SOLARI: Illuminating The Local Economy

My lifelong passion has been about recreating a deeper sense of community, the relationships on many levels that contain the true richness of life. It meant protecting the Earth, caring for one another in a way that guarantees the dignity of all of humanity, and cultivating the inner relationship to a higher power that defines absolute freedom. Money had played a very small role in this journey, but came front and center a little over a year ago when I heard a talk given by astrologer Caroline Casey and Catherine Austin Fitts. The title of the presentation was Magic and Money. I wasn’t quite sure what to expect but had been deeply inspired by a talk given by Caroline at the previous year’s Bioneers conference. Catherine is an internationally recognized investment banker, and was the former Assistant Secretary to HUD under Bush I. She refers to herself as a recovering Republican. It was an interesting juxtaposition in worldviews as she and Caroline, an elfin, pagan interpreter of symbols and mythos, stood on stage together, and yet the combination was dynamic and perfect.

Caroline drew in those who didn’t want anything to do with the system and Catherine gave credibility to what might be perceived as ungrounded. Catherine spoke on how our money is being used in the larger system. She said that if the thousands of people who had gone out on the streets in protest over an impending war against Iraq had pulled their money out of Citibank, or similar institutions the same day, the government would have listened. I knew that she was right. As it was we, the concerned and active citizenry of this “democracy” were being completely discounted and there was a deep sense of despair over the current state of affairs. She went on to say that when the government looks at antiwar protesters they discount the protester’s words in deference to their actions, and what most people are voting for with their money is in line with the government’s policies, or business as usual. I am adamant that I don’t adhere to the same value system as those in power. However, my lack of understanding about how money works beyond the basics I need to operate my own life, has by default conceded my power to others who are all too happy to run the show.

In the book, Secrets of the Temple: How the Federal Reserve Runs the Country, William Greider theorizes about what brought about a collective dumbing down of the U.S. citizenry around how money works and who controls it. “The confusing economic language employed by the Fed made it easier for citizens to block out the money question–to accept instead the powerful mystery. This was odd but nonetheless true: in a great democracy, where political power depended upon information and every interest clamored for it, the American culture had repressed the knowledge of money. There is no other way to describe the mass ignorance or explain it except as a collective blocking out. . .. The general ignorance created its own political imbalance, enhancing the influence of the small minority who did understand the subject and cared most intensely.”

Greider also suggests this denial around money accompanied the move of self-reliant farmers to the cities during the industrial revolution. There was a kind of faustian bargain that was struck in the relinquishing of their connection to the land, and with it the access to a larger context of life, for material gains and a perceived security through a regular paycheck. This wound to the spirit then created a silent agreement that the source of the money, or how the system operated, would not be talked about so long as one could continue to soothe a sense of the loss of deeper meaning with material comforts.

Although Catherine spoke of the bad news about where we are at in her presentation that night, she also came with a solution and she called it, Solari, meaning to reduce anxiety through illumination. Solari is an economic model for revitalizing communities by brining our money home and investing it locally. Catherine’s creation of this model came after being let go from HUD when she proposed a system of transparency for tracking the flow of money. After leaving HUD, Catherine’s firm, Hamilton Securities Group, Inc., developed a piece of software called Community Wizard to assist communities in tracking money locally, as a way of putting power back into the hands of the average citizen. That software, and all of the firm’s computer equipment, were seized by the government and destroyed, along with other actions against her firm. The following year $59 billion dollars worth of unaccounted for expenditures were reported by HUD, with no effort by the government to determine where the money was or to get it back.

Keeping the Money Local
Solari has two components that make it unique from other community-based economic models. The first is to create a transparent database of the assets belonging to the community. Transparency meaning that any citizen could follow the course of his tax dollars to see how they are being allocated. Community assets are anything your tax dollars and a tax-supported credit and regulation fund pay for, such as, parks, land, water, government facilities, schools, libraries, and housing projects. Once these are identified, the citizens can begin to look at how the assets are being used and where the wealth of the community is being lost. Some of the ways these losses might happen are: community-held resources are sold and privatized (such as water or correctional institutions) at below market prices or in a way that encourages further exploitation; contracts are out-sourced outside of the community at a higher cost than what it could be done for locally; or contracts are “padded” and development “incentives” are given to corporations. One example of an inefficient use of funds is a school district that hired a national executive search firm to recruit their school board supervisors. The cost to the community was exorbitant in a time when funding is being drastically cut for the basic needs of operating a classroom. Knowing what work is being contracted from outside sources provides an opportunity to create new jobs for community members and often times resulting in a better price for the service.

The second unique feature of Solari is to set up an investment advisor to raise and circulate equity capital invested in local businesses. Solari uses a two class structure—Solari A voting shares and Solari B nonvoting shares. A shares can only be purchased by members of the community and are the only shares with voting rights. B shares can be traded on an open exchange, the value of which increases as the “Solari index” goes up. The “Solari index,” a term coined by Catherine, is a different measure of success than the Consumer Price Index. Basically, it measures the confidence people have in sending their child to the corner store alone to buy a popsicle and having them return home safely. The value system that drives the “Solari index” is also about whether the environment, schools, and local businesses are thriving. In other words, the healthier the community and the environment, the better the return on investment in the community’s Solari stock.

When we talk about socially responsible investing, this is as good as it gets. Many of the corporations that are now categorized as “socially responsible” investments aren’t necessarily exemplary in their social ethics. Without transparency we have no way of getting full disclosure on a corporation’s practices. When our investments speak of our faith in each other, and when the businesses we are invested in are in our own neighborhoods, we have the opportunity to lovingly realigned a polluting business, for example, with the agreed upon values. Otherwise, those businesses know they risk not being eligible for the community investment pool and stand to lose customers as well.

