What I’m most interested in today is not that you just listen to what I have to say and accept it as new information—“somebody came and gave a talk”—but that you ask yourselves if there is anything you might do about the topics I’m going to address. It’s an existential matter. Did you come only to listen, or did you come to ask what you can do with this conversation?
We have been working on a lot of practical things in the Democracy Collaborative. On our web page, www.democracycollaborative.org, you will find details on what numerous community groups are currently doing to fundamentally change the structure and ownership of wealth. For instance, the most obvious item for this group would be the community land trust (CLT). On the website you will find a whole section with the latest information—state of the art research on who’s doing what and where. You will also find information about the more than 11,000 worker-owned companies in the United States. In fact, there are six million more people now involved in some form of worker ownership than there are members of unions in the private sector. The American press doesn’t cover this phenomenon, but it is growing. Some of these businesses are good; some are not so good. But they are all part of a very conventional, noncontroversial, and nonthreatening change in the “ownership of the means of production” that is taking place all over the country. You’ll also find information on co-ops and nonprofits in general as well as nonprofit businesses that are specifically involved in community service (sometimes called social enterprise). There are between 4,000 and 5,000 neighborhood corporations, and by forming municipal corporations cities are also going into business in order to solve either environmental problems or land problems and at the same time make profits for the city. The website will give you a sense of a great deal that is going on, some of which is discussed in my book America Beyond Capitalism.
To give you a bit more specific sense of what is happening and what is possible, The Democracy Collaborative is involved with a big project in Cleveland, Ohio, that includes a CLT and worker ownership and is receiving a lot of press lately. There’s an article in last week’s Nation (March 1, 2010) that I wrote with two colleagues, and several other magazines have covered it recently, including Time, The Economist, and Businessweek.
With that as background, I’d like to start this discussion with an experience I had during the anti-war movement of the 1960s. A young organizer who took me door to door with him in one of the industrial cities near Cambridge—I think it was Somerville—said, “I’m going to teach you something about politics.” I was a professor, and he was a young, activist kid. It was at the height of the war in Vietnam when the entire Congress, with only a few exceptions, supported the war. And the President was for the war; the major news enterprises were for the war; the television networks were for the war. This was during the period before Martin Luther King, Jr., made the courageous decision to oppose the war—something that took him a long time to do because he knew it would hurt the civil rights movement.
This young organizer started knocking on doors, and people would say, “Well, you know, I’m against the war, but nobody else on this block is.” A large number of the people on the block whom we talked to agreed that the war needed to be ended, but they didn’t know how to proceed. So I thought, if you personally happen to think that the system needs to be changed, your neighbors might feel the same way, but they may not know what to do about it. In fact, I often find the question that people really are interested in—and I’m interested in, and I suspect some of you are too—is whether there is any conceivable way of changing the political/economic impact of the most powerful system in the history of the world. That’s the real question people are asking and are worried about, but it remains below the surface.
I imagine that the kind of folks who come to a meeting like this would like to see major political and social change of one kind or another. And of course there will be a next system; history is not over yet! But how do we start to think about the next system in new and creative and meaningful terms?
The way I’ve been thinking about it, which I’m developing in a new book—and it’s also the way I’ve developed to come to terms with some of the oddities of this particular advanced corporate capitalist system—begins as follows: Many European countries have had the capacity to mobilize what is often called a “social democratic” solution to the problem of corporate capitalism. What does that mean? Well, in this country we call it “liberalism,” which means that we accept as the core institution of the economy the large for-profit corporation. Everyone knows it has an uneven path in terms of environmental and equity implications as well as growth. The role of politics in this system design is to mobilize different groups to keep the corporation in check by cleaning up the environment, changing the distribution of income, providing welfare programs, etc.
That’s the model. It is not a socialist model, not even a free-enterprise competitive capitalist model. Some of the early, very conservative Chicago-school economists understood that what we have is nothing like what they were talking about. They thought the giant corporations were destroying capitalism because of their organized economic and political power. The truly free competitive market, they held, consisted of individual entrepreneurs—whereas in the corporate economy small and medium-sized firms were thrown aside, and with them went freedom and liberty and democracy. These were the considered views of conservative economists like H. C. Simons, the founder of the Chicago school and the revered teacher of Milton Friedman.
In “social democracy” abroad and “liberalism” domestically what you see are large corporate structures—and European as well as U.S. attempts to hold these structures in line somehow or other. In this country they have been weak, faltering attempts. And it is useful to consider, from a system design and evaluation point of view, how different our capitalism and our “liberalism” are from those of most other countries.
The United States ranks 77th in inequality among 141 nations in the latest (2009) United Nations Human Development Report rankings, tied with Turkmenistan, Georgia, and Tunisia. Now, that is a disastrous and horrible statistic—but one that also tells you a great deal about how weak we are in our capacity to manage this system. One percent of the wealth owners in the United States today own slightly under 50 percent of all individually held productive assets. It’s a medieval design. That’s our society. Five percent have roughly 70 percent of such productive assets. With those numbers comes extraordinary power for the wealth holders.
