Monday, 24 November 2014 / TRUTH-OUT.ORG

America Beyond Capitalism: An "Evolutionary Reconstruction" of the System Is Necessary and Possible

Thursday, 12 July 2012 10:55 By Gar Alperovitz, Democracy Collaborative Press | Book Excerpt

America Beyond Capitalism(Image: Democracy Collaborative)This is the first chapter in an exclusive Truthout series from political economist and author Gar Alperovitz. We will be publishing weekly installments of the new edition of "America Beyond Capitalism," a visionary book, first published in 2005, whose time has come. 

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The first edition of "America Beyond Capitalism" was published a few years too early. Although it argued that the nation already faced a systemic crisis in 2005 (not simply a political or economic crisis), the financial break-down and Great Recession that began in late 2007 had not yet occurred—to say nothing of the political outbreaks that began with the Wall Street "occupation" in late 2011. The book's message seemed distant to many readers. To some, its argument that fundamental institutional rebuilding was necessary—and, on the basis of the evidence, possible—seemed odd. Nor did large numbers take seriously the conclusion's prediction concerning emerging political-economic realities:

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The first decades of the twenty-first century are likely to open the way to a serious debate about these and other systemic questions...

The prospects for near-term change are obviously not great–especially when such change is conceived in traditional terms. Indeed, although there may be an occasional progressive electoral win, there is every reason to believe that the underlying trends will continue their decaying downward course...

On the other hand, fundamental to the analysis presented in the preceding pages is the observation that for precisely such reasons, there is likely to be an intensified process of much deeper probing, much more serious political analysis, and much more fundamental institutional exploration and development... 

And only a few readers were willing to accept the book's central judgment that "beneath the surface level of politics-as-usual, it is by no means clear that the public is or will remain quiescent forever—especially if social and economic pain continues, if political elites continue to overreach, and if new directions begin to be clearly defined."

Although such an understanding of the emerging historical era no longer seems unusual, the primary theoretical and strategic argument of "America Beyond Capitalism" has yet to be widely confronted—nor its conclusion, that an "evolutionary reconstruction" of the system is not only necessary but well within the range of long run possibility. The argument rests on three challenging assessments:

The first and foundational judgment is that (quite apart from other considerations) with the radical decline of organized labor as an institution from 35 percent of the labor force to 6.9 percent in the private sector (11.9 percent overall, and falling), a new progressive politics must ultimately build new institutional foundations to undergird its fundamental approach, or it will continue to remain in an essentially defensive and ultimately declining posture.

The second judgment is that a new longer term institution-building effort—one that at its core is based on the democratization of capital, beginning first at the community and state level and then moving to larger scale as time goes on—is both essential, and also that it is possible.

The third is that the emerging historical context is likely to create conditions that steadily open the way to such a strategy, and also help force awareness that it is needed.

These judgments, of course, do not dispute the importance of efforts to help sustain and re-energize labor organizing, create a more engaged activist 'movement' and mobilize a new and more energetic 'populism.' They do, however, point in a direction far more attuned to a diverse, decentralized and more democratized economic and political vision than has been central to progressive thought for much of the last century.

At the center of the traditional progressive theory is the hope that the political and economic power of the large corporation can be contained economically and politically through political mobilization, aided, abetted and bolstered by the organizational and financial power of labor unions. Numerous studies have documented the importance of labor in this theory. The "main finding" of international research on the relationship of union membership to political outcomes in industrialized countries, the late Seymour Martin Lipset and Noah Meltz observe, is straightforward: "support for unions is associated with social democratic strength."[1]

Studies by Emory sociologist Alexander Hicks of European social democracy also reveal a "[near]-perfect relationship between mid-century [social] program consolidation and working class strength" in five major areas of social insurance policy—"retirement, work-injury, illness, unemployment, and child-rearing compensation." Yale University political-economist David Cameron adds: "The existence of a relatively high level of unionization is...an important prerequisite for enduring leftist government, since unionized workers provide the core of the electoral base of most Social Democratic and Labor parties."[2]

Confronting the new realities of labor's decline is not easy; but realities they are. Which means, quite simply, that along with the decline, traditional liberalism has lost a good part of its fundamental power base—and further, that unless some new institutional source of political capacity is developed, it is likely to continue to remain in a defensive and weakened posture. (And this, of course, is to say nothing of race, cultural, religious and other factors weakening traditional reform politics.)

"America Beyond Capitalism's" cautious and paradoxical optimism that a new (and potentially newly energized) institutional way forward is possible derives from two streams of quietly developing evidence that have been largely ignored by many progressives. The first (as Part II of the book documents) is that just below the surface of media attention literally thousands of grass roots institution-changing, wealth-democratizing efforts have been quietly developing throughout the nation for the last several decades. Roughly 4,500 not-for-profit community development corporations devoted in the main to housing manage day-to-day operations in cities throughout the country. There are also now more than 11,000 businesses owned in whole or part by their employees; approximately six million more individuals are involved in these enterprises than are members of private sector unions.[3] Another 130 million Americans are members of various urban, agricultural, and credit union cooperatives. In many cities, important new "land trust" developments are underway using an institutional form of nonprofit or municipal ownership that develops and maintains low- and moderate-income housing. "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).

Related to this is a "paradoxical dynamic" that is generating more forms of institutional change even as traditional reforms falter. Job training programs, small business programs, incentives to lure major corporations to depressed communities—all of these have either largely failed, or at great taxpayer expense induced corporations to move to one community and away from some other community. A full employment strategy along Keynesian lines could achieve greater results in theory, but in the real world, again, the decay of progressive political power (and its underlying labor union base) has reduced its capacity to achieve traditional policy solutions here as well. Given the inability of politics to provide meaningful solutions to the problems facing millions of Americans, creating new institutional forms appears as the only positive option available, difficult as this may be.

The state of Ohio offers an illustration of just what this can mean both in the short run, but even more important, over time:

"America Beyond Capitalism" opens with a description of a major fight over the fate of a large steel mill in Youngstown, Ohio in 1977. The collapse of Youngstown Sheet and Tube threw 5,000 workers on the streets on "Black Monday" of September 19, 1977. No local, state or federal programs offered any significant help. Steel workers called training programs "funeral insurance;" they led nowhere since there were no other jobs available. Inspired by a young steel worker, an ecumenical religious coalition put forward an innovative plan for community-worker ownership of the mill that captured widespread media attention, the support of numerous Democrats and Republicans (including the conservative governor of the state at the time), and the promise of an initial $200 million in loan guarantees from the Carter Administration.

