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January 15, 2013 |
Most activists tend to approach progressive change from one of two
perspectives: First, there’s the “reform” tradition that assumes
corporate control is a constant and that “politics” acts to modify
practices within that constraint. Liberalism in the United States is
representative of this tradition. Then there’s the “revolutionary”
tradition, which assumes change can come about only if the major
institutions are largely eliminated or transcended, often by violence.
But what if neither revolution nor reform is viable?
Paradoxically,
we believe the current stalemating of progressive reform may open up
some unique strategic possibilities to transform
institutions of the political economy over time. We call this third option
evolutionary reconstruction.
Like reform, evolutionary reconstruction involves step-by-step
nonviolent change. But like revolution, evolutionary reconstruction
changes the basic institutions of ownership of the economy, so that the
broad public, rather than a narrow band of individuals (i.e., the “one
percent”) owns more and more of the nation’s productive assets.
1. A People’s Bank
One
area where this logic can be seen at work is in the financial industry.
At the height of the financial crisis in early 2009, some kind of
nationalization of the banks seemed possible. It was a moment, President
Obama told banking CEOs, when his administration was “the only thing
between you and the pitchforks.” The president opted for a soft bailout,
but that was not the only possible decision.
When the next
financial crisis occurs – and many experts think it will —a different
resolution may well be possible. One option has already been put on the
table. In 2010, 33 senators voted to break up large Wall Street
investment banks that were “too big to fail.” Such a policy would not
only reduce financial vulnerability, it would alter the structure of
institutional power
.
Nor is an effort to break up banks,
even if successful, likely to be the end of the process. The modern
history of anti-trust and finance suggests that the big banks, even if
broken up, will ultimately regroup. So what can be done when breaking
them up fails?
Traditional reforms have aimed at improved
regulation, higher reserve requirements and the channeling of credit to
key sectors. But future crises may bring into play a spectrum of
sophisticated proposals for more radical change. For instance, a
“Limited Purpose Banking” strategy put forward by conservative economist
Laurence Kolticoff would impose a 100% reserve requirement on banks.
Since banks typically provide loans in amounts many times their
reserves, this would transform them into modest institutions with little
or no capacity to finance speculation. It would also nationalize the
creation of all new money as federal authorities, rather than bankers,
directly control system-wide financial flows.
More striking is the
argument of Willem Buiter, the chief economist of Citigroup, that if
the public underwrites the costs of bailouts, “banks should be in public
ownership.” In fact, had the taxpayer funds used to bail out major
financial institutions in 2007-2010 been provided on condition that
voting stock be issued in return for the investment, one or more major
banks would have become essentially public banks.
Nor is this far
from current political tradition. Unknown to most, there have been a
large number of small and medium-sized public banking institutions for
some time now. In fact, the federal government already operates 140
banks and quasi-banks that provide loans and loan guarantees for an
extraordinary range of domestic and international economic activities.
The
economic crisis has also produced widespread interest in the Bank of
North Dakota, a highly successful state-owned bank founded in 1919.
Between 1996 and 2008, the bank returned $340 million in profits to the
state. The bank enjoys broad support in the business community, as well
as among progressive activists. Legislative proposals to establish banks
patterned in whole or in part on the North Dakota model have been put
forward by activists and legislators in more than a dozen states
.
2. Move to Universal Healthcare
That
austerity and failing reform might open the way to "evolutionary
reconstructive" institutional change is also suggested by emerging
developments in healthcare.
Cost pressures are also building
up—and, critically, in ways that will continue to undermine U.S.
corporations facing global competitors, forcing them to seek new
solutions. The federal Center for Medicare and Medicaid Services
projects that healthcare costs will go up from the 2010 level of 17.5
percent of GDP to 19.6 percent in 2019. It has long been clear that over
the long-haul cost pressures are ultimately likely to force development
of some form of single-payer system —the only serious way to deal with
the underlying problem.
A national solution may come about
either in response to a burst of pain-driven public outrage, or more
slowly through a state-by-state build-up. Massachusetts already has a
near universal plan. In Hawaii, health coverage (provided mostly by
nonprofit insurers) reaches 91.8 percent of adults in part because of a
1970s law mandating low-cost insurance for anyone working 20 hours a
week. In Vermont, Governor Peter Shumlin signed legislation in May 2011
creating “Green Mountain Care.” Universal coverage, dependent on a
federal waiver, would begin in 2017 and possibly as early as 2014. In
Connecticut, the legislature in 2011 authorized a “SustiNet” non-profit
public health insurance program, which it aims to launch in 2014. In
all, bills to create universal healthcare have been introduced in nearly
20 states.