Another way of grasping the “outcome results” of our system can be found in these statistics: The U.S. federal government represents about 22 percent of the Gross Domestic Product (GDP). If you add in the states, you get 30 or 32 percent. (In most European countries the percentage range is 28 to 30 at the low end and up to 45.) This is another measure of how weak our traditional politics are in terms of managing the problems of a large corporate capitalist society. There are various other ways of looking at this reality as well. Many countries provide free college education; we don’t. Their politics have generated that. Many countries have free day care; many countries provide paid family leave.
The U.S. prison system is another area in which we are one of the least progressive nations. Seven times more people per capita lose their liberty and are imprisoned in this country than in other Western societies. In this regard we are closer to China than to other advanced industrial nations. I could go on, but you already know the litany. We are almost last in virtually every one of a number of key areas.
I have worked professionally in the U.S. Congress. I was staff director in both the House and Senate, working for liberal congressmen and as legislative director for Senator Gaylord Nelson, the founder of Earth Day. I come out of liberalism. That’s my background—Wisconsin liberalism, which is really just a somewhat more progressive version of mainstream liberalism. Our goal during the time I worked in Congress was to organize political power in a way that would constrain the corporate system—and I still affirm that goal. The truth was, however, that we never asked whether the system ought to be changed or whether changes in major trends could be achieved by following our approach.
How successful were we? Over the past thirty years there has been almost no increase in real wages—close to zero—for the bottom 80 percent of workers. At the same time corporate income has gone way up. And the outcome trends in most areas of the environment are either negative or have not improved. In most areas of income distribution it has either gotten worse or is stable; there is little evidence that we’ve achieved any significant positive improvement. What is the bottom line? We are forced to question whether these manifestations of politics suggest that traditional liberal strategies do not in fact work in this particular form of capitalism, given its history and development. Here is another example: A few years ago much-hailed legislation to raise the minimum wage was passed. This liberal achievement brought wages back not quite to where they were when John Kennedy was president and to less than when Lyndon Johnson was president. The minimum wage in real terms has gone down, and all we were able to do was prevent it from going down further. If you consider what I’m talking about in system terms, liberalism appears to be a “resistance movement,” not a progressive movement that can advance its values. It is resisting negative trends in the distribution of income; it is resisting negative trends in the environment; it is resisting negative trends in terms of democratic capacities.
The liberal politics I come from attempt to slow down these disturbing trends. Thank God for that, but it’s obvious that if we’re interested in changing the trends, there will have to be much more radical change. Many people, of course, aren’t interested in changing the trends. Or they prefer to look away from such “outcome facts.” Or they think that more fundamental change is not possible, which is a reasonable position. It may indeed not be possible to do more than be a resistance movement. On the other hand, I’m not so sure. I’m an historian, and what one knows from history is that decaying societies suffering pain and alienation have a way sometimes—but not inevitably—of beginning to offer answers that are new answers precisely because of that very decay and pain and alienation, because of the problems that keep growing.
Another way of exploring these issues is by reference to Arthur Schlesinger, Jr.’s, theory of politics. He thought that the “political pendulum” always swung in thirty-year cycles. It’s a crude theory, but I think that in fact it’s what most progressives have in the back of their minds: “Maybe we’ll elect somebody new in the next swing of the pendulum, and then the current trends, which are so hard to face, will improve.” What I’m suggesting to you is that in this particular corporate capitalist system the pendulum is simply not likely to swing in serious trend-changing ways. On the other hand, it is possible that important processes of a different kind—of a more radical, institution-shifting kind—may create change. And thus we need to pay attention to what may be building up in other areas.
I think we need to stand back from history and think in terms of where we will be heading over the next three decades. Here’s one way to think about it: The civil rights workers in the 1930s and 1940s are among my heroes because it’s much harder to lay the foundation for the next transformation than it is to join a movement that’s already moving—partly because it’s inherently difficult but also because, who knows, nothing may come of it. You may be whistling in the dark. The people in Mississippi in particular could easily have been hanged from a tree—and many were—for trying to bring change. The people who interest me most are those who have the courage in this time of the potential “prehistory” of the next big change to think that they might possibly be establishing the foundation for a transformation rather than just waiting for the pendulum to swing so that we might be able to slow down the decay. Those are the people who bring me out to speak, and I hope some of you have that courage.
I think we are entering the most interesting period of American history that I have ever experienced. It’s far more interesting than the 1960s. The reason is that the people who raised issues of civil liberties, civil rights, and the environment came right up against economic power, and that stopped them dead in their tracks. The Martin Luther King, Jr., movement, when it got to the poverty issues, was powerless even before he was assassinated. Powerless because the power of the game was now in the economic sphere.
What is so interesting about our time in history is that Americans are entering a period when the economic issues cannot be avoided and neither can the environmental issues. This presents us with a large-order challenge that economic and social pain is forcing us to confront, although nobody really wants to. The thinking now is, “Something is really wrong.” Not, “If we can just elect this candidate, it will all be fine.” No, now something deeper is clearly going wrong. I think we have entered an era in which this realization is reaching millions and millions of Americans, and this in turn is the precondition for saying, “By God, something different is going to have to be done.”
