Lula da Silva keeps his promise: Amazon deforestation reduced by 64%

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The deforestation of the Amazon rainforest has been in action for years, risking the collapse of the unique ecosystem. But the election of Lula da Silva as president in early 2023 brought hope. He announced that he would put an end to the deforestation of the Amazon. He seems to be keeping his promise as, compared to November 2022, deforestation in the Amazon fell by 64% in November 2023.
The Amazon rainforest is one of the largest carbon reservoirs on earth. This makes it particularly important in the fight against climate change. Despite this, illegal deforestation persists. This was especially evident under the right-wing nationalist ex-president Jair Bolsonaro. During his time in office, rainforest deforestation increased by around 75%.
The current president, Lula da Silva, promised to stop deforestation when he took office – and it looks like Silva is keeping his promise. Compared to the previous year, deforestation fell by 64% in November 2023. According to the Brazilian Space Agency (INPE), around 200 square kilometres were destroyed. This is the smallest area since the evaluations began. It is also the first time since 2018 that less than 10,000 square kilometres have been deforested in one year.
“Brazil is ready to resume its role in the fight against the climate crisis and protect all ecosystems, especially the Amazon. Our government once managed to reduce forest destruction by 80 per cent. Now let’s all fight together for zero deforestation!”
FIRST SUCCESSES AFTER JUST 6 MONTHS: RAINFOREST DEFORESTATION DOWN BY 33.6 PER CENT
After six months in office, the BBC report initial successes in the fight against deforestation. Compared to the first half of the previous year, deforestation has been reduced by 33.6%. In June 2023, 41% less forest was destroyed than in the previous year. Brazilian Environment Minister Marina Silva attributes this to Lula’s successful environmental policy.
LULA’S POTENTIAL TO REDUCE DEFORESTATION BY 89%
Lula’s goal of ending deforestation by 2030 is a major challenge. This is because deforestation reached alarming proportions under his predecessor Jair Bolsonaro. The new conservation plan published by President Lula at the beginning of June 2023 aims to achieve this goal. Among other things, it provides for the confiscation of half of all illegally used land within protected areas, as well as higher penalties for illegal deforestation.
The Brazilian president also calls on other countries – especially the rich West – to contribute financially to saving the “green lungs of the Earth” in order to combat the global climate crisis.
A study attests that Lula’s plans have the potential to actually reduce deforestation in the Amazon by 89%. In any case, Lula will not have an easy time of it. The left-wing president still faces a conservative majority in parliament.
UNDER BOLSONARO, THE AMAZON SHRANK BY MORE THAN TWICE THE AREA OF VIENNA – PER MONTH
This is sorely needed, as the Amazon has been badly affected in recent years. When Lula first moved into the presidential palace in 2003, he launched an ambitious programme to save the rainforest. He and his successor Dilma Rousseff, who like Lula comes from Brazil’s left-wing Workers’ Party, succeeded in reducing deforestation by 80% to a historic low. But when Bolsonaro came to power in 2019, Brazil made a U-turn in its environmental policy.
Bolsonaro willingly granted concessions to allow corporations to clear the rainforest for soya and palm oil cultivation, cattle breeding and mining. Illegally cleared areas were legalised by Bolsonaro and forest fires were only half-heartedly combated. Deforestation increased sharply by 70 per cent under his government.
FOR THE FIRST TIME, THE AMAZON EMITS MORE CO₂ THAN IT CAN CAPTURE
Under Bolsonaro, the Amazon’s carbon footprint has turned around. For the first time, it is emitting more CO2 than it can bind. This was revealed in a study by researchers from the French National Institute for Agronomic Research. The scientists mainly analysed satellite data documenting the plant biomass in the rainforest and its deforestation. The result: the Amazon basin released around 16.6 billion tonnes of CO₂ into the environment, but only absorbed around 13.9 tonnes. This 2.7 billion tonne difference is roughly Austria’s consumption for 35 years.
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WITHOUT A WELL-PRESERVED AMAZON RAINFOREST, THE ENTIRE ECOSYSTEM COULD COLLAPSE
The Amazon currently has a perfectly functioning water cycle. Inland regions actually have too little rainfall for a tropical rainforest. But the trees suck the groundwater upwards, it evaporates and rains down again over the huge forest area. This cycle could be permanently disrupted by further deforestation. The rainforest would slowly die off, turn into a savannah and change the climate around the world.
This process would release as much CO2 as the entire world consumes in seven years. The unique ecosystem, which is home to 10% of all species, would be irretrievably lost and with it the CO2-binding effect of the rainforest. Scientists assume that this tipping point is reached at a deforestation rate of 20 to 25%. We are currently at 18%.
ANTI-DEFORESTATION RAIDS AFTER TAKING OFFICE
Just a few days after taking office, Lula’s government took action and carried out controls in the rainforest against illegal deforestation. As reported by Reuters, checks were carried out in areas that are all within the Cachoeira Seca indigenous reserve, where deforestation is strictly prohibited.
While deforestation is decreasing, the number of fires continues to rise, as satellite monitoring shows. Whether this is due to natural causes or arson cannot be determined.
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Finland is successfully fighting homelessness – despite new political developments