3. Build Community Wealth
“Social
enterprises” that undertake businesses in order to support specific
social missions now increasingly comprise what is sometimes called a
"fourth sector” (different from the government, business and non-profit
sectors). Roughly 4,500 not-for-profit community development
corporations are largely devoted to housing development. There are now
also more than 10,000 businesses owned in whole or part by their
employees; nearly 3 million more individuals are involved in these
enterprises than are members of private sector unions. Another 130
million Americans are members of various urban, agricultural and credit
union cooperatives. In many cities, “land trusts” are underway using an
institutional form of nonprofit or municipal ownership that develops and
maintains low- and moderate-income housing.
In Cleveland, Ohio,
an integrated group of worker-owned companies has been developed,
supported in part by the purchasing power of large hospitals and
universities. The Cleveland effort, which is partly modeled on the
85,000-person Mondragón cooperative network, based in the Basque region
of Spain, is on track to create new businesses, year by year, as time
goes on. The goal is not simply worker ownership, but the
democratization of wealth and community building in general. Linked by a
community-serving non-profit corporation and a revolving fund, the
companies cannot be sold outside the network; they also return 10
percent of profits to help develop additional worker-owned firms.
A
critical element of the strategy points to what is essentially a
quasi-public sector planning model: Hospitals and universities in the
area currently spend $3 billion on goods and services a year—none, until
recently, from the immediately surrounding neighborhoods. The
“Cleveland model” is supported in part by decisions of these
substantially publically financed institutions to allocate part of their
procurement to the worker-co-ops in support of a larger
community-building agenda. Numerous other cities are now exploring
efforts of this kind, including Atlanta; Pittsburgh; Amarillo, Texas;
and Washington, DC. Related institutional work is now underway, too,
through the leadership of United Steelworkers, a union that has put
forward new proposals for a co-op-union model of ownership.
Another
innovative enterprise is Market Creek Plaza in San Diego, a $23.5
million, mixed-use, commercial-retail-residential development. The
project was conceived, planned and developed by teams of community
members working with the Jacobs Center for Neighborhood Innovation.
Market Creek Plaza is also a green project, and aims to expand to become
a transit-oriented village with 800 units of affordable housing and
extensive facilities for nonprofit organizations. The project has
restored 1,400 linear feet of wetlands, while generating 200 permanent
jobs (70 percent filled by local residents), provided 415 residents with
a 20-percent ownership stake in the project, and generated $42 million
in economic activity (in 2008).
4. Leverage City Assets
Yet
another arena of institutional growth involves municipal development.
By maintaining direct ownership of areas surrounding transit station
exits, public agencies in Washington, DC, Atlanta and elsewhere earn
millions, capturing the increased land values their transit investments
create. The town of Riverview, Michigan has been a national leader in
trapping methane from its landfills and using it to fuel electricity
generation, thereby providing both revenue and jobs. There are roughly
500 similar projects nationwide. Many cities have established
municipally owned hotels. There are also nearly 2,000 publicly owned
utilities that provide power (and often broadband) to more than 45
million Americans, generating $50 billion in annual revenue. Significant
public institutions are also common at the state level. CalPERS,
California’s public pension authority, helps finance local community
development needs; in Alaska, state oil revenues provide each citizen
with dividends as a matter of right; in Alabama, public pension
investing has long focused on state economic development.
5. Organize for the Long Haul
You can think of the slow buildup of democratizing strategies as the
pre-historical
developmental work needed to clarify new principles for larger scale
application. Just as in the decades before the New Deal, state and local
experiments in the “laboratories of democracy” may suggest new larger
scale approaches. The new direction has four aspects; democratization of
wealth; community, both locally and in general; decentralization in
general; and substantial but not complete forms of democratic planning.
Let’s take a look at each of these.
Democratization of Wealth:
Institutions like public banks challenge the idea that private
corporate enterprise offers the only possible way forward. They also
help open new ways of thinking about how to get meaningful larger scale
democratization. Historically, cooperatives and other federations also
helped establish institutional and organizational support for explicit
political efforts in support of specific policies. Critically, they also
help stabilize local community economies, since such institutions tend
to be anchored locally by virtue of their democratic ownership
structure.
Rethinking Community: If you want to
alter larger patterns of wealth and power, you have to build a culture
that reconstructs “community.” In economic terms, building community
means introducing and emphasizing practical forms of
community ownership.
In the Cleveland effort, for example, the central institution is a
community-wide, neighborhood-encompassing non-profit corporation. The
board of the non-profit institution includes representatives both of the
worker cooperatives and of key community institutions. Worker co-ops
are linked to this (and to a revolving fund at the center), and though
independently owned and managed, they cannot be sold without permission
from the founding community-wide institution. The basic principle is
that the effort should benefit the broader community, not only or simply
workers in one or another co-op.
