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Sunday, July 31, 2022

Australia’s Aggressive Policy Tightening Set to Weigh on Economy - BNN

(Bloomberg) -- Australia is on track for its steepest tightening of monetary policy in a generation, raising the risk of an economic slowdown as the housing market shifts into reverse and consumers pull back on spending.

The Reserve Bank of Australia will lift its key interest rate by 50 basis points for a third consecutive month on Tuesday to 1.85%, according to all but one of 23 economists surveyed. That will take its combined tightening since May to 175 basis-points, the biggest increase inside six months since 1994.

“The RBA is behind the pack,” said Andrew Ticehurst, senior economist and rates strategist at Nomura Holdings Inc. The current cash rate is “not appropriate for an economy with an unemployment rate at around a 50-year low and with core inflation running at a 6% annualized pace.”

Ticehurst sees the cash rate at 3.35% by year’s end while money markets are pricing in about 3%. Such a sharp pace of tightening will ratchet up loan repayments and weigh on consumption, which accounts for about 60% of economic output. 

Policy makers are trying to rein in inflation that’s running at more than twice the upper end of the RBA’s 2-3% target. They maintain households can cope with further hikes because they built up savings during the pandemic and 3.5% unemployment means most Australians have incomes to meet their obligations.

RBA rate increases flow through quickly to borrowers as most are on variable-rate loans. Figures last week showed early signs of cooling demand with retail sales in June rising at the weakest pace this year. 

Commonwealth Bank of Australia internal data, which captures spending on credit and debit cards at the nation’s largest lender, showed a “clear easing” in consumption in July. 

“There is a clear risk that the volume of household consumption falls by late-2022,” according to Gareth Aird, head of Australia economics at CBA. “We expect forward-looking indicators of the economy to slow sharply.”

Sliding house prices, which are directly linked to perceptions of wealth, are already weighing on consumer confidence. Real estate firm PropTrack expects prices to fall 15% from current levels in 2023, after climbing at an “exceptional pace” over the past two years.

That’s one reason Nomura, CBA, AMP Capital Markets and UBS Group AG predict rate cuts will come as early as next year.

The RBA will publish its quarterly update of forecasts on Friday that’s widely expected to show downgrades to economic growth and employment and a sharp increase in the inflation outlook -- in line with Treasury’s outlook last week. 

The RBA doesn’t release its own projections for interest rates.

“We expect the labor market to start easing gradually later in 2023,” Felicity Emmett and Catherine Birch, senior economists at Australia & New Zealand Banking Group Ltd., said in a research note. “This will add to the case for the RBA to cut rates” in mid-2024.

©2022 Bloomberg L.P.

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Australia’s Aggressive Policy Tightening Set to Weigh on Economy - BNN
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Australia's Aggressive Policy Tightening Set to Weigh on Economy - Bloomberg

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Australia's Aggressive Policy Tightening Set to Weigh on Economy  Bloomberg
Australia's Aggressive Policy Tightening Set to Weigh on Economy - Bloomberg
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Saturday, July 30, 2022

Friday, July 29, 2022

The strange reason America's economy is shrinking - CNN

London (CNN Business)When you think about a shrinking economy, what comes to mind?

Factories shutting down. A wave of job losses and few open positions. Huge financial losses that batter most industries.
That's not what America is seeing right now, even though the country's gross domestic product has declined for two consecutive quarters, meeting one technical definition of a recession.
So what is happening, and where could we be headed? The answer to both questions could be found in the country's stockrooms.
Breaking it down: US GDP for the second quarter fell at an annualized rate of 0.9%, according to the first reading from the Commerce Department published Thursday. That followed a contraction of 1.6% during the first three months of the year.
The data stoked debate about whether the United States is already experiencing a recession, which economists have warned is a risk as the Federal Reserve hikes interest rates and inflation curbs consumer spending.
Fed Chair Jerome Powell, for one, doesn't think this moment has arrived — at least not yet.
"I do not think the US is currently in a recession," Powell said earlier this week. "There are just too many areas of the economy that are performing too well."
But GDP doesn't just turn negative on its own, and Thursday's data contains useful guidance for understanding a complex economic moment.
Pay attention: Inventories, or goods held by a business that haven't been sold yet, had a major role to play.
Companies stocked up on many items late last year as they attempted to dodge supply chain problems and ensure they could meet resurgent demand.
But in recent months, they've realized they have too much stuff, especially at an uncertain moment for manufacturers and shoppers, and become hesitant to place new orders.
The subsequent slowdown in inventory accumulation contributed to a large chunk of the contraction between April and June, removing a whopping two percentage points from economic output.
Why it matters: Some economists and investors think that because growth was pulled forward at the end of 2021, activity in the first half of 2022 looks artificially low.
"The fourth quarter, to me, was bloated a little bit," said Anna Rathbun, chief investment officer at CBIZ Investment Advisory Services. "Everyone was just hoarding things."
But that doesn't mean inventory levels should be disregarded. In fact, they contain helpful clues when monitoring how fast the US economy could decelerate from here on out.
Ed Cole, managing director of discretionary investments at Man Group, told me there's two main reasons he's closely watching the speed at which US inventories grow "as an indicator of where we are in the cycle."
  • If customers are buying fewer products, companies won't place new orders, which will weigh on factory output.
  • If companies are forced to get rid of unwanted inventory with hefty discounts, it will put pressure on revenue and profits.
"Recent warnings by large retailers have demonstrated this effect quite clearly," he added.
See here: This week, Walmart (WMT) slashed its profit outlook, warning that customers are changing their shopping habits. That's requiring markdowns to clear out excess inventories of products like clothing.
It's not the only company with this problem. American Outdoor Brands (AOBC) recently told analysts that "rapidly rising inflation and interest rates ... have served to drive up inventory levels." Hasbro (HAS) also said it had "higher-than-typical inventory levels" for this time of year, though it emphasized its stock is "extremely high quality."

Amazon dodges the tech slump

Amazon (AMZN) is going strong even as other Big Tech companies stumble.
The e-commerce giant on Thursday reported net sales of more than $121 billion between April and June, a 7% increase from the same quarter last year and higher than Wall Street's estimates.
Investor insight: Amazon stock surged 12% in premarket trading as investors shrugged off the company's $2 billion loss, which it attributed in part to its investment in electric truck manufacturer Rivian.
The focus is instead on the company's guidance for its current quarter, which ends in September. Amazon expects net sales between $125 billion and $130 billion, a jump of as much as 17% from last year.
"Big Tech's been a mixed bag this earnings season, but Amazon proved that the strong can survive even the toughest environments," Hargreaves Lansdown analyst Laura Hoy told clients.
Meanwhile, Apple (AAPL) looked less impressive. The world's most valuable tech company reported revenue of $83 billion, up just 2% from last year and a marked slowdown from the breakneck growth it saw in 2021. Profits declined by nearly 11%.
Still, Apple beat estimates, sending shares up more than 2% in premarket trading.
My thought bubble: Even corporate behemoths aren't immune to pressure from an economic downturn, but they are better insulated.
Having a cloud services business certainly helps. It was a bright spot for Microsoft (MSFT) and Google (GOOGL), and Amazon Web Services posted a profit of $5.7 billion. The unit's revenue nearly hit $20 billion, a 33% increase from the same period last year.

