Looking at Marx’s Wage Labor and Capital

https://www.marxists.org/archive/marx/works/1847/wage-labour/index.htm

Introduction (by Engels)

Let’s look more closely at our 27 shillings of daily production and profit. Is Engels correct in assuming that the worker is entitled to all 3 shillings of profit? If the worker was the owner of the lathe and steam engine and purchased the materials required, then obviously he would be. If the capitalist owns the steam engine and lathe, then he is entitled to the profit on the one shilling of input he provided, assuming materials are easily disposed of if not used with no loss, and raising the price for easy calculation to 28 shillings, the worker should receive 3 shillings profit and the capitalist, one shilling.

Most capitalists would not concede that point. They consider themselves at risk for the material costs as well. The risk to capital is now 3.5 shillings per day, but even that calculation leaves half a shilling more in the pocket of the machinist.

If the machinists were unionized, the wage would be higher and the day shorter, but the profit entitlement would be higher as well, hopefully higher than the dues paid to the union. Of course, the capitalist may also be a sales worker, entitled to a share of the profit from the labor of selling the machines. If it were just the machinist and the capitalist, they should organize as partners, although the assumption should be many machinist and one capitalist, who may or may not employ separate workers to sell the machines.

Preliminary

Marx could be describing the expulsion of the working class from the middle class under the rule of the neo-liberals, with the eventual election of the abomination, Donald Trump, as an ersatz billionaire who pandered to the worst racial and misogynist hatred still existing in the unradicalized working class.

What are Wages? How are they Determined?

Labor power can also be called the supply cost of labor, which may be over or under the wage, the price of labor. The price of the materials, like the wool to be made into cloth, include the labor power of the farmer and the broker. The sheep gets food for her trouble or may already be mutton. The farmer’s landlord gets his share, probably an out-size one (and he may even be the capitalist).

Marx poetically demonstrates that the capitalist risks only property. The worker contributes a portion of her very life, which cannot be replaced. The comparison to the slave and serf are interesting, because, however, badly, the master or lord must make sure the workers’ needs are met by the system. There is no guarantee for the worker in capitalism.

By what is the price of a commodity determined?

Marx starts by highlighting the goals of monopoly and monopsony and goes from there to how these things effect prices and how they relate the the cost of production. I am sure if he were here today, he would have something to say about the artificial oil price boom of the last decade. He then relates cost of production to labor-time included in the cost.

By what are wages determined?

Supply and demand influence the price of labor power, but in general it is the supply cost of labor (living and education/training) that determines the price of wages or labor power. His observations on the lower cost of training translating into subsistence wages is as true today as a century and a half ago, although if the collective pays for training and education, a more equal price can be paid for having it. Likewise, he is equally correct about the need to pay for replacement workers, aka children. Both Milton Friedman and a number of Roman Catholic Popes agree with him on this. The sad factor of the matter is that the economy does not pay people enough to propagate themselves (i.e., have kids). Immigration covers some of the lack, bringing in workers used to a lower standard of living, i.e., slaves.

The Nature and Growth of Capital

Marx identifies capitalism as a set of social relations rather than as a necessary thing. It consists of both physical and human means of production but also of the exchange values and commodities. This allows shifting commodities within the same system. Commodification provides a common scale for trading or sales. The fact that we have classes of people who can only labor makes them the servants of the accumulated labor of others in machines and commodities, the essence of capitalism. Of course, we don’t have to use money. If we shift to a standard labor hour based currency and have workers determine the means of production, commodification diminishes and capitalism is doomed because it is deprived of workers and growth.

Relation of Wage-Labor to Capital

Capital reproduces itself from workers generating profits for capital or building capital equipment. This provides jobs for workers, but jobs which produce no value above subsistence. Of course, when consumer surpluses build up, the working class gets a better life, which is why revolution has never come to an industrialized society. It is not how workers work that must change for revolution, it is how we consume. We control production as shoppers but not workers. This is what we must change, allowing more control of commodities available from working. Under capitalism, workers subsist while capitalists live in luxury. During the mid-20th century, this was reduced through progressive income taxes, but low taxes again allowed CEOs to minimize wages and the mansions built as a result are again recreating class division. owning the means of production through collective action takes care of that.

The General Law that Determines the Rise and Fall of Wages and Profits

Here Marx assigns all profits to productive labor. Even before machines could think this ignored the financial risk of the capitalist, who in turn ignores the fact that the worker has risked a portion of the only possession he really has, time on earth, in spending the day employed. In this part, Marx discusses the rise of real wages in comarison to the relative share of labor and capital. In the U.S., since the early 70s, relative profits have gone through the roof while relative wages have not. Capital is stronger than ever. Automation provides some of this, as does monetary policy designed to control inflation, however the biggest factor has been tax policy that rewards CEOs for cutting labor costs by lowering their tax rates, which Trump wants to do again.

The Interests of Capital and Wage-Labor are diametrically opposed
Effect of growth of productive Capital on Wages

In the start of the industrial age, growth in capital meant more workers at lower pay. Unions and a consumer surplus, where technical efficiency produced too many commodities to maintain price levels took the steam out of revolution, although the economic booms and busts of capitalism have made it harder for workers to advance as a class unless they are radicalize. Therefore, Marx’s surmise of the desperation of the working class is a bit overblown, at least until you examine the working conditions of undocumented workers in America, some of whom are actually slaves, kept under peonage to company stores or until they pay back what the capitalist paid to Coyotes who provided them. The growth of capital often involves monopolization, where higher cost producers go belly up, which means in some industries everyone must use slave labor or its equivalent. Then the entire market brings down the price (consumer surplus), although slaves don’t get the benefits. Not so in an employee-owned firm that uses much of its production internally because the workers control the means of consumption.

