What’s Different About the “New Economy”? A View from Appalachia

August 5, 2016

New EconomyWhile there is no one definition for the “new economy”, most folks working in this field would probably agree on a few basic elements that distinguish this economic approach from the current dominant economic model. I’ve attempted to summarize those below.

Six Elements of Emerging New Economies, Contrasted with the Dominant Economy

1. New economies are more just, work better for people.

The dominant economy has used tax, trade and patent policy to greatly favor huge corporations and the very wealthy over small businesses and working people, leading to extreme levels of wealth concentration at the top, alongside stagnant wages for working and middle class people, and growing poverty. The very wealthy pay lower taxes on much of their income than do teachers and truck drivers; giant corporations pay an effective tax rate that is 6 – 8% less than what small businesses pay.  Trade policy grants corporations the right to sue nations, states and communities over health and environmental protections. You can’t make this stuff up.

In the new economy, small businesses and family farms are central, creating substantially more jobs per dollar of sales. By purchasing from other local businesses, they create ‘economic multipliers’ that add much more value to the local economy than do chains and big boxes. New corporate forms, such as the Benefit Corporation, which commits businesses to positive social and environmental outcomes as well as financial profit, are also emerging in the new economy, with over 1000 nationwide. Some localities have begun to use Community Benefit Agreements to hold big corporations legally accountable for the promises they make to local communities, in exchange for public subsidies. These and many other creative measures ensure that economies work for people, not the other way around.

2. New economies are more diverse, less dependent on outside corporations, foreign markets.

The dominant economy rests on two core assumptions: that prosperity requires endless growth, and that jobs and income for the many ‘trickle down’ from the top, so long as taxes on this group are low. In actuality, the record of the past 60 years demonstrates unequivocally that lower taxes on the wealthiest and on the biggest companies have not made for a bigger economic pie; and economic wealth, rather than trickling down has been sucked up from working people, community banks and small businesses. There are many reasons for this, but one of them is the subsidies we provide to big boxes and big business, averaging over $100 billion per year. The results? Several studies have shown how communities with a diverse array of local businesses are stronger economically and socially, with better incomes, higher employment, and lower rates of poverty, incarceration, health problems and substandard housing, than those dependent upon a few big employers.

In the new economy, small to mid-size businesses take hold that build on the assets of their place, including music, art and culture, farms, forests and fisheries, the outdoors, historic downtowns and more. Local business associations, like the Business Alliance for Local Living Economies (BALLE) help strengthen these local enterprises and increase the connections between consumers and producers. Instead of spending millions of dollars to entice a big box chain, resources are redirected to homegrown businesses and entrepreneurs, making for more resilient economies and communities.

3. New economies build broadly-based prosperity, real wealth from the bottom up.

The five biggest Wall Street financial institutions own more than twice the capital of all the community banks in the nation combined. Yet these mega banks direct very little of their resources towards local prosperity: Small to mid-size community banks, with just half the assets, provide more than twice as much lending to local businesses. Big banks, especially since the overturning of the Glass-Stegall Act, concentrate on generating high returns for the biggest, wealthiest investors, often through the use of derivatives and other means that don’t produce tangible wealth.

In the new economy, capital is refocused towards small to mid-sized businesses, towards infrastructure that enables farmers and entrepreneurs to add value to their products, and towards technologies and businesses that meet real needs, such as affordable, green housing, renovated buildings and revitalized downtown business districts, and regenerative farm and food enterprises.  Cooperatives, Employee Stock Ownership options, community land trusts and community-owned energy systems are among the means used to broaden prosperity, while increasing the productivity of businesses.

4. New economies fit within the ecosystem, recognizing limits rather than depending upon endless growth.

The dominant economy both depends upon endless growth and assumes that it is possible forever into the future. Yet serious limits confront us, from enormous declines in groundwater reserves, to an 80% reduction in productive land per capita, worldwide. And of course, there’s climate change and the consequences of too much carbon in our atmosphere – drought, floods and severe weather, sea level rise and more. In spite of these increasingly serious problems, the dominant economy fights all environmental regulation and assumes that technology and ‘the market’ will fix things.Anthony Flaccavento (Story fertility, soil organic matter)

In the new economy, our places, our ecosystems are understood to have limits, but also to present new and better ways of meeting needs and creating work. From organic and urban farms and restorative fishery systems to super energy efficient building systems and solar and wind power companies, the new economy is spawning products and services that meet people’s needs with far less impact on the environment. Complementing that is a growing emphasis on urban and community design that makes our towns and cities more walkable, more bike-able and more enjoyable.