China's leaders have gone silent on economic goals

China's top leadership has gone quiet on the growth targets it had set for the year as the world's second-largest economy battles an economic slowdown that's largely self-inflicted.
In early March, China's government had said that the country would aim for gross domestic product to rise by about 5.5% this year. It was China's lowest official target for economic growth in three decades. Even so, economists have said it looks increasingly out of reach.
See here: Earlier this week, the International Monetary Fund lowered its forecast for GDP growth in China to just 3.3% this year as Covid-19 lockdowns and a crisis in the real estate sector weigh on its expansion.
Now, the country's leadership has fallen silent on growth targets altogether, my CNN Business colleague Laura He reports. At a key meeting of top leaders on Thursday, there was no mention of GDP targets.
According to analysts, this is a sign that the government thinks it might not be able to meet its goals after all.
"In today's meeting, policymakers used the new phrase: 'Strive to achieve the best result.' It means that they no longer view 5.5%, or even 5% as achievable for this year," said Larry Hu, chief China economist at Macquarie Capital.

Up next

Chevron (CVX), Bloomin' Brands (BLMN), ExxonMobil (XOM), Newell Brands (NWL) and Procter & Gamble (PG) report results before US markets open.
Also today: The Personal Consumption Expenditures Price Index arrives at 8:30 a.m. ET. It's the inflation measure watched most closely by the Federal Reserve.
Coming next week: The US jobs report for July will be closely scrutinized for evidence the economy is slowing faster than expected.
— Martha White, Alicia Wallace, Rishi Iyengar and Clare Duffy contributed reporting.

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The strange reason America's economy is shrinking - CNN
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U.S. Economy Shows Another Decline, Fanning Recession Fears - The New York Times

Gross domestic product, in an initial reading, fell 0.2 percent in the second quarter. President Biden said any troubles would be transitory.

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By The New York Times

A key measure of economic output fell for the second straight quarter, raising fears that the United States could be entering a recession — or perhaps that one had already begun.

Gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, the Commerce Department said Thursday. That drop followed a decline of 0.4 percent in the first quarter. The estimates for both periods will be revised in coming months as government statisticians get more complete data.

News of the back-to-back contractions heightened a debate in Washington over whether a recession had begun and, if so, whether President Biden was to blame. Economists largely say that conditions do not meet the formal definition of a recession but that the risks of one are rising.

For most people, though, a “recession” label matters less than the economic reality: Growth is slowing, businesses are pulling back and families are having a harder time keeping up with rapidly rising prices.

“We’re absolutely losing momentum,” said Tim Quinlan, a senior economist for Wells Fargo. “Income gains at minimum have struggled to keep pace with inflation, and that’s what is chipping away at people’s ability to spend.”

A deceleration, on its own, isn’t necessarily bad news. The Federal Reserve has been trying to cool the economy in a bid to tame inflation, and the White House has argued that the slowdown is part of an inevitable and necessary transition to sustainable growth after last year’s rapid recovery.

“Coming off of last year’s historic economic growth — and regaining all the private-sector jobs lost during the pandemic crisis — it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Mr. Biden said in a statement issued after the release of the G.D.P. report. “But even as we face historic global challenges, we are on the right path, and we will come through this transition stronger and more secure.”

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President Biden said that the findings of the gross domestic product report were “consistent with the transition to a stable, steady growth.”Tom Brenner for The New York Times

Still, forecasters in recent weeks have become increasingly concerned that the Fed’s aggressive moves — including raising interest rates three-quarters of a percentage point on Wednesday for the second month in a row — will result in a recession.

Jerome H. Powell, the Fed chairman, acknowledged that the path to avoiding a downturn was “narrowing,” in part because of global forces, including the war in Ukraine and strict pandemic policies in China, that are beyond the central bank’s control.

“When you’re skating on thin ice, you wonder about what it would take to push you through, and we’re on thin ice right now,” said Diane Swonk, the chief economist for KPMG.

Matthew Martin, 32, is paying more for the butter and eggs that go into the intricately decorated sugar cookies he sells as part of a home business. At the same time, his sales are falling.

“I guess people don’t have as much money to toss at cookies right now,” he said.

Mr. Martin, a single father of two, is trying to cut back on spending, but it isn’t easy. He has replaced trips to the movies with day hikes, but that means spending more on gas. He is hoping to sell his house and move into a less expensive place, but finding a house he can afford to buy has proved difficult, especially as mortgage rates have risen. He has thought about finding a conventional 9-to-5 job to pay the bills, but he would then need to pay for child care for his 4-year-old twins.

“Honestly, I’m not 100 percent sure what I’m going to do,” he said.

When G.D.P. fell in the first three months of the year, some dismissed the decline as a fluke, the result of quirks in how the government accounts for spending and investment. Underlying measures of demand remained solid, and many economists thought it was likely that the first-quarter data would eventually be revised to show a modest gain.

The second-quarter decline, though milder, is harder to dismiss. Home building dropped sharply, business investment stalled and after-tax income, adjusted for inflation, fell. Consumer spending, the bedrock of the economy, grew, although at its slowest pace since the first months of the pandemic.

“The second quarter is really closer to the definition of a bona fide slowdown,” said Gary Schlossberg, a global strategist with Wells Fargo Investment Institute. “What we saw in this quarter was an outright decline in domestic spending.”

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Source: Bureau of Economic Analysis

By The New York Times

Economists often use two quarters of falling G.D.P. as a shorthand definition of a recession. In some countries, that is the formal definition.

But in the United States, declaring a recession falls to a private, nonprofit research organization, the National Bureau of Economic Research. The group defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” and it bases its decisions on a variety of indicators — usually only months after the fact.

Some forecasters believe a recession can be avoided, if inflation cools enough that the Fed can slow interest rate increases before they take too much of a toll on hiring and spending.

The economy still has important areas of strength. Job growth has remained robust, and, despite a recent uptick in filings for unemployment insurance, there is little sign of a broad increase in job losses.

Households, in the aggregate, are sitting on trillions of dollars in savings built up earlier in the pandemic, which could allow them to weather higher prices and interest rates.

“What drives the U.S. consumer is the healthy labor market, and we should really focus on job growth to capture the turning point in this business cycle,” said Blerina Uruci, an economist at T. Rowe Price. The Labor Department will release data on July’s hiring and unemployment next week.

The lingering effects of the pandemic are making the economy’s signals harder to interpret. Americans bought fewer cars, couches and other goods in the second quarter, but forecasters had long expected spending on goods to fall as consumers shifted back toward prepandemic spending patterns. Indeed, economists argue that a pullback in spending on goods is needed to relieve pressure on overstretched supply chains.

At the same time, spending on services accelerated. That could be a sign of consumers’ resilience in the face of soaring airfares and rental car rates. Or it could merely reflect a temporary willingness to put up with high prices, which will fade along with the summer sun.

“There is going to be this element of, ‘We haven’t had a summer vacation in three years, so we’re just going to take one, no matter how much it costs,’” said Aditya Bhave, a senior economist for Bank of America. “The question is what happens after the summer.”

Avital Ungar is trying to interpret the conflicting signals in real time. Ms. Ungar operates a small business running food tours for tourists and corporate groups in San Francisco, Los Angeles and New York.

When restaurants closed and travel stopped early in the pandemic, Ms. Ungar had no revenue. She made it through by offering virtual happy hours and online cooking classes. When in-person tours came back, business was uneven, shifting with each new coronavirus variant. Ms. Ungar said demand remained hard to predict as prices rise and the economy slows.

“We’re in two different types of uncertainty,” she said. “There was the pandemic uncertainty, and then there’s the economic uncertainty right now.”

In response, Ms. Ungar has shifted her focus to higher-end tours, which she believes will hold up better than those aimed at more price-sensitive customers. And she is trying to avoid long-term commitments that could be difficult to get out of if demand cools.

“Every annual plan I’ve done in the past three years has not happened that way,” she said. “It’s really important to recognize that what worked yesterday isn’t going to work tomorrow.”

Lydia DePillis contributed reporting.

