I remember commenting to a co-worker, a few years back, that our company’s projected growth of 15% year over year was an inflated and impossible target. The “growth” the firm was touting wasn’t coming from increased sales but from cuts. In order to show profitability, service staff was reduced, billing was centralized in states with the lowest labor costs, sales compensation was slashed, warehouses were consolidated – anything to reduce costs in order to meet the stated quarterly and annual goals. While corporate executives earned their bloated bonuses, everyone else suffered, including the customer. Eventually a buyer was found and the firm was sold. And while the corporate executives and stockholders were happy, at least in the short-term, the remaining employees were subjected to layoffs, more consolidation of departments and even shoddier customer service.
This is far from an isolated case. It’s business as usual in corporate America. Employees are no longer referred to as John or Susan, but as an FTE (full-time employee), a cipher on a balance sheet that can easily be cut to improve the bottom line. Far too many companies have abdicated their responsibility to their employees and to the communities in which they reside in a race for short-term profits. That’s why I believe a new economic model is required – one that empowers workers and is responsive to the needs of communities.
In their essay, The Possibility of a Pluralist Commonwealth and a Community-Sustaining Economy, Gar Alperovitz, a Lionel R. Bauman Professor of Political Economy at the University of Maryland and Co-Founder of the Democracy Collaborative and Steve Dubb, a Research Director of the Democracy Collaborative, present a way forward.
They believe, “openings for evolutionary reconstruction are becoming observable in many parts of the current American system, and that these openings could, if progressives seize upon them, become a potentially system-altering force over time.”
One area that is ripe for change is the financial sector:
One option has already been put on the table: In 2010, thirty-three Senators voted to break up large Wall Street investment banks that were ‘too big to fail.’ Such a policy would not only reduce financial vulnerability; it would alter the structure of institutional power. Nor is an effort to break up banks, even if successful, likely to be the end of the process. The modern history of the financial industry—to say nothing of anti-trust strategies in general—suggests that the big banks, even if broken up, will ultimately regroup and re-concentrate as ‘the big fish eat the little fish’ and restore their domination of the system.
So what can be done when breaking them up fails?
…a spectrum of sophisticated proposals for more radical change [has been] offered by figures on both the left and right. For instance, a “Limited Purpose Banking” strategy put forward by conservative economist Laurence Koltikoff would impose a 100 percent reserve requirement on banks. Since banks typically provide loans in amounts many times their reserves, this would transform them into modest institutions with little or no capacity to finance speculation. It would also nationalize the creation of all new money as Federal authorities, rather than bankers, directly control system-wide financial flows. On the left, the economist Fred Moseley has proposed that for banks deemed too big to fail ‘permanent nationalization with bonds-to-stocks swaps for bondholders is the most equitable solution.’ Nationally owned banks, he argues, would provide a basis for ‘a more stable and public-oriented banking system in the future.’ Most striking is the argument of Willem Buiter, the Chief Economist of Citigroup no less, that if the public underwrites the costs of bailouts, ‘banks should be in public ownership.’ In fact, had taxpayers demanded voting stock in return for their investment when bailing out major financial institutions in the Great Recession, one or more major banks would, in fact, have become essentially public banks.
Nor is this as far from the current political tradition as many may think. Unknown to most, there have been a large number of small and medium-sized public banking institutions for some time now. They have financed small businesses, renewable energy, co-ops, housing, infrastructure and other specifically targeted areas. There are also 7,500 community-based credit unions. Further precedents for public banking range from Small Business Administration loans to the activities of the U.S.-dominated World Bank. In fact, the federal government already operates 140 banks and quasi-banks that provide loans and loan guarantees for an extraordinary range of domestic and international economic activities. Through its various farm, housing, electricity, cooperative and other loans, the Department of Agriculture alone operates the equivalent of the seventh largest bank in America. And just recently, in spring 2012, under pressure from American business, Congress reauthorized the Export-Import Bank to support U.S. trading interests.
New economic systems are also being developed in the central neighborhoods of some of the nation’s largest cities. These economically depressed areas are:
…democratizing development…again paradoxically, precisely because traditional policies—in this case involving large expenditures for jobs, housing and other necessities—have been politically impossible. ‘Social enterprises’ that undertake businesses in order to support specific social missions now increasingly comprise what is sometimes called ‘a fourth sector’ (distinct from the government, business, and non-profit sectors). Roughly 4,500 not-for-profit community development corporations are largely devoted to housing development. There are now also more than 10,000 businesses owned in whole or part by their employees; nearly three million more individuals are involved in these enterprises than are members of private sector unions. Another 130 million Americans are members of various urban, agricultural, and credit union cooperatives. In many cities, important new “land trust” developments are using an institutional form of nonprofit or municipal ownership that develops and maintains low- and moderate-income housing.
Although the financially stressed popular press covers very little of this, the various institutional efforts have also begun to develop innovative strategies that suggest broader possibilities for change. In Cleveland, Ohio, an integrated group of worker-owned companies has developed, supported in part by the purchasing power of large hospitals and universities. The cooperatives include a solar installation and weatherization company, an industrial scale (and ecologically advanced) laundry, and a greenhouse capable of producing over three million heads of lettuce a year. The Cleveland effort, partly modeled on the 83,000-person Mondragón cooperative network based in the Basque region of Spain, is on track to create new businesses, year by year, as time goes on. However, its goal is not simply worker ownership, but the democratization of wealth and community-building in general in the low-income Greater University Circle area of what was once a thriving industrial city. Linked by a community-serving non-profit corporation and a revolving fund, the companies cannot be sold outside the network; they also return ten percent of profits to help develop additional worker-owned firms in the area.
If you are interested in exploring alternatives to capitalism, the current issue of The Good Society, the long-running journal of the Committee on the Political Economy of the Good Society (PEGS), is devoted in its entirety to “Alternatives to Capitalism.” In addition a new Democracy Collaborative venture, The Next System Project, is being formed. This multi-year initiative is aimed at developing carefully researched comprehensive proposals required to deal with systemic challenges—environmental, economic, social and political—the United States faces.
For more comprehensive information, I highly recommend these books:
What Then Must We Do?: Straight Talk about the Next American Revolution
America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition
Rebel Cities: From the Right to the City to the Urban Revolution
A Brief History of Neoliberalism
Profit Over People: Neoliberalism & Global Order
Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism
23 Things They Don’t Tell You About Capitalism
The Shock Doctrine: The Rise of Disaster Capitalism