From Globalization to Localization: Bringing Kentucky

out of Poverty by Garda Ghista

The Kentucky River in the state of Kentucky, USA

The solution to removal of Appalachian impoverization is to adopt the

principles that will support economic decentralization, namely: (1) All
resources in a socio-economic unit should be controlled by the local
people. (2) Production must be based on consumption and not on profit. (3)
Production and distribution of all natural resources and finished products
must be carried out by cooperatives. (4) Local people must be employed in
local business enterprises, and (5) All goods that are not produced locally
should be removed from local stores. In addition to these five principles for
creating and maintaining a decentralized economy, Sarkar has provided
requirements for the implementation of economic democracy, as follows:
(1) The minimum requirements of a particular age – food, clothing, housing,
education and health care – must be guaranteed to all citizens; (2)
Increasing purchasing capacity must be guaranteed to all citizens. In fact,
adequate purchasing capacity of every person must be guaranteed in the
national constitution; (3) The power of making economic decisions must lie
entirely with the local people; and (4) Outsiders, non-local people, must in
no way be allowed to interfere in local economies. This will stop the
outflow of local capital, the present cause of local impoverization. These
four requirements if implemented along with the principles necessary to
create a decentralized economy will lead people closer to economic
democracy, because the power to control the economy will lie with the
people. When outside ownership of local land and resources is prohibited,
and when local lands and resources are owned collectively by local people,
at that point in time poverty in Kentucky will cease to exist, and will
become a relic in the history museum. - Garda Ghista

A typical Kentucky horse farm. The American Saddle Horse originates from
Kentucky.

Background
Communism as an economic model was tried in various parts of the world such
as Russia and Eastern European countries, however it failed. Under communist
economies the common people became even more impoverished than they were
prior to communism. Communism is symbolized by state ownership and public
enterprise. In essence, it is state capitalism. Capitalism is the economic model in
vogue today in most countries of the world. The United States is the bastion of
capitalism. In fact, many scholars and historians refer to it as the American
Empire, which has replaced the British Empire of the 19th and 20th centuries.
Capitalism is symbolized by individual ownership and private enterprise. We
have today not merely capitalism but global capitalism, also referred to as
globalization. In all these economic systems, i.e., communism, capitalism and
global capitalism, the economic system is centralized with control being in the
hands of a few persons. The question begs to be asked as to whether the
common people have fared well in centralized economies, and whether they
have been guaranteed an improved standard of living based on increasing
purchasing capacity. According to economist Prabhat Sarkar, in a centralized
economy exploitation cannot be eradicated nor can the poverty of the common
people be removed. In the above economic paradigms, economic policies are
formulated by a handful of men for the benefit of those men who are generally
indifferent to the plight of the masses.

Globalization
For the past several decades, economists, political scientists, presidents, prime
ministers and corporate CEOs have championed the cause of economic
globalization, saying that a nation’s economic goals should include comparative
advantage and international competitiveness. Globalization as an economic
construct has become the new global theology. Comparative advantage refers to
the belief that accessing the cheapest source of supply is of greatest benefit and
efficiency to a particular country. The term was coined by British economist Adam
Smith in 1776 and later refined by David Ricardo in 1817. According to Smith and
Ricardo, all nations benefit when each nation specializes in particular products,
i.e., specialized cash crops. If one nation has the land, climate, natural resources
or labor to produce a good more cheaply than other nations, it should focus on
mass production of that product. This gives it a comparative advantage in the
global market. Economies of scale – the idea that the more goods you produce,
the cheaper they become to produce – is a contributing factor in pushing for
comparative advantage, i.e., specialization of particular crops and goods in each
nation. Smith believed in open trade boundaries between all nations to maximize
the benefits of comparative advantage. He further insisted that the “invisible
hand” of market forces would bring about the best global scenario. Neither Smith
nor Ricardo could predict the unfettered flow of money across national
boundaries. This free flow of capital has led to comparative advantage changing
to absolute profitability, and hence absolute advantage has replaced comparative
advantage. The other factor they overlooked was that comparative and absolute
advantage were guaranteed not just by corporations but by state governments
and their military machines. The present Bush-Cheney regime in the U.S. has
taken this guarantee to new heights such that militarization has replaced
globalization as the U.S. government invades other nations at will in the name of
gaining market shares or trade advantage for U.S. corporations. While the WTO,
IMF, WB, NAFTA, MAFTA, et al were the legal handmaidens of U.S.
corporations, today they became insignificant in the face of U.S. global
militarization to ensure obscene profits for the Iron Triangle, i.e., the nexus
between government, military and corporations.

Globalization supporters claim that the theory of comparative advantage and

international competitiveness support the growth model, i.e., the growth of GNP.
In reality, globalization compels state leaders to sign away the rights of the
common people and hand them over to corporations and financial speculators. In
that process the common people lose their right to better wages, better health
care, better education and a host of other social benefits. Furthermore, in the
name of benefiting international trade, what used to be an infinite spectrum of
available goods became a consumer monoculture.

Production in other countries means unemployment for local people. Even the
lowest-priced items at Walmart cannot be purchased when people are
unemployed. Hence, the urgency is to bring production back to the local
community or region. When goods are produced in China or India, local people
have no control over that production or that economic process. In contrast, local
production leads to local control and hence control over the local economy. The
goal of concerned citizens is to regain control over the local economy. The
common people should not live at the mercy of transnational corporations who on
any particular day may decide to move their factories from Bellevue, Kentucky to
Tijuana, Mexico or to Dhaka, Bangladesh. The owners of those transnational
corporations may reside in New York, San Francisco, Germany or Australia and
have never met anyone in Bellevue, Kentucky. There is no relation, no
sentimental connection, and hence there is corporate indifference to the welfare
of the Bellevue population. If 90 percent of Bellevue residents lose their jobs, it is
of no concern to corporate CEOs living in another region or country. International
trade, be it in bananas, hormone-filled beef or genetically modified (GM)
vegetables, benefits the owners and CEOs of gigantic agri-corporations. The
common workers and consumers do not benefit financially from international
trade. At present, the laws of the World Trade Organization (WTO), North
American Free Trade Association (NAFTA), Middle-East American Free Trade
Association (MAFTA) and other global corporate bodies are carefully crafted so
as to create a continuous curb on public expenditure, meaning health, social and
education programs for the common people. Corporations, who in nexus with
national governments create global trade agreements, do not acknowledge any
needs of the people. For this reason, alert citizens often refer to globalization as
the “trade liberalization beast.”

Evidence indicates that economic globalization, whose hallmarks are

international competitiveness and comparative advantage, leads to a rise in
unemployment. Higher GNPs give the illusion that national economies benefit
from globalization. However, only the owners of corporations benefit from global
competition and comparative advantage. The common people of all countries,
including the United States, are suffering economically as a direct consequence
of globalization. As a simple example, in recent years India has signed several
trade agreements with the United States that give all-powerful American
corporations unhindered access to Indian markets as well as raw materials. The
Indian GNP has risen markedly during the same period. Both Indian and non-
Indian businesses have flourished. However, during the same period, Indian
farmers have starved. In the past year in Central and Southern India, thousands
of farmers have committed suicide, either by hanging themselves or taking
poison, because they saw no escape from crushing poverty caused by the
introduction of western seeds, western fertilizers and pesticides, whose costs
were insurmountable in comparison to the simple seeds and local farm
technologies used prior to the onset of globalization. Corporations look for
maximum profit at any cost. Maximum profit at any cost does not take into
account the lives and well-being of human beings, animals and plants.

Today millions of households around the world live in deep insecurity, never
knowing whether the next day will bring them the final day of their employment
and source of income. In the United States, while official statistics give the
illusion that unemployment is stationary, in reality millions of Americans have lost
their jobs since 2000. Many, after losing high-paying jobs, have taken up new
jobs, but invariably those jobs are in a far lower position and pay scale.
Thousands of other Americans have given up looking for jobs and instead
returned to university to get higher degrees, in the hope that jobs await them on
graduation.

