Posted by: davenlu | July 5, 2011

Pope Benedict XVI argues for new business models

In his latest encyclical, Charity in Truth, Pope Benedict XVI expresses concern with the functioning of the global economy and its overemphasis on profit at the expense of human and community needs. “Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value.” (40) The Pope’s solution to this situation is not only government regulation of businesses, but the creation of new business models where human and community effects are considered as a fundamental part of the bottom line. In many ways, he describes alternative businesses that are part of the rapidly expanding solidarity economy.

Pope Benedict writes, “Profit is useful if it serves as a means towards an end… Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.” (21) It is clear that, “Economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good” (36 – emphasis in original)

He also points out how merely relying on governments to make the economy more equitable is no longer enough:

“Perhaps at one time it was conceivable that first the creation of wealth could be entrusted to the economy, and then the task of distributing it could be assigned to politics. Today that would be more difficult, given that economic activity is no longer circumscribed within territorial limits, while the authority of governments continues to be principally local. Hence the canons of justice must be respected from the outset, as the economic process unfolds, and not just afterwards or incidentally.” (37)

Throughout the world millions of people involved in grassroots initiatives work every day to create an integrally just economic system through the formation of businesses in which workers are co-owners and/or are involved in making business decisions. These new forms of businesses are also committed to environmentally sustainable practices.

Worker cooperatives, employee stock ownership plans, community land trusts, community development corporations, municipal enterprises, local currencies, community development financial institutions, state banks, social enterprises and “B” corporations are but some of the examples of these new business models that aim to “apply justice to every phase of their economic activity.” To learn more about these alternative business models, see www.community-wealth.org.

The city of Cleveland is a good example of how these businesses can work together to provide good livelihoods and a stable local economy. A traditionally industrial town, Cleveland has been heavily affected by globalization seeing corporate leaders move huge portions of its industries overseas in order to take advantage of lower wages and weaker environmental, and other, regulations. The result was massive deindustrialization, skyrocketing unemployment and urban blight. To rebuild their local economy, city leaders decided to focus on “anchor industries” as the center of an economic renaissance.

Hospitals and universities are large institutions that are unlikely to be “offshored” like manufacturing industries. By establishing local businesses to supply these anchor industries, they were able to create more secure jobs in poorer neighborhoods in the city. They began with a laundry cooperative to supply a number of hospitals and have added workers cooperatives that install solar panels in these anchor institutions and retrofit buildings to be more energy efficient. They are also starting an urban garden run by a workers cooperative that will supply food to the anchor institutions.

Without siphoning off money to pay exorbitant CEO incomes and corporate dividends, workers in cooperatives tend to make higher incomes while also building up equity ownership accounts worth tens of thousands of dollars – for many of the workers, the first time they have had any significant savings. And being co-owners of the business, they are more likely to stay on the job, creating much more stability in previously precarious neighborhoods.

Most participants in these alternative businesses would agree with Pope Benedict that “Without internal forms of solidarity and mutual trust, the market cannot completely fulfill its proper economic function” (35) and that, “What is needed, therefore, is a market that permits the free operation… of enterprises in pursuit of different institutional ends. Alongside profit-oriented private enterprise and the various types of public enterprise, there must be room for commercial entities based on mutualist principles and pursuing social ends to take root and express themselves.” (38)

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