Effect of Capitalist Competition on the Capitalist Class, the Middle Class and the Working Class

Marx describes very well how we get to a consumer surplus domestically without identifying how that benefits workers. He then addresses how power comes from being able to fire workers on an international scale. He could be writing today and would be as accurate on trade. The decrease in wages for some and the low wages in Asia testify to how globalization works against workers. The antidote is employee - ownership across borders and an equal standard of living for each worker. Are machinists immune to downward wage pressure? Not then and not so much now.  Now it is the workers who can program the machines, although if the collective pays them to get that knowledge then the collective shares the reward, although the educated worker may get a stock bonus rather than higher wages. Female and child labor were identified as lowering wages. Child labor has been outlawed, although some places it rears its ugly head. No one nowadays talks seriously about women working being a problem, although maybe a non-working spouse could be subsidized to provide child care to children. At various times, including ours, an excess of workers was a problem. Then and now, solidarity is the solution.

New authentic interpreter of doctrine emerges, frets over Paglia

https://www.ncronline.org/news/opinion/new-authentic-interpreter-doctrine-emerges-frets-over-paglia
MGB:_We should not be too hard on young Mr. Gallagher. Everything is vital when are in doctoral school, but he does need to start writing for real refereed journals. This article will not help him unless he is auditioning for the alt-right of the Church, the Ecumenicism of Evil, as it has been called. As a member of the Catholic Libertarian Left, I will debate him any day at any venue. I do agree with him on one thing.

 An argument on abortion should rest on the related facts, some of which he undoubtedly ignores, like how abortion regulation is a tool to reinforce or restore the patriarchy. One look at Casti Connubii makes that clear, so a feminist retort is legitimate. The feminists win the point as Casti is socially outdated.

Then there is the issue of pluralism, which Mario Cuomo devised and other Catholic politicians endorse. It states that Catholic legislators and governors cannot substitute the will of the Church or their own views in unity with the Church upon the vast majority of non-Catholics. I thought it a week argument, but having reviewed Dignitas Humanae and the history of its passage in Vatican II and its acceptance into the Magisterium by Pope Paul, I can see their point. We are not required to impose Catholic values on our secular constitutional nation. Mr. Gallagher should avoid arguing this issue, as doing so may cause the university to question his orthodoxy in his oral exam, which would ruin his career in punditry. Regardless, I would hope that Catholic politicians would actually educate the public and the Church on the issues surrounding Roe.

The constitutional argument over life is two fold. First, there is federal jurisdiction, which says states have no power in this area of privacy (like in marriage equality, sodomy, contraception or Catholic rights to have parishes in Alabama, and eventually funded Catholic schools). To deny federal supremacy is to support mob rule. Second is the issue of personhood, which Roe puts at viability, which is more general that the constitutional standard of birth. Under Amendment 14, Congress can enforce, meaning, change this interpretation, but it can only go as far as it can get votes, probably week 25.

Anything earlier in the second trimester is equivalently rare and complicated with fetal survival issues, although I will concede the problem of Downs Children if he will concede that any regulation in this area will require intensive federal financial support of these families. As for first trimester embryos and fetuses, if he can devise a legal way that will not violate equal protection rules that treats fetuses who will miscarry differently than those aborted in terms of criminal investigation and tort relief, than he may have the chance of law beyond the status quo. I doubt he is that smart. No one is. Indeed, if the best that the Pro-life argument can do on Roe is to agree that the status quo is all it can get, then perhaps is essential for all Catholics to denounce it for the fraud it has become, or at least not abet it.

What he can do is agree to my Catholic Liberal position and support a robust child tax credit of $1000 per month per child (what USDA calculates a child costs for an average lifestyle), paid with wages or tuition stipends, and a $15 minimum wage. This is also in line with Casti and as such is part of the Magisterium.

Though the sexual teachings may be disregardable-due to their origin in-clerical asexuality (not chosen celibacy, but a sexual orientation, like homosexuality) and be socially outdated as patriarchal, it is correct on mandatory sterilization although scientifically inaccurate on contraception being equivalent to abortion (while embryologists won’t say life begins at gastrulation, what they say about it should ring true for anyone who has read Aristotle’s teachings on the human soul, which are still used by Thomistic philosophers). Pius on the innocence of the child does not understand that innocence is not an issue in any life question. Danger is. Even economic danger, although he has a solution.

Casti not only echoes Pope Leo, but Pope Pius expands on what is meant by a living family wage. That keeps it relevant when it is otherwise ignorable. Here are the relevant passages:

120. If, however, for this purpose, private resources do not suffice, it is the duty of the public authority to supply for the insufficient forces of individual effort, particularly in a matter which is of such importance to the common weal, touching as it does the maintenance of the family and married people. If families, particularly those in which there are many children, have not suitable dwellings; if the husband cannot find employment and means of livelihood; if the necessities of life cannot be purchased except at exorbitant prices; if even the mother of the family to the great harm of the home, is compelled to go forth and seek a living by her own labor; if she, too, in the ordinary or even extraordinary labors of childbirth, is deprived of proper food, medicine, and the assistance of a skilled physician, it is patent to all to what an extent married people may lose heart, and how home life and the observance of God's commands are rendered difficult for them; indeed it is obvious how great a peril can arise to the public security and to the welfare and very life of civil society itself when such men are reduced to that condition of desperation that, having nothing which they fear to lose, they are emboldened to hope for chance advantage from the upheaval of the state and of established order.