At present the global trade laws of WTO, World Bank (WB) and International
Monetary Fund (IMF) are penned by big business lawyers to bring more profit to
corporations. Those same laws cause regions and nations to become the
enemies of one another. When negative results occur, big business claims that
eventually benefits will trickle down to the masses. Thus far, it has not happened.
What has happened is that the income gap between rich and poor has steadily
increased. Social benefits for the masses have decreased. Environmental
pollution has spiraled out of control. According to the International Labor Office
(ILO), in the late 1990s one third of the world’s work force was either unemployed
or underemployed. We can recognize the hallmarks of the economic process
called globalization by the following features: (1) ever decreasing trade barriers,
(2) ever decreasing constraints on capital flows, (3) increasing privatization (even
of things as basic as water), (4) deregulation (particularly with regard to the
environment), (5) increasingly severe constraints on all public expenditure, i.e.,
social, health and educational welfare programs, in the name of ever higher profit
for corporate CEOs. The signs of success of globalization are rising GNPs, rising
stock market prices and rising trade statistics. These three indicators, however,
provide no indication of the well-being of the common people.

Globalization, or global capitalism, has resulted in 80 percent of the world

population living in absolute poverty. Absolute poverty is economically defined as
a person without one or more of the five fundamental necessities of life, i.e., food,
clothes, housing, health care and education. Glocalization refers to the attempt
by transnational companies (TNCs) to become accepted by local people so that
their presence and their products are accepted and purchased by the people. In
most countries of the world glocalization has succeeded. In a few, like India and
Bolivia, the people saw the direct consequence of global trade treaties on their
lives and drove the oppressive corporations out of their countries.
Colin Hines tells in a nutshell the history of trade as represented by four phases:
(1) the mercantile division of labor, wherein surplus of goods was caused by
geography, climate, and the availability of animals and plants. (2) the industrial
division of labor, wherein machines began to replace people in the production of
goods, causing more workers to be dependent on wages and leading to the first
worker strikes; (3) the imperial division of labor, wherein companies moved to
developing countries where workers sweated and scrounged for raw materials for
companies to ship back to their home countries. Gradually workers in developing
countries became cash crop producers to suit the profit goal of corporations; (4)
the transnational era, wherein migrant labor is imported to developed countries to
become wage slaves in local corporations. Increasingly, production of goods has
shifted entirely to countries like India and China where wages come to mere
pennies per worker per week. In addition, developing countries do not have the
labor law restrictions of western countries, hence even ten-year-old children work
in Chinese, Indian and Bangladeshi factories making goods for western export.
Globalization has drastically reduced the power of national governments to take
care of its citizens. In the words of David Korten, today corporations do indeed
rule the world.

Localization
Concerned citizens around the world, observing the effects of globalization over
the past two-three decades, have begun grassroots movements in an effort to
regain control of their local economies. The process of moving from the global to
the local has been called localization. The force propelling this process is the
desire for an economy that protects people and rebuilds local communities. To be
engaged in this process requires the courage to publicly reject the mantra of
“international competitiveness” that is repeated worldwide by big business,
financiers and mainstream economists, and replace it with new words such as
“local sustainability,” “cooperative economy,” and “economic democracy.”
Concerned citizens engaged in the struggle to improve their local region no
longer listen to the idea that every country must economically outcompete every
other country. Instead of purchasing products from the cheapest source, which
may be Brazil or China, it is more beneficial to the people if those same products
are produced locally, even if the cost of production and hence the final price to
the consumer is higher.

We need not condemn all global trade. We need only change the end goal of
trade. We need to move from GATT (General Agreement on Trade and Tariffs) to
GAST (General Agreement on Sustainable Trade). If international trade is to
continue, a new end goal is required. The goal of world trade must be to protect
the local people, not politicians or owners of corporations. The local in
localization can refer to a nation state or, as in the case of larger nations like the
U.S., Canada or Russia, it can refer to a particular bioregion, state or province
within the larger nation. It means simply to bring economic control back to the
local arena. Localization does not refer to “state” control, as in the communist
model. It refers to local people in a town. Every person must have a voice and a
vote in the economic direction of his community.

The Universal Declaration of Human Rights guarantees every human being the
right to food, clothing, shelter, employment, education and health care, to justice,
and especially the right to take part in the decisions that affect our lives. In a
society dominated by corporations whose goal is maximum profit, human beings
will not have these rights. Localization does not mean closing off the outside
world. It means becoming more self-sufficient and less dependent on imports.
When we gain control over our local economies, our lives will have more stability.
Our jobs will be more stable.

What is local? Economist Prabhat Sarkar refers to the lowest socio-economic

unit as a bloc comprising 100,000 persons. Sociologists refer to “social fields,”
which are towns of 1500-100,000 population living within a 10-15 mile radius. In
developing countries blocs will refer to groups of villages or medium-sized towns.
To go local means to move from a centralized, corporate-controlled economy to a
local, decentralized economy controlled by communities, by local people. It
means to completely reverse the present economic direction around the world
from global to local. It also means that instead of individuals and communities
being indifferent or feeling powerless, every individual needs to become involved
in the economic future of the community. We need to participate in the process of
changing our economy from global to local.

Sarkar says that economic planning must start from the lowest level, from the
grassroots, where the knowledge, experience and talent of local people can be
applied to solve local problems and build local economies. He further says that
since the handful of capitalists presently controlling the global economy will never
voluntarily give up their vast power, it is up to the common people to start a
global movement in which the slogan should be: “Abolish centralized economy to
end exploitation; establish decentralized economy.”

Sarkar provides five principles for creating and maintaining a decentralized

economy: (1) All resources in a socio-economic unit should be controlled by the
local people. This applies particularly to those resources that are essential in
providing the minimum necessities of life. Raw materials should be converted by
the local people into finished products to be sold locally to the local people.
Sarkar defines “local people” as those who have merged their individual socio-
economic interests with the interests of the local, socio-economic unit. Hence,
the term “local people” has no relation to one’s race, complexion, language or
birthplace. The one point of consideration is whether an individual has made that
geographical region and community as his own, and whether he has merged his
individual socio-economic interests with the collective. If an individual has not
done this, then he would not be deemed as a local person, and hence would
have no say as regards local socio-economic issues, for example, as regards
production and distribution of either natural resources or their finished products.
Surplus wealth, after meeting the needs of the local people, can be distributed to
those having greater merit, such as doctors, engineers, scientists and teachers.
These persons with highly specialized knowledge and acumen can be provided
with extra amenities that will help them in their profession. However, the goal of
the community will be to constantly reduce the economic gap between the
wealthiest person and the poorest person.

(2) Sarkar’s second principle for maintaining a successful decentralized economy

is that production must be based on consumption and not on profit. In a
decentralized economy, all goods produced will be sold in the local community.
Hence a sound economic and moral stability will be established. This practice will
also cause the local money to be continually flowing inside the community, which
will further strengthen the economy, and make it practically immune from any
upheaval or depression. With the constant internal circulation of money, both
incomes as well as people’s purchasing capacity will go on increasing. This has
never been achieved with the communist model or the capitalist model.