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U.S. Economy Shows Another Decline, Fanning Recession Fears - The New York Times
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Thursday, July 28, 2022

Yellen Says US Economy Is Not Seeing Recession Conditions Now - Bloomberg

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Yellen Says US Economy Is Not Seeing Recession Conditions Now  Bloomberg
Yellen Says US Economy Is Not Seeing Recession Conditions Now - Bloomberg
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Biden Helped by BofA’s CEO in Stressing Strength of US Economy - BNN

(Bloomberg) -- Bank of America Corp. Chief Executive Officer Brian Moynihan told President Joe Biden that American consumers remain in solid shape despite inflationary pressures that have wreaked havoc on the economy. 

“Right now, they’re doing what we want them to do, which is being employed,” Moynihan said Thursday during a White House meeting with other corporate executives to discuss the economy. “Some of the stresses in the system, there’s no discounting that, and we’re trying to help all those customers.” 

The Bank of America chief said Americans spent 10% more in the first 25 days of July compared with the same period last year and have ample savings. He credited financial rescue packages signed by Biden and former President Donald Trump as well as “strong employment” for mitigating inflation-related stress.

Still, Moynihan said Americans’ fears about inflation persist as they continue to pay high prices for consumer goods and rent.

“They’re worried about inflation because prices go up, they’re worried about rent increases,” he said. 

Earlier: Biden Counters GOP Recession Talk by Touting Job Gains 

Biden appeared to welcome the comments, after spending the day battling Republican claims the US has entered a recession, and following the release of disappointing economic data. The president and his team have argued the nation isn’t in a recession despite the economy shrinking for a second consecutive quarter, citing low unemployment, job growth and foreign investment. 

Biden thanked Moynihan “for always being available” to share his input on the economy. “Thanks for taking all my phone calls, pal,” he said. 

Moynihan said leisure spending remains steady even amid high gas prices, giving him confidence that American households are economically strong.

“They’re traveling and experiencing the world due to the vaccines and the condition of the Covid pandemic,” he said. The price of gas “is starting to come down as the price of oil stabilized.” 

Moynihan appeared virtually at Thursday’s meeting. He has participated in White House events on other occasions during Biden’s presidency, including a briefing on the war in Ukraine in March, as well as gatherings last year on cybersecurity and the federal debt limit. 

The CEO also attended White House events during Trump’s presidency. 

©2022 Bloomberg L.P.

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Biden Helped by BofA’s CEO in Stressing Strength of US Economy - BNN
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U.S. economy contracts, flashing signs of technical recession - The Globe and Mail

Treasury Secretary Janet Yellen delivers remarks during a press conference at the Treasury Department in Washington on July 28.Win McNamee/Getty Images

The American economy unexpectedly shrank for the second quarter in a row between April and June, triggering a fight among economists and politicians over whether the U.S. faces a full-blown recession, or simply a technical one.

Gross domestic product fell at a 0.9-per-cent annualized rate during the second quarter, the Commerce Department said in its advance estimate of GDP on Thursday. Economists polled by Reuters had forecast GDP rebounding at a 0.5-per-cent rate.

The second quarter estimate brings the total contraction of the U.S. economy in the first half of the year to 1.3 per cent.

Two consecutive quarters of shrinking economic output is often regarded as an informal sign an economy has toppled into recession, yet it’s by no means an official definition, a point President Joe Biden’s administration has gone to great lengths to emphasize in recent days.

Earlier this week Mr. Biden pointed to the overall health of the American economy to dismiss recession speculation. “God willing, I don’t think we’re going to see a recession,” he told reporters.

The White House earlier sought to get ahead of recession talk by putting out a blog post titled “How Do Economists Determine Whether the Economy Is in a Recession?”

Republicans have accused the administration of trying to redefine what constitutes a recession. “Reality check,” the Republican National Committee tweeted Thursday morning. “You can’t change the definition of recession just because you might cause one.”

On Thursday, Treasury Secretary Janet Yellen continued to hammer the administration’s message after the latest GDP release.

“Most economists and most Americans have a similar definition of recession,” she said, pointing to mass layoffs, business closings and family budgets under immense strain.

Threat to Canadian electric vehicle industry dissipates with U.S. Senate deal

“In sum, a broad-based weakening of the economy. That’s not what we’re seeing now,” she said.

The semi-official arbiter of when recessions begin and end in the U.S. is the National Bureau of Economic Research, which defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The NBER also considers a range of factors when assessing whether a slowdown meets the bar to be labelled a recession, including employment, incomes and consumer spending.

Many economists believe these other factors, in particular record-low unemployment levels, suggest recession talk is premature. For instance, during the first half of the year, American businesses added 2.7 million new jobs to their payrolls, even as the economy technically shrank.

“It’s hard to say the U.S. is in a recession when you have the tightest labour market in history,” said Beata Caranci, the chief economist at Toronto-Dominion Bank. “It doesn’t make sense.”

Ms. Caranci said the GDP report also carried a key reason for optimism in the details: American consumers have kept right on spending, despite punishing inflation rates.

Canada to enter ‘moderate and short-lived’ recession in 2023, RBC economists warn

Recession risks are rising but downturn not inevitable, economists say

During the second quarter, consumer spending rose 1 per cent on an annualized basis after inflation, with consumers shifting from buying goods to services. Spending on durable goods was down 2.6 per cent, while services rose 4.1 per cent, according to the BEA.

Yet other economists believe the drop in economic output during the first half of the year reflects an outright downturn.

“Do I call this a technical recession? No, this is a recession,” said David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee and now a professor of economics at Dartmouth College. “The only question now is how long does it last and how deep can it go.”

For Prof. Blanchflower, the evidence this is a real recession lies in the sharp drop in American consumer confidence as measured by both the U.S. Conference Board and the University of Michigan.

According to an upcoming paper co-authored by Prof. Blanchflower in which the authors examined nearly 45 years of consumer confidence and unemployment data, “consumer expectations of future unemployment are highly predictive of rising unemployment.”

In a draft of that paper released last fall, the authors wrote that the sharp drop in consumer expectations over the previous six months suggested “the economy in the United States is entering recession now, even though unemployment and wage growth figures suggest otherwise.”

Even if the U.S. economy isn’t in a full recession yet, many worry the foundations are crumbling fast.

“The U.S. economy has lost a lot of steam and is very vulnerable to a real recession,” said Sal Guatieri, senior economist at BMO Capital Markets. While he, too, doesn’t see a recession happening when employment levels are so high, he’s watching for any sign of weakening payroll employment. That would feed into an outright contraction in consumer spending, raising the possibility of a recession significantly.

At present, Mr. Guatieri said the odds of a recession are 50-50. “It’s a pretty close call whether the U.S. is in a real recession now,” he said.

If a recession has begun, it will be many months before the eight economists who make up the NBER’s business cycle dating committee declare it. The committee takes what it calls a “retrospective” approach to dating the peaks and troughs of business cycles, which means many months can pass before a recession start is formally announced – sometimes after a recession has already ended.

Even so, the technical two-quarter yardstick for recessions has an impressive track record. The last two consecutive quarters during which the U.S. economy shrank and an official recession was not declared occurred in 1947.

The question of whether this is a full-on U.S. recession or a technical one is more than semantics for Canadians. A recession would have a “huge spillover effect” on Canada because the U.S. is our main trading partner, Mr. Guatieri said.

While Canada benefits from elevated commodity prices and a relatively weak loonie compared with the U.S. dollar, “if the U.S. flips into a recession, most likely Canada will follow.”

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U.S. economy contracts, flashing signs of technical recession - The Globe and Mail
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Wall St gains on hopes of smaller rate hikes as economy shrinks again - Financial Post

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Wall Street’s major indexes reversed course to gain in early afternoon trading on Thursday, as a contraction in the U.S. economy for the second straight quarter raised expectations of a less aggressive monetary policy by the Federal Reserve.