The corporate and other political maneuvering that in the end undercut the Youngstown initiative has been described at length elsewhere. What is of particular importance from the perspective of this account is that its impact was nonetheless ongoing, especially in Ohio, where the idea of worker ownership became widespread in significant part as a result of publicity and educational efforts traceable to the Youngstown effort, and in part because of the depth of ongoing policy failures, and the resulting pain throughout the state. In the more than three decades since the Youngstown collapse, numerous employee-owned companies have been developed in Ohio. Individual lives were also changed and inspired by the Youngstown effort. Importantly, the late John Logue, a Professor at Kent State University, established the Ohio Employee Ownership Center, an organization that provides technical and other assistance to help firms become worker-owned throughout the state.[4]

At the heart of this trajectory of paradoxical evolution in the wake of the failure of traditional policies is a process of partially forced institutional innovation—a process that, once underway, suggests further possibilities for larger scale and for more (and accelerating) ongoing development. In the brief time since "America Beyond Capitalism" was originally published, for instance, a major effort in Cleveland has built upon the long developing institutional work in Ohio (and on related research and theoretical efforts) to suggest further directions and broader possibilities. The "Cleveland Model" now underway in that city involves an integrated complex of worker-owned cooperative enterprises targeted in significant part at the $3 billion in purchasing power of such large scale "anchor institutions" as the Cleveland Clinic, University Hospital, and Case Western Reserve University. The complex also includes a revolving fund so that profits made by the businesses help establish new ventures as time goes on.

The first of the linked worker-owned companies, Evergreen Cooperative Laundry, is a state-of-the-art commercial laundry that provides clean linens for area hospitals, nursing homes, and hotels. The thoroughly "green" company operates out of a LEED-Silver ecologically sophisticated building and uses (and only has to heat) less than one third as much water per pound of laundry as typical competitors. The enterprise pays above-market wages, provides health insurance, and is still able to compete successfully against commercial laundries. Another company, Ohio Cooperative Solar (OCS), provides weatherization services and installs, owns and maintains solar panels on the rooftops of large university, hospital, and civic buildings. In its first year of operations OCS installed 400 kW of solar generation capacity. OCS alone is on target to more than double current total statewide solar generating capacity of two megawatts in 2012.

A commercial hydroponic greenhouse that covers 3.25 acres and will be capable of producing three million heads of lettuce and 300,000 pounds of herbs a year broke ground on October 17, 2011, just as this volume was going to press. Additional new businesses are being developed at a planned expansion rate of two to four ventures per year. A twenty acre land trust is also being designed for the land upon which many of the businesses are situated and as a first step to permit development in targeted neighborhoods of urban agriculture, and, when conditions permit, affordable housing.

That much larger scale and more advanced development is not beyond future possibilities is suggested by one of the precedents planners in Cleveland are drawing drawn upon: The Mondragón Cooperative Corporation in the Basque country of Spain is a highly successful integrated grouping of worker-owned cooperatives that employs more than 85,000 individuals in fields ranging from sophisticated medical technology and the production of appliances to large supermarkets and a credit union with 21 billion Euros in assets. In a further and related development the "Cleveland Model" has, in turn, struck a chord among activists and economic development practitioners throughout the nation who are concerned with the collapse of the economic core of many cities. At this writing exploratory efforts are underway to adopt aspects of the model in Atlanta, Pittsburgh, Washington, D.C., and other communities.

The judgment that broader, longer term processes of institutional innovation—and, critically, the development of ideas concerning the practicality, political feasibility, and importance of such innovation—may be underway (and forced by the paradoxical logic now facing traditional reform) is also suggested by the historical evolution of the United Steelworkers union over time. In the late 1970s the union saw worker ownership as a threat to organizing, and it opposed efforts of local steel workers to explore new employee owned institution-building in cities like Youngstown. Over time, however, the union reversed its position as its leaders saw the need to supplement traditional organizing with new forms of economic organization. The United Steelworkers union has now become a strong advocate of such ownership, and is exploring a new ownership model based upon the Mondragón experience that also helped inform some of the directions taken in Cleveland.

There are also important political implications: In Cleveland the developmental trajectory has begun to bolster support for its liberal mayor. At the same time it has slowly begun to suggest ways to make city officials less vulnerable to the demands of major corporations seeking large tax and other inducements to locate, often temporarily, in the city.[5]

The above sketch of a several decades long process of evolutionary change—and the paradoxical development of new awareness and of new institutions—suggests a possible path forward, over time, to the creation of a potentially important new progressive strategic approach, one that complements and in key areas transcends traditional strategies, in the first instance at the local level, but also at other levels as well.

Although there is nothing inevitable about the processes of institutional change illustrated by these developments, there are many more communities experiencing converging institution-building possibilities than is commonly realized. Furthermore, the deepening social and economic pain is intensifying the "situational logic" that demands either that a new approach be undertaken, or social and economic pain must continue. Critically, the "demonstration effect" of successes in one part of the country can radically shorten the time frame of change in new situations, super-charging the dynamics of institutional development.

At a very different level, the core ideas involved in the approach have begun to inspire younger activists concerned with the question of how to create a truly democratic, ecologically sustainable and decentralized future in general. The structural content of worker-owned firms in Cleveland and of the thousands of other developing institutional forms reported on in the book is critical: All in one way or another democratize the ownership of wealth through new cooperative or other community-serving forms. The principle has political and moral implications; at the same time, it has quite specific policy implications. Unlike private corporations, for instance, worker-owned companies rarely move to another city. The fate of those who own the company is intimately tied to the fate and health of the locality in which they both live and work. And the idea of creating wealth—not simply "jobs"—on behalf both of workers and the community as a whole has a powerful resonance.

Most important of all—at a time when the top one percent owns almost half of the nation's investment wealth, and has more net worth than the bottom 90 percent put together, it introduces a simple but important idea into everyday experience; namely, that different forms of ownership in general—and forms that democratize ownership in particular—are possible.[6] Put another way, developments like the Cleveland worker-owned companies serve to challenge what Antonio Gramsci called the dominant hegemonic ideology—and do so in a very practical, down-home American fashion.

One of the important further questions posed by these developments is whether a new and more youthful progressive politics might begin to advance various ownership efforts as a way not only to solve problems but strategically—as part of an active and self-conscious effort to expand the range of what can be discussed in American politics. Another is how, in a very decentralized nation like the United States, widespread "evolutionary reconstructive" efforts to rebuild, community by community, might be developed by those who understand the need for change, and understand, too, its demanding longer term requirements.