(3) The third principle for maintaining a healthy decentralized economy is that
production and distribution of all natural resources and finished products must be
carried out by cooperatives. It is extremely difficult for cooperatives to survive
when surrounded by capitalist enterprises. The prices of goods sold by
cooperatives cannot compete with the prices of Walmart corporation, which has
their goods made in China often by ten-year-old children earning a few pennies a
day, then has those goods flown directly to private air terminals next to Walmart
headquarters. The consequences of Walmart’s actions are that local people who
could have produced those goods are without jobs and hence do not even have
money to shop at Walmart; (2) small children and women in China are paid
pittance and work 70-80 hours per week making those products; (3) people
employed in Walmart stores earn pittance and receive no benefits. Hence
Walmart engages in a full (global) circle of exploitation to end up ranked as one
of the top ten richest companies in the world. According to Sarkar’s first principle,
Walmart does not classify as a “local” person. Hence it must be removed from
the community and replaced by local companies managed by local people to
produce many of the same goods produced by slave labor in China for Walmart.
The final price of locally made goods will be higher; however, people will not mind
those slightly higher prices with the realization that local people are gainfully
employed in producing and selling those goods and are receiving living wages for
their work. Living wages and adequate purchasing power will be guaranteed
because the business model of all companies created in local communities will
be the cooperative business model. Raw materials, i.e., the natural resources of
a bioregion, will provide constant supplies to cooperative businesses that can
produce finished goods and sell them in the local market. When people of a
community understand the benefits of the cooperative business model, they will
accept it whole-heartedly. Agriculture, industry and trade can all be organized
through cooperatives. Private ownership of these industries can be abolished
because in private ownership the well-being of the larger community will not be
served. Cooperatives and decentralization are inseparable.

(4) The fourth principle required of a decentralized economy is that local people
must be employed in local business enterprises. If they are not employed in local
businesses, the problem of unemployment cannot be solved. Local people
should collectively decide on the minimum requirements essential for their
physical and economic well-being. It is critical that no outside interference is
allowed in a local economy. Cooperatives can provide employment to the local
people. People knowledgeable in agriculture, in agro-industries (industries
related to farm production) as well as agrico-industries (industries related to
products from farming, i.e., silk from sericulture, rope from jute) will be required to
work in agricultural cooperatives.

(5) The fifth and perhaps the most difficult principle to implement is that all goods
that are not produced locally should be removed from the local stores. The goal
of decentralization is for communities to become self-sufficient. So long as
imported goods are available, there will be no incentive for blocs and regions to
produce those goods. So long as imported goods are available, the local people
will not be guaranteed employment in local cooperative industries. For this
reason, banishing all imported products is critical to a community gaining self-
sufficiency. Local products may not be as cheap as imported goods. They also
may not be as efficient or technically sophisticated. Nevertheless, this principle is
essential in order to create self-sustaining communities. During times of
economic collapse as we saw in the 1930s, it is only the self-sufficient
communities that will be able to survive and reasonably cope during hard times.
Self-sustaining communities will be immune to inflation and deflation. Bringing in
imported products means the money gained in sales of those products will not
remain in the community. It will leave and travel to the company owner who may
be in another state or even another country. Money leaving a community will
cause it to suffer. In order for people to prosper, money must remain in a town
and must keep circulating through production, sales and continually improving
production and increasing wages.

If any good can be produced locally, it should not be imported. Several centuries
ago, when men ventured by ship to India for spices and other luxuries, they
brought products back to their home countries that were unavailable locally. This
motto must be revived. Global trade must be used only to acquire essential items
that cannot be produced locally. It is the premise of the “fair trade” movement.
This will protect local jobs and local cooperative businesses. If goods are
produced locally, and sold locally, local money returns to the producing
cooperative, and profits are given to the employee-owners in the form of
dividends. All money involved in production and sales remains in the local area.
This money can be used to create more cooperatives or to strengthen the local
economic infrastructure. Resource and other taxes can be introduced to help
cover the costs of converting from a global to a local economy. Thus only that
trade should be undertaken that enhances and strengthens local economies and
local environments. The shorter the distance between producer and consumer,
the greater control of that economy by the consumers.

Cooperativization
Peter Warbasse wrote in 1923 about his experiences traveling throughout
Europe to see first hand cooperatives in action. He wrote:

"The student of Co-operation, if he is not already familiar with the facts, will
discover with some amazement its actual extent. This revelation is bound to
gratify anyone who is seeking a tested method for the reorganization of society. I
have for months at a time lived and traveled among co-operative societies where
I have seen many thousands of Co-operators – living in their co-operative
houses, supplied by their own stores, working in their own industries, financed
through their own banks, entertained in their own theatres; I have seen happy,
healthy children frolicking in their own playgrounds; and I have realized that I was
in actual contact with a demonstration of that very society for which utopian
theorists hope as a remote possibility of the future and strive to attain by some
other means."

While the five principles stated earlier for establishing decentralized economies
are clear guidelines, the overriding factor in decentralized economies will be
cooperatives, as mentioned in the third principle. The goal is to move from a
capitalist economy to a cooperative economy. American universities in their
macro and micro economic courses teach three types of business models: (1)
proprietorship, i.e., single owner; (2) partnership, i.e., 2 or more owners of a
company, and (3) corporation, which has multiple shareholders. However, the
fourth business model, which is the cooperative business model, is omitted
entirely from 99 percent of American economics courses.

We can give the example of any Walmart outlet where a minimum of 20 women
are employed, earning minimum wage and barely making ends meet. If those 20
women were to form a cooperative of any kind – a health food store, a corner
mini-mart, or a dairy cooperative – raising cows and selling the fresh milk, later
expanding to make fresh butter and cheese – they will work for living wages, and
they will get their equal and fair share of surplus funds at the end of each year.
They will no longer be slaves to a wealthy man. The women are both employees
and owners. All share in the work and all share in the profits. Together the
women decide how much of profits is ploughed back into the business and how
much goes to the owners/employees as annual dividends. This business model
can help all women in Kentucky to escape poverty.

Cooperatives leads to humane, democratic production. Wages must be kept as

closely together as possible to avoid the entry of classism. Tasks should be
divided as equally as possible. Other precautions are necessary, such as taking
care that the collectively appointed manager of the cooperative does not misuse
his position to take excessive control of its management.

In 1844 the weavers of Rochdale, England formed a cooperative and wrote up

the “Principles of Cooperation.” These principles later became the “Principles of
the International Co-operative Alliance.” They continue to form the bedrock of co-
operatives around the world, and are as follows:

“Principle 1: Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all persons able to use their
services and willing to accept the responsibilities of membership, without gender,
social, racial, political or religious discrimination.

Principle 2: Democratic Member Control

Co-operatives are democratic organizations controlled by their members, who
actively participate in setting their policies and making decisions. Men and
women serving as elected representatives are accountable to the membership.
In primary co-operatives members have equal voting rights (one member, one
vote) and co-operatives at other levels are also organized in a democratic
manner.

Principle 3: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their
co-operative. At least part of that capital is usually the common property of the
co-operative. Members usually receive limited compensation, if any, on capital
subscribed as a condition of membership. Members allocate surpluses for any or
all of the following purposes: developing their co-operative, possibly by setting up
reserves, part of which at least would be indivisible; benefiting members in
proportion to their transactions with the co-operative; and supporting other
activities approved by the membership.

Principle 4: Autonomy and Independence

Co-operatives are autonomous, self-help organizations controlled by their
members. If they enter into agreements with other organizations, including
governments, or raise capital from external sources, they do so on terms that
ensure democratic control by their members and maintain their co-operative
autonomy.

Principle 5: Education, Training and Information

Co-operatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute effectively to
the development of their co-operatives. They inform the general public –
particularly young people and opinion leaders – about the nature and benefits of
those co-operatives.
Principle 6: Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-
operative movement by working together through local, national, regional and
international structures.

Principle 7: Concern for Community

Co-operatives work for the sustainable development of their communities through
policies approved by their members.”