Gross domestic product fell at a 0.9% annualized rate in the last quarter, the Commerce Department said in its advance GDP estimate. A Reuters survey had showed that the growth likely rebounded at a 0.5% annualized rate.

“The Fed will likely interpret this decline in real growth as confirmation to slow down the pace of rate hikes at the upcoming meetings,” Jeffrey Roach, chief economist for LPL Financial said.

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“Front-loading rate hikes eventually mean smaller hikes in the near future.”

Two consecutive quarters of declines in growth are traditionally considered a recession, but the private research group which is the official arbiter of U.S. recessions looks at a broad range of indicators including jobs and spending.

Market participants believe that even if the U.S. economy entered a recession, its effects would be mild.

“While it is certainly on the negative side of the estimates, a 1% decrease is relatively small and supports the idea that any recessionary environment will be mild,” said Mike Loewengart, managing director at E*TRADE from Morgan Stanley.

Markets have been rattled by worries of runaway inflation and aggressive interest rate hikes hurting economic growth, but comments by Fed Chairman Jerome Powell on Wednesday that he doesn’t believe the U.S. is in a recession on account of a stable labor market offered some relief.

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Wall Street also carried gains from the previous session when the U.S. central bank raised interest rates as expected and Powell eased some worries about the pace of rate hikes.

At 12:40 p.m. ET, the Dow Jones Industrial Average was up 222.25 points, or 0.69%, at 32,419.84, the S&P 500 was up 28.38 points, or 0.71%, at 4,051.99 and the Nasdaq Composite was up 56.89 points, or 0.47%, at 12,089.31.

Among individual stocks, Meta Platforms Inc fell 5.8% after posting its first-ever quarterly drop in revenue.

Qualcomm Inc fell 4.6% after warning of difficult economic conditions and a slowdown in smartphone demand could hit its mainstay handset chips business.

Shares of Apple Inc were trading flat, while Amazon.com Inc gained 0.3% ahead of their quarterly reports after market close.

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Rising interest rates have hammered shares of mega-cap companies whose valuations depend on future cash flow as it gets heavily discounted.

Defensive sectors, including S&P 500 utilities and real estate gained nearly 3% each, indicating a largely risk-off day of trading.

Ford Motor Co gaining 5.5% after reporting a better-than-expected quarterly net income.

Advancing issues outnumbered decliners by a 2.50-to-1 ratio on the NYSE and by a 1.32-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 31 new lows, while the Nasdaq recorded 49 new highs and 83 new lows. (Reporting by Aniruddha Ghosh and Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur)

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Wall St gains on hopes of smaller rate hikes as economy shrinks again - Financial Post
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A New Circular Economy Example: Closing The Loop For Poop - Forbes

Wednesday, July 27, 2022

As The Economy Weakens, Business Leaders Grow Fearful - Forbes

As the realization of stubbornly high inflation, paying more for less, a possible recession, an endless war in Eastern Europe, supply chain disruptions resulting in empty shelves and job cuts sink in, the United States may be entering the fear stage.

Working-class families worry about feeding their children. Young adults lament that they can’t afford the promised American dream of home ownership and starting a family. Only a year ago, the U.S. was reaping the benefits of economic prosperity. Now, 401(k)s, college funds for the kids and stock market investments have substantially plunged with no end in sight.

Emblematic of the mindset shift is what happened in the tech sector. After unbridled growth for over a decade, hiring thousands of well-paid professionals and offering them enticing amenities and perks, the party has abruptly ended. The end of cheap money is over due to the Federal Reserve Bank’s quantitative tightening and the government halting trillion-dollar financial stimulus programs.

You can see the results on LinkedIn, as thousands of newly laid-off tech workers post about their downsizing in pursuit of new jobs. Renowned venture capitalist Bill Gurley summarized the new landscape in an informative Twitter thread, stating that the “‘game on the field’ has changed.” During the economic boom, the tech companies “created a Disney-esque set of experiences [and] expectations.” Gurley added, “You can't ‘wish away’ the fact that if your company isn't cash-flow positive [and] capital is now expensive, you are living on borrowed time.”

Is Mark Zuckerberg Starting To Panic?

It’s been reported that fearful Meta, the parent company of Facebook, employees are expecting job cuts as high as 10%. Mark Zuckerberg, the imperial head of the once-invincible, social-media giant, said he would crack down on low performers.

Meta human resources chief Lori Goler struck a chord of fear, as she suggested in a memo that employees who couldn’t meet expectations in this new tougher environment may have to worry about the safety of their positions within the organization. Meta has been feeling the heat, as TikTok continues to steal market share.

The New York Post reported that Zuckerberg allegedly couldn’t maintain his composure when one of his employees inquired about vacation and personal days off during a meeting in which the CEO shared his plans for potentially letting go of underperforming workers.

The Wall Street Experts Sound The Alarm

You may recall the name Michael Burry from the book and film, The Big Short. He was one of the lone money managers to predict that the economy and stock market were in for a free fall. His reputation for making prescient market calls was cemented when the stock market crashed in the Great Recession.

Burry has been warning that the U.S. is in for another economic plunge, which would reverberate to the job market. Sensing that the White House is not owning up to the severe nature of the dilemma, he accused President Joe Biden of moving the goalposts on the definition of a recession (two consecutive quarters of contraction). Burry pointed out that Americans are using their credit cards to cover the high living costs. The high-interest rates on the debt will cause further concerns for the consumers.

His views are echoed in a new Maru public opinion poll, which found 57% of Americans are anxious over inflation’s impact on their financial situation, and 14% are experiencing a sense of fear, as they feel their lifestyle will decline.

Nouriel Roubini, chief executive of Roubini Macro Associates and teacher at New York University's Stern School of Business, said, “There are many reasons why we are going to have a severe recession and a severe debt and financial crisis.” Roubini, another expert who predicted the financial meltdown of 2008 and 2009, told Bloomberg, “The idea that this is going to be short and shallow is totally delusional. Today, we face supply shocks in a context of much higher debt levels, implying that we are heading for a combination of 1970s-style stagflation and 2008-style debt crises—that is, a stagflationary debt crisis.” He believes that U.S. stocks will most likely plunge lower and drop by 50%.

Walmart’s Warning

Walmart’s share price plummeted about 10% and its management cut its quarterly and full-year profit guidance. Walmart, the largest big-box retailer, is a bellwether for the economy. So it's alarming that one of the most successful U.S. companies that cater to working Americans is experiencing challenges.

As inflation hits a 40-year high and prices are uncomfortably rising, families are cutting back on their purchases. While they are buying necessities, such as food (which have low-profit margins), families are skimping on electronics and other items that don’t need to be bought at this time. The problem for Walmart and other retailers is that the profits are more substantial with the big-ticket items.

There are also concerns in an array of other sectors. For example, Wall Street is seeing fewer M&A, IPOs and deal-making activities. In addition, real estate faces headwinds as cash-strapped families can’t afford the higher monthly mortgage payments and are walking away from purchasing homes. Similarly, renters are not able to afford the rent in major cities.

Here’s Some Positivity

Famed Wall Street analyst Ed Yardeni offered some comfort. In a Bloomberg interview, the longtime securities analyst said the worst has passed for this bear market. The Yardeni Research president contends that the S&P 500’s plummet last month to a 3,666.77 low was most likely the bottom of the 2022 stock market rout. In addition, he points to the recent corporate earnings mainly looking solid, as American consumers continue to spend and there is still a high employment rate.

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Future Horizons: Visions toward Democratizing Our Economy - Non Profit News - Nonprofit Quarterly

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Editors’ note: This article is from the Summer 2022 issue of the Nonprofit Quarterly, “Owning Our Economy, Owning Our Future.