This is not the place to review the many increasing opportunities that exist for the creation of new ownership institutions at other levels of scale.[7] That new directions for longer term change may be possible at the state and national level as well, however, is also suggested by emerging lines of political cleavage and dynamic change in connection with health care and finance. "America Beyond Capitalism" argued that "growing difficulties [in the health sector] must inevitably increase the pressure to find new solutions... With traditional solutions blocked, the search for alternatives...is all but certain to intensify." The Obama health care legislation may be understood as an important first step in a process of potentially equally paradoxical political and institutional change. Almost certainly, the next step will be painful, as millions of Americans are hurt by conservative efforts to cut back the mostly unrealized benefits of the Affordable Care Act. The next step, however, is not likely to be the last, and a new situational logic is already coming into focus.

Polls show overwhelming distrust and deep hostility toward insurance companies. Cost pressures are also building up—and, critically, in ways that will continue to undermine corporations facing global competitors, forcing them to seek new solutions and at the same time creating divisions in traditional conservative political alliances. A recent report from the federal Centers for Medicare and Medicaid Services projects health costs to rise from the 2010 level of 17.5 percent of GDP to 19.6 percent in 2019. It has long been clear that the central question is to what extent, and at what pace social pain, on the one hand, and underlying cost pressures, on the other, ultimately force development of some form of single-payer system—the only serious way even to begin to deal with the underlying cost problem.

A new national institutional solution is likely to come about over the coming decades either in response to a burst of public outrage (aided by corporate divisions), or more slowly through a state by state build-up to a national system. Massachusetts, of course, already has a near universal plan, with 99.8 percent of children covered and 98.1 percent of adults. In Hawaii, health coverage (provided mostly by non-profit insurers) reaches 91.8 percent of adults in large part because of a 1970s law mandating low cost insurance for anyone working twenty hours a week. In Vermont, Governor Peter Shumlin signed legislation in May 2011 creating "Green Mountain Care," a broad effort that would ultimately allow state residents to move into a publicly funded insurance pool—in essence a form of single-payer insurance. Universal coverage, dependent on a federal waiver, would begin in 2017 and possibly as early as 2014. In Connecticut, legislation approved in June 2011 created a "SustiNet" Health Care Cabinet directed to produce a business plan for a non-profit public health insurance program by 2012 with the goal of offering such a plan beginning in 2014. In California it is possible that a universal "Medicare for all" bill may be on the governor's desk for signature in the reasonably near term. (Similar legislation passed by both the General Assembly and Senate was vetoed by Governor Schwarzenegger in 2006 and 2008.) In all, at this writing more than 15 states appear likely to consider bills to create one or another form of universal health care, a number that will surely vary over time as legislative wins and losses occur, but one that nonetheless suggests the emerging direction of potentially major long-term change.

Although "America Beyond Capitalism's" theory of change and institutional possibility was explored only indirectly in connection with financial matters, [8] the potential dynamics of longer term change in this sector were brought into sharp relief by developments at the height of the financial crisis in early 2009. "The public hates bankers right now...," the Brookings Institution's Douglas Elliot observed. "Truthfully, you would find considerable support for hanging a number of bankers..." It was a moment, President Obama told banking CEOs, when his administration was "the only thing between you and the pitchforks." The President, however, opted for a soft bailout engineered by Treasury Secretary Timothy Geithner and White House Economic Adviser Lawrence Summers. Franklin Roosevelt attacked the "economic royalists" and built and mobilized his political base. Obama entered office with an already organized base and largely ignored it.

When the next financial crisis occurs (or one of the ones thereafter...), different political opportunities are likely to become increasingly possible. One option has already been put on the table: in 2010, thirty-three 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 the financial industry—to say nothing of anti-trust strategies in general—suggests that the big banks, even if broken up, will ultimately regroup and reconcentrate as 'the big fish eat the little fish' and restore their domination of the system. The question then becomes: What can be done when both regulation and "breaking them up" fails?

The potentially explosive political force of public anger at financial institutions was evidenced in May 2010 when the Senate voted by a stunning 96-0 margin to audit the Federal Reserve's lending—something that had never been done before. Traditional reforms have aimed at improved regulation, higher reserve requirements, and the channeling of credit to key sectors. Future crises may bring into play demands for a spectrum of far more radical proposals already being developed and refined by figures on both the left and right. For instance, a "Limited Purpose Banking" strategy put forward by conservative economist Laurence Kotlikoff would impose a 100-percent 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 the banks, directly control system-wide financial flows. A variety of respected liberal as well as conservative economists have welcomed this strategy—including five Nobel laureates.

On the left, the economist Fred Moseley has proposed that for banks deemed too big to fail "permanent nationalization with bonds-to-stocks swaps for bondholders is the most equitable solution...." Nationally owned banks, he argues, would provide a basis for "a more stable and public-oriented banking system in the future." Most 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, in fact, have become essentially public banks.

Equally important, the economic crisis has also produced widespread interest in the Bank of North Dakota, a highly successful state-owned bank founded in 1919 when the state was governed by legislators belonging to the left-populist Nonpartisan League. Over the past fourteen years, the bank has returned $340 million in profits to the state and has broad support in the state 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 Washington, Oregon, California, Hawaii, Arizona, New Mexico, Montana, Illinois, Louisiana, New York, Maryland, Virginia, Maine, and Massachusetts. In Oregon, with strong support from a coalition of farmers, small business owners, and community bankers, and backed by State Treasurer Ted Wheeler, a variation on the theme—"a virtual state bank" (i.e. one that has no storefronts but channels state-backed capital to support other banks)—is likely to be formed in the near future.

How far the various strategies may develop is likely to depend on the intensity of future financial crises, the degree of social and economic pain and political anger in general, and the capacity of a new politics to focus citizen anger in support of major institutional reconstruction and democratization. In all cases, the direction, again, is not simply to counter and regulate, but to actively displace—and replace!—corporate power.

Part II of "America Beyond Capitalism" also surveys developments at the municipal and state level that suggest surprising possibilities—along with a similar paradoxical logic of pain and challenge that continuously confronts serious progressives and other activists with the choice either of moving forward in new ways, or allowing the pain and despair to continue. Here, simply as a reminder of what is already possible, are some of the larger scale efforts reviewed in the following pages.

