Summertown, Tennessee, USA

POST-COMMUNAL ECONOMIC EXPERIMENTS AT THE FARM IN THE CONTEXT OF DEVELOPMENTAL COMMUNALISM (1)

by Albert Bates (2)


The Farm was founded in 1971 by Stephen Gaskin and three hundred people who had travelled with him from California to Tennessee. Stephen's religion emerged in the course of a series of group disccussions, beginning in San Francisco State College where he was an assistant professor, and continuing regularly for three years. These discourses, carried out in the street vernacular of the Haight Ashbury hippies, attracted as many as 2000 people to venues like the Family Dog, a rock music emporium overlooking the Pacific Ocean. Stephen's eclectic, hermeneutic discourses ranged over subjects as widely varied as Einsteinian physics, Tantrayana, and Bop Cabbalah. Monday Night Class was the beatnik-to-hippie transmission of dharma. Through it, Stephen galvanized a dedicated core group of "students" which, in the fall of 1970, left San Francisco in a caravan of some 50 remodelled school buses, bread vans, and VW campers and eventually came to rest, in the Fall of 1971, in 1750 acres of Tennessee oak woods. The 320 original settlers of The Farm had little or no experience with farming or forestry. What these former street people and college dropouts shared was a common vision of a world in which peace replaces war, love vanquishes hate, and hard work, study, and willingness to sacrifice your own egotistical desires can accomplish anything.

By 1974, The Farm had attained a level of prosperity adequate to support a resident population of 800 and up to 20,000 free overnight visitors per year. Its communal businesses were netting a quarter million on gross sales in excess of one million per annum. 1974 marks the year that The Farm decided it was wealthy enough, with basic subsistence needs met on an income of one dollar per capita per day, to found Plenty, a program of giving away food and other assistance to those in real need. Today Plenty continues with an international development program several times larger than the budget of The Farm. It has long-term projects on 4 continents, spreading appropriate technology with a focus on building a sustainable human ecology.

What follows is a necessarily abridged account of the changes which occurred in the Farm's economic structure during the 1980s, when it moved from a communal society to a cooperative land trust.

By the late 1970s, The Farm had achieved remarkable success. The population stood at about 1200 full time residents and another 200 overnight visitors on average. There was a comprehensive primary health care system with 24 hour ambulance service, 60 licensed paramedics, and a full surgical clinic. The Farm School had more than 400 students attending grades K to 12. The communal businesses were grossing several million dollars and had high Dun and Bradstreet ratings. More than a dozen satellite farms had sprung up from New York to California, and in Canada, France, and Ireland. There were Farm-run vegetarian restaurants in Nashville and California. There were free clinics for the poor in New York City and Washington D.C.. The Farming operation ran 24 hours, 12 months a year. When harvesting was done in Tennessee, planting was underway in Florida, with tractors, combines, and even the bee hives moving by a fleet of semi-trailers, back and forth in season. The whole operation was tied together by homebrew computers, sideband radio and ham television, and by dovetailed holding corporations, subsidiaries and business divisions.

However, below the surface of this enormous material success, all was not well. To handle this level of industry, a large bureaucracy developed, replete with hierarchical decision-making, or alternatively, endless and frequently unresolved meetings, whose attempt was to make community decisions more democratically. While Stephen Gaskin had voluntarily relinquished control of the Farm to an elected board as early as 1973, his influence in a wide range of policy matters was inordinately strong and a constant source of friction. Incompetence, mismanagement, secrecy and even dishonesty by elected representatives subverted many important projects and doomed them to waste and failure. The Farm was far from being able to cope with the scale of its national and international operations when the late 1970s brought the first really large test of its strength and resourcefulness--a nationwide crash in traditional agriculture.

One of the trade-offs in getting involved with high- stakes commerce with the outside world is a greater vulnerability to macroeconomic trends--you are going to be buffeted by the prevailing winds. With the decline in food prices and the increase in farm loan interest rates, by 1981, The Farm found itself more than a million dollars in debt and interest rates averaging above 20 percent. Austerity measures implemented in the wake of the farming crisis augured an exodus of talented members to greener pastures in the outside world. The Farm population began a drop that was not to level off until 1988, at about 110 adults and 140 children.