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No more homelessness – a goal that sounds like utopian fiction may become reality soon. The “Housing First” concept in Finland, supported by NGOs like the Y-Foundation, is aiming towards the end of homelessness in 2027. In a new interview, Juha Kahila, Head of International Affairs at the Y-Foundation, talks about the implementation of “Housing First”, new developments in politics and his hopes for the future.
The “Housing First” project in Finland is still successfully reducing homelessness. Those affected by homelessness receive an apartment and additional support without any preconditions. The result: The number of people without housing is decreasing steadily since the 80s. In 2022, there were 3,686 homeless people in Finland, which is 262 less than in 2021. The aim is to end homelessness in Finland by 2027. We’ve already reported on this in a previous article.
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New developments on “Housing First” in Finland
A key stakeholder in the Finnish fight against homelessness is the Y-Foundation. The NGO has been providing housing for the homeless since 1985. It is now one of the sponsors of the “Housing First” policy in the country. It organizes housing and is the fourth largest landlord in Finland. Today, it manages 19,000 apartments throughout Finland. 7,000 of these apartments are specifically for homeless people or people who are about to become homeless.
In a recent interview Juha Kahila who works as Coordinator and Lead Coordinator of the National Housing First Development Network at the Y-Foundation is talking about the process of “Housing First”. He gives detailed information about the financial benefits of the housing project and explains the role of the Finnish government in the realization of this concept.
A new development is the election of a conservative government in 2023. Kahila believes that the success of “Housing First” is depending on whether the new government is cutting certain social benefits. But he is still hopeful that the goal of ending homelessness can be achieved. Furthermore, he thinks that organizations and political decision-makers in other countries can be inspired by the project and that this will help the countries greatly in the long term.
Interview with Juha Kahila from the Y-Foundation about the implementation of “Housing First” in Finland
Kontrast.at spoke to Juha Kahila about the successful Finnish concept and the Y-Foundation. He has been involved in helping the homeless for over 10 years and worked at the Finnish Youth Housing Association services (NALPA) before becoming its CEO. He later moved to the Y-Foundation, where he now works as Head of International Affairs. You can read the interview in German here.
Juha Kahila (Photo: Juha Kahila:Twitter)
Mr. Kahila, what does the process of the allocation of housing look like? How does a person approach you and how long does it take to get an apartment?
Juha Kahila: First of all, before a person becomes homeless, most people have already tried a lot to prevent this. If someone still loses their apartment, they can consider – together with one of our social workers – what the best housing solution and form of support is. In other words, whether it should be a single apartment with occasional support or a “Housing First” unit, i.e. an apartment in a “Housing First” complex where help is available around the clock.
At the moment, we can provide both housing and support very quickly. Only if someone wants to live in a specific “Housing First” unit they may have to wait longer for an apartment. But many people want to wait in temporary accommodation anyway and that is always possible.
Social benefits begin to flow immediately. Depending on the person’s situation, we also consider appropriate job opportunities. For example, the “Housing First” units offer low-threshold employment provision themselves.
The Y-Foundation always works together with other agencies. We provide the housing. Support, advice, social services and other services are then provided by the welfare districts and other organizations.
Common rooms – and even a sauna: This is what the “Housing First” houses look like
What do these apartments or houses look like? Are they spread throughout the city?
Juha Kahila: The apartments are mainly quite ordinary. 80 percent of the apartments are scattered around the city. The rest are in “Housing First” units, each with around 33 to 100 apartments in one building and support services on the ground floor. The apartments are equipped with a fridge, oven, etc. The residents furnish the rest themselves so that they feel at home. In the “Housing First” units, there are also communal areas where people can cook, watch TV together or just meet and chat.
Housing First Unit Väinolä in Espoo, Finland. (Foto: Y-Foundation, zVg)
There are certainly people who say it is unfair that many people have to spend a large part of their income on housing, while others simply get it “for free”. What do you say to them?
Juha Kahila: The answer is that housing is a human right. If that’s not enough of an argument, we explain that it actually saves money to provide housing in this way – and to avoid people having to sleep in emergency accommodation or on the street. We explain that the city is also safer for everyone if we really take care of everyone.
Besides, nothing is given away for free, people pay rent for their apartments. Of course, in the early stages most of them pay their rent through various social benefits. But a permanent home gives them the chance to contribute more again.
You and the Y-Foundation say that it is cheaper for the state to provide housing for the homeless than to have them remain in their situation. What does this calculation look like?
Juha Kahila: It’s true that ending homelessness saves money in the long run. The reason behind this is that people don’t have to use expensive emergency services. They spend fewer nights in prison, they less often need police or legal services and so on. In Finland, we have calculated that the savings are around 15,000 euros per person per year if they get housing instead of being left in shelters or on the streets.
Once people have a home and the help they need, the resources that are needed for the other shelters and services are freed up. In addition, homeless people become taxpayers again in the long run – but we haven’t even included that in our calculation.
Overall, the effects are multifaceted. We studied this in Finland and there are studies worldwide that show the same result: It is always cheaper to house people with support than to leave them in emergency shelters or on the streets.
The initiative for “Housing First” came from the Finnish government
In Finland, there is a lot of political support for the “Housing First” approach. How did this come about – who convinced whom?
Juha Kahila: The “Housing First” model was inherently a political decision in Finland. It worked differently here than in many other countries, where organizations and other stakeholders had to explain to politicians why it makes sense. In Finland, politicians had to convince the stakeholders! With carrots and sticks, so to speak.

The politicians said: We want to change the system. If you are on board, we will help you with the renovation of the apartments. If you’re not on board, we won’t buy the accomodation you provide. So, there has been a ‘gentle push’.

However, we currently have a government that wants to cut social benefits and build less affordable housing in the future. Of course, this presents us with challenges. But we are not despairing, we are working with the tools we have.
What about other countries: Do NGOs or political representatives come to you to learn from your experience with “Housing First”?
Juha Kahila: Yes, we get several hundred visitors every year and many of them are political decision-makers: Ministers, mayors and EU decision-makers. In addition, many groups come and get inspiration for their own work.
Do you know of any comparable international projects?
Juha Kahila: There is currently great work on this in Denmark and Austria and I believe that this will benefit the countries greatly in the long term.
No one should be homeless by 2027 – Helsinki wants to achieve this goal by 2025
The Finnish government wants to eliminate homelessness completely by 2027. Will that work out?
Juha Kahila: That depends on the decisions of the current government. If not all the cuts are implemented, I firmly believe that it will be possible to end homelessness by the end of 2027.
Helsinki has an even more ambitious goal: the city wants to end homelessness by the end of 2025. They also have an excellent program, so this goal can also be achieved.
Are there also criticisms of “Housing First” and if so, from whom?
Juha Kahila: Sometimes, yes. Mostly from people who think that “Housing First” is only about housing and who don’t realize that other forms of support are an essential part of the model. Of course, we all need to do a better job in the future to reduce these prejudices.
What motivates you personally to work at the Y-Foundation?
Juha Kahila: The foundation really wants to change the world and is taking concrete measures to do so. Reducing homelessness worldwide is a goal that I can easily and happily support. We want to do everything we can to ensure that one day everyone has a home.
Is there a story of a person that you particularly remember and would like to share?
Juha Kahila: I used to be a social worker and worked with a young man for several years. At some point, he no longer needed support and was ready to live independently. This fall, after several years, he suddenly called to let me know that he had become a father and that he really wanted to tell me about it. The thought of that always makes me smile.
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Historic decision forces corporations to pay minimum of 15% tax globally

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Multinational corporations such as Amazon, Facebook and Apple will now have to pay a minimum global tax of 15%. Even hiding their profits in tax havens won’t help. They will have to pay tax where they generate their profits, not where they produce or where they have their fictitious headquarters. This has been agreed by 138 countries after years of negotiation. This global tax is now coming into force – a “reform of the century” on the road to fair taxation.
OECD countries and the G20 nations have been negotiating global tax justice for more than ten years. In 2021, 138 of the 141 countries agreed on a two-pillar reform; a minimum tax rate of 15% and a tax shift away from the place of production to the place where profits are made. The regulation will come into force in January 2024.
The basic idea is simple. If profits in tax havens are taxed at a higher rate, it pays less for companies to shift their profits there. This won’t only effect stereotypical tax havens such as the Caribbean islands, where there is often no corporation tax at all. Tax havens within the EU, such as Ireland with 12.5% corporation tax or Hungary with 9%, are also set to be hit.
“The principle of paying taxes where profits are generated is gaining acceptance and a common tax rate of 15 per cent puts a stop to destructive downward tax competition,” says Evelyn Regner. The MEP (Social Democratic Party of Austria) has been campaigning for fairer taxation of corporations at the European level for years.
Despite criticism that China and the USA are not on board, and that a global tax rate of 15% is too low, there has never been a comparable regulation before.
“For the first time in the history of taxation, states are being given the right to tax profits generated in other states according to agreed rules,” write tax experts Prof Dr Deborah Schanz and Dr Ulrike Schramm.

