The Cheddar Path | A blog about economics, politics and personal finance
This book, detailing the events surrounding Chicago’s Republic Windows and Doors company, looks really interesting and I’m planning on checking it out as soon as I can get a copy.
“I think they’re absolutely right… what’s happening to them is reflective of what’s happening across this economy.”
–President Barack Obama on the workers at Republic Windows & Doors
December 5, 2008: It wasn’t supposed to work like this. Days after getting a $45 billion bailout from the U.S. government, Bank of America shut down a line of credit that kept Chicago’s Republic Windows & Doors factory operating. The bosses, who knew what was coming, had been sneaking machinery out in the middle of the night. They closed the factory and sent the workers home. Then something surprising happened: Republic’s workers occupied the factory and refused to leave.
Kari Lydersen, an award-winning “Washington Post” reporter, tells the story of the factory takeover, elegantly transforming the workers’ story into a parable of labor activism for the 21st century, one that concludes with a surprising and little-reported victory.
I’ve set a personal goal for myself to start setting aside money specifically for opening a Roth IRA retirement account to invest in socially responsible companies. Contrary to what you may hear from Wall Street, I think it’s possible to invest in companies that are practicing solid environmental, labor and human rights policies and also make money for yourself. The rest of the world seems to be catching on to this as well, as the socially responsible investing, or SRI, market is booming. Predictions point to the SRI market in the US reaching $3 trillion by 2011.
However, I’ve realized that to make the best decisions, I have to step my game up and educate myself about investing. Here’s some dope books that I recommend:
The First Book of Investing: The Absolute Beginner’s Guide to Building Wealth Safely, by Samuel Case
A good beginner’s guide for people with no prior knowledge so you can learn what the hell terms like mutual fund, closed end fund, stock, preferred stock, bonds, notes, futures and options mean.
The SRI Advantage: Why Socially Responsible Investing Has Outperformed Annually, by Peter Camejo
The late great Peter Camejo and his homies use a lot of evidence and data to make the case for not only why SRI is more ethical, but why it actually beats the competition and is going to make you more money in the long term.
Investing with your Values: Making Money and Making a Difference, by Hal Brill; Cliff Feigenbaum; Jack A. Brill
A good companion to SRI Advantage that goes in depth about the different SRI strategies and activities out there like social screening, shareholder activism and community investing.
I know a lot of you are probably thinking that reading books about investing is right next to pulling teeth on your list of things you want to do. On the other hand, like it or not, we all have to face investment decisions at some time or another. Our education system has failed to provide education on investing for the public good, so why not take a few nights out the week to get up on this stuff? It just might make a difference in the world, and make you a little richer.
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Several months ago, I opened an online checking account with Charles Schwab, and I have to say, they’ve got a great thing going on. Let me be clear: in these times of financial crises and corporate banking bailouts paid for with tax dollars, I think our privatized, corporate banking system is at the heart of much of our financial problems. Regardless of politics, though, there’s a lot of reasons to hate the huge banks strictly from the standpoint of a consumer and customer service.
I can’t stand fees. Getting charged fees for stupid things that you shouldn’t be charged for is whack. I use another bank’s ATM, I get charged a fee. I travel in another country and use my debit card, I get charged an international fee. If I don’t maintain a minimum balance in my account, I get charged a fee.
Why would companies that make millions and billions in profits and get bailed out by the government and the people’s tax dollars continue to nickel and dime their customers, the people that sustain them and that they depend on? To hell with them, I say.
A better option I’ve found for myself, is to set up two checking accounts. One is Charles Schwab’s High Yield Investor Checking. No ATM fees, no international fees, no minimum balances, and I’ve tested this out myself. The account is completely online, so you don’t go to a physical bank building to withdraw money from your account. Instead, once you sign up and they send you your VISA debit and ATM card, you simply use your card at any ATM anywhere and any fees that you get charged with by the ATM or bank is reimbursed into your checking account at the end of the month. No more of having to go to your specific bank branch because you can only withdraw money from those ATMs or face getting charged a fee from another bank or the ATM at the store down the block from you. You also receive a small amount of interest on your checking account, so they’re actually paying you. Much appreciated, Chuck. Furthermore, they open a brokerage account for you that can be linked to your checking account, so if at some point you want to start investing or open a retirement savings account, you can easily transfer money between your checking and brokerage (and gain access to a wide range of socially responsible investment funds that support companies who are adhering to strict environmental regulations and have great track records for labor relations and human rights).
