Mutualism: A Tried-and-True Approach to Social Welfare
Speaking from her personal experience and family history, Sara Horowitz lays out a path toward a new, community-based social safety net.
Review by Anthony M. Barr
How do we fund social welfare? How do we support all the concrete systems and services, both governmental and nongovernmental, that constitute our social safety net? Their answer to this question can tell you a lot about a person’s politics. On one end of the spectrum, free market fundamentalists talk about replacing “inefficient government” with “market-based solutions.” On the opposing end, progressives champion a “spend big and don’t worry” mindset, with government as the solution to every social ill.
In her book Mutualism: Building the Next Economy from the Ground Up, Sara Horowitz calls for a new political approach to the social safety net, “one that goes beyond the monolithic government solutions of the left and the free market, libertarian individualism of the right to recognize the community solutions that have always filled in the gaps.” In between the market and the state, there is plenty of room for civil society to meet the needs of community members at whatever scale is required, with hyper-local organizations generating broader ecosystems of support. This is a vision of political vibrancy that mobilizes citizens and communities to create the kind of robust social safety net that ensures the most vulnerable among us receive the care they need.
Mutualism retrieves a distinctly American approach to social welfare, while showing how that approach can be updated to fit the contemporary landscape.
A distinctively American vision:
For Horowitz, mutualism runs in the family. Her immigrant grandfather Israel Horowitz helped build the International Ladies’ Garment Workers Union (ILGWU) to boost wages and secure benefits for workers like his wife. Horowitz explains that even as the ILGWU was fighting for fair wages, “it was simultaneously setting up local healthcare clinics, housing cooperatives, retail centers, credit unions, and more.”
In addition to this family connection, as a labor lawyer, Horowitz fought for workers, gaining experience that undergirds the perspective she offers in her book. Ironically, her progressive labor law firm classified her as a contractor to avoid having to provide benefits like health care and sick leave. It was this experience that led her to create the Freelancers Union, which uses its advocacy and purchasing power to offer insurance at affordable rates to freelancers who need it. All of this experience infuses Horowitz’s writing, which deftly combines theory with practical insights.
Mutualism retrieves a distinctly American approach to social welfare, while showing how that approach can be updated to fit the contemporary landscape. Horowitz observes that “America has a rich mutualist tradition that is older than our Constitution itself, a tradition that is as much a part of our country’s identity as American capitalism and democracy.” She cites Tocqueville’s famous observations of American civic life and the proliferation of social associations that spring up to tackle any conceivable problem. For Horowitz, the spirit of “township freedom” that struck Tocqueville lives on today in the various religious organizations, mutual aid societies, worker cooperatives, and labor organizations that together make up mutualist ecosystems.
This strong grounding in American history and identity helps to shield her arguments from the charge of “socialism” that the Right often uses to smear social welfare initiatives and movements. But there is also much here to challenge neoliberals on the Left who are too quick to forget that the best victories of the Civil Rights movement (an example Horowitz analyzes at length) were only made possible through the kind of community organizing that lies outside (and is perhaps precluded by) overt governmental control. Horowitz explains that “mutualist organizations are often the source of big ideas, but the mutualist ecosystems they grow into are where profound social change begins.” She adds that “in every era [mutualism] has been fueled by the local community institutions that give major social movements their infrastructure, their financing, and the logistical base that makes it possible to organize.”
There is an investment binary in the market today with slow capital such as grants and gifts, on the one hand, and fast capital such as venture capital and private equity on the other.
From Theory to Practice
This is a practice-minded text. Horowitz wants her readers to roll up their sleeves and get to work. To that end, she outlines three key features of all mutualist organizations: 1): a social purpose—they exist “to solve a social problem for a community.” 2): an economic mechanism that is “independent” and “sustainable.” 3): a long-term focus: “intergenerational institutions with leadership infrastructures and capital strategies that equip them to serve future generations.”
The point about an independent economic mechanism is crucial. As Horowitz notes, “when organizations for social good can fund themselves with their own independent economic mechanism, that community’s political power increases dramatically.” Yet this goal can be difficult to achieve. While there are many ways to fund local organizations—from membership dues to selling services or renting out property—it can be much harder to scale those organizations, or to fund a broader ecosystem of like-minded organizations benefiting from collective power (such as in purchasing or procurement.) One of the core challenges in funding is that so much of investment culture is fixated on ventures that promise high yields at rapid rates.
