A new economic paradigm
Interviewed by David Barsamian
January 19, 2012
available from Alternative Radio
You can listen to Gar Alperovitz speak for himself here.
Gar Alperovitz is Professor of Political Economy at the University of Maryland and co-founder of the Democracy Collaborative. He is the author of numerous books, including Unjust Deserts, Making a Place For Community, Rebuilding America, Atomic Diplomacy, The Decision to Use the Atomic Bomb, and America Beyond Capitalism.
In a New York Times op-ed on December 15, 2011, you wrote, “A mere 1% of Americans own just under half of the country’s financial assets and other investments. America, it would seem, is less equitable than ever. But at another level, something different has been quietly brewing in recent decades.” What’s been brewing?
What’s interesting—and, again, the press doesn’t cover this—is just below the surface of what the press normally sees. There are thousands and thousands of institutions that democratize the ownership of wealth. Political and economic systems are defined in terms of their power. But who owns the capital?
In the U.S. 1% owns just under half of the investment capital, 5% owns 70%. Literally, a medieval power structure. So if there is to be a democratic alternative, what you look for is: Are there ways that democratic ownership can happen? Indeed, if you look closely, there are some 13 million people involved in one form or another of worker-owned companies, a form that changes who owns; there are 130 million people involved in credit unions and co-ops, another democratized form of ownership; there are 4,000 or 5,000 neighborhood corporations, devoted to neighborhood development; there are 2,000 utilities that are owned by cities. People don’t realize that. A quarter of the American electricity supply is essentially socialized in a radically decentralized way, utilities and co-ops, city-owned utilities. And it’s been growing. There’s a whole quiet building up of a different model that has a very American tone to it but goes at the central question of who owns capital, who owns the wealth. That I think is a critical basis for possible longer- term change.
And what do you mean by a particular American tone?
Unlike France, for instance, or Russia or the former Soviet Union, we have a very decentralized tradition, localism and states and kind of participatory American idea that comes from the agricultural frontier days. So there is something in the culture that can go many different ways: it can go far to the right, to individualism, but it also has community spirit and a kind of you-can do-it, roll-up- your-sleeves, we-can-try-something-here.
The models that are interesting—and I think of this as a long historical development—are very much at the local, neighborhood, workplace level of democratizing. I see that, one, as a precondition of how you could actually develop a system which was not state-dominated but also change who owned the productive capital. That’s a precondition, building up that kind of an experienced culture and also a vision, models of what could be. It also in a funny way has a Gramscian aspect, because it cracks open in a very American way the ideological question. That is to say, it opens up the question of who owns capital in a practical way rather than in a challenging way. That’s another question. The challenge part is needed. But here you have ordinary Americans doing worker-owned companies. What do we make of that? Why not? And why can’t that expand?
You write further, “If such cooperative efforts continue to increase in number, scale and sophistication, they may suggest the outlines, however tentative, of something very different from both traditional corporate-dominated capitalism and traditional socialism.”
That is what’s interesting about this to me. At one level this is all very positive, it’s all useful and it’s helpful and it’s a good thing to do. But much more interesting is whether or not these kinds of developments, if we are aware and self-conscious and clarify the meaning, give people a sense, and even an ideological perspective, of what might be possible. Re-creating a sense of the possible and a sense of vision and something beyond rhetoric, something that gives content to an alternative structure of beyond corporate capitalism and beyond the traditional state socialist models. You need to have that if you’re to build a movement that gets beyond rhetoric and also has something concrete to do and say.
So, yes, I see it as both useful to do no matter what, but also laying down ideas and practices and experience and expertise of how actually do you do a good worker-owned company, not rhetorically. And what are its limits? There are problems with worker-owned companies, too. Getting much more sophisticated about what it is we want and what it is that makes sense.
And you realistically observe that these efforts are minor compared with the power of Wall Street banks and the other giants of the American economy. Are they willingly going to go along with the weakening and evisceration of their own power?
Of course not. The struggle for real triumph over the systemic issues is a many-decade struggle. So if you say now is the fight, tomorrow, it’s obvious that the deck is stacked. If that’s where the confrontation comes, that’s not going to happen. On the other hand, if you take—I wear a hat as a political economist and historian, but if you stand back and ask, how does historical change really take place, what you’re looking at is decades of developmental struggle, both negative, challenging, and the creation of ideas, projects, vision, concrete ideology.
What I think is interesting is the failures of the American system. I think they are endemic now. I don’t think they are going to go away, I don’t think the pendulum is going to swing. I think we’re into deep stagnation and decay and pain. That is the forming ground of people waking up and saying something is profoundly wrong, not just who wins the next election. Occupy cracked open the debate about the 1% and the 99%. But that would not have happened if people didn’t feel there was something wrong. Much more important even than Occupy is that there is a sense in the public that something is wrong. So I see it as a long, long battle and a long developmental process.