Second, I’d open another checking account at a local credit union or community bank. Past articles show that The Cheddar Path loves credit unions. They are nonprofit organizations that are owned by their members, so any profits they make aren’t used to pay shareholders or for stupid, risky ventures like all that derivatives trading and predatory lending we’ve been hearing about in the headlines that have contributed to this whole global financial crisis thing. Plus, I like the security of knowing that if I need to cash a check asap, I can just go to my local credit union or community bank that I have an account with and get it done instead of having to send the check to Charles Schwab who deposits it into my account in 2-3 business days (I get my regular paychecks direct deposited into my Schwab account, but when you need to cash or deposit another check, Schwab gives you pre-paid envelopes that you put the check in and send to them). Furthermore, from a community based economics perspective, banking with a credit union means that you are helping people in your local community get mortgages or loans.
Bam, there it is. Screw the big banks if they continue to nickel and dime their customers. The folks at Charles Schwab seemed to know this, as do the credit unions and community banks. Shouldn’t we support them with our dollars, instead?
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A recent SF Chronicle article describes how the decline in printed newspaper revenue has some proposing that newspapers move to a nonprofit model in which they establish an endowment to fund their operations as well as receiving direct donations. Basically, an endowment is a large amount of money that is invested by a foundation or a nonprofit organization into things like the stock market, real estate, etc. The interest collected from such investments then goes back into the foundation or nonprofit organization to fund their work.
Proponents of this idea say that endowments “would enhance newspapers’ autonomy while shielding them from the economic forces that are now tearing them down.”
Conversely, critics say, “endowments also could beholden newspapers to their large donors, and giving newspapers tax-exempt status could restrict them from endorsing candidates and running editorials on pending legislation” (since nonprofit organizations have restrictions placed on them in terms of engaging in politics).
We know that becoming a nonprofit organization does not “shield you from economic forces,” as the system of philanthropy we have now is very much tied to corporate America.
I’m not entirely opposed to this idea of nonprofit newspapers, but I think it misses the larger point highlighted by the current situation.
We’ve all heard the gloom and doom stories about how the rise of internet use has led to less money being made by newspapers and other printed media. The fact we don’t hear highlighted in conjunction with this, though, is that newspapers are still in fact running a profitable business. They are still making money, just not as much as they used to. In terms of figuring out ways of making more money to offset losses, it appears that revenue from advertising on their websites is not cutting it.
I’ve got an idea for how newspapers can regain their prominence: produce quality information again. I think a large reason why people are migrating to the internet to get most of their information is because they can do their own research and investigation to try to get to the truth of relevant issues. Newspapers used to provide a level of rigorous investigatory journalism that produced quality information for the public good. Take the media’s role in the Watergate Scandal back in the ’70s, for instance. Since then, it seems that the media has toned down their level of relevant, investigatory journalism (which is chronicled really well in the book, End Times: The Death of the Fourth Estate). This is probably due to the level of corporate interests that own the major media outlets and are intertwined with the government.
I think overall, the public is not entirely trustful of the mainstream media’s reporting. I don’t know if newspapers will be able to regain that trust, but I think focusing on producing the best quality stories for the public good that deserve to be paid for will be a good start.
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Ralph Nader, arguably America’s most visible consumer advocate of the last few decades, wrote a great piece on CounterPunch recently detailing why credit unions seems to be faring much better than the corporate, commercial banks during this economic recession.
The opening passage is pretty insightful and summarizes the situation:
“While the reckless giant banks are shattering like an over-heated glacier day by day, the nation’s credit unions are a relative island of calm largely apart from the vortex of casino capitalism.
Eighty five million Americans belong to credit unions which are not-for-profit cooperatives owned by their members who are depositors and borrowers. Your neighborhood or workplace credit union did not invest in these notorious speculative derivatives nor did they offer people “teaser rates” to sign on for a home mortgage they could not afford.
Ninety one percent of the 8,000 credit unions are reporting greater overall growth in mortgage lending than any other kinds of consumer loans they are extending. They are federally insured by the National Credit Union Administration (NCUA) for up to $250,000 per account, such as the FDIC does for depositors in commercial banks.
They are well-capitalized because of regulation and because they do not have an incentive to go for high-risk, highly leveraged speculation to increase stock values and the value of the bosses’ stock options as do the commercial banks.
Credit Unions have no shareholders nor stock nor stock options; they are responsible to their owner-members who are their customers.”
This is really interesting information that, if spread, could push more folks to park their money in a local credit union or community bank given the bleak economic forecast. The results speak for themselves: in the absence of strong government regulation (clearly our situation), the large, corporate banking institutions have clearly showed how irresponsible they are with the people’s money. Becoming a member of your local credit union seems to be a much safer solution for the people. On top of that, it’s the easiest way to localize your finances, in terms of making sure that your money is not only working for you, but strengthening the well-being of your local community.
That being said, I honestly have to follow my own advice and open up a checking/savings account with my local credit union (I’m currently still banking with a large corporate bank). The information in Nader’s article is all the more reason to do so.
