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If you don’t like capitalism or state socialism, what do you want?


If You Don't Like Capitalism or State Socialism, What Do You Want? 

Text of 2011 E.F. Schumacher Lecture – Nov. 5, 2011
(stream or download mp3)

The very first book I wrote—my Ph.D. thesis, basically—was on the bombing of Hiroshima. An odd place to start. The puzzlement for me was why this country and its leaders, knowing there were alternatives—which is now established as fact—nevertheless went ahead with those bombings. 

What was the nature of our culture, the expansionism that created it, and the system that had driven it, which led us to do that? Vietnam and Korea, Iraq and Afghanistan, the World Bank and the IMF—what were they all about? I'm giving you shorthand for a way of thinking about very complex ideas that I’m sure you will understand.

The flaw is an odd kind of imperialism. It is a tragic and ironic form because Americans do have a genuine interest in promoting democracy and liberty as well as a genuine interest in running the global economy in a way that most people thought and still think is the only way possible.

I've worked at high levels of the U.S. government, including the Senate. The people there believe they're doing good work. It’s not that these are bad folks, and yet havoc is wreaked, wars go on, the Third World is badly damaged. We're up against not simply a power structure, not simply a system called capitalism, but a way of thinking that is genuine and honorable—and in my view, wrong. So it is better to start here when we think about what has gone wrong rather than to demonize. But it is a big deal, because now we're up against something more powerful—not only a system, whatever that might mean, but a culture and an ideology as well.

This situation has led me to the kinds of questions that I think are being posed by Occupy Wall Street and the young people who have spoken here today. To put it another way, if you don't like corporate capitalism and you don't like state socialism, what the hell do you want, and why should we listen to you if you don't know? Seriously: what do you want? And if you don't know, what are you talking about?

I don't pretend to offer you a final answer, but I do think those questions are on the table. They are on the table for the first time in my adult lifetime, perhaps even for the first time in American history. We can go through the long history of how, when problems arose in the nineteenth century, free land seemed to solve almost anything. And how in the twentieth century, wars in the first and second quarters of the century bailed us out of great stagnation and then the Great Depression, followed by wars in Korea and Vietnam and the growing military budgets of the third quarter of the century. Those wars were not by design, but they stabilized the system. With the spread of nuclear weapons we are now up against the incapacity of that particular mechanism to stabilize this particular system.

I don't think the system will collapse. U.S. government spending was 11 percent of GDP in 1929. It is now roughly 30 percent, providing a substantially greater “floor” beneath the economy. It may stagnate and decay, stagnate and decay, stagnate and decay—all the while gobbling up resources and causing climate destruction. I think this is the odd context we're moving into historically. It is also a context that is steadily forcing people to ask deeper and deeper and deeper questions, triggered, wonderfully, by Occupy Wall Street. It would not have triggered such a reaction if people didn't already sense that something is seriously wrong. Many don't have words for it, and many certainly don't have concrete actions in mind although they may have some inkling of what needs to be done. There are a lot of projects, there are a lot of ideas, but when such a large number of people—including the Tea Party, in its strange way— realize something is wrong with the prevailing system, that is a profound moment of history. It is the most profound moment of history I have ever been engaged in. And I have lived though the 1960s and was active in the anti-war movement, the civil rights movement, and so forth.

Those movements, particularly the feminist movement and the civil rights movement, were largely about getting into the system. "Let us in. Don't discriminate, don’t discriminate, don't discriminate." There were pieces of those movements with a different vision, but that was the dominant form. The environmental movement was saying, "Regulate the corporations." And indeed, a moment burst open that was favorable to regulation. I think that moment is over, and getting in is no longer the primary issue, except for very large numbers of people, particularly minorities, who are not getting in at all. There are now urgent questions of whether the system works and, I think, whether it can be changed in large.

So I think the underlying problem we're talking about here is: If you don't like capitalism and you don't like socialism, what the hell do you want and how do you get there? That's where I'm coming from—just to lay my cards on the table.

We spend a great deal of time at the Democracy Collaborative coming at it another way, not theorizing about history, although that's where we're coming from—Ted Howard and I—but asking, "Is there anything that the press isn’t covering because it lacks the money for on-the-ground reporting?" We try to learn what's out there, and we’ve been doing it for longer than I care to remember. What we’ve found out is that in one form or another there are four to five thousand neighborhood nonprofit corporations trying to benefit communities—some good, some bad, some very interesting, some not so interesting.

