Toward a New Economic Model: Vermont Aims for More Local, Sustainable System

Sunday, November 10, 2013
Norwich — Under our present economic system, Vermonters, like residents of other small states, suffer.

Under the present system, local assets are flowing out of the state, only to be returned at a higher cost. Capital that could be building Vermont businesses is flowing to Wall Street. Government funds are being siphoned off by the largest national banks to the detriment of local institutions and taxpayers.

The Norwich-based Donella Meadows Institute is one of a number of groups and agencies in Vermont making those arguments — and trying to change things.

They are working to move the state in the direction of a new economic model that uses a public bank, local investments and alternative currencies, and draws on networks of residents, businesses, nonprofits and government to build a more sustainable quality of life.

“We’re on a new frontier in Vermont, and a lot of us are focusing on the economic system that has the most impact on our sustainability,” said Marta Ceroni, the director of the Sustainable Economies Program at the Donella Meadows Institute. “Unless we reform the old, mainstream economic system, which benefits the strongest and largest with its economy of scale, it’s going to be hard for Vermont to be sustainable.”

Changing Vermont’s economic system is a big job and requires a coordinated effort from key players in the state’s essential sectors of energy, food, forestry and transportation, said Ceroni, who has a doctorate in forest ecology from the University of Parma, Italy, and has spent 10 years as a research professor at the University of Vermont’s Gund Institute for Ecological Economics. She also has been working for a number of years to promote sustainable economies in Vermont and New Hampshire through her participation in the New Economy movement. She joined the Meadows Institute last year.

“Right now, we have all the ingredients and vision in Vermont, but there is no shared agenda. All the sectors are working with separate agendas. There are great ideas out there, but we need to bring them all together under (an umbrella) network of networks.”

When author and economist Michael H. Shuman spoke to about 100 people at the Building A Local Economy program last month at the Chandler Music Hall in Randolph, he had 10 suggestions for creating a new economy in Vermont, a state he said had an advantage over other states because of its size and ability to focus on key factors.

Among the suggestions: create a state stock exchange; offer tax credits for local investments; change state laws to allow pension funds to invest in solid local businesses, create financial co-ops, credit unions and land trusts; allow co-ops and community investment funds; and start a public bank.

“Rather than occupying Wall Street, the key is to divert Wall Street,” Shuman said during the program.

“At a minimum, this (state) bank should place state surplus funds — yet-to-be-expended tax collections or transfer payments — on deposit with local banks and credit unions to enhance their lending capacities,” Shuman said.

A Town Meeting petition campaign to call on the Legislature to establish a public bank is being spearheaded by Washington County Sen. Anthony Pollina and Gwendolyn Hallsmith, executive director and founder of Global Communities Initiative based in Montpelier.

In addition to helping state-chartered banks and state businesses, the bank also would benefit towns and cities by providing lower borrowing costs and higher interest rates on deposits, a news release about the petition says.

Smaller, local banks aren’t able to handle deposits that amount to hundreds of millions of dollars a day, so Vermont has to send those funds to large, out-of-state national banks, which invest the money in Wall Street, Hallsmith said in an interview last month.

“A public bank would be able to help local banks underwrite their lending capacity, and also would help fund and coordinate existing agencies that are already lending funds to small businesses,” she said.

The Vermont public bank, which would accept deposits only from state and local governments — not from individuals or businesses — would be modeled after the Bank of North Dakota, the only state-owned bank in the country.

The North Dakota bank was established in 1919 and typically returns 70 percent of its earnings to the state. In 2009, during the national banking crisis, the state bank delivered a $30 million dividend to public coffers.

Establishing a public bank in Vermont like the Bank of North Dakota is estimated to generate about $80 million in additional revenue a year for the state’s general fund. That’s the amount of interest the state pays on bonds that a state bank would be able to issue, supporters say.

During an interview last year with Vermont Public Radio, Pollina said Vermont’s practice of sending money out of state doesn’t make good business sense.

The banks on Wall Street “couldn’t care less about Vermont or Vermonters. … We could keep the money in Vermont, where we would have more control over it and therefore more of it would be invested in the state,” he said.