A MINIMUM TAX RATE OF 15 % COULD BRING IN AN ADDITIONAL 220 BILLION DOLLARS
The minimum tax rate will apply to all groups with an annual turnover of more than 750 million euros – regardless of whether the parent company or only one subsidiary is based in an EU member state. This affects around 7,000 to 8,000 companies worldwide and, according to OECD calculations, is likely to generate around 200 billion dollars in additional taxes.
For Austria, the tax office is expecting 100 million euros in additional revenue from 2026. According to economist and head of the tax department at the Vienna Chamber of Labour, Dominik Bernhofer, this could even amount to 200 to 300 million euros per year. In the long term, it could be even more, as there will be less profit shifting and tax competition. Together with his colleague Professor Matthias Petutschnig from the University of Vienna, Bernhofer looked at 19 of the largest Austrian companies. These include the cardboard group Mayr-Melnhof, banks such as Erste Bank and Raiffeisen, Vöst and Andritz. According to them, these 19 companies alone would have to pay a good 130 million euros more per year.
AUSTRIAN PEOPLE’S PARTY REPEATEDLY OPPOSED TRANSPARENCY DIRECTIVES AT EU LEVEL
Conservative and liberal governments in Europe have been resisting tighter taxes for corporations for years. The Irish government, for example, once declared that it did not want Apple to pay any back taxes, even though this would be necessary under EU law. Austria’s Austrian People’s Party (ÖVP) finance ministers are also taking part in the blockade games. Back in 2018, the then ÖVP Finance Minister Löger blocked tax disclosure by large corporations at EU level. His predecessor Schelling – also ÖVP – also blocked the EU’s planned financial reporting obligation for large corporations in 2016.
The Austrian parliament decided in 2019 that Austria should campaign for more transparency and tax disclosure, no matter who is finance minister in the future. Despite this decision, Austria abstained from another vote at EU level in 2021, once again preventing a push for greater tax transparency. The Finance Minister at the time was Gernot Blümel (ÖVP).
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Colombia strengthens regional economies and promotes cooperation instead of competition

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Latin America is emerging as the place to look for alternatives to the neoliberal economic system. In Colombia, the Gustavo Petro led government has spent the last year restructuring the previously isolated sector of small businesses and cooperatives. Petro wants to shift away from this model, and into a solidarity-based system. 
The German-language Latin America news portal amerika21 reports that the establishment of a solidarity sector is intended to promote small domestic companies in Colombia. These companies include coffee producers, food vendors, artists and small businesses in the construction sector. The Colombian government has already initiated solidarity-based associations of micro-businesses in eleven regions, with a total of 33 of these projects planned. At a year-end meeting in Ibagué, 3,200 organisations celebrated the development of the solidarity economy in the country.
NEW ECONOMIC APPROACH: COOPERATION INSTEAD OF COMPETITION
The co-operatives, small businesses and small-scale farmers in the eleven regions have joined together to form so-called circuits. This means that, based on the interactions between their products and services, the businesses have also formed cross-sector networks. For example, the “Circuit for Industry, Trade and Tourism” has been created in the northern department of La Guajira and the “Circuit for Tourism and Renewable Energies” in the desert region of Tatacoa.
In the “Solidarity Network of Coffee” (Cafesol) in the department of Huila, small coffee farmers can now join forces instead of competing against each other.
PETRO WANTS TO FAVOUR COOPERATIVES FOR CONTRACTS
Last year, the government department for solidarity organisation in Colombia launched a project to create a solidarity sector. Initially, the department organised local meetings on the topic of the solidarity economy, where small-scale farmers, cooperatives and micro-enterprises could get to know each other and exchange ideas. Entrepreneurs were then trained to take on leadership positions in an educational programme. This enabled existing cooperatives to be strengthened and new cycles to be established.
President Gustavo Petro emphasises the strategic importance of the solidarity sector for the economy in Colombia:
“We want associations of small shopkeepers alongside the financial cooperatives. We want associations of small potato farmers who join forces to obtain subsidised loans so that they can begin the light industrialisation of their products.”
In addition, 30% of state contracts will no longer be carried out by large companies in future. Rather, they will be taken by joint co-operatives. This applies to projects such as road construction. The mergers of small companies therefore make it possible to complete larger contracts, which in turn generates more profit for the sector.
SOLIDARITY-BASED ECONOMY INSTEAD OF NEOLIBERALISM
The Colombian government under the presidency of Gustavo Petro shows that there are alternatives to the neoliberal model. Instead of emphasising competition, the economy is to be geared more towards a principle of solidarity by promoting the cooperative sector. The project suggests that it is possible to strengthen the local economy with the help of small businesses and cooperatives. With the development of a solidarity-based sector, small businesses can be maintained and further developed collectively.
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Complete success for the 4-day week in South Africa: 90% of companies want to keep it

