your rent is effectively 21 percent lower per year, in addition to the benefits of growing an asset.

Home investment gives a local investor one huge, indisputable advantage. As the custodian of your home and as a participating member of your community, you actually have the ability to increase the probability of your investments succeeding. You can improve your house through repairs, additions, and tender loving care. You can help create a fabulous neighborhood spirit. You can contribute to the success of your public schools. And once you own your home, free and clear, no knuckleheaded politician or CEO can take it away from you. Being an active investor, holding a real deed to real property, means you’re less vulnerable to the next generation of Bernie Madoff–like fraudsters. In contrast, when you place your retirement money on Wall Street, you can only watch and pray.

3. Become Your Own Utility

The typical U.S. household is spending about $3,500 per year on electricity, fuels, and water. If you’re trying to get a 7 percent return on investment or better, you could spend $1,000 on dozens of kinds of efficiency measures that would save you more than $70 on your energy bill each year. You could use your $1,000 to buy a new high-efficiency refrigerator, oven, or washer and dryer—plus you get the bonus of a brand-new appliance. Indeed, you probably can do much better than a 7 percent return. According the U.S. Environmental Protection Agency, customers participating in many utility- or state-sponsored efficiency programs are saving 10 to 20 percent of their energy bills. If Americans took full advantage of the more efficient appliances and took steps to improve the efficiency of their homes and buildings, they could cost-effectively save 10 to 30 percent on their energy bills per year.

According to energy-efficiency expert Greg Pahl, “Home energy efficiency retrofits are probably the best returns on investment you’re going to get, as opposed to putting a windmill in your backyard. The home energy efficiency retrofits can pay for themselves, depending on where you happen to live and what the credits/incentives may be, in just a couple of years. Dramatic savings are realized very quickly. The money that you will be saving on your energy costs from these retrofits will make any further renewable energy system installations much more effective, and much more cost-effective.”

Of course, not every $1,000 investment in energy-efficiency equipment will make your house $1,000 more valuable upon resale—you may not be able to preserve all the principal invested. Some investments, like those in greater insulation, will increase your home value, while others, like appliances with a limited lifetime, won’t. Economists sometimes call the latter a “wasting asset,” which means it loses value over time, perhaps even immediately.

The entire discourse about energy-expenditure savings is oddly disconnected from that of long-term investment for retirement. Household efficiency measures are spoken of in terms of years of payback, with the investment assumed to contribute nothing to the long-term value of your house. If you install a thermal blanket around yourhot-water heater that costs $200 and saves you $100 per year, it is said to have a two-year payback. Many regard paybacks beyond, say, five years as farther out on a limb than consumers are willing to go. A payback of six, seven, or ten years is too uncertain, too unreal, to be taken seriously. Yet in the world of 401(k)s, we are essentially asked to prioritize investing in a 44-year payback.

The McKinsey Global Institute (part of McKinsey& Company, one of the nation’s most respected business consulting firms) estimates that, world- wide, there’s $170 billion of energy-efficiency investments possible by 2020 that could each generate an internal rate of return of at least 10 percent. The average rate of return of all these investments, McKinsey believes, would be 17 percent.

If consumers had to make all these replacements themselves, even slam-dunk investment opportunities might be difficult to take advantage of. Who has time to study the options, shop for energy-efficiency devices, and make all these complicated calculations? But across the United States are private and public institutions ready to help. New Jersey residents participating in the statewide program to replace inefficient heaters and air conditioners are saving $63 per year. Pennsylvania is weatherizing the homes of low-income families and saving them $300 per year. New York State offers homeowners rebates on their investments in more efficient appliances, typically saving them $600 per year. And according to Energy Trust of Oregon, customers participating in its programs have collectively saved nearly $800 million on their energy bills.

As was true for becoming your own landlord, you bump into limits on this investment strategy. Once you’ve become super-efficient, you again need to look for another place to put your money. Since the typical American household is spending $3,500 per year on utilities and $2,700 on gasoline, it will hit this ceiling once it invests $38,750 to become energy self-reliant.