Another way to look at it is—and we’ve been doing a fair amount of work in the Midwest, where the destruction of cities is just powerful—that’s the internal empire. And at the tail end of the internal empire the pain is greatest. But it’s also the place where people are struggling to build something new. So if you see it historically—you can even see it in traditional terms—many of the preconditions of even the New Deal were developed in the states and localities, some of them state by state, decade by decade. The women got the vote in the 19th century decade by decade by decade, one state and another state and another state, until finally they accumulated enough power to go national.
This is the prehistory of a possible transformation, not the history of it. My heroes are the civil rights workers in Mississippi in the 1930s and 1940s. That’s when the real work was done, laying the groundwork and building up ideas and people and inspiration that ultimately could become the 1960s. That’s the hard place. Something roughly analogous is the way I think about this period.
In America Beyond Capitalism, to reinforce what you said about Americans in large numbers feeling that something’s not quite right, you write, “Repeated studies have shown the majority of Americans know full well that something fundamental is going on with ‘democracy’“— and I’m interested that you put “democracy” in quotes; I’ll ask you to explain that in a moment—“and four out of five judge that government leaders say and do anything to get elected, then do whatever they want, and another study found that seven out of ten felt that ‘people like me have almost no say in the political system.’”
Not only is that now true, that people sense that and they know money is dominating, and even more so with the Citizens United decision, that people understand that. But what’s very interesting—and, again, if you’re thinking about transformative change in stages of development— three decades ago the numbers were just the opposite. If you asked somebody, “Do the politicians or the president or the Congress do what people say?” they said, “Well, of course they do what the people say.” So there has been a major ideological shift, consciousness shift, negative in this case, that something is wrong, it’s all rigged, or Washington is broken or whatever the language is, or four out of five saying they will just do anything to get elected. That is a—more important than the shift— a profound change in the sense of direction of understanding in the ordinary public. You can’t get to much more fundamental change until you eliminate the possibility of believing in some of the foolishness. That’s going on big time in the U.S. People sense there’s something profoundly wrong. They don’t quite know what to do with it, they are still struggling with that. But awareness has grown over my lifetime in a way that’s astounding.
You suggest these efforts toward building some kind of alternative worker-owned structures will take many decades, that we’re now in the incipient stages. Am I summarizing correctly?
Not only worker ownership. Municipal ownership. That was the early part of the Debs revolution, was about municipal ownership and neighborhood development. All forms of changing, not just worker ownership. We are potentially in the incipient stages. We are further along than that. There’s lot on the ground. As I say, 130 million people are involved in credit unions and co-ops. A very American institution that doesn’t get taken seriously, except all of a sudden $4 billion or $5 billion have been shifted from big banks to credit unions as a matter of ideology, a matter of saying, We don’t want to be with the big banks. Let’s go there.
Some cities now are saying, Why can’t we set up a city bank or a city credit union? The state of North Dakota has an old state public bank. Publicly owned banks. In San Francisco they have about $28 billion in regular float, cash around. Why should that go to Bank of America? Why not put it in a city bank? Why not set up a city bank or a credit union?
Worker ownership is part of this, but there are all kinds of models that are emerging quietly that the central principle is democratizing ownership in one form or another, from my point of view, as the preliminaries to the transformation, or to an America beyond capitalism.
You trace the origins of this movement to actually a failed effort. In 1977 in Youngstown, Ohio, a big steel plant closed down, 5,000 workers lost their jobs. You were involved in an effort then to get that plant going again. It didn’t succeed. But from those efforts other things evolved. The Cleveland model.
Yes. Many of these things have grown up on their own. The industrial worker-owned co-ops, that’s very interesting and does trace back in part to Youngstown. There are many other roots we could go into. This was in 1977. Five thousand people got pink slips in one day, thrown out of work. In 1977 that was really big news. That was national news because it hadn’t been happening. Now it happens all the time.
So the steel workers there in the local in Youngstown—it was Youngstown Sheet & Tube, a big company—said, why don’t we take this place over and run it ourselves, along with the religious leaders of the city, the ecumenical council. That was the original idea. I was called in to try to help them design a plan and the strategy to do it. What happened was they did their politics very carefully. They got the whole state, Democrats and Republicans, including the so-called conservative governor, who had to be for it because the religious leaders and labor was for it, and they put forward a plan, which would have made for a worker-owned company, a large one. They even got the Carter administration in those days to commit $200 million in loan guarantees.
After the election of, I think it was, 1978 the money disappeared. There is a story there, too. Nonetheless it was popular. So the mill did not happen.
But what was interesting is that the leadership understood that might occur and they understood—and this is critical for activists now—they were self-consciously aware that even if it failed, they were injecting an important idea into political consciousness and that they couldn’t lose. Indeed, what happened in Ohio is there are probably more worker-owned companies now per capita in Ohio than perhaps any other state. There’s no study on that, but you get a sense of that if you go out there. A little center was set up at Kent State which began giving technical assistance to worker-owned companies.