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South Africa has become the latest in a long list of 4-day week trialists. Here, the test run was a complete success. Not only the employees, but also over 90% of participating companies want to keep the reduced working hours with the same pay. This is in line with the global trend. However, one small detail distinguishes the African country from previous tests – very few South Africans want to have Fridays off.
The test of the 4-day week in South Africa has been running since 1 March 2023. 28 South African companies and one company from Botswana took part. Most of them are in the IT, finance and recruitment sectors. But how exactly does a study like this work?
Essentially, employees only work four days a week instead of five, do the same work and receive the same salary. Unlike in most previous trials, each employee in the 29 companies was allowed to choose their own day off.
As in the previous tests, the results are consistently positive, both for the employees and for the companies.
RESULTS: LESS STRESS & BURNOUT AND MORE JOB SATISFACTION
After around six months, the first results are now available. These are similar to the results of trials already carried out in other countries. The employees report that they were:
– less stressed
– sick less often
– enjoyed going to work more than before the trial
The mood of trialists had also improved at home as a result of the reduction in working hours. The frustration and stress normally induced by a long week were not taken home from work.
The participating companies are also satisfied, as productivity has remained the same. In the long term, it could even increase as a result. This is because staff turnover fell during the test phase, i.e. fewer employees left the company during this time. This means that the company’s expertise and experience is retained.
Around 92% of the participating companies plan to retain the 4-day week. However, there is one peculiarity that distinguishes South Africa from fellow trialists. While employees in other countries mostly want Fridays off, it is not so clear in South Africa. Only around a quarter of them took Fridays off.
TEST OF THE 4-DAY WEEK IN SOUTH AFRICA IS PART OF A GLOBAL SERIES OF EXPERIMENTS
The study is part of a whole series of tests being carried out by the non-profit organisation “4 Day Week Global”. It has already been successfully implemented in several countries around the world, including Australia, Spain, Japan, the UK and Iceland. The results have been consistently positive.
Iceland is one of the first countries to de facto introduce the 4-day week following a successful test. The reduction in working hours is already a reality for almost 80% of Icelanders.
THE 4-DAY WEEK IN AUSTRIA?
In contrast to South Africa, a 4-day week test has yet to be carried out in Austria. Nevertheless, there are already some companies that have switched to the 4-day week on their own. For example, the Upper Austrian IT company Tractive. A detailed list of companies that have already opted for shorter working hours in Austria can be found here:
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Fairer Taxes and Inheritance for all: The economic Plans of Star Economist Piketty

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Thomas Piketty is probably the best-known economist of our time. In his works, he presents proposals on how we can make our economy and society fairer and more democratic. Pikettys economic plans include more economic co-determination, fairer taxes and a stronger welfare state. We have collected his most important demands and show what he stands for.