But there may be ways to go beyond this $38,750. Right now, many U.S. utilities pay you to generate electricity for the grid. Put up your own wind- electric machine or photovoltaic array, and the utility will pay you for the surplus you sell back. Subdivisions and neighborhoods that work collectively to get themselves off the grid and get into the power-generation business may find themselves having a nice income supplement every month. The catch on this, for the moment, is that most utilities will allow you to run your meter back to zero but not negative. Many European governments, in contrast, have mandated “feed-in tariffs,” where the utility not only must buy back your surplus but do so at a higher rate than your electricity bill. This has created a huge incentive for households, neighborhoods, and small businesses to get into the energy-production business. If U.S. states start to reform their utilities in this way, there may be no practical limit to how much you can invest in simple, renewable energy technology that easily will last as long as your house.

The logic of seizing every invest-in-yourself option that delivers better than a 16 percent rate of return can of course extend to other kinds expenditures. It’s worth investing $1,000 in water-efficiency measures, if you can bring down your annual water costs by$160. Or $1,000 in a home-based greenhouse, if you can bring down your food expenditures $160 per year. Or $1,000 in a great bicycle, if it reduces your driving costs by $160 per year. Or $1,000 in an Italian espresso maker, if it shrinks your Starbucks habit by $3.08 per week. But why stop there?

4. Invest in Your Potential

Warren Buffett says, “Generally speaking, investing in yourself is the best thing you can do—anything that improves your own talents. Nobody can take it away from you. They can run up huge deficits and the dollar could become worth far less, you’re gonna have all kinds of things happen. But if you’ve got talent yourself and you’ve maximized your talent, you’ve got a terrific asset.”

Think of how many educational courses you could take, how many new skills you could acquire, or how many new degrees you could complete that would increase your earning power. Forget about enrolling in an expensive private university. Suppose you spend $10,000 per year over three years taking a bunch of classes to broaden your skills. If that $30,000 investment generates more than $4,800 in additional pretax income, your education will generate the needed 16 percent rate of return to do better than your tax-deferred IRA. Adrianne McVeigh, a management consultant and clinical psychologist in Atlanta, tells her clients that “the most successful executives and managers invest time and energy in their own self-development.”

Even if you’re not prepared to change careers, there may be subtle tweaks of your lifestyle that could generate better than a 16 percent rate of return. Everyone knows that prevention of health problems is more cost-effective than treatment. The assumptions required to work out the cost–benefit numbers are admittedly rife with speculation, but there are plenty of low-cost ways most of us would agree would save us more than 16 percent per year. If you’re a smoker, for example, investing several thousand uninsured dollars to quit can pay off in years of longer life with fewer maladies and health-care costs, as well as immediate savings by eliminating hundreds of dollars of cigarette purchases each year. There are similar, if perhaps less dramatic, payoffs by investing in whatever it takes—nutrition classes, exercise programs, spending more cooking healthy meals—to reap the myriad benefits of a healthier you.

Hey, Wait a Minute!

Have I gone too far with these arguments? I can imagine two objections. The first is something I’ve hinted at throughout this chapter—that smart investors will do everything on my list, plus save funds in their tax-deferred retirement accounts.

But I hope I’ve made it clear how far you can go before you should even think about a retirement account. Let’s review: $50,000 to $100,000 for your own bank, $1 million for real estate, $38,750 for energy efficiency, who knows how much for your own education and earning potential—this is well beyond what 90 percent of American families ever dream about saving for their retirement. The average American household has an after-tax income of just over $46,000, and few will retire with anything approaching $1 million to their name.

The second objection might be that I’m comparing apples and oranges. Money saved is not the same as money invested—and ultimately, you do need cash or some kind of income-paying asset to live on when you retire. Your reduced electricity bill will not pay your grocery bill after you turn sixty-five. To make this analysis work, you have to be committed to capturing your savings and placing them into some kind of savings account or asset that ultimately pays you an income stream. But, again, there’s no reason why that asset cannot be your home. And each year, you can take your savings and plow them back into home improvements. When you’re ready to retire, sell the home, move into more modest digs, and then place your savings into very safe, low-risk, local securities.