The most sophisticated model that exists is in Cleveland. And it’s an interesting model because it’s in a very poor black area: $18,000 is the family income average, 40% unemployment. But there are also big hospitals there. The Cleveland Clinic is there and big universities. If we put two and two together in this case, building on the ideas of worker ownership, those hospitals and universities—and this can be done anywhere, in fact, many cities have picked up on this—they buy $3 billion in goods and services every year, $3 billion. That’s in addition to salaries and construction, just buying, none of which had been bought from this area. So the light bulb went on. Why not see if we can either induce them or ask them or force them to buy from worker-owned co-ops in this area that will service them and also service other things?
So the result is, in that area there are a series of worker-owned co-ops. They’re not simply to make a couple of workers rich, or not rich but make a lot. They’re linked to build a community. A nonprofit corporation ties them together. They can’t be sold off without a major decision. There’s a revolving fund so that the money is made, and a percentage, 10%, of profits go back in to make new companies. So that they want to build a complex of community building in a structure also of worker ownership, and partly stabilized by the fact that in these big hospitals and universities, taxpayer money, a huge amount in health care and in education, is being used to reconstruct the community on a wholly different institutional design. In America, right now.
Indeed, the small businessmen like it, it helps the tax base. And it has ideological resonance in a way that what we’ve learned there is if you speak concretely and make sense and know what you’re talking about, very, very fundamental institutional change can be made available in cities, particularly where the pain levels are growing and deepening. Cleveland has gone from a population of 800,000 to 400,000 in the last 30 years. Devastated. It’s like Detroit. Nothing has happened that works. If something like this works—and this is working; there are several companies—they have a possibility of reaching a much broader public. Which is critical. Not just small, radical groups; a much larger public.
So, for instance, they’re just about to open a greenhouse, partly solar, hydroponic. But the scale is not your little co-op. Three million heads of lettuce a year is the production, plus a lot of other stuff. They have an industrial-scale, very advanced, high-tech laundry, ecologically the greenest in the Midwest, perhaps—it uses about a third of the water and heat for laundries—that is servicing the hospitals and the nursing homes in the area. They have another solar installation company which is on track to put in just probably shortly more installations in Ohio and more capacity than existed in the whole state already. The goal is to build up not your own little, tiny worker co-op, but it’s to really get serious about developing scale and power. And community. Worker ownership, but not just worker ownership. Community development, in the largest sense of the community.
Talk about the role of organized labor. You trace in your book the steep decline from a peak of around 35% of the work force being unionized in the 1950s to what it is today, in single digits in the private sector a little higher in the public sector. You say it’s going to drop even further.
Historically unions were a countervailing force to capital. This is critical. The way in which most of the advanced systems around the world have been run—to say nothing is different in other parts of the world—is you allow the corporations and the capital owners to have a dominant role, and you build up union power as the basis of some form of progressive political coalition to keep distributional questions, social questions, environmental questions sort of in line. That’s the social democratic model in Europe or liberalism or progressive politics in this country. That’s the model. A “countervailing force” was what Galbraith called it. Indeed, without that, the situation would have been dreadful in most parts of the country and in many parts of the world.
That system model, that entire design of how you run a system, I think that’s decaying before your eyes, for better or for worse. There is a lot of pain associated with that. And the most fundamental of the reasons is that the power of organized labor, the muscle and money behind democratic elections, has radically declined, from about 35% in 1952 to just under 12% now, and probably declining further. So even the fights in Wisconsin—I’m from Wisconsin—recently and in Indiana and Ohio, very inspiring fights, but the thing to notice is that they were all defensive. They’re moving backwards saying, Do less, don’t take away more. They’re not on the offense. And they would love to be, to gain more power for both the unions and for social programs and economic programs. But there is a decay process at work.
Either there is going to be a new model of how you transform advanced systems in a new direction, or the decay will worsen and the pain will grow and the violence will come with it. I think this is the most important period of American history, bar none, and I include the American revolution, because we’re running out of options in the traditional models. The question that’s posed by all this experimentation and many other things and by Occupy is whether we’re in potentially the beginning of really reshaping our idea of where to go and how to get there. Critical to that is to get beyond rhetoric to what does it look like. What is it that makes sense in the design and politics and vision of the next system?
All these experiments on the ground—there are many, many more, some of them larger, some of them smaller—Alaska gives away the oil—if you go to Texas and Alaska and see what they do to oil, for odd reasons Alaska gives every citizen a right to a share of the profits from oil. Odd, historically. But there it is in America, that odd pattern.
If you look deeply, there are lots of elements that begin to form a mosaic, I think, potentially suggesting the direction of an America beyond capitalism and also beyond state socialism, a decentralized democratic model that begins to give content to a different vision and practical experience to build towards it. I think this is an extremely important development. Potentially, when it gets to politics—it doesn’t have a politics now; it has developments, experimentation, fragments—I think the next stage is a politics that begins to pick up on the knowledge and the experience and the practicality of all of this and begins to offer answers that you can explain to anybody.
I’m from Racine, Wisconsin. That’s kind of a decaying industrial town. I can go back to Racine and talk to my conservative high school buddies—and there are some who are really conservative, very intelligent but very conservative—and talk about all this, and it makes sense to people. It is explainable development and it has a vision that people understand,
That’s a good thing to do. We’ve got a lot of pain here in this town. So that content as well as the vision I think is very important.
