avatar
America Beyond Capitalism: the Pluralist Commonwealth


        [Contribution to the Reimagining Society Project hosted by ZCommunications]

Is it possible to conceive in serious and practical terms an "America Beyond Capitalism" (ABC)? The following presents a summation of the systemic argument of my recent book of this title, together with an expanded elaboration of certain key points related to problems of political-economic context and possibility, on the one hand; and, on the other, of larger system goals and outcomes (Alperovitz 2006).
 

Just below the surface level of media attention, theorists, policy makers, and informed citizens have been generating an extraordinary range of new ideas in recent decades. It is possible to bring together critical elements of the evolving foundational thinking, and project and extend others, to define the underlying structural building blocks of a democratic political-economic system "model" that is different in fundamental ways from both traditional capitalism and most models of traditional socialism.


ABC holds that we face a long term (and unusually structured) systemic crisis, not simply a political crisis. From any serious historical perspective the long term trends are ominous: there is now massive evidence that for decades Americans have been steadily becoming less equal, less free, and less the masters of their own fate. Although we may experience momentary periods of important renewal, ABC argues that the emerging era is one in which truly fundamental values—equality, liberty, meaningful democracy, ecological sustainability—are all likely to be increasingly thwarted by real world trends. Given the emerging constraints on traditional politics, it suggests, both serious liberal reform and genuine conservatism are likely to falter. In addition to growing social and economic pain and the likely recurrence of major recession, given the failing long-term trends related to equality, liberty and democratic capacity, it holds that we are beginning to enter a sustained period in which the classic elements of a legitimation crisis appear to be slowly coming to the fore.


One of the critical points to grasp is that the American labor movement has long been in the process not simply of decline, but of radical decline. This, along with America’s unusual racial and ethnic divisions, is a key reason why the book judges (after allowing for certain definable exceptions like health care) that most progressive social-democratic proposals based on European precedents are unlikely to be achieved in more than marginal ways in the United States. Although I would welcome whatever can be done, ABC argues that the traditional hope of reforming capitalism in general following the best liberal welfare state and corporatist precedents is not likely to be realized.


The book’s central argument also rests on the judgment that we face a crisis which is not easily described in conventional or classic terms: The system may not be capable of fundamental reform; but it also unlikely to collapse. What we are already beginning to experience, ABC suggests, is a process of slow decay, punctuated by recurrent economic crises–one in which reform achieves sporadic gains, but the long-term trends of growing inequality, economic dislocation, failing democratic accountability, deepening poverty, ecological degradation, greater invasions of liberty (and growing imprisonment, especially of minorities) continue to slowly and quietly challenge belief in the capacities and moral integrity of the overall system and its governing elites. Surveys demonstrate that whereas forty years ago three out of four believed the government does what the citizens wish, now roughly three out of four believe it does what the rich, the corporations, and the special interests urge.


It is quite possible, ABC suggests, that a sustained process of occasional gain, economic disruption, large-order stalemate and failing belief will simply mean the continuation of long term decay: Rome declined. Period.


That there might be other possibilities as well is the thesis of the book.


A PLURALIST COMMONWEALTH


The central intellectual problem at the heart of ABC is whether it is feasible even in theory to develop an institutional architecture that allows for true democratic control of the political-economy. The book answers in the affirmative, but stresses that the problem is far more challenging than is commonly understood. Among other things it points out that the two main traditional capitalist strategies for controlling corporate behavior—anti-trust and various forms of regulation—are both deeply compromised: The attempt to use the former is almost a forgotten relic of history. And repeated studies of "regulatory capture" have shown that various forms of regulation are commonly narrowed, and often redirected, by the powerful corporate interests they seek to control. In socialist systems, many studies also demonstrate that in practice powerful institutional economic actors commonly dominate planning and other policy mechanisms. Systems that rely only on worker-ownership structures tend to develop market-driven competitive (as well as ecologically destructive) behavior between units as well as lobbying and institutional power relationships that are not easily managed despite socialist intent.


What long-term structural arrangements might in principle be capable of achieving and sustaining the key values?


ABC accepts the traditional co-op, social economy and democratic socialist arguments that democratic control ultimately will require some form of social ownership of significant industry. But this is hardly sufficient: The first question is "what form?" The second and third are: "What else would be required?" And: "Are there any real world experiences which suggest the practicality and feasibility of a new approach?"


ABC argues that what is actually happening "on the ground" in a number of key areas involves the build-up of a mosaic of different institutions that suggest the direction of new answers—and, further, a process which at this stage of development is both peaceful and evolutionary. At the heart of the emerging model is the principle that ownership of the nation’s wealth must ultimately be shifted, institutionally, to benefit the vast majority—and in ways which draw upon and extend what is already happening in diverse areas to larger and more comprehensive applications.


