Economic Democracy Will Create an Economy of Worker-Owners, Shrink the Wealth Divide and a Financial System that Serves the People’s Interests
In his popular 1948 economics textbook, Nobel Laureate economist Paul Samuelson noted that “if we made…an income pyramid out of a child’s play blocks with each layer portraying $1,000 of income, the peak would be far higher than the Eiffel Tower, but almost all of us would be within a yard of the ground.” By the end of the century, he changed his metaphor to Mount Everest.
The preceding anecdote is retold in Gar Alperovitz’s America Beyond Capitalism, a book that argues several theses forcefully and convincingly: gross social inequality is incompatible with a sustainable and democratic republic; the neoliberal status quo of the past three decades ensures gross social inequality; a return to the welfare state is now rendered impossible by globalization and ecological brinkmanship; state socialism is equally unacceptable, but something more just and viable is possible. He calls his vision a “pluralist commonwealth,” and in his latest manifesto, What Then Must We Do?, he defines it as
…Not only communitywide stabilizing efforts, but also cooperatives, worker-owned companies, neighborhood corporations, small- and medium-sized independent firms, municipal enterprises, state health efforts, new ways of banking and investing, regional energy and other corporations, and in certain areas national public firms and related democratic planning capacities.
Alperovitz may be the most accessible and relevant political economist around, and these two books may be the most accessible and relevant statement on the possibilities of political economy in our time. Granted, the latter pamphlet is no Communist Manifesto, which is probably not a bad thing. Like most of Alperovitz’s work, it is written in the chummy tongue of his Midwestern youth, replete with “many, many” this or “huge, huge” that, as well as brief and conversational chapters that conclude with “to be continued” or “to be continued (again).” The cultural historian Warren Susman once remarked of Eugene V. Debs that he was a distinctively American socialist, a political radical who nonetheless channeled the sensibilities of Americans. The same could be said of Alperovitz.
The winter issue of Jacobin featured an essay by editor Seth Ackerman, “The Red and the Black,” about socialist possibilities. Ackerman writes:
What I’m describing is, in one sense, the culmination of a trend that has been proceeding under capitalism for centuries: the growing separation of ownership from control….By the 1930s this “socialized private property” had become the dominant productive form in American capitalism, as Adolf Berle and Gardiner Means signaled in The Modern Corporation and Private Property….How should these socialized firms actually be governed? A complete answer to that question lies far beyond the scope of an essay like this; minutely describing the charters and bylaws of imaginary enterprises is exactly the kind of Comtist cookshop recipe that Marx rightly ridiculed.
What Alperovitz does, however, is minutely describe the charters and bylaws of actually existing worker enterprises—of all actually existing socialisms, in fact, be they in Cleveland, Ohio or the Basque region of Spain. His empirically rich survey of socialist and communalist experiments in the mid- and late-twentieth century and the early twenty-first, especially in the most advanced economies, shows them to be far from the totalitarian cesspools conjured by neoliberals and neoconservatives. Not only that, they actually make concrete many of the ideals—equality of opportunity, individual liberty, stable family life, thriving community, and genuine democracy—that neoliberals and neoconservatives continually invoke.
The varieties of socialism Alperovitz describes are manifold. The best-known is the Mondragon Corporation, a federation of worker cooperatives in the Basque Country that deals in finance, metal-cutting tools, refrigerators, washing machines, dishwashers, “turnkey” factories, a retail food chain, space research, and one of the leading technical institutes in Spain (Mondragon University). The corporation currently employs 83,000 and prides itself on an average five-to-one ratio between executive compensation and the lowest wage. Mondragon is the economic powerhouse of the Basque region and one of the leading forces in the Spanish economy. Alperovitz is particularly interested in their revolving loan fund, a mechanism that provides capital to new co-ops, something worker-owned networks in the United States are now replicating.
What Alperovitz does is minutely describe the charters and bylaws of actually existing worker enterprises—of all actually existing socialisms, in fact, be they in Cleveland, Ohio or the Basque region of Spain.
Alperovitz’s examples in the United States are worth recounting at length, for the sheer variety of forms they take and functions they undertake. His go-to favorite is Evergreen Cooperatives, which he calls the “Cleveland Model,” a Mondragon-like effort that acts as a “pluralist commonwealth” in microcosm. Noting that government at all levels is already heavily involved in economic development and unlikely to surrender this prerogative in the future, he walks the reader through several positive examples of the “entrepreneurial state” in action, where government intervention supports worker and consumer cooperatives, social enterprises, and other nonprofit land development (and anti-gentrification) efforts. In Cleveland, for example,
the Department of Housing and Urban Development (HUD) section 108 and BEDI (Brownfields Economic Development Initiative) funds helped clear land for the greenhouse; Department of Treasury New Market Tax Credits helped support the laundry; Ohio Solar Renewable Energy Certificates have played a role in the solar co-op’s installation work; City of Cleveland NSP (Neighborhood Stabilization Program) grants and Department of Commerce EDA (Economic Development Administration) working capital loans helped the overall effort.