The name of Marx’s book was Capital. It centers on who owns the power base.
People like Howard Zinn and Noam Chomsky would say that socialism has never really been tried. That the Soviet Union was a distortion, an aberration. They took the name socialism, but it was a form of top-down state capitalism.
That’s definitely fair. Indeed. I think it’s also true that you can find libertarian socialist theory and communitarian socialist theory and also syndicalist socialist theory. So there are traditions you can draw upon. But for the most part we have dwindled to the place that socialism means for most people the state owning and controlling.
I was a student of Bill Williams, the wonderful historian at the University of Wisconsin at Madison. He was always down on rhetoric. He was interested in content. What does it look like and why should this work any better, is the question we need to ask.
Indeed, you mention Howard Zinn and Noam Chomsky, both of whom are friends of mine who have been kind of urging this book, because it gets very practical about where to go and how to begin to build. A lot of the book is simply reporting on what’s out there all over the country that the press does not cover that you can do in your community. If they can do it in Cleveland, Ohio, you can do it anywhere.
Then the problem becomes, what are you willing to do? It becomes existential. You want to do something? It is not that it is impossible. We know that from all the things that I report on in the book or the cities like Cleveland. It’s whether people get off their chair and begin to act. So there is an existential component to this, as in all movements. Unlike 30 years ago—we were talking about Youngstown—when to build a worker- owned company, there weren’t many people you could call and ask how to do it, that’s changed. It’s a massive historical evolution when we have people available who actually know how to do this kind of thing.
And they exist. If you want to do any of the kind of developmental trajectories we’re talking about, just get online or look in the book. There’s a website I should mention, community-wealth, which simply surveys this kind of thing. You can find people who can say, “Hey, we’re doing it in way here. And we’d be happy to help you if you want to do something.”
That’s the challenge in a democratic system. It becomes not just about what they’re doing but what we are willing to get off our chair and do. Because now it is possible to do things, and the ball is in our court. One never knows about historical development. All of this may decay. It’s possible. But we certainly know that if you don’t build, you’re never going to get anywhere. So this developmental trajectory is very interesting from that perspective as well.
The U.S. as well as much of the world is experiencing the worst economic crisis since the Great Depression of the 1920s and 1930s. There are well-documented studies of the tremendous increases in wealth and income inequality, massive unemployment. Curiously, as economist Richard Wolff points out, this unemployment is unusual because it is chronic and long-term. People are out of work for long periods of time, and many of them drop out of the work force. With this kind of background, I see several possibilities.
One is a fertile time for alternative points of view: Look, this is what this system has produced. But also there is a worry, to use Bertram Gross’s term, “friendly fascism,” scapegoating immigrants and gays to explain the crisis.
And civil liberties. The President just signed into law provisions that allow some bureaucrat to put you in prison without trial. Maybe that will get taken out in the next legislation. But there has been no violence yet. A little bit of violence and you could see civil liberties go out the window in the U.S., as they did in the 1920s or in the McCarthy era. Even worse now, with terrorism. So I think Gross was right.
You can lay out the options. One of the options is that decay will simply continue. Rome decayed, period. Another option is it will explode into violence. And with violence, suppression and loss of civil liberties, our “friendly fascism.” It’s certainly a possibility. A third option is the basis of a great transformation will be established in the coming decades. No one knows what can happen, but it’s clear where the action should be.
That is, to say, build as strong and powerfully and as intelligently as we can in the new direction and then see what happens. One of the really important things I think that we tend to ignore about the U.S.—and I use that language about the internal empire—this is a very large country, and there are lots of places locally where things can be built, slowly in ways that build up over time. It allows for the rebuilding of local politics and local people, people who learn to become leaders in doing. It’s unusual in that.
The scale question. Let me say a word about this, because I think a lot about scale these days. Bill Williams always thought about scale. The architect of the American Constitution, James Madison, formulated the problem first in exactly the way Karl Marx did. Politics depends upon who owns property, and the people with property need to control. And secondly, you’ve got to keep the people without property, without capital, out of the game. He also said—and Marx didn’t have it as clear as Madison did— that if we can build a very large country, we can keep dividing and conquering. That’s straight Madison in Federalist 10. The larger the sphere, we can keep the people without property from ganging up. You can drop Germany into Montana. People don’t realize that the scale of the U.S. is radically decentralized and very different. In Germany you can build a social democratic polity much more easily. Here it’s different. Conversely, at the external parts of the society, lots of things are possible in a decentralized way that can build up over time and lots of initiatives are taking place. That possibility also exists.
We all have a vested interest in pessimism. If you’re pessimistic, you don’t have to do anything. If you say maybe there’s a shot, then the responsibility is basically on our shoulders. Since we don’t know and since I see as a historian, revolutions are as common as grass in world history. Things radically change over time. We’ll see.