The fact is literally thousands of real world efforts that illuminate how alternative wealth-holding principles can work in practice have developed in communities throughout the nation over the last several decades. The range of social or ‘common’ ownership models suggest a ‘pluralist’ and community-anchored vision which may ultimately nurture greater diversity, decentralization, and democratic control of crucial economic institutions and processes in general. It might accordingly be called a "Pluralist Commonwealth."


ABC holds that larger-scale industry will ultimately also require new institutional forms. Large order problems ranging from global warming and technological investment to local community stability are unlikely to be solved unless the powerdemocratic accountability problem is solved. Here the book again proposes a diverse and pluralist institutional model. In many areas, traditional public ownership will be appropriate. In Medicare and Medicaid we already have a nationalized partial health insurance system, and this is ultimately likely to be expanded. Current auto-industry bailouts involve joint government and worker ownership that suggests much more expansive future possibilities (including, for instance, what might happen if a decision were taken to expand mass transit and high speed and other rail, and target production to such enterprises.) The recent nationalizing of some banks and insurance companies suggest additional precedents to build upon. European experience also provides numerous practical (and, modern studies demonstrate, efficient) public ownership practices to draw upon; and it underscores the obvious fact that private U.S. corporate control is not the only practical economic option.


ABC (23-27, 70-80) suggests that in connection with a number of large industries another appropriate structure of ownership is something close to that suggested by Nobel Laureate James Meade some time ago. In the first instance this involves establishing some form of national "Public Trust" or other agency which would own major controlling interests (ultimately perhaps nearly all stock) in very large corporations. Within a new public investment framework different groups of investment managers would compete with each other in managing chunks of the non-nationalized public portfolio (as investment managers commonly do today in both private and public pension fund investing). Larger ecological and other non-economic criteria for investment would be set by government trustees, in a manner analogous to the kinds of criteria that are imposed today in California by the California Public Employees’ Retirement System (CalPERS). Such strategies, though modest and flawed in their current limited range of demands, have demonstrated a growing capacity to bring together economic efficiency and larger political goals. They also utilize the market mechanism and competition, and could establish a complement and counter-weight to the fully nationalized sector. Critical from the perspective of longer term democratic control are the possibilities they suggest for a system of public accountability and transparency—and the accrual of major portions of profits to the public. Precedents also exist in the way the Swedish and Norwegian governments organize a substantial share of their present holdings. "Sovereign fund" investment management by other nations owning large shares of U.S. corporations suggests additional possible precedents.


ABC argues that for many industries there is no way around something like the Public Trust form of social ownership as a first approximation. However, it suggests that even such a mechanism —a partial analog for some non-nationalized large industry to some ‘market socialist’ models—would hardly be adequate to achieve democratic accountability. The institutional power of large enterprises—and of the market—would likely continue to substantially dominate even a fully realized system of ownership based on a "dual" structure of nationalized and Public Trust ownership.


Countering the inevitable power of large scale industry, ABC holds, ultimately, requires the systematic development of local democratic experience and a culture of community that transcends specific and inherently narrowly concerned economic institutions (including worker-owned, nationalized, and private—all of which tend to develop their own interests and power relationships.). ABC gives great emphasis to the strategic arguments of earlier theorists like de Tocqueville and John Stuart Mill, and of modern theorists like Jane Mansbridge, Steven Elkin, and Benjamin Barber, who hold that over the long haul only if a strong and participatory version of democratic experience is nurtured at the local level can there ever by a strong and participatory capacity for democratic control in the nation at large.


A precondition of the reconstruction of local democracy and community, however, is community economic stability. Partly to achieve such objectives—but for much larger reasons as well—the model stresses the need to steadily develop new local ownership institutions, including local worker-owned, municipal, and other community-benefiting firms. Most important are enterprises that are practical, anchored locally, and which either alter inequality directly or use profits for public or quasi-public purposes (or both). Employee-owned firms, co-ops, neighborhood-owned corporations, and a wide range of municipal and social enterprises, along with municipal and state investing agencies, are among the key locally-based institutions of the "Pluralist Commonwealth" articulated in ABC. New forms based on the Mondragon model like that being developed in Cleveland, Ohio suggest other ways to integrate a number of co-operatives within a broader community- serving and community-stabilizing institutional umbrella.