Horowitz writes that “mutualist organizations today are starved for capital that can help them build or expand, because they need a kind of investment—an investment of patient capital—that just doesn’t exist.” There is an investment binary in the market today with slow capital such as grants and gifts, on the one hand, and fast capital such as venture capital and private equity on the other. There are few capital infusions occurring in the middle space where yields are moderate and long-term. Some of this lack is likely due to market considerations of compensation for risk, and of the understandable desire to be able to cut one’s losses quickly and move on to the next investment. But a deeper reason is that too few investors have a loyalty to any given place: philanthropists focus on solving big issues like climate change, while profit-motivated investors focus on whatever markets (local, regional, national, or global) will yield the greatest returns.
While there is a growing desire in the business sector to help improve society, dedication to patient capital is less trendy, even among those businesses that have broadened their focus beyond profit. Horowitz writes, “I found that impact investors—whose guiding principle is to demonstrate that it’s possible to receive the same return on investment as traditional venture capitalists while investing in companies that have a social purpose—are nonetheless still focused on fast-capital-sized returns.” She elaborates that these investors “see the purpose of profit the same way venture capitalists do: as something to be maximized and returned to investors rather than as the by-product of a successful social mission that can be recycled back into the community.” In contrast to this, Horowitz describes the patient capital market investor as someone who “would look for returns that were financially healthy but community focused.”
In a model built around patient capital, Horowitz explains that “revenues would be recycled back into the community or invested entirely in new mutualist organizations, to begin to anchor a mutualist ecosystem. Small loans would help these new institutions grow, and larger loans would help the ecosystem expand, but lenders would have to remember that the purpose of these loans is to give communities the economic tools to build the institutions they need to help themselves.”
There are viable examples of Horowitz’s model in practice. Trust Neighborhoods is an organization created by Google and Obama Foundation alumni that has pioneered and implemented the Mixed Income Neighborhood Trust (MINT) model. In this model, a neighborhood creates a legal entity (a community trust) that is specifically tailored to purposes agreed upon by the residents (such as providing affordable housing without creating displacement) which then acquires land and other assets which can be leveraged to achieve the trust’s goals. This is mutualism at the local level, complete with an independent economic mechanism (rent payments, real estate sales, etc..) that can incorporate outside funding but is governed by the legally binding terms of the trust, rather than being beholden to the wishes of the outside investors—who can still make healthy returns on their investments.
Finally, it is important to note that the government does have a place in the mutualism framework, though largely in a supporting role. In particular, Horowitz mentions “refundable tax credits, low-interest loans, use of government spaces, and zoning assistance.” Essentially, the goal should be to get federal funds into the hands of local and regional leaders and organizations who best know the needs of their communities. In many ways, The American Rescue Plan fits with that vision, as argued by my Brookings Institution colleagues here and here. But while respecting the crucial importance of good government structures and policies, given the degree of fluctuation in political agendas it is largely private investment that is needed to both scale mutualism up and to ensure the long-term financial solvency of mutualist ecosystems regardless of who is in office.
Together, we can create a stronger civil society from the bottom up.
Conclusion: What Institutions Will We Build, and How Will We Fund Them?
In her prologue, Horowitz observes that “future generations will measure us by the institutions we leave them.” This question invites us to imagine a better future.
But how will we fund the mutualist organizations, institutions, and ecosystems that we need to undergird our civil society? To answer this question will require looking to the lessons of history, drawing on the technical knowledge for implementation, and all the while attending to the normative dimensions embedded in this important work.
This is a tall order. But we are Americans, after all. And mutualism is just as American as baseball and apple pie. Together, we can create a stronger civil society from the bottom up.
Anthony M. Barr is a master of public policy candidate at Pepperdine University’s School of Public Policy. He is currently a research intern at the Brookings Institution, where he is working on asset-based development. All views expressed here are his own.
Mutualism: Building the Next Economy from the Ground Up by Sara Horowitz was published by Random House on February 16, 2021. Fare Forward thanks them for providing a review copy. You can find your own copy on the publisher’s website here.
