Re: Gulf Coast reconstruction & broadening ownership

[Norman Kurland <thirdway@cesj.org>]

John,

You may find these two items useful in providing an overall structure 
and vision for fitting employee ownership into the picture:
http://www.cesj.org/homestead/strategies/regional-global/katrina-bushltr.html
http://www.cesj.org/homestead/strategies/regional-global/katrinaplan050907.html

All the best, Norm

jlogue@kent.edu wrote:

>Friends -
>
>Recently the OEOC was asked to brainstorm ideas for using employee
>ownership in the reconstruction of the areas that were hit by Hurricane
>Katrina.
>
>I thought that this might be a useful topic of discussion for the
>eosubnat group, so I have attached it here. 
>
>I'll look forward to your comments if you find this of interest.
>
>************
>
>Wealth broadening measures and Gulf Coast reconstruction
>
>Thoughts from the staff of the Ohio Employee Ownership Center
>Prepared by John Logue
>September 30, 2005
>
>
>Recently the OEOC was asked to brainstorm ideas for using employee
>ownership in the reconstruction of the areas that were hit by Hurricane
>Katrina.
>
>Our point of departure: the post-Katrina and -Rita reconstruction of the
>affected Gulf Coast areas should be designed to broaden the ownership of
>productive assets among employees, to broaden home ownership among
>poorer families, and to create economies of scale among small,
>owner-operated businesses. The general thrust of these proposals would
>be to use the reconstruction effort to put more productive assets in the
>hands of employees to create greater wealth for them in the future and
>to create institutional structures to encourage the growth of small
>business in the future.  Increasing home ownership would also encourage
>asset growth for those who currently have very limited assets.
>
>The basic problem: Practically the entire infrastructure of small
>businesses in the affected areas was shut down by Katrina and Rita.  In
>a majority of cases, they are under-insured.  While most will probably
>be reopened by their now severely undercapitalized owners, a significant
>minority will not reopen at all.  Yet all of them involve social capital
>– employees know how to work together to produce goods and services, and
>many of those which otherwise would not reopen could be reopened by the
>employees with some technical and financial assistance.  Reopening and
>recapitalizing small businesses is crucial to long term job growth in
>the area.
>
>The secondary problem: Large and absentee-owned firms are likely to be
>better insured and more likely to be able to extra reconstruction
>funding from the public sector.  This would further skew income and
>wealth distribution toward greater inequality in a region in which
>inequality is already far too great.  Public sector aid to this sector
>should be coupled with provisos that channel some of this income and
>wealth (re)creation back into the broader community.
>
>Here are the basic outcomes:
>
>1) There are many possibilities around reopening the businesses that the
>storm has shuttered.  In a number of cases the owners, especially those
>near retirement, are likely to decide that the time has come to
>liquidate their business by accepting the insurance settlement.  This is
>not such a great thing for the employees.  It would be useful to have
>mechanisms to help to capitalize employees to reopen firms that
>otherwise would not reopen. 
>
>Setting up or strengthening fishing, agricultural, and small business
>cooperatives would also be useful.
>
>2) A lot of the assistance in New Orleans is going to go into physical
>reconstruction.  It would be a good idea to have some provisions to
>encourage construction workers to set up their own firms or to set up
>cooperatives; we know that those firms based on skilled labor tend to be
>reasonably successful.  On the consumer side, it makes a lot sense to
>set up housing cooperatives.  That would give folks, who otherwise lack
>the funds to buy homes, the opportunity to own the roof over their head.
> It would be useful to have a specific regional credit facility to
>support the development of housing cooperatives. 
>
>3) The reopened businesses under employee ownership will be more or less
>the equivalent of startups and will require considerable technical
>assistance if they are to survive and prosper. The same is true of
>consumer and producer cooperatives.  It would make sense to set up a new
>cooperative development center under the Department of Agriculture in
>the region to assist in the reconstruction of farmer cooperatives and
>fishing cooperatives.  It would be equally useful to have a technical
>assistance organization to support the development of employee-owned
>businesses. 
>
>Here are the ideas that came out of the brainstorming session.
>