The Farm's second largest business was construction. In 1981 and 1982, the Reagan Recession, which included a sharp decline in building starts, cut more than $10,000 per week from the collective earnings. These reverses, and The Farm's inability to react in a timely way, brought The Farm, by 1983, to the brink of bankruptcy. After several unsuccessful attempts to cut spending and stimulate earnings, The Farm was faced with the stark choice of reorganization or dissolution. Reorganization took the form of a community vote, in October of 1983, to decollectivize The Farm, and to turn it into a cooperative, with all members required to pay monthly dues assessments in order to remain. This change did not halt the decline in the Farm's population or rescue many of its teetering businesses, but it did succeed in saving the land from being foreclosed, retaining a semblance of the original community and, most importantly, retiring the million dollar debt, leaving no creditor unsatisfied. That is the briefest of overviews of Farm history to the mid- 1980's.

What I will describe now are two economic experiments, post the full communal phase, which were attempts to recapture some of the economic synergies that were lost by the decollectivization in 1983. The first was called the NEW system, an acronym for Non-monetary Economic Well-being. The second is The Second Foundation.

The NEW System

The NEW system was based on a scheme of local credit exchange pioneered by Michael Linton in Vancouver in the early 1970s, called LETS (Local Exchange Trading System). It was a barter system made possible by the affordability of the small personal computer. The objective of the LETS and NEW systems was to keep the scarce availability of federal dollars from impeding the growth in standards of living within a local economic unit--in this case, The Farm.

It is a theory of economic development that standards of living are influenced more by the velocity with which transfers of resources occur within a system than by the balance of external commerce, the number of people employed, or other factors. To increase velocity, one must encourage the number of trades of goods and services occurring within the community. When the Farm went to a dollar system of exchange, velocity began actually declining, because dollars were scarce and were consistently hoarded, or spent in non-productive pursuits like servicing bank loans. Dollars went outside the community as quickly as they arrived. They did not stay around long enough to stimulate local trading.

What the NEW system did was to say to its subscribers, go ahead and purchase whatever goods and services you want from the other subscribers here within The Farm, and we'll keep track of everyone's credits and debits on the computer. You are never in debt. A negative balance means you have issued credit to the system, not borrowed it from others. No individual is waiting for you to pay them and nobody has any claim on your assets. Its not a debt to an individual, its a commitment to the community, and you can honor it at your own rate. There are no interest charges, no repayment schedules and no tight squeezes at the end of the month.

How the NEW system functioned was that members who had goods or services to sell put an ad in a weekly catalog offering those items. The ad was charged 30 cents in "green" money to help defray administrative costs. If someone wanted to buy what was offered, they would notify the seller and when the transaction was complete, they would drop a transfer slip in one of the collection boxes on The Farm, which might say something like, "Please acknowledge Joe Seller $10, (signed) Mary Buyer." Each transfer was also charged 45 cents from the Buyer's account. Balances and transaction volume were published monthly so that people could see who needed to stimulate sales or receive purchases more, and also project their own balance of payments needs. The point is, the economy didn't have to slow down just because there weren't any real federal dollars circulating. In theory, people with little or no outside income could still make a good living using green money--computer credits--from the NEW system.

This experiment was unsuccessful and short-lived. It went into operation in October 5, 1984, one year after the change-over, with 8 founding members. The computer software was first in Dbase II on a CP/M platform and subsequently in BASIC on an OASIS platform. Two months later the system had only 15 subscribers, with a transaction balance of $44.20 in outstanding credits and debits. What made people reluctant to use the system-- beyond the distrust of anything looking like a free lunch--was that within The Farm at that time, relatively few goods and services were exchanged between families. Most transactions were between individuals and the Farm Store, or the Farm School, or the Farm Clinic, or The Foundation, which collected dues and rents. If someone wanted some firewood, they could credit another member with the cost of his labor in cutting the wood, but the woodcutter couldn't cash in that green money credit at the store because the store needed actual federal currency to pay their suppliers. Likewise the dispensary, or the mechanics, or the construction crews not only needed actual currency for parts and supplies, but they needed to pay their people mostly in actual currency or their people would not be able to buy groceries or pay their rent. So the system, being only partial, not whole-cloth, was doomed from the outset.