If you include all forms of worker-owned coops, you’ll see that they come in various flavors: some not so good, some wonderful, some changing. Even Employee Stock Ownership Plans (ESOPs) are changing, by the way—many are becoming unionized and participatory. There are in America today something like 11,000 worker-owned firms involving five to six million more people than are involved in the labor movement. Nobody is covering them; they are not being talked about. I opened the morning news and saw that credit unions are all of a sudden becoming very popular as the place to shift your money to. There are 130 million Americans involved in one or another form of coop, including credit unions.

Community land trusts (CLTs), started thirty years ago by Bob Swann, co-founder and first president of the E. F. Schumacher Society, are also popping up in different forms—hundreds of them all over the country. People are looking at various forms of ownership, and the CLT is one of them. There are also nonprofit corporations called social enterprises, whose sole purpose is to pursue some good mission for society. They too are popping up all over. Another form that is beginning to appear is municipal ownership. People tend not to be aware of municipal ownership of hotels and of land for development; there are 500 projects around the country where cities have established ownership of capturing the gas from garbage and turning it into electricity as well as into jobs and revenues. I could go on and give you more and more of these examples, but you can find them on our website:www.community-wealth.org

By the way, for you socialists out there, you probably already know that 25 percent of America's electricity is created and distributed by either public utilities or coops. Twenty-five percent by public enterprise that is much cheaper than private enterprise because executive salaries are not high and there are no profits; it is as efficient or more efficient, more ecologically sound, and more amenable to community interests. In addition, there are 23 state governments that currently own or are establishing businesses, some in the form of venture capital, with the state retaining partial ownership. America? Socialism?

I'm giving you an overview of the myriad projects like this that are not reported on. Many of them have merit from an ecological point of view; many do not, but overall they democratize the ownership of capital. What did I say? I said these projects democratize the ownership of capital—in a very down-home American way. Coops. Community land trusts. Municipal enterprises—a lot of these in the South, by the way. They begin to tell you something about the possibility, no more than that as yet, of slowly establishing, in a radically decentralized, localist way—and then maybe going further—a different vision of how productive wealth might actually be organized. They may even provide some principles that would allow you to begin talking about a long-term systemic possibility. Maybe.

Systems—such as feudalism historically, capitalism and state socialism currently—are characterized above all by property relationships. And if you don't like any of them, ultimately you have to ask who owns the capital in your system.  We now know that 1 percent owns just under 50 percent of the investment capital; 5 percent owns two-thirds. It is a highly concentrated corporate capitalist system, maybe even more extreme in its ownership patterns than medieval society. I do not say that rhetorically. The pattern is medieval in its scale and scope of concentration of ownership. So ultimately, if you are interested in systemic change rather than—and I'm going to use a loaded word— “projectism,” you must ask not only who owns capital but what it might look like if the system were democratized, were American in content, and were to give rise to the principles and nurture the principles of democracy, ownership, community, and ecological sustainability.

Think of all of the advanced systems, particularly in those little countries in Europe, like Germany—remember that Germany could be tucked into Montana. We live in a continent. If you want democracy in a continent, you've got a big problem, especially compared to little countries. (I sometimes say to my students, just to drive the nail in, "France and Germany are ‘dinky’ little countries," meaning that their polity is organizable on a smaller scale than in a continent.)

I was legislative director to Gaylord Nelson, the founder of Earth Day. Our goal then was to regulate. We've largely run out of that possibility, I believe. Now there are deeper pressures at work. Let me say a bit about that to sharpen the edge of this nasty argument I'm making:

You can see in this country that whenever progress was made toward using the regulatory system—"the regulatory state"—to manage environmental issues (sort of), there also were strong labor movements. Historically, the progressive parties required a strong labor movement, even when it was at odds with the environmental movement, to enthrone a regime that could manage environmental problems through the regulatory system.

One of the negatives we face is that the American labor movement is in radical decay and under attack; it is faltering as the situation becomes worse and worse. Even at its height, it was a weak labor movement. In Sweden 80% of the labor force was unionized; in this country it was 35.4% at its height in 1945. Total labor movement unionization is currently at 11.8 or 11.9 percent, depending on whose numbers you use. It's at 5.7 percent in the private sector, and declining. I emphasize this number for a reason. Some people believe that there will be a resurgence of the old Democratic, liberal party out of which I grew—I'm a Wisconsin progressive—by organizing to make the state powerful enough to manage the corporate problems that can be identified and spoken about. Social democracy abroad, progressive liberalism here.

