Finding home: Lack of affordable housing is a crisis across the West

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Stuck on the street: only a quarter of families in the US that qualify receive housing assistance. © Nick Beer/Alamy Stock Photo

In the sharp glare of spring sunshine the paint on the simple wooden display case is peeled and fading. It is a modest affair, the top angled in the shape of a roof, as if offering final shelter to the men and women whose names are displayed there. Fresh flowers, a solitary act of commemoration, perhaps atonement, have been placed to the side. Eight sheets of paper are pinned under glass, each sheet filled with the names of homeless people who have died – on the street, under bridges, in ravines and back allies. The Toronto Homeless Memorial sits beside an inner-city church, cheek-by-jowl with one of the city’s largest downtown shopping malls.

Not far away is another Toronto. A skyward glance reveals dozens of construction cranes crowding the horizon: 50- and 60-storey towers joust with each other to get the best view of Lake Ontario. The last decade has seen a frenzy of new building in the downtown core, mostly luxury freehold flats (condominiums), a phenomenon not uncommon in other ‘hedge cities’.

Across the globe money is pouring into urban centres considered safe harbours for deep-pocketed investors. In the Toronto city centre nearly 100,000 condominium units were built between 2012 and 2016. In older residential areas the average selling price of a detached home has soared, leaping by 33 per cent in the past year alone. Meanwhile, 180,000 people are on the waiting list for subsidized housing and the city faces a $2.6 billion repair bill for existing social housing. Buildings too costly to fix are sold: 475 units are on the block this year.

This phenomenon is widespread across the industrialized world. The US has shuttered 10,000 units of federally subsidized housing every year since the 1970s. The right to shelter is recognized by the UN in the Universal Declaration of Human Rights and more than 40 countries have declared housing a basic human right. Yet, the UN estimates more than 1.6 billion people worldwide lack adequate shelter and more than 100 million are homeless. They flock to temporary shelters or sleep in public buildings like railway stations or bus terminals. Others set up house on the pavement or erect simple houses from salvaged materials on waste land.

In the global South millions living in slums from Mumbai to São Paulo have migrated to the city in search of work. The growth of these informal settlements is fuelled by rural poverty and landlessness. They live in precarious housing without tenure; they don’t own the land and they lack basic services like water, sewerage and electricity. Their right to shelter often depends on the benevolence of local elites. These poor communities are tolerated or ignored until the price of land jumps and makeshift homes are ‘cleared’ for development under the guise of ‘squatter rehabilitation’.

But homelessness in the South is also a by-product of top-down economic development. Established slums are bulldozed to make way for international sporting events or glitzy shopping malls. Natural disasters (floods, hurricanes, earthquakes), climate change, civil war and political conflict also conspire to force people from their homes.

In the West our clichéd view of a homeless person is a single, older man – jobless, uprooted from family, socially isolated, mentally unstable and addicted to alcohol or drugs. And, indeed, many people living on the street do fit this category.

But these visible homeless are the tip of the iceberg. Far more numerous are those who suffer from housing insecurity. An estimated 75 per cent of people who are homeless are not on the street. These hidden homeless, often women, teens and children, sleep in shelters or double up with friends or relatives. Women are most often homeless as a result of violence. One Canadian study found that 71 per cent of women in shelters reported abuse as the reason for seeking refuge.1

It’s a similar story for young people, most of whom have either fled or been forced from home because of abuse or neglect. Without adult coping skills, often emotionally confused, homeless young people are easily exploited. On the street they are drawn into a vortex of substance abuse, victimization, violence and sexual exploitation. A 2013 report by York University’s Homeless Hub found that 82 per cent of homeless youth are victims of crime, and more than 30 per cent are sexually assaulted.2

The Toronto Homeless Memorial

Wayne Ellwood

The new precariat

There are many paths that lead to homelessness but poverty is always a key factor. The rise of low-wage, part-time jobs; the declining power of trade unions; the attack on the welfare state, and the hollowing out of industry have left people scrambling to meet rising rental costs. The poor simply cannot afford a decent place to call home. According to the Washington-based National Low Income Housing Coalition, a US worker earning the federal minimum wage of $7.25 an hour would need to work 90 hours a week to afford a one-bedroom apartment.3 Housing insecurity extends to the new ‘precariat’ (young people whose work is marginal and low-paid) as well as to single families, disabled people, new immigrants, refugees, ‘illegal’ squatters and the working poor.

Eviction and wrenching dislocation is a constant threat.

The US sociologist Matthew Desmond notes that ‘if you’re paying 60-80 per cent of your income in rent, eviction becomes inevitable’. The result: broken communities and a downward spiral of neglect and suffering. In the US, says Desmond, ‘the face of the eviction epidemic is moms and kids from predominantly Latino and African American neighbourhoods... About one in five Black American women renters are evicted at some point in their lives.’4

Children who grow up in the shadow of homelessness struggle with school and face mental health challenges as well as behavioural problems. They often live in poverty as adults

Lack of affordable housing is a crisis across the West. Inflated real estate markets have combined with growing wealth inequality and a systematic neglect of public provision to create a surge of homelessness.

It’s no secret that market-based solutions don’t work. Treating shelter as a commodity rather than a basic human right leads to what critics call the ‘financialization’ of housing. In essence that means a house is no longer a place to live but a source of profit. That’s been good news for the banks who’ve been raking it in providing loans for inflated mortgages. As the gap between house prices and incomes grows the banks gladly step into the breach. According to the New Economics Foundation, domestic mortgage lending in the UK has grown from 40 to 60 per cent of GDP since the 1990s.

‘It’s housing disconnected from its social function,’ stresses Leilani Farha, UN special rapporteur on the right to housing. Speculators treat housing as just another commodity. The result: ‘Housing is as valuable whether it is vacant or occupied, lived in or devoid of life. Homes sit empty while homeless populations burgeon [because] that is the quickest way to turn a profit.’

In Melbourne, she points out, a fifth of investor-owned apartments are unoccupied, while in Chelsea and Kensington in the city of London the number of vacant units increased by 40 per cent between 2013 and 2014.5

Across the industrialized world skyrocketing real estate has made home ownership for the average family an impossible dream. The contradictions are stark. Luxury condos abound in booming cities like Sydney, Auckland, Hong Kong, San Francisco and Vancouver, while homeless shelters are packed, food banks can’t keep up with the demand and the supply of affordable public housing stagnates or plummets.

What’s clear is that unless it’s forced to comply the market bends inexorably towards the wealthy.

The destructive consequences ripple out in all directions. As inequality grows rising rents and higher mortgages absorb an ever increasing chunk of net incomes.

Housing activists have a phrase for it: ‘the rent eats first.’

A young Angolan boy perches above an open sewage ditch in Bairro Rangel, Luanda. Slumdwellers are often the victims of development.

Novarc Images/Alamy Stock Photo

When minimum wages are below the poverty level and social benefits like welfare or disability support are inadequate, paying the rent means less money for other expenses like food, transport, clothing, healthcare and school supplies.

The UK housing charity, Shelter, warns that nearly 40 per cent of renters are a month’s pay away from not being able to meet the rent.

A fifth of all renting families in the US spend half their income on housing. Matthew Desmond argues that America’s housing crisis ‘is driving poor families to financial ruin and even starting to engulf families with moderate income.’

‘Families who spend more on housing spend less on their children,’ Desmond writes. ‘This problem is leaving a deep and jagged scar on the next generation.’4

Major cities across the West are now physically divided by race and class, polarized between wealthy, gentrified urban centres and scattered pockets of poverty and privation where low-paid workers, immigrants, refugees and racialized communities find barely affordable shelter.

This stands in contrast to celebrated urbanist Jane Jacobs’ view that cities need a range of class and culture to survive and thrive. Jacobs wrote famously of the need for density and diversity to support a busy streetscape and create ‘eyes on the street’.6 Instead our major urban centres are increasingly divided along class lines. Inequality is embedded in geography.

Bailing out

As real estate markets have exploded cost-conscious governments are bailing out of the housing business while cutting social assistance and unemployment benefits.