An interesting article in the SF Chronicle recently described how in spite of the dismal current economic situation, investors adhering to certain Muslim principles have somewhat insulated themselves from the markets’ suffering and have actually made a profit. The article points to many reasons for why this might be, and one in particular really got my attention: “Islamic compliance also precludes investing in things Muslims are expected to avoid, like pornography, tobacco, alcohol and gambling.” So, Muslim investing basically applies social criteria to screen out companies that are involved in industries in disagreement with the Muslim faith. Furthermore, that strategy has proved profitable.
I’m really becoming interested in socially responsible investing, or SRI, and this example of Muslim investing complements what a growing number of investors have realized over the last several years: socially responsible investing allows people to invest according to their values and does not sacrifice financial performance; in fact, studies show that SRI actually outperforms the market (see: The SRI Advantage: Why Socially Responsible Investing Has Outperformed Financially; essential reading for anyone interested in SRI.).
Whether you are adhering to your faith or simply don’t want to invest in companies with histories of environmental or human rights abuses, a growing body of data shows that this strategy isn’t just good for your conscience, it’s good for your wallet. The SRI market has grown tremendously over the last few decades, and I’m sure will continue to grow as more people become concerned about the environment and other social issues and apply those concerns to their investing habits.
Recently, after receiving $25 billion in federal bailout funds, Bank of America hosted a meeting with members of the business community and conservative activists to discuss sending “large contributions” to groups trying to defeat the government’s proposed Employee Free Choice Act, which would make it easier for workers to join unions. So, Bank of America is using our tax dollars to stop a bill that would help grow the middle class and put more money in the pockets of hard working Americans? Sounds pretty shady to me.
Think what you want about labor unions, but the fact is that across the board, from industry to industry, union job wages are on average 15% higher than non union wages, as well as being beneficial for a host of other reasons.
It’s hearing about stories like these that really make me want to stop supporting the huge commercial banks. I currently bank with one of them, but am strongly considering moving my money into a credit union or community bank, which is much more beneficial to my local economy. MSN has a great article laying out all the benefits of going with a credit union.
Members of Congress have recently introduced the Trade Reform, Accountability, Development, and Employment (TRADE) Act, in the face of rampant outsourcing of US jobs overseas, a growing US trade deficit, and continual public opposition to current trade agreements such as NAFTA and GATT. Rep. Mike Michaud, D-Maine, a chief House sponsor, says that under this new legislation, the United States would have “trade agreements not written for multinational investors” but instead “written for working families and for our communities.”
It’s also impressive to look at the broad base of support the bill has, from organized labor to environmental groups to human rights and fair trade advocates.
The bill has a long way to go to get passed, but Presidential hopeful Barack Obama is apparently supportive of the legislation.
The time to renegotiate NAFTA and GATT is long overdue, so this bill looks like a strong step in the right direction.
The Wall Street Journal (WSJ) recently conducted an experiment in which a group of consumers were tested on how much they would pay for products they knew were produced with ethical standards versus without such standards. Contrary to popular belief that all people care about is low prices, their findings showed that people are willing to pay more for products made by socially responsible companies, and thus being socially responsible is highly profitable! This may not be news to a lot of people, but I found the article interesting in terms of the conservative WSJ conducting a scientific experiment centering around corporate social responsibility.
Economist and lawyer Michael H. Shuman has written extensively on many of the subjects discussed in this site, such as social entrepreneurship, progressive philanthropy and community based economics. Some of my favorite articles of his are:
“Profits for Justice” and “Why Do Progressive Foundations Give Too Little To Too Many?”
Recently, Shuman has shifted his focus to community based economics, specifically a movement to support locally owned businesses he calls the “Small-Mart Revolution.” He makes some great points why it is in society’s best interest to do so. In the face of rampant globalization and growth of multinational corporations, he points out that the majority of the US economy is still comprised of small, locally owned businesses (about 58%). Furthermore, those businesses are much more beneficial to local communities because they keep dollars circulating within that community (they buy materials from other local businesses, they use local lawyers and accountants, etc.). This means more people supporting their community through making money, spending money, and generating tax revenue. What is so ridiculous then, is how local governments (and the federal government for that matter) have pushed policy that unfairly favors the large corporations instead of the locally owned businesses that are strengthening the community and contributing more to the tax base. Local governments actually use tax dollars to pay companies like Wal-Mart to come to town, all in the name of “economic development.”
What’s interesting to me is the realization that small, locally owned businesses are (dare I say it) very socialist enterprises in a sense, while these large multinational corporations are the real capitalists.
The Small-Mart Revolution thus aims to promote a much more progressive model of economic development centered around empowering people to take their communities back. Shuman’s ideas are articulated in his book, The Small-Mart Revolution: How Local Businesses are Beating the Global Competition. Check it out! Better yet, head over to booksense.com, find a locally owned bookstore in your area, and buy it from there!
Also, much of Shuman’s ideas are summarized in an interview he did that is posted on youtube. It’s about 28 minutes but he makes some great points and throws out some compelling research.