My contention is that the likelihood of a resurgence is slim. I'll take as much of it as I can get, but that is not the future. If the traditional models for managing inequities as well as social and environmental problems, models that required a strong social democratic formation of the labor movement at its core, are no longer valid, either there is another way forward institutionally—not just on the part of good folks but based on the institutional muscle and organizing power and money of an institution, in this case labor—or there is no way forward. We need to struggle with that dilemma.

My suggestion to you is that precisely because of the failure of this particular way of going about business (from which I come), we're finding these community experiences developing around the country, and everywhere we're finding anger and a change of consciousness and awareness that something is wrong. That’s why so many people have responded to Occupy Wall Street. My hat is off to Occupy Wall Street. Overall, there is a huge response brewing that tells you something about America. I believe that, almost because of the failings in the way corporate capitalism has been managed, we're paradoxically beginning to think about and build new institutions, to develop ideas and develop consciousness that are pointing in a different direction—maybe.

I'm a Schumacherian—by the way, do you know that Schumacher was a socialist? Everyone likes the first three parts of Small Is Beautiful. Read the fourth part, in which Schumacher stated: "Private ownership of large-scale industry is an absurdity." We should honor this, and we need to face it. Remember, he was chief economist of the National Coal Board of England, a nationalized industry that was more efficient than our coal industry. He struggled with what ought to be done about private ownership. Scott Bader, an early British experiment in a large-scale, cooperatively run industry, was one of his options. He also had complex schemes to transfer ownership to communities. He considered nationalization or maybe nonprofits as possible routes.

We haven't even stepped up to that question. We've been looking at local projects, and they're giving us ideas. You might be able to organize a local economy around small, high-tech businesses, the kind Juliet Schor talked about this morning—different types of coops, land trusts, all sorts of nonprofits and social enterprises. Even if you are able to do that, what do you do about big enterprise?

And then there's another dirty word: what do you do about planning? You want to manage a slow-growth, low-growth economy? Whether you're talking about how work hours may be changed and the policies involved— which Julie discussed this morning—or about changing material inputs, you are ultimately talking about regimes using one or another mechanism—regulation, tax benefits, or other forms that are inherently a planning system. Now you're back to power.

By the way, we plan all the time. That's what's going on with the committees in Congress right now. They're going to come up with a nasty plan, but it will be an integrated plan that's going to cut budgets and cause more recession and so forth. We do planning; the question is, who controls the planners?

So if we're interested in systemic change, not just projectism, we're not only going to have to face this kind of question but build the kinds of institutions from the ground up that begin to establish the power base over time, which might set the terms of reference for the larger patterns we're talking about. My term is a "Pluralist Commonwealth": many different forms—coops, land trusts, worker-owned companies, etc.—of common wealth. I don't think it's a great term, but it's descriptive of the mix and the kind of American diversity that my friends in Racine, Wisconsin, where I come from, would understand. I can talk to my conservative friends from high school about it. They understand that you can do such things in Racine, and you better be able to understand it, or you're not going to get anywhere.

I have found, when I talk about real things on the ground, I can have a rational discussion with almost anyone. And that leads to the larger questions. I have a very conservative friend—my old high school buddy. Extremely brilliant, extremely right-wing, extremely religious. When I was back in Wisconsin I asked him, "What do you think of Russ Feingold?" And he said, "Well, you know, I voted for Russ." 

"You voted for Russ Feingold?" 

"He was a man of principle. He said what he meant. And I respect that."

Strange, strange quality. So a good lesson is to ask, what do you want? Ask it seriously, with integrity, and also really know what you're talking about.

Let me press forward a little bit on some elements that take us beyond projectism and offer a sketch of what could become, maybe, a systemic design. The Democracy Collaborative has been deeply involved with a group of important cooperatives in Cleveland, Ohio. We've helped launch this project with the help of many people in Ohio. I'm going to tell you a little bit about the project, about the process that built it and where it's going, and also about its design.