Other examples include the 22nd Street Retail Center in Tampa, Florida, where the Community Economic Development program of the U.S. Department of Health and Human Services helped fund a $759,000 equity investment in providing wholesome food to a neighborhood previously without fresh groceries. There are now retail co-ops like the outdoor recreational company REI and the hardware purchaser ACE. There are credit unions, health care and artist co-ops, a cooperative that produces “precision” robotic assembly machinery in Madison, Wisconsin, and even a worker-owned cab company. The almost century-old Bank of North Dakota, is the only state-owned bank in the country and a possible example for other states still reeling from the effects of financial collapse. Louisville Biodiesel Cooperative turns cooking oil into low-polluting, nontoxic fuel for school buses and family-run farms. In North Carolina, the Sandhills Farm-to-Table Cooperative provides local food to 1,250 homes. The Alliance to Develop Power in western Massachusetts has established a patchwork of housing co-ops and other democratic businesses, accruing a net worth of over $40 million. The Southwest Key Programs in East Austin, Texas, with a budget over $74 million, manages numerous schools, juvenile justice programs, and other community and workforce projects. The Black Star Co-op pub and microbrewery is also in Austin. Pioneer Human Services in Seattle, Washington engages in much of the same work as Southwest Key. The Greyston Bakery in Yonkers, New York offers housing to the poor and those infected with HIV/AIDS, along with a variety of other services.
What Then Must We Do? also touches on the most advanced and successful community development corporations, land trusts, and benefit corporations. Alperovitz writes about the New Community Corporation in Newark, New Jersey, with $500 million in assets and a $200 million operating budget., which provides day care, after-school supervision, a nursing home, senior-citizen medical day care centers, a nursing school, and a Gateway to Work facility; the faith-based Bethel New Life in Chicago; and land trusts like the Champlain Housing Trust in Burlington, Vermont, where development profits are deployed to subsidize low- and medium-income housing, rather than clear the way for more high-end apartments. The history of benefit corporations (B corps) like Ben & Jerry’s, which allow businesses to use shareholder dollars both for profit and for socially beneficial ends (until recently, the latter was prohibited), is reviewed. There is a brief discussion of low-profit limited liability corporate forms, organizations geared toward creating local social enterprises that have sprouted in Illinois, Michigan, Utah, Wyoming, Vermont, Louisiana, Maine, North Carolina, and Rhode Island.
Alperovitz is most compelling on Employee Stock Ownership Programs (ESOPs) and worker-owned firms. He brandishes a number of studies that have repeatedly confirmed that both ESOP companies and more ambitious worker-owned firms are often “more profitable, more competitive, and more efficient” than their traditional counterparts. This might explain why the likes of Ronald Reagan, William F. Buckley, Jesse Helms, Jack Kemp, George Will, and Ron Paul have endorsed them, and why conservatives like philosopher Mortimer Adler and political economist Louis Kelso were promoting such ideas as early as the 1950s. Today, the list of prospering ESOP and 100 percent worker-owned businesses includes the Appleton Company (a paper products manufacturer), W.L. Gore (the maker of Gore-Tex clothing), Hy-Vee (a supermarket chain), Lifetouch (a school picture enterprise), and Southwest Airlines. There is a vast cluster of other fledgling or established businesses with similar structures, ranging in size and profits, although small to medium-sized firms are the most common. Though there are significant differences in levels of employee participation and democratic decision-making in each setting, the standard is more democratic than its alternative, the trend-line leans in the direction of more democracy, a growing number of unions are coming on board, and proposed bipartisan legislation continues to push for federal tax benefits to ESOP companies operating under a one-person, one-vote system.
This catalog of success stories and prototypes is impressive in itself. But Alperovitz insists that these efforts constitute a “prehistory” of something more radical—a social infrastructure that isn’t corporate capitalist, state socialist, or welfare-statist. The historian Howard Brick, inTranscending Capitalism: Visions of a New Society in Modern American Thought, criticized the post-capitalist imaginings of the past century for failing to make clear how and when the segue to the next stage would take place, even when they devoted much ink to what that next stage might look like. The merit of Alperovitz’s thinking is that it’s at once Hegelian and pragmatic. He concedes the present system’s resilience while simultaneously honing in on patterns of resistance. He then predicts how—and, less confidently of course, when—such agents of resistance are most likely to get us out of the morass.
Alperovitz insists that these efforts constitute a “prehistory” of something more radical—a social infrastructure that isn’t corporate capitalist, state socialist, or welfare-statist.
Alperovitz’s language on this score sometimes sounds like self-help jargon, but it’s useful nonetheless. He divides his tactics into four categories: “evolutionary reconstruction,” which entails all of the models examined above; “checkerboard municipal and state development,” which focuses on state and municipal ownership of specific land trusts, utilities, or Internet services, and other state and local investments concerning energy sustainability; “crisis transformations,” an umbrella term for state and national public banking along the lines of the Bank of North Dakota, as well as a national single-payer health care system; and “big crisis transformations,” nationalizations of faltering but crucial industries and eventual movement toward “public, public-worker, or quasi-public national or regional TVA-style and related ownership forms.” (The TVA, or Tennessee Valley Authority, is a federally owned energy corporation created in 1933.) Alperovitz assembles an array of witnesses and documents about the latter, including the chief economist of Citigroup, Willem Buiter, the Economist’s Adrian Woolridge, Henry C. Simons (Milton Friedman’s mentor), and an impressive global survey of “The Return of State-Owned Enterprises” in the April 2009 issue of the Harvard International Review, which shows that many public enterprises have proven “efficient, even in comparison to their private counterparts.”