Whatever you think of strategies of investing in yourself, there’s one overarching advantage to them over every other local-investment strategy discussed thus far: You are the person principally responsible for whether or not the investments pay off. You have the ability to improve your home, to tweak your energy-efficiency systems, and to upgrade your own personal earning power through the right class. You can bring down the risks of your investments going sour. You are the star of your own investment firm.

And it’s in this spirit that I present one final tool to consider, what’s effectively the secret weapon of local investors—namely, the self-directed IRA. Even though the tool is mainstream enough that a “for Dummies” guidebook has been written on it, 99 percent of Americans—even 99 percent of sophisticated investors—appear to be unaware of it.

5. DIY Retirement Funds

Tom Anderson is the founder of PENSCO, one of the largest providers of self-directed IRAs in the country, and until he recently retired he served as its CEO. “After twenty-two years of operation I’m proud that PENSCO has an A+ rating from the Better Business Bureau,” he boasts, “and we’ve got $3.5 billion under administration. From a customer satisfaction standpoint, we’re performing better than some of the top banks in the country.”

Anderson is also the president of the Retirement Industry Trust Association (RITA). “We almost exclusively handle self-directed IRAs and retirement accounts as custodians, which means we provide the means to hold IRA and individual pension plans under the laws governed by the Internal Revenue Service. We hold their assets in custody, execute our clients’ investment instructions, and report the value of their holdings—on an annual basis to the IRS and on a monthly basis to our clients. We also provide all the other traditional services, including Internet access to your account, and your ability to do all kinds of transactions, purchases, sales, transfers, and distributions. Basically we do everything that’s required to keep your plan compliant with the law. And that’s about it!”

The difference, of course, is what you can invest in. “Unlike broker-dealers or traditional banks, we’re dealing with myriad asset types those institutions don’t handle. For example, a broker-dealer like Schwab or Merrill Lynch generally will just handle traded assets like stocks, bonds, and mutual funds, and those assets are essentially processed electronically these days. Our systems and personnel are very specialized as every transaction is unique—sort of like a handmade shoe.

“We can do anything that is not prohibited by law,” Anderson asserts confidently, “from buying 40 head of cattle and putting ear tags on them in the name of your IRA, to buying a property underwater off the coast of Miami. There are only three asset types that a self-directed IRA can’t buy: collectibles (antiques, artwork, a 1957 Corvette, alcoholic beverages, et cetera), life insurance, and the stock of a sub-chapter S corporation. So, for example, we have bought fishing rights in the state of Alaska, which is just a map of the ocean that allows somebody to fish, in this case for black cod, over a period of time, who then rent out these rights to smaller fishermen. We have helped start thousands of traditional businesses through early-stage capital, either at the very beginning like start-ups or with mezzanine financing. At this time there’s very little credit out there for new-business innovation, and service providers like us are stepping into the gap.”

You could use a self-directed IRA to put tax-deferred dollars into almost every local-investment option discussed in this book. The one prohibition is on personal use of the funds. You can’t invest in your daughter’s house, for example, or a business in which your spouse has greater than 50 percent ownership. But you can invest in almost every other type of local investment discussed in this book. That means that you can support a friend or neighbor’s personal project. You even can invest in your neighbor’s house. In Canada, where the rules around self-directed retirement funds are very similar to those here, a company in Calgary is being formed to enable groups of neighbors to invest in one another’s homes, enjoy the tax benefits of mortgages, and avoid the high interest charges of mortgage banks.

Suppose you know someone who wants to borrow money to buy furniture or put her kids through college. You know she has plenty of assets, but they’re tied up in the house or in a typical pension fund, so you’re confident about getting paid back. You could use a self-directed IRA to loan her the money at, say, 5 percent annual interest—or whatever interest rate you preferred. And taxes on your gains would be entirely deferred.

Anderson wishes that more Americans knew about self-directed IRAs. He believes that most retirement accounts are dangerously undiversified. In fact, according to most current statistics available from Investment Company Institute (ICI), more than 95 percent of all IRA assets are invested in the markets in one fashion or another. “These are an individual’s most valuable portfolios due to their tax-deferred or tax-free status, and if any portfolio should be diversified it should be your retirement account.”

