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SOLARI: Illuminating The Local Economy, p. 2 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 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.” For
further information on Catherine, her work, and the Solari Action Network,
visit www.solari.com. Some other
resources I found very useful for creating a larger framework of understanding
money were: The Soul of Money by Lynne Twist and Secrets of
the Temple, How the Federal Reserve Runs the Country by William
Greider. Mr. Greider also writes on the economy for The Nation
and has a new book, The Soul of Capitalism, Opening Pathways to a
Moral Economy. |