The task now is obvious: laying groundwork and building a base and understanding more clearly what makes sense. I want to emphasize that, because I think that’s really interesting, to get beyond rhetoric to really what makes sense. Like this design question. You can talk to a lot of Americans about it. They may be scared off by some things, but they’re not scared off by “You tell me how it’s going to work.” “Really?” You would probably get the Tea Party willing to nationalize the Wall Street banks. The anger is building up.
We’re talking mostly local, but the next big financial crisis—and everyone knows there’s going to be another one, experts left, right, and center know there’s going to be another financial crisis because they can’t regulate these guys—one of these days, they’re going to say, “Take them over.” Indeed, with Citicorp and AIG, Bank of America, probably the U.S. government, had it wanted to, could have used its power already, instead of giving it back, because they put so much taxpayer money in, to have a controlling share. I think that part of it is also going to happen.
We did nationalize two big auto manufacturers, Chrysler and GM. So there are other levels of the crisis. But the thing that I think is most important, if we’re to have a democratic system, is the rebuilding of local experience, individuals locally learning how to do this in a democratic way as the precondition of any kind of system.
A theme you keep coming back to is American values. You talk about liberty, equality, and democracy. I just want to get underneath that a little bit, because it seems that there’s a huge gap between the historical record and the historical fact.
Oh, indeed, indeed. If you look at the way democracy has been practiced in the destruction of liberty and certainly inequality, there is a great gap between the ideals and the practices. What is interesting about this time in history is that all the trends are going south. That is to say, inequality is getting worse and worse.
That’s why Occupy, as we said, was so successful. At a certain point something breaks and people say, “Hey, there’s something really wrong here,” partly because we proclaim ourselves as a society that cares about equality and democracy. I think that’s what we’re seeing.
In terms of liberty, it hasn’t yet broken. There’s awareness that there’s a danger. But in terms of the trends on liberty, you can talk about it in terms of civil liberties, where there’s been a narrowing, and that requires you to get into the law and the Constitution. But the simplest test of liberty in any system is what percentage of the population is put in prison. That’s how you take people’s liberty away. It’s the first place to look. In this country seven times as many people per capita than in all the other advanced industrial systems are in jail, a large percentage of whom are black people. Something going on that is changing what actual liberty is, to say nothing of technical aspects of civil liberties, which are also going south.
So there is an erosion of the value base. Proclaim, liberty, democracy, equality often enough and then begin to destroy it, and people begin to say, “Something is profoundly wrong here.” That’s the precondition of really fundamental change. I think that’s where we’re going, and in many areas that’s where we are. So this is an extremely important period. It’s just not the next election or some pendulum swinging.
Is that why you put “democracy” in quotes?
I think that is why, because real democracy, genuine democracy—we were talking earlier that the “Red Mayor” of London wrote a book saying that if democracy allowed you to achieve anything, they wouldn’t let you vote. Meaningful democracy.
And the U.S. version of that: If God wanted us to vote in elections, he would give us candidates.
Right. That is to say, what is a meaningful electoral process? A meaningful electoral process really gives choices and sufficient power to actually make the choices real. Right now it’s almost a joke, the way in which politics and the primaries is going. It is a joke. That is to say, the money is so powerful and so important, how much gets on television, and has nothing to do democracy. It has to do with very large amounts of money competing for the airwaves. You’ve seen the ridicule of this, Stephen Colbert doing this, and he’s doing it in a very brilliant way. Because he’s saying, This is total fraud, and everybody knows it. It’s not like this is 10 years or 20 years ago. It wouldn’t have rung true. Now it’s obvious.
So the decay of ideology, the decay of consciousness, the loss of belief in the standard nostrums is a critical precondition. You’ve got to get it out of the way, the old ideas, before you can begin to take seriously the next direction. That’s happening right before your eyes.
Let me stray a little bit from the actual topic of America Beyond Capitalism but ask a related question. That’s about imperialism, the U.S., with its string of bases around the world, with its massive military force. Are democracy and liberty and these values that we’ve been talking about compatible with empire abroad?
No. The reason I got to this book started with American imperialism. In particular, it started with the atomic bomb and the bombing of Japan. I wrote two books on that subject, asking why was it that this culture was able to kill that many people, knowing that it was unnecessary. We now know that they knew that it was unnecessary, that the war was about to end, that as soon as the Russians came in, that shock would end the war well before there could be an invasion. That’s what drove me.
That takes you to the question of why systems expand in either formal colonialism or informal empire, the American kind. We were talking about William Appleman Williams and his work on that. Essentially, the source of this, in my view, is an expansionary system, a system that has to expand. There are other sources. There have been empires that were not based on capitalism and corporate expansion. Whatever we call the former Soviet Union, there was a Russian equivalent that was not capitalist. But there is certainly a drive in capitalism and in corporate capitalism in particular, but also agricultural capitalism, for control of markets, for control of investment. And more than that, even a genuine belief that this is a way to spread democracy—genuine, authentic— mixed with that ideology.