It’s thrilling to see how much interest there is in building democratic futures that center people, communities, solidarity, and ecology in our economic system. We (the coauthors of this article) have been engaged in just that for the past twenty-plus years. We have a close, wide, and deep perspective on the emergence of a more democratic economy. Indeed, we have some thoughts about the next horizon of that work.

For the past decade, the primary questions for those seeking to expand the democratic economy in the United States have focused on scale: “Are we capable of larger projects?” “Is it possible to scale elements like worker cooperatives, participatory budgeting, community land trusts, and nonextractive finance?”

Such questions are inadvertently limiting. We’ve known for years that the solidarity economy can scale, and yet too much energy that could have been channeled into developing it has instead been devoted to raising awareness and producing data about whether that leap is even possible. We don’t mean to imply that such efforts were fruitless. Indeed, compiling data along these lines was essential for garnering support among elected officials, government workers, foundation program officers, lenders, investors, and other power brokers new to the field and unfamiliar with the viability—let alone the imperative—of expanding the democratic economy as the path toward a just, sustainable, and equitable economy.

We suspect all this itching around scale and proof of concept is merely a proxy for implicit questions of vision. Put another way, curiosity about scale is one way of provoking debate about what we’re even hoping to build. What animates questions of scale may just be the provocation to share what it actually looks like when an economy serves and is accountable to people and communities by design.

The choices we make over the coming years will be critical to either hampering or catalyzing a democratic transition rooted in worker and community ownership and control. To be sure, we’re not suggesting that even a turbocharged transition would land us at such a vision a mere few years from now. Rather, a strategic, resilient, resourced, and supported network of leaders, institutions, and infrastructure might, over the next decade or so, create fertile soil for such transformations to take root and, ultimately, flourish.

What evidence is there for the viability of a democratized economy when so many of its elements across this country have languished as marginal “experiments” for generations? The problem starts as a discursive one. For half a century, cooperatives and our allies in the United States have oriented toward institutions of a democratic economy as an “alternative” to traditional American business as usual (dispossession, extraction, pollution, exploitation, and inequality). In this we include the leaders of such initiatives themselves. In the Black community—going on several generations now—we have used the language of “economic alternatives” for self-sufficient societies;1 only recently are some of our leaders agitating to shift from language that doesn’t presume to displace the exploitation of racial capitalism, which otherwise will ravage our people for what would become a fifth century.

Visions of a Solidarity Economy: Four Scenarios

Without a mindset that a robust solidarity economy is possible beyond a few marginalized projects, most of the key agents of change have not been positioned to offer a vision for transformative possibilities. And yet, so many parts of that vision are already present for us to observe. We could simply look beyond the United States as proof that a democratized economy can transform society. See, for example: Northern Italy’s Reggio Emilia approach, a primary instrument of early childhood education;2 Quebec’s forestry and EMT services, industrial mainstays for the region;3 scaled cooperative “guilds” of freelancers (primarily composed of artists and creatives) in Belgium and France;4 India’s Self-Employed Women’s Association, the country’s largest organizing means for women’s collective empowerment;5 and Argentina’s6 and the Basque Country’s7 worker cooperatives, engines of industrial output.

Even just within the United States, we can already track strong signals of the rise of a democratic economy at a scale that was difficult (but not impossible) to imagine back in 2012. In the last year, Philadelphia8 and parts of California (San Francisco,9 Los Angeles,10 and the East Bay11) have cleared their first hurdle to allocate money to establish public banks, the likes of which only previously existed for the state of North Dakota.

Puerto Rico has had a cooperative curriculum integrated into public schools (elementary and secondary) for decades, reaching tens of thousands of students. It is no accident that the island boasts more worker cooperatives than any U.S. state or territory other than California and New York.12 We are also seeing larger enterprises, thanks to the use of digital platforms: The Drivers Cooperative, for example, established in 2020 as a democratic rival to Uber and Lyft, recruited somewhere between 2,500 and 3,000 workers within a few months of its launch.13

What’s more, we are living in transformative times. In the midst and continuing effects of the still-raging COVID-19 pandemic and ongoing and ever-deepening racial, economic, and climate injustice, things that recently seemed like far-fetched alternatives now appear as the only path for resilience under unprecedented pressures. With the recent “Great Resignation”14 and a newfound labor militancy,15 workers across the country are increasingly choosing unions, cooperatives, and worker ownership as a way into the economy when they have no other alternatives.16 Young people, particularly attuned to the contradictions of our current system with the total amount of student debt load surpassing $1.6 trillion, are demanding that the debt be canceled.17 Housing shortages and unaffordability are stoking interest in—and organizing of—a new wave of permanent real estate cooperative land trusts and the Vienna model of green social housing18—as well as a retreat from expensive cities, scrambling demographics in unpredictable patterns. Heightened crises and consciousness provide a different set of political and movement-building conditions.

Even the government eventually mobilized in unforeseen ways in the wake of COVID-19. In 2020, we saw the financial tools of government briskly deployed. Everyday people got a taste of what the world’s wealthiest economies are capable of: unemployment benefits for most workers (including freelancers, for the first time), monthly child tax credit payments, stimulus checks, free COVID tests and vaccines even for the uninsured, and forgiveness of small business loans powered by the SBA and underwritten by banks and CDFIs. Indeed, these dramatic shifts in how public infrastructure intervened with visionary economic policy were so expansive that they also watered our little seeds of a solidarity economy. Thanks to the institution building and leadership development of the past decade, multiple democratic economy organizations were in a position to inform the drafting of the CARES Act and ensure that previous government obstacles were removed in order for cooperative economic constituents to receive economic rescue support. Three thousand or more co-ops of all types accessed Paycheck Protection Program (PPP) and/or Economic Injury Disaster (EIDL) loans, unlocking $1.2 billion in financial assistance to cooperative sectors and preventing countless co-ops from going under.19

All of this is evidence that we ought to seriously consider visions of what a more democratic economy might look like ten or fifteen years from now. Such visions are meant to provoke our action in the present— informing the choices we make now to shape our preferred future. It is in this spirit that we offer not one static vision but rather a glimpse of how a solidarity economy might show up in four very different scenarios.

Scenario 1

The World We Know: Obstruction

In a scenario without much further disruption and with current trends enduring, what might a more democratized economy look like by the mid-2030s? A “status quo world” could see a democratized economy stagnate.

It’s entirely possible that the government never becomes the partner we need in order to scale the democratic economy in the United States. In this future, by 2035 there has been a host of so-called “messaging” bills promoting public banks, regenerative economics, green social housing, and worker ownership introduced around the country, but few are ever enacted as law. In the executive branch, the Small Business Development Centers stubbornly resist changing the 7(a) SBA loan conditions that require a personal guarantee for every co-owner of a loan to cosign and put up collateral in order to access this federal business debt program. This effectively disbars cooperative and community-owned enterprises from tapping into federal programs and their cache of low-interest finance capital.

Perhaps the experimentation of the 2020s amounted to nothing fundamentally groundbreaking. A flurry of platform co-ops and legal and hybrid structures attempt to include more members in the democratized economy, but few of these models proliferate beyond marginal success. Even then, some of the previous decade’s innovations, particularly with LLC co-ops and nonprofit community land trusts, remain the last vestige of experimental new forms of economic solidarity. The United States misses an opportunity to foster learning and exchange with a growing international network building a democratic economy, and is ultimately left behind. Rather than growing steadily, ESOPs lose power under attacks from private equity.

Though they still outnumber worker cooperatives, that gap begins to narrow, and experiments with democratic ESOPs remain just that. Seeing little uptake in most democratized models, U.S. institutions, social movements, and everyday workers dispirited by the crushing momentum of extractive platforms, private equity, and the unified will of the billionaire class judge the solidarity economy to be esoteric and marginal.