DISTRIBUTING PROSPERITY MORE FAIRLY
The entire history of mankind is characterized by great inequality. A few people own the majority of the wealth, the rest share what remains. This small group of people is not only extremely wealthy, but also largely controls politics and the economy. Star economist Thomas Piketty wants to change this. He has developed reform proposals that distribute the wealth of our society more fairly and make our lives more democratic. The most important pillars of his reforms are economic co-determination, fairer taxes and a stronger welfare state.
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PROFIT INTERESTS USUALLY DECISIVE IN THE WORKPLACE
We spend a large part of our lives at work. While we make democratic decisions in almost all areas of life, there is hardly a trace of democracy in the workplace. In almost all companies, the owners alone make the decisions and employees have to follow suit. At most, they have a say. This is a particular problem because owners and employees often have completely different interests. The workforce wants good, stable jobs that will enable them to provide for themselves and their loved ones in the long term. Owners are primarily interested in profits. Everything else is secondary.
This contrast is particularly extreme in the case of large stock corporations. Shareholders are rarely involved in the work of the company and are often scattered all over the world. Their interest in the company is limited to how much money they can make with their shares.
MORE CO-DETERMINATION CAN MAKE COMPANIES MORE SUCCESSFUL
Piketty wants employees to have a say in their company. They should have half of all voting rights in large companies. If the owners want to change something in the company, they must therefore negotiate with the workforce. If the workforce has new ideas, they can push them through with the support of one vote from the owners. Piketty argues as follows:
Nothing guarantees, for example, that shareholders are more likely than employees to be able to manage a company or invest more in the economic project in the long term. Often enough, the opposite is true: an investment fund can get in and out of the company in the short term, while the employees have generally invested a significant part of their lives, energy, knowledge and skills in it.
In addition, unlike shareholders, employees often live in the vicinity of the company. If the company operates in an environmentally damaging way or if many employees suddenly resign, this has a direct effect on the lives of the employees, but hardly on the lives of the shareholders.
In working life today, those who have money decide, and the rest must follow. Piketty wants to democratize our working world. This should mean that our economy is not exclusively geared towards the profit interests of a few entrepreneurs, but towards the well-being of the entire population. With half of the voting rights, employees could ensure that the focus of their company is on the well-being of employees and local residents as well as the long-term positive development of the company, rather than just profits for owners.
THE BIGGER THE COMPANY, THE MORE DEMOCRACY
How voting rights are distributed in a company should, however, depend on the size of the company. Piketty’s principle here is: The more people work in a company, the more people need to be involved in decision-making. Let’s look at this using an example:
If a company has, say, fewer than 10 employees, the owner(s) can make all decisions alone. Only from the 10th employee onwards do the employees have half of the voting rights. From then on, the owner needs the support of at least one employee to make major decisions.
STRONGER WELFARE STATE INCREASES QUALITY OF LIFE
For Thomas Piketty, the welfare state is one of humanity’s greatest achievements. Free healthcare has caused our life expectancy to explode, free education has led to better technologies and products as well as more self-determination, and collective agreements and minimum wages guarantee that people no longer have to toil for a pittance.
Piketty wants to further expand these social achievements in order to reduce inequality and improve people’s quality of life.
ALL CHILDREN HAVE A RIGHT TO EQUAL EDUCATION
For Piketty, education is the basis for equality. Therefore, one of his most important demands is that all pupils have access to a well-funded public education system and that resources in the education system are distributed fairly.
Piketty criticizes countries such as the USA, where private schools and private universities play a central role, but also shows that in Europe education depends on income.
Using France as an example, he explains that the state spends three times as much on pupils who attend the country’s best educational institutions as it does on pupils who attend financially disadvantaged schools.
However, elite schools are often attended by the children of wealthy families, while children from low-income families often end up at disadvantaged schools. This further increases social inequality. Children from rich families benefit from the best public education, while children from poorer families receive a much poorer education.
This should change. The star economist is calling for “all children to be entitled to the same education spending”. State investment in the education system should not only be increased, but also redistributed. Instead of providing particularly strong support for children from wealthy families, schools with children from low-income families should receive more funding.
ALL PEOPLE HAVE A RIGHT TO A BASIC INCOME AND A JOB
The star economist also calls for everyone to have the right to a basic income that guarantees their livelihood. Although there are already programs in many countries, such as the minimum income in Austria, Piketty proposes reforms in this area. Everyone should be entitled to this basic income, including students and the homeless. In addition, people with an income below the basic income should automatically be topped up to this level without having to apply.
Piketty also advocates a state employment guarantee. Every person who cannot find a job on the labor market would be allocated a position in the public or charitable sector. The aim here is not to pay a pittance, but a decent wage with which employees can make a living.
A BASIC INHERITANCE FOR ALL
Inheritances are extremely unequally distributed. While the majority of Austrians inherit little to nothing, the richest people in the country have mostly received their wealth from mom and dad. Piketty wants to democratize inheritance. In concrete terms, this means that everyone receives an unconditional basic inheritance on their 25th birthday. This inheritance should amount to 60 percent of a country’s average wealth. In Austria, that would be around 120,000 euros. This basic inheritance is to be financed by taxes on large inheritances and assets.
This basic inheritance is intended to guarantee young people an easier start to adult life. They could use it to finance the down payment on an apartment or start a business, for example. When asked whether young people would not simply squander this gift of money, the economist replies:
“This can happen to rich people as well as poor people. I don’t believe that the children of millionaires only do clever things with their money. Rather the opposite.”
LIMITING PARTY DONATIONS
In order to protect our democracy, Piketty believes that the financing of political parties must be completely reformed. Today, corporations and the super-rich can buy political influence through party donations. We saw this in Austria under former Federal Chancellor Kurz.
Piketty wants a “total ban on all party donations from companies or other corporations” in conjunction with “a radical cap on donations and contributions from private individuals”. Private individuals should only be allowed to donate a few hundred euros per year to political parties. Instead, every citizen should have a certain quota of state funding at their disposal, which they can allocate to parties or political movements.
PIKETTYS ECONOMIC PLANS: WEALTH AND INHERITANCE TAX SHOULD FINANCE REFORMS
But how does Piketty want to finance all these reforms? By changing the tax system. The two basic ideas: the tax system should be simplified and the richest should be asked to pay more so that the majority of society can be relieved.
The basic elements of this are the introduction of a wealth and inheritance tax and a more progressive income tax. In addition, a progressive CO2 tax should be introduced and indirect taxes such as VAT should be abolished.
For Piketty, wealth and inheritance taxes are a key tool for achieving a fairer society. Austria does not have either of these taxes, although the vast majority of the population would be in favor of their introduction.
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Piketty’s concept of inheritance tax works similarly to that of income tax. Small and medium-sized inheritances should be taxed little or not at all. The higher the inheritance, the larger the share that has to be shared with the public.
In contrast to inheritance tax, which is only levied once, wealth tax is an annual tax. For taxes below the average wealth, an annual tax of 0.1 percent is levied. Similar to income tax and inheritance tax, wealth tax also increases with the amount of wealth. At 2 times the average wealth, the tax is 1 percent, 10 percent at 100 times, 60 percent at 1,000 times and 90 percent at 10,000 times.
To fall into the highest tax bracket here, you need assets of 2 billion euros. This top tax rate would only affect around the richest 20 Austrians.
LARGE INCOMES TAXED MORE HEAVILY
Even today, large incomes are taxed more heavily than small incomes in most countries. While top tax rates today are around 50 percent, they were significantly higher in almost all industrialized nations until the 1980s, reaching over 80 percent in the USA and the UK, for example. Since then, taxes have been cut for the rich and an ever greater proportion of the tax burden has been borne by small and middle incomes.
Piketty wants to reverse this trend and make the richest people pay more tax again. People whose income is around 10 times higher than the average income should pay between 60 and 70 percent income tax. Incomes that are 100 times higher than the average should be taxed at 80 to 90 percent.
INDIRECT TAXES ONLY WITH A STEERING EFFECT
In Piketty’s view, indirect taxes have no real justification unless they are intended to correct negative behavior. Accordingly, taxes such as a tobacco tax would be justified, but VAT would not.
The consumption of tobacco has serious health effects and causes enormous costs in the healthcare system. A tobacco tax makes cigarettes expensive. This is intended to discourage people from consuming tobacco. So there is a steering effect here.
This steering effect does not exist with VAT, for example. Whether staple foods such as bread or potatoes are taxed will make little difference to whether I buy these foods or not. They are essential for survival. So there is no steering effect here.
VAT in particular is an enormous burden for low-income households. Abolishing it would help these people in particular.
CO2 TAX SHOULD PARTICULARLY AFFECT THE SUPER-RICH
An indirect tax that is central to Piketty’s economic model is the CO2 tax. Unlike most current CO2 taxes, however, Thomas Piketty calls for a progressive CO2 tax. This means that the more CO2 a person consumes, the higher the tax rate at which consumption is taxed.
Data shows that a large proportion of CO2 emissions can be attributed to a relatively small group of super-rich people. This progressive CO2 tax would primarily affect this group.
The money raised from this tax will be used to support low- and middle-income households to switch to sustainable energy.
PARTICIPATORY SOCIALISM
Thomas Piketty calls his economic model participatory socialism. His demands are intended to ensure that it is not the richest in our society who call the shots, but that we all have an equal say in the direction in which our country and our world should develop.
The star economist takes up many of the demands already propagated by great social democrats such as Bruno Kreisky, Willy Brandt and Olof Palme. However, he modernizes them and goes one step further. His reforms would create a level of social equality and justice that has never been seen before, and guarantee that democracy permeates all areas of our lives and does not stop at the office door.
We must flood all areas of society with democracy. – Bruno Kreisky, former Chancellor of Austria
Who is Thomas Piketty?
Thomas Piketty received his doctorate in economics at the age of 22 and became a professor at the Massachusetts Institute of Technology at the age of 26. He is the founding director of the Paris School of Economics and also works at the École des Hautes Études en Sciences Sociales (EHESS). His research focuses on social inequality and the question of how we can create a fairer economic order. In 2014, Piketty published Capital in the 21st Century, which brought him worldwide fame.

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Star economist Isabella Weber: “Companies use inflation as excuse to raise prices”

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She is currently one of the most sought-after economists in the world: Isabella Weber is an expert on price trends and inflation – and is considered the “inventor” of the gas price cap. She has been awarded the Kurt Rothschild Prize for her work. We had the pleasure of meeting Isabella Weber for an interview and spoke to her about the consequences of price shocks, companies’ scope for action and the failings of politicians. As well as how we can better manage the next price shocks that are coming.