>Employee ownership
>
>Partial employee ownership of smaller businesses through a special SBA
>reconstruction loans and loan guarantee (without personal guarantees for
>employees with less than $10,000 in financial assets) program.
>
>There should be a special finance window and technical assistance window
>for helping former employees restart small firms that the previous
>owners have decided not to restart but to take their insurance payments
>and retire.
>
>Special construction firm/contractor program. This SBA program (or
>similarlar state or local programs) should focus particularly on
>restarting and recapitalizing small construction firms and contractors –
>otherwise the price pressures in this sector will raise the cost of
>rehousing the displaced even more than would otherwise be the case.
>
>The program should also focus on helping construction tradesmen start
>new contracting firms.
>
>Establish a general preference for employee-owned firms in contracts for
>reconstruction.
>
>A special effort could be made to increase the availability of
>construction materials through supporting the reopening of small
>brickyards, saw mills, lumberyards, cement batch plants, etc., through
>partial or complete employee ownership.  
>
>There are possibly substantial business and employment opportunities in
>recycling construction materials.
>
>In rural areas, craft cooperatives may provide modest part-time
>employment for folks who otherwise would have no employment.
>
>There will also be some larger businesses that will not be reopened by
>their current owners.  To the extent these are unionized, it makes sense
>to work with the unions to explore how to reopen them or how to open
>new, smaller firms in the shell of the former larger company and with
>its unionized employees.
>
>All of these employee-ownership measures will require significant
>technical assistance and considerable financing.  For these, see below.
>
>Consumer ownership
>
>Housing co-ops.  About 275,000 housing units were lost to the two
>hurricanes.  Reconstruction on market premises will dramatically
>increase costs of housing stock, pricing homes and rental units out of
>reach for many working families, including those who could previous hope
>to own or could afford the rent. A special program to support housing
>co-ops in poorer neighborhoods in the most affected urban areas could
>create the development of home equity (and long-term reduction of
>housing costs) for urban working poor.
>
>Cooperative trailer parks.  Trailer parks were particularly hard hit. 
>In general manufactured housing provides a primary source of home
>ownership by working people.  Coop ownership of the land under trailer
>parks has become a proven way to reduce housing costs over the longer
>term in the periphery of urban areas in New England and Minnesota. 
>
>The utility infrastructure in the area took a terrible hit, and will
>require substantial public subsidy for reconstruction.  One good way to
>create modest wealth for consumers is to allocate a portion of the
>public sector cost of reconstruction to consumers, rather than treating
>it all as a subsidy to investor-owned utility (IOU) shareholders.  
>
>This is particularly true of the hardest hit utilities like Entergy,
>which has taken its New Orleans electric subsidiary bankrupt.  To bring
>it out of bankruptcy, it should be reconstructed as a hybrid of a
>consumer-owned cooperative, a partly employee-owned firm, and a partly
>investor-owned firm.
>
>All of these consumer-cooperative measures will require significant
>technical assistance and considerable financing.  For these, see below.
>
>
>Fair Exchange
>
>Deb Olson's "Fair Exchange" proposal for a variety of quids pro quo for
>public support of larger firms makes a lot of sense as part of a $250
>billion reconstruction effort.  
>
>Reconstruction aid to other large firms, such as the casino industry,
>should provide quid pro quos to the community possibly in the form of
>providing shares to a community trust that would benefit all local
>residents or to employees.  
>
>Another alternative would be to require the provision of employee health
>insurance by employers who employ more than 500 employees and who
>receive public assistance for reconstruction.
>
>
>Technical assistance for broadening wealth ownership
>
>Provide additional co-op development staff for the Department of
>Agriculture regional offices in Louisiana,  Mississippi, and Texas.
>
>Expand the scope of activities of the Dept of Agriculture co-op
>development staff to support establishing consumer, housing, and
>employee cooperatives as well  
>
>A particular issue is fishing cooperatives.  The Gulf Coast fishing
>industry was hard hit.  Cooperative packing, freezing, and marketing
>could help bring this industry back with owner-operated boats. 