There are two other aspects of how money works that help give a better understanding of the importance of keeping money local. There is a game played by the “big boys” and it is about identifying markets where they can extract value and get significant capital gains, or a “pop,” as a return on their investment. Basically, name any big, discount retail operation. We will use WM as an example. WM comes into a community where there are locally owned businesses that have a certain percentage of the market share. WM already has a competitive advantage because of its ability to buy at deeply discounted rates. These expansions into new markets are also financed by the big corporate banks using our retirement savings. Let’s say WM captures $100,000 worth of market share from one of the local, independent retailers. The equity value of that local company is 1 to 5 times earnings ($100,000), depending on its track record, client base, or various other factors that determine worth. The equity value of WM stock is 30 times earnings (also known as the price-earnings ratio), largely because it is “liquid,” and also because of the future expectation of how the company will perform based on significant management infrastructure and political support. Large corporations have these higher price-earnings ratios, because people have more faith in them to continue extracting value and getting big returns on quick turnarounds. Corporations have also taken on a life of their own, so the coming and going of CEOs or other key employees seems to have little impact on the overall trajectory of the company. Investors can also move easily in and out of investment in these firms because they are liquid, or traded through stock. Let’s return for a moment to the $100,000 of profit. To the local business owner it is probably worth just that, $100,000. However, WM takes that $100,000 and leverages it in stocks trading at 30 times earnings and realizes a return (a “pop”) of $3 million. Not only does this further increase the competitive advantage for WM, but it also takes the $100,000 equity value out of circulation in the community, along with some of the knowledge and higher skilled jobs that are lost when local businesses fold. Although these corporations do provide jobs, they often times bring upper management with them, leaving lower-paid service positions available for the local job market. Minimal salaries leave shoppers looking for the best bargain and so they end up returning their hard earned dollars to the discount retailers, again taking the money out of the community and fueling the interests of the big corporations.

Now let’s talk about the circulation of money within a community. Simply put, the value of a dollar is not just a dollar. There is something called a multiplier effect, which means that the more times a dollar circulates the more value it can provide. For example, I spend a dollar at a local market. It gets paid to the local farmer who provides the produce. He then spends it with the local mechanic who repairs his truck, and the mechanic spends the dollar at a play to raise funds for his daughter’s school. The student’s use the dollar to set up a recycling program for their school. On and on this dollar continues to add value, the benefits of which can accrue into future generations. Also, if I put my paycheck in a local community credit union, small business members can borrow that money to start new enterprises, whereas bigger banks may tighten credit terms in favor of their large clients, putting small businesses further at risk in an inflationary economy. Purchases made on a credit card from my credit union also benefit local projects and social services because of their policy to commit a certain percentage of the interest earned on credit cards or loans to these projects. If money continues to be siphoned out of communities the vitality declines proportionately. When I invest my money locally, I am making a commitment to relationships with the people whose well being is tied up with my own.

Applying the Solari Model in Communities
So, how does one start? There are several communities utilizing the concepts of the Solari model. You can find out about them on the Solari Action Network at www.solariactionnetwork.com, where ideas and approaches are shared to accelerate the learning curve and broader implementation of the model. The community that is farthest along in actualizing these concepts is Middlebury, Vermont. Jason Eaton is the inspiration behind that effort and you can learn more about what they are doing at: www.middleburysolari.com. There is nothing to buy or no proprietary agreements to sign. This is just a framework Catherine is offering as a means to restoring integrity to a deeply degraded system. How each community will personalize it to best represent their interests is completely up to them. What I like best about this concept is that it makes the most sense for creating healthy communities, no matter what the political or economic climate. The important thing is just to start somewhere. At times I have felt very frustrated trying to wade through what seemed to be particularly dense economic jargon, but I kept looking for other sources to inform my growing understanding of the subject. I think as more of us start grasping and translating these concepts into everyday language, it will be important to find ways to share that information. Personally, I believe that when mothers really get what all of this means for the future of their children that’s when a movement will really take hold.

It seems relevant to revisit a piece of our history that is extremely pertinent to this discussion. The period referred to is the Populist Movement of the late 1800s. Author William Greider writes, “The founding assumptions of the Federal Reserve System were first championed by a most unlikely group of Americans–not orthodox economists at prestigious universities, not important bankers on Wall Street and not the elected leaders of Republican and Democratic politics. The modern way of thinking about money and credit was first articulated by plain country people–hard-worn men and women, drearily poor and ill-educated, with barefoot children and bleak futures. Respectable opinion dismissed them as backward and dangerous–“hayseeds” sprouting outrageous ideas. Yet, in adversity, these unsophisticated citizens discovered great talents within themselves and, together, they created an original political agenda for the nation…The movement began in 1877 and the founding organization would come to be known as the Farmers Alliance. They “organized to ‘more speedily educate ourselves’ against impending ruin–the day ‘when all the balance of labor’s products become concentrated into the hands of a few, there to constitute a power that would enslave posterity.’”

Historian Lawrence Goodwyn captured Populism’s essence in Democratic Promise: The Populist Moment in America: “When a farm family’s wagon crested a hill en route to a Fourth of July ‘Alliance Day’ encampment and the occupants looked back to see thousands of other families trailed out behind them in wagon trains, the thought that, ‘the Alliance is the people and the people are together’ took on transforming possibilities.’”

The communities movement is informed by a value system that makes it the most natural birthing place for a populist movement today. Catherine and many others believe we can reclaim our power and align our stated beliefs with actions that quietly unravel the prevailing story. We don’t have to take on some beast of mythic proportions. All we have to do is tend our own gardens and one garden at a time, the world becomes a beautiful place. Lynne Twist, author of the book, The Soul of Money,eloquently states “Money carries the power and intention we give it. Endow it with your stand. Empower it to change the dream.”