Thirty years ago Margaret Thatcher launched the austerity model in the UK with her drive to radically shrink the role of the state. She introduced a ‘right-to-buy’ policy for public housing in 1980. Since then, more than 1.8 million council homes have been sold at a discount. Fewer than 10 per cent of those have been replaced, resulting in a huge loss of affordable housing. From April 2012 to November 2015 more than 40,600 homes were sold under the right-to-buy scheme while just 3,694 social housing units were built.7 In addition, housing benefits have been slashed by more than £5 billion, and funds for homelessness services cut by 45 per cent.

Not surprisingly the number of ‘rough sleepers’ has mushroomed. Shelter says more than 250,000 people are homeless across Britain. In the capital soaring rent and house prices have pushed ordinary working people out of the market. Councils are shipping homeless families to parts of the country where rents are cheaper. The number of people being housed outside their local authority has tripled in the past five years.

This trend has been repeated wherever market-based policies have come to dominate. In the US federal support for low-income housing fell by half from 1980 to 2003.

Living on the edge means struggling families are stuck in a cycle of poverty. Only a quarter of American families that qualify for housing assistance actually receive it. In Washington, DC the waiting list is more than 20 years.

Housing as commodity: a protest against the changing face of London.

Urbanbuzz/Alamy Stock Photo

Homelessness is literally deadly. A 2011 study by the British charity, Crisis, found that the lifespan of the chronically homeless is 30 years below average. They were also nine times more likely to commit suicide than the general public, and twice as likely to die of infections. Another study found that the life expectancy of the homeless in the Canadian province of British Columbia was half that of the rest of the population.8

Homelessness not only destroys lives, it’s also expensive. It’s cheaper to house someone than to leave them in limbo. The Central Florida Commission on Homelessness found that Florida residents shell out, on average, $31,000 a year for each chronically homeless person – on things like transport, hospital visits, policing and jails. Alternatively, they found it would cost just $10,000 a year to provide permanent housing, job training and healthcare.

Most people who work with the homeless understand this.

Here’s what Canadian doctor and anti-poverty activist, Gary Bloch, wrote recently: ‘Last week I saw a patient who had spent more than 10 years living in a ravine. He had been to hospital multiple times... with heart attacks, skin infections and serious depression. If he had been housed... at even the most basic standard of living... the tens of thousands of health dollars spent on him may well have been avoided.’9

Homelessness feeds a whole set of social pathologies. These include sub-standard education, discrimination, addictions, crime, spousal abuse, as well as issues of mental health and family well-being. Children who grow up in the shadow of homelessness struggle with school and face mental health challenges as well as behavioural problems. They often live in poverty as adults.

So we are left with an army of researchers and academics who dissect and analyze the ‘homeless problem’. And a support group of social workers, activists and NGOs who advocate on behalf of the homeless and the housing insecure.

Shifts and strategy

Nonetheless, things are changing. There has been a seismic shift over the past decade, spurred by the ‘Housing First’ model. Providing housing for the chronically homeless is the first step. Give people choice and control over their accommodation, combine that with support and counselling, and they are more likely to get themselves back on track (see page 16).

Housing First is an important breakthrough, but it’s a partial solution.

The causes of homelessness are rooted in a complex mix of the political and the personal. If we want to stop homelessness we need to start with poverty. Employment is scarce and available jobs are poorly paid and insecure. Add to that a frayed social safety net and government support programmes that can’t keep up with the rising cost of housing and rent. Lastly, are individual and social factors: people under stress are more vulnerable, less able to cope with change. The slightest shift in fortune, a loss of income or a family row, could push them over the edge.

A clear strategy for preventing homelessness involves addressing all these things simultaneously.

We must also recognize that a ‘home’ is more than just physical shelter. Stable housing builds stable communities. But a home is also an anchor for the soul, a place where we live out our lives. That’s why homelessness is so devastating. It’s both a personal tragedy and a social disaster – a loss that sabotages self-esteem as it erodes collective well-being.

  1. Statistics Canada nin.tl/womenCan
  2. ‘Local service offers support to local disadvantaged youths’, Toronto Star, 27 December 2016
  3. NLCHP, ‘No Safe Place: the criminalization of homelessness in US cities’, nin.tl/NLCHP_SafePlace
  4. Desmond Matthew, Evicted, Poverty and Profit in the American City, Penguin Random House, 2016.
  5. UN Human Rights Council, Thirtyfourth session, 27 February-24 March 2017.
  6. Jane Jacobs, The Death and Life of Great American Cities, Random House, 1961.
  7. Dawn Foster, ‘Right to buy’, The Guardian, 7 December 2015, nin.tl/MTRight
  8. Megaphone, November 2014, nin.tl/MegaDOS
  9. Gary Bloch, ‘The cost of poverty affects us all’, 6 December 2016, nin.tl/Star-cost

Last stand

Loggers Brazil

Weapons of mass destruction: loggers harvest precious tropical hardwoods in Brazil. The South American nation is losing more than half-a-million hectares of rainforest every year. © BrazilPhotos.com/Alamy

From the air, the earth is shorn and desiccated. Waves of heat billow upward, mixed with plumes of smoke. A few lonely trees stand in relief against the flattened landscape, while knots of cattle clump together in dusty paddocks ringed by barbed wire. This is the Brazilian state of Rondônia, the heart of the Amazon, wedged between the vast state of Amazonas to the north and, due south, Bolivia.

Fifty years ago, Rondônia was swathed in dense tropical rainforest. Today, it is one of the most deforested parts of the Brazilian Amazon. An astonishing 100,000 square kilometres of forest has vanished from the state since 1978. Poor people from the crowded coastal areas, attracted by land and opportunity, flocked here in the 1970s when roads began to penetrate the forest. First came loggers, who harvested the valuable tropical hardwoods; then settlers, who cleared the remaining trees to plant maize and soy; and finally large landowners, who consolidated the land to graze cattle. Two-thirds of Brazil’s deforested land is used for cattle ranching.1

But let’s leave the Amazon for a moment and shift our focus more than 3,000 kilometres southeast to the sprawling megalopolis of São Paulo, home to more than 20 million people. São Paulo is Brazil’s economic powerhouse: chaotic, pulsing with life and a little intimidating.

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Severe drought

But Paulistas, as the city’s citizens are known, have a problem – a big one. São Paulo is drying up. In fact, much of southeast Brazil is suffering, including the country’s second-biggest city, Rio de Janeiro. The region has had three consecutive years of drought. Despite recent El Niño-influenced downpours, São Paulo’s reservoirs are nearly empty. Last year, the Cantareira Reservoir, which supplies nine million people, was operating at just five-per-cent capacity.2 About a quarter of the country’s 200 million people now live in areas where rainfall is below historic averages.3

But it’s not just the coast that’s drying up; it’s the Amazon itself. The region has had three severe droughts over the past decade. All signs point to climate change as the culprit. Forecasters say the area affected by severe drought may triple by the end of the century. In addition, unpredictable feedback loops could accelerate the cycle. Carbon dioxide (CO2) released from a dead and dying forest will further disrupt rainfall patterns and increase drought – which kills more trees, releasing more carbon in an endless cycle.

It turns out that drought in the Amazon and drought in São Paulo is not just coincidence. Researchers have found a direct link between deforestation in the country’s heartland and water shortages in the densely populated southeast.

Stumped: a young boy surveys the remains of giant conifers on a mist-shrouded inlet in the US Pacific northwest.

RooM the Agency/Alamy

Scientists use the term ‘aerial’ or ‘flying rivers’ to describe the forest’s role in continental rainfall patterns.

Here’s how it works.

As humid air rises from the Amazon, water vapour condenses, lowering the air pressure. Since air moves from high to low pressure, humid air from the Atlantic is continually sucked into the centre of the continent. Researchers call this phenomenon the ‘biotic pump’. When the moisture-rich air mass moves west, it eventually slams into the Andean Cordillera, then arcs south and eventually east, bringing rain to southeast Brazil and northern Argentina. If the biotic pump is turned off, or loses its energy, that spells trouble. And that’s essentially what’s happening as the rainforest disappears.

