A New Economic Paradigm

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.


BARSAMIAN: In a New York Times op-ed on December 15, 2011, you wrote, “A mere 1 percent 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?


ALPEROVITZ: What’s interesting—and 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 percent owns just under half of the investment capital, 5 percent owns 70 percent—literally, a medieval power structure. So if there is to be a democratic alternative, what you look for is whether there are 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
  • there are 130 million people involved in credit unions and co-ops,
    another democratized form of ownership
  • there are 4-5,000 neighborhood corporations devoted to neighborhood
  • 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 to 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 an American tone?


Unlike France, for instance, or Russia or the former Soviet Union, we have a very decentralized tradition, localism and states and a kind of participatory 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.


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, 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. 


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, 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 ask how historical change really takes place, what you’re looking at is decades of developmental struggle and the creation of ideas, projects, vision, concrete ideology.


Occupy cracked open the debate about the 1 percent and the 99 percent. 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.


You’re suggesting these efforts toward building some kind of alternative worker-owned structures will take many decades, that we’re now in the incipient stages.


Not only worker ownership. Municipal ownership. That was the early part of the Debs revolution—municipal ownership and neighborhood development. 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 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. 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 publicly owned banks. In San Francisco they have about $28 billion in cash around. Why should that go to Bank of America?


You trace the origins of this movement to 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 to get that plant going again. It didn’t succeed. But from those efforts other things evolved.


Five thousand people got pink slips in one day, thrown out of work. In 1977 that was national news because it hadn’t been happening. Now it happens all the time. So the steel workers in the local in Youngstown said, why don’t we take this place over and run it ourselves?


What happened was they did their politics very carefully. They got the whole state—including the so-called conservative governor who had to be for it because the religious leaders and labor were 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 to commit $200 million in loan guarantees. After the 1978 election, the money disappeared. So the mill did not happen.


But what was interesting is that the leadership understood that even if it failed, they were injecting an important idea into political consciousness. Indeed, 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 it 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 where $18,000 is the family income average and there is 40 percent unemployment. 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 idea 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. That’s in addition to salaries and construction. 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 that 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 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 percent, of profits go to make new companies. So that they want to build a complex of community building in a structure of worker ownership.


The small businesspeople like it. It helps the tax base. We’ve learned that if you speak concretely and make sense and know what you’re talking about, fundamental institutional change can be made. 


So, for instance, they’re just about to open a greenhouse, partly solar. 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—while servicing the hospitals and nursing homes in the area. They have another solar installation company, which is on track to put in probably more installations in Ohio and more capacity than existed in the whole state already. 


Talk about the role of organized labor. In your book you trace the steep decline from a peak of around 35 percent of the workforce 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.


The way in which most of the advanced systems around the world have been run, 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. 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.


What is it that makes sense in the design and politics and vision of the next system?


I think the next stage is a politics that 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 very conservative—and talk about all this. It is explainable development and it has a vision that people understand.


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 chronic and long-term. People are out of work for long periods of time, and many of them drop out of the workforce. 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 of, to use Bertram Gross’s term, “friendly fascism,” scape- goating immigrants and gays to explain the crisis.


In this cosmology 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 was put together by Huey Long’s son—who was at that point chair of the Senate Finance Committee—and a maverick corporate banker named Louis Kelso. The way it works is if you have started a company and your kids don’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 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 plans—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 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.


Perhaps one of the better known of the international worker co-ops is based in Spain. Explain what Mondragon is and why is it significant?


It’s a very interesting development because it’s now roughly 85,000 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 percent of the co-ops is about 4 or 5 to 1, that the boss has only 5 times as much as the lowest worker, and then in the biggest parts it’s 9 to 1. Compare that to the U.S. It’s 250 to 1 in most big corporations.


It’s been very successful with very interesting worker participation. 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 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 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.


There has been an increase in farmers’ markets and 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. 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 the paper “dollars” and recirculate them to rebuild the local economy. Notice that the vision there is communitarian, 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, such as co-operatives, reach 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 that the hospitals buy from it and they stabilize and it builds up the tax base. And I pointed out that the local small businesspeople 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 got exactly the same response. It has a way of speaking to different groups.


Given the 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. The choice is to try to get to build a way 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 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’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, but their contribution is like a pebble on top of a Gibraltar of both taxpayer creation and historic creation of generations without which you couldn’t do anything. So when George Will says this, it seems to me blatantly ignorant of the sources of wealth and who gets to control them.


“Worker Owners of America, Unite” was the title of your New York Times op-ed. 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, by, and for the people.” What are the prospects of that vision being realized?


All great revolutions look impossible before they happen.  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.


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, 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 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.




David Barsamian is the founder and director of Alternative Radio, (www.alternativeradio.org). His latest book with Richard Wolff, is Occupy the Economy: Challenging Capitalism (City Lights).