The most famous example of a successful co-operative is the Mondragon

cooperative network that originated in the town of Mondragon in the Basque
country of northern Spain. In 1956 a priest named Jose Maria Arizmendiarrieta
opened a small stove factory and ran it with five former students as a democratic
co-operative. In 1958 the government denied them health and unemployment
benefits, hence in 1959 the co-op members created the Caja Laboral Popular,
which provided banking, entrepreneurial services and health care to all co-
operative members. The Mondragon group of co-operatives focused on
household appliances and machine tools. During the 1980-83 economic
recession, the Basque region lost 20 percent of its jobs and numerous firms laid
off thousands or shut down completely. Five co-operatives had to close and
others reduced wages by 11 percent. However, all other co-operatives survived
without financial setbacks and without layoffs, and served to stabilize the regional
economy. It is an example of how during economic recession, if the economic
power is decentralized and wholly locally controlled, that local economy will be
relatively unaffected by external economic crises. In the 1980s Mondragon
formed a huge network called the Mondragon Co-operative Corporation in order
to compete with capitalist corporations whose appliances were coming into Spain
from other European countries such as France and Germany. As of 2003, the
Mondragon co-operative network had more than 66,000 employees/owners
operating more than 160 co-operatives; 135 are industrial, 6 are financial and 14
are distribution co-operatives. In addition they run housing, service, research,
education and training co-operatives. In 1997 they founded the Mondragon
University, which trains students in the skills required to work in their co-
operatives. The University board of directors comprises members from the
student body and faculty and some members from local co-operatives. Since
1997 they have founded technology and management schools and research
institutes affiliated with the university. Every co-operative in the Mondragon
network has an annual general assembly when the board of directors is elected.
That board of directors appoints the management persons, elects a watchdog
council that monitors management, and a social council, which has the
responsibility to index all jobs on a 1 to 6 spread based on the job requirements
for experience, training and responsibility.

As James Warbassa points out, the quest for profits and privilege in a society
leads to unending crime, corruption, immorality, poverty and wars. According to
him, the only solution is to introduce the co-operative business model at every
level, for all production, distribution and administration of economic issues. Co-
operatives can bring about real economic democracy, which in turn can foster
genuine political democracy. The critical factor to remove is the profit motive, due
to its de-humanizing influence on human beings. It must be replaced with the far
more humane mindset of thinking for collective welfare above individual welfare.
Warbassa sees this change of mindset as an evolutionary process that more and
more people will accept as they witness the great benefits from working in co-
operatives. Sarkar also says that changing to the co-operative model will be a
gradual and voluntary process. It cannot be forced upon the people. People need
to be educated and convinced regarding its benefits. At present the poverty in
Kentucky and elsewhere may not be severe enough for people to consider the
co-operative option. It is the opinion of this author that in the near future the U.S.
economy will collapse, heralded by a collapse of the dollar. At that time, when
unemployment begins to reach the levels of those during the Great Depression
(25 percent), people will become amenable to the co-operative business model
and way of life.

Poverty in Kentucky
Ralph Ramsey describes poverty in Kentucky as “being a condition of deprivation
in any aspect of living which handicaps a person in acquiring the good things of
life…” as measured by the following factors: “(1) income, (2) education, (3)
employment, (4) housing, (5) health, (6) social participation, and (7) welfare
recipients.” Kentucky, USA has the second highest poverty levels in the United
States after Mississippi. The average annual household income in eastern
Kentucky is under $22,000 per annum. In 1999, 15.6% of Kentucky’s women
over 18 were living below poverty level, while 11.6% of men were below poverty
level. More than 20 percent of families are headed by single mothers. While in
the U.S. 34.3 percent of single mothers live below poverty level, in Kentucky the
percentage is 42.7 percent. Older women at poverty level in Kentucky are 16.7
percent, while older men comprise 10.5 percent. In 1999, the Center on Budget
and Policy Priorities stated that 80,000 Kentucky families with children live in
poverty despite one working parent. According to the Center, poverty among
working families increased during the 1990s, with less than 20 percent of families
relying on welfare. The reason can be attributed to the fact that 60 percent of
those leaving welfare and returning to work received wages of less than $7.00
per hour. Author Barbara Ehrenreich has stated categorically that the minimum
wage in the United States must be not less than $14.00 per hour in order for
working families to move out of the ‘working poor’ category into the ‘self-
sustaining’ category. Nearly one in four children in Kentucky is poor, according to
the Center. They report that job growth has been primarily in the area of service
and retail jobs, both of which are low-paying positions. Second, the minimum
wage of $5.15 per hour has not kept up with inflation over the past 20 years.
Third, the Center notes that poor families in Kentucky pay a higher percentage of
their salaries into taxes than is paid by middle and upper-middle class families.
As of August 31, 2006, 1,806,397 Kentuckians lived in rural areas, 2,367,008 in
urban areas, coming to a total of 4,173,405. Per capita income in 2004 in rural
areas averaged $21,203, in urban areas $30,827, coming to a state average of
$26,642. The percentage of Kentuckians living in poverty was 17.5 percent in
1979, 19 percent in 1989, 15.8 percent in 1999 and 14.9 percent in 2003. The
percentage of rural Kentuckians living in poverty in 2003 was 18.4 percent,
substantially higher than the national average of 12.7 percent. The percentage of
Kentuckians completing high school in 2000 was 33.6 percent (35.5 percent in
rural areas and 32.1 percent in urban areas). Kentuckians completing college in
2000 was 17.1 percent: 11.3 percent in rural areas and 21.8 percent in urban
areas. In 2002 18.4 percent of Kentuckians were in farming or farm-related jobs.

Poverty is the single greatest cause of disease in Kentucky. The life expectancy
for men in Harlan County in 2001 was 65 years, which is shorter than in
developing countries like Ecuador, Columbia and Turkey. Due to impoverization,
people in rural areas and particularly in the Appalachian mountain region of
eastern Kentucky go without essential medicines such as blood pressure, insulin
and ulcer medications. Seventeen of the 20 counties of Kentucky having the
highest death rates have poverty levels of more than 20 percent, including
people who have been impoverished for 30 years, i.e., they have known only
poverty. However, health crisis and early deaths are not restricted to rural areas.
Poor residents in urban areas unable to afford basic medications and medical
items like inhalers for asthma suffer likewise. According to Laura Ungar, in 2005
one in six Kentuckians live below the federal poverty level, in contrast to the
national average of one in eight. Kentucky’s median household income is 20
percent lower than the national average, and 38 percent of Kentucky households
earn less than $25,000 annually, while nationally 29 percent of households earn
less than $25,000. More than 50 percent of Kentuckians earn less than $35,000,
while the national average is 41 percent. Poor health is directly correlated to both
education and income, with people in lower income brackets being far more likely
to smoke, have poor diets and a sedentary lifestyle. As healthy whole wheat and
other full-grain breads cost double in price compared to white bleached breads,
poor people are often condemned to the least healthy supermarket products. In
2005 just 75.1 percent of Kentuckians graduated from high school – one of the
lowest rates in the United States. The poor are hit from all sides: due to poverty
they are less likely to have education and hence more likely to adopt bad habits.
They are more likely to purchase cheap foods having zero nutritional value. And
again due to poverty they are less likely to have medical insurance and hence
visit the doctor only when in dire straits, when their diseases are too advanced to
bear without pain medication.

Causes of Poverty
Dwight B. Billings and Kathleen M. Blee in their study of poverty in Eastern
Kentucky have provided plausible reasons for its development from 1860
onwards. One reason was the high rate of population growth among local
families, leading to the constant division and re-division of land as fathers
parceled out their holdings equally amongst their children. Eight to fifteen
children in a family was normal in the mid and late 19th century. While the
original settlers had vast land holdings, over generations through repeated
divisions to accommodate all siblings the holdings became relatively small and
often contained no fertile land, i.e., the agricultural land available was generally
over-cropped, causing it to become rocky and unproductive. From the beginning
in the mid-19th century, emphasis was on subsistence farming rather than on
commercial farming. The same pattern had occurred in New England, with the
only difference being that in Kentucky subsistence farming continued much
longer due to the region’s relative geographical isolation and delayed
development of transportation.

Billings and Blee note that when lumbering came to eastern Kentucky, local
people prospered financially and consequently gave up their traditional crafts of
weaving and shoemaking, preferring instead to purchase clothes and shoes.
While they had formerly produced flour, sugar, lard and meat, they likewise
stopped home production and began to purchase these items, gradually losing
more and more ability to sustain themselves through their own labor and
ingenuity.

