This blog started out as a companion piece to my book, Musings from the Christian Left (excerpts of which can be found in the July 2004 link) and to support a planned radio show. Now, its simply a long term writing project from a Christian Left Libertarian perspective (meaning I often argue for liberty within the (Catholic) Church, rather than liberty because the church takes care of a conservative view of morality.

Tuesday, October 10, 2017

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?

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