As many of you know, these are worker coops. Julie mentioned that most people who have been involved in the new-economy movement are highly educated, wealthy, and white; this project, however, is in a part of Cleveland that is almost entirely black and where the median income is $18,000 per family. In that community, for complicated reasons I won’t go into here, a complex of worker-owned companies is developing—sophisticated in design and also a little bit different from regular coops. I want to emphasize that, because those of you who know something about coops, including worker-owned coops, also know that they have a difficult history because problems arise if there is not an adequate capital source or an adequate market. The ejido, a peasant cooperative structure developed in Mexico, was undermined by numerous political and economic forces. I don't want to see American coops go the way of the ejido in Mexico or the many other coops that have died aborning. 

Argentine worker-owned companies provide an inspiring case. Very exciting, but if you actually study those that are succeeding, for the most part—not entirely—they are linked to the purchasing power of Buenos Aires's municipal government. That's a stabilizing part of the market.

What's going on in Cleveland draws to some extent on the Mondragón federation of worker cooperatives in the Basque region of Spain. In the Cleveland model there will be a series of worker-owned cooperatives. At present there is a large laundry—the most ecologically advanced laundry in northern Ohio, which uses and heats about a third of the water normally used—and a solar installation and weatherization company. They've just broken ground on a 3.25-acre greenhouse. About two businesses a year are going to be set up, with a revolving fund to help finance them. Significantly, this is a complex that is oriented—by design—to the purchasing power of large, nonprofit institutions in the area: hospitals and universities

In that section of Cleveland the universities’ and hospitals’ purchases amount to $3 billion a year, and that’s just procurement. Add to it salaries and construction costs. All by nonprofits, mostly subsidized by the taxpayer through Medicare, Medicaid, the hospital system, or government money going to universities. And none of it goes to the people who live in the neighborhood.

What has happened, thanks to a complex organizing process, is that part of the procurement, a very small part, is being directed—not entirely, we use the free market as well—to partially stabilizing the cooperatives and providing them with some protection from the violence of the free market.

The reason is not simply that people like worker coops and not simply that some of these nonprofits have an interest in improving their neighborhood—hospitals do like to have pleasant environs—but that they want to help rebuild the community as a whole, not help out only a few workers. It's a sin in some quarters, when discussing coops, to prioritize community over workers. There are purists who don't want to hear me say that. But I'm not interested in token jobs that fall apart.

The worker-owned companies in Cleveland are designed to link to a nonprofit, community-benefiting corporation. They give 10 percent of the profits to a revolving fund, part of which is used for the community; otherwise, they are independently run, worker-owned companies—except that they can't be sold. The goal is to rebuild community, not simply benefit a small group of workers who may sell the company and run off to the suburbs as soon as they make substantial money.

(By the way, there are 300 to 400, maybe 500, genuine worker coops that have not increased in scale and size for many years, but they hold the principle of worker-ownership, rather than community, as sacrosanct.)

The argument I’m making is that there is a larger interest, particularly when community-benefiting health and education institutions are involved and we have the reconstruction of the community as a whole as a goal. There is a larger interest in building a structure that is responsive to that goal. So here’s a principle and a little bit of an oddity to chew on. We're trying to stabilize the market substantially because there are so many community interests involved. It will be an easy matter, otherwise, for a large multinational doing solar installations to zoom in on the small company, undercut the prices for a year or two, and clobber it. In Buenos Aires, the city government has exactly the same goal of helping to stabilize, in part, the market for small companies.

I have just given you a design principle for a radically decentralized community-building cooperative system. Were you to apply this principle—substantial stability of community markets in a community-sustaining system—linking worker ownership to a design of this kind, you would have a design that doesn't look like corporate capitalism and doesn't look like state socialism but begins with community as the dominant principle and works backward from there.

I think this is a crucial principle, and let me tell you why: first, if you don't abide by it, you uproot communities. Cleveland was a city of 800,000; it's now 300,000. Where did the people go? They were blown away, scattered, and nobody cares—particularly if they're black and poor. Either you stabilize a community or—boom! That's what happens when capital moves on.

Second, we've been literally throwing away cities and rebuilding them in new locations. The schools, the housing, the roads, the hospitals, the government structure are simply discarded, and the companies move elsewhere. If you have an interest in rebuilding cities, you need to know there are extraordinary capital costs and extraordinary carbon costs.

