Posts Tagged ‘Economic democracy’

Blockadia: the climate fight’s new front

October 25, 2014

The fight against global warming consists of many local struggles that, at first glance, don’t have anything to do with climate change.

These struggles include resistance to hydraulic fracturing for natural gas, to the Alberta tar sands industry and the Keystone XL pipeline, to deep ocean oil drilling and to other destructive practices by oil, gas and coal companies.

Such destructive practices are necessary to keep the fossil fuel companies in business because all the easy-to-get oil, gas and coal has been used up.  And greenhouse gas emissions will decrease only when oil and gas drilling and coal mining decrease.

naomi-klein.book0coverNaomi Klein in her book, THIS CHANGES EVERYTHING: Capitalism vs The Climate, reported on how these scattered local resistance movements are coming to realize they are part of a common cause.

In just one chapter, she touched on protests in Greece, Rumania, Canada’s New Brunswick, England’s Sussex, Inner Mongolia, Australia, Texas, France, Ecuador, Nigeria, West Virginia, South Dakota, North America’s Pacific Northwest and Quebec—all related directly or indirectly to stopping fossil fuel operations that would produce greenhouse gasses.

She and others call this alliance “Blockadia”.   Unlike some of the big, established environmental organizations, the grass-roots protesters do not limit themselves to lawsuits and political lobbying.  They engage in nonviolent direct action, the kind of mass defiance that Gene Sharp advocated.   These movements, more than the lobbying and lawsuits of the Big Green environmental organizations, will determine the future climate, she wrote.

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Can workers own the means of production?

September 30, 2014

income distribution

The Marxist economist Richard D. Wolff thinks that a new form of economic organization, the worker self-directed enterprise, can gradually replace the for-profit corporation.

Richard D. Wolff

Richard D. Wolff

I hope he is right because the world needs something better than predatory corporations or oppressive government bureaucracies, which are the main choices on offer now.

But successful worker-owned enterprises have been around for a long time, and yet have never reached the critical mass that would enable them to become an important part of the economy.

Advocates of worker-owned businesses cite the example of the Mondragon Corporation, which originated in the Basque country in Spain in 1956 with a half dozen people and now is a federation of 257 businesses and co-ops employing 76,000 people in 31 countries.  But why is there only one Mondragon Corporation?  Why hasn’t it become a template for other successful efforts?

One of the things that limit worker-owned businesses, as I see it, is precisely this lack of critical mass.  There is a societal infrastructure of business schools, business services and business finance to serve the new for-profit business.  Worker-owners would have to learn as they go.  This takes a level of commitment of which many people aren’t capable, unless they are in dire straits.

One of Wolff’s ideas is to provide seed money for WSDEs by giving the unemployed their compensation in a lump sum rather than weekly checks.  This shows how he underestimates the difficulty of implementing his program.

To begin with, starting a successful small business is not something everybody can do, although many people think they can.  If you wanted a pool of people with the ability to succeed in business, you probably wouldn’t choose them from among the unemployed.  You’d be more likely to find them among people who have good jobs and money in the bank.

Then again, the American Dream is to own your own business.  Generally speaking, it is not to be part of a community of comrades who share and share alike.   We Americans think of ourselves as individualists, no matter how subservient to authority we may be in practice, and we only abandon the dream of self-sufficiency for compelling reasons.

Farmers’ marketing co-ops came into existence because farmers thought they were being cheated by middle-men.  Electric power co-ops came into existence because the investor-owned utilities weren’t interested in serving them.  Savings and loan associations, and later credit unions, were formed because people were dissatisfied with banks.

Workers have been known to take over factories from bankrupt employers and restart the businesses.  Some co-ops are formed around political and social movements, such as selling organic food.  But worker-owned and cooperative businesses are not the norm.  There has to be a compelling reason to commit to starting one.

The commitment tends to fade when the compelling reason fades.  Even the successful cooperatives tend to wither away, or be bought out, or to incorporate.  Even the successful utopian communities, the Oneida community in New York state and the Amana community in Iowa, wound up as corporations.

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Is economic democracy possible?

September 30, 2014

feed-with-gdp

Richard D. Wolff, a Marxist economist, wrote in his recent books that capitalism has failed, and that it is necessary to replace for-profit corporations as we know them with what he calls worker self-directed enterprises.

Democracy at WorkBut for-profit corporations aren’t going to go away, even if—which remains to be seen—worker-owned enterprises offer a better alternative.

If economic democracy is the only means by which workers can keep the value of what they produce, then it is going to be necessary to reform existing corporate structures.

The USA needs legislation to curb abuses in corporate management, such as leverage buyouts, in which slick financial operators can gain control of a company with borrowed money and then milk it for their own benefit, regardless of its impact on the company.  We need enforcement of anti-trust laws and prosecution of corporate and financial fraud.