Through direct public ownership of areas surrounding transit station exits, public agencies in Washington, D.C., Atlanta and many other cities already earn millions capturing the increased land values their transit investments create. Many cities have established municipally owned hotels. 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 revenues and jobs. There are roughly 500 similar projects nationwide. There are also over 2,000 publicly owned utilities that provide power (and, increasingly, broadband services) to more than 45 million Americans, in the process 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 from public investment strategies as a matter of right; in Alabama, public pension investing has long focused on state economic development (including employee owned firms).

None of this is to suggest there is an easy, straightforward path to institution building at the municipal and state level. The fiscal crisis—and conservative resistance to raising taxes—has led some mayors and governors to sell off public assets. In Indiana, Governor Mitch Daniels sold the Indiana Toll Road to Spanish and Australian investors. In Chicago, recently retired Mayor Richard Daley privatized parking meters and toll collection on the Chicago Skyway, and even proposed selling off recycling collection, equipment maintenance, and the annual "Taste of Chicago" festival. On the other hand, in many areas public resistance to such strategies, though less widely publicized, has been surprisingly strong. Toll road sales have been held up in Pennsylvania and New Jersey, and at this writing newly elected Chicago Mayor Rahm Emanuel has voiced his opposition to an attempt to privatize Midway Airport as previously attempted by Daley. An effort to transfer city-owned parking garages to private ownership in Los Angeles also failed when residents and business leaders realized parking rates would spike if the deal went through.

Moreover, in many states—following examples in Wisconsin, Indiana and Ohio—there has been an explosion of angry activism in response to radical challenges by conservative governors. So far the new state political energies have been mainly focused on defending against further losses in what is best characterized as a resistance posture aimed at slowing down budgetary cuts and attacks on the wages, pensions and bargaining power of public sector unions. Few have hoped positively and progressively to significantly increase taxation or public expenditures on social programs. On the other hand, younger activists have begun to demand something much more far-reaching.

The interesting strategic question is what might happen over time as the pain continues to deepen while short-term bursts of anger and attempts at reform continue to be unable to alter the longer trends. Further forms of institutional innovation clearly appear possible, building on existing municipal and state models—and following longer term evolutionary trajectories like that suggested by the developmental path in Ohio, energized now with new forms of activism. It is also important to note "Tea Party" anger at Wall Street and major corporations, and that often other seeming conservatives are open to new institutional efforts even as they oppose tax and spend reforms. In Indiana, for example, Republican State Treasurer Richard Mourdock has established a linked deposit program to provide state financing support for employee ownership.

What seems all but certain is that the paradoxical logic of no alternative is likely to intensify as time goes on: Either a new way forward will be created, step by agonizing step, building on already proven elements of experience, or the decay and pain will continue.

The longer term historical judgment at the heart of the book is that the persistence of this logic over time is likely slowly, agonizingly, and painfully to open the possibility of a new developmental path that, once understood and acted upon as an explicit political choice, offers potentially important new ways for moving forward with accelerating pace—and in alliance with a newly inspired activism concerned with decentralizing and re-democratizing the American system in general.

The most important questions inevitably involve the scope and scale of alternative scenarios, the time dimension of change, and the long term "situational logic" generating change. The options are not difficult to define: It is possible that neither traditional reform nor paradoxical forms of "evolutionary reconstructive" change will develop significant political force. Which in turn might simply mean no serious alteration in the long-running negative trends and no significant resolution of the deepening domestic and global problems now confronting the American system. Even allowing for new bursts of activism, the era of stalemate and decay might simply continue ... Rome declined.

It is also possible that a more dangerous corporate state might emerge (though the substantial stability of a nonetheless decaying system is likely to work against formal change in the direction of an American form of repressive state—what the late Bertram Gross termed "friendly fascism.")

Critically, however, it is also well within the possibilities of a sustained era of stalemate and decay that a reasonably coherent new strategic direction may slowly be developed—one that in its institutional thrust begins to achieve critical mass moving beyond, but also complementing, traditional lines of politics and policy. Such a direction would logically bring together (1) traditional liberal reforms to the extent feasible, with (2) growing populist anger and movement agitation aimed at corporate power, the extreme concentration of income, failing public services, continuing ecological decay, and military adventurism, with (3) an explicit approach that aims self-consciously at slowly building the new institutional basis of a more expansive democratizing politics.

Such a direction would likely also converge with a wide range of environmentally inspired "new economy" efforts that involve community-building cooperative, small business, and related strategies. New organizations like the Business Alliance for Local Living Economies (BALLE) and the American Sustainable Business Council (ASBC) have been quietly developing momentum in recent years. Key environmental leaders like Gus Speth, former adviser to two Presidents, now declares: "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." And environmental business leaders like Jeffrey Hollender, former CEO of Seventh Generation, now attack the U.S. Chamber of Commerce for "fighting democracy and destroying America's economic future."

Three final thoughts: The first is that although two chapters of "America Beyond Capitalism" deal with environmental issues, were I writing the book today I would develop more fully the sections that concern ecological sustainability in general and climate change in particular. The second is that although the book proposed Public Trust ownership for some truly large scale industry, this is an area where a great deal more work is needed by activists and by scholars alike. In particular, we need to understand much more clearly which industries (for technological, marketing, financial, institutional power or other embedded reasons) appear inherently likely to reach large scale under any system—and with such scale, sufficient power to compromise the effectiveness of traditional anti-trust and regulatory strategies unless taken much more directly into the public domain.

Similarly, questions of overall economic management, including democratic planning, are assumed but not specified in any detail in the following pages—except, critically, to stress the importance of deep community-based democracy as a precondition of democratic planning in general. (In the Note that follows I offer some suggestions on these and other related matters.)

The final and concluding thought is this: Part I of this work stands back to consider questions of fundamental democratic theory concerned with how over the long haul a "system" might ultimately be organized to provide institutional support for values of equality, liberty, and democracy. It suggests the inherent logic of a very American community-based and community-sustaining direction that moves beyond the theoretical approaches at the heart of both traditional corporate capitalism and traditional socialism. I have characterized the overall approach as a "Pluralist Commonwealth"—"Pluralist" because it involves diverse, plural and decentralized institutional forms of democratizing wealth; "Commonwealth" because common to all the forms at the various levels, though in different ways, is the concept of wealth ownership by the many rather than the few.