Salt mining became the state’s first significant commercial activity, and farmers
moved into the region to work in the salt mines. Wealthy, slave-owning families
also moved to Appalachian Kentucky to reap the benefits of salt-mining. The
family of James White had an estate worth $2 million by 1838. James Garrard,
the second governor of Kentucky, owned more than 45,000 acres of land,
including in the Appalachian region, where he built salt wells and furnaces. These
two families became wealthy due to salt-manufacturing, large-scale commercial
farming and the use of slave labor. The growing wealth disparities caused
pronounced social stratifications, with the wealthy, slave-owning families
controlling huge lands, commercial ventures and personal estates worth nearly
$46,000, while the vast majority of Appalachian farmers had holdings worth only
$859. The wealthiest individual in Clay County, Francis Clark, had an estate
worth $175,000 in 1860. In the late 19th century most African-Americans left
Appalachia and moved westward. Former slave owners continued in their role as
wealthy landowners, corporate commercial investors, and as local agents for
external capitalist interests in local resources such as land, timber and coal. Thus
while half a century earlier the farmers had been relatively self-sufficient, poverty
increased as farm sizes along with livestock inventories diminished and land was
over-cropped, rendering the soil infertile. Soil exhaustion and soil erosion was
commonplace. By 1880 poverty was entrenched in Appalachian Kentucky.

While Billings and Blee focus on non-capitalist causes of Kentucky poverty,

subsequent scholars have highlighted the encroachment of absentee, non-
Kentuckian owners of mines and timberland as well as increasing corporate
stranglehold of local energy and other natural resources. Ronald Eller claims that
the small, impoverished, subsistence farms characteristic of eastern Kentucky
today developed in tandem with the invasion of external coal and timber
interests. Slow economic growth, rapid population increase, small land holdings
per farmer and soil depletion were all factors leading to Appalachian
impoverishment. Subsistence farming in the region was the norm during the
antebellum era in Kentucky and other southern states. Many farms continued to
be non-commercial through the first half of the 20th century. While initially the
region underwent capitalist transformation in the latter half of the 19th century,
today eastern Kentucky has been swallowed up by national and international
corporations.

International Coal Group (ICG) is a major coal producer with mine complex
throughout Appalachia and headquarters in West Virginia. ICG East Kentucky is
a surface mining operation in Pike County that manages the Blackberry mine. It
includes three coal beds. The Blackberry mine has about 2.6 million tons of coal
reserves. According to ICG, when Blackberry mines are empty, the company will
start mining the Mount Sterling property in Martin and Pike Counties near the Tug
Fork River. Another 4.4 million tons of coal reserves is in the Mount Sterling
property. ICG mines in Northern and Central Appalachia and sells to both
domestic and international customers. As of January 1, 2006 ICG owned more
than 315 million tons of metallurgical quality coal reserves and 572 million tons of
steam coal reserves. In addition the company owns another 707 million tons of
coal resources – coal-bearing bodies that have been analyzed but are not
presently considered as commercially viable coal according to SEC rules.
Metallurgical coal is used for producing coke and steam coal is used by utilities
companies. The ICG is an investor group formed in May 2004 that acquired the
bankrupt Horizon coal company through a public auction on August 17, 2004.
ICG purchased only the nonunion operations of Horizon, and operates the Sago
mine in West Virginia where 12 coal miners died on January 2, 2006.

International Coal Group is an example of the increasing consolidation of the coal

industry, which causes smaller coal companies to go bankrupt or sell out to the
mega coal companies such as ICG. ICG Chairman Wilbur Ross previously
bought up dying steel companies, consolidated them into one company called
International Steel Group, made them profitable and then sold them at a huge
profit to the Mittal Group. In this process, and as he is now doing in the coal
industry, unions will be eliminated or grossly restructured and pension obligations
to miners will be shifted to the federal government. The top ten coal companies
as of November 20, 2004 were Peabody Eergy, Arch Coal, Kennecon Energy,
Foundation Coal Holdings, CONSOL Energy, Massey Energy, Horizon Natural
Resources, North American Coal, Westmoreland Mining, TXU and Vulcan
Partners. Kennecon Energy and TXU are Australian-owned companies.
Foundation Coal Holdings and CONSOL Energy are German companies. George
Bush has removed restrictions on strip mining as well as emissions from coal-
based electric generators, making it thus more profitable for coal industries. The
coal business is already an oligopoly, with the top five companies controlling
more than 50 percent of domestic coal production. The strategy is not to build
new mines but to buy out smaller existing mines, as it is cheaper and financially
involves less risk. According to Steve Hannaford, the top five coal producers -
Peabody Coal, Kennecott Energy, Arch Coal, RAG American and Consol Energy
– are all now owned by foreign corporations.

Mergers and acquisitions are an ongoing phenomenon, leading to increasingly

concentrated oligopolies, be it in coal, gas, petroleum, timber, beef cattle or
vegetable produce. In every case, it is the worker, the labourer, who suffers
maximally, as in the name of higher profits the companies constantly squeeze
their salaries and benefits. We find the same scenario in the tobacco industry
with increasing mergers and acquisitions leading to larger oligopolies with fewer
corporate members. The world’s second largest tobacco company, Dimon, buys
leaf tobacco from farmers in more than 40 countires and has more than 30
percent of the market share with companies like Philip Morris (Altria) and Japan
Tobacco. The largest tobacco-processing corporation is Universal Corporation,
which also deals in lumber and other agricultural products. Economic
globalization compels consolidation and oligopolies, which demand “free
markets” of national governments. However, these free markets are only free for
corporations, as those same corporations using financial and political power
effectively crush smaller companies, driving them out of business and livelihood.
Hence, in every country, including the U.S., the small companies and the small
farmers suffer to the point of sell-out, bankruptcy and starvation. Farm laborers
and coal miners are at the mercy of corporate boards whom they never see but
who they know as denying them their fundamental rights to a living wage, to safe
working conditions, to health care and to pension benefits. In the New York Times
article “Supermarket Giants Crush Central American Farmers,” published Dec 28,
2004, the plight of millions of Guatemalan farmers is highlighted as they simply
do not have the technological skills and equipment to create the “standard”
produce required by the mega supermarkets taking over the towns and cities.

As Steve Hannaford points out, the WTO treaties serve the wealthy alone, as its
laws provide a means for wealthy corporate farmers to unload their unsold
produce onto third world countries. Local people in third world countries do not
benefit. Only a handful of local elites benefit. The small farmers and landowners
everywhere suffer. It is a natural then that the United States would expect more
and more immigrants to arrive on its shores or to scramble over the wall along
the Mexican border, as the only means of providing economic relief to people
starving as a direct result of WTO/corporate laws and policies.

The Capitalist Factor

As Sarkar has correctly stated, capitalism turns men into beggars and
communism turns men into beasts. The world today is controlled by oligopolies
(a few companies controlled by a handful of extremely wealthy men that sell
goods to other people or companies.) As elaborated by Lawrence, Vidal and
Morris in their article “Unfair trade winds,” the food industry has likewise become
an oligopoly. For example, the banana market is dominated by an oligopoly of
five companies: Chiquita (formerly United Fruit), Dole, DelMonte, Fyffes and
Noboa. The coffee industry is dominated by Kraft, Nestle, Proctor & Gamble,
Sara Lee and Tchibo. These mega corporations squeeze the farmers and pit one
country’s farmers against another country’s. The farmers do the only thing they
can do which is to squeeze and cut labor costs. As an example, in 2002 a
Ugandan farmer received 14 cents for one kilogram of coffee beans. The same
kilo was sold in stores as instant coffee for $26.40, which is 7000 percent more
than the price received by the farmer.

