BOTTOM-UP CAPITALISM – THE PRESENT AND FUTURE MODE

[Jim Mller]

--As distinguished from the present and soon-to-be past mode of “Botttoms-up Capitalism”.
By Jim Miller

“Laily Begum has become famous in Bangladesh. She is the public face of those who borrowed from Grameen Bank, the microfinance institution that creates opportunities for Bangladesh’s rural poor. Begum’s face has been on thousands of posters and leaflets, promoting the benefits of microcredit.

Begum’s loan from Grameen was for a mere 500 taka (about £4 at today’s exchange rate), which at the time, 11 years ago, was enough to obtain a mobile phone. With this, Begum became possibly the first ‘village phone lady’ in Bangladesh, establishing a profitable business in letting fellow villagers make calls to sort out their business.

In fact, her enterprise was so successful that Begum has moved onward and upward, now she and her husband – a former farm labourer, living on subsistence earnings – own a row of five shops, each let to tenants, and a small apartment block. Microfinance gave the Begums the chance to move from losers to (at least in a local context) winners in the game of capitalism.”

The Paul Gosling Report
http://www.paulgosling.net/2008/09/microfinance-faces-meltdown-co-operative-news/

Now you know the secret of how really poor people get started in capital prone businesses. In Begum's case, it was a small microloan from Grameen Bank.

“The Grameen Bank has stayed true to its roots. It is a mutual organisation – owned by those (almost all women) who borrow from it. But it is now a giant institution, which owns its own skyscraper headquarters in Dhaka, has 7.5 million borrowers, over 24,000 staff, more than 2,500 branches and works in 82,000 villages. Since its first loan in 1974, Grameen has loaned $7.1bn, almost all of which has either been repaid or is being repaid. It charges interest on loans at 20%, which Grameen recognizes is not cheap, but covers its costs in collecting money in a rural environment where agents of the bank have to spend much time traveling on bicycles and mopeds over dirt roads.”
Id.

We can look into the operations of many countries and find microcredit operations, usually at the family and grass roots level. These sources are not unknown, just uninteresting to the medias. KIVA is one such organization, while receiving scant media attention, it has grown to cover most of the impoverished world, especially Africa and Latin America.

“The people you see on Kiva's site are real individuals in need of funding - not marketing material. When you browse entrepreneurs' profiles on the site, choose someone to lend to, and then make a loan, you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates and track repayments. Then, when you get your loan money back, you can relend to someone else in need.”

Kiva.org
http://www.kiva.org/about

I wrote KIVA and asked if it had a domestic U.S. Microcredit program. The answer is no, they preferred to loan in truly impoverished countries. Impoverishment is relative. Years ago, my then spouse and I sponsored a graduate student from India, Gerbachen Paul. When he arrived we toured La Jolla, CA, and showed him how our “rich folks” lived, then toured Southeast San Diego and showed him how the “poor folks” lived. His comment was that all of our poor people would be considered rich folks in India. Things are relative.

We need a domestic KIVA or some sort of “locavore” microcredit to macrocredit lending and more importantly, micro-equity to macro-equity generation. It is widely known that most of the new jobs are created by small businesses. With outsourcing, whole industries are moving out of the US – the “giant sucking sound” which Ross Perot used to describe the effects of NAFTA. Thus the hunt is on for local means of generating fresh equity capital, which can be used to match loans for the magic 1:1 ratio of equity to debt, the bankers love to fondle.

Not surprising, the English and the Irish have taken the lead in developing these new sources of funding, both equity and debt. All the while, the Americans sit in their living rooms, dumbed down by TV and wonder why the meltdown. We know that the really big, mega corporations are shedding employees at an increasingly faster rate – to keep those short-term dividends flowing and the corporate executive stock option values floating up on a tide of increasing national, corporate, institutional, and personal debt. China buys 1.1 billion dollars as day of U.S. debt. Billions more are drained off to pay for our gluttony of “cheap” oil (not so cheap anymore). You know the story and I digress.

The London Accord
“The London Accord is a collaboration between investment banks, research houses, academics and NGOs to produce free research on climate change for financial investors. It is intended as an reference guide for investors in the climate change sector.

The London Accord is significant in that it is the largest cooperative project in the world on investment opportunities in avoiding climate change(about 7 million UK pounds). [1] (It is also significant in being a non government-funded initiative).