On the flip side, self-directed IRAs provide a great source of investment capital and support innovation through the launch of new businesses. “The most significant success we had at PENSCO,” recalls Anderson, “involved a group of entrepreneurs who came into our office in 1999 and wanted to start a business on the Internet. They were going to use a traditional IRA, but I suggested they use Roth IRAs because the gains would be tax-free. So they started this company, and the lead investor put in $1,800, because he didn’t have any more. The limit at the time was $2,000. The others put in a certain amount, most of them the maximum contribution amount. Approximately three years later they sold the company to a national firm, and the CEO, the guy who put the $1,800 in, now had multiple millions in his Roth IRA. Then he took those millions in his Roth and became a lead investor in a whole bunch of other start-ups, which grew his IRA to hundreds of millions. All from his $1,800 investment!”

So why don’t more people use this technique? Anderson thinks most Americans don’t believe they are capable of handling their own finances. “People are accustomed to the normal contributory IRA. They get a solicitation from their bank in April just before tax time to take a deduction, they fill out a little form, and put $2,000 or $4,000 into an account, and it just sort of sits there. They don’t pay a whole lot of attention to it. The whole process is relatively passive.”

The custodian of a self-directed IRA, in contrast, cannot be the decision maker. That’s what self-directed means: It’s up to you.

This article is adapted from Local Dollars, Local Sense  by Michael Shuman.

Shuman shows how unaccredited investors—nearly 99 percent of Americans—can put their money into building local businesses and resilient regional economies, and profit in the process.

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Love, Money, and Valentine’s Day

Tuesday, February 14th, 2012

Reposted from the Winnipeg Free Press.

Valentine’s Day is the second-busiest day of the year next to Mother’s Day for florists like the family owned Winnipeg business McDiarmid Flowers.

But when the holiday of romance falls on a Tuesday, Wednesday or Thursday, there seems to be a lot more love to give — at least when measuring the volume of flower sales.

“Flowers sell much better on those days, because when people have Valentine’s on Friday, Saturday, Sunday or Monday, they tend to go to the lake, get a theme hotel, go across the border or go for a big meal at a fancy restaurant,” says Gayle Sidney, co-owner with her mother, Marion Shewchuk, of the River Heights shop.

On average, people spend between $75 and $100 on flowers when Valentine’s falls in the middle of the week, compared to $40 or $50 when it falls closer to weekends.

Still, flowers are the most popular purchase on Valentine’s Day, according to a recent American Express-sponsored survey. The U.S. poll found consumers estimate they’ll spend about eight per cent more this year than last year — or about $200.

The credit card firm’s survey states the increase is part of an overall up-trend in consumer spending.

One could suppose the better we feel about the economy, the more love we feel emanating from our wallets.

That Valentine’s Day spending is connected with the health of the economy is hardly surprising, says an expert on the history of the holiday.

Over hundreds of years, Valentine’s Day has evolved from a Christian celebration of martyrdom into a celebration of romantic love. And its popularity in the modern context is intertwined with the rise of industrialization and finance about 150 years ago, says English literature professor Heather Evans at Queen’s University in Kingston, Ont.

Ironically, this period of tremendous change, which deeply shaped society today, also marked a shift in how we ‘love’.

“The same period that saw the development of Valentine’s Day as a commercial venture is the same period that saw a shift in the construction of marriage from one that is primarily for the purpose of transferring money and other forms of power to one being based on love,” Evans says.

Today’s typical Valentine’s Day fare — the box of chocolates, the cards, the heart-shaped decor and even flowers — were a new phenomenon during the 19th century, only made possible by the advances in printing, marketing, textiles and other modernizing innovations of the day, she says.

Increases in industrial production allowed for greater distribution of goods and, in turn, wealth, which led to an expansion of the middle class. By the mid-1860s, Valentine’s Day became more popular because a large portion of the population had the disposable income to spend on consumer goods that were not necessities for survival.

Romantic love, like most other things in a free-market society, became affordable. Or at least those items that represented its spectacle — chocolates, cards and other gifts — could be produced in large enough supply to meet a growing demand, partially created by a newly emerging advertising biz.

Love could be commoditized, packaged and priced, while marriage was becoming less about transferring wealth and solidifying economic status and increasingly more about the freedom of choice among the middle class to pursue relationships on mutual romantic interest.