In After Capitalism, David Schweickart looks at both the theoretical and practical implications of these developments. Schweickart, like Alperovitz, is from the Midwest—he actually hails from Cleveland, the site of so many of the latter’s examples. Schweickart shares Alperovitz’s knack for speaking simply and passionately about complex matters of political economy. (A panel discussion between the two that took place at the 2011 conference of the International Confederation of Associations for Pluralism in Economics, available online here, beautifully displays this mutual sensibility.) Schweickart has also devoted a good portion of his adult life to constructing and revising a comprehensive alternative to corporate capitalism, one that is as theoretically rigorous as it is practically apt. What makes him unusual is that he’s not reluctant to put forth a blueprint, even as he acknowledges its limits and pitfalls. Schweickart shows how the enterprises championed by Alperovitz could lead to a political program.
His reform program calls for:
(1) public support of worker co-ops and buyouts of capitalist businesses;
(2) legislation prodding traditional firms in the direction of profit sharing and workplace democracy;
(3) legislation affording the right of workers to purchase their companies;
(4) legislation requiring that bailed-out corporations be nationalized and revamped as worker-owned companies;
(5) “democratization and reregulation” of the banks;
(6) the establishment of public banks;
(7) the replacement of the corporate income tax with a capital assets tax;
(8) “reregulation of transnational capital flows,” taking the “Tobin tax” as a start;
(9) the reintroduction of government as employer-of-last-resort legislation (ELR);
10) tariff-based trade “when there are significant wage and environmental regulation disparities between the trading countries”;
(11) giving these tariff revenues to “worker-friendly” private and public institutions in poor nations;
(12) the replacement of the income tax with a “wealth tax”;
(13) campaign finance reform similar to the “publicly funded credit cards” and anonymous donations recommended by Yale Law School professors Bruce Ackerman and Ian Ayres.
After unveiling this aggressive program, Schweickart makes plain that even if it were brought to fruition, the result would still not amount to real economic democracy. It would be a “kinder, gentler” capitalism, but the majority of individuals and communities would still be at the mercy of capitalist speculators and hyper-mobile capital flows. He then sets out three “revolutionary” scenarios in which the power of Wall Street would fall once and for all, the first two of which take for granted catastrophic financial collapse.
The third, however, envisions a relatively crisis-free transition, invoking the famous 1976 draft proposal of Rudolf Meidner, chief economist of the largest trade union federation in Sweden and co-founder of the Swedish welfare state. (Seth Ackerman also discusses the Meidner Plan in “The Red and the Black.”) In the Meidner Plan, every business with more than fifty employees would contribute new annual shares amounting to 20 percent of its profits to a worker-owned “labor trust,” ensuring that in about thirty-five years most companies would be majority-owned by workers. The genius of the scheme was that the release of the new shares each year would amount to a cost-free interruption to normal operational and investment budgeting. Not surprisingly, Sweden suffered a severe corporate backlash to the plan, leading to the effective gutting of the project and to the ouster of the Depression-era Swedish Social Democratic Party for the first time in its history.
The fate of the Meidner Plan should serve as a warning. At a moment when a Democratic president is advancing Social Security cuts amid a six-year recession, and where labor union rolls are at all-time lows, Schweickart’s vision might be dismissed as a pipe dream. On the other hand, if the longue durée of human history is any guide, there is good reason to believe the phoenix will rise again. The United Nations named 2012 the “International Year of Cooperatives,” encouraging governments to subsidize worker-owned and worker-controlled enterprises. And global partnerships, like a framework agreement between Mondragon and the United Steelworkers and the International Summit of Cooperatives, may mark the beginning of solidarity between traditional unions and newer progressive formations.
Formidable challenges remain. We must think through potential conflicts between full employment or basic income policies and price stability, or (as Rudolf Meidner did in his final years) between bureaucracy and efficiency. We must build further transnational resistance to multinational capital, along the lines of the World Social Forum and the “Pink Tide” in Latin America. Above all, we must arouse a now apathetic and cynical public. Gar Alperovitz and David Schweickart, among other thinkers and activists, are already lighting the way.
America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy
By Gar Alperovitz
Wiley, 2006, 336 pp.
What Then Must We Do?
Straight Talk About the Next American Revolution
By Gar Alperovitz
Chelsea Green Publishing, 2013, 224 pp.
By David Schweickart
Rowman & Littlefield Publishers, 2011 (paperback), 280 pp.
Lyle Jeremy Rubin is a Ph.D. candidate in American history at the University of Rochester. He served in the United States Marine Corps for five years.