As Alexandre Uezu, an ecologist with São Paulo’s Ecological Research Institute, explains: ‘Were it not for the flying rivers the whole area would be desert.’4

Although the pace of deforestation has slowed recently, the country is still losing more than 500,000 hectares of jungle every year.

Many Brazilians accept this as the price of prosperity. They wonder why they shouldn’t be free to exploit their resources just as North Americans and Europeans did centuries ago.

Biodiversity

Since the dawn of the colonial era, our exploitation of the natural world has led to the obliteration of forests on a massive scale. The consequences have been dire – for plants and animals, and for communities that depend on forests for their livelihoods. In the broadest sense, forests are key to maintaining comfortable living conditions on Earth by providing what economists call ‘environmental services’ – storing carbon, filtering air and water, preventing floods and helping to regulate climate. Woodlands are home to 80 per cent of the world’s terrestrial biodiversity. Trees also provide food and shelter as well as healing medicines. It is estimated that a quarter of modern medicines originate from forest plants.

As the human population grew, so did our economic activity. Initially, most of the loss was in temperate regions where agriculture first developed. Later, industrialization, with its ceaseless craving for energy and raw materials, added to the pressure.

At the time of the Roman Empire, dense forests covered 80 per cent of Europe. By the medieval era that figure had dropped to 40 per cent. And in some places it began much earlier. Half of England had been cleared of forest by 500 BCE. Today, ancient forests in Europe have all but vanished. In Ireland, for example, native woodlands make up just one per cent of the land area.

A similar pattern emerged in North America as settlers pushed west, razing forests rapidly during the 18th and 19th centuries. By the end of the 20th century, farms and new settlements had replaced much of America’s deciduous forests.5

Degraded land

For landless poor in Rondônia, the chance to carve out a few hectares from the forest to grow bananas and maize, and raise a few chickens and pigs, trumps conservation. The frontier acts as a relief valve allowing the state to mask extreme inequality. (Brazil has the world’s eighth-biggest economy but there is a yawning gap between rich and poor).

Successive governments have encouraged settlement of the Amazon. But small farmers are neither the main cause of deforestation nor, in the long run, the main beneficiaries. Within a few years, rain and erosion leaches nutrients from the thin tropical soil. Yields fall. The degraded land is soon sold to large landowners and powerful agribusiness companies.

Aggregated forest loss in the Brazilian Amazon, 1988-2014 (sq km)

Not surprisingly, a similar combination of cash crops and resource projects threatens forests the world over.

  • In Australia, coalmining menaces more than a million hectares of forest, while in Canada 20 per cent of the boreal forest (more than 150 million hectares) has been ceded to logging companies, oil and gas exploration, hydro dams and mines.6
  • Illegal logging flourishes, driven by renegade loggers in cahoots with corrupt politicians and greedy entrepreneurs. In Burma, according to the Environmental Investigation Agency, ‘Chinese businesses pay in gold bars for the rights to log entire mountains and smuggle timber out of [Burma]’s conflict-torn state of Kachin.’
  • Often the graft is transparent. Under Papua New Guinea’s ‘Special Agriculture and Business Leases’ scheme, 30 per cent of the country has been auctioned off to foreign timber companies. More than 80 per cent of its forests may be gone by 2021, according to the PNG Forest Authority.1
  • The conversion of woodlands to cash crops is widespread. In Uganda, tea planters have set their sights on 250 hectares of the Kafuga Pocket Forest Reserve on the southern fringes of the Bwindi National Park. The forest is one of the last homes of the endangered mountain gorilla and the national park has been listed by the UN as a World Heritage Site.
  • Perversely, even the demand for so-called green fuels has fuelled deforestation. Across Europe, power plants looking to replace ‘dirty’ coal are now burning wood pellets for generating electricity. As a result, old-growth trees in Slovakia and Romania are ground into wood chips.7 This trend also endangers forests in the US south. From Georgia to the Carolinas, biologically rich wetland forests are replaced by monoculture pine plantations.8

Zero net deforestation

In many countries, managed tree plantations are now the norm. The UN Food and Agricultural Organization (FAO) says 50 million hectares of forests were planted between 2000 and 2010. Unfortunately, these were mostly industrial monocultures – pine, acacia, eucalyptus, rubber and palm – which the FAO bizarrely equates with natural forests.

This might seem odd until you understand the UN’s corporate-friendly goal of ‘zero net deforestation’. Simply put, it means that natural forests can continue to be toppled as long as they are replaced – somewhere, anywhere – by other trees. That’s one reason global corporations such as Unilever, Bunge and Mondelez International have jumped on the bandwagon.

As the World Rainforest Movement notes: ‘Zero net deforestation means companies can continue destroying forests as long as they can show a certificate that someone elsewhere has planted trees or protected some forest of at least the same size as one they converted into pasture or monoculture plantation.’9

‘Our land, which once filled our lives with joy, is a desert of pine trees... where silence reigns because there are no animals, birds or fish’

But planting trees does not necessarily make a forest. Just ask the Mbyá Guaraní people in the Argentine province of Misiones who saw their native lapachos and timbós replaced by an endless expanse of foreign pine trees.

Now, they lament, ‘our land, which once filled our lives with joy, is a desert of pine trees... where silence reigns because there are no animals, birds or fish.’10

The other ‘game changer’ that the UN and the business community endorse goes by the unwieldy acronym REDD (Reducing Emissions from Deforestation and Forest Degradation). The idea is to use market forces to arrest deforestation in what is really an elaborate carbon-offset scheme. It seems simple enough – rich countries pay poor countries not to cut down their forests. Save the trees, save the CO2. Countries (or companies) providing the funds can claim credit for the emissions saved and eventually those credits can be traded in a global carbon market.

But there are a few barriers en route. One is that market-led schemes tend to spiral into greed-driven free-for-alls. We’ve seen what convoluted investment vehicles the deep-thinkers on Wall Street can invent. The 2008 global recession was triggered by such chicanery and the wreckage is still with us. But more to the point: the scheme is an elaborate solution that ignores the core problem.

We need to stop burning fossil fuels.

Forests without people

With REDD, rich countries can continue to pump out carbon as long as they can pay poor countries not to cut their trees.

More critically, it’s communities who depend on the forest for their livelihoods that tend to get the sharp end of the stick. As journalist Sam Knight argued in his meticulous exposé of REDD in Papua New Guinea: ‘When money and trees mix, it is normally local people who get screwed.’11

A grizzly bear mother and cubs in Canada’s northern boreal forest. The boreal makes up 30 per cent of global forest cover and is severely threatened by climate change and resource extraction.

John E Marriott/Alamy

An NGO study of 24 projects across a range of countries – including Mozambique, Peru, Nigeria and Kenya – found that communities in REDD project areas are ‘subjected to restrictions on forest use which interfere with their ways of life and livelihoods and reinforces the idea that a well-conserved forest is a forest without people.’12

And that would be a mistake. Because our idealized notion of forests as pristine wilderness separate from human culture is pure invention. Human life has always been deeply intertwined with forests. Millions of people today depend on forests for their most basic needs. And it’s those communities that are best placed to protect and defend them. Recent research supports this claim. Deforestation rates in community-managed forests are consistently lower – up to six times lower in forests where local people have legal rights.13 In the Maya Biosphere Reserve in Guatemala, where indigenous communities manage about a quarter of the two-million hectare reserve, deforestation is a scant 0.02 per cent. In Peru it’s the opposite. There, the government has allowed resource companies to trample on indigenous rights. Concessions cover 75 per cent of the jungle and deforestation is rampant.

Kenya is another country where community forestry is making a difference. Critical upland watersheds were denuded as trees were burned to make charcoal, leading to a dramatic reduction in rainfall and widespread drought. That set alarm bells ringing and eventually led to the creation of community forestry associations to reclaim and manage the barren hillsides. Today, forest cover is increasing and so are the rains.

According to Simon Gitau, warden of Mount Kenya National Park: ‘People who used to be poachers and illegal loggers are now defending the forests.’14

So should we all.

People need forests. But so do the creatures we share the earth with and so does the planet. That’s why it’s urgent we both protect and nurture them.