Thankfully, even without institution building, communities respond to the ensuing economic crises with heroic and sundry mutual aid projects.

Scenario 2

The World We Know 2.0: Limited Progress

But there’s another direction in which a “status quo world” could go. What follows is a “best-case” scenario if the world we know persists.

Obstruction and marginalization aren’t inevitable. It’s possible that with a sound foundation of research and experimentation, the leaders, institutions, and infrastructure of the solidarity economy prove sufficient for some significant evolution. In this scenario, the impact by 2035 is impressive but uneven. Developments are clustered in certain sectors of the economy, and in specific regions of the country that either already had a strong local ecosystem or leadership and infrastructure friendly to experimentation, innovation, and resourcing of new approaches to economic problems.

Here, the establishment of public banks has proven to be impactful, unlocking capital for both a proliferation of worker- and community-owned enterprises and large-scale innovations in social housing, green retrofits, and post-carbon energy democracy. Young politicians have found ample support to test out community benefit agreements, permanent real-estate cooperatives, tuition-free public colleges, universal child care programs, and democratic municipal energy and broadband utilities in progressive cities. Historical strongholds of worker- and consumer-owned cooperatives like Ohio, California, Western North Carolina, southern Wisconsin, New England, the mid-Atlantic, and the Pacific Northwest grow fivefold. Worker co-ops grow from about one thousand firms in 2022 to five thousand, thanks to a burgeoning ecosystem of cooperative leaders, technical assistance providers, business leagues, employee ownership centers, and community development organizations. Eighty percent of the growth in the field is concentrated in these places, but the standout case is Colorado.

The Centennial State, a nascent ecosystem in 2020, by 2035 becomes a beacon of innovation for models of employee ownership. Leadership from the Rocky Mountain Employee Ownership Center, Amicus Solar,20 a new Colorado State Chapter of the United States Federation of Worker Cooperatives (USFWC), and iconoclastic lawyers, organizers, and politicians open the way for a wave of legal experimentation in the democratic economy. This leads to cohorts of platform co-ops, refugee- and immigrant-owned co-ops, and multistakeholder co-ops, including those with easy pathways for investor classes. The state and local governments partner with these experiments, forming public acquisition funds to purchase business assets and eventually sell them from founders to workers or community owners. Not every experiment is a success, but Colorado’s confluence of leaders, institutions, and infrastructure over a period of fifteen years pioneers a dozen breakthrough strategies that make it the home of more worker-, platform-, and community-owned cooperatives than any other state—surpassing even Massachusetts, New York, and California.

Perhaps the biggest realization among the existing community of solidarity economy practitioners is the importance of protecting and defending the gains and infrastructure built during the first third of the twenty- first century. With increased visibility, the associations, coalitions, and federations of new economy organizations band together with renewed solidarity. Together, they commit to funding their own membership organizations, including representing the field in the media and legislative spaces—and against attacks from traditional corporate firms that have fallen out of favor among a shifting consumer base expressly concerned with a sustainable post-capitalist future.

Scenario 3

The World Shaken Up: Collapse

Of course, rather than continuity of a stable status quo, volatile (in some cases violent) disruption is all but certain. What remains speculative is the nature and valence of change, the extent of it, and its impact on prospects to democratize the economy. An upheaval of this elevated magnitude could spin in a positive or negative direction, but turmoil of some flavor is coming and bears some consideration.

Since 2022, it was easy enough to sense the multitude of disturbances on the horizon—problems poised to overwhelm existing systems—but it wasn’t easy to pinpoint any single upset that would lead to collapse. It could have been catalyzed by any one or combination of wicked climate conditions, rise of militarized surveillance and authoritarianism, unaccountable financial and fossil fuel corporations, monopolistic concentrations of capital and intellectual property, new waves of racial justice uprisings and subsequent fascist backlash, ruinous debt, a compounding housing crisis, and a new flux of human migration in response to droughts, floods, famines, heat waves, wars, and public health outbreaks. Each compounding crisis hollows out the working class and further fractures workers and communities, leading to a tipping point.

The burden on communities is fatiguing. Nonetheless, our crisis-response systems within the solidarity economy and its ability to fill in the cracks (including co-ops for this purpose) offer some respite to the many left behind by a rapacious economic system. Worker-directed nonprofits, land trusts, community practices like participatory budgeting, and employee-owned businesses are resilient enough that disorder does not lead to our ecosystem’s total demise. Democratic economic institutions that survive do so because they meet a community need or solve a pressing problem.

When energy and food systems, labor conditions, and “social institutions” collapse, we eventually see a substantial turn to a solidarity economy, even if in all but name. Overwrought systems of control and consolidation evoke interest in mutuality as a countervailing force. In the 2020s, this was initially very weak, but by 2030 small efforts demonstrate potential to grow and thereby potential to rebuild a set of institutions and infrastructure to nurture a new solidarity economy.

However, this growth in mutual economic activity, catalyzed as it is by exclusion and opposition, and taking place amid the collapse of mainstream institutions, does not have political support—at least not initially. Only over time does a political party and even a movement begin to grow around the principles of solidarity economics. A new generation of politicians centers the question of democratizing the economy and explicitly works to counter corporate power and consolidation of ownership. A political program begins to form under very difficult conditions.

Scenario 4

The World Evolved: Transformation

As Arundhati Roy said at the beginning of the pandemic, “It is a portal, a gateway between one world and the next.”21

Along with the racial justice uprisings and the climate crisis, the early 2020s force us to more fundamentally reckon with ourselves and our relationships to land and work. This leads to a watershed of abolitionist modalities—land back, reparations, transformative justice, worker power, community ownership, social housing, just transitions, renewed global solidarity—which we use to step through the portal. While these practices start in the cracks and margins, as crises intensify and people need the answers to how they and their communities are going to survive, they blossom into genuine and necessary alternatives.

As above, a new generation of politicians centers the question of democratizing the economy and explicitly works to counter corporate power and consolidation of ownership. They lean in hard with political will and some power—and the leaders, institutions, and infrastructure of the democratized economy are there to meet them, inform their vision, and help their impulse take shape into a political program.

This scenario is different from the others in two critical ways: first, the institutions of government and the economy don’t reach a point of collapse; second, the will of the people to democratize the economy continues to grow. They can’t be ignored as they unionize, build their own institutions, elect new politicians, and demand a stronger and more accountable role for the public sector in providing for the needs of people and communities.

After workers at Starbucks and Amazon teach us that we have the power to take on the owning class and win, grassroots labor strategies go viral across the board. Government partners with the democratic economic institutions to meet real needs, bringing resources and regulatory powers to support the growth of care cooperatives, social housing, and food systems. The Department of Labor’s platform cooperatives division supports that growth. Alongside union drives at corporate retailers across the country, platform co-ops are able to offer gig workers genuine pathways out of precarity toward ownership, benefits, and community. The Small Business Administration’s shared ownership division dedicates debt and even equity pools for cooperatives. The Department of Transportation undertakes infrastructure projects in partnership with the solidarity economy sector and prioritizes cooperatives in procurement. It funds robust institutions to meet community needs more efficiently, and the economy is democratized at many levels.

How We Get There

These speculative visions are intended to give some texture informing how the work of organizing for a democratic economy will play out within the context of broader trends and drivers of change. But it remains true that the future is still fundamentally open to us to continue to plan and shape. We can and should always approach the work from the starting place of an aspirational vision that can orient our collective strategies.

An honest assessment of the current state of economic democracy in the United States leads us to conclude that we are, per the scenarios above, currently toggling between Obstruction and Limited Progress, in a world that is on the brink of Collapse by several metrics. So how do we get to Transformation? Specifically, how do we use the tools of policy to remove obstacles and foster democratic economic organization throughout the U.S. economy?