121. Wherefore, those who have the care of the State and of the public good cannot neglect the needs of married people and their families, without bringing great harm upon the State and on the common welfare. Hence, in making the laws and in disposing of public funds they must do their utmost to relieve the needs of the poor, considering such a task as one of the most important of their administrative duties.

122. We are sorry to note that not infrequently nowadays it happens that through a certain inversion of the true order of things, ready and bountiful assistance is provided for the unmarried mother and her illegitimate offspring (who, of course must be helped in order to avoid a greater evil) which is denied to legitimate mothers or given sparingly or almost grudgingly.

Gallagher should warn his conservative friends that they are on the road to Hell.

Revolution in Rojava: Democratic Autonomy and Women's Liberation in the Syrian Kurdistan by Michael Knapp

This is essential reading if you want to know what is really going on in Syria, especially what the media won't cover, and how bad an actor both Turkey and the Iraqi Kurds have become.  This is a socialist experiment that might just work unless murdered from the outside.  They are the essential players and their example could bring an end to the conflict, even with agnosticism on Assad being removed (as long as he respects local autonomy).

Controlling the Means

In September, I was the guest speaker at the DC Metro Chapter of Democracy@Work, or D@W, which seeks to do community efforts to bring Richard Wolff’s book into action. Before my talk, I wrote the usual definition of socialism on the white board.

Workers control the means of production.

I then wrote the words Bureaucrats, and Capitalists above the word workers, voters below the word workers and the words consumption and government above the word production. Like this:

Capitalists                                    

Bureaucrats                                 

Workers control the means of production/consumption/government

Voters

Most good comrades could explain this diagram rather well, but I will repeat what I said, with a few additions. I noted that while we want workers to control the means of production, we are stuck in capitalism, where capitalists control both the means of production and the means of consumption, both through monopolistic pricing and by holding down wages, which deprives workers of all they deserve to consume. Capitalists also control the means of government, mostly by controlling voters through campaign ads and funding wedge issues, like abortion and gay rights. This assures that the Capitalists control the Workers.

By Bureaucrats, I meant party officials in state socialisms, who control government, consumption and production, was well as the workers and voters, with no union rights or alternative candidates. When Bureaucrats control the means of consumption, they get the best stuff and when they don’t deliver consumer goods, nothing happens to them. Bureaucratic control was essentially control by gentry, which sounds like feudalism to me.

Neo-liberalism is capitalism with better stuff and more of it, especially if the neo-liberals remember how Keynesianism works. Democratic Socialsim has much better stuff and better government and there may even be quality circles at work or an ESOP to give the illusion of control over the means or production, but there is still something missing, which is sometimes even more annoying than straight capitalism.

Socialism happens when workers first control the means of consumption, which makes make v. buy decisions on production really easy. Workes can make the same choices about government in house health care v. purchased or government healthcare, or education, or infrastructure, or housing or food. More important is the choice between exernal finance with interest or cooperative finance with less profit. Most important is the question of management: meritocracy, election or lowest bidder, from foreman to CEO. Making that last choice apparent will cost me clients. 

Other options to consider are providing housing to younger workers near the workplace, higher pay v. free cafeteria for breakfast, lunch, clothing, cooperative markets, how to deal with multi-national workers and supply chains (absorb them silly comrades). 

As voters we decide whether to support a Mars mission (instead of weapons) which will surely yield habitat technology that comrades can use to grow their own food to work shorter days and fewer years (with less cash). Most importantly, do we want to borrow money to buy out the capitalists or divert Social Security employer contributions to worker ownership and control, or maybe both. There is lots more to consider, but you get the idea. We can grow as big as we want and the bigger we go, the more we control the means of production and consumption, especially if we control the profits (instead of the capitalists doing so). Workers currently chose money over group consumption and more control over production, even if they only do so implicitly and they have no access to the profits unless they borrow them back on credit and take slavery to a whole new level, like in the 2000s. That is also why higher taxes are better than selling bonds to rich people. How is this not obvious, even to the neo-libs?

I am available to give this talk anywhere desired, optimally where duck is served.

The Cooperative Solution by E.G. Nadeau

This is a good primer on cooperatives, why we need them and where they are going. This book was written in 2012. I picked it up in 2015 and am writing this in 2017, so there have been some changes, at least in the overall economy and certainly in the politics. Richard Wolff’s Democracy at Work came out the same year, with Gar Alperovitz’s What Then Must We Do came out the following year. Both covered some of the same ground and were a bit more radical, with Gar being closer than Richard to E.G.’s book, although Gar covered more ground.

2012 was the International Year of the Cooperative. E.G. lists the seven principles of what a cooperative is, including voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, cooperation among cooperatives and concerns for the community. They have come a long way since my great-grandfather, Silas Locke Allen, helped organize a little farmer’s cooperative in southern Minnesota that has now set the standard in butter production. Of course, because it was a cooperative, I was born with zero Land O Lakes stock. Had I been, I would have expanded the cooperative to include the factory workers, local construction companies, gardeners, county road builders and local schools across the Midwest and probably part ownership in John Deere. More about that later.