That is not to say money and marriage today are not deeply connected. Instead, Evans says, love, marriage and Valentine’s Day are like most everything else in our free-market civilization. Their value is often measured in dollars.

So while we love ‘love’, we love money, too.

“We love it in so many ways,” Evans says with a laugh. And whether we like it or not, money is a fundamental common denominator, even in affairs of the heart. Still, calling Valentine’s Day a ‘Hallmark Holiday’ — a means for retailers to boost sales of their products — is a little too cynical, in Evans’ view.

“It’s very difficult to point fingers at Valentine’s Day without thinking of it in that larger context,” she says. “It simply says something about who we are.”

Somewhat oddly, though, our market system on the one hand puts a price on love as measured by how much we spend on the holiday, or how much we spend on engagement rings or marriage.

But on the other, it also largely excludes aspects of civilization that are often most associated with love, such as nurturing and co-operating, says a renowned U.S.-based economic theorist.

Hazel Henderson is an acclaimed futurist, recently named by Wired UK as one of the Top 50 people most like to change the world, who coined the term the ‘love economy’ decades ago. She concluded modern-day economic indicators — like gross domestic product (GDP) — largely ignore unpaid work that goes on in homes and communities, such as raising children, volunteering and housework.

She says economists like to refer to GDP as a pie with two layers, the free markets and the underneath, the public sector that supports it.

But Henderson says that excludes all that goes on in the home and community that is largely unpaid.

“I began to wonder what was wrong with economics, and why did we not count this?” says the president of Ethical Markets Media, who is also a pioneer in socially responsible investing. The answer, she concluded, was that the fundamentals of modern economics developed alongside the Industrial Revolution, the growth of the middle class and many of the holidays that are widely commercialized today, including Valentine’s Day.

“It was all about competition and individual maximizing of your own self-interest,” she says.

But Henderson says human nature also includes nurturing and co-operation.

“That’s what I meant by the ‘love economy,’ ” she says.

“If you don’t acknowledge that — whether you’re a government in Ottawa, Washington or wherever — you’re playing with a map of only half the territory.”

When put into dollar figures, the love economy is worth tens of trillions of dollars in GDP every year, she says.

Yet, it’s almost entirely excluded from the equation in modern economics, even though the ‘economy’ can’t survive without it.

“While all these competitors go out there and earn money in the cash economy, there is somebody back home who is keeping home fires burning, taking care of the kids and binding up the wounds of the competitors when they come back home.”

Henderson says we fail to factor the ‘love economy’ into the marketplace, often to our peril.

“Part of the whole problem that most of the economies are in now after the whole Wall Street debacle is we’re not recognizing the extent to which all industrial societies — not to mention developing countries — rely on creative goods and services and production that are unpaid.”

Greed is validated as a motivator of competition, yet the lust for profit has led to financial crisis after crisis, while the ‘loving’ aspects of our human nature often get trampled as a result.

Still, Henderson says, nothing is wrong with free-market enterprise in and of itself. It’s that we’ve chosen to exclude aspects of our lives that are equally important from our economic calculations.

So, while we can buy our loved ones tokens of our love this Valentine’s Day, the product of our romantic love — a family — largely remains off the balance sheet.

[email protected]

10 Reasons for Financial Optimism (If You Invest Locally)

Thursday, February 9th, 2012

Reposted from LivingEconomies.org, by Michael Shuman

Even though these are tough times for tens of millions of Americans, there’s reason for hope.  That’s the message of my new book from Chelsea Green, Local Dollars, Local Sense:  How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity, which showcases dozens of ways individuals, businesses and communities are reinvesting their money locally and creating new jobs.  To give you a little taste of what’s in the book, let me share my Top 10 Reasons for Optimism.

10.  Wall Street’s Decline – Fortune 500 companies have long enjoyed an unnatural competitive advantage as all of us have unquestioningly forked over some $30 trillion of our retirement funds into their stocks and bonds.  This lemming behavior is now coming to a close. Occupy Wall Street has been so effective that even Newt Gingrich is questioning our fealty to “vulture capitalism.”  My book documents that the long-term historic rate of return for U.S. stocks has been an astonishing 2.6% per year.  Against that record, all kinds of many local investment opportunities seem fabulous!