According to Steven Hannaford, oligopolies (a handful of sellers) invariably lead

to oligopsonies (a handful of buyers). Examples of oligopsonies are Barnes &
Noble, ClearChannel andViacom. The supermarket industry is a further example
of an oligopsony, where in 2003 three major chains existed: Safeway, Kroger and
Albertson’s. These three have bought out most smaller chains, a step that gives
them tremendous power, leading to oligopsony exploitation, which has led to
severely reduced income for farmers as the oligopsony of produce buyers
squeezes prices using their power to select the lowest price from amongst the
helpless farmers. In addition, growers in the United States, or example, are
expected to not only sell at a cheaper price but are obliged by the buyer oligopoly
to market and promote their produce inside the supermarkets. In the produce
sphere, supermarket chains are now an oligonomy, which means they are both
the buyers (oligopoly) and the sellers (oligopsony). The supermarkets are the
middlemen and use their “middle” position to exploit in either direction. (It is
interesting to note here that Venezuelan President Hugo Chavez eliminates
middlemen in every sphere of the economy, both in Venezuela as well as in his
program to supply oil to poor Americans. He bypasses politicians and
governmental structures and ensures that the oil reaches the poor directly.)

Hannaford says that just oligopolies breed oligopsonies, the converse is also
true. While the two words ‘oligopoly’ and ‘oligopsony’ exist in economic
vocabulary, there is on economic term that covers the increasingly common
scenario of corporations serving as both oligopolies and oligopsonies, i.e., when
the same few buyers are also the same few sellers. Hannaford has coined the
word “oligonomy,” which means that companies are an oligopoly towards one
group (i.e., farmers) and an oligopsony towards another group (retailers). The
only group strong enough to deal with an oligopoly is an oligopsony, which leads
then to a tiered oligonomy. Safeway, Kroger and Walmart are an oligopoly to
consumers, while to producers/farmers and food brokers they are an oligopsony.
Vendors providing ice cream are an oligopsony to dairy farmers and
simultaneously an oligopoly to supermarkets. The two huge chocolate companies
called Archer-Daniels-Midland and Cargill are an oligopsony to West African
farmers, bidding one against the other to get the cheapest price for cocoa beans.
Thereafter they become an oligopoly when selling to chocolate manufacturers
such as Nestle, Kraft, Mars and Hershey. These four chocolate producers
become an oligopsony to cocoa merchants, while simultaneously serving as an
oligopoly to cocoa retailers who need their products to sell to the consumers.
This inter-layered process becomes what Hannaford calls the “tiered oligonomy.”
He presents the following example of the chocolate oligonomy:

1. Cocoa growers
2. Cocoa processors (ADM, Cargill) – Oligopsony for cocoa beans, Oligopoly for
processed cocoa.
3. Chocolate makers (Kraft, Nestle, Mars, Hershey) – Oligopsony for processed
cocoa. Oligopoly for chocolate candy.
4. Key retailers (Walmart, Safeway, CVS) – Partial oligopsony for chocolate
candy. Partial oligopoly for retail candy.
5. Candy eater / consumer

Understanding the tiered oligonomies that today permeate the capitalist

economic paradigm helps us to understand how the various market layers exploit
the two end-layers of each layered tier: the farmers/producers at the beginning of
the tier and the consumers/shoppers at the other end. These two end layers
have no control and no leverage over the middle layers which comprise the
oligopoly and oligopsony. Hence, there is no way for the producers and
consumers to avoid exploitation. As oligonomies are permeating every sector of
the market, including coal, timber and produce, it becomes easier to understand
why Kentucky is impoverished. Several reasons have been cited above as the
cause of poverty: slow economic growth, rapid population increase, repeated
land division generations, re-cropping and soil depletion, However, Appalachian
writer and activist Scott Goebbels cites the prime cause of poverty in Kentucky
and particularly in eastern Kentucky as being capitalist exploitation, which began
in the early 19th century with the in-migration of slave-holding southerners who
became exceedingly wealthy while surrounded by impoverished Appalachian
farmers. From the few wealthy local exploiters, capitalism has grown until today it
is represented by international oligonomies, manifested by companies in
Germany and Australia owning Kentucky coal mines. Another word for
oligonomies is globalization or capitalism on a global scale. Unless the economic
paradigm of capitalism is removed and replaced by a more democratic,
egalitarian economic structure, a large percentage of Kentuckians will remain
impoverished due to circumstances far beyond their control.

Kentucky Resources
As Florence Cope Bush writes, “Most everything we needed for survival was
there in the mountains.” Bush’s book about her mother Dorie details life in the
Appalachian mountains from the period 1898 to 1942. Even In 1942 poor
Appalachian families were remarkably self-sufficient as compared to other
regions of the state. They made their own furniture, kitchen utensils, and grew
wheat, corn, potatoes and oats. Beef cattle and sheep were slaughtered for
consumption, while milk cattle were utilized for milk consumption, butter and
cheese-making. The people produced their own sugar from maple trees,
collected wild honey, and in addition had their own beehives, and knew how to
make sorghum molasses. They spun sheep’s wool into thread that was used to
make cloth. People raised both cotton and flax to use for cloth and linen-making.
Tanned hides were used for shoe-making. Farmers owned oxen, hogs, horses
and mules. To augment this they hunted deer, boar, squirrels and other animals
for food. Food, clothing and shelter were available in Appalachian Kentucky since
the 19th century and earlier. Health care and education were deficient and
remain so today, with only a handful of colleges and an even smaller handful of
doctors to serve the people.

Many Appalachians who live way in the “outback” move by walking, not by car.
There is no store nearby so they rely on help from neighbours. When they need
the home heated, they pick up a bucket and go out and fetch a bucket full of coal
from the coal pile next to the house. When they need water, they take a bucket
and go out to draw water from the well. Many continue to heat their homes with
wood. Many homes continue to have outdoor toilets and rainwater is collected in
cisterns and used instead of municipal water.

Bartering continues to be common. If a woman’s well breaks down, she visits the
neighbours to get help and offers a quilt in return for repairing the well. If money
is not available to purchase jewelry for Christmas presents, a man may collect
some of his guns and take them to a jewelry shop in Williamsburg, Kentucky and
offer them in exchange for jewelry. Others in the region may use food stamps as
a bartering item. This style of bartering remains commonplace amongst the
people of Appalachia. Sarkar has advocated that bartering take place as much as
possible as a means for acquiring essential goods and services. Venezuelan
President Hugo Chavez has led the world in reviving the barter system by
providing oil to other countries in exchange for goods and skills needed in
Venezuela, such as doctors, medical skills and cows.

Kentucky’s most valuable natural resources are bituminous coal, timber, crushed
stone, natural gas and oil. Eastern Appalachia, which is historically and presently
riddled with poverty, has abundant natural resources. In 1993 bituminous coal
comprised 85 percent of mineral production in the United States. Other types are
anthracite, subbituminous, lignite and brown coal. At present only 80 percent
Kentucky coal deposits have been utilized. In addition there are clay deposits,
commercial and industrial limestone, dolomite, glacial sand/gravel, iron, shale,
riverine sand/gravel, rockcastle sandstone, phosphate and zinc deposits.
Besides coal and minerals, Kentucky has substantial natural gas deposits, which
have increased, and small reserves of petroleum with original supplies nearly
exhausted. Kentucky contains a large network of gas transmission and
distribution lines, including not just local gas but lines between major
northeastern and midwestern markets. Kentucky gas comprises 3 percent of the
total amount of gas running through the distribution lines.

Another vast resource in Kentucky is timber, including yellow poplar, shortleaf

pine, black gum, sweet gum from the south and northern red oak, white pine,
hemlock, hard maple, basswood, black walnut and beech from the north. About
one half or close to 12 million acres of Kentucky land is forested. Oak and
hickory represent the main commercial timber sources. Most of Kentucky’s
timber is privately owned with each owner averaging between 10 and 25 acres.
Kentucky produces around 800 million board feet annually.