Moreover, the Internal Revenue Service (IRS) began discouraging barter systems by requiring all transactions to be treated as if they were actual money transfers. That would have required the NEW system manager to report all transfers to the state and federal governments and to withhold taxes, including the 7.5 percent state and county sales and use tax, on every transaction, as if real money were involved. Faced with these stark realities and the lack of enthusiasm for the system, the computerized trading board closed down after a three month run. This is not to disparage that system as a viable and serious alternative-- something that may in fact become the world's universal trading system of the future--but just to say that The Farm could not make it work within its restricted laboratory context, and I suspect anyone who tries to use that system within the United States at this time will face similar obstacles.

Capitalism versus Socialism

Before discussing the second experiment, let me digress for a moment to mention what I view as the pros and cons of both the communal form and more traditional private family economies. These comparisons became more apparent after experiencing the abrupt transitions back and forth between the two systems. One shortcoming of the standard Western economic model is its stimulation of competitiveness, not only between and within business and national market settings, but between and even within families. One feature of the hippie ethos is a rebellion against the competitive attitudes and values fostered by American schools, which is also a cause of friction within families. To quote an early hippie role model, Maynard G. Krebs, "woorrrkk?" It wasn't that hippies didn't enjoy working, it was that they didn't enjoy working for money, or for social position, or for some other selfish and alienating reason.

A second shortcoming of the standard Western economic model is the waste inherent in the accumulation of individual, rather than tribal, wealth. Every homeowner has his own set of power tools, and lawn mower, and swimming pool, even though he may use any piece of this property only rarely. A more efficient use of resources would share the capital costs of tools like lawn mowers and rototillers and chain saws among larger social units. There are not only efficiencies of scale, but also efficiencies of talent. So for instance, only one person in 20 may be truly talented at preparing IRS Form 1040s. Another person may have an exceptionally green thumb or be a talented teacher. It therefore makes good sense to have the person who enjoys doing tax forms do the tax forms for a small group, the person who enjoys gardening to manage the group's garden and the teacher to teach school. In the standard western model, the value of the services of a tax accountant is much greater, in a dollar per hour formulation, than the value of the services of the farmer or the schoolteacher, something that is a cultural artifice, rather than being based on any real logic related to training or degree of difficulty. It is because of these disparities, and a variety of other neglected externalities, that Western civilization is on a collision course with famine and pollution. Sustainable family agriculture can't compete on the same playing field with giant banks and insurance companies pushing reams of paper between skyscrapers.

The tendency of the Western economic model is to work well on a rising tide but to shortchange the weakest and underempowered segments of the population when the going gets rough. Most at risk in this system are minority single mothers, grandparents, and whales. That is to be expected in a system based on Darwinian competition. Only the fittest survive. But since the measure of fitness is in dollars, and wealth is transfered by the coincidence of birth, the selection process is unfair, not Darwinian.

In our experience, I think it is fair to generalize, large communal societies have problems of comparable scope, complexity, and intractability. First is the rock or hard place choice between hierarchical decision-making and endless and often unresolved democratic meetings. The Farm suffered from both of those ills. Second, there is the reluctance to repose full faith and trust in powerful managers, knowing that everyone makes mistakes but people are less willing to suffer the consequences of others' mistakes than of their own. Under these conditions, managers seldom have very much real power, but are mere cogs in a larger machine that tends to bring everyone to a common level of mediocrity. Third, there is the decline in productive performance that comes from a reduction of individual incentives and disincentives. If you are going to get the same food and housing and recreational time regardless of how well you perform or how efficiently you utilize the common resources, there is little incentive to improve your performance beyond some socially acceptable minimum. There is also some loss to the group planning process because you are less likely to be involved in planning for your old age, or for the welfare of your grandchildren, or the future of the commons, if such planning decisions have been delegated to someone else and/or your own interests are perceived as being equally served in meeting the interests of the group, which may in fact not be the highest achievable standard.