Often activists and academics alike shunt aside questions of fundamental political vision and democratic theory. Traditional reformers think systemic change impossible; hence the questions irrelevant. Radical activists sometimes fall back on largely unexamined rhetorical statements as they demand a different "system." Alternatively the focus may be on the merits of one or another institutional form (e.g. worker ownership; nationalization), or on the question of markets versus planning. My urging is that we integrate such explorations with a much more direct confrontation with explicit matters of political theory, and in particular the theory of democracy attendant upon different forms of economic institutional change. Doing so, I believe, is ultimately likely to add both rigor and new energies to the long term "evolutionary reconstruction" of our nation: We need to know clearly where we are going and where we want to go. And we need to begin to face and debate matters of principle and theory, now and as we go. It is the only way to guide action wisely in the here and now.[9]

In many ways "America Beyond Capitalism" is best thought of as a "tool-box" of practical precedents that can be built upon, along with theoretical work than can perhaps help guide a coherent integration of the parts. 

Footnotes:

1. Seymour Martin Lipset and Noah M. Meltz, The Paradox of American Unionism (Ithaca, NY: Cornell University Press, 2004) p. 7.

2. Alexander Hicks, Social Democracy and Welfare Capitalism: A Century of Income Security Politics (Ithaca, NY: Cornell University Press, 1999), quotes on p. 233. David R. Cameron, "The Expansion of the Public Economy: A Comparative Analysis," American Political Science Review, v. 72, no. 4 (December 1978), p. 1257.

3. See Chapter 7 for a discussion of the limitations and evolving possibilities of current forms of such ownership.

4. The leaders of the Youngstown effort were fully aware of the implications of what they were doing: they judged that even if it failed, the dramatic effort might help suggest possibilities for other, future efforts that built upon its central themes. For further information, see: Gar Alperovitz and Jeff Faux, "Rebuilding America" (New York: Pantheon Books, 1984); Staughton Lynd, "Fight Against Shutdowns: Youngstown's Steel Mill Closings" (San Pedro: Singlejack Books, 1982); Terry F. Buss and F. Stevens Redburn, "Shutdown at Youngstown: Public Policy for Mass Unemployment" (Albany: State University of New York Press, 1983).

5. Full disclosure: I was one of the chief planners of the Youngstown steel effort, and The Democracy Collaborative, an organization which I co-founded, played a major role in helping develop the Cleveland effort.

6. Edward N. Wolff, "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze-An Update to 2007" (Annandale-on-Hudson, NY: Levy Economics Institute of Bard College, March 2010, Working Paper No. 589).

7. In addition to the numerous illustrations offered in Part II, see www.Community-Wealth.org for ongoing reporting of the many different forms of wealth-democratizing now underway throughout the nation.

8. See Chapter 10 on public investment strategies and on public banking in North Dakota.

9. Nor should it be forgotten that issues of 'liberty' and 'democracy'—not simply economics—are central to the rhetorical appeal of the Right in general, and the Tea Party in particular—in significant part because the current system, in fact, is failing to deliver on its promises in both areas.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Gar Alperovitz

Gar Alperovitz is the co-founder of the Democracy Collaborative, and the author, most recently, of What Then Must We Do? Straight Talk About The Next American Revolution (Chelsea Green, May Day 2013).


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America Beyond Capitalism: An "Evolutionary Reconstruction" of the System Is Necessary and Possible

Thursday, 12 July 2012 10:55 By Gar Alperovitz, Democracy Collaborative Press | Book Excerpt

America Beyond Capitalism(Image: Democracy Collaborative)This is the first chapter in an exclusive Truthout series from political economist and author Gar Alperovitz. We will be publishing weekly installments of the new edition of "America Beyond Capitalism," a visionary book, first published in 2005, whose time has come. 

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The first edition of "America Beyond Capitalism" was published a few years too early. Although it argued that the nation already faced a systemic crisis in 2005 (not simply a political or economic crisis), the financial break-down and Great Recession that began in late 2007 had not yet occurred—to say nothing of the political outbreaks that began with the Wall Street "occupation" in late 2011. The book's message seemed distant to many readers. To some, its argument that fundamental institutional rebuilding was necessary—and, on the basis of the evidence, possible—seemed odd. Nor did large numbers take seriously the conclusion's prediction concerning emerging political-economic realities:

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The first decades of the twenty-first century are likely to open the way to a serious debate about these and other systemic questions...

The prospects for near-term change are obviously not great–especially when such change is conceived in traditional terms. Indeed, although there may be an occasional progressive electoral win, there is every reason to believe that the underlying trends will continue their decaying downward course...

On the other hand, fundamental to the analysis presented in the preceding pages is the observation that for precisely such reasons, there is likely to be an intensified process of much deeper probing, much more serious political analysis, and much more fundamental institutional exploration and development... 

And only a few readers were willing to accept the book's central judgment that "beneath the surface level of politics-as-usual, it is by no means clear that the public is or will remain quiescent forever—especially if social and economic pain continues, if political elites continue to overreach, and if new directions begin to be clearly defined."

Although such an understanding of the emerging historical era no longer seems unusual, the primary theoretical and strategic argument of "America Beyond Capitalism" has yet to be widely confronted—nor its conclusion, that an "evolutionary reconstruction" of the system is not only necessary but well within the range of long run possibility. The argument rests on three challenging assessments:

The first and foundational judgment is that (quite apart from other considerations) with the radical decline of organized labor as an institution from 35 percent of the labor force to 6.9 percent in the private sector (11.9 percent overall, and falling), a new progressive politics must ultimately build new institutional foundations to undergird its fundamental approach, or it will continue to remain in an essentially defensive and ultimately declining posture.

The second judgment is that a new longer term institution-building effort—one that at its core is based on the democratization of capital, beginning first at the community and state level and then moving to larger scale as time goes on—is both essential, and also that it is possible.

The third is that the emerging historical context is likely to create conditions that steadily open the way to such a strategy, and also help force awareness that it is needed.

These judgments, of course, do not dispute the importance of efforts to help sustain and re-energize labor organizing, create a more engaged activist 'movement' and mobilize a new and more energetic 'populism.' They do, however, point in a direction far more attuned to a diverse, decentralized and more democratized economic and political vision than has been central to progressive thought for much of the last century.