Our strategy encompasses three interdependent strands. First, we must create access to—and parity across— democratic economic forms. Second, we aim to unlock advantages and unique supports for broad-based ownership. Third, we contend for power within the larger economic system to displace undemocratic, exploitative, and wealth-concentrating forms and practices. Each strategy has its own logic and tactics, but this is not an either-or proposition—it is a both-and approach. To be effective at creating the conditions we know to be possible, we must do all three things.

Access

Access to existing institutions of support is the first ask. Parity with conventional forms of small business and individual ownership is simply a matter of fairness for all actors in a diversified economy. Worker cooperatives should be able to access SBA 7(a) loan programs without a personal guarantee. Credit unions should be able to do business lending above the current 12.25 percent cap that effectively kneecaps them from competing with banks. MBA programs should include courses on broad-based ownership. Unions should be able to associate, organize, and collectively bargain free of interference, intimidation, and reprisal.

The frame is simple: economic institutions with shared ownership based in democratic values exist and deserve access, too. The tactics are relatively straightforward: use data and numbers to show that we exist, and framing to make the case that we should be included. Persuade validating institutions—trade associations, think tanks, educational institutions, the media—to bring us under the mainstream umbrella. Ultimately, this is a numbers game: there are enough of us, and we generate enough revenue or employ enough people or provide enough services that you should acknowledge we exist and include us in your supports.

The modest accomplishment of the Main Street Employee Ownership Act (MSEOA) was precisely this.22 It served to alert the Small Business Administration that employee-owned businesses exist, and directed it to make programs available to worker co-ops. Including worker cooperatives in eligibility for PPP funds by temporarily waiving the SBA requirement for a personal guarantee was another example of parity.23

Both recent advances were critically important; they were also wholly inadequate for removing the obstacles faced by shared ownership forms. At the mercy of mainstream institutions for inclusion, broad-based ownership forms will always be vulnerable and marginal. Democratic economic institutions risk looking like inferior businesses, stuck forever trying to prove our legitimacy, instead of the powerful human-centered engines of community resilience we know them to be. Depending on the prevailing political winds, our options within this frame range from indifferent acceptance to uncomfortable alliance to cute window dressing.

Advantage

A stronger way forward is to shift the frame: position democratic economic institutions as an active solution where others have failed, and then craft policy that creates advantages based on those strengths. Anywhere in the world the economy has democratized at scale, it has been because advocates successfully made the case that shared ownership plays a unique role in meeting public needs and therefore should access unique public supports.

The frame is ambitious: cooperatives and other mutual forms solve problems better than profit-maximizing forms can, and in some cases better than the public sector can (or is willing to). The tactics are sophisticated: articulate a clear vision; undertake demonstration projects; develop a policy strategy to leverage the success of values-driven, community-serving, and democratically-controlled shared ownership strategies; and start making friends. We can show how broad-based ownership forms meet worker and community needs both more effectively and holistically. Allies in the industry, sector, or place already doing advocacy around the issues that cooperatives address can help make the case.

The U.S. Department of Treasury’s inclusion of employee ownership provisions in implementation of the federal State Small Business Credit Initiative (SSBCI) constitutes an acknowledgment that conversions to employee ownership are a real solution to the problem of business closure, and should therefore have dedicated access to capital. California’s pending “Expanding Employee Ownership Act,” which would provide funding for education, technical assistance, and other supportive resources for conversions, employs the same logic, as do state-funded employee ownership programs.

The key here is to include cooperatives and other democratized economic forms in initiatives to solve real problems, and to do that we cannot focus on cooperatives or employee ownership or land trusts alone; we must focus on the problems they solve best, and build relationships with communities and organizations already working on those issues.

In 2022, there are clear and pressing unmet needs in whole sectors where profit-maximizing models have proven a poor fit, left gaping holes in the social safety net, and actually weakened the economy. These include child care, home care, elder care, transit, the arts, job creation for excluded workers, and business- owner retirement. For example, Cooperative Home Care Associates provides better care because its worker- owned company provides better jobs; this is why they and their partners have access to substantial workforce development funding to train home care workers. United Taxicab Cooperative of San Diego, a project of United Taxi Workers of San Diego that was incorporated in 2021, is building its business model around providing affordable and ethical “last-mile” transit to hospitals that are not consistently served by corporate ride-hailing services, and is exploring an anchor contract with the city.24 Rapid response cooperatives provide income pathways for excluded workers, who are also often essential workers—this is why multiple cities and counties are funding their development.

Meeting needs is not the heavy lift—the challenge is building the ecosystem that can stand up to predatory competition. Cooperatives are designed to meet member and community needs: they spring up where a need is not being met, and they often meet that need better than profit-maximizing businesses can. Sadly, there has been a trend of cooperatives building a market that is later captured by corporate actors. You have cooperatives to thank for access to healthy foods and coworking spaces, both now almost entirely controlled by corporate giants. This evolution was not inevitable, but it is what happens when we fail to recognize and make the argument that some economic forms are better suited to meeting some needs and providing public goods and therefore should be privileged, supported, and incentivized to grow. It’s what happens when we limit our ask to access and don’t press for advantage.

Cooperative advocates often point to “the cooperative advantage.” Local, state, and federal governments can recognize this advantage by giving cooperatives and other democratic economy forms specific preferential treatments in procurement, contracting, licensing, and access to affordable capital, among many other elements of business.

Power

Ultimately, we want to make the case that democratic economic institutions must contend for power and aim to change the economic system overall. Accepting that we exist and granting access to existing programs is a start. Acknowledging that we do some things better and therefore conferring some advantages is progress. But the policy work that will ensure the long-term democratization of the economy should aim to realign public investments, supports, and commitments to serve human and community needs, not outside investors.

The frame is expansive: our vision understands democratic economic institutions as one piece of a much larger strategy to build power. This cannot be accomplished alone. A transformative approach requires a great degree of active, functional solidarity that connects high-road solutions to broader demands to limit extractive practices and police bad actors. Shared ownership advocates must see ourselves as part of a labor movement, a fair housing movement, a movement to change how capital flows, and immigrants’ rights and racial justice movements. We work together in a strategic, coordinated way with base-building and member- serving organizations. Our asks are grounded not just in the cooperative advantage but in what will benefit whole workforces, industries, and communities.

Some examples: when home care cooperatives partner with the National Domestic Workers Alliance to advocate for better conditions and raising the minimum wage for all home care workers, and point to their own cooperatives as an example that good jobs in the industry are possible; when the National League of Cities promotes shared ownership strategies to its members as part of a community resilience strategy; when labor, cooperative, and immigrants’ rights advocates inform the California Department of Labor’s priorities to unlock millions of dollars for shared entrepreneurship strategies for excluded workers. None of these efforts are exclusively about specific models but rather about democratizing the economy writ large and working together to create the ecosystem of support that business, economic, and community development projects will use to do so.

There is a sequencing question here. We may seem to be implying that you start with aiming for access and build up to advantages and power—but we think this would be a mistake. In fact, we see the process as iterative: all three strategies must be operative at all times, in varying proportions. As gains are made in one area, possibilities open up in another and build to bigger opportunities.

***

Back in the latter part of the twentieth century, when democratic economic institutions conceived of themselves as an “alternative,” there wasn’t much of a policy ask. Our world—the worker cooperative sector—operated with a general indifference and even occasionally an understandable hostility to government. The implicit vision was that the alternative could grow to displace undemocratic economic institutions. This seemed feasible under different conditions than today’s. There was space for an alternative to survive and even thrive that simply doesn’t exist under the totalizing institutions of late capitalism. But in 2022, to be solely an alternative is to be able to spot your own demise right over the horizon.