Kontrast.at: Ms. Weber, Austria has been the sad leader in inflation in Western Europe for months. We feel the high prices very strongly when shopping in supermarkets. If you compare the prices of the same products with those in Germany, your jaw drops. Where does that come from? Do the supermarkets in our country inflate prices excessively, or what is the cause?
Isabella Weber: It’s not that companies – such as supermarket chains – have become greedier overnight or anything like that. These price increases are simply part of a capitalist market economy in which companies want to make a profit. And that also means that these companies take every opportunity they can to achieve this goal. In this respect, we are not dealing with a sudden change in mindset or anything similar. Instead, we have experienced external shocks, price shocks, caused by the pandemic and the energy crisis.
1. IT WAS THE PRICE SHOCKS IN SYSTEMICALLY IMPORTANT AREAS THAT FUELED INFLATION IN GENERAL
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Kontrast.at: Now you could say that there were crises in one form or another in previous years as well. Why has inflation now skyrocketed – especially in our country – and remained so high?
Isabella Weber: We experienced high price stability for around 20 years. That was almost exceptional. It was a time that coincided with the financial crisis of 2008/09. There were large economic stimulus packages and a loose monetary policy. Despite this, prices remained relatively stable, and now we suddenly have this high inflation. Why is that? My finding is that there were major price shocks in systemically important areas that had an impact on other areas. So of course the energy sector is very important, but also areas such as raw materials, transportation, etc. At the same time, we have to ask of who is going to pay for these costs or the cost shocks.
In general, the corporate sector in most countries has managed to pass on this cost shock. In short, they have passed on the higher producer and supplier prices. As a rule, profit margins have been kept constant. This means that when energy prices soar – and with them the costs on the business side – and the profit margin remains constant, profits also go up.
Let’s take a refinery as an example: the refinery does the same thing it always does. It processes crude oil into a form so that it can be used. If the price of crude oil goes up, the cost of a ton of oil is still the same. But if the margin remains constant, then profits skyrocket. I would say that is the most general phenomenon.
But of course there were also supply chain bottlenecks that led to a kind of temporary monopoly. All companies in a sector knew, so to speak, that the competition had the same supply problems, and they reacted by raising prices – because they knew that the competition couldn’t undercut them.
2. COMPANIES WERE ABLE TO PASS ON COSTS – IN THE END, EMPLOYEES AND CONSUMERS ARE LEFT TO BEAR THE COST OF INFLATION
Kontrast.at: If companies have been able to protect their profits by and large, who are the losers?
Isabella Weber: If you consider that the corporate sector has protected its margins and at the same time wages have not kept pace with inflation, then the situation is that it is the employees as a whole who are bearing this cost shock. The latter are experiencing a crisis in which they are finding it increasingly difficult to cover the increased cost of living. This is particularly dramatic for the lower income groups.

By and large, the corporate sector has managed to pass on the higher costs and keep profits constant. In the end, consumers pay the price, argues economist Isabella Weber. (Foto: Melissa Mumic)
The German government has opted for measures such as one-off payments, i.e. it has left the price trend itself untouched. A few months ago, the European Central Bank (ECB) took action and raised the key interest rate. How do you assess this measure? What consequences did it have?
Isabella Weber: First, I think you have to realize that the interest rate hikes were a massive intervention. So there is a very massive political intervention in the economy – but through interest rates, not through price regulation. If I raise interest rates at this record speed, as has now been done, then on the one hand this creates a situation where the banks have opportunities to make excess profits. This is because the interest rate increases were not immediately passed on to savers, but were very quickly passed on to borrowers. This has created great profit opportunities. It is said that this is to combat inflation, but in fact such an interest rate hike is aimed at increasing unemployment. This is because higher interest rates affect the economy: investments and purchases become more difficult.
In the end, this also means redundancies. Higher unemployment in turn weakens the position of the employee side in wage negotiations. There is talk, quite euphemistically, of a “cooling off” on the labor market. This is supposed to sound like a spring breeze, but what they really want is for people to lose their jobs so that they have less leeway to demand higher wages. In my opinion, this is an extremely problematic way of doing politics. Because it fuels recessionary tendencies that are already visible in Austria, for example.
The price shocks and interest rate policy have exacerbated inequality in the corporate sector. Because when consumers have to spend all their money on covering basic needs, there is not much left to spend on other things. Companies are noticing this – especially smaller ones that cannot finance themselves on the financial market and are reliant on bank loans. Falling demand is having a massive impact on them.
3. PRICE BRAKES AND EXCESS PROFIT TAXES WOULD (HAVE BEEN) EFFECTIVE MEANS OF COMBATING THE PRICE SHOCK
Kontrast.at: In your opinion, what would have been a better alternative to intervene in the economy in this crisis?
Isabella Weber: I think that it would first have been important to stabilize these central prices or what I also called systemically relevant prices in my research. So that these price shocks don’t rattle through the whole system and have all these knock-on effects. That means, for example: Taxing excess profits. But it can also mean introducing a price cap to cushion the shock and prevent all these second-round effects from being triggered in the first place.
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Of course, in the energy sector in particular, we are talking about prices that hit both companies and households very hard. If it is a situation, as I have tried to explain, in which companies are able to react to these energy price shocks in such a way that their profit volumes increase, then this means that at the same time this energy price shock indirectly exacerbates inflation for households.
In this respect, I think the approach of energy price cap is definitely a good one. Because it protects basic needs. Because part of the energy consumption of households falls into the area of existential needs. I can try to heat less, but there are limits to the potential savings that can be made.
4. “WE NEED A NEW FORM OF STABILIZATION POLICY – ONE THAT AIMS TO SECURE BASIC NEEDS”
Kontrast.at: Do you think that these crises and shocks now have an expiration date? Or will they keep us busy for longer?
Isabella Weber: We are living in very crisis-ridden times. You could say we are living in a time of multiple crises. Climate change is a reality. Extreme weather events are already a reality. The situation in the Middle East is extremely precarious. There is a risk of a regional expansion of the conflict. In this respect, it is very likely that there will be further shocks. It is therefore also necessary to rethink the financial and economic situation. We need to find a different way of reacting to these shocks. We see this with interest rate hikes. They sometimes lead to recession. Then comes the next shock – what then? Interest rate hikes again, more unemployment?
We have to break out of this logic. We need to think about a new type of stabilization policy that aims to protect basic needs against these price shocks.
5. POLITICIANS MUST NOT JUST WATCH AND WAIT FOR THE MARKET – THEY MUST INTERVENE IF IT DOESN’T WORK
Kontrast.at: How does this “breaking out” work? Where should the big change take place?
Isabella Weber: For example, we need a different structure for the energy supply itself – then we won’t be so vulnerable when it comes to price shocks for oil and gas. At the same time, I think we also need ways of reacting to extreme price increases at short notice. For example, by having monitoring processes.
If you look at what has happened to gas prices: Prices have already risen dramatically in the winter of 2021. Sebastian Dullien and I published articles on the topic of gas price caps back in February 2022. Because even then – before the war against Ukraine – it was clear that these gas prices alone could trigger 2.5% inflation. But politicians didn’t say “gas is a systemically relevant price, we have to monitor it and react with measures”. They simply waited. In the case of Germany, until the fall. In the end, people’s basic needs were not protected. There really needs to be a rethink.
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Of course, you can’t always predict everything in advance, but there are prices that you know will have serious consequences if they skyrocket – and you have to react immediately. In this respect, you need a mandate to act.
What we are seeing now is that people are continuing to do their jobs and work – and yet are afraid that they will no longer be able to afford their basic needs. That’s breaking a social contract. The foundation on which a market economy is built is being shaken.
6. THIS INFLATION IS NOT ONLY SHAKING THE ENTIRE ECONOMY, BUT ALSO DEMOCRACY
Kontrast.at: What other dangers do these existential fears pose?
Isabella Weber: Well, if I can no longer be sure that I can meet my basic needs, if I have existential fears, then I become sensitive to angry and sometimes extreme ideas. We can see that in many European countries, radical right-wing or extreme right-wing parties are experiencing an upswing that should give us pause for thought. In the end, democracy is also being shaken.
That is why we need an alternative. The alternative means intervening and rethinking the state and the economy in such a way that they are attractive to the many and secure basic needs.
Who is Isabella Weber?
Isabella Weber is Professor of Economics at the University of Massachusetts, Amherst. Together with Sebastian Dullien (Scientific Director of the Institute for Macroeconomics and Business Cycle Research (IMK) at the Hans Böckler Foundation), she was awarded the Kurt Rothschild Prize this year for her research on the gas price cap to combat inflation.
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Brazil: Deforestation of Amazon reduce by more than 30 Percent