At the center of the traditional progressive theory is the hope that the political and economic power of the large corporation can be contained economically and politically through political mobilization, aided, abetted and bolstered by the organizational and financial power of labor unions. Numerous studies have documented the importance of labor in this theory. The "main finding" of international research on the relationship of union membership to political outcomes in industrialized countries, the late Seymour Martin Lipset and Noah Meltz observe, is straightforward: "support for unions is associated with social democratic strength."[1]

Studies by Emory sociologist Alexander Hicks of European social democracy also reveal a "[near]-perfect relationship between mid-century [social] program consolidation and working class strength" in five major areas of social insurance policy—"retirement, work-injury, illness, unemployment, and child-rearing compensation." Yale University political-economist David Cameron adds: "The existence of a relatively high level of unionization is...an important prerequisite for enduring leftist government, since unionized workers provide the core of the electoral base of most Social Democratic and Labor parties."[2]

Confronting the new realities of labor's decline is not easy; but realities they are. Which means, quite simply, that along with the decline, traditional liberalism has lost a good part of its fundamental power base—and further, that unless some new institutional source of political capacity is developed, it is likely to continue to remain in a defensive and weakened posture. (And this, of course, is to say nothing of race, cultural, religious and other factors weakening traditional reform politics.)

"America Beyond Capitalism's" cautious and paradoxical optimism that a new (and potentially newly energized) institutional way forward is possible derives from two streams of quietly developing evidence that have been largely ignored by many progressives. The first (as Part II of the book documents) is that just below the surface of media attention literally thousands of grass roots institution-changing, wealth-democratizing efforts have been quietly developing throughout the nation for the last several decades. Roughly 4,500 not-for-profit community development corporations devoted in the main to housing manage day-to-day operations in cities throughout the country. There are also now more than 11,000 businesses owned in whole or part by their employees; approximately six million more individuals are involved in these enterprises than are members of private sector unions.[3] Another 130 million Americans are members of various urban, agricultural, and credit union cooperatives. In many cities, important new "land trust" developments are underway using an institutional form of nonprofit or municipal ownership that develops and maintains low- and moderate-income housing. "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).

Related to this is a "paradoxical dynamic" that is generating more forms of institutional change even as traditional reforms falter. Job training programs, small business programs, incentives to lure major corporations to depressed communities—all of these have either largely failed, or at great taxpayer expense induced corporations to move to one community and away from some other community. A full employment strategy along Keynesian lines could achieve greater results in theory, but in the real world, again, the decay of progressive political power (and its underlying labor union base) has reduced its capacity to achieve traditional policy solutions here as well. Given the inability of politics to provide meaningful solutions to the problems facing millions of Americans, creating new institutional forms appears as the only positive option available, difficult as this may be.

The state of Ohio offers an illustration of just what this can mean both in the short run, but even more important, over time:

"America Beyond Capitalism" opens with a description of a major fight over the fate of a large steel mill in Youngstown, Ohio in 1977. The collapse of Youngstown Sheet and Tube threw 5,000 workers on the streets on "Black Monday" of September 19, 1977. No local, state or federal programs offered any significant help. Steel workers called training programs "funeral insurance;" they led nowhere since there were no other jobs available. Inspired by a young steel worker, an ecumenical religious coalition put forward an innovative plan for community-worker ownership of the mill that captured widespread media attention, the support of numerous Democrats and Republicans (including the conservative governor of the state at the time), and the promise of an initial $200 million in loan guarantees from the Carter Administration.

The corporate and other political maneuvering that in the end undercut the Youngstown initiative has been described at length elsewhere. What is of particular importance from the perspective of this account is that its impact was nonetheless ongoing, especially in Ohio, where the idea of worker ownership became widespread in significant part as a result of publicity and educational efforts traceable to the Youngstown effort, and in part because of the depth of ongoing policy failures, and the resulting pain throughout the state. In the more than three decades since the Youngstown collapse, numerous employee-owned companies have been developed in Ohio. Individual lives were also changed and inspired by the Youngstown effort. Importantly, the late John Logue, a Professor at Kent State University, established the Ohio Employee Ownership Center, an organization that provides technical and other assistance to help firms become worker-owned throughout the state.[4]

At the heart of this trajectory of paradoxical evolution in the wake of the failure of traditional policies is a process of partially forced institutional innovation—a process that, once underway, suggests further possibilities for larger scale and for more (and accelerating) ongoing development. In the brief time since "America Beyond Capitalism" was originally published, for instance, a major effort in Cleveland has built upon the long developing institutional work in Ohio (and on related research and theoretical efforts) to suggest further directions and broader possibilities. The "Cleveland Model" now underway in that city involves an integrated complex of worker-owned cooperative enterprises targeted in significant part at the $3 billion in purchasing power of such large scale "anchor institutions" as the Cleveland Clinic, University Hospital, and Case Western Reserve University. The complex also includes a revolving fund so that profits made by the businesses help establish new ventures as time goes on.

The first of the linked worker-owned companies, Evergreen Cooperative Laundry, is a state-of-the-art commercial laundry that provides clean linens for area hospitals, nursing homes, and hotels. The thoroughly "green" company operates out of a LEED-Silver ecologically sophisticated building and uses (and only has to heat) less than one third as much water per pound of laundry as typical competitors. The enterprise pays above-market wages, provides health insurance, and is still able to compete successfully against commercial laundries. Another company, Ohio Cooperative Solar (OCS), provides weatherization services and installs, owns and maintains solar panels on the rooftops of large university, hospital, and civic buildings. In its first year of operations OCS installed 400 kW of solar generation capacity. OCS alone is on target to more than double current total statewide solar generating capacity of two megawatts in 2012.

A commercial hydroponic greenhouse that covers 3.25 acres and will be capable of producing three million heads of lettuce and 300,000 pounds of herbs a year broke ground on October 17, 2011, just as this volume was going to press. Additional new businesses are being developed at a planned expansion rate of two to four ventures per year. A twenty acre land trust is also being designed for the land upon which many of the businesses are situated and as a first step to permit development in targeted neighborhoods of urban agriculture, and, when conditions permit, affordable housing.

That much larger scale and more advanced development is not beyond future possibilities is suggested by one of the precedents planners in Cleveland are drawing drawn upon: The Mondragón Cooperative Corporation in the Basque country of Spain is a highly successful integrated grouping of worker-owned cooperatives that employs more than 85,000 individuals in fields ranging from sophisticated medical technology and the production of appliances to large supermarkets and a credit union with 21 billion Euros in assets. In a further and related development the "Cleveland Model" has, in turn, struck a chord among activists and economic development practitioners throughout the nation who are concerned with the collapse of the economic core of many cities. At this writing exploratory efforts are underway to adopt aspects of the model in Atlanta, Pittsburgh, Washington, D.C., and other communities.