You must go back to the base. The system that doesn’t do this would be a system that is not necessarily based on expansion. So that’s another way of asking the question, If you don’t like corporate capitalism and you don’t like state socialism, can you begin to get serious about nonexpansionary systems, where you both change the nature of ownership and change the structure of the system so it doesn’t have to expand.
Actually, that’s how I got into these questions myself. And we can get way into it. The same question is involved in climate change and in resource use and in growth: systems that don’t have to grow. If a big corporation stops growing and its numbers start changing on Wall Street, boom, its stock will be out, the management will be out, and the business will be out of business. That’s the nature of the game. You have to grow, out of either greed or fear. If you can’t change that institutional dynamic, you are into an expansionary system, which tries to control, control, control. And whatever you call it, that’s implicitly imperial.
In this cosmology, as you’ve been describing it, of worker- owned—I believe the acronym is ESOP. What does that stand for?
ESOP is one form of worker ownership: employee stock ownership plan. It’s a very American breed, very interesting, because it was put together by Huey Long’s son, who was at that point chairman of the Senate Finance Committee, and a maverick corporate banker named Louis Kelso. The way it works is very simple. Basically, if you have started a company and your kids, your son and daughter, doesn’t want it when you retire, you have a choice to sell it to a big corporation. They will probably take the productive capacity away from the city. You might make money on it. If you sell it to your workers— this is what they did—the law now gives a tremendous financial benefit to the boss who sells to his workers. That’s a very, very unusual American thing. Part of our maverick tradition. And the ESOPs—there are 11,000 of them and some 13 million people involved in these employee stock ownership plan—are a different form of worker ownership, many of which in the original stage were set up without voting power. So they’re not democratic, most of them. However, there are reasons why they wanted to keep the financing under a trusteeship.
But now what’s happening within here, as you can imagine, as the workers get more ownership, they’re beginning to break that down and get more direct formal and informal power, and some of them are beginning to unionize. So there’s a trend within the trend. It’s very intriguing. I think of it this way. If you’re in a nondeveloped country, the means of production is land. And if you want to get the land from the landowner, you’ve got to bribe him big time or you’ve got to take it. So the way you do it is essentially to get the means of production. You give him a very large chunk of money, if you can do it politically, or you take it. What these are is another way to find democratized capital with major taxpayer financing.
Perhaps one of the better known of the international worker co-op efforts is based in the Basque country of Spain, Mondragon. Explain what Mondragon is. And why is it significant?
It’s a very interesting development, because it’s now roughly 85,000, at the last count, people involved in a very complex worker-owned set of co-ops that are integrated and operate very successfully, everything from construction to supermarkets to high-tech equipment to advanced research. These are not little co-ops. The rate of pay from the top to the bottom in 90% of the co-ops is about 4 or 5 to 1, that the boss has only five times as much as the lowest worker, and then in the biggest parts it’s 9 to 1. Compare that to the American. It’s 250 to 1 in most big corporations.
It’s been very successful. It is running into the world market, however. This is not a part of a socialist plan. There’s no state plan. It’s kind of separate and grew up out of Catholic Worker tradition and a Basque culture and suppression by the fascist regimes, creating a hothouse culture, and Catholic social thought. Very interesting worker participation within. But it is now running into the world market, and that’s a difficulty. It’s looking for markets, and it’s up against competition. So there are some questions about it. Nonetheless, it has a great deal to teach us about how you can organize internally within co- ops and worker-owned companies. In the Cleveland discussion, part of it, the revolving fund, has been drawn straight from Mondragon. And the linking of different co- ops rather than being just separate is drawn from that principle. Mondragon has not used the public or quasi- public ownership market, the hospitals and universities, buying from it. That’s not its design. So it’s problematic in some areas. Nonetheless it has a great deal to teach.
Explain what happens to the profits? Are they plowed back into these efforts or are they paid out to the workers?
It’s critical, because in the early period of worker co-ops and worker ownership, they did not make provision for this problem. So if you pay out all the profits, what happens is that you don’t have investment and new technologies and new equipment. So most modern worker co-ops have a provision that a certain percentage has to be plowed back into investment and new technology and research, otherwise you’re going to fall behind. So most of them now do that.
I think a lot of people are familiar with the going-local movement. There has been an increase in farmers’ markets and what are called CSAs, community-supported agriculture, and food co-ops, all coming under this rubric of going local. But there’s much more than just the food aspect to it, isn’t there?
That’s an allied kind of vision, I think, building around the notion of local community. So there are various forms of new currencies that are trying to break the hold of the dollar. Many parts of the country are experimenting with that such as Ithaca, New York. There is a big one in the Berkshires and elsewhere in the country. The local merchants will take these paper “dollars” and recirculate them to rebuild the local economy. That’s partly what I was talking about. When I say internal empire, I mean the cities are dying within different parts of the country, the local areas. And one way to reverse it is agriculture, another is small co-ops, another is these currencies that say buy local, increase the local multiplier.