Beyond that, the USA needs to build up labor unions as a countervailing power.  Congress should enact the Employee Free Choice Act, aka Card Check, in which employees get the right to bargain collectively when a majority sign up to join a union.  It should repeal or reform the Taft-Hartley Act and Landrum Griffin Act.

But all of this falls short of true economic democracy.  True economic democracy would mean something like Germany’s co-determination system, in which employees of firms are represented on the board of directors.  I think this should be required of all companies whose stock is publicly traded.  If an entrepreneur doesn’t want to share control of a company,  then don’t sell its shares on the open market.

Economic democracy also would mean letting workers share in day-to-day management of the company, along the lines suggested by W. Edwards Deming.  Knowledge in any institution is widely distributed.  No small group has a monopoly on useful information.  I think a company will be better managed when workers and managers have the same information available.

Banking and finance are a separate issue.  There can be no economic democracy when financiers have a veto over democratic decisions.  Banks should be regulated utilities.  Bankers should be servants of the people, not masters of the universe.

When and if these things can be achieved, there will be a favorable environment for Wolff’s worker-self-directed enterprises.  The government would give them the same kind of support across the board that rural electric co-ops got in the 1930s and 1940s.  Otherwise, probably not.

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Is there a path to economic democracy?

January 21, 2014

alpervitz.coverIf 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.

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After capitalism: free-market socialism?

July 25, 2011

Kevin Drum is probably correct … that “if, in the real world, Keynesianism is too difficult for human beings to practice during the 80 percent of the economic cycle taken up by expansion, then it’s not much good.” …

But my real non-rhetorical question is, what system of political economy isn’t unworkable then?  Outright communism breeds tyranny, nomenklatura and misallocation [of resources].  Attempted laissez-faire degrades to an archipelago of private tyrannies.  The institutions of neoliberal monetarism (central banks; national treasuries), the governing ideology of the US and Europe since the 1980s, get captured by the asset-holding classes, which is why we’re skating the edge of a deflationary sink.

That leaves . . . what exactly?

via Unqualified Offerings.

The history of the 20th century shows that centrally planned economies don’t work.  Knowledge is too widely distributed in society for a tiny group of masterminds to be able to direct the economic activities of everybody else.  But unfettered capitalism isn’t working either.  Power has migrated into the hands of financiers and corporate executives who are rewarded for exploiting their positions, not for creating value.  Here in the United States, working people have experienced 25 or 30 years of slow decline and we are now mired in a “jobless recovery” (also known as a depression) with no end in sight.

Click to enlarge

A philosopher named David Schweikart, in an interesting book entitled After Capitalism, proposes an alternate system called “economic democracy” or “market socialism.”  In his system:

  • Limited-liability corporations are replaced by cooperatives.  You’re not hired by a co-op; you join it.  The purpose of the co-op is not to maximize profits; it is to maximize wages and benefits.
  • Investment banks are replaced by non-profit grant-making “banks.”  They allocate capital to the cooperatives based on their judgment as to whether the cooperative will create jobs, and are given more capital depending on their success in creating jobs.
  • Free markets and economic competition, however, still determine which cooperatives thrive and grow and which ones fail.  Government does not own industry nor micro-manage individual enterprises.

There is no central planning board.  The cooperative can do anything (within the law) that its members and directors think will be beneficial.  Not everybody in the co-op will have equal shares or equal wages; that’s up to the members.  Not every co-op will be a success; that’s up to the workings of the market.  The difference betwee a co-op and a corporation is in the organization’s purpose.  The objective of a corporation is to maximize the return on capital.  The purpose of a co-op is to maximize the return on labor.

Capital for a cooperative would come not from stock or bonds, but from grant-making “banks.”  Instead of paying interest on loans and dividends on stock, a cooperative would pay a flat tax on its capital (calculated, I suppose, in the same way as the book value of a corporation).  The cooperative would have a legal obligation to maintain the value of its capital, through a depreciation fund, and to pay minimum wage.  If these requirements could not be fulfilled, the cooperative would be required to disband.

Revenue from the tax on capital would go into a new public capital fund, which would be allocated to local areas based on population, and then among local grant-making banks based on their past success in generating jobs.

Schweikart’s model is the successful Mondragon Corporation, a cooperative organized by a Catholic priest, Don Jose Maria Arizmendiarrieta in the Basque region of Spain in 1956, to create jobs for graduates of the vocational school he founded.  It started by making small cookers and stoves, and now is a multinational conglomerate with 84,000 employees and 256 affiliated cooperatives, which did about $19.5 billion worth of business last year.  That’s up from 53,000 employees and $6.6 billion revenue when Schweikart wrote his book.

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