9.  Main Street’s Rise – Evidence continues to mount that local small businesses are the best job producers in the U.S. economy, at least as profitable as their global competitors, and becoming increasingly competitive (thanks in part to groups like BALLE).  Local investment can pay off, big time, if we can figure out how to create, pool, trade and evaluate local “securities” more efficiently.

8.  The Crowdfunding Revolution – The bad news is that archaic securities laws have made it impossibly expensive for the 99% of us who are “unaccredited” to put money into the 99% of businesses that small.  The good news is that a remarkable coalition led by Tea Party Republicans and Occupy Democrats, and supported by President Obama, is on the verge of overhauling these regulations.  Even if the weakest of these legislative alternatives are passed, local businesses will be soon be able to take small investments ($100-1,000) from millions of unaccredited investors with little legal cost.

7.  Cookie-Cutting Offerings – If crowdfunding reform stumbles, the revolution will still happen.  Companies like Cutting Edge Capital are designing DIY websites so that you can go through the legal hoops to sell stock within one state at a tiny fraction of the previous cost.  For example, my colleague Jenny Kassan recently helped Workers Diner, based in New York City, do an affordable stock sale to raise capital from its employees, customers and neighbors.

6.  Better Understood Loopholes – Not every kind of investment requires a securities filing.  Some companies seeking local loans, like Equal Exchange, have partnered with their banks to create specialized CDs that allow their unaccredited depositors to invest.  Cooperatives have long borrowed from their members, with many delivering annual rates of return over 5%.  Awaken Café in Oakland raised tens of thousands in capital from its customers by preselling coffee (offering $1,200 advance purchases for $1,000).

5.  Small Town Initiative – Communities with fewer than 10,000 people have proven that local investment can be a successful economic development tool.  The Local Investment Opportunities Network (LION) of Port Townsend, Washington, has woven a network of “preexisting relationships” among dozens of businesses and investors, facilitating $2 million of investment since 2008.  Fairfield, Iowa, has mobilized about $300 million over 25 years into so many startups that it’s known as Silicorn Valley.

4.  Community Pools – While securities laws have made it difficult and expensive for unaccredited investors to participate in diversified local investment funds, there are exceptions.  Innovative revolving loan funds for local business are open to unaccredited investors in New Hampshire, North Carolina and Ohio.  A terrific investment club in Maine affiliated with Slow Money, called No Small Pototoes, allows unaccredited investors to participate.

3.  Local Stock Exchanges – In the next few years, perhaps even sooner, unaccredited investors will be able to buy and sell shares of local companies on electronic exchanges.  Early prototypes can now be seen in the platforms of Mission Markets of New York and the LanX of Lancaster, Pennsylvania.  Once shares of local companies have some liquidity, it will be possible to assemble diversified portfolios, and mutual and pension funds might finally be convinced to begin investing locally.

2.  Self-Directed IRAs – If you want to invest your retirement funds in these options above right now, there’s no need to wait.  For a fee in the neighborhood of $100-200 per year, you can hire a custodian to oversee your IRA and designate almost any local investment opportunity imaginable, including municipal bonds and local real estate. Alternatives Credit Union in Ithaca, New York is exploring how to facilitate such investments by its members.

1.  Self-Investment Opportunities – Perhaps the most intriguing, readily available and safe local investment opportunity is to invest in yourself.  Buying a home, condo or co-op house you can afford generates a better return than Wall Street.  So does paying down your mortgage faster.  Or investing in energy efficiency in your home or a wind machine for your subdivision.  In fact, for most Americans, the high-return opportunities for investing in oneself are so many that they perhaps should stop investing in IRAs and 401(k)s altogether.

If you’re interested in learning more about these ideas, here are four things you can do:

Michael Shuman is a BALLE Fellow and Director of Research and Marketing at Cutting Edge Capital and the author (with Kate Poole) of the forthcoming BALLE manual: Growing Local Living Economies: A Grassroots Approach to Economic Development.  Michael’s book Local Dollars, Local Sense:  How to Move Your Money from Wall Street to Main Street and Achieve Real Prosperity is now available!


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