The London Accord was launched in March 2007 [2] and published its results on 19th December, 2007 launching them at a roll out meeting at Mansion House in London. These findings are freely available from its website.”

http://en.wikipedia.org/wiki/The_London_Accord

The Cooperative Bank

“The Co-operative Bank Plc is a commercial bank trading in the United Kingdom with headquarters in Manchester, England. It is an ethical bank, and refuses to invest in companies involved in the arms trade, global climate change, genetic engineering, animal testing and use of sweated labour as stated in its ethical policy. The ethical policy was introduced in 1992.[1] In 2002 the Co-operative Group brought the bank and Co-operative Insurance Society under the control of a newly incorporated holding society, Co-operative Financial Services Limited.”

http://en.wikipedia.org/wiki/Co-operative_Bank

The SHARE lending program

“Judged by standardized financial criteria, small businesses receiving collateral support through the SHARE program are high risk undertakings; but to the local SHARE member/depositor who knows the character of the borrowers and can experience first hand the quality of their products - the investments are sound.

The SHARE program of the Southern Berkshire region brought a human face back into lending decisions. Members of SHARE pointed to Rawson Brook goat cheese or Jim's draft horses, or Marty's Washing Machine Repair Service, or Bonnie's wool-knit tights and sweaters for children and knew where their savings were at work.”

The E. F. Schumacher Society; http://www.schumachersociety.org/

Local currencies are becoming a popular method of promoting “locavore” sales to a local population which understands that it is better that the incoming money from outside or earned locally should “turn” seven times before it leaves the community (as it does in San Diego with tourist dollars), rather than turn once or twice before it leaves (as in most Indian Reservations).

“BerkShares (www.berkshares.org) are a local currency for the Southern Berkshire region of Massachusetts. They were issued on September 29, 2006 by BerkShares, Inc. BerkShares are exchanged for federal dollars at participating regional banks and circulate at a wide variety of local businesses. View television coverage of BerkShares by clicking here, and other international, national, and regional news coverage by clicking here.”
The E. F. Schumacher Society
http://www.schumachersociety.org/local_currencies.html
Corvallis, OR, has its own fledgling form of local currency, issued by the Hour Exchange at the rate of roughly ten USD per hour of work or value of property exchanged.
“WHY ARE THEY CALLED HOURS?
They are called HOURS to remind us that the real source of money's value is created by people -- our time, skills, and energy. The One-HOUR to $10 equivalence is based on the fair average hourly wage for Benton County. By encouraging people to think about the value of everyone's time, HOURS help bring equity to work. “
The Hour Exchange; http://www.hourexchange.org/drupal/node/5
My own version of local currency depends on and is tied to the intrinsic and extrinsic value of metal, mostly copper and nickel. Both of these metals are generally available as scrap, can be stored in 4 x 4 x 4 compacted cubes and can readily be exchanged for any of the major world currencies. The metal is obtained in exchange for USD and rise and falls, not as the USD rises or falls, but according to demand for the mostly the intrinsic value (what can be made from the metal). It goes like this:
“So....., how do we “localize” our economy, our collective decision making, and our local sustainability? First we plan, then gather the physical and human resources, hit the start button, and get underway. Governments are mired in planning, “paralysis by analysis”. Like the generals, they are are always planning to fight the next war with ideas and tools used to fight the last one.”
LOCAL CURRENCY + LOCAL ECONOMY = LOCAL SUSTAINABILITY
-- The formula for local failure is to give your purchasing power over to the Boards of Directors of the Nation's mega-corporate empires.
By Jim Miller
http://algaloildiesel.wetpaint.com/page/LOCAL+CURRENCY+++LOCAL+ECONOMY+=+LOCAL+SUSTAINABILITY?t=anon

We need to move (transition = change, a “dirty word” to some) to a different economic basis, that of low energy input and moderate output. We need to depend more on ourselves rather than the flood of consumer and industrial goods from Asia, especially China. That basis is the “locavore” basis. Keep the money here and the home fires burning. Why “burn” your money in New York, Chicago, London, LA or SF? Why not let a “green, local company” have a better existence and become more sustainable? We need our own “locavore credit union”.
We need to fund our local enterprises, both small and medium size, with locally derived funds. We need both debit and equity funding. In short, we need to become sustainable on a local basis. The alternative is stagnation, inflation, devaluation of the USD (the “dollar”), continual shipping of jobs and resources off-shore and increasing poverty in America. We need to stabilize on a local basis to become more sustainable.
“There are, at the local level, many hopeful signs that a shift toward sustainability is beginning. But there are also many discouraging signs that large political and economic institutions will resist change in that direction. Seeing the latter signs and the immensity of the challenge before us, we can easily drift into discouragement and inaction. Is it too late? Are recommendations for a peaceful energy transition hopelessly unrealistic?
Am I being fatalistic? Or simply realistic? Our cultural obsession with good news, promises, and hope is humanly understandably, but there comes a time when the best thing to do is to accept that a bad situation has developed and find intelligent ways to manage it.”
-- Richard Heinberg. The Party's Over – Oil, War and the Fate of Industrial Societies, p. 236.
I hope our locavore party has just begun.
Jim Miller
[e-mail]
October 25, 2008