  1. On the Edge, the State and Fate of the World’s Tropical Rainforests, Claude Martin, (Greystone Books, Vancouver/Berkeley, 2015).

  2. The Guardian, nin.tl/brazil-drought.

  3. National Academy of Sciences, nin.tl/amazon-projections.

  4. NPR, nin.tl/residents-leaving.

  5. Saving the World’s Deciduous Forests, Robert A Askins, (Yale University Press, New Haven/London, 2014).

  6. Global Forest Watch, nin.tl/canada-tree-cover.

  7. Fern, nin.tl/biomass-devastation.

  8. Dogwood Alliance, nin.tl/bioenergy-report.

  9. World Rainforest Movement, nin.tl/wrn-redd.

  10. World Rainforest Movement, nin.tl/fsc-landgrabbing.

  11. The Guardian, nin.tl/money-on-trees.

  12. World Rainforest Movement, nin.tl/number-games.

  13. World Resources Institute, wri.org/securingrights.

  14. Yale Environment 360, nin.tl/kenya-conservation .

Hooked on commodities

Demonstrators in Burma

Demonstrators jostle in the streets of Rangoon, Burma, to protest the expansion of the Chinese-backed Latpadaung copper mine in the country’s northwest province. Thousands of hectares of farmland have been expropriated by the company and hundreds of villagers forced from their homes. © EPA/Alamy

Say what you will about the late Venezuelan President Hugo Chávez; he had chutzpah. What better place to a make a point about Latin America’s colonial inheritance than in front of the world’s media? So it was with a sense of occasion that the smiling Chávez strode across the floor of the Summit of the Americas conference in April 2009 to present US President Barack Obama with a book. And not just any book. It was a copy, in Spanish, of Uruguayan writer Eduardo Galeano’s 1973 classic, The Open Veins of Latin America: Five Centuries of the Pillage of a Continent.

Hugo Chávez presents Barack Obama with some light reading.

Kevin Lamarque/Reuters

Cheeky, yes, but the point was made: history is important. Galeano’s analysis of the continent’s economic plight was not new – the book summed up, in a swashbuckling and provocative style, what economists like Raúl Prebisch and Andre Gunder Frank had been arguing for years. They had a term for it: ‘dependency theory’. Galeano gave the theory ‘street cred’, hauling it out of the murky backwaters of academia. (Years later he explained his book’s enduring popularity to the New York Times, calling it a work of political economy ‘written in the style of a novel about love or pirates’.)

Dependency theory can be as arcane as any economic treatise. But the main assumptions are clear. The core argument goes something like this. The economies of the South were warped by 500 years of colonialism and imperialism, shaped and determined by their colonial masters. The colony’s early role, whether in Latin America, Asia or Africa, was to ship raw materials to the imperial ‘centre’ – and to provide a market for ‘value-added’ manufactured exports from the centre. Sometimes the natural resources were minerals like silver, copper or diamonds; sometimes they were agricultural products like bananas, cotton or sugar. The result was the same: colonies became dependent on the export of a handful of cash crops and raw materials produced by cheap labour. The system became deeply entrenched over centuries and irrevocably shaped social, political and cultural structures – even after decolonization led to political independence. Basic transport, energy and communications systems were tilted towards commodity exports; education systems and bureaucracies were groomed to handle exports.

Cheap raw materials made good business sense for the dominant nations and for the companies that piled up super-profits from their colonial advantage. As the UN Conference on Trade and Development (UNCTAD) has pointed out, apart from short-term price booms, the ‘terms of trade’ – the price of resource exports relative to manufactured goods – have been falling for more than a century.

Poor countries were not undeveloped, they were intentionally underdeveloped – a yin-yang process that directly linked the enrichment of the North to the impoverishment of the South

As a result, global economic structures geared to primary exports did little to advance prosperity or social welfare in the South. Poor countries were not undeveloped, they were intentionally underdeveloped – a yin-yang process that directly linked the enrichment of the North to the impoverishment of the South. The upshot was that corrupt politicians, local élites, profit-driven corporations and a global trading system tilted to favour the rich nations meant that benefits of the ‘extractive model’ of development bypassed the poor majority.

Those days are over, you might say. Economic power houses like South Korea, India, Brazil and China prove that poor countries, with enough gumption, can scramble their way to the top. They just need to capture as much as they can from their natural wealth and reinvest it to benefit their citizens. We had the ‘Asian tiger’ economies, so why not ‘resource tiger’ success stories?

There’s no question the demand is there. The world’s voracious appetite for raw materials and new energy sources sparked an explosion in commodity prices from 2002 to 2012 – the so-called ‘commodity supercycle’. Since 2000, average prices have doubled while more countries than ever are dependent on commodity sales. UNCTAD notes that 94 of 156 developing countries currently depend on resources for at least 60 per cent of their export earnings.1 Most of the increased demand has come from China (and to a lesser extent India and Brazil) where double-digit economic growth boosted resource imports and sparked a frenzy of exploration activity.

Export treadmill

You might think higher prices for resource exports are a good thing. Troublingly, the opposite seems to be true. There is growing evidence that dependence on a few commodities can release a cascade of problems, often referred to as the ‘resource curse’. On average, resource-rich countries are economic laggards. Studies show a direct correlation between resource dependency and declining GDP. They get stuck on the export treadmill, rarely diversifying. This is partly due to the ‘enclave’ nature of commodity production, which makes it hard to develop ‘forward linkages’ (processing raw materials) or ‘backward linkages’ (making the machinery used to dig the mineral or harvest the crop). In Africa, for example, as former US Assistant Secretary of State for African Affairs, Hank Cohen, points out, ‘commodities are being exported with virtually no value added’.2

Mining, especially, is capital intensive and provides relatively few jobs. The benefits redound to high-income countries where the big transnationals are headquartered. In addition, easy profits from resource extraction soak up scarce investment capital and discourage long-term investment in infrastructure that could support a more diverse economy. The orthodox development path of ‘import substitution’ – developing domestic industries to replace foreign imports and so jump off the resource treadmill – is less likely in today’s globalized economy. When an industrial powerhouse like China takes up so much space, it’s virtually impossible for small players such as Ghana or Bolivia to compete. None of this has been helped by the neoliberal prescription for deregulated markets, which means that newly industrializing countries can no longer defend themselves with protective tariffs. In sub-Saharan Africa, for example, average manufacturing tariffs fell 45 per cent from 1990 to 2010. At the same time, the US and European Union relaxed their restrictions on Chinese clothing imports. The two moves combined to wipe out the nascent African clothing industry.3

In addition, the prices of raw materials are notoriously fickle, rising and falling with the gyrations of the world market. This volatility has knock-on effects on national governments for both debt service and budget planning, since revenues are uncertain from one year to the next. This insecurity has been compounded in recent years by the ‘financialization’ of commodity trading, the latest twist of the ‘casino economy’. Big banks, hedge funds and money managers scour the globe for opportunities to invest surplus capital that will reap the biggest returns in the shortest time. The lessons of the 2008 economic crash, it seems, have yet to be learned. Short-term financial flows continue to unsettle the world economy. In the year 2000, commodity assets controlled by finance capital amounted to $10 billion; by 2012 that figure had topped $439 billion. UNCTAD notes that investors are now warping commodity markets so that ‘prices are detached from supply and demand’. This leads to ‘high volatility and distorted prices’ – generating tidy profits for speculators but financial insecurity for farmers, miners and nations whose income depends on these markets.4

Strong currencies

Commodity dependency can also lead to the ‘Dutch Disease’, a term coined by The Economist in 1977 to describe the effects of the North Sea natural gas boom on Holland in the 1960s. Foreign investors poured money into the gas industry, artificially inflating the value of the guilder and pricing Dutch manufactures out of domestic and export markets. Resource-rich countries tend to have strong currencies. As the Dutch case shows, this can backfire – even in so-called ‘developed’ countries. In both Australia and Canada today, domestic manufacturers are being sandbagged by the high value of their respective currencies. Canada’s overvalued dollar, buoyed by tar sands oil, has made it tough for its manufactured exports to compete; while Australian coal exports to China inflate the Oz dollar. This is a slippery slope – an overvalued currency also encourages more debt by making interest payments cheaper. Not a problem as long as exports are booming: both private and public lenders love good collateral and resources in the ground are certainly that. But easy credit can also bolster corrupt governments and lead to spectacular defaults if resource earnings suddenly plummet. When the value of a currency falls, debt service increases.