The planned economies of Eastern Europe suffered from all of these deficiencies, though for longer and with greater levels of pain and environmental devastation than those experienced by The Farm. I surmise these problems of shared resource management are generic to large experiments in socialism. However, that is not meant to elevate capitalism over socialism, any more than the reverse. In The Farm's experience with a communal economy it found a number of endearing characteristics which many of its members considered superior to the private family economic system they had come from and subsequently returned to. These characteristics included a sense of common fortune that served both to relieve unhealthy and sometimes unmanageable burdens (e.g., Dad the provider; Mom, the homemaker) and substitute group support; better efficiencies of labor division, such as childcare and tax accounting; the spiritual value of shared wealth, with its implicit requirement for greater cooperation; and the decoupling of life and liberty from the more alienable (and socially, ecologically destructive) rights of property and unrestrained acquisitiveness.

The Second Foundation

This brings me to our most recent economic experimental phase at The Farm, involving The Second Foundation. After the break-up of the communal society in 1983, there were a number of people who still adhered to a philosophy of voluntary simplicity and firmly considered that to be a life-long commitment. Voluntary simplicity does not mean that you must suffer constant deprivation, a condition that would condemn you to a short and non- productive life at best. Rather it means that you must be frugal and minimalist in your approach to life, making your mark in the improvement of the lot of others rather than in building a vast stockpile of consumer goods. Poverty in this sense is graceful, elegant, and efficient. Those people who adhered to this view did just fine under the new regime in 1983, because they lived within their means and gave any surplus earnings away to others in need, both on The Farm and off. But they missed the efficiencies of income sharing that I have mentioned: the burden-sharing for family and business decisions; the tool- sharing for home construction and gardening; and most of all, the group process. This shared psychological need to return a measure of communal interdependence was the impetus for the formation of The Second Foundation. The challenge was to design a format that minimized the drawbacks of both the communal society economy and the private family wealth system while drawing upon the advantages of both.

The Second Foundation is therefore a hybrid, an exploration into developmental communalism. Indeed, Historian Donald Pitzer's seminal paper which first coined the term, "developmental communalism"(3) was avidly read and frequently discussed in the Second Foundation's early organizational meetings. In 1988, a series of communications was circulated to probe what shape a new communal economy for the Farm might take. The first conclusion reached was that "The Farm" even at a population of less than 280 people, could be too large a unit to attempt to be manageably collective on a human scale. A better size group might be 30 to 50. As it happened, that was about all the people who were interested in going into such an experiment at that point in time anyway, so 30 to 50 was the size The Second Foundation started with, and remains within.

The Second Foundation practices a community of goods. Because members take a formal "vow of community," individuals have no legal claim to any property, irrespective of how it is held.(4) The way the system works is that you work in a business, either within or outside The Farm, your paycheck is turned in to The Second Foundation's bookkeeper. The bookkeeper subtracts some percent for the group pension fund, some percent for administration and emergencies--or common welfare--and some percent for whatever group purchase plans (firewood, food, building materials) might be currently in effect. After those deductions, the remainder is disbursed to your family's personal checking account and you are issued a blank expense voucher, or "chit" to fill in as you spend the money. When you're ready to collect your next pay, you turn in the completed chit and the process begins again. The purpose of the expense vouchers is to keep track of everyone's discretionary spending, to look for economies of scale or purchasing power. The purpose of the variable disbursement for discretionary spending is to put incentive into the system so people can directly feel the benefits of earning more, or less, within some reasonable range. If they earned too little, the group would augment individual support in various ways. If they earned too much, and didn't find ways to cycle it back to others on their own, the group might impose some more exacting tax.