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For years, the Amazon rainforest was cut down. The concern: the unique ecosystem could collapse. The deforestation in Brazil is a huge environmental problem. But the election of Lula da Silva as president gave hope. He announced that he would end the deforestation of the Amazon. In fact, the first steps followed a few days after taking office. The encouraging result: in comparison to the previous year, deforestation was reduced by more than a third.
“Brazil is ready to resume its role i the fight against the climate crisis and protect all ecosystems, especially the Amazon. Our government once managed to reduce forest destruction by 80%. Now lets all fight together for zero deforestation!” says Lula da Silva, President of Brazil.
The BBC reports first successes in the fight against rainforest deforestation. Compared to the first half of the previous year, deforestation was reduced by 33.6%. In June 2023, as much as 41% less forest was destroyed than the previous year. Brazilian Environment Minister Marina Silva attributes this to Lula’s successful environmental policy.
Lulas potential to reduce deforestation by 89 percent
Lula’s goal of ending deforestation by 2030 is a major challenge. Under his predecessor, Jair Bolsonaro, deforestation took on alarming dimensions. The new conservation plan, which President Lula published at the beginning of June 2023, aims to achieve this goal. Among other things, it provides for the confiscation of half of all illegally used land within protected areas, as well as higher penalties for illegal logging.
Furthermore, the Brazilian president calls on other countries, especially the rich West, to contribute financially to saving the “green lungs of the earth” in order to combat the climate crisis globally.
A study confirms that Lula’s plans actually have the potential to reduce deforestation in the Amazon by 89 percent. In any case, Lula will not have it easy: The left-wing president still faces a conservative majority in parliament.
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Under Bolsonaro, the Amazon shrank by more than twice the area of Vienna – per month
This is sorely needed, because the Amazon has been badly affected in recent years. When Lula first moved into the presidential palace in 2003, he launched an ambitious program to save the rainforest. He and his successor Dilma Rousseff, who like Lula comes from Brazil’s leftist Workers’ Party, succeeded in reducing deforestation by 80 percent to a historic low. But when Bolsonaro came to power in 2019, Brazil did an about-face on environmental policy.
Bolsonaro readily awarded concessions to allow corporations to clear rainforest for soy and palm oil farming, as well as cattle ranching and mining. Illegally cleared areas were legalized by Bolsonaro, and forest fires were fought only half-heartedly. Clearing jumped by 70 percent under his government.
For the first time, the Amazon emits more CO2 than it can absorb
Under Bolsonaro, the Amazon’s climate balance had turned around: For the first time, it emits more CO2 than it can absorb. This was shown in a study by researchers from the French National Institute for Agronomic Research. The scientists mainly analysed satellite data documenting the plant biomass in the rainforest and its deforestation. The result: the Amazon basin released about 16.6 billion tons of CO2 into the environment, but only absorbed about 13.9 tons. This 2.7 billion ton difference is roughly Austria’s consumption for 35 years.
Without well-maintained Amazon rainforest, the whole ecosystem could topple over
Currently, the Amazon has a perfectly functioning water cycle: regions inland actually have too little rainfall for a tropical rainforest. But the trees suck the groundwater upwards, it evaporates and rains down again over the huge forest area. This cycle could be permanently disrupted by further deforestation. The rainforest would slowly die, turning into savannah and changing the climate around the world.
This process would release as much CO2 as the entire world consumes in seven years. The unique ecosystem that is home to 10 percent of all species would be irretrievably lost, and with it the CO2-binding effect of the rainforest. Scientists assume that this tipping point is reached at a deforestation rate of 20 to 25 percent. Currently, we are at 18 percent.
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Deforestation in Brazil: Raids after taking office
Within days of taking office, Lula’s government took action, conducting checks in the rainforest against illegal logging. As reuters reports, controls were carried out in areas all within the Cachoeira Seca indigenous reserve, where deforestation is strictly prohibited.
While deforestation is decreasing, the number of fires continues to increase, satellite monitoring shows. Whether due to natural causes or arson cannot be determined.
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Portugal launches a 4-day week field trial

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Last week sees the launch of a pilot trial of the 4-day week in Portugal. Thirty-nine companies are taking part, including 12 that have previous experience with shorter working hours. The aim of the project is to measure the impact of the 4-day week on employees’ physical and mental health, as well as the economic impact on companies. 
The companies have committed to reducing weekly working hours while maintaining full pay. Specifically, the 100-80-100 model will be used: Employees receive 100% of pay if they work 80% of the time and perform 100% of the time in return. Companies have volunteered for the program without receiving financial compensation. They can also reverse the measure at any time if they wish.
Participation was open to all private companies in Portugal. The project is now being carried out in collaboration with the non-profit organization 4-Day-Week-Global, which is contributing its expertise and supporting implementation.
Companies from production, trade, research – including daycare center and nursing home
The participating companies come from various industries. They include companies from the manufacturing sector, the retail trade and non-profit organizations. A daycare center, a nursing home, a research and development center and a stem cell bank are also part of the pilot project.
The main reasons for participating were to reduce stress and burnout risks among employees and improve employee retention.
The project is coordinated and supervised by Dr. Pedro Gomes, professor of economics, and Dr. Rita Fontinha, professor of strategic management. They will follow the companies’ experiences during the test to determine the economic, social and environmental impact of the four-day week.
“The future belongs to those who can attract the best workforce”
“So much has changed in society in the last 30 years: the technology we use, the speed at which we communicate, the types of jobs we do, the length of our lives or the role of women in society. But we still organize work in exactly the same way. We believe that the four-day week is a more efficient and sustainable way to organize work in the 21st century, and that it brings mutual benefits for workers, companies and the economy,” the project’s coordinators, Dr. Pedro Gomes and Dr. Rita Fontinha, explain the field trial.
“Portugal is taking another step into the future of work. The four-day workweek pilot project is based on the premise that work-life balance is crucial to attracting employees and improving productivity and innovation. The best companies are those that guarantee to provide space for talent and fulfillment for workers. This is just the beginning – a promising start – of one of the many changes we are implementing in the labor market of a country that has historically high employment levels and strives to attract and retain talent. The future belongs to those who can attract the best workers with strong skills and higher levels of satisfaction in a globally competitive marketplace where talent and people are the best resources.”