The judgment that broader, longer term processes of institutional innovation—and, critically, the development of ideas concerning the practicality, political feasibility, and importance of such innovation—may be underway (and forced by the paradoxical logic now facing traditional reform) is also suggested by the historical evolution of the United Steelworkers union over time. In the late 1970s the union saw worker ownership as a threat to organizing, and it opposed efforts of local steel workers to explore new employee owned institution-building in cities like Youngstown. Over time, however, the union reversed its position as its leaders saw the need to supplement traditional organizing with new forms of economic organization. The United Steelworkers union has now become a strong advocate of such ownership, and is exploring a new ownership model based upon the Mondragón experience that also helped inform some of the directions taken in Cleveland.

There are also important political implications: In Cleveland the developmental trajectory has begun to bolster support for its liberal mayor. At the same time it has slowly begun to suggest ways to make city officials less vulnerable to the demands of major corporations seeking large tax and other inducements to locate, often temporarily, in the city.[5]

The above sketch of a several decades long process of evolutionary change—and the paradoxical development of new awareness and of new institutions—suggests a possible path forward, over time, to the creation of a potentially important new progressive strategic approach, one that complements and in key areas transcends traditional strategies, in the first instance at the local level, but also at other levels as well.

Although there is nothing inevitable about the processes of institutional change illustrated by these developments, there are many more communities experiencing converging institution-building possibilities than is commonly realized. Furthermore, the deepening social and economic pain is intensifying the "situational logic" that demands either that a new approach be undertaken, or social and economic pain must continue. Critically, the "demonstration effect" of successes in one part of the country can radically shorten the time frame of change in new situations, super-charging the dynamics of institutional development.

At a very different level, the core ideas involved in the approach have begun to inspire younger activists concerned with the question of how to create a truly democratic, ecologically sustainable and decentralized future in general. The structural content of worker-owned firms in Cleveland and of the thousands of other developing institutional forms reported on in the book is critical: All in one way or another democratize the ownership of wealth through new cooperative or other community-serving forms. The principle has political and moral implications; at the same time, it has quite specific policy implications. Unlike private corporations, for instance, worker-owned companies rarely move to another city. The fate of those who own the company is intimately tied to the fate and health of the locality in which they both live and work. And the idea of creating wealth—not simply "jobs"—on behalf both of workers and the community as a whole has a powerful resonance.

Most important of all—at a time when the top one percent owns almost half of the nation's investment wealth, and has more net worth than the bottom 90 percent put together, it introduces a simple but important idea into everyday experience; namely, that different forms of ownership in general—and forms that democratize ownership in particular—are possible.[6] Put another way, developments like the Cleveland worker-owned companies serve to challenge what Antonio Gramsci called the dominant hegemonic ideology—and do so in a very practical, down-home American fashion.

One of the important further questions posed by these developments is whether a new and more youthful progressive politics might begin to advance various ownership efforts as a way not only to solve problems but strategically—as part of an active and self-conscious effort to expand the range of what can be discussed in American politics. Another is how, in a very decentralized nation like the United States, widespread "evolutionary reconstructive" efforts to rebuild, community by community, might be developed by those who understand the need for change, and understand, too, its demanding longer term requirements.

This is not the place to review the many increasing opportunities that exist for the creation of new ownership institutions at other levels of scale.[7] That new directions for longer term change may be possible at the state and national level as well, however, is also suggested by emerging lines of political cleavage and dynamic change in connection with health care and finance. "America Beyond Capitalism" argued that "growing difficulties [in the health sector] must inevitably increase the pressure to find new solutions... With traditional solutions blocked, the search for alternatives...is all but certain to intensify." The Obama health care legislation may be understood as an important first step in a process of potentially equally paradoxical political and institutional change. Almost certainly, the next step will be painful, as millions of Americans are hurt by conservative efforts to cut back the mostly unrealized benefits of the Affordable Care Act. The next step, however, is not likely to be the last, and a new situational logic is already coming into focus.

Polls show overwhelming distrust and deep hostility toward insurance companies. Cost pressures are also building up—and, critically, in ways that will continue to undermine corporations facing global competitors, forcing them to seek new solutions and at the same time creating divisions in traditional conservative political alliances. A recent report from the federal Centers for Medicare and Medicaid Services projects health costs to rise from the 2010 level of 17.5 percent of GDP to 19.6 percent in 2019. It has long been clear that the central question is to what extent, and at what pace social pain, on the one hand, and underlying cost pressures, on the other, ultimately force development of some form of single-payer system—the only serious way even to begin to deal with the underlying cost problem.

A new national institutional solution is likely to come about over the coming decades either in response to a burst of public outrage (aided by corporate divisions), or more slowly through a state by state build-up to a national system. Massachusetts, of course, already has a near universal plan, with 99.8 percent of children covered and 98.1 percent of adults. In Hawaii, health coverage (provided mostly by non-profit insurers) reaches 91.8 percent of adults in large part because of a 1970s law mandating low cost insurance for anyone working twenty hours a week. In Vermont, Governor Peter Shumlin signed legislation in May 2011 creating "Green Mountain Care," a broad effort that would ultimately allow state residents to move into a publicly funded insurance pool—in essence a form of single-payer insurance. Universal coverage, dependent on a federal waiver, would begin in 2017 and possibly as early as 2014. In Connecticut, legislation approved in June 2011 created a "SustiNet" Health Care Cabinet directed to produce a business plan for a non-profit public health insurance program by 2012 with the goal of offering such a plan beginning in 2014. In California it is possible that a universal "Medicare for all" bill may be on the governor's desk for signature in the reasonably near term. (Similar legislation passed by both the General Assembly and Senate was vetoed by Governor Schwarzenegger in 2006 and 2008.) In all, at this writing more than 15 states appear likely to consider bills to create one or another form of universal health care, a number that will surely vary over time as legislative wins and losses occur, but one that nonetheless suggests the emerging direction of potentially major long-term change.

Although "America Beyond Capitalism's" theory of change and institutional possibility was explored only indirectly in connection with financial matters, [8] the potential dynamics of longer term change in this sector were brought into sharp relief by developments at the height of the financial crisis in early 2009. "The public hates bankers right now...," the Brookings Institution's Douglas Elliot observed. "Truthfully, you would find considerable support for hanging a number of bankers..." It was a moment, President Obama told banking CEOs, when his administration was "the only thing between you and the pitchforks." The President, however, opted for a soft bailout engineered by Treasury Secretary Timothy Geithner and White House Economic Adviser Lawrence Summers. Franklin Roosevelt attacked the "economic royalists" and built and mobilized his political base. Obama entered office with an already organized base and largely ignored it.