Third, if you don't substantially stabilize the local basis of the economy, you cannot do serious planning for sustainability—such as high-density housing and mass transportation planning, key ingredients in changing the carbon footprint of a community. And if the population moves on and fragments, you can't combat climate change. There won't be anybody there to do it; you'll have wreckage as corporations and people move on to the next area and the next. Think about that.

If you want to stabilize communities, you'll have to do it through planning, as I just said. That is to say, supposing we had a serious mass-transit, high-speed rail system. Supposing we were able to match what many other countries already have—and what we will one day do when we overcome. Then we would have something to build on as a society, and it would all be paid for by taxpayers and commuters.

Would we want to hand the rebuilding of our transit system over to Bombardier, a Canadian company? Or to the Spanish companies or the German companies? All well qualified for doing it. Or could we not begin rebuilding American transit and manufacturing on our own, at the same time creating worker- and socially-owned jobs to stabilize communities so that they might become able to deal with the underlying problems in those communities that lead, for example, to climate change? Again, I’m simply taking that tiny model in Cleveland and applying it to some of the ingredients of a larger systemic model in order to address those problems and do it in a decentralized way.

Now, I've been around a long time. I do not think we're going to accomplish this tomorrow, but I'm also an historian; I wear two hats: as a political economist and as an historian. You know, systemic change comes and goes. Most societies endure radical changes unexpectedly; social movements arise out of nowhere. I wrote a book published a couple years ago, America Beyond Capitalism, and I’m glad I said in it that there’s going to be a movement that will explode. It’s the first time I’ve dared to predict something in general terms (and then find with the Occupy movement that something like it has occurred). 

Because there's something so wrong that people know something major must be done, we're now casting about, looking for ways and doing wonderful experiments, trying to learn, trying to sense where to go. For the first time in many generations we are open to seriously rethinking our situation.

I’m talking here about systemic change. You want to play this game? Don't mess with it unless you're willing to really dig in and put your time on the line. The chips represent decades of your life. By the way, I'm talking to the person in your seat. This is not an ordinary discussion. Much as these are systemic questions, they are also existential questions about whether you want to do something—or not.

We are learning from the multitude of projects out there that, in my view and at this stage of development, are giving people an inkling of what might be. They're not much more than an inkling, but that’s a good start. They give people a chance to theorize and to think about what might happen if we put together, piece by piece, parts of the political, social, and cultural movements that are dedicated to community, democracy, equality. Even liberty is at stake. Liberty is at stake because if current conditions decay much more, we're going to see violence, and then there will be crackdowns. Heavy-duty issues are on the table.

In any case, right now there's a lot to do. It's a moment that is really opening up, as we have seen from Occupy Wall Street, and it's an exciting moment to take new steps and to do so in a way that takes us beyond anything that was done in the 1960s and, I think, in the 1930s and in the Progressive Era before that.

That is to say, we’re seeing the slow and steady reconstruction, culturally, of the notion of community in America, community in Cleveland, Ohio, or Racine, Wisconsin. It's the re-knitting of community as a cultural as much as an economic idea, and it’s happening in a way that is informed by what we've learned from the ecological and environmental movements but is also tough-minded about systemic questions. 

It’s a question, if I'm even roughly close to the ball, of systemic change, not projectism. Let me see if I can say that another way: we need projects desperately, and we need to advance and learn from them and develop them. Economic experiments are also reaching a stage we can actually learn from and develop. But we need to go beyond projectism to systemic change, to a vision that is authentic and can answer the question, "If you don't like capitalism and you don't like socialism, what do you want, and how are you going to get there?" Really. And if you don't have an answer, why should we listen to you?

The starting point is where we are. Now we need collectively to grapple with the task in a much more sophisticated way than any of us has ever stepped up to before and then to advance the vision and nurture it in cultural, political, economic ways and beyond. What is especially interesting is that the ingredients, the cultural ingredients, are in place. And the OWS young people are bringing to the mix their awareness that something is truly, profoundly wrong, not only in this country but globally as well.

So all of this is on our plate, and in an exciting way. The problem is that if what I have said is even half-way true, it does present a burdensome existential problem: If it is our lot in history to open the possibility of that future, then we have to take responsibility in the matter. I'm talking to the person in your seat and mine.

The questions, as I say, come down to whether we as a whole will learn enough, do enough, and rise to the occasion to be able to actually transform the most powerful corporate capitalist system in the history of the world. I think maybe we can. Just possibly. In any case, it's certainly worth one hell of a try.

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