Yes, it is also possible that societies simply decay, just as Rome decayed, and that societies turn to violence, and outcomes such as fascism can occur. But societies can also build and renew and have revolutions—or what I like to call “evolutionary revolutions.” For those of you who wonder about this, let me remind you that we had one of these—the American Revolution. (Moreover, Shays’ Rebellion took place right around the corner from where we are meeting tonight.)
I am a very cautious historical optimist, a prudent optimist, and I’m interested in what the pre–historical possibilities of the next great change might be. This is our time in history, yours and mine, and I think it’s a time of potentially great significance. Let me give you some sense of why I am moderately optimistic despite all the problems. I see people at the local level struggling with and addressing problems that they used to think the election of the right person would solve for them. Now they know that you can’t leave it to the politicians. That doesn’t mean you shouldn’t elect good people—politics are important—but unless there is genuine commitment at the local level, real change won’t happen. We know that as a theory, but I can tell you that in the work we’ve been doing at The Democracy Collaborative we see vast numbers of people who have come to this understanding and commitment.
Even if the moribund press had the money to cover this story, unfortunately they wouldn’t do so because they don’t think it’s interesting enough. But with city after city struggling with poverty and suffering at the local level, people are simply being forced to try new things, often in a mini-form that changes the ownership of wealth—a co-op, a worker-owned firm, municipal ownership, a local currency, or a community land trust. And that isinteresting, at least to someone like me who is interested in the long arc of prehistory and what must happen over time before big moments of change actually can occur. Let me give you some examples of what I mean.
When Bob Swann introduced the first community land trust into this country over 40 years ago, nobody was talking about the concept. CLTs remained on the margins of society, and people did not take them seriously. But now Chicago has a massive community land trust as does Washington, D.C., and Irvine, California, is building 10,000 residential units on a CLT. They’re exploding all over the nation because you can’t solve the land/housing problem without changing the ownership pattern. An idea that was once on the margin is forced by events into the mainstream and is now becoming conventional.
The same thing is happening with city ownership of different entities. Riverside, Michigan, for instance, is capturing methane at their landfill and turning it into electricity, socializing the process, municipalizing it, and providing jobs. This is happening all over the country because of the financial crisis and the environmental crisis. Here again, it is an idea that was way out on the margins and is now accepted because there are few other ways to solve the problem. This is also the case with all kinds of social enterprise.
My view is that this form of development is happening because the traditional ways of solving problems have failed, traditional ways that still work for many European countries but not for us. It is in part precisely because we have a much weaker social-democratic capacity that new solutions are multiplying and proliferating. Many of you in this room are helping to create these solutions, as are those who have been involved with the Schumacher Center or Schumacher’s ideas—which also took a long time to get to the place where they were taken seriously. As the pain continues to grow, I think you’re going to see a real expansion and explosion of this kind of activity, based on the fact that now there are so many models out there to choose from. The prehistory of the next phase of development is built on the history already accumulated in the work of the last phase. And the pain level is all but certain to deepen because the current public system does not have the power to adequately allocate resources through taxation and spending; indeed, there will be more and more spending cuts for domestic programs.
For those of you who are not economists, let me give you the simple version of why growing stagnation is currently built into the economic system—another reason why the pain levels generating a hunger for new answers are likely to increase. If workers’ wages don’t increase and profits do increase, who’s going to buy what’s produced? The long trends in this direction don’t necessarily mean that the system will collapse, but they are, in fact, a recipe for economic stagnation. You can’t tax more, because the corporations and upper-income groups resist, and consumers don’t have money to spend, so problems multiply.
In my view the period of stagnation we’re entering also offers potentially positive longer-term possibilities. Let me tell you why. An environment of stalemate and decay is historically a time for growing, building, and learning enough to generate the preliminary ideas, practices, and people needed for a much larger possibility. With collapse, which I don’t expect will happen, there wouldn’t be time for us to learn and develop; consequently, much less democratic outcomes might occur.
I said I thought this was the most interesting period of American history I’ve lived through—and perhaps the most interesting ever. I say this because the various developments we have been exploring—some negative, some positive—point in a direction that may well take us beyond both capitalism and traditional socialism. The model that’s emerging is changing who owns capital, but in a very decentralized, community-building way. And if you don’t change ownership, you can’t change the political power structure. An attempt is also being made to democratize it in a way that respects environmental constraints. Rather than having to attempt to come in after the fact to regulate poor environmental practices, many of the institutions I mentioned have solid environmental practices built in. Liberalism, as I’ve said, assumed you could do in the United States what is possible in many European countries: change the relationships and outcomes without changing the ownership power relationships. That’s the idea now being challenged by history and also by the new models.
Like those people in Mississippi in the 1930s, I am interested in how we think about the next decades, not simply the next election. In the emerging era of stalemate and decay I think you’re going to see a lot more quiet work and development-building on the wealth of experience that is already out there. If you want to start a worker-owned firm, I can tell you whom to call. Thirty-five years ago if you wanted to start a worker-owned company or a community land trust, there weren’t many people to call. Today, if you want to start an agricultural co-op, there are experts all over the country who can tell you how to do it. The existence of such practical knowledge in area after area is a great historic and cultural achievement. It’s something we can build on, and I think these models, using that knowledge, will multiply as people’s suffering increases.