E.G. highlights the problems of concentrated economic power in the U.S. It is incompatible with political and economic decision-making. We have had 237 years on an economic roller-coaster, largely because of capitalism and its boom-bust cycles. This gave us the Occupy Wall Street Movement (which commented on financial wealth issues well after it left the park, producing detained comments on Dodd-Frank reforms). Capitalist with political power give us cornered markets, insider trading, collusion, monopolies and oligopolies, misrepresenting the value of an investment or purchase, high-margin investing, unrealistic expectations and fraud. Five years after this book went to print, little has been done to bring individuals to justice who engaged in these activities most recently, save some obvious bad actors. Cooperatives don’t engage in such nonsense on a regular basis. Is big business a better innovator? E.G. sites examples where big firms held back innovations to avoid market disruption, and by disruption we mean their ability to control it.

E.G. focuses on the Great Recession and how it was caused by the financial sector demanding so many loans that bad ones were rated as AAA. I would add that NYMEX oil futures markets were artificially bid up (which Dodd-Frank now prevents, at least until Trump guts the implementing regulations) and when the Congress intervened, the prices crashed, leading traders to sell housing securities to cover their positions, which showed how bad those bonds really were, crashing the economy. The aftermath was high unemployment, loss of savings, loss of homes and underwater mortgages, and insecurity. In the five years since then, these conditions are no longer the case, although give Trump time to ruin things again.

We do know a bit more now about how tax and deficit policy is a causal factor than we did in 1789. If taxes are too low without a big deficit sucking up the excess saving, we get economic booms, low wages, accommodating monetary policy and recessions, according to my research. The passage of the American Tax Relief Act of 2013 made the tax cuts for the working and professional classes (called the middle class by those who believe in economic unicorns) enacted by George W. Bush permanent while increasing taxes on the top 2%, while at the same time imposing additional taxes on the same households as part of the Affordable Care Act (the latter being what the GOP most wanted to repeal). These cuts forced money out of savings and into government purchases and transfer payments, i.e. private consumption, which led to the current slow and steady growth. Without these tax increases, the stagnation E.G. reported would have likely continued to the present day. What does this have to do with cooperatives? In a cooperative economy, rich capitalists who seek low tax rates to enhance rent seeking at the expense of their employees and excess savings to invest in speculative crap simply won’t be a factor.

Wealth and inequality are out of control. E.G. lists data on who owns what, who gets what income, income decline and poverty. While some of these numbers have improved with recovery, wealth concentration is getting worse. It has been since the 1970s. Gold bugs will say that is because we went off the gold standard. It is more likely that this because we have been fighting to control inflation since then and workers have borne the brunt of it, from restrictive monetary policy to tax cuts that encouraged lower wages to union busting for the same reason. Cooperatives don’t generally bust unions and shame on those who do.

The current environmental crisis, where California is burning after drought and Puerto Rico, Houston, Texas, Central Florida and the U.S. Virgin Islands, among others, have been hit with the worst hurricane season in years, is particularly apparent as I write this. Coal barons Charles and David Koch have funded an industry of climate change deniers and, ironically, E.G. quotes then Exxon (now Exxon Mobil) CEO Rex Tillerson, now our Secretary of State (who recently called his boss a moron) denying the seriousness of climate change. (I am glad I waited to write the review on a book I finished two years ago). E.G. asks if we can trust these people to do the right thing on climate change? The answer is obvious.

E.G. calls for moving to a fairer, more secure economic system. We have done so before, moving from the days of the Trusts to the Sherman Act, the break-up of Standard Oil (which is partly back together, oops), the Federal Reserve Act (which the MMT folks don’t like) and the progressive Constitutional Amendments on Income Tax, Senatorial Selection, Prohibition (oops again) and women voting. We can do it again on economic democracy. Indeed, we already are.

Chapter 2 talks about the various types of cooperatives. There are consumer co-ops, producer co-ops, employee-owned co-ops, co-ops of businesses and other organizations and multi-stakeholder cooperatives (like a store owned by employees and shoppers). Cooperatives employ just under one million workers. That includes, however, one third of the agricultural sector (which is declining in labor), largely due to the Farm Bureau Federation and one of its founders, my great-grandfather). The bulk of the chapter, and the book, describes the various sectors where cooperatives currently operate, which does not say they cannot expand into other industries.

I will list them and you can buy the book for more information: mutual insurance, agriculture, cooperative finance (they literally lend to co-ops), credit unions, rural energy, cooperatives of small businesses (like farms and drug stores), social service organizations, housing cooperatives¬¬ (especially New York City), Grocery, food and other consumer goods like REI, and 300 or so worker cooperatives (as well as Mondragon, ESOPs). 

Why have these cooperatives succeeded? The same reason other businesses do: market niche (unmet demand), champions of the model, funding, good management, appropriate business model and committed members. Cooperatives exist because people use them. I suspect I have either shopped at, banked or been employed by almost every type of cooperative on the list above or have relatives who have been. E.G. thinks that regulation of wealth and industry in this century may make cooperatives more likely. Not with this President. Of course, such movements have always been a bit insurgent. We like it that way.

Chapter 3 looks at growth opportunities for cooperatives in 2012 and beyond. E.G. makes some very specific suggestions. On credit unions, he would expand membership of consumers and small businesses, expand small business lending take on the payday lending industry, and let the world know that credit unions are full-service financial institutions. 

