Is there a better way than capitalism?

Marxists say that the trouble with the capitalist economy is that workers don’t get the full value of what they produce.  Whether or not that’s true as a general principle, it is a good description of the current direction of the U.S. economy.

The Marxist solution is that the workers themselves should own the means of production.  A Marxist economist, Richard D. Wolff, said that where socialists and Communists have gone wrong is in promoting government ownership rather than worker ownership.

I recently read Wolff’s three latest books.  His view of the current economic crisis is the same as mine.   In the 1970s, overall American wages stopped growing.  Working people tried to maintain their material standard of living by putting in longer hours and having more family members in the work force.   When that reached a limit, they kept up their spending levels by borrowing.

Now the spending power of ordinary Americans has reached a limit.  Most Americans are either broke, nearby broke or paying down their debts.  That’s why the government has failed to stimulate the economy through spending or lower interest rates.

The solution, according to Wolff, is the creation of WSDEs – worker self-directed enterprises – in which the workers themselves are the ultimate deciders of what is done with the profits (in Marxist lingo, the “surplus”).

A WSDE would be more than worker participation in management, where corporate ownership remains the same.  And it would be more than a worker-owned business, where board of directors and the rest of the corporate management structure remains in place.   And it would be more than just a co-operative, which can be organized to serve the interests of any group, not just employees.

This would not necessarily solve all problems, Wolff wrote, but it would make other problems easier to solve.  A WSDE wouldn’t lay off workers or reduce wages merely to increase the income of managers and stockholders.  Employees wouldn’t feel alienated from their work.  A worker-owned business would be less likely to be willing to pollute the community in which they live than would a board of directors responsible to stockholders who live far away.

I am in favor of more worker-owned businesses, but I think Wolff greatly underestimates the opposition to his proposed program.   Does he think the interests that engineered the sale of the Postal Service’s assets to private businesses (such as Nancy Pelosi’s husband) or advocate replacing public schools with for-profit businesses (aka charters)—does he think these interests are going to sit still and allow Wolff’s WSDEs to push them aside?

Back in the New Deal era, the federal government fostered electric power co-operatives, which provided electricity at lower rates than the for-profit corporations.  But they did not displace the for-profit corporations, nor become a model for how to operate electric utilities.

Instead the electric power industry successfully pushed for deregulation of the industry, in which competition between electric power providers was supposed to keep rates low.  Deregulation also abolished a requirement that an electric utility have enough reserve generating capacity to prevent future blackouts and brownouts.  Nobody is responsible for keeping the lights on now.

 The fact that something is economically feasible and socially desirable does not mean that it will be politically successful.   There is no substitute for political power.

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.

Mexican workers take over and run their factory

This Real News broadcast tells the inspiring story of how workers in Mexico successfully fought a closing of their factory, took it over and now run it successfully themselves.

It is a stirring story that ought to be better known, because worker-owned businesses lack the support network that investor-owned or government-owned businesses enjoy.  I don’t know of any colleges of business that train managers of cooperatives, or banks that specialize in providing credit to worker-owned businesses.