AN EMERGING NEW MOSAIC


ABC spends a great deal of time on the issue of practicality. As noted, it emphasizes that key elements suggesting some of the outlines of what a new system would ultimately require are already discernable in American practice—if one takes the time to look. ABC provides information on the 11,000 employee-owned firms now operating in the United States, on co-ops (more than 120 million members), on neighborhood corporations (4,600), and on numerous quasi-public land trusts and municipal businesses (including 2,000 public electric utilities), etc. It suggests that these and related efforts, including state and municipal investment strategies, already provide a practical basis for building towards an expanding decentralized, socially owned, public and quasi-public sector, and—along with public pension fund management—for learning the principles and practicalities of larger public efforts which might build upon these as time goes on. The quiet development of a mosaic of entirely different institutions suggests the possibility of an evolutionary process which, if extended and refined, points in the direction of a pluralist model organized around the principle that ownership of the nation’s wealth must ultimately be shifted, institutionally, to benefit the vast majority. State and local development in the years prior to the 1929 crash provided precedents and key principles for many New Deal national scale efforts when the right political moment arrived—and, ABC argues, what is now happening on the ground has the potential for doing the same in an even more powerful way as time goes on.


Worker-Owned Firms


That individuals work harder, better, and with greater enthusiasm when they have a direct interest in the outcome is self-evident. The obvious question is: why aren’t large numbers of businesses organized on this principle? The answer is: roughly 11,000 are. Indeed, 11.2 million Americans now work in firms that are partly or wholly-owned by the employees, three million more than are members of unions in the private sector (Bureau of Labor Statistics 2008, Table 3; National Center for Employee Ownership 2008).


Appleton (Co.) in Appleton, Wisconsin (a world leader in specialty paper production) became employee-owned when the company was put up for sale by Arjo Wiggins Appleton, the multinational corporation which owned it—and the 3,300 employees decided they had just as much right to buy it as anyone else (Appleton Ideas 2006, Dresang 2001). Reflexite, an optics company based in New Avon, Connecticut, became employee-owned in 1985 after 3M made a strong bid for the company and the founding owners, loyal to their workers and the town, chose to sell to the employees instead (Case 1992). W. L. Gore—the maker of Gore-Tex apparel—has been owned, since 1974, by (currently 8,000) worker-owners in 45 locations around the world (W.L. Gore and Associates, 2008).


Although there are 300-500 traditional worker co-ops, most worker-owned businesses are organized through "Employee Stock Ownership Plans" (ESOPs). Technically an ESOP involves a "Trust" which receives and holds stock in a given corporation on behalf of its employees. What is positive about this mechanism is that it offers major tax benefits for the creation of large numbers of worker owned firms—especially when an original owner retires and decides to sell to the employees. What is negative is that although there are exceptions, in the main the ESOP form is not at this stage organized democratically.


Several considerations suggest, however, that greater democratic control of ESOPs is likely to develop: First, many ESOP companies — more than 25 percent according to one report (Wirtz 2007)—are already majority-owned by workers. Of these, the National Center for Employee Ownership estimates 40 percent already pass voting rights through to plan participants. Second, as workers accumulate stock their ownership stake tends to increase. Annual ESOP Association member surveys indicate that in 1982 only 20 percent of ESOP Association member companies were majority ESOP-owned companies; by 2000, that figure was 68 percent (Democracy Collaborative 2005: 59). It is conceivable that as more and more ESOPs become majority-owned, workers will simply ignore the fact that some have little power. On the other hand, the more likely probability-as Business Week observed in 1991-is that ultimately workers "who own a significant share of their companies will want a voice in corporate governance." In Ohio a survey completed in the mid-1990s found that employee ownership was becoming more democratic over time, with three times as many closely held companies passing through full voting rights to ESOP participants as had occurred in a previous 1985-86 survey (Business Week 1991, Logue and Yates 2001).


Municipal Enterprises


An extraordinary range of local municipal efforts embodying Pluralist Commonwealth wealth-related principles also exist. One of the most important areas of activity is land development. As early as 1970 the city of Boston embarked on a joint venture with the Rouse Company to develop the Fanueil Hall Marketplace (a downtown retail complex). Boston kept the property under municipal ownership. One study estimates that in the project’s first decade the city took in 40 percent more revenue than it would have collected through conventional property tax (Frieden and Sagalyn 1989: 169). Entrepreneurial "participating lease" arrangements for the use of public property are now common. Alhambra, California, for instance, earns approximately $1 million a year in rent revenues from a six-acre holding it leases to commercial tenants (Williamson, et al. 2002: 158).


A fast growing arena of new activity involves internet and related services. In Glasgow, Kentucky the municipally owned utility offers residents electricity, cable, telephone services, and high speed internet access-all at costs lower than private competitors. The city also has access to an ‘intranet’ which links local government, businesses, libraries, schools and neighbors (Glasgow Electric Plant Board 2007). Tacoma, Washington’s broadband network "Click!" also offers individuals and private company’s internet and cable service; as does Cedar Falls, Iowa (Cedar Falls Utilities 2008; Click! Network 2007). More than 700 public power utilities have equipped their communities with such networks (American Public Power Association 2008).