I go the opposite direction. I would not only more closely link credit unions to sponsoring organizations, I would absorb them into governmental or employee-owned organizations. In other words, instead of getting a loan from the credit union, the loan is with the ESOP or worker cooperative, both for home and consumer credit. Of course, you could have customer credit unions for food co-ops or car manufacturing and sales, but they must not be instruments of peonage. I would not let capitalists use them as a profit center. Just the opposite. I favor home loans from ESOPs and fully realized employee-owned firms at zero interest. They would also build the homes, which might grow food hydroponically with flicker lights and waste water conversion and storage. Indeed, to build such homes, zero interest rates and cooperative building are essential.

Building such homes would be a huge environmental break-through, although climate change involves alternative energy sources. While homes could make alcohol to fuel cars or have solar panels or windmills to make hydrogen, I am personally betting on fusion. E.G. suggests a few items: mobilizing rural energy cooperatives, sustainable family farm and family forest management (I caution about respecting indigenous people, who deserve their forests back from government mismanagement), increasing energy efficiency in homes and distance from market to table (home grown food is the shortest of all) and renewable energy (burn your own paper, plastic and waste gases for energy).

E.G. suggests revolutionizing social services through co-ops. I would go one further. I would have employee-owned firms pay a subtraction Value-added Tax and be able to take a deduction for providing social and educational services themselves or through a secondary provider, like Catholic Schools and Hospitals. This even includes finding the less than educated and paying them to go to school from literacy to advanced literacy in lieu of taxes for adult education, welfare, food stamps, Medicaid and the like. Firms would also take care of their own retirees, the disabled and addicts and alcoholics who are members or who are related to a member (and no more adopting away kids, whole families should be fostered with pay). Health cooperatives might even have on-site sick and well child day care so that people can come to work more easily, and on-site doctors so you can’t call in sick without being seen.

Cooperatives from farm to table are suggested. Even if people grow some of their own food, they might want to buy lunch or get free breakfast and lunch at work. Employee-owned firms could have their own farms as cooperative or ESOP members, rather than simply cooperating with them. Until Mars mission tech develops home food growing to where it needs to be (a good reason for an aerospace cooperative or ESOP to get funded to do this), the same growers that produce food for the employee-owned or sponsored school and the employee cafeteria might provide it to an employee food cooperative store. The driving force behind such a decision has to be democratic, not just for the food growers but for the customers. No Soviet style shortages or food lines. Workers and members must control the means of consumption, not just production. If someone wants a steak, either get it from a non-cooperative farm or make sure you have adequate steers in the pipeline.

Stressing the mutual in mutual insurance through more democracy is important, with real voting by members rather than proxy voting. This is another case where members control the means of consumption. I would go further. Employee-owned and cooperative firms would provide employees free insurance, some through their own underwriting, others in cooperation with similar smaller companies through a mutual insurance company that might even hold some of their stocks. 

E.G. writes about expanding and diversifying housing, including considering Condo and HOA boards part of the movement. Expanding to more disabled and senior housing is proposed. While disability housing requires a housing council, this is for input, not tenant governance. I would have both employee-owned and traditional firms provide housing for younger employees, for example buying condos near a movie theater or mall for young adults and apartments in office parks for recent graduates and interns, which they could keep until they are ready to buy housing through the firm, although I would reserve the latter for employee-owned firms to guard against peonage.

Taking this out of order:  small businesses could join into cooperatives to market their products and to consume services. Some such businesses are really employees of a larger franchiser or firm that forces them into 1099 status when they would rather be and really are statutory employees. Both employee ownership, pulling back franchises and tax changes could eliminate this exploitation. I am no Distributist.

E.G. favors making employee ownership a significant part of the US economy, including changing the rules to expand democracy in ESOP decision-making. I am all about that. There are also laws that limit union investment in employee-ownership. He concludes the chapter by stating that we can do anything cooperatively with a shared interest and that some activities are best suited to meet common needs that others are not. He is correct. He concludes the book by saying we must take back our democracy from the wealthy, both through legislation and attitude and to begin to work on expanding cooperation.,

We have a lot to do, but we must get existing ESOP workers excited about doing it. To do so, we must do much of the above so that workers control the means of consumption. Cash and prizes like this (including education funding as well) will turn employee ownership into more than an additional chore at work. A key to doing this is to end stove pipe cooperativism in much the way I would expand Land O Lakes if still a member. Credit Unions, housing, food cooperatives et al must be components of the same organization. It is not enough for them to just associate with each other. If we want to make legal changes, including shifting part of employer payroll or value-added taxes to buying employer voting and preferred stock (and edging out the capitalists), we must show a working model and expand it. We must Occupy Capitalism! Until we do so, I do not believe the political option is at all possible.

The Center for Fiscal Equity: Reaction to Michael Harrington's Socialism: Past and Future, 25th Anniversary Edition

The Center for Fiscal Equity: Reaction to Michael Harrington's Socialism: Past and Future, 25th Anniversary Edition

What Then Must We Do? by Gar Alperovitz

This book is important because the status quo is no longer sustainable. Of course, this is not just a straight review. I have included some of my strategies to get us where we need to go. Also, I have the benefit of 20/20 hindsight on our recovery from stagnation over the last few years and have included prospects for going back to it under our moronic president.

Alperovitz begins in Part I by laying out the System Problem, starting with the numbers on how the US compares with other nations in terms of well-being and equality then diving deeper into how unequal income is, how tax rates have gotten lower on the wealthy and how poverty and real earnings have not improved while corporate taxation had declined. He looks at how politics is working to do what needs to be done and whether what FDR did was an exception to the rule (Richard Wolff would say yes). As far as I can tell, even after the latest worldwide crisis, things are not moving. In his book Socialism, Past and Future, Michael Harrington predicted the 2008 crisis would occur in the 90s, however the Clinton era seemed to delay but not stop it.