Kentucky with its rolling hills, limestone bedrock and river floodplains has ample
cultivatable land, particularly in the loess-filled Jackson Purchase area. The
Bluegrass regions with their shale and limestone backed soils also serve as rich
agricultural lands. While presently a strong trend predominates for farmers to sell
their land due to price competition with foreign imports, yet the potential to
increase farming in Kentucky remains if and when pricing becomes adequate
such that farmers can make a reasonable living. Principal crops have been hay,
soybeans, wheat, corn and tobacco. Again, the diversity of crops could expand
substantially if required and if a solid local market for those crops were made
available. In addition there is ample hog and pig production, broiler and other
chickens, beef cattle, dairy cattle, horses that are sold on a commercial basis.
Other animals such as deer, wild boar, turkeys and peasants are available in
plenty. With its vast waterways, lakes and reservoirs, Kentucky abounds in fish
that provide another source of local subsistence.

Manufacturing is extensive in Kentucky and presently includes a large

percentage of foreign ownership. Only eastern Kentucky lags behind in
manufacturing development. As of 994, General Electric, Toyota Motor
Manufacturing, Fruit of the Loom, Ford Motor Assembly Plant, Ford Motor Truck
Plant, Lexmark international, Philip Morris USA, Martin Marietta Energy Systems,
Armco Steel, Porter paints, General Tire, Brown-Forman Corporation, Fisher-
price, Ashland Petroleum Co., The Apparel Group, Square D Company and
Courier Journal & Louisville Times all had plants located in Kentucky. Products
made in Kentucky range from chemicals, petroleum refining, tobacco,
transportation equipment, metal industries, electrical and electronics industries,
paper and related products, stone, clay and glass products, printing and
publishing, rubber and plastics, food and related products, furniture and
accessories, wood products, leather and leather products such as shoes, and
clothing. In 1990 there were 41,100 Kentuckians working for foreign-owned
plants in Kentucky, which came to about 14 percent of its manufacturing
employees. Only six states had a higher share of their manufacturing workforce
employed in foreign-owned companies.

In 2005 Kentucky remains exceedingly rich in natural resources. The top five
agricultural commodities in Kentucky were (1) horses/mules, at $1,010,000 or
82.2 percent of US value, (2) broilers, at $704,297 or 3.4 percent of US value; (3)
cattle and calves, at $561,348 or 1.1 percent of US value; (4) tobacco, at
$342,540 or 31.3 percent of US value, and (5) corn, at $336,060 or 1.8 percent of
US value. The top five agriculture exports in 2005 were tobacco (with number
one ranking in the US), live animals and meat (ranked number 8), soybeans and
related products (number 15 rank), feed grains and related products (14 ranking),
and wheat and related products (22 ranking). In 2006 Kentucky continues to
have abundant natural resources and manufacturing capabilities.

Kentucky landscape - rolling green hills covered with trees

While multiple causes are cited for Kentucky poverty, the single greatest
cause above all else is the predatory capitalism via economic exploitation
and political domination that took place from the very early days of the 19th
century and stands in sharp contrast to the “culture-of-poverty” theory of
Appalachia. The deep culture and kinship helped the people to survive the
onslaught of capitalist exploitation that arrived in tandem with racial
oppression to establish the salt mines and later coke manufacturing. While
the official rate of (structural) unemployment in 1989 was about 9 percent,
the “real” rate of unemployment, which includes those who have given up
looking for work, came to more than 54 percent of the population. Along
with capitalist exploitation, the concurrent crime in Appalachia is the
continuous lack of public investment by state and federal governments to
build up health care and educational facilities along with cultural activities,
environmental programs and the building of other public goods such as
more roads, libraries, theaters, colleges, etc., leading one to speculate on
the inherent bias of political structures against the subordinate, poor and
neglected segments of society. Despite the severe exploitation, the poorest
of the poor in Appalachia have resisted and survived by “making ends
meet the Kentucky way,” as has been described earlier. In addition, there is
today a strong people’s movement for social, economic and environmental
justice, indicating that, aided by close relationships with neighbours and
kin, the people of Appalachia may soon lead the nation in creating a
political and socio-economic revolution in the United States. - Garda Ghista

Kentucky warbler

Conclusions
While scholars and politicians find various causes of Kentucky poverty, including
those enumerated herein, they overlook the fundamental cause, which is
exploitation by capitalists, particularly external corporations, based in the United
States or elsewhere, such as Germany and Australia, as is evidenced by coal
mine ownership. Billings and Blee write of the exodus of millions from Appalachia
after World War II with the increasing mechanization of coal mining. Due to
strong kinship and reciprocity among the people, land was divided over
generations until at present the descendants have small parcels of not more than
160 acres. Billings and Blee put the poverty rate in eastern Kentucky at 42
percent, three times the national rate; 54 percent of the children in Clay, Owsley,
Perry and Leslie Counties are living below poverty level. While poverty has
decreased to some extent, in 1990 one-fourth of the people in Appalachian
Kentucky were poor.
While Billings and Blee elaborate on multiple causes of poverty, including
familism, traditionalism, cultural legacies, yet they emphasize above all else the
predatory capitalism via economic exploitation and political domination that took
place from the very early days of the 19th century and stands in sharp contrast to
the “culture-of-poverty” theory of Appalachia. The deep culture and kinship
helped the people to survive the onslaught of capitalist exploitation that arrived in
tandem with racial oppression to establish the salt mines and later coke
manufacturing. While the official rate of (structural) unemployment in 1989 was
about 9 percent, the “real” rate of unemployment, which includes those who have
given up looking for work, came to more than 54 percent of the population. Along
with capitalist exploitation, the concurrent crime in Appalachia is the continuous
lack of public investment by state and federal governments to build up health
care and educational facilities along with cultural activities, environmental
programs and the building of other public goods such as more roads, libraries,
theaters, colleges, etc., leading one to speculate on the inherent bias of political
structures against the subordinate, poor and neglected segments of society.
Despite the severe exploitation, the poorest of the poor in Appalachia have
resisted and survived by “making ends meet the Kentucky way,” as has been
described earlier. In addition, there is today a strong people’s movement for
social, economic and environmental justice, indicating that, aided by close
relationships with neighbours and kin, the people of Appalachia may soon lead
the nation in creating a political and socio-economic revolution in the United
States.

The solution to removal of Appalachian impoverization is to adopt the principles

outlined earlier that will support economic decentralization, namely: (1) All
resources in a socio-economic unit should be controlled by the local people. (2)
Production must be based on consumption and not on profit. (3) Production and
distribution of all natural resources and finished products must be carried out by
cooperatives. (4) Local people must be employed in local business enterprises,
and (5) All goods that are not produced locally should be removed from local
stores. In addition to these five principles for creating and maintaining a
decentralized economy, Sarkar has provided requirements for the
implementation of economic democracy, as follows: (1) The minimum
requirements of a particular age – food, clothing, housing, education and health
care – must be guaranteed to all citizens; (2) Increasing purchasing capacity
must be guaranteed to all citizens. In fact, adequate purchasing capacity of every
person must be guaranteed in the national constitution; (3) The power of making
economic decisions must lie entirely with the local people; and (4) Outsiders,
non-local people, must in no way be allowed to interfere in local economies. This
will stop the outflow of local capital, the present cause of local impoverization.
These four requirements if implemented along with the principles necessary to
create a decentralized economy will lead people closer to economic democracy,
because the power to control the economy will lie with the people. When outside
ownership of local land and resources is prohibited, and when local lands and
resources are owned collectively by local people, at that point in time poverty in
Kentucky will cease to exist, and will become a relic in the history museum.