A cyclist rides by wooden crosses set up to honour workers killed on the job in the unregulated coal mines of northern Mexico.

Daniel Becerril/Reuters

Countries whose economies centre on resource extraction are also more prone to conflict, corruption and authoritarian governments. Oxford University economist Paul Collier found that if a third or more of a country’s GDP came from the export of commodities, the likelihood of conflict was 22 per cent. For similar countries without commodity exports, it was one per cent. Examples abound. But perhaps the most shocking case is the Democratic Republic of Congo (DRC) where fabulous mineral wealth – gold, diamonds, copper, coltan – has financed decades of brutal fighting, mass rapes, mutilations and the coercion of thousands of child soldiers. Corruption is rampant and these ‘conflict minerals’ are at the heart of it. Congolese military officers make less than $100 a month but cruise around in expensive 4x4s and live in luxury. ‘War in this country is business,’ a UN official told reporter Geoffrey York. ‘It’s like the Mafia. With every military operation, people say that the commander must be buying a new house.’5

Oil may be the most poisonous resource of all – and we are not just talking climate-altering carbon emissions. Many of the globe’s worst-governed countries today are petroleum addicts. Azerbaijan, Saudi Arabia, Iraq, Chad, Libya, Equatorial Guinea – the list is long. Political scientist Terry Karl argues that oil-dependent countries ‘eventually become among the most economically troubled, the most authoritarian, and the most conflict-ridden in the world’. Oil wealth not only poisons democracy, entrenches corrupt élites and worsens inequality – it also hobbles the state.

Whether it is expanding oil palm plantations in Sierra Leone or new coal mines in Mozambique, the extractive industry faces stiff opposition from local communities

In the late 1970s, there was an attempt to organize ‘producer cartels’ so commodity-dependent countries could control supply and thus stabilize market fluctuations. OPEC is one of the few remaining producer cartels still standing. This was tied to the creation of a New International Economic Order which would include ‘international commodity agreements’ and a price stabilization mechanism called the ‘common fund’. But with the rise of neoliberal economics in the 1980s, and the faith in markets über alles, this intervention was dismissed as ‘inefficient’ meddling. The debt crisis of the 1980s led to ‘structural adjustment’ agreements, which in turn killed national commodity marketing boards and gutted international commodity agreements.

Markets were deregulated; prices fluctuated wildly. In addition, neoliberal ‘reforms’ led to privatization of state-run mining companies and discredited government involvement in commodity production in general. This opened the floodgates to private investment in resource industries across the globe – which is more or less where we are today. With investment barriers shattered and demand booming, the extractive industries are blanketing the world in search of new opportunities, often in so-called ‘frontier markets’ far from major cities.

Corporate smokescreen

Could this surge be an opportunity to turn the ‘resource curse’ on its head? Oxford’s Paul Collier believes the world’s hunger for raw materials will continue and that countries blessed with natural resources need to get smart. The challenge, he suggests, is how to use this wealth as a springboard for future development. Collier and others are working on a Charter of Natural Resources to manage the relationship between citizens, producer states and private companies with the goal of turning it into a legally binding international convention. There is also the World Bank-backed Extractive Industries Transparency Initiative (EITI) run by a coalition of governments, NGOs, companies and investors, launched more than a decade ago. The EITI is supposed to ensure ‘transparency in how a country’s natural resources are governed’ and ‘full disclosure of government revenues’. So far it has been little more than a smokescreen for corporations and states to pursue at breakneck speed their own pro-mining agenda.

Resource-dominated economies: Ratio of Commodity Exports to Total Merchandise Exports, by region, 2009-10 average

UNCTAD, SPecial Unit on Commodities

Nations as diverse as Norway and Botswana have shown there are alternatives. Norway has managed to squirrel away more than $905 billion in its sovereign wealth fund – a state-owned vehicle which collects taxes from oil and invests in stocks. Seventy per cent of Botswana’s income is from diamonds but the country stands in stark contrast to its African neighbours, channelling mining income into education and healthcare. But it wouldn’t be that way had Botswana not played hardball with diamond giant De Beers. Resource-rich states need a balanced approach – but first they need full value for their natural gifts. After all, resources in the ground are not about to disappear.

But perhaps that is the point. Whether it is expanding oil palm plantations in Sierra Leone or new coal mines in Mozambique, the extractive industry faces stiff opposition from local communities. Citizens under threat are refusing to accept the steep cost of ‘development’ – a price calculated in fractured communities, human rights violations, flattened forests, poisoned land, polluted water and loss of self-determination. The London Mining Network and Mining Watch Canada are just two organizations that have painstakingly documented the death and destruction visited on the planet by the resource industry over the past decade.

According to Gaia Foundation Director Liz Hosken, ‘mining is invading indigenous territories, protected areas, World Heritage Sites and fragile ecosystems around the world at an alarming rate. Nothing is safe in the face of this assault.’6

In response, local communities are standing up to this violence and intimidation, opposing a model that destroys the environment and their right to live in the way they choose. There has even been a new word coined to capture this resistance: ‘Yasunization’ – derived from Ecuador’s failed plan to ‘keep the oil in the soil’ in Yasuní National Park, an Amazon rainforest region of breathtaking biodiversity. According to the consortium of environmental justice groups, EJOLT, Yasunization is a concept that ‘questions economic growth, fossil-fuel dependency and climate change’ while ‘conserving nature, community ways of life’ and ‘protecting human rights and the rights of nature’.7

This may sound fanciful, maybe even naïve. But it is already happening. From the Peruvian Amazon to the boreal forests of northern Canada, people are beginning to say ‘no’ to a model of progress that appears more bankrupt and destructive with each passing day.

‘Yasunization?’ Better add it to your dictionary.

  1. ‘Commodities and Development Report, 2012’, UNCTAD..

  2. ‘African commodities bonanza still not financing sustainable development,’ African Arguments, 13 September 2013..

  3. ‘One thing leads to another: Promoting industrialization by making the most of the commodity boom in Sub-Saharan Africa,’ Morris, Kaplinsky & and Caplan. commodities.open.ac.uk/discussionpapers.

  4. 'Commodities and Development Report, 2012’, UNCTAD..

  5. ‘Inside the clash for Congo’s mineral wealth,’ Geoffrey York, The Globe and Mail, 30 November 2012..

  6. ‘Call to respect no-go areas and set boundaries for the extractive industries’, GAIA Foundation press release, 20 December 2012..

  7. ‘Towards a post-oil civilization: Yasunization and other initiatives to leave fossil fuels in the soil’, EJOLY Report No 6. ejolt.org/reports.

Podcast: Wayne Ellwood on co-ops

new Internationalist co-operatives magazine cover. Issue 454

Around the world more than a billion people are involved in co-operatives – as members, customers, employees or worker/owners. Co-ops employ 100 million people worldwide – considerably more than multinational corporations – but they do it in a way that is sustainable, ethical, and democratic. This month's New Internationalist magazine celebrates the UN Year of co-operatives.

In this podcast, New Internationalist co-editor Wayne Ellwood discusses why co-ops present such a compelling alternative to the crisis in growth and the global economic slump. He lists some beautiful examples of how co-ops are making the world a better place, empowering people to take control of their own affairs, and keeping profits in the community. He also gives an insiders' view of the workings of one co-operative that most of our listeners will be familiar with – New Internationalist itself!