The proposed state bank came before the Legislature last year but met with resistance from banking interests.

Supporters are hoping that the Town Meeting petitions and getting the backing of community banks will encourage action by the lawmakers in the upcoming legislative session.

The proposal doesn’t require a lot of new money, only the consolidation of the state’s lending institutions — the Vermont Economic Development Authority, the Vermont Housing Finance Agency, the Vermont Student Assistance Corp. and the Vermont Municipal Bond Bank — into one entity.

Lawmakers also would have to grant a bank license and indicate how the state’s assets would capitalize the bank.

One of a number of areas where Vermont is making great strides toward a local economy is the Farm to Plate program, which was created by the Legislature in 2009, Ceroni said.

The program is a 10-year strategic plan to increase economic development and jobs in Vermont’s food and farm sector and improve access to healthy local food for all Vermonters, the legislation says.

An economic impact analysis showed that every 5 percent increase in the production of locally grown food translates to at least $213 million in additional annual output and 1,700 new jobs, according to the Vermont Sustainable Jobs Fund, which oversees the program.

“Farm to Plate is amazing, and it’s the core program of the organization. They had 20 groups when they started, and now they have 300 groups,” Ceroni, of the Meadows Institute, said.

About 60,000 Vermonters are now employed in the state in farming, cheese making, as vintners, brewers and bakers, in restaurants and other aspects of the food sector, Rachel Carter, communications director at the Jobs Fund, said in an email last week.

In the period from 2007 to the second quarter of 2012 — the latest figures available — food sector jobs in Vermont increased by 1.2 percent while other private sector jobs decreased by 2.4 percent. During the period, a net of 304 new food businesses and 709 new food-related jobs were created, bringing the sector to about 60,000 workers in the state, Carter said.

New figures will be out in April that may show more directly how the Farm to Plate program is paying off.

Some of the other areas that are moving the state toward a new economy include:

∎ The Working Lands Enterprise Initiative, which was created by the Legislature last year and provides more than $1 million a year to stimulate economic develop on behalf of Vermont’s agriculture and forestry industry.

∎ The Harvest Use Initiative, a collaboration between government agencies and forest products businesses to take advantage of emerging market demand for Vermont-grown and sustainably harvested wood.

∎ The Flexible Capital Fund, a socially responsible investment, provides flexible risk capital to Vermont food, renewable energy, waste management and environmental technology companies. The Flex Fund can offer loans creatively structured somewhere between equity investments and traditional loans.

∎ The Clean Energy Development Fund, which has a goal of increasing the development and deployment of cost-effective and environmentally sustainable electric power resources — primarily with respect to renewable energy resources, and the use of combined heat and power technologies in Vermont.

And the state is already moving toward a more inclusive way to evaluate how the economy is working.

As an alternative to gross domestic product, the state’s economic system will be gauged by the “genuine progress indicator,” endorsed last year by the Legislature.

The indicator is a double-entry bookkeeping method that looks at the economic well-being, assessing costs and benefits of such factors as the environment, commuting and leisure time, which are not included in the GDP, author and political science professor Eric Zencey said in an interview earlier this year.

The Donella Meadows Institute is taking a guiding role in the move toward establishing a new economy in Vermont — “helping to educate, organize and facilitate change toward regional economies that reflect people’s values for community and the environment,” Ceroni said.

The Institute was founded by Donella H. “Dana” Meadows, a pioneering environmental scientists who taught at Dartmouth College for 29 years before her death in 2001 and was a MacArthur Fellow and a Pew Scholar. In addition to the Institute, started in 1996, Meadows also founded Cobb Hill, an organic, sustainable farm community in Hartland.

The new economy movement needs leadership and cohesion, Ceroni said, adding that the Meadows Institute not claiming that leadership role.

“Agencies can’t do that, or government. Nobody can really claim that position. It will come out of the networks and key players will begin to work for the same agenda. There’s a whole science of how to collaborate.

“We want to stay loyal to our priorities of changing the system and establishing the networks that will work collectively,” she said.

Warren Johnston can be reached at wjohnston@vnews.com or 603-727-3216.