I’m interested in what these new forms also teach us for the longer term. The notion that there is a way to think differently about the principles of the next system is important politically, particularly for younger people. I’ve mentioned that it took considerable time before the concept of a community land trust as introduced by Bob Swann became widely accepted. How does that happen historically? How do people like us make it happen in general in the prehistory of the next era of great change? I don’t want to let you off the hook. We’re all on the hook, and we can’t avoid it.
On the national level I see several potential changes in the offing—in significant part because of the weakness of this particular form of capitalism. One of them you see right before your eyes, and that is the health care system. Every other advanced nation has long had universal health care. The financial pressures connected with health care are now so great that it’s obvious to anybody who takes a careful look at the trends that the system will have to be “socialized” in one way or another within the next twenty years. (The term we use in this country for this is “Medicare.”)
It is of interest for the long haul that the corporations benefiting from the current system—the insurance companies, the pharmaceuticals, the hospital companies—have different interests from one another and are likely to be slowly divided and potentially conquered. But most important, the large American corporations are also increasingly challenged by the current health system because it is too costly in terms of international competition. Overall, in my judgment, the health-care system will eventually be forced—in part by growing health costs, in part by the major corporations—into a single-payer “Medicare for all” format. This is a critical change because the health-care system will shortly represent 20 percent of the GDP; thus, one-fifth of the economy is likely to ultimately be under a very different structure.
What’s happening in finance and banking is similar in that we do not have the capacity to manage the system in the old way. In theory we can regulate banks, but in practice we do not have the power to do so effectively. Most financial experts agree that there will be another crisis, in which case the favored remedy now is to break up the too-big-to-fail institutions. But if that were to occur, once they are made smaller, the big fish are likely to eat the little fish, and we’re right back at square one. A banking system like that is ultimately going to be a candidate either for crisis and collapse or for some form of public ownership within the next twenty years or so. Several states are exploring state banks like that of North Dakota.
The dynamics are entirely different from the capacities of many European countries that are able to manage their systems better. Here I’m suggesting that the oddity sometimes called American Exceptionalism and the general weakness of our system (which is nevertheless strong enough not to collapse) put us in a different category from waiting for the pendulum to swing or organizing in the hope that the corporations will regulate themselves. I think we are entering into what I would call a very long-term “reconstructive” pattern, with the possibility of institutional redevelopment at the local level, new institutional development of the health-care sector, and new institutional development in finance and banking.
There is the possibility that we may see a still longer-term shift of this kind in transportation as well. Two of the auto companies have already been partially nationalized, although it’s badly designed nationalization and presumably temporary in nature. As we move toward mass transit and high-speed rail, almost nobody in this country is manufacturing what’s needed to produce the necessary equipment. We’ll have to buy from France, Japan, and elsewhere. We should be shifting some of this production to U.S. worker-owned companies, even worker-owned and jointly nationalized companies. What does that mean? Well, General Motors and Chrysler are partially worker-owned, jointly nationalized companies in primitive form today. That is what the bail-outs have already established.
Yes, this will be reversed in the near term; I suspect, however, that we’ll see a lot of experimentation over the long term, particularly in sectors where there is substantial taxpayer money invested as well as a demand for jobs and enthusiasm for buying local. Note that much of this is all going to involve taxpayer financing, which in principle opens it for public discussion in a new way—particularly if the old ways continue to fail. Quite simply, as the pain level increases, I think there are going to be many more pragmatic models that can be built upon. Put another way, there are already signs of a different “design” in parts of American society. These signs are coming out of a fairly successful period of history now turning into a period of great decay when new design principles are emerging out of the pain. The old ways don’t work. We need a new solution, and that lies in development.
Let me pause now to note that in fact most of us have a vested interest in believing nothing can be done. If we believe nothing can be done, then we don’t need to try to do something, and we don’t have to struggle with these nasty problems. Fortunately, not everyone thinks this way. Many of the actions people like you in this room are already taking are valuable in their own right and also valuable in that they inspire the rest of us to do something similar. The next stage is to make a little more effort because it’s possible that we are actually laying groundwork in the prehistory of a potentially great transformation—and that requires more of us.
A long, transformative movement might take an evolutionary form something akin to that of the American feminist movement of the 1960s. Feminism challenged the most powerful cultural institutions and relationships in society, and in the early years it was considered a ridiculous idea. Most women in those years—and my mother was one of them—didn’t work outside the home, not only because of having children to raise but also because it would be a signal that perhaps their husbands couldn’t properly support them. My mother was an intelligent woman who could have been a lawyer or a doctor, but the culture did not encourage that in the 1940s and 1950s. Gradually, however, people started acting in transformative ways, achieving something that was once thought impossible, and we have now forgotten how impossible it once seemed. In addition to the feminist movement, of course, the civil rights movement, the early environmental movement, and the anti-war movement all followed a pattern that built from small beginnings against impossible odds.
