Replacing profit maximization and extractive ownership with living enterprises and generative ownership?

Excerpted from Majorie Kelly:

“Dominant ownership designs of today are built around profit maximization, central to that imperative is the need to grow. As Herman Daly and others have so eloquently articulated, the growth imperative threatens the living system of the Earth. When we take apart the system to see where this imperative resides, we find that what keeps it in overdrive are the demands of Wall Street for ever-higher profits and stock price. Corporations, and the capital markets where their ownership shares trade, are the internal combustion engine of the capitalist economy. They are where it hits the ground and goes. And where it spins out of control. As Fritjof Capra put it, “It’s an alarming thought that organizational systems are now the main driving force of ecological systems.”

In the short run, profit-maximizing companies can help in a rapid transition to an ecologically cleaner economy. But in the somewhat longer run, that transition might represent a brief moment in time. If human civilization and planetary ecosystems are still functioning well 50 years from now (not a small if), what about the next 50 years? And the next 100 or 200 or 1,000 years beyond that? What kind of economy will be suited for ongoing life inside the living earth? Will it be an economy dominated by massive corporations intent solely on earnings growth? That doesn’t seem likely. When you take the long view, the question turns itself about:

Can we sustain a low-growth or no-growth economy indefinitely without changing dominant ownership designs?

That seems unlikely. Probably impossible. How, then, do we make the turn? How can we design economic architectures that are self-organized not around profit maximization, but around serving the needs of life?

After my sojourn in England, this question set me on a journey in search of answers. I had seen, over many years, how extractive design – the quest for endless extraction of more and more financial wealth – was at the root of many of our ills. I began a quest to find alternative designs. And I was heartened to find they were everywhere, emerging in largely unsung, disconnected experiments all over the world.

I visited wind farms in Denmark that had been started and owned by wind guilds, groups of small investors who joined together to fund and own wind installations, with no corporate middleman. Denmark now generates one-fifth of its electric power from wind, more than any other nation. And this success is widely credited to the grassroots movement of the wind guilds. It’s an ecological success story made possible by the community-rooted ownership designs behind it.

I studied the community forests of Mexico, where the rights to govern and profit from the forest have often been granted to local communities, many of them indigenous tribal peoples – like the Zapotec Indians of Ixtlan de Juarez in southern Mexico. At Ixtlan, the problems that bedeviled other forests in Mexico, like deforestation and illegal logging, have become relatively unknown. The reason is community members have incentive to be stewards, because forest enterprises employ 300 people harvesting timber, making furniture, and caring for the forest. These are living forests, communities of trees and humans, where the purpose is to live well together. Worldwide, more than a quarter of forests in developing nations are managed by local communities. In Mexico, community forests represent more than 60 percent of all forests. Yet they remain virtually unknown, even in Mexico.

On Martha’s Vineyard, off the coast of Massachusetts, I visited South Mountain Company, an employee-owned design and build firm specializing in sustainable construction, which has made a deliberate choice to slow down its growth. It was the first example I’d seen of a consciously post-growth company. As its president John Abrams had written, this company was “challenging the false gospel of unchecked growth.” After the crash of 2008, it had in fact opted to shrink – and to do so in the most humane way possible. Its ability to make that choice arose directly from the fact that the company was owned and controlled not by absentee owners, but by its own employees.

In Maine, I visited a lobster cooperative that supported more than 40 families, helping them by allowing lobstermen to collectively buy bait and sell their catch efficiently. It is a small-scale community ownership design that is part of a larger economic design – a state governing framework. That framework includes democratically elected lobster zone councils, as well as ecological rules prohibiting the taking of lobsters that are under-age, or carrying eggs. Most innovatively, the state rules prohibit corporate boats from operating in sensitive inshore waters, allowing only owner-operated boats there. In other words, only small, local, mom-and-pop type lobster operations are allowed to work the best waters. At a time when the vast majority of the world’s fish stocks are overexploited, the Maine lobster industry remains vibrant. It is often cited as an example of successful collective action in “common pool resource management.” Rules on ownership design are central to it all.

In Denmark, I visited the town of Kalundborg, where the major pharmaceutical Novo Nordisk produces 40 percent of the world’s insulin. The town is home to a famed example of “industrial symbiosis,” where this company’s waste becomes food for the ecosystem. Yeast from making insulin, for example, is treated and then passed to farmers to be used as food for pigs, or for fertilizer. That ecological design – which has been operating and stable for decades – is possible only because ownership of this major, publicly traded company is also stable. It is an example of a design that is common throughout northern Europe, which can be called the “mission-controlled corporation.” The aim of this company is to defeat diabetes. And the corporation is legally controlled by a foundation, intent on that social mission.

These various models embody a coherent school of design – a common form of organization that brings the living concerns of the human and ecological communities into the world of property rights and economic power. They can be called a family of generative ownership designs. They are aimed at creating the conditions where all life can thrive. Together, they potentially form the foundation for a generative economy – a living economy that might have a built-in tendency to be socially fair and ecologically sustainable.

In ownership design, there are five essential patterns that work together to create either extractive or generative design: purpose, membership, governance, capital, and networks. Extractive ownership has a Financial Purpose: maximizing profits. Generative ownership has a Living Purpose: creating the conditions for life. While corporations today have Absentee Membership, with owners disconnected from the life of enterprise, generative ownership has Rooted Membership, with ownership held in human hands. While extractive ownership involves Governance by Markets, with control by capital markets on autopilot, generative designs have Mission-Controlled Governance, with control by those focused on social mission. While extractive investments involve Casino Finance, alternative approaches involve Stakeholder Finance, where capital becomes a friend rather than a master. Instead of Commodity Networks, where goods are traded based solely on price, generative economic relations are supported by Ethical Networks, which offer collective support for social and ecological norms.

Ownership is the gravitational field that holds an economy in its orbit. Today, dominant ownership designs lock us into behaviors that lead to financial excess and ecological overshoot. But emerging, alternative ownership patterns – when properly designed – can have a tendency to lead to beneficial outcomes. It may be that these designs are the elements needed to form the foundation for a generative economy, a living economy – an economy that might at last be consistent with living inside a living being.”

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