Notice that the vision there is communitarian: it’s community, not simply worker ownership, which is a syndicalist model. It has a very different flavor to it. I think there’s going to be a mix of these two different directions. And certainly political alliances are being built between the worker ownership model and the community kind of green model. There’s a lot going on at the grass- roots level where these things are coming together.
You say the appeal of many of these ideas that we’re talking about such as cooperatives reaches across traditional left-right political divisions. What’ s the evidence of that? And where does the Tea Party factor in?
I had a very strange experience recently, because I was asked to come talk to the Chamber of Commerce, of all places, in one of the suburbs of Washington. And I was describing things like what’s going on in Cleveland, the worker-owned model, and the hospitals buy from it and they stabilize and it builds up the tax base. And I pointed out that the local small businessmen like it because it helps them, too, more customers.
And here’s the Chamber of Commerce saying, “That’s fantastic. We ought to do that here.” Everyone at this particular meeting said, “That’s a great thing. Why can’t we do that here? It will help the community, help the tax base. That’s a good thing to do. It will recycle money.” That same evening I was talking to radical organizers in Baltimore, and exactly the same response. It has a way of speaking to different groups.
Again, it has to make sense. It gets beyond rhetoric. We’re changing, in this case, the ownership of the means of production, if you like, towards a collective ownership structure that is worker-owned. Done in an intelligent way, it will help them and the community. People, even very conservative people, at the local level, not the ideologues, like the idea that why shouldn’t everybody own parts of their work. This is a positive thing, not a negative thing, when you get down to the nitty-gritty. It doesn’t mean to say that the national ideologues don’t have very different ideas and propaganda. And the Tea Party, you can find ideologues, obviously. It isn’t quite clear where they break down on this. But the experience I’ve had and the experience of many people I know is, in many of these local areas what looks to be quite radical in fact, when done intelligently, when you’ve done your homework, makes sense to people. And it ought to make sense. If what people who care about changing this system want doesn’t make sense, you shouldn’t do it. So it’s very important to understand that if you can’t explain it to an ordinary citizen, why what you’re proposing is a better way of doing things in life, then you probably don’t know what you’re talking about.
Rational, intellectual arguments aside, that make perfect sense, still many people are not persuaded. This is any entrenched economic system, and there’s fear of change. How do you overcome that fear?
I think what’s changed in my lifetime is that the pain levels have gotten to a place where people now know personally or in their family or in their friends or in their neighbors something has to change or it’s going to get worse. That’s a big deal when that happens in a society, that you get beyond talk to see the pain levels change. People have a really different way of listening, when everything else is failing and you begin to offer both an explanation and answers that might build up. Even if building over time, even if there’s a long developmental process, even if that’s necessary, you find people listen differently and talk differently because of the pain levels and the failures.
But given the in extremis financial situation that millions are in right now, the unemployment, the foreclosures and the like, is there that kind of space in terms of time? Can we wait during what you’re suggesting might be a decades-long process?
The answer is no and yes. That is to say, of course we can’t wait. The pain levels are terrible. There either is a path forward that we can make or the pain will get worse. So it’s an agonizing reality. It’s a horrible experience that’s going on when the society goes through the wringer as we are going through the wringer.
The choice is to try to get to build away out of it or let it get worse. So, no, there’s not enough time, and, yes, that’s the only way forward.
You mentioned ideologues. George Will is certainly one such ideologue in the corporate media. He’s a widely circulated columnist. He writes about redistribution in extremely pejorative terms. To him it’s tantamount to a Stalinist gulag and a code word for a socialist takeover and elimination of so-called American freedoms.
That is pure ideology, as far as I’m concerned. There is a concern that a state can be too powerful. The conservatives were right to worry about a state that’s too powerful. Fair enough. And very often liberals and radicals didn’t take seriously the dangers of statism. I give them that and I think we ought to respect that, in genuine conservatives.
I did a book on this with Lew Daly called Unjust Deserts. If you look at the sources of wealth in America and in virtually all countries, overwhelmingly it is technological change that makes the difference.
That is to say, in 1790, if you go from then till now, one person can now produce 40 to 50 times as much per hour. That’s where all the wealth comes from, this increase in productivity. Who gets to benefit from that? Everybody is working as hard. It’s not a question of envy and greed.
That’s a social construction. Indeed, think of Bill Gates or Steve Jobs. They would have been nowhere, literally nowhere, without the Internet. Who paid for the Internet? Taxpayers paid for it. And the development of all the schools that led to the place where you could actually develop the knowledge for the Internet, who paid for that? The American people paid for that.
You can go right down the list and find that virtually all of what is modern wealth, the cream of which is taken off at the top, is a social construction. So that the source of what we’re having is not some guy who did a wonderful thing. People did do creative things such as Steve Jobs and Bill Gates. But their contribution is like a pebble on top of a Gibraltar of both taxpayer creation and historic creation of generations that created chemistry and physics and math, without which you couldn’t do anything.