Back to Gar. He looks at the postwar boom and notes that everyone else was rebuilding from the war and that there was much federal money in play during that time, including massive military spending. The third problem is that Labor, which was dominant during the boom years, is a shadow of itself. He looks at Obamacare’s passage to see if it reform is possible and finds that it is an incremental improvement, not a radical change. Finally, he looks at the civil rights revolution, from race to feminism to gay rights. Most of these victories are legal, not political and on race and gender much of the past economic inequality maintains.

Part II addresses evolutionary reconstruction, both old and new systems. Faced with the assumption that there is no alternative (TINA), we look at how we got there from the traditional list of feudalism, nineteenth century capitalism, state socialism (aka state capitalism-Wolff or bureaucratic authoritarianism - Harrington), modern corporate capitalism (pure capitalism from the trust era, managed capitalism aka democratic socialism, fascism) and Chinese communism. Note that in the U.S., 400 individuals control more than half the population. How much more concentrated can wealth get? More importantly, is there a way back to democracy in civic life and ownership?

Gar starts with the legendary Youngstown steel plant turned to an ESOP after the Carter Administration pulled promised funds in 1978, with the help of the Ohio Employee Ownership Center at Kent State, which also operated the Capital Ownership Group where Gar and I were both members. There is also the partnership between Case Western and the Cleveland Clinic to work with employee-owned enterprises. Unions are now finally joining this effort in major cities. People are looking at Mondragon as an example. Gar stresses that this is not just policy development, it is institution building.

Next, Gar looks at the many kinds of worker cooperatives, including agricultural, rural electric, insurance, food, retail, health, artist, credit union, high tech, taxis, biodiesel, solar, Part B Corporations, social services, land trusts, etc. I wish he would post the list because what these all have in common is socialist stove-piping and I would love to sell them on expanding their scope into more vertical monopoly in consumption, as well as production. They do one thing. Advanced socialist companies should do many things if not everything that their members want to use, from energy to housing to finance to schools to food (buying, eating out or growing-in). Socialism is much more attractive when workers know they can control the means of consumption as well as production. They do so implicitly now. Starting the dialogue lets them make these decisions explicit.

ESOPs are another form of socialist organization. The National Center for Employee Ownership does publish these databases, which I will use to urge more integration, although the 100 I am starting with are leaving some important ones out, like Hy-Vee, where my mother used to shop. Gar tells the story of how Louis Kelso and Senator Russell long set up ESOP tax incentives. The folks at the Center for Social and Economic Justice carry on this work urging the use of capital credit. I would expand ownership by redirecting employer contributions to Social Security, but only for the workplace, not for Wall Street. Of course, as Gar relates, ESOPs are not exactly hot beds of socialism, which has some workers consider ownership as chore rather than as an empowerment. They also do not allow warm body voting (one worker, one vote), but there are proposals to change that. Indeed, there are a lot of legislative changes needed to get the full potential out of ESOPs and COOPs, but they need to be both bigger and more widespread to demand it. As Gar relates, these firms work better, so this won’t be too long in coming. Organized labor has not been an avid participant in these companies. Gar thinks they will and I agree, if only to act as the representative of their members on ESOP and Cooperative Boards, which may still exist inside of decisions the membership votes on as a whole. Baby-boomer retirement may accelerate this, but I am banking on tax code changes.

Part II ends with mention of Gramsci and his ideas of cultural hegemony, the ultimate being TINA (where he began). Gar’s challenge is to create a coop or ESOP. I have one better. Figure out a way to improve and expand existing employee democracies that is so successful that they pay you to help them. In other words, let us develop some consulting models, run them up the flagpole and see if we can become hegemonic.

Part III looks at the “checkerboard” of municipal and state possibilities.  First-things-first, he examines and shoots down the myth that Adam Smith created an economics that called for an unfettered market place with no governmental intervention.  Friedman, Hayek and the Austrians assumption that this was ever the case is false.  A shining example is corporations seeking payments to relocate or stay in a particular location, from tax abatements or credits to my favorite example, a new stadium.  Gar is not criticizing, he is suggesting that democratized firms and institutions can insist on the same kind of thing, especially where most needed on environmental projects.

Socialism American-style already exists. Publicly owned utilities pay executives less, as do energy and other cooperatives.  Profits from these firms can also fund other government operations and are often more green (which is important if you have noticed this year’s hurricane season).  Public development projects, like Boston’s Faneuil Hall, are also an example of a public-private partnership.  I have never seen so much junk food in my life.  Transit area development is also socialist.  Let’s not forget broadband. Hotels are like stadiums as far as public land and private building linking up. Trump’s Post Office Pavilion Hotel is the most recent example.

Public hospitals used to be great socialism until the privatizers went after them.  Now they are monopolistic and a reason for going for Single Payer (and Purchaser).  Of course, cooperatives and ESOPs could also buy their own hospitals.  Some local power depends on capturing methane or burning waste, however I would like to see that at a household level. Pension systems are another area, although in recent years the defined contribution industry has been going after them, giving them bad ratings in order to sell them a product that gives brokers more and workers less. Better to convert to Social Security.   Some states help out ESOPs. I would like to see some of these ESOPs return the favor and take over more government functions for the support of their members. States help start-ups, although I don’t know that there are any that don’t stovepipe their socialism by letting workers control the means of consumption except as isolated purchasers. Finally, Texas gives its education system money from oil and gas revenues, which keeps property taxes lower.  I would double check the equity of its distribution.