One of the things I imagine many people in this room know that perhaps younger people don’t know is what a movement that “begins moving” feels like. Older folks know what it is when people actually begin to react practically, as well as morally, and reinforce one another in order to create real change. Then you have something different from “elect that person” politics. Then you have real dynamism. Now, I may sound like a utopian, but besides being an historian and an economist, I’m actually a very hard-headed “pol,” someone who has worked in practical politics. I realize that it is quite possible that no change will occur. On the other hand, I believe that the possibility of a movement emerging out of today’s increasingly intolerable conditions is also quite real, and to discount this is to delay the change we seek.
Let me put it differently. The most intriguing development that’s taking place in this country politically, if you read it carefully as an historian, is the tea-party movement—a movement that has a right-wing, free-enterprise, anti-government ideological component. At its core, what those angry people are saying, however—and progressives ought to be saying this too—is that there is something rotten about the way things work. They rarely put it clearly, but in connection with banking, for instance, they also know there is something wrong about government cutting deals with the big corporations and taxing us all for something that doesn’t work. The tea-party people are not my cup of tea, so to speak, but they happen to be correct in their often misdirected anger that something is fundamentally just not right.
The problem is that the tea-partiers want to go back to an archaic idea of free-enterprise capitalism, even though there is clearly no going back. And the old liberalism obviously doesn’t work either. So you are going to have to talk about a new way forward. You’re going to have to talk about who owns the system. And if you’re interested in democracy and the environment, you’re going to have to talk about new practical patterns that can restore democracy and protect the environment. My heroes today are people who are contributing to laying the groundwork for the next big change. Any of you can join in. The resistance to doing so is not, fundamentally, in the political system; the real resistance is in us. It is existential. This is not about “Why don’t they do something?” It’s about “Why don’t we do something?”
Here’s the test. Will you spend one hour a week doing something different? One hour? Will you study, will you learn about options developing around the country? Will you call a group together and ask, “What can we in this community do that takes us another step forward?” Most people don’t want to do that; they just want to talk about it. But that’s the test I’m offering to you. I’ll give you a practical way to proceed: Another group of my heroes besides those folks working in Mississippi thirty years before the big moments of the civil rights era, were people in the very early women’s movement. Chairman Mao said that power grows out of the barrel of a gun, but the women’s movement said: “No, no, no. Six women get together for coffee once a week, study, learn about options, figure out something practical, reinforce one another, and act—that’s where power comes from.”
You probably have five friends you can meet with. You can read and learn about what’s being done around the country to initiate change. You can study a little history to find out what other societies have gone through, about slow changes coming out of long-endured painful conditions. Then you can decide what we should do to move the ball a little farther along than what we’ve tried so far—and then do it. And by the way, you’re going to be called socialists! But don’t worry, because as you know you’re being called socialists anyway for anything at all progressive these days, so that doesn’t really matter anymore. You might as well advocate worker ownership, co-ops, community land trusts, health care for all, and public ownership of this and that when it is appropriate. The main thing is to be able to say, “Show me a better way that will work.”
Let me tell you another tale about long-term development. Several years ago our group at The Democracy Collaborative had seen reports on the many ways groups around the country were attempting to change ownership forms in one way or another, and so we decided to try to do something on the national level to bring together people who were changing ownership in a variety of ways. We held a big meeting at the Aspen Institute of co-op leaders, land trust leaders, worker-ownership leaders, and many others. The national leaders were there, and we thought that if they got together, they would see that they have ideas in common. Of course that was naïve. It was a useful meeting, but they all went home and did their own thing back in their own “silos.” What they did was good, but the notion that they might find ways to develop something larger collaboratively did not occur to them.
So three years ago we went to Cleveland—by chance and for odd reasons. It could have been any city. We said: “Let’s see if we have more success on a local level in bringing people together. Maybe they will notice they have something in common.” We held a day-and-a-half meeting for the leadership of the various groups. We brought in people who were doing interesting work in different parts of the country and asked: “Do you realize you can do ‘x’? Do you realize you can do ‘y’? It’s being done, you know, in other cities.” Knowledge turned out to be very important in that community, and for that matter in any community. People simply did not know what could be done and is being done. We told them, “If you want to try this, here’s a telephone number to call, and someone will come and talk to you about how to get started.” There’s so much practical knowledge out there that gives people heart and inspiration about what to do. Also, importantly, we had people at the meeting from the state investment side as well so that we could include what states are doing in the way of investing public pension funds and owning investment in new technologies.
I won’t have time to go into the long and complicated process that followed the meeting in Cleveland, except to say that a great leadership group picked up on the notion that this is about ownership in general and also about green ownership, not just about green jobs. Now Cleveland has a large worker-owned co-op effort built on the Mondragon model, but it is one designed for geographic impact, community-wide impact.