5. New economies focus more on meeting real needs, fostering innovation in the process.

The dominant economy has been enormously productive and has made countless products much more affordable for ordinary folks, from cars to computers. However over the last thirty years or so, it has also become increasingly dependent upon what is called financialization, that is a focus on money and monetary products as a central part of the economy and the policy guiding it. This has led to what David Korten calls “phantom wealth”, where trillions of dollars of ‘assets’ are traded on Wall Street, making a small group of people spectacularly rich, while real assets – bridges, roads, high speed rail, rural health clinics, waterways and agricultural lands – are neglected and fall into decline.

In the new economy, there is a strong focus on addressing real needs and doing so in a way that helps people and communities to become more self-reliant. Business incubators and accelerators help local firms be more competitive, more innovative. Poor communities, from Detroit and Buffalo to Appalachia and the Southeast launch community gardens, urban farms, and ‘green development zones’. New techniques and systems enable farms to simultaneously increase their productivity while pulling excess carbon from the atmosphere. Businesses put people to work in reclamation of disturbed land, urban brownfields and energy efficient housing. Lower income people gain access to healthier foods through mobile markets and farmers market EBT initiatives. In the new economy, the driving question shifts from “Where are the jobs?” to “What work needs to be done?”

6. New economies cultivate citizens, not just consumers.

The dominant economy is now a consumer economy, fundamentally dependent upon more and more people buying more and more stuff. At the same time, the belief in private, market-based solutions to a whole host of societal problems – from prisons to public schools – has become increasingly commonplace. Alongside both of these developments is the reality of widespread cynicism, even disgust with politics and government. Taken together, these trends have convinced many people to give up on civic, political or even neighborhood engagement, believing that their opportunities as well as their responsibilities play out almost entirely as consumers.

The new economy welcomes the creative force of the marketplace and encourages people to use their dollars to support businesses that reflect their values. But it recognizes that this is not enough; that in order to have an economy that works well for all people, and that is sustainable into the lives of our grandchildren and beyond, we also need a vibrant democracy and honest public debate. Many new economies are therefore emerging alongside community based media, arts and theater that give voice to folks from all walks of life. The revival of public squares, parks and community centers has facilitated both new commerce and broader public participation. The work of Policy Link and other organizations is helping to find ways to revitalize communities economically without falling into the trap of gentrification and even greater racial segregation.

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The new economy differs from place to place because it builds upon and fits within the land, culture and communities of its place. It is unfolding and emerging, with much still to figure out. It will unfold successfully to the degree that the full diversity of our communities and society are welcomed in, get engaged and help make it productive, democratic and sustainable. Think about joining the New Economy Coalition (http://neweconomy.net/), BALLE (https://bealocalist.org/), Bottom up Economy (www.bottomupeconomy.org), the Canadian CED Network (https://ccednet-rcdec.ca) or other groups working to make this a reality.


Anthony FlaccaventoAnthony Flaccavento is an organic farmer near Abingdon, Virginia, in the heart of Central Appalachia. He has been working on community environmental and economic development in the region for the past 27 years. In 1995, he founded Appalachian Sustainable Development, which became a regional and national leader in sustainable economic development. Anthony left ASD in December, 2009 to found SCALE, Inc, a private consulting business dedicated to catalyzing and supporting ecologically healthy regional economies and food systems. SCALE works with community leaders, farmers, foundations, economic development agencies and others in Appalachia, Iowa, Michigan, New Mexico the Arkansas Delta and other communities. Anthony speaks and writes about sustainable development, economics, food systems and rural development issues extensively, with some of his pieces appearing in the Washington Post, Huffington Post, Solutions Journal and elsewhere.

Anthony is the author of Healthy Food Systems: A Toolkit for Building Value Chains, and has also authored chapters in books on rural development and ecological literacy. Most recently SCALE Inc produced Is Local Food Affordable for Ordinary Folks?, a study of farmers market affordability in six states in Appalachia and the Southeast. Read more about Anthony