Notes

1 Jake Karlyle, “A Cooperative Economy – What Might it Look Like?” Paper

presented at the Conference: Community, Economy and the Environment:
Exploring Tasmania’s Future, Hobart, Tasmania, October 15, 2005.
2 Prabhat Ranjan Sarkar, Proutist Economics: Discourses on Economic
Liberation, Kolkata, AM Publications, 1992., p. 212.
3 Colin Hines, Localization: A Global Manifesto, Earthscan, 2000, p. 10.
4 In Kentucky the largest cash crop is tobacco. However, corn and soybeans are
also sold outside the state.
5 Colin Hines, p. 11.
6 Ibid, p. 13.
7 This new U.S. militarization around the globe is amply elaborated upon by
Chalmers Johnson in his book Sorrows of Empire, Owl Books (NY), 2005..
8 Colin Hines, p. ix.
9 Numerous articles are available in the Frontline magazine published by The
Hindu newspapers.
10 Vandana Shiva, Stolen Harvest: The Hijacking of the Global Food Supply,
South End Press, 2000.
11 Colin Hines, p. 6.
12 Ibid, p. 6.
13 In his book The Myth of Free Trade, Professor Ravi Batra documents how
since the beginning of the free trade era in the early 1970s real wages have
steadily declined. This has led to the necessity of both parents working, which
prior to the 1970s was not an economic necessity in the majority of families.
14 Absolute poverty can be economically defined as missing one of the five
minimum necessities of life, i.e., food-water, clothing, shelter, health care and
education.
15 Colin Hines, Localization.
16 Numerous articles in Frontline magazine, The Hindu, and Zmag.
17 In fact, many more countries are involved, such as Turkey, Malaysia,
Indonesia, Mexico and Guatemala to name a few.
18 David Korten, When Corporations Rule the World, Berrett-Koehler Publishers,
2001.
19 Colin Hines, p. x.
20 Ibid, p. ix.
21 Ibid, p. 28
22 Ibid.
23 Prabhat R. Sarkar, Proutist Economics, p. 213.
24 Ibid, p. 214.
25 Ibid.
26 As is mentioned later in this paper, the Mondragon Cooperative conglomerate
in the Basque region of Spain has set salary gradations of from 1 to 6. That is,
the highest salary in any cooperative will not be more than six times the lowest
salary. Economics professor Ravi Batra, who is a lifelong student of Prout
economic model, has stipulated that the wage differential not be more than a
ratio of 1 to 10.
27 Prabhat R. Sarkar, Proutist Economics, p. 216.
28 Ibid, p. 217.
29 Ibid.
30 Ibid. p. 218.
31 James Peter Warbasse, Co-operative Democracy: Attained Through
Voluntary Association of the people as Consumers – A Discussion of the Co-
operative Movement, Its Philosophy, Methods, Accomplishments, and
Possibilities, and its Relation to the State, to Science, Art, and Commerce, and to
Other Systems of Economic Organization, New York: The MacMillan Company,
1923, p. ix.
32 Northern Kentucky University is an example.
33 In Betsy Bowman and Bob Stone, “Cooperativization As Alternative to
Globalizing Capitalism,” it is mentioned that this same cooperative in Rochdale
founded in 1844 degenerated when in 1859 it took on investment members to get
the requisite funds to purchase a new mill. The investor members outvoted the
co-operative members steadily and within three years converted the cooperative
to a capitalist business.
34 International Co-operative Alliance. http://www.coop.org/ica/ica-rules.pdf.
35 Betsy Bowman and Bob Stone, “Cooperativization as Alternative to
Globalizing Capitalism,” http://www.geo.coop
36 Ibid.
37 Ibid.
38 Ibid.
39 Ibid.
40 James Warbasse, Co-operative Democracy, p. 480.
41 Prabhat Sarkar, Proutist Economics, p. 105-121.
42 Garda Ghista, “The Fall of the American Empire – and the Rise of a New
Economy,” at Prout World, http://www.proutworld.org.
43 Ralph J. Ramsey, “Forms and Scope of Poverty in Kentucky.” Resource
Development Series 10. 1967. 50 pp.
44 2003 Fact Sheet, Kentucky Commission on Women. www.women.ky.gov
45 Ibid.
46 “Poverty despite work: Many working families with children in Kentucky
remain poor,” in the report Poverty Despite Work in Kentucky, published by the
Center on Budget and Policy Priorities and Kentucky Youth Advocates, April 7,
1999. http://www.cbpp.org/4-7-99sfp.htm.
47 Barbara Ehrenreich, Nickel and Dimed: On (Not) Getting By in America. Owl
Books, 2002.
48 Two simple solutions to both these issues is to raise the minimum wage to
$14.00 per hour, as calculated by Ehrenreich , and to remove all income tax
obligations to persons earning less than $30,000. These steps would
immediately bring thousands of Kentuckians out of poverty. One more essential
step is to provide universal health care to all Kentuckians and all Americans, to
remove a major source of mental tension amongst the poor and the middle class
who face bankruptcy in the present medical system.
49 State Fact Sheets: Kentucky. USDA – United States Department of
Agriculture, Economic Research Service. Data updated August 31, 2006.
50 Ibid.
51 Laura Ungar, “Poverty fuels medical crisis: Access to care is difficult for rural
residents,” The Courier Journal, Louisville, Kentucky, September 25, 2005.
52 Ibid.
53 Ibid.
54 Ibid.
55 Dwight B. Billings and Kathleen M. Blee, “Agriculture and poverty in the
Kentucky mountains: Beech Creek and Clay County, 1850-1910,” Paper provided
by University of Wisconsin Institute for Research on Poverty in its series Institute
for Research on Poverty Discussion Papers with number 1064-95. March, 1995,
50 pp.
56 Ibid, p. 4.
57 Ibid, p. 6.
58 Ibid. p. 28.
59 Ibid, p. 30
60 By the early 1920s Tennessee farmers had succumbed to similar
impoverishment.
61 Ibid, p. 1.
62 Ibid, p. 2.
63 “Coal follow-up,” Oligopoly Watch, November 20, 2004,
http://www.oligopolywatch.com/2004/11/20.html.
64 International Coal Group, Inc. http://www.intlcoal.com.
65 Oligopoly Watch. The latest maneuvers of the new oligopolies and what they
mean.
http://www.oligopolywatch.com.
66 This figure is based on September, 2003 data. Most likely there has been
greater consolidation in the past three years up to the present - November, 2006.
67 Oligopoly Watch. http://www.oligopolywatch.com
68 Ibid.
69 Celia W.Dugger, “Supermarket Giants Crush Central American Farmers,”
New York Times, December 28, 2004.
70 Felicity Lawrence, John Vidal and Steven Morris, “Unfair trade winds,” The
Guardian, May 17, 2003. As the article is three years old, it is likely that the
interim period has seen further consolidation.
71 Oligopoly Watch. http://www.oligopolywatch.com
72 Ibid.
73 Interview with Appalachian writer-activist Scott Goebbels on November 9,
2006.
74 Florence Cope Bush, Dorie: Woman of the Mountains, Knoxville, University of
Tennessee Press, 1992. The author has written the story of her mother and
father’s life in the Appalachian mountains during the period 1898-1942.
75 Ibid, p. 15-16.
76 Phone interview on November 2, 2006, with Peggy King, Library Specialist,
Steely Library, who with her husband originates from the Appalachian region.
77 Richard Ulack, Karl Raitz and Gyula Pauer (Eds.) Atlas of Kentucky,
Lexington: The University Press of Kentucky, 2000, p. 133.
78 Ibid, p. 135.
79 Ibid, p. 145.
80 Ibid, p. 146.
81 Ibid, p. 149.
82 Ibid, p. 181.
83 Ibid, p. 183.
84 State Fact Sheets, Kentucky, USDA – U.S. Dept of Agriculture, Economic
research Service.
85 Ibid.
86 Dwight B. Billings and Kathleen M. Blee, The Road to Poverty: The Making of
Wealth and Hardship in Appalachia, Cambridge: Cambridge University Press,
2000, p. 318.
87 Billings and Blee, p. 319.
88 Ibid, p. 321.
89 Ibid, p. 325
_____________________

Garda Ghista is a freelance journalist, author of The Gujarat Genocide: A Case

Study in Fundamendalist Cleansing, and Founding Director of World Prout
Assembly.