Beyond the Economic Crisis

What does the solidarity economy actually have to offer in the context of the current economic crisis? Let’s look at three areas that were involved both in bringing about the crisis and that are now in crisis: housing, finance and jobs.

First, let’s consider how they contributed to the crisis:

- Stagnant wages combined with easy credit and rising consumer expectations set the scene for  skyrocketing consumer debt.

- Speculation drove the housing bubble, as people believed, or were tricked into believing that house prices would continue to rise indefinitely. This was presented as a good strategy of asset and wealth accumulation even for poor people.

- Speculation also fueled the reckless mortgage lending, financial ‘innovation’ and general feeding frenzy in the financial industry which has grown as a share of the GDP to historic levels.

What is to be done? One option is to re-regulate, raise wages and rein in the financial industry – very similar to the response to the Great Depression. But memories are short and this will probably just lay the groundwork for the same thing happening in another 50 years, or less, given the increasing volatility of global financial markets.

What are solidarity economy solutions that can put us on a path to recovery that doesn’t set us up for yet another round of boom and bust? Here are some successful strategies in the three critical areas of housing, finance and jobs.

Taking the speculation out of housing: Community Land Trusts (CLTs) are non-profit organizations that create permanently affordable homes by taking housing out of the speculative market. Here’s how it works: the CLT owns the land and leases it to the homeowner for a nominal sum. The homeowner pays for the home, not the land. In Vermont, the homes in the Champlain Housing Trust are typically half the price of a comparable open-market unit. Owners can sell their houses at a fair rate of return, but it’s capped in order to maintain permanent affordability.

A study conducted in December 2008 showed thatforeclosure rates among members of 80 housing trusts across the United States were 6 times lower than the national average.[1]Community land trusts have been growing rapidly. In the last seven years the number of CLTs doubled from around 100 to 200 throughout the country. In the wake of the disastrous boom and bust of the housing market, this a model whose time has come. We should demand that the government channel public resources in expanding CLTs throughout the country.

Finance for need not greed

Community Development Financial Institutions (CDFI) work for economic development in poor communities that are under-served by traditional banks. The CDFI’s have been doing sub-prime lending to people and enterprises that wouldn’t qualify for a traditional loan because they would be considered to be too risky. They take these risks in order to nurture community economic development and still outperform traditional financial institutions. To take one example, among the 200 credit unions in the National Federation of Community Development Credit Unions, which serve predominantly low-income communities, delinquent loans are about 3.1 percent of assets compared to a national delinquency rate on sub-prime loans of 18.7 percent. This impressive track record is due to responsible lending and various kinds of advice and support provided by the Credit Unions.

Green Jobs and economic democracy

Green jobs, yes. But let’s also use this opportunity to create green jobs that are also good jobs. By good jobs we mean ones that with decent pay and benefits, worker participation and satisfaction, and stability. Research on worker owned cooperatives and ESOPs (employee stock ownership programs)  shows that worker ownership improves outcomes on all of these fronts.[2] While ESOPs are more widespread, worker cooperatives have a stronger built-in commitment to workplace democracy, worker ownership, and  support for the welfare of the local community.[3] There’s already a pressure from labor and community activists to ensure that poor people and people of color are able to access green jobs. The ILO (International Labor Organization) recognizes that cooperatives are particularly well suited for creating green jobs in marginalized communities.[4] Cooperatives currently provide over 100 million jobs around the world, 20% more than multinational enterprises.

[1]“Community land trusts lower risk of losing homes to foreclosure,” National Community Land Trust Network, 3/17/09,

[2]  “Effects of ESOP Adoption and Employee Ownership” Steven F. Freeman, Univ. of Penn., working papers/2

[3] “Statement of Co-operative Principles,” International Co-operative Association,

[4] See ILO slideshow on Climate Change and the Role of Cooperatives