Think of it this way. If the technological changes that come from both social processes and government processes continue at the rate they have been continuing in the last century, in 2100 the income levels will be something like seven times as much as they now are— none of which will have been due to the work of the people then, all of which will be the construction of taxpayer investment and social development and science and resources that they get to rip off then. They won’t have done any more work. So when George Will says this, it seems to me blatantly ignorant of the sources of wealth and who gets to control them.
There should be, perhaps, a study on really existing capitalism, not this laissez faire fantasy that is put forth in economics departments at Harvard and other learned institutions of higher education. You could add to that list of the Internet that it was taxpayer money that paid for avionics, the jet planes that we are flying, the airports, pharmaceuticals and all the medicine and vaccines developed at the National Institutes of Health. So there’s this really existing capitalism and then there’s the fantasy version of capitalism.
Exactly. The easy part is when you begin looking at pharmaceuticals, the jet airplane, radar, the sources of the computer. Bill Gates was under contract at MIT when he first started doing all of the developmental work. That’s one part of it. The other part is, schools and high schools, bringing the vast majority of the people to the level where they can actually create and invent, is all social investment. So I think that’s even more important than the easy ones to understand, like the computer and the Internet.
I’m looking at the pie chart of where income tax money really goes. It’s the U.S. federal budget for 2010. It’s published by the War Resisters League in New York. Anyone can access it at warresisters.org. What does this pie chart tell you about where money is going?
Certainly the military is a big piece of it, 30% on this chart; past military, 18%; general government, 8%; physical resources, infrastructure, 6%; human resources, 38%, but that means Social Security and health care primarily, and Medicare, which are being paid for out of your very, very regressive taxes, working taxes. The actual spending, federal government programs are financed in two ways. And it’s worse at the state and local level, which use the sales tax often. We have payroll taxes, which are Medicare and Medicaid, which is extremely regressive. That is to say, it’s $107,000 now, capped, so that anything above that just doesn’t get taxed. Which is amazingly regressive, when you think about it. And then the income tax, which has gotten worse and worse and more regressive as time goes on. I’m obviously not a Republican, but I think we ought to go back to Eisenhower’s income tax, because in the greatest American economic boom, the post-war boom, when Eisenhower was president, the marginal tax rate for people at the top was 91%. Now it’s down to 35-37%, depending on which year.
There has been a major change in the distribution of income, where the top 1% has gone from 10% of the income to 23%. Now, because of the recession, it’s down a little lower than that. Somebody lost that income, the other 99%. And then the tax rate went down on the top 99%. Mitt Romney’s being taxed at 15% because it’s all investment income. They tax working-class income and worker income at 20% and 25% and up to 35%, but if you make your money by investment, 15%. It’s wonderful to see an illustration in the national arena. Economists know this, but now the public is treated to the inside knowledge. Hey, he’s only being taxed 15% and I’m being taxed 30%. What’s going on here?
“Worker Owners of America, Unite” was the title of your New York Times. You say, “A long era of economic stagnation could well lead to a profound national debate about an America that is dominated neither by giant corporations nor by socialist bureaucrats. It would be a fitting next direction for a troubled nation that has long styled itself as of and by and for the people.” What are the prospects of that vision being realized?
All great revolutions look impossible before they happen. That isn’t to say great revolutions always happen. But it is to say, if you look at the folks who started the civil rights movement, the odds in Mississippi in 1930 and 1940 of achieving a civil rights revolution appeared to be far worse to people at the time. They would hang you from a tree if you made any kind of trouble. The odds even in the Middle East to break loose were greater than anything we face. The odds of the women’s movement. The greatest cultural revolution in modern advanced history, the cultural revolution of women in the last 40 years, I can still remember when it was not possible for women to be taken seriously in work, life, culture. That’s a radical shift that looked impossible. It is not to say it’s inevitable. But I think that a cool assessment from this historian and political economist is that it is within the range of reasonable possibilities that a transformation can be achieved and that this next two to three decades is the prehistory of such a transformation. In any event, all of the positive changes that would be necessary are useful to do, no matter what. So I’m cautious on it, but I think, there is a finite, realistic, and very much worth doing chance to build the basis of a next possibility.
You say America Beyond Capitalism is “a tool box” of practical precedents that can be built upon.
That’s what I think is very important, to realize that we can get beyond rhetoric, to the thousands of things on the ground that the press doesn’t cover, which alter the nature of the power base of most systems, who owns capital, and do it in a very American way. So I think there’s a lot that you can do. Worker-owned companies, neighborhood corporations, municipal ownership, state ownership. Twenty-seven states already own shares in companies and take ownership positions. That’s another interesting thing in America. There are state banks. There are something like 20 states that are considering single payer legislation. In another 15 states there are movements for state banking, public banking. So if you look beneath the headlines, and as the pain level grows, there are very real practical embodiments of a different idea, the democratizing of wealth. As I said, that’s the prehistory. That breaks the idea of system. That opens up a different debate. That’s not the history of the next transformation; that’s the step that’s necessary without which you can’t get to the next stage.
But it’s very well underway, if you look beneath the headlines.
(Due to time constraints some portions of the interview were not included in the national broadcast. Those portions are included in this transcript.)
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