Municipalities have also been active venture capital investors, retaining publicly owned stock in businesses that hold promise for the city’s economy. A survey conducted in 1996 found more than a third of responding city governments reported venture capital efforts of one kind or another (Clarke and Gaile 1998: 72, 79-86). During the 1990s the publicly owned New York Power Authority and two private companies formed a joint investment pool of $60 million which yielded $175 million at the end of the first five years of operation. (Brodoff Communications 2000). Many smaller cities have created local venture funds that make investments in the $500,000 to $2 million range (Bowman 1987: 4; Clarke and Gaile 1998: 84).


Municipally owned sports teams are also widespread. Communities which own (or have owned) minor league baseball teams include Indianapolis, Indiana; Rochester, New York; Franklin County (Columbus), Ohio; Lucus County (Toledo), Ohio; Harrisburg, Pennsylvania; Lackawanna County (Scranton), Pennsylvania; and Visalia, California (Mahtesian 1996: 42-5; Imbroscio 1998: 239-40). At the major league level, the Green Bay Packers are owned by a nonprofit corporation whose stock-holders are mainly city residents.


Other areas of innovation include health services and environmental management. Denver Health is a municipal enterprise which has transformed itself from an insolvent city agency ($39 million in debt in 1992) to a competitive, quasi-public health-care system ($54 million cash reserves in 1997) delivering over $2.1 billion in care for the uninsured over the last ten years (Moore 1997; Denver Health 2008). Denver Health operates a satellite system of 8 primary care centers and 12 school-based clinics and employs some 4,000 Denver area residents (Denver Health 2008; Nuzum, et al. 2007).


Hundreds of municipalities also generate revenues through land-fill gas recovery operations which turn the greenhouse gas methane (a by-product of waste storage) into energy. Riverview, Michigan, one of the largest such recovery operations, illustrates the trend. Riverview’s sale of gas for power production helps produce enough electricity to continuously power over 5,000 homes. Royalties covered initial costs of the effort in the first two years of operation and now add to the city’s cash flows. (DTE Biomass 2007; EPA 2007)


Building Community: Neighborhoods and Nonprofits with a Mission


The neighborhood-based Community Development Corporation (CDC) combines the community-serving mission of a nonprofit organization with the wealth-building and ownership capacities of an economic enterprise. The CDC is a hybrid self-help entity that operates at both the community-building level and the economic level, and exhibits micro-level applications of Pluralist Commonwealth principles.


The Bedford-Stuyvesant Restoration Corporation (BSRC)-a CDC developed in the 1960s with the bipartisan support of then Senators Robert F. Kennedy and Jacob Javits-helped set the terms of reference for an institution which can now be found in thousands of communities: In its initial 15 years of operation BSRC developed some 3,000 units of residential and commercial property and provided start-up capital and other assistance to more than 125 local businesses, maintaining thereafter a revolving loan fund. The CDC also launched a major commercial development (Restoration Plaza) – including a 214-seat theater, retail attractions and office space – as well as a property management company, and a construction firm (Pratt Center 1994).


Another leading example is New Community Corporation (NCC) in Newark, New Jersey-a CDC which employs 2,300 neighborhood residents and generates roughly $200 million in economic activity each year. Profits help support day-care and after-school programs, a nursing home, and four medical daycare centers for seniors (Rusch 2001: 5; Guinan 2003). NCC also runs a Youth Automotive Training Center; young people who complete its courses are guaranteed jobs offering $20,000-plus starting salaries (Rusch 2001).


Since the 1960s 4,600 neighborhood-based CDCs have come into being in American communities. Most are not nearly as large and sophisticated as the leaders, but all employ wealth-related principles to serve "small publics" in geographically defined areas. The assets they commonly develop center above all on housing, but many also own retail firms and, in several cases, larger businesses (National Congress for Community Economic Development 1999: 3; Sirianni and Friedland 2001: 59).


Other nonprofit organizations have picked up on the underlying principles of development (Emerson 2003; Massarsky and Beinhacker 2002). A leading example is Pioneer Human Services (PHS), in Seattle, Washington. Initially established with donations and grants, PHS is now almost entirely self-supporting. PHS provides drug- and alcohol-free housing, employment, job training, counseling, and education to recovering alcoholics and drug addicts. Its annual operating budget of nearly $60 million is 99 per cent supported by fees for services or sales of products. PHS’s various social enterprises employ nearly 1,000 people and include a light metal fabricator employing theoretically unemployable people, which manufactures parts for Boeing and other customers; a Food Buying Service which distributes food to other non-profit organizations; and two restaurants (Pioneer Human Services 2005, Dubb 2006).


A Chronicle of Philanthropy study estimates that over $60 billion was earned from business activities by the 14,000 largest non-profits in 1998. Income from fees, charges, and related business activities are estimated in other studies to have grown from 13 per cent of non-profit social service organization revenues in 1977 to 43 per cent in 1996 (Lipman and Schwinn 2001; Salamon 1999: 177; Strom 2002).


State and National Innovators