To respond to these multiple overlapping crises with clarity of vision is to choose to survive and to thrive. Our explicit vision is for an economy in which all people have access to ownership and control of the institutions that sustain us—work, land, home, care, education. This is not a utopian vision. It is not an alternative. It is possible. And it is necessary. There is no shortage of crises to address, and democratic economic institutions thrive in times of crisis. Our challenge—to ourselves and to you—is first to assert this vision and aim for embedding it in policy, and then to get to work building the relationships of active, functional solidarity that will help bring this vision to reality.

Notes

  1. Jessica Gordon Nembhard, Collective Courage: A History of African American Cooperative Economic Thought and Practice (University Park, PA: Pennsylvania State University Press, 2014).
  2. Carolyn Edwards, Lella Gandini, and George Forman, , The Hundred Languages of Children: The Reggio Emilia Approach to Early Childhood Education (Norwood, NJ: Ablex Publishing Corporation, 1993).
  3. See “Presentation,” Québec Federation of Forestry Cooperatives, accessed May 18, 2022, fqcf.coop/wp-content/uploads/English.pdf.
  4. See “What is Smart?,” Smart, accessed May 18, 2022, be/wp-content/uploads/2019/02/What_is_smart.pdf.
  5. Shalini Sinha, “Supporting Women Home-Based Workers: The Approach of the Self-Employed Women’s Association in India,” WIEGO Policy Brief (Urban Policies) 13, Women in Informal Employment Globalizing and Organizing (March 2013), wiego.org/sites/default/files/publications/files/Sinha-Home-Based-Workers-SEWA-India-WIEGO-PB13.pdf. And see “Introduction,” Self-Employed Women’s Association (SEWA), Bhadra, Ahmedabad, India, accessed May 19, 2022, www.sewa.org/.
  6. Peter Ranis, “Factories without Bosses: Argentina’s Experience with Worker-Run Enterprises,” Labor: Studies in Working-Class History of the Americas 3, no. 1 (Spring 2006): 11–24.
  7. Imanol Basterretxea Markaida, “Sources of Competitive Advantage in the Mondragon Cooperative Group,” Jennifer Martin, in Basque Cooperativism, Current Research Series No. 6, Baleren Bakaikoa and Eneka Albizu, eds. (Reno, NV: Center for Basque Studies, University of Nevada, Reno, in conjunction with the University of the Basque Country, Universidad del País Vasco/Euskal Herriko Unibertsitatea, 2011), researchgate.net/profile/Imanol-Basterretxea/publication/259357225_Sources_of_competitive_advantage_in_the_Mondragon_Cooperative_Group/links/00b7d52b2b862bab5f000000/Sources-of-competitive-advantage-in-the-Mondragon-Cooperative-Group.pdf.
  8. In March 2022, the City Council passed legislation initiating the process to create the Philadelphia Public Financial City Council, City of Philadelphia, Legislation, Bill No. 210956-A02, March 3, 2022, phila.legistar.com/LegislationDetail.aspx?ID=5346357&GUID=00DC3873-9635-4513-BC58-F25D00A8C90D.
  9. In June 2021, the San Francisco Board of Supervisors began the process of drafting a business plan and bank charter See “SF Supes Approve Plan To Create First Public Bank In U.S.,” CBS News Bay Area, June 15, 2021, sanfrancisco.cbslocal.com/2021/06/15/sf-supes-approve-plan-to-create-first-public-bank-in-u-s/.
  10. In October 2021, the Los Angeles City Council began the process of drafting a business plan and bank charter See “LACityClerk Connect,” Council File: 19-1235, October 5, 2021, cityclerk.lacity.org/lacityclerkconnect/index.cfm?fa=ccfi.viewrecord&cfnumber=19-1235.
  11. In March 2022, Alameda County allocated $75,000 to Friends of the Public Bank East Bay for planning activities. See “Supes To Give $75K To Help Plan Public Bank for East Bay,” California Public Banking Alliance, April 6, 2022, californiapublicbanking alliance.org/news/supes-to-give-75k-to-help-plan-public-bank-for-east-bay/.
  12. Government of Puerto Rico, “Departamento de Educación promueve cooperativas juveniles en las escuelas,” Departamento de Educación, San Juan, Puerto Rico, October 13, 2019, pr.gov/noticias/departamento-de-educacion-promueve-cooperativas-juveniles-en-las-escuelas/; and 2021 State of the Sector: Worker Cooperatives in the U.S (San Francisco, CA: Democracy at Work Institute and Philadelphia, PA: United States Federation of Worker Cooperatives, 2021), institute.coop/resources/2021-worker-cooperative-state-sector-report.
  13. “The Drivers Cooperative: A ridehailing platform owned by workers, not billionaire founders and venture capital,” Wefunder, accessed May 26, 2022, com/driverscoop; Drivers steer our company.,” The Drivers Cooperative, accessed May 19, 2022, drivers.coop/; and Kate Conger, A Worker-Owned Cooperative Tries to Compete With Uber and Lyft,” New York Times, May 28, 2021, www.nytimes.com/2021/05/28/technology/nyc-uber-lyft-the-drivers-cooperative.html.
  14. Ian Cook, “Who Is Driving the Great Resignation?,” Harvard Business Review, September 15, 2021, hbr.org/2021/09/who-is-driving-the-great-resignation.
  1. “It’s Time to Renew Labor Militancy,” Teamsters Local 237, City Employees Union, accessed May 19, 2022, local237.org/about-237/presidents-biography/from-the-president/793-its-time-to-renew-labor-militancy120.
  1. Cook, “Who Is Driving the Great Resignation?”
  2. Jacqui Germain, “The Debt Collective Day of Action Urges Biden to Cancel Student Debt,” Teen Vogue, April 4, 2022, com/story/debt-collective-day-of-action.
  3. See, for example, the work of the Urban Homesteading Assistance Board (UHAB) in New York City: “Our Impact,” Urban Homesteading Assistance Board (UHAB), accessed May 19, 2022, uhab.org/about-us/impact/; and Daniel Aldana Cohen and Mark Paul, “Memo: The Case for Social Housing,” Data for Progress, November 2, 2020, dataforprogress.org/memos/the-case-for-social-housing.
  1. NCBA CLUSA, “At NCBA CLUSA’s 2021 Annual Membership Meeting, lifting up the cooperative identity,” National Cooperative Business Association, CLUSA International, May 11, 2021, coop/blog/at-ncba-clusas-2021-annual-membership-meeting-lifting-up-the-cooperative-identity/.
  1. See “We help values-driven solar companies grow stronger and thrive,” Amicus Solar Cooperative, accessed May 19, 2022, amicussolar.com/.
  2. Arundhati Roy, “The pandemic is a portal,” Financial Times, April 3, 2020, ft.com/content/10d8f5e8-74eb-11ea-95fe-fcd274e920ca.
  3. Steve Dubb, “Historic Federal Law Gives Employee-Owned Businesses Access to SBA Loans,” Nonprofit Quarterly, August 14, 2018, nonprofitquarterly.org/employee-owned-businesses-sba-loans/.
  4. “Housing Cooperatives and the Need Certification for PPP Loans,” Armstrong Teasdale, January 27, 2021, armstrongteasdale.com/thought-leadership/housing-cooperatives-and-the-need-certification-for-ppp-loans/.
  5. Lilly Irani et , Transportation for Smart and Equitable Cities: Integrating Taxis and Mass Transit for Access, Emissions Reduction, and Planning (San Diego: The Design Lab at UC San Diego and United Taxi Workers San Diego [UTWSD], August 2021); and “Agenda: Meeting of the San Diego Metropolitan Transit System Taxicab Advisory Committee,” Metropolitan Transit System (MTS), July 15, 2020, www.sdmts.com/sites/default/files/071520_final_meeting_packet.pdf.

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