Is there a path to economic democracy?

If you, like me, think our present corporate capitalist system is not working, and if you, like me, thinks state socialism and central planned economies are proven failures, what is the alternative?

Economist Gar Alperovitz, in a flawed but thought-provoking new book, What Then Must We Do? says the answer is economic democracy – worker-owned businesses and cooperatives.  Unlike the giant for-profit corporation, the worker co-op would operate for the benefit of the employees instead absentee stockholders.  Unlike with nationalized industry under central planning, the worker-owners would be deciding for themselves and not trying to rule over other people.

I think so, too, and so do other people, whose books I’ve reviewed on this web log.  Alperovitz’s book represents an advance over David Graeber’s The Democracy Project in that he suggests some practical ways in which this ideal can be advanced.   Alperovitz’s blind spot, compared to Graeber, is his failure to see the magnitude of the opposition that would have to be overcome.

Alperovitz pointed out that there already are quite a number of worker-owned businesses and cooperatives.  In Cleveland, there’s a worker-owned Evergreen Cooperative Laundry, which is powered by solar panels bought from the worker-owned Evergreen Energy Solutions.  In Madison, Wisconsin, there is the worker-owned Isthmus Engineering and Manufacturing Co., which makes precision machines and robots.  He has a long list covering much of the country.

Local governments spend a lot of money subsidizing private businesses.   Instead of providing economic incentives to bring in a big box retail store, which is likely to put established retail merchants out of business, or a manufacturing plant, which is likely to relocated in 10 or 15 years in search of low wages and new economic incentives, why not help the worker-owned businesses in your own community?

Executives of big corporations (except for family-run companies such as Corning Inc. or Wegmans Food Markets) have no tie to any community or, indeed, to any country.  Workers, along with small-business owners, are the ones who are committed to living in a community and building it up.

Along with worker-owned businesses, there are credit unions, electric power co-operatives, businesses with employee stock ownership plans – all with more democratic forms of organization than corporations listed on the New York Stock Exchange.  There is something called a “B” corporation, whose charter says it is organized for public benefit rather than maximizing shareholder value.  All these provide something to build on and expand.  One simple reform, Alperovitz noted, is to allow owners of stock under ESOP plans to vote their own shares rather than giving their proxies to a trustee.

He advocated public banks, such as the Bank of North Dakota, as a way of serving local communities and providing a safe haven for depositors.  He said states such as Vermont. which is working on a single-payer, universal health insurance plan, could show the way for health care reform.  In the next financial crash, the federal government is likely to take over some failed corporations, as it did AIG and General Motors, and the next time around it should ask for reforms to make these companies serve workers and the community.

In time, over a period of decades, Alperovitz thinks that worker-owned and public enterprises could gain constituencies and crowd out the dysfunctional corporate system that we have down.  Such an approach offers more hope, he wrote, than supporting the declining labor movement or progressive political action.  In this I think he is naive.  The corporatist elite that have worked for decades to crush organized labor and thwart progressive politics is not going to stand idly by and let themselves be threatened by worker co-operatives.

Co-operatives, like corporations, are created by law.  Without progressive legislators and judges, the laws will be written and interpreted so as to favor corporations and thwart co-operatives.  Without labor unions, there will be no organization that specifically represents the interests of working people.  Alperovitz appears to think that Barack Obama and Hillary Clinton represent the limits of progressive politics, and the present AFL-CIO leadership represents the limits of what labor unions can accomplish.  I think he is too quick to give up.

I think that, in addition, there are inherent problems with worker-owned businesses.   Most successful co-ops are consumer co-ops or marketing co-ops, not employee-owned businesses.  There are many examples of business owners giving their businesses to the employees in their wills, and the employees eventually cashing out and reverting to a conventional stockholder-owned company.  This happened with 19th century utopian socialist experiments, such as the Oneida community in New York state or the Amana community in Iowa.  At some point their members decided to incorporate as regular businesses.

I think part of the problem is that worker-owned businesses require more dedication and commitment from employees than a regular business.  Given a choice, not everybody wants their lives to revolve around their jobs.

This is not to say that worker-owned businesses can’t succeed.  Spain’s Mondragon Corp. is an example of a large, successful worker-owned business that has existed for more than 50 years.  What’s needed is an infrastructure of knowledge comparable to what is available to corporations through business and management schools.

Alperovitz’s plan would take decades to implement.  It represents a hopeful way forward, but it doesn’t offer much to the long-term unemployed, the young people stuck in low-wage jobs, the homeowners facing mortgage foreclosures and the college graduates with student loan burdens they never can replay.  Who knows what will become of them if they cannot organize to defend themselves in the here and now?

Finally, I think any economic system needs a place for the individually-owned business and the entrepreneur.  The plumber and the handyman I hire to work on my house are workers who own the means of production.  My neighborhood restaurant and hardware store are owned by families with a human relation to their employees; I think they are closer in spirit to Alperovitz’s worker collectives than they are to Burger King or Home Depot.

None of this subtracts from the merit of Alperovitz’s book, which consists of his ideas for a constructive way forward.

Click on What Then Can I Do?  Ten Ways to Democratize the Economy for more constructive suggestions by Gar Alperovitz and Keane Bhatt for TruthOut.

Click on The Twelve Plank Program Draft and  Draft 2 for a more comprehensive political-economic program on the Corrente web log.

Tags: Capitalism and socialism, Economic democracy, Gar Alperovitz, Worker Cooperatives, Worker Ownership, Worker-Owned Business, Worker-Owned Factory