Big Thinkers on Co-operation

Illustration by Alan Hughes

Robert Owen (1771-1858)

‘There is but one mode by which man can possess in perpetuity all the happiness which his nature is capable of enjoying – that is by the union and co-operation of all for the benefit of each’

The Welsh industrialist is seen as the father of the modern co-op movement.
He made his fortune in cotton but after witnessing the horrific poverty and suffering caused by early capitalism, Owen had a different plan – ‘villages of co-operation’ where people could work and live together in a sharing, humane environment. He was a true radical, attacking the family, private property, the market economy and organized religion, and reviled the notion of consumer co-ops. ‘Joint stock retailing,’ he said, ‘will not form any part of the arrangements in the New Moral World.’
He launched his co-operative experiment at his textile factory in New Lanark, Scotland on the banks of the River Clyde. It was a success – eventually 2,500 people, including 500 children, lived in Owen’s cotton mill village, many from the slums of Glasgow and Edinburgh. He then tried, unsuccessfully, to start similar communities in Orbiston, Scotland and in New Harmony, Indiana. Co-operation, he reckoned, would lead to financial independence and self-government, while competition and capitalism would eventually fade, leading to a classless society.

Illustration by Alan Hughes

Friedrich Wilhelm Raiffeisen (1818-88)

‘When you help others, you help yourself’

German entrepreneur Friedrich Raiffeisen was a fervent Christian of modest background and little education.
He served in the military and then ran for mayor of several small towns before starting a cigar factory and a wine business. When he was mayor of Flammersfeld in 1847, the desperate poverty and precarious finances of local farmers struck a chord. Many of them were ex-serfs recently freed from bondage, forced to take high-interest loans from loan sharks.
During the famine of 1846-47, Raiffeisen solicited donations to buy flour and distributed bread to the poor. Eventually, his ideas about self-help led to the first rural credit union in 1854. Members would pool their savings, and buy shares in the enterprise, to help each other rather than rely on outside capital from private banks or loan sharks. Raiffeisen convinced farmers to show solidarity and proved that poor people were credit worthy. By 1913, over two million Germans were members of credit unions, mostly in small communities. The concept quickly spread to Canada, the US and other European countries. Today, an estimated 186 million people in more than 100 countries belong to credit unions.

Illustration by Alan Hughes

Peter Kropotkin (1842-1921)

‘The lesson of evolutionary history is that it will be through conservation, interaction and networking, not domination, that we avert a premature end to our species’

The Russian naturalist, philosopher and anarchist was a prolific writer and brilliant thinker with wide-ranging interests.
In 1902, Kropotkin argued in Mutual Aid: A Factor of Evolution that species survived where the individuals co-operate. Co-operation, he said, is both beneficial and essential to human society.
‘The animal species, in which individual struggle has been reduced to its narrowest limits, and the practice of mutual aid has attained the greatest development, are invariably the most numerous, the most prosperous, and the most open to further progress. The mutual protection which is obtained in this case, the possibility of attaining old age and of accumulating experience, the higher intellectual development, and the further growth of sociable habits, secure the maintenance of the species, its extension, and its further progressive evolution. The unsociable species, on the contrary, are doomed to decay.’
A century later, biologists and zoologists were noting many instances where real animals – bees, birds, ants and even microbes – were co-operating.

Illustration by Alan Hughes

Lynn Margulis (1938-2011)

‘Life did not take over the globe by combat, but by networking’

In 1966, when she tried to publish her paper on evolutionary changes in single- cell micro-organisms, the leading science journals wouldn’t give Lynn Margulis the time of day.
Eventually, of course, she was published and her research changed the course of evolutionary theory. Margulis, who taught geoscience at the University of Massachusetts, argued that co-operation takes precedence over competition in evolution. She did it by looking at evolutionary changes in single-cell creatures billions of years ago, rather than at fully formed species.
The way to evolutionary success, she argued, was through symbiosis, where simple cells merged to form new higher order creatures. Organisms that are mutually beneficial become one, and then reproduce. This hypothesis challenged the prevailing belief that random mutation was the driving force of evolution.
‘Far from leaving micro-organisms behind on an evolutionary ladder, we more complex creatures are both surrounded by them and composed of them. New knowledge of biology alters our view of evolution as a chronic, bloody competition among individuals and species... Life forms multiplied and grew more complex by co-opting others, not just by killing them.’

Illustration by Alan Hughes

Elinor Ostrom (1933 - )

‘There is no reason to believe that bureaucrats and politicians, no matter how well meaning, are better at problem solving than the people on the spot, who have the strongest incentive to get the solution right’

This political scientist from the University of Indiana was awarded the 2009 Nobel Prize in economics in the wake of the global financial meltdown.
Talk about timing. While mainstream economists believed that self-interest was paramount, Ostrom found that co-operation is often key to managing common resources successfully. Greed, in other words, is not always good.
Back in 1968, Garrett Hardin argued in The Tragedy of the Commons that shared resources tend to be over-exploited and eventually destroyed. Ostrom proved the opposite. She showed how shared resources like water, fish stocks, pastures and forests could be well managed by groups. According to the Nobel committee she ‘challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized’.
Ostrom’s work shows that people can work together to get things done for the common good. That’s an important lesson today when so many of humankind’s most pressing problems – from global warming and air quality to aquifer depletion and global pandemics – need to be tackled collectively. Looks like the commons doesn’t have to end in tragedy after all.

Illustration by Alan Hughes

David Sloan Wilson
(1949 - )

‘Selfishness might beat co-operation within groups, but co-operative groups beat selfish groups’

Is co-operation the critical driving force in nature? David Sloan Wilson thinks so.
His ideas counter the bio-determinists’ claim that humans are selfish competitors driven by greed and self-interest. Wilson is a professor of biology and anthropology in Binghamton, New York. His notion of ‘co-operative evolution’ based on ‘multi-level selection’ is still hotly contested in some academic circles, but is gaining ground quickly.
His theory considers the action of natural selection but at a group level, both between and within groups.
‘For decades we have been told that evolution is based entirely on individual and genetic self-interest, which does not extend to groups. Is it any wonder that we have produced countless business leaders, financiers and politicians for whom the selfish pursuit of self-interest is a natural law and a maxim to live by? The truth is that individuals can evolve to behave for the good of their groups and that co-operation is the signature adaptation of our own species. Selfishness might beat co-operation within groups, but co-operative groups beat selfish groups.’

Can co-operatives crowd out capitalism?

This special report was published in the July/August edition of the New Internationalist on co-operatives. Buy this issue or subscribe from just £7

In the eyes of the mainstream media and the high priests of the free market, Argentina just doesn’t get it. This past May, the country was savaged by the international business press for nationalizing the Spanish-owned oil company, YPF. Scarcely mentioned was the fact that Argentina’s oil and gas industry was only ‘privatized’ in the late-1990s under pressure from the International Monetary Fund (IMF) and other hardline enforcers of then fashionable neoliberal economic policies. Like many countries around the world, Argentina’s oil industry used to be state-owned.

Back in 2001, the knives were out again. After years of enforced austerity and ‘structural adjustment’ the resource-rich South American country was awash in debt, crippling inflation, staggering unemployment and negative economic growth. (Notice any parallels with present day Greece and Spain?) The IMF’s prescription for setting the economy right – ‘flexible’ labour conditions, deregulation, loosening of capital controls, privatization of state-owned assets, devaluation of the national currency – only made things worse.

Skilled and in control: an Argentine co-op member thins dough for tarts at a recovered bread factory in Buenos Aires.

Andres Lofiego/ Majority World

With inflation raging and tens of thousands of workers on the streets, the government finally called it quits, defaulting on its debt and devaluing its currency. Predictably, the kingpins of global finance went ballistic, warning that Argentina would sink into penury and chaos.

It didn’t happen. Over the next decade the country’s GDP grew by nearly 90 per cent, the fastest in Latin America. Poverty fell and employment rose steadily while government spending on social services slowly increased.

Many factors contributed to this astounding turnaround, including the determination of Argentineans to strike an independent economic course not reliant on the whims of foreign capital.

But a significant part of its success is rooted in Argentina’s rich history of co-operatives. Waves of Jewish and Italian immigrants brought the co-operative vision with them during the early 20th century. Co-ops were well established, especially in agriculture, prior to the financial and political meltdown in 2001. According to the International Co-operative Association (ICA), nearly a quarter of the South American country’s 40 million people are linked directly or indirectly to co-operatives and mutual societies.