Mondragon is the name of the region and town in Spain’s Basque country, where Franco had many people shot or hanged during the Civil War. In 1956, in an attempt to provide jobs for the town’s young people, a Catholic priest started a co-operative in Mondragon. Gradually he and a few graduates of the school he had founded set up more co-ops—a particular form of co-op, a production co-op, designed in such a way that if a new co-op starts up, it becomes part of the same system and doesn’t break away. They also set up a credit union to give co-op members access to financial services and to provide start-up funds for new co-ops. There is a central bank as well, the Central Fund. Now there are, I believe, more than 100 integrated co-ops—many of them high-tech businesses and highly successful financially—many big, some not so. These are not your corner co-ops. Altogether they employ around 100,000 people in service industries, manufacturing industries, and advanced research. The current ratio in the United States of CEO salary to the average worker’s is between 200 and 300 to one. The Mondragon ratio between top and bottom is five to one, except that for about 8 percent of the (larger) co-ops it’s 9 to 1, which is the maximum. That’s a good topic, by the way, for your study group to take on as well.
The model in Cleveland is based in part on the Mondragon design. It’s not one co-op but will be an integrated group of ten co-ops in one geographic area trying to build up a culture and a structure. After six months on the job, employees start buying into the company by way of payroll deductions of 50 cents an hour for a total of $3,000 in three years. In nine years they can build as much as $65,000 in equity. A crucial feature of the plan is that each of the co-operatives must pay 10 percent of pretax profit into the Evergreen Cooperative Development Fund for the purpose of seeding additional co-ops and thus creating new jobs. In addition to each co-operative’s commitment to providing living-wage jobs, affordable health benefits, and asset accumulation for its workers, there is also commitment to the community by providing stability through the creation of new businesses.
The initial firm was the Evergreen Cooperative Laundry, an industrial-scale, worker-owned green laundry. Most industrial-size laundries use three gallons of water per pound of laundry; Evergreen uses only eight-tenths of a gallon. It’s been operational for six months now and is eager to meet the increasing demand for laundry services in the healthcare industry, which is currently 16 percent of GDP and growing. The second worker-owned co-op is a solar installation company, Ohio Cooperative Solar, which will be installing solar panels on the roofs of nonprofit health, education, and municipal buildings as well as leading Cleveland’s weatherization program. The third, which will open next year, is Green City Growers, a ten-acre year-round hydroponic greenhouse in urban Cleveland with the capacity to produce 5,000 heads of lettuce a day along with basil and other herbs. Another is a community-based newspaper, Neighborhood Voice. Manufacturing co-ops are also being explored, all around this same model and in the poorest part of Cleveland, a predominantly black community where the average family income is $18,000. The model is arousing a lot of interest, and probably other cities will follow suit.
Now we get to design principles. This model is not simply floating in the capitalist market. If it were, that would be fine, because it’s competitive and not being subsidized, but the model is also directing its output and services to big hospitals and universities, sometimes called “anchor” institutions, in the Cleveland area. They are willing to buy from the new co-ops because they want the environment around them to be better, because it provides good will, because of their own genuine commitments, and also because there’s a little pressure on them. But the model is particularly noteworthy in a different respect. Energy and health are expanding sectors, not declining sectors. By design, the growth path is likely to expand on its own terms. We now give contracts to small businesses run by women and minorities; we hope one day to do the same for companies that change the wealth pattern and that anchor jobs in the community. Significant for the long haul is that the model is likely to be open to political discussion because public funds are involved. So this is a model with a potential political-economic thrust.
Anchoring the worker-owned companies is not just about changing and democratizing ownership; it has another advantage. These companies don’t get up and run away! People live in the community, and that’s critical in a society in which the corporations are allowed to come and go and to throw away communities—literally throw away. A city constructs roads and sewers, builds schools and hospitals, etc. to accommodate the population brought in by big companies, and then the companies leave. Public worker-owned companies are valuable because they anchor and save the capital and save the environment. There’s a definite advantage to this model in that respect as well.
What I’ve just described to you in terms of principles is a highly decentralized, cooperatively based, democratic, community-sustaining, environment-enhancing design linked to a planning system with public impact—in this case, a health-care system. This is different from most models, not only because it is radically decentralized but also because of being linked to a partly public, and publicly financed, planning system.
The overall national public sector (and “public planning system”) is also going to have to purchase from somebody as we expand mass transit and build high-speed rails with public money. If it buys from a community-building new form of institution such as the one that is being developed on a small scale in Cleveland, the model offers entirely different design principles from those of corporate capitalism or state socialism. What is happening in the here and now may open directions for longer-term change. (Do not forget Bob Swann and the lessons of forty years of work and development.)
Finally, let me open the door on one other long-term issue—the one Don mentioned in his introduction. You can fit Germany into the state of Montana. I sometimes tell my students that most of such “little” European countries can be dropped into Oklahoma. We have a huge continental system, which is very hard to manage, and we have a population of 300 million that will be 450 million in about thirty-five years. How can you have participatory democracy in a continental system of 450 million people? If you solve that problem, you get the Nobel Prize. It’s not possible. The system is just too large for genuine democratic control; moreover, the central government—at the national level—is obviously in stalemate.
Ultimately, most of the states are too small to manage as political economies, and the continent is too big. An entity in-between is called a region. I suspect that as Washington remains stalemated and as some of the states try to take action, over the long run there is likely to be a turn to the regional level. New England has been experimenting as a region in the environmental area. California itself is a region, and when it gets through its current crisis and comes out the other end, you may see that state becoming interested too in another approach.