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“Creating Prosperity Together”: How the social economy model saved the English city of Preston

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For a long time, Preston was the centre of industry in England. But when the city’s big companies decided to move production to low-wage countries, the economy collapsed and Preston plunged into a deep crisis. The people of Preston didn’t let it get them down, however, and together they rebuilt their economy. Instead of international corporations and low wages, they relied on local production and co-determination. Thanks to the “communal prosperity” model, Preston is booming again today.
Preston was the economic engine of England for a long time. In the city in the northwestern county of Lancashire, the textile industry boomed in the 19th century. Products from Preston were exported all over the world, and the city grew rapidly. The boom did not last forever, however. After the Second World War, large parts of English industry migrated to low-wage countries. The economy crumbled and with it the city. Just a few years ago, Preston was considered one of the poorest areas in England.
But then came the turnaround starting in 2012. The city reorganized itself to boost its own economy. It was understood that no help would come from big investors or the government in London. The results of their effort can be seen: Unemployment is falling, the city is growing, and the economy is booming. And how did the people of Preston do all this? With an idea called Community Wealth Building.
Community Wealth Building: Business for the People, Not the Corporations
But what is community wealth building? Broadly speaking, it’s an approach that shapes the economy to serve local people, not managers in corporate headquarters or investors in tax swamps. Preston achieves this primarily through four principles:

Working with what’s there
Producing and buying locally
creating good working conditions
Shaping the economy

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Preston’s “Communal Prosperity”: Working with what’s there
Preston knew that no outside savior would come to help the city. If they wanted to change their lot, the people of Preston would have to tackle it themselves. So the first step was to look at how the city’s economy was set up at the time.
While many businesses had left Preston, there were also institutions that were still in town and would remain. These included the local university, a housing cooperative, the pension fund, the town hospital, and the local government. These institutions were called anchor institutions because they were firmly anchored in the city and would not leave.
The anchor institutions spent many millions annually. The hospital needs fresh food and laundry every day, the housing cooperative needs materials and people to maintain the houses, and the local administration needs stationery and furniture. The list goes on and on. These expenses were looked at by the city government. The result: these institutions hardly ever shopped in Preston. Only about 5 percent of the spending was done in their own town. The rest of the money went to other parts of the country and the world.
Produce locally, buy locally
To boost Preston’s economy with the “communal Prosperity” concept, these anchor institutions had to be persuaded to spend more money in their own city. Since they all had a vested interest in seeing the city do well, all institutions were willing to buy more locally. The result of this was that the order books of local businesses filled up. This allowed those businesses to hire new people. Now, more people had jobs and more money in their pockets to spend again. That further boosted the local economy.
Where the increased demand from anchor institutions could not be met by existing businesses, new ones were started. Preston University assisted the start-ups with its expertise. 
By having anchor institutions, such as local government, buy more from their own city, more jobs could be created in Preston. (Foto: pixabay/PaulCosmin)
Co-determining the economy
There was also a plan for when new companies were founded. What should not happen is that all the profits end up in the boss’s pocket and the workers have no say. The people of Preston should decide for themselves how they want to shape the economy of their city and also reap the fruits of their own labour. The solution to this: cooperatives!
The university supported the people of Preston in setting up cooperatives, in which they themselves can determine how work is done and what is done with the profits. This, it said, strengthened co-determination in the city and meant that the profits generated ended up in the workers’ pockets rather than in investors’ accounts in tax swamps. The cooperatives also had another positive effect. Because the workers themselves determine their company policy, their jobs are not outsourced to low-wage countries.
A wage you can live on
It was also important to the people in Preston and its “communal prosperity” concept that everyone should be able to live on their wages. What is the point of working in a cooperative or one of the anchor institutions if the money is not enough to live on? That’s why most local institutions, businesses and cooperatives decided to pay a wage that is above the minimum wage and that people can live well on. Now that people have more money in their pockets, they were able to consume more, and the local economy continued to grow.
At the same time, however, a lot of money was put into providing a good education for the city’s workers. The city’s university provided training and counselling, and other anchor institutions such as the local government and the housing cooperative also invested more in the education and training of the local workforce.
Preston’s “Communal Prosperity” Model as a model for success
Preston’s four principles worked strongly together. Anchor institutions looked to their purchasing not only to ensure that local production took place, but also that companies paid their workers well and gave them a say. While not everything could be produced and sourced locally, the percentage of anchor institutions’ spending in their own cities increased sharply. When the Community Wealth Building project started in 2012, it was 5 percent. In 2016, it was more than three times that, at 18 percent!
That wasn’t the only thing that had improved in Preston. From 2014 to 2017, unemployment was cut in half. At 3.1 percent, it was below the statewide average of 4.6 percent. The city’s economic development was so successful that it became the most up-and-coming city in the country, overtaking the capital London in quality of life.
Mondragón is the largest cooperative in the world. For Preston and Cleveland, Mondragón is a source of inspiration. Mondragón workers built the roof of the famous Guggenheim Museum in Bilbao, for example.(Foto: Unsplash/Jorge Fernández Salas)
Social business: Global trend
Preston’s success has created a buzz and encouraged imitation. Today, there are 20 other cities and communities that also use the Community Wealth Building approach. This approach did not come out of nowhere, however, but has its roots in the U.S., in the former industrial metropolis of Cleveland. Similar to Preston, industrial companies in Cleveland migrated to low-wage countries. The result was a fallow economy and a decaying city. However, through a regional economic plan and the formation of cooperatives, Cleveland achieved economic recovery.
Cleveland, in turn, got its inspiration from the small Basque town of Mondragón. There, the Spanish Civil War had devastated the local economy. Under the guidance of the left-wing priest José María Arizmendiarrieta, a technical college and several cooperatives were founded in the small town. Today, Mondragón is the largest cooperative in the world, with branches in 31 different countries and over 80,000 employees. The entire cooperative federation is democratically run and owned by the workers. Läs mer…