‘So when the national economy collapsed and the country's business class started to bail out... the workers had a better idea’

So when the national economy collapsed and the country’s business class started to bail out, abandoning factories and stripping assets, the workers had a better idea. They decided to form worker co-ops and run the factories themselves. The movement became known as las empresas recuperadas (recovered companies). You can see the background to the Argentine crisis and the story of one such takeover in Avi Lewis’ and Naomi Klein’s inspiring documentary, The Take.

It was by no means an easy road. One estimate put the number of factories around Buenos Aires abandoned by their owners at close to 4,000. Argentina was a country steeped in decades of corrupt, clientalist politics and ‘I’m-all-right-Jack’ trade unionism. Democratic ownership, the workers taking control, running their own factories as co-operatives, was a stretch. How to re-engineer a top-down system of traditional management where employees defer to authority in an adversarial workplace? The psychological shift alone was daunting. But desperate times can bolster resolve. Against all odds, including belligerent bosses, intransigent owners and reluctant bureaucrats, the idea took hold.

Today, there are more than 200 ‘recovered’ co-operative factories in Argentina – up from 161 companies in 2004 – providing jobs for more than 9,000 people. Most are smallish, which means the hands-on approach is a little easier to manage. Three-quarters of the firms employ fewer than 50 workers, though two per cent have more than 200 employees. They are scattered across a range of industries from shoes and textiles to meatpacking plants and transport firms.1

What began as a brave experiment after the economic collapse of 2001 has become a vibrant and stable part of the economy. According to University of Buenos Aires researcher Andrés Ruggeri: ‘The workers learned that running a company by themselves is a viable alternative. That was unthinkable before… These are workers who have got back on their feet on their own.’2

As in Argentina’s 2001 crisis, the co-operative spirit often emerges when times are toughest, in the midst of economic collapse and social disintegration, when people are searching for alternatives. A little history is instructive.

Radical thinkers

Weavers formed the first documented co-operative society in 1769 in Fenwick, Scotland. But the modern co-op movement really began with the Rochdale Society of Equitable Pioneers in December 1844. As the Industrial Revolution rolled across Britain, a menacing, muscular form of capitalism was remaking the country from top to bottom. Thousands of workers lost their jobs to the new steam-powered machines; the cities were flooded with unemployed; poverty and illness soared as the skies blackened; men, women and small children worked 70 hours a week in life-threatening conditions in the booming mills and factories.

Co-ops put people at the centre of decision-making.

Stringer/Reuters

Across Europe, radical thinkers sparked opposition to the ravages of this new industrial capitalism. Proudhon, Fourier, Owen, Marx and Engels all argued for a social and political order where people would come before profit and where co-operation would trump competition. In Rochdale, a bustling mill town north of Manchester, 30 citizens including 10 weavers pooled their savings and opened a tiny shop selling candles, butter, sugar, flour and oatmeal. By combining forces they were able to afford basics they could not normally buy. Soon they were also selling tea and tobacco. It was a success and an inspiration that gave birth to a new movement. In the next half-century co-operatives and credit unions spread through Europe and around the globe.

According to the ICA, more than a billion people are now involved in co-operative ventures – as members, customers, employees or worker/owners. Co-operatives also provide over 100 million jobs – 20 per cent more than multinationals. There are producer, retail and consumer co-ops and they’re spread across every industry. Members may benefit from cheaper prices, friendly service or better access to markets but, most importantly, the democratic structure of co-operatives means members are ultimately in charge. A core principle is ‘one member, one vote’. It’s that sense of control that builds social capital and makes co-operatives such a vital source of community identity. Profits might be reinvested in the business, shared among members or channelled to the local community. Because they exist to benefit their members, rather than to line the pockets of private shareholders, co-operatives are fundamentally more democratic. They empower people. They build community. They strengthen local economies.

The stunning success of the co-op movement is reason enough to celebrate 2012 as the UN’s International Year of Co-operatives. But the timing is propitious for other reasons. We’re living with an economic system that is producing vast wealth for the few at the expense of the majority. The model is broken and the damage to people, communities and the natural world is growing. In the aftermath of the great financial meltdown of 2008 and the continuing instability of the global economy there is an urgent need – and a deep yearning – for balance and equality. The search for alternatives has never been more urgent.

As US social critic and author Chris Hedges has written: ‘The demented project of endless capitalist expansion, profligate consumption, senseless exploitation and industrial growth is now imploding.’3

Old orthodoxies hold firm

And so it is. But not gracefully. The owners of capital are unlikely to cede power willingly. The Occupy Movement struck a powerful chord and new research underlines the notion that social ills are rooted in inequality. Income gaps weaken society and make things worse for everyone, not just the poor. ‘It’s what they’re yearning for out there on the streets of the Occupy Movement – to have some active engagement in their community and in their economy, ’ says Dame Pauline Green, president of the ICA. ‘That’s what they want.’

Yet inequality is growing almost everywhere and those in power refuse to do anything about it. In the US, where belief in free markets reigns supreme, the incomes of the richest 1 per cent of Americans grew 58 per cent from 1993-2010 while the rest rose just 6.4 per cent.

‘Members may benefit from cheaper prices, friendly service or better access to markets but, most importantly, the democratic structure of co-operatives means members are ultimately in charge’

Against reason, science and empirical evidence, the old orthodoxies hold firm: ‘The market will sort things out. Economic growth will be our salvation. Technology will save us.’ Yet people sense there is something wrong even if they can’t quite identify the problem. Middle-class budgets are stretched. Young people can’t find meaningful work or affordable housing; the ranks of the poor are growing; social services are pared back while the welfare state is dismantled. People have lost faith in big government, big banks, big business, Wall Street and the City of London. Karl Marx wrote of the dislocating social upheaval of his time that ‘all that is solid melts into air’. It is just as apt today.

A central part of what’s missing is economic democracy. As corporate critic Marjorie Kelly notes: ‘Our politics and economy are so intertwined that imbalances in wealth and ownership have eroded our political democracy. To fix this we need to democratize the economic aspect of sovereignty.’4

‘We can no longer afford the free-market shenanigans of the past decade, the freewheeling state-capitalist Chinese model or the dead hand of traditional communism’

Without overstating the case, co-operatives can help do precisely that. They offer a way to democratize ownership and to counter the divisions and inequalities of the market economy. The co-op model is a challenge to the hyper-competitive, winner-takes-all model of corporate capitalism. Co-operatives show there is another way of organizing the market where profit is not the sole objective and where, theoretically, fairness is institutionalized and people are at the centre of decision-making.

But can co-ops actually ‘crowd out capitalism’? University of Wisconsin sociologist Erik Olin Wright believes they can play a vital role in expanding democratic space. Co-ops help rebuild the public sphere and create a wedge between the market and the state. Wright talks of a ‘symbiotic’ transformation where co-ops spearhead a wider democratic surge to help bolster civil society and put down roots in the cracks of the existing system.

People over capital

Co-operatives can be a community anchor and they can revitalize the local economy. When the Fonderie de l’Aisne in Trelou sur Marne northeast of Paris was threatened with closure, a group of 22 former workers came up with a bold plan. They bought the factory and reopened it as a co-operative. Now they run the place themselves. The workers are ‘really motivated and provide solutions to problems,’ says manager Pascal Foire. ‘We work for ourselves and for our own future.’

But for co-ops to really tip the balance, Wright points to the need for some key policy changes. These include access to publicly financed credit markets at below-market rates (to solve the problem of under-capitalization) and more ‘cross-subsidizing and risk pooling’ between co-ops themselves.

There is no question that mutual support works. The massive Mondragon Co-operative, a $23-billion global operation in Spain’s Basque region, is a case in point. Of the group’s 270 component companies, only one has gone out of business during the current Spanish crisis. And all these workers were absorbed by other co-ops.