If you wish to “change the system” in terms of what can be done locally, and if you’re looking for design principles, there is plenty of experience available now to build upon. If you look to what may evolve because of the national crisis in health care, finance, and transportation, there are also many areas where quite new directions may be set—first at the local and national levels, but perhaps ultimately decentralizing to the regional level as well. Of course, fundamental changes in these directions might never happen. Rome did decay, and we may decay as well. The work in a new direction that I’ve been urging may not lead over time to something much larger. Because I am a realist, I admit that this is a very real possibility. But nothing ventured, nothing gained.
And here’s a little secret to ponder: Virtually anything you do locally or regionally in the new direction is useful and is valuable to do in any case!
Question & Answer Period
Q: Does the capitalist system have to grow based on environmental destruction?
A: Here’s the problem: Capitalist corporations operating in a capitalist market must grow because they fear their competitors will take them over if they become weak—or at least that is one major fear that drives them. Put it this way: It is often less about greed than it is about fear. If you don’t expand and somebody else enters your market, this competitor may well take you over. You’ve got to grow in order to stay alive. That’s the dynamic, and it’s brutal. I don’t think it’s a matter of bad guys or good guys, and I don’t think it’s all about greed. It’s also about the dynamic that is implicit in the marketplace so that one company has to cut costs to stay in the running. And in cutting costs, you often destroy the environment.
Young people today don’t know who Gaylord Nelson was. He was the founder of Earth Day and probably the most important environmental Senator of the 1960s and 1970s. He laid the groundwork for the Clean Water Act, for conservation measures, and for the Appalachian Trail, right here in your backyard. He tried to minimize environmental damage. His stance was for the government to come in after the fact, clean up the mess, and set up regulations. That’s good insofar as it slows the process down; however, in our particular system the evidence, with a couple of exceptions, is that we don’t have enough power to slow down the overarching trend of decay, and there sure isn’t much we can do about climate change. In most areas our capacity to alter trends—as opposed to taking modest actions—is a joke.
That’s the dynamic right at the heart of the system. Socialism has never been any better; it’s worse. The nature of the problem is that neither of these systems works. So you either say, “That’s the way it is,” or you have to say, “What are the principles for the new system, and how do we build it?” Then knock on some doors and see if anybody’s there. I suggested that this is the most interesting time in American history because the old model is illuminating its own incapacities while elements of the new model are quietly emerging, and with promising possibilities.
If you want to participate, figure on a couple of decades of your life. Don’t bother unless you’re prepared for the long haul, like my friends in Mississippi in the 1930s and 1940s, the people who launched the civil rights movement. What’s required is to establish models that are workable, to translate new principles into political programs, to develop policies and legislation concerning these issues.
By the way, don’t bother with any of this unless it’s practical. This is not about rhetoric. The Cleveland experiment is practical, which leads local businesspeople, small businesspeople, to say this is a good thing to do. It provides jobs, helps the city, and helps the community.
Q: The university is one institution you didn’t speak much about, yet it has a formative role in terms of how we see our possibilities, not just in terms of what goes on in the classroom and of visionary teachers like you but also how universities act as an institution. They are big businesses; they run big operations. How are they using their resources? How are they using their endowments? In Cleveland, for example, how is Case Western Reserve using its financial resources? Is it investing in Wall Street or is it investing in the local community? The American Association for the Advancement of Sustainability in Higher Education has an evaluation system that considers these issues. This organization and others are putting sustainability in new terms.
A: You’ve made a good point. The big “anchor institutions” that are quasi-public—universities and hospitals are the most important ones—all have enormous purchasing power. In Cleveland alone $3 billion comes from the hospitals and universities in the area I was talking about. Also in Cleveland, Case Western is participating in the project and so are University Hospital and the Cleveland Clinic. They were persuaded that it was a good thing to do. They not only wanted to help the community but also saw that it was to their advantage. We’ve had experience with other universities, however, that don’t want to play, largely because it takes more effort. They say, “I’ll stay with the one company I’ve been buying from.” Our people must have spoken to 140 procurement officers in Cleveland, asking: “Where do you buy? Why don’t you buy here?” If the answer is, “You don’t have the capacity,” then they ask: “What if we build the capacity? Then would you give us the contract? Can you help us finance it?” It takes careful, thoughtful, nitty-gritty effort. There are businesspeople who can help with the business plans, and we found some in Cleveland who helped us reach the point where we could approach the universities and hospitals.
Q: You mentioned that when the cost of health care goes way up, many businesses are hurt. If power companies cause acid rain, they’re hurting large timber operations. When a great deal of our wealth is siphoned off by war, that wealth isn’t available to buy consumer goods. Why isn’t there a natural check and balance in the system among the large corporations?
A: Typically what happens in this country, with different variations in different societies, is that the corporations all share the overall attitude that the government should not interfere. Even though it would be advantageous in certain cases to say that the government ought to do something to help, it’s a little too risky for most corporations. Just before the Clinton health-care program was debated, General Motors and a couple of other corporations came out for a comprehensive approach, but they backed off after they were attacked for breaking ranks.