On the other side, there is a lot of pain out there in the cities and states, mostly from ill-advised austerity (which if you look probably coincides with the unwillingness to tax sales, real estate and income adequately.  Since this book was written, Kansas has become a watchword for stupidity in tax policy.  Even its Republican legislature is backsliding. I suspect that ALEC membership has something to do with the new ideocracy.  Gar is counseling going forward anyway. Unions and the poor can cite a common interest in defeating austerity, which sometimes works. Using public purchasing power to stabilize low income neighborhoods is helpful, as well as public and semi-public land trusts, attacks on corporate welfare giveaways, community organizing and green projects. Taking over municipal electric system, developing urban Internet or cable and developing lease writes to public-private property also reduces the need for austerity while building coalitions.

Part IV addresses the hot spots of banking, health care and crisis transformation. Government action after the Great Recession did little to break concentration in banking. The telecomm breakups gave us AT&T and Verizon, so there was little change. Glass-Steagall remains repealed and dividends remain unregulated. If even the Chicago School thinks regulation is impossible, what is left but nationalization? What about public banks at the state and urban level? There are possible, but I favor a world where most financing for investment, consumer finance and housing is done by employee-owned companies, with the banks simply ceasing to exist once the transformation is complete.

Our health care system is the most expensive in the developed world and has some of the worst outcomes. I bet that if you control for the size of the low wage population, both recent immigrants and the descendants of slaves, that the problem is generational poverty as much as it is plutocracy. Countering with Medicare for All is good, although Obamacare with the highest subsidy is roughly equivalent to Medicare. What Bernie is pushing is to make Medicare as cheap as Medicaid and then expand that. There are other options, like expanding the Uniformed Public Health Service on a British model or have employee-owned firms opt out of either Obamacare or Medicare for All by hiring their own doctors as employee-owners and either own their own hospitals or at least buy into them. Both would be true socialist medicine.

In the pre and post war era, unions and other institutions were seen as countervailing power to big business. The Reagan revolution changed that, both by beating inflation through lowering taxes on CEOs and by deregulating government and labor law enforcement. Gar sees change coming locality by locality with alliances, patience and luck. I disagree. I favor showing workers that if they ask for it together, they can control the means of consumption.

Gar looks at bigger possibilities and precedents. I agree that regional, rather than national public industries are probably better, but even nationally, public firms do well on cost. The problem capitalists have is that there is no difference between cost and price, i.e. profit, for them to play with and control. Hospitals such as iNOVA have quite low costs, but the prices? Not necessarily. He cites the car bailouts, among others. I sent both GM and Chrysler, the UAW and the White House employee-ownership proposals. No one gave me the courtesy of a response. I did not expect one. The Car Czar was an old auto executive. He was unwilling to step out of the box and he was to be the change agent. We must assume the workers must be the change agents. I have not yet given up on the auto industry.

Part V addresses narrow minded efficiency, public enterprise and all that. By efficiency, he describes technical efficiency as opposed to allocative efficiency. Of course, neither concept applies to either governmental operations or big businesses, which are often monopolies or oligopolies. The latter pervert the free market and extract more profit than such a market would allow, while public enterprises are likely as technically efficient, but don’t extract profit. The Distributists et al seek small firms with distributed power, which may or may not shed the effectiveness that bigness provides, although they would operate in perfect competition. Literature on public or state capitalism has shown that CEOs in that environment rely on political connection rather than success, which the Soviet experience shows plainly. In cooperative socialism, however, where employees control the means of consumption as well as production, equilibrium balance is very possible, duplicating what a perfectly competitive market might produce. I suggested such a system to GM and they were not having it. Hopefully my proposal is still in their files, because their need for what I am offering is still there, especially in the rust belt wastelands of Cleveland and Detroit.

Airlines are the next target. Before deregulation, with price floors and anti-competitive policies, fares got lower faster than afterwards. After regulation, there are cities with bad service that really deserve better, prices that reflect a concentrated market and low fares for competitive routes. The free market is not delivering as promised, although there is both bankruptcy and tax breaks to subsidize the dysfunction. National airlines seem to do better, although Aer Lingus has had its problems of late. Even United, which is employee-owned, has declared bankruptcy at least once, mostly because it was run like a capitalist firm with strong unions who were not acting as owners. Instead of a national airline, I would suggest cooperative airlines as part of larger concerns or consortia of employee-owned firms. Like health care, if the users are also paying the freight, efficiency will result.

There is the question of grow or die, which is stock market driven. It is better to have a strategy on how to deal with growth in small and medium firms, public and private. Even cooperatively owned firms deal with this when they decide whether to add a business because the membership wants to use the product or simply purchase commodities, although a bias toward expansion will exist here as well. Also, because life is a Ponzi scheme, seeking growth is not unnatural, although employee-owned firms with in-house production and consumption can better control how much they want to produce and consume, allowing more leisure. Of course, with all things socialist, it will be up to them.

Part VI discusses the emerging historical era. He starts by repeating the themes of the early part of the book: how the political process is stuck and the ability to move a progressive agenda has not come back and possible solutions for democratizing capital, including cooperatives, employee ownership and checker board reform connecting with state and local governments. The democratic socialist model which allows private ownership of industry in return for socialized human services is in decline and was never going to get us to worker democracy. The continues by illustrating that the conditions that caused the Great Depression to lead to transformation no longer maintain because those structures are still with us and Capitalists know when to support existing correctives to keep prevent collapse and more radical change. There will be no collapse leading to either a proletariat, libertarian or distributist revolution. As for a major war offering a reset, the concept is unthinkable in the nuclear age.