Decentralization:
Can there be meaningful democracy in a very large system without far
more rigorous decentralization than is commonly assumed in the United
States? It is a commonplace that Washington is “broken.” But part of
the problem has to do with scale. We rarely confront the fact that the
United States is a very large geographic polity: Germany could easily be
tucked into Montana. The United States is also very large in
population—currently more than 310 million, likely to reach 500 million
shortly after mid-century.
Decentralization in these circumstances
is nearly inevitable, and if the continental nation is too large and
most states are too small to deal with economic matters, what remains is
the intermediate scale we call the region— a unit of scale that is
likely to become of increasing importance as time (and population
growth) go on. The question is almost certainly how to regionalize, not
whether to do so—what powers to maintain at the center and what powers
to relegate to various smaller scale units. The principle of
subsidiarity—keeping
decision-making at the lowest feasible level, and only elevating to
higher levels when absolutely necessary—is implicit as a guiding
principle.
Democratic Planning: A well-designed
planning system can change relationships between firms, the community
and the market. Planning also needs to be democratic at all levels.
Take
a look at Brazil’s innovations in participatory budgeting, where
citizens determine major public expenditures – an idea that is gaining
traction in Chicago. So far these experiments have definite limits since
they are restricted to municipal budget decisions. But if the practice
can be extended in scope and scale over time, it could provide an
important mechanism for increasing meaningful democracy.
High-speed
rail and mass transit are another area in which we can think about
larger scale planning approaches. The United States has limited capacity
to build equipment for any of this. But when the next crisis occurs in
the auto or other industries, a public bail-out might restructure firms
so that we could use public contracts needed to build mass transit and
high-speed rail in ways that also help support the development of
quasi-public national and community-based firms—both to produce what is
needed and simultaneously to help stabilize local communities.
6. Cut Corporate Power Down to Size
To
deal with economic issues, ecological challenges and local community
stability, we must also come to terms with corporate power dynamics.
Public corporations are subject to Wall Street’s first commandment: Grow
or die!” You can’t just wish or regulate that idea away.
In
addition to carbon emissions, countless studies have documented growing
energy, mineral, water, arable land and other limits to unending growth.
Yet the trends continue: The United States, with less than 5 percent of
global population, consumes 22 percent of the world’s oil, 13 percent
of world coal, and 21 percent of world natural gas. From 1940 to 1976,
Americans used up as large a share of the earth’s mineral resources
as did everyone in all previous history.
At
some point, a society like the United States that already produces the
equivalent of over $190,000 for every family of four must ask when
enough is enough. As Juliet Schor has argued, one key change is to
encourage less consumption and more leisure time. That means reforming
unemployment insurance policy to encourage work sharing, changing
government labor practices to model shorter working hours, and
discouraging excessive overtime. We need to restore balance on a
personal level, but we can’t ignore the big systemic challenges. As
former presidential adviser James Gustav Speth has observed: “For the
most part we have worked within this current system of political
economy, but working within the system will not succeed in the end when
what is needed is transformative change in the system itself.”
As a
matter of cold logic, if some of the most important corporations have a
massively disruptive and costly impact on the economy and
environment—and if experience suggests that regulation and anti-trust
laws are likely to be largely subverted by these corporations—
a public takeover becomes the only logical answer.
This general argument was put forward most forcefully not by liberals,
but by the founders of the Chicago School of economics. Conservative
Nobel Laureate George Stigler repeatedly observed that regulatory
strategies were “designed and operated primarily for [the corporation’s]
benefit.” Henry C. Simons, Milton Friedman’s mentor, was even more
forceful. “Turned loose with inordinate powers, corporations have vastly
over-organized most industries,” Simons held. The state “should face
the necessity of actually taking over, owning, and managing
directly…industries in which it is impossible to maintain effectively
competitive conditions.”
For many decades, the only choices to
many have seemed state socialism, or corporate capitalism. When
traditional systems falter and fail, new ideas spring to life. Little
noticed by most observers, handholds on processes of potentially
important new forms of change have been quietly developing around the
country. These changes build upon each other to create an evolutionary
process that has the power to transform the way we live – for the
better.
Gar Alperovitz is the Lionel R. Bauman professor of political economy
at the University of Maryland and co-founder of the Democracy
Collaborative. He is the author of the newly released book, "
America Beyond Capitalism." Follow him on
Facebook and Twitter
@GarAlperovitz.
Steve Dubb is
research director of the Democracy Collaborative at the University of
Maryland, and the co-author of the forthcoming book "The Road
Half-Traveled: University Engagement at a Crossroads."