A: The environmental community is worried, and rightly so, about the implications of climate warming. Some people say, “If we don’t stop it in the next ten years, we’re in real trouble.” We aren’t going to stop it in ten years, so we had better set our sights on doing what we can in the next twenty or thirty years. Yes, a lot of people are going to be hurt, and there will have to be a long process of painful creating and developing. I am against the position that the sky is going to fall if we don’t succeed in ten years. It can’t be done, and taking this position is ultimately disheartening. It stops people from doing what can be done, even if over a long painful period.
Let me also say that the impulse behind what Jeffrey Sachs is proposing is certainly a good one; however, he’s talking about the huge amount of money that is needed. But because this system is in great pain and decay, the big money isn’t going to be forthcoming. Even if it were, it would tend to end up reinforcing the political power of the existing structures, which are usually corporate structures. To get ahead of that game, what you will ultimately have to do is design and slowly build a political system that they can’t control.
Q: I’m a senior at Bard College, and I’m studying economics and ecological issues. One of my more recent heroes is Henry George. He’s a great forgotten economist. I’m wondering if the community land trust idea can basically apply to where the government is the trust. Does a land tax levied by the government itself fit in with your plans?
A: George was correct, I think, in his basic analysis. That is to say, if you take an empty piece of land, its value doesn’t increase until people come to it. That’s a social process, and capturing that land value ought to be public. George’s technique was to allow the land to be privatized and then try to tax it back. That turned out not to work because the political power that goes with the land ownership—the developer in this case—is too great to let you do much serious taxing. The community land trust captures the gains directly through a public form. By the way, one reason why CLTs are developing all over the country now is that you can’t get the land back from the developers. They’ve got too much power. A political economy perspective tells you that it’s not just the economics but the political structures that grow out of the development. I think George’s idea was right, but I believe the answer is some form of land trust.
I always like to bring it down to the practical: In many places in this country where new mass transit is being put in, at many exits there will be an explosion of land values. Stores surrounding those exits will make a lot of money. It is often cities that now own that land, so they can capture the increased value directly, because they can’t adequately tax it if the land goes to the developers. They’re willing to socialize the land around the exits. They don’t use that language, but they do get the CLT point. It’s being forced on them, because otherwise they can’t get sufficient revenues from the improved land values, and they know it.
Q: Do you think it’s worth going to Washington to join a protest?
A: Oh, yes. Let it not be said that I am opposed to doing whatever can be done in the traditional political and activist ways. Any way pressure can be applied is useful. The Chinese have a great formulation: In some situations what you need to do is “walk on two legs.” We’ve got to do what we can through traditional means and simultaneously build anew.
A: I don’t know what Tocqueville would say, but I’m sure he would be sympathetic to the localist emphasis. I have a research assistant from China who has been here for fourteen years. He says: “There is no ‘China.’ American corporations go over there and invest and then sell products back to the United States. That is called ‘China.’” He thinks China’s successes are going to force us to say, “We really have to get our act together.” I think it’s a good thing that the trajectory of globalization is toward some form of “protectionism.” Why is it good? Because I don’t think a seriously effective planning system for a macro-economy can work on the current basis. Purchasing power is leaking out on the one hand and wages are being undercut on the other hand. I think some form of planned trade is inevitable, and this is good even if it causes difficulty when it’s done the wrong way. I see it as part and parcel of a serious attempt to get manufacturing back in this country. Keynes pointed out that such “planned trade” could also help achieve full employment and thereby ultimately higher overall trade.
Q: Regarding your comment about the rising level of economic pain in our society today: Looking back to the 1930s when we had similar economic troubles, as a society we looked more to the left for solutions then. Now with the tea-party movement it seems that the immediate reaction goes more to the right, emphasizing trends and ideas that some people fear will lead to political violence. What are your thoughts on that?
A: The short version is that Herbert Hoover was in office for more than three years after the Depression started, and it kept getting worse, with 25 to 30 percent unemployment. So the pain levels were dramatic, and they were shared by a much larger segment of the society than now. It was not stalemate and decay; it was collapse. That gave the Roosevelt administration a chance to rush legislation through. Even though I think more was possible, it was still very hard to do.
By the way, Hoover did not “create” the Depression. He happened to be standing there when the collapse occurred. If Roosevelt had been standing there, you’d all be attacking Roosevelt instead of Hoover, who actually was a conventional, interesting man and not the stereotype we have of him. In any case, Roosevelt had an opportunity because of the politics of great collapse and because the suffering was so great. That is different from what we now have. What happened when the system collapsed was the passage of Social Security, the Wagner Act, welfare programs, etc. Even though they did produce big changes, they didn’t end the Depression; World War II ended it. But collapse works if you’re in the right place at the right time.
Then came the post-war economic boom. For that to happen, in part there has to be a big war to destroy all your competitors for twenty years. If there’s a boom, you pass Medicare and Medicaid and several other programs. The norm now facing progressive politics is like neither of the crisis and post-crisis times we’re talking about. The norm is much more limited in its capacities. Only in exceptional moments such as depression or war and the following boom have we seen substantial change. I think we’re returning to what’s normal, an environment of minor change and much decay—an environment that is forcing people to think again about what might be necessary and possible.