Sacred Headwaters #10: Generative Economic Models
We've talked a lot about the extractive nature of the existing global economy. But what other options are out there?
Sacred Headwaters is a bi-weekly newsletter that aims to guide a co-learning process about the existential issues and planetary limitations facing humanity and about how we can reorient civilization in a way that will enable us to thrive for centuries to come. If you’re just joining us, consider checking out the first issue for some context and read through the other issues when you can. The newsletters are not strictly sequential, but this exploration is meant to build on knowledge and understanding over time. Subscribe below if you haven’t already, and please share with friends, family, and colleagues who may be interested:
Issue #10: Generative Economic Models
Over the last few months, we’ve read about how the modern economic system and the value systems and legal frameworks it’s rooted in are a major cause of a myriad of crises including transgression of physical planetary boundaries and striking global inequality. This traditional economic structure is often referred to as “extractive” by those who are working to change it. In simple terms, we generate wealth by withdrawing value from something or someone else. The most illustrative example comes from fossil fuels: we’ve built a global-scale growth-dependent economy over the last century largely by extracting buried carbon reserves and transforming them into wealth. But the descriptor also applies to how globalization has been used to extract wealth from the global south and to how the income gap continues to skyrocket, even within the bounds of the world’s wealthiest countries.
In the last issue, we read about how other cultural models have existed (and continue to exist) with value structures that allow them to live in a more generative and sustainable way. But reading about sweeping social change often leads to the sentiment “You can’t get there from here.” In this issue, we’re going to read about generative economic models that exist today, in our current society. Communities, people, and businesses around the world are building alternative ways of creating value within the current system while simultaneously guiding our path away from it. Some of these examples may surprise you. They often blend in so well that they may not seem revolutionary, but upon close inspection, their incorporation of values into governance allows a fundamentally different paradigm of “doing business.” Credit unions, coops, B corps, non-profits, foundation-owned corporations, public banks: these are all different approaches that are built on stakeholder ownership or are dedicated to a social mission beyond “turn a profit for shareholders.” While your interactions with these businesses may not feel unique or special, they represent a very different conception of the purpose of business than a typical shareholder-owned public company, and that conception plays out in the way these businesses interact with their communities.
"Learning about alternative ownership models through Open Source design" (20 minutes)
In this article, Marjorie Kelly, a pioneer in researching generative ownership and commons management, explores multiple levels of community based asset management and value generation through a case study on the lobster industry in Maine. She shows how a community used innovative legal and financial structures to incentivize business development that perpetuates the community by ensuring, among other things, that the lobster population remained healthy and that wealth generated from community resources (the lobsters and the coastline) stayed in the community. She draws on the lessons from this case study to lay out an “Architecture of Ownership,” comparing key features of traditional “extractive” ownership with those of innovative generative ownership. This essay outlines a synthesis of business and commons asset management that leads to genuinely sustainable development for the benefit of the community.
“The Tragedy of the Commons: How Elinor Ostrom Solved One of Life’s Greatest Dilemmas” (15 minutes)
I suspect that most of you are at least passingly familiar with Garret Hardin’s “tragedy of the commons.” Hardin argued that humans, as self-interested creatures, were incapable of sustainable management of a common resource without top-down (governmental) intervention. This theory was based on both contemporary (it was published in 1968) interpretations of evolutionary biology and the increasing perception of humans as “rational economic man.” In 2009, Elinor Ostrom won the Nobel Prize in economics for her work on common pooled resources in which she analyzed the dilemma Hardin framed and demonstrated empirically that, under the right circumstances, humans are capable of managing common resources (“commons”) in a way that can sustain their utility (or even enhance it) rather than degrading it.
In this essay, evolutionary biologist David Sloan Wilson writes about Ostrom’s work and about the “design principles” she devised for successful commons management. The article is a good summary of the context surrounding Ostrom’s work, her work itself, and some interesting practical efforts on Wilson’s part to apply Ostrom’s design principles to practical situations, using them to empower communities to develop their own successful frameworks for managing resources.
“Notable Urban Commons Around the World” (15 minutes)
Innovative structures of commons management have been developing all around us, hidden in plain view, for many years. This article lays out a handful of specific initiatives in cities around the world including community land trusts, self-organized urban revitalization, and resident-managed apartment buildings. This list is meant to inspire and to point out that these sorts of strategies for managing common resources do exist in the world today, they are just not the norm. It’s also by no means exhaustive: the nature of successful commons management is that it’s self-organizing and emergent. There’s a reason many of these authors in this area of research cite the work of systems thinkers like Fritjof Capra and Donella Meadows. The fact that examples like these exist is, in my mind, a proof of concept: we can build an alternate system — one that preserves and protects common resources for the benefit of all — and we can do it now, even within the constraints of existing social structures and hierarchies.
Note: this essay comes from a book called Patterns of Commoning. The other essays in the book are freely available and, among other things, include many other examples of successful commons management.
Book Recommendation: Divine Right of Capital, Marjorie Kelly
Marjorie Kelly (author of the first essay in this issue) has spent her career researching generative economic models: ways of organizing ownership and business such that they are driven by purpose, operate within ethical norms, and are tied to the stakeholders effected by their work. In this book, Kelly looks both at the traditional extractive model — shareholder capitalism — and at the generative models of ownership that can create what she calls economic democracy. Her criticisms of the existing model will likely sound familiar — we’ve spent many issues discussing how the current paradigm values wealth over utility and turns a blind eye to what it terms “externalities” even as they threaten to destroy every aspect of our civilization. Her dive into the principles of economic democracy is something to be hopeful about: change is possible and change is happening. We just need to recognize it and nurture it.
Note: Kelly has a newer book called Owning Our Future: the Emerging Ownership Revolution that is full of examples of generative economic models and how we get there from here.
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Image source: North End Lobster Co-Op Facebook page.