Gar talks about stagnation. It does exist in parts of the world and the nation where austerity has been practiced as the cure for the Great Recession. That happens where people worry about the government’s bottom line rather than the economy. Luckily, as a nation, the spectre of stagnation has gone away, at least for now. In 2013, Obama found the votes to keep tax cuts for the bottom 98% of taxpayers (probably too big a group) while letting them increase for the top 2%. Since then, growth has occurred, as Keynes would have predicted, and both joblessness has declined and home prices increased so that many are no longer under water.

In each of the last three recessions, tax reform or tax cuts favoring the wealthy have occurred, resulting in more investments in garbage and leading to the S&L crisis, the tech boom/bust and the Great Recession. Tax cuts do not add to investment in real corporate infrastructure, which is funded when demand increases (not when money is cheap). Either the stock market is bid up or bad investment vehicles are created. This will be the result if Trump gets the cuts he proposed. The oil boom came from both deregulation of NYMEX and too much money in the system. Now that Dodd-Frank regulations on NYMEX are in force, prices are lower, and because food prices are linked to oil, these prices have stabilized as well. Only climate catastrophe can intervene, but the regulated market won’t let the price increases become permanent. Of course, because we know that people buy gas at higher prices, there is no excuse for not raising carbon and gasoline taxes.

Change will be difficult, especially in light of citizens united and the decline of organized labor. Fiscal difficulties still exist, although these are more political than real. Health costs have stabilized with the success of Obamacare and recent tax increases have shown that Keynes is still the only real theory for today. The sad fact is that anti-taxers use sexism and racism to keep their values voters in line, although as it becomes clear that there is no going back from social change, there will be an opening. The overt racism of some Trump supporters may be poisoning the social issues well for the GOP. Indeed, change seems more likely now than when Gar published this book. He offers four potential strategies: evolutionary reconstruction, checkerboard state and local development, crisis transformations in health and banking and big crisis transformations like GM and AIG (hopefully the next time Larry Summers won’t be there to stop real change).

Gar offers five options: 1. Demographic changes leading to progressive majorities, although in a Citizens United world will these simply be different neo-liberals? 2. Movement building toward more progressive solutions, although such movements, like the populists a century ago, had limited results, 3. Occupy and other young person’s movements could move things forward. In hindsight, the Sanders Political Revolution has magnified this possibility, although we have yet to see systemic change and Sanders did not offer much in that department, staying with social welfare items like Medicare (really Medicaid) for all, free college tuition and a $15 minimum wage. His positions have still left the world safe for capitalists. 4. Further deterioration could lead to violence and a fascist backlash. While it is a rule of revolution that to radicalize the population, you must force repression, most hope it won’t go that far, and 5. Slow development along the lines developed in this book, evolution rather than revolution.

I will add a sixth possibility. Making employee-ownership more attractive so that workers demand it. Right now, employee-ownership is an extra-duty chore. Make it worthwhile for the workers through cash and prizes, i.e. workers controlling the means of consumption, and things will likely move much faster, with such firms using the tools of Citizens United to ease some of the obstacles to more rapid adoption and even diverting social insurance funds toward giving everyone an option to convert to better ownership.

Part VII concludes the book. A starting point for bringing about the needed changes are the American ideals of liberty, equality and democracy, even if normal politics evaporated in the 1980s. We need a new system and if corporate capitalism and state socialism are not wanted, what do we want? Can we continue to have a democratic nation where people spend most of the day at work with no democratic rights? Is it possible to have democracy in one sphere and not the other? Not likely. If democracy is for sale to the highest bidder, can it survive? Can it survive if local communities are captives of capitalist demands? Can the environment survive in such a political economy? If not, what do we want?

Can we manage a political change from Washington, or do we need something more regional? (I propose seven regions of equal electoral vote strength). Large employee-owned firms could organize as separate entities on regional lines, but expand vertically as the worker-owner-consumers see fit. In the interim, however, pain is increasing for many while solutions are slowly causing the system to evolve. If we wish to control this evolution, we must change. The resources available for democratization are huge, though badly distributed. For now, our resources seem limited and we use more than our share (although this can change too. A small committed group will make this change, as has always been the case.

The Afterword explores the question of long-term systemic design. This is where to go for further research by Gar and his Democracy Collaborative. America Beyond Capitalism is the seminal and periodically updated book and there are other must-reads. He favors community-wide ownership structures for further research. Of course, this can happen two ways, with the community helping to create ownership or my method of employee-owners consciously creating community, with the relevant human and physical infrastructure. Either way, democratizing wealth is important. While in the long-term, family fortunes do dissipate as younger generations with trust funds fall into addiction and alcoholism, perhaps transferring productive wealth sooner than later will help all concerned.

Other research questions include the challenges of scale, the role of planning (and by whom), moving from isolated projects to integrated systems, or what I would call going beyond smoke stack socialism, and how to globalize these changes and go beyond our current foreign policy, which was America and capitalism first long before Trump. My own preference is to turn multi-national corporations and supply chains into systems where every international part of the system gives workers the same deal provided to American employee-owners, from share ownership to an equivalent standard of living, which will eventually move the world to not only equality, but to peace. Who wants to play?