>Employee-owned fishing boats are also an option when boat owners take
>their insurance and quit, but crews want to continue fishing.
>
>Set up special "reconstruction co-op development center" funded by the
>US Department of Agriculture like the twenty or so which exist currently
>to support (1) reconstruction of the agricultural co-operative
>infrastructure which has been damaged and (2) creation of new, value
>added agriculture and fishing cooperatives.
>
>Establish a special "Gulf Coast reconstruction employee ownership
>program" to restart existing small businesses which have been abandoned
>by owners, and to provide succession planning services for business
>owners who are wondering whether to restart their businesses or collect
>the insurance and quit.  Having the employees as possible buyers at the
>point of succession would encourage some who would not otherwise do so
>to restart. This program should be designed to dissolve after several
>years into employee ownership centers in Louisiana, Mississippi, and Texas.
>       
>Provide training on the use of housing and other consumer cooperatives,
>employee ownership, and small business cooperatives to city, county and
>state economic development professionals.
>
>Feasibility funds for larger projects can be provided from the existing
>WARN/EDWAA feasibility fund provision in the Workforce Investment Act
>which, as far as I know, has never been used in any of these three
>states, although it has been used in more than 20 other states.
>
>Finance for broadening wealth ownership
>
>Special credit facilities for co-op and employee ownership in reconstruction
>
>Could add funds to the existing Federal programs for ag co-ops and for
>rural electric coops
>
>Could establish special CDBG program to fund reconstruction with loan
>recapture going to fund asset- ownership-broadening measures
>
>Special credit facility for employee ownership in reconstruction
>       
>Special credit facility for housing cooperatives
>
>Loan guarantees for all of the above
>
>
>Creative uses of unemployment compensation
>
>Grant half of worker unemployment compensation in lump sums to
>capitalize new employee-owned firms or recapitalize existing small
>businesses as part owner and part employee owned
>
>Permit drawing the other half of unemployment comp during the start-up
>or restart of the business, essentially supporting working capital
>development
>
>Small business cooperatives
>
>It is not reasonable to expect large businesses to be the major players
>in putting unemployed Gulf Coast workers back to work.  It's going to be
>small business - which, after all, are the net creators of jobs in the
>US while the Fortune 500 are net liquidators of jobs.   Consequently
>measures that strengthen small business, whether family-owned or
>employee-owned, will have positive employment impact.  
>
>We strongly recommend establishing small business purchasing
>cooperatives and, in individual industries, marketing cooperatives.  
>
>Tax holidays
>
>It should be noted that all three of the states affected depend
>disproportionally on general sales taxes for revenue that hit the poor
>hardest.  A sales tax holiday on firms with less than $1 million in
>sales in the affected areas for 6 months or a year would help get
>smaller businesses back on their feet, bring in some outside trade, and
>reduce living costs especially for the bottom 80% of families while they
>get their lives back together.
>
>Other measures
>
>Louis Kelso used to espouse non-inflationary expansion of the money
>supply and of employee ownership by putting out increased Federal
>Reserve System credit through loans to employees to purchase businesses
>at the Fed's discount rate rather than through putting the same funds
>out through banks.  This discount window credit could also be used to
>fund construction of co-op housing. This Kelsonian principle could be an
>idea whose time has come in the Gulf Coast reconstruction effort.
>
>Some "best practice" Community Development Corporations (CDCs) have a
>good record of business and job creation as well as low income housing
>creation.  That could be promoted in affected urban areas.  
>
>There has been a good bit of experimentation with local currencies.  My
>impression in reading about these is that they have had some modest
>success.  Perhaps they are worth supporting in the affected areas.
>
>It's also probable that commuting distances will increase as energy
>price increases raise commuting costs and road repairs increase
>commuting time.  Support for some sort of  cooperative transportation
>system – mini-buses? – and for improved public transportation may make
>some sense.
>
>
>
>
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>  
>


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