The tax treatment of the Second Foundation is favorable. Technically, the IRS refers to this type of structure as a 501(d) corporation. To qualify as a 501(d), the IRS requires you to have a religious basis, combine sources of income, occupy a common piece of property, and have a communal treasury in which everyone has an equal share. The net earnings of the members are aggregated and divided into equal annual pro rata shares which are reported on Form K-1. This generally reduces the reportable income of all members to below the poverty level, so Second Foundationers would not normally pay taxes. Moreover, because a 501(d) is treated like a monastery, with "members" rather than "employees" working for their common good, the K-1 share is also exempt from Social Security and "Health Security" withholding. Keep in mind that the K-1 share does not reflect what members actually spend, but rather reflects their paper share of net earnings.

Second Foundationers pay no taxes if they elect to work for Second Foundation businesses, meaning that as much as 15 percent of their income can be recovered immediately or put into their own pension fund for support after age 65.

However, the Second Foundation urges its members to contribute the minimum 40 quarters of taxes to Social Security in order to qualify for baseline federal benefits. As a practical matter, this is accomplished by converting the K-1 shares of older members to "earned income" using Schedule SE (self-employed in a partnership). To obtain four quarters of coverage, the pro rata distribution must exceed some minimum amount. In 1992, for instance, this had to be $617 per quarter or $2468 per year per person seeking coverage. In order to reach this level of pro rata share, it was necessary for us to omit some qualified business expense deductions, because we simply didn't need them. By the serendipity of this process, we discovered that once we had converted the income from "unearned" to "earned," some members--those with children--also became eligible for the earned income credit. By pooling our earned income credits, we were nearly able to offset the added cost of paying social security taxes for the whole group.

The Second Foundation tries to strike a balance between, on the one hand, a planned central economy in which there are neither very rich nor very poor members, and, on the other, the incentives and disincentives of private control over wealth. The goal is to encourage greater productivity and creativity while providing thoroughgoing coverage of all members' real needs. This balance is struck by dividing expeditures between those best managed by large groups (capital plant acquisitions; business decisions; expensive tool use; tax accounting; etc.) and those best left to the discretion of individuals or small family units (food, clothing, travel, home economics, education, retirement planning, etc.).

After five years of operation, the Second Foundation appears to be a limited success. The IRS has reviewed its accounting methods and given full approval to the system. In its second year it achieved annual net earnings for its 30 members comparable to the earnings of The Farm when it was 800 members strong. The pension fund is appreciating at the rate of more than $2000 per month, and that money is turned around and reinvested in the community's businesses as low-interest loans. So, while only one person in eight at The Farm belongs to the Second Foundation, the Second Foundation's economic weight is considerable. If you look around at the construction projects and new businesses underway at The Farm today, many of them are financed in whole or part by The Second Foundation.

Neither The Second Foundation nor The Farm as a large intentional community can be characterized as "pure" communitarian systems today. What we have provided is rather an ecology of systems which work together to offer individuals the most appropriate choices at each stage of their lives, and to provide a matrix of support and interaction that makes life more secure, productive and enjoyable.


Notes:
(1) Originally presented at the Second Triannual International Communal Studies Association Conference, Elizabethtown, PA., USA, July 27, 1991 and subsequently published in Green Revolution 50:4 (Winter 1993-94).

(2) Albert Bates is an attorney and author in Summertown, Tennessee. He has lived at The Farm since 1972 and serves informally as a community historian. He can be contacted at P.O. Box 90, Summertown TN 38483-0090, 931-964-4474, Fax 931-964-2200.

(3) presented in New Lanark, Scotland, in 1987

(4) Since the corporation owns everything as a matter of law, there is little likelihood for rancorous lawsuits by ex- members attempting to divide the assets. As a matter of course, The Second Foundation is generous to departing members, giving them a stake to start over again outside the system.

1991, 1993, 1995 Albert Bates. All Rights Reserved.


Albert Bates

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