Co-operative by nature

Despite Mondragon’s success we live with an economic system that is inimical to the spirit of co-operation. Competition and efficiency are its watchwords. You could even say it is systemically unco-operative, based on individuals operating in their own self-interest. The rightwing icon Ayn Rand mythologized unbridled capitalism as the pinnacle of freedom but it was Margaret Thatcher, in her attack on the ‘nanny state’, who put it most baldly way back in 1987 when she said ‘there is no such thing as society’. Mrs Thatcher’s current heir in Westminster, David Cameron, is both more cynical and more devious. His ‘Big Society’ formulation calls on citizens to pick up the pieces after the state withdraws from the provision of social services. Help each other because you’re on your own. In the end the vision is the same.

Recent thinkers argue that biology and evolution prove we are natural co-operators.

Jorge Martin

And yet we are a supremely co-operative species by nature. How else to account for our ability to survive and prosper in every corner of this planet, from the frozen Arctic tundra to the blistering Australian outback? Harvard maths and biology professor Martin Novak describes co-operation as the ‘master architect’ of evolution.

Of course, reality does not always live up to theory. Co-ops operate within market structures and must rely on human beings to make them work. The competitive market is ruthless and those who can’t compete are trampled underfoot. Co-operation can sometimes drift into co-optation. And people are... well, people – sometimes nasty, selfish, lazy, opinionated, bull-headed. While co-operation for mutual benefit is a good idea, the road may be bumpy.

In his recent book, Wired for Culture, the evolutionary biologist Mark Pagel argues that culture is made possible by social learning, which in turn depends on co-operation. Evolution allows co-operation to flourish within groups – but not necessarily between them.

‘It is our uniquely human sense of social and cultural relatedness that makes our co-operation work... we are prompted to behave well toward each other; but even slightly perceived differences can end in xenophobia, racism, and extreme violence.’5

The same drive that pulls people together can also cause them to turn on anyone different as a perceived threat. Choose your own horror. The list is endless: Stalin’s Gulag, the poisonous antisemitism in Nazi Germany, the slaughter in Rwanda, the carnage in ex-Yugoslavia. The co-operative urge, while strong and innate, does not always lead to sweetness and light. People can co-operate for bad ends as well as good. Street gangs co-operate, but so do surgical teams. Building bridges of mutual understanding and eroding both tribal and group frontiers has to be at the forefront of the co-operative vision.

A good idea takes root

Where plants are closed down, worker co-operatives can reopen them. The ‘recovered factories’ co-op movement is spreading in Latin America. There are 69 ‘recovered factories’ in Brazil, around 30 in Uruguay, 20 in Paraguay and a handful in Venezuela.

We’ve got some endgame issues facing us as a species, problems which will require us to co-operate at a global level if we are to get through the next century without catastrophe. Climate change, resource depletion, ecological collapse and galloping consumerism: these are challenges few business or political leaders have the courage to confront. The UN itself is one chequered attempt to unite the peoples of the world in a common project of peace and prosperity. It has been fraught, to say the least.

We can no longer afford the free-market shenanigans of the past decade, the freewheeling state-capitalist Chinese model or the dead hand of traditional communism. We will have to do much better.

Co-operatives can point the way towards a different kind of economic model, where people control capital and not the other way around.

A little real democracy wouldn’t hurt. ■

  1. Las Empresas Recuperadas en la Argentina, Andrés Ruggeri, Open Faculty Programme, University of Buenos Aires, 2010.
  2. ‘Worker-run factories in Argentina continue to thrive, boosting the economy and influencing workers in other countries’, Marcela Valente, IPS, 12 Nov 2010.
  3. ‘The implosion of capitalism’, Chris Hedges, Truthdig, 30 April 2012.
  4. ‘Can there be good corporations?’ Marjorie Kelly, Yes Magazine, Spring 2012.
  5. Wired for Culture, Mark Pagel, WW Norton 2012.

Your go-to guide for all things co-operative

Campaigns, conferences and resources:

Further Reading:

  • Humanizing the Economy - co-operatives in the age of capital, John Restakis, New Society Publishers, Gabriola Island, BC 2010.
  • Super Co-operators - altruism, evolution, and why we need each other to succeed, Martin Nowak with Roger Highfield, Free Press, New York, 2012.
  • Together - the rituals, pleasures and politics of co-operation, Richard Sennett, Yale University Press, New Haven, 2012.
  • Wired for culture - the natural history of human co-operation, Mark Pagel, WW Norton, London/New York, 2012.
  • The Neighborhood Project, David Sloan Wilson, Little, Brown & Co, New York, 2011.

The credit union boom

Back in 1897, Alfred Desjardins was distressed when he heard about a Montreal man forced to pay $5,000 interest on a loan of $150. Ordinary folk wanting small loans were spurned by big banks and so turned to loan sharks. Desjardins, a former journalist with a keen interest in finances, decided to do something about it. Why not start a ‘co-operative savings’ society where citizens could extend loans to each other, using their collective savings for mutual benefit?

Desjardin’s vision took off. More than a century later, the Caisses Desjardins du Québec is the largest credit union in North America and the sixth largest financial institution in Canada, with more than 5.8 million members, $172 billion in assets, 42,600 employees and nearly $80 million ploughed back into community sponsorships, donations and bursaries.

According to the US Credit Union National Association, 54 per cent of credit unions increased membership in 2011.

No doubt about it – credit unions are booming in North America since the bank-fuelled financial crisis. In most cases, membership is based on belonging to a certain profession, sharing a common workplace, or being part of the same cultural or ethnic group.

A lot of the attraction is sparked by growing disgust with the big banks’ huge profits, cavalier service, bloated executive salaries and sky-high fees.

According to the US Credit Union National Association, 54 per cent of credit unions increased membership in 2011. After the Bank of America announced it would introduce a fivedollar debit-card purchase fee, credit union membership jumped by more than 650,000 (the Bank has since cancelled the fee).

In the US, credit unions help save money because they are non-profit. They often pay better interest rates on savings, and charge lower loan and credit-card rates.

Self-help, co-operative principles and a savings and loan system owned and administered by its members? Sounds like just the ticket. Bankers, take note.

Life beyond growth

These are not normal times, that’s for sure. Stock markets swoon and the global economy shudders as politicians grapple with the sovereign debt crisis in Greece. There’s talk that the ‘contagion’ may spread next to Italy, Spain or Portugal. Maybe even France. Meanwhile, there are clear signs that ordinary citizens are no longer willing to accept the status quo.

‘Join the 99%’, the slogan of the ‘Occupy’ movement which started on Wall Street in New York and has now spread across Europe and North America, may not be a crisp policy directive. But it makes a point. There’s a growing recognition that the global economic system is rigged in favour of the wealthy, the top 1% who run the show. The super rich prosper in the midst of recession; the rest of us, not so much.

People are beginning to notice. Change is in the air.

First came the ‘Arab Spring’, which captured the attention of the world, igniting political change across North Africa and the Middle East. In tapped-out European countries citizens faced with painful austerity measures continue to stage mass public protests. There were riots in London. Chilean students took to the streets to bring attention to economic inequality and rising tuition while Israel experienced its largest demonstrations in decades when hundreds of thousands of middle-class Israelis protested high housing prices and falling living standards. Even in the two economic powerhouses of the developing world there were signs of dissatisfaction. A popular protest against corruption in India attracted millions. And in China there is mounting labour unrest and festering anger over corruption and inequality.

The global economy is again grinding to a halt while ordinary people take the hit. The ghost of the Great Depression of the 1930s hovers in the wings. So what’s the solution? Growth. A growing economy equals more jobs, rising incomes, peace and prosperity. Without growth the system would collapse. Get growth back on track and everything will be OK. That’s the theory. But no-one is talking about the biggest dilemma of all: economic growth may not be the cure but the source of the problem. After all we live on a finite planet with limited resources. How can we expect to grow forever?

The current economic situation is an opportunity for us question orthodoxies and re-examine our priorities. For a timely analysis of the growth cul-de-sac we invite you to take a look at:

Natures bottom line’, where I explore the folly of endless growth.

Oops, no brakes!’, in which Rowenna Davis speaks to zero-growth advocate Tim Jackson and Oxfam policy analyst Duncan Green about economic alternatives.

These articles first appeared in our Life beyond growth issue, published July/August 2010.


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