When the next financial crisis occurs (or one of the ones thereafter...), different political opportunities are likely to become increasingly possible. One option has already been put on the table: in 2010, thirty-three 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 the financial industry—to say nothing of anti-trust strategies in general—suggests that the big banks, even if broken up, will ultimately regroup and reconcentrate as 'the big fish eat the little fish' and restore their domination of the system. The question then becomes: What can be done when both regulation and "breaking them up" fails?

The potentially explosive political force of public anger at financial institutions was evidenced in May 2010 when the Senate voted by a stunning 96-0 margin to audit the Federal Reserve's lending—something that had never been done before. Traditional reforms have aimed at improved regulation, higher reserve requirements, and the channeling of credit to key sectors. Future crises may bring into play demands for a spectrum of far more radical proposals already being developed and refined by figures on both the left and right. For instance, a "Limited Purpose Banking" strategy put forward by conservative economist Laurence Kotlikoff would impose a 100-percent 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 the banks, directly control system-wide financial flows. A variety of respected liberal as well as conservative economists have welcomed this strategy—including five Nobel laureates.

On the left, the economist Fred Moseley has proposed that for banks deemed too big to fail "permanent nationalization with bonds-to-stocks swaps for bondholders is the most equitable solution...." Nationally owned banks, he argues, would provide a basis for "a more stable and public-oriented banking system in the future." Most 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, in fact, have become essentially public banks.

Equally important, the economic crisis has also produced widespread interest in the Bank of North Dakota, a highly successful state-owned bank founded in 1919 when the state was governed by legislators belonging to the left-populist Nonpartisan League. Over the past fourteen years, the bank has returned $340 million in profits to the state and has broad support in the state 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 Washington, Oregon, California, Hawaii, Arizona, New Mexico, Montana, Illinois, Louisiana, New York, Maryland, Virginia, Maine, and Massachusetts. In Oregon, with strong support from a coalition of farmers, small business owners, and community bankers, and backed by State Treasurer Ted Wheeler, a variation on the theme—"a virtual state bank" (i.e. one that has no storefronts but channels state-backed capital to support other banks)—is likely to be formed in the near future.

How far the various strategies may develop is likely to depend on the intensity of future financial crises, the degree of social and economic pain and political anger in general, and the capacity of a new politics to focus citizen anger in support of major institutional reconstruction and democratization. In all cases, the direction, again, is not simply to counter and regulate, but to actively displace—and replace!—corporate power.

Part II of "America Beyond Capitalism" also surveys developments at the municipal and state level that suggest surprising possibilities—along with a similar paradoxical logic of pain and challenge that continuously confronts serious progressives and other activists with the choice either of moving forward in new ways, or allowing the pain and despair to continue. Here, simply as a reminder of what is already possible, are some of the larger scale efforts reviewed in the following pages.

Through direct public ownership of areas surrounding transit station exits, public agencies in Washington, D.C., Atlanta and many other cities already earn millions capturing the increased land values their transit investments create. Many cities have established municipally owned hotels. 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 revenues and jobs. There are roughly 500 similar projects nationwide. There are also over 2,000 publicly owned utilities that provide power (and, increasingly, broadband services) to more than 45 million Americans, in the process 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 from public investment strategies as a matter of right; in Alabama, public pension investing has long focused on state economic development (including employee owned firms).

None of this is to suggest there is an easy, straightforward path to institution building at the municipal and state level. The fiscal crisis—and conservative resistance to raising taxes—has led some mayors and governors to sell off public assets. In Indiana, Governor Mitch Daniels sold the Indiana Toll Road to Spanish and Australian investors. In Chicago, recently retired Mayor Richard Daley privatized parking meters and toll collection on the Chicago Skyway, and even proposed selling off recycling collection, equipment maintenance, and the annual "Taste of Chicago" festival. On the other hand, in many areas public resistance to such strategies, though less widely publicized, has been surprisingly strong. Toll road sales have been held up in Pennsylvania and New Jersey, and at this writing newly elected Chicago Mayor Rahm Emanuel has voiced his opposition to an attempt to privatize Midway Airport as previously attempted by Daley. An effort to transfer city-owned parking garages to private ownership in Los Angeles also failed when residents and business leaders realized parking rates would spike if the deal went through.

Moreover, in many states—following examples in Wisconsin, Indiana and Ohio—there has been an explosion of angry activism in response to radical challenges by conservative governors. So far the new state political energies have been mainly focused on defending against further losses in what is best characterized as a resistance posture aimed at slowing down budgetary cuts and attacks on the wages, pensions and bargaining power of public sector unions. Few have hoped positively and progressively to significantly increase taxation or public expenditures on social programs. On the other hand, younger activists have begun to demand something much more far-reaching.

The interesting strategic question is what might happen over time as the pain continues to deepen while short-term bursts of anger and attempts at reform continue to be unable to alter the longer trends. Further forms of institutional innovation clearly appear possible, building on existing municipal and state models—and following longer term evolutionary trajectories like that suggested by the developmental path in Ohio, energized now with new forms of activism. It is also important to note "Tea Party" anger at Wall Street and major corporations, and that often other seeming conservatives are open to new institutional efforts even as they oppose tax and spend reforms. In Indiana, for example, Republican State Treasurer Richard Mourdock has established a linked deposit program to provide state financing support for employee ownership.

What seems all but certain is that the paradoxical logic of no alternative is likely to intensify as time goes on: Either a new way forward will be created, step by agonizing step, building on already proven elements of experience, or the decay and pain will continue.

The longer term historical judgment at the heart of the book is that the persistence of this logic over time is likely slowly, agonizingly, and painfully to open the possibility of a new developmental path that, once understood and acted upon as an explicit political choice, offers potentially important new ways for moving forward with accelerating pace—and in alliance with a newly inspired activism concerned with decentralizing and re-democratizing the American system in general.

The most important questions inevitably involve the scope and scale of alternative scenarios, the time dimension of change, and the long term "situational logic" generating change. The options are not difficult to define: It is possible that neither traditional reform nor paradoxical forms of "evolutionary reconstructive" change will develop significant political force. Which in turn might simply mean no serious alteration in the long-running negative trends and no significant resolution of the deepening domestic and global problems now confronting the American system. Even allowing for new bursts of activism, the era of stalemate and decay might simply continue ... Rome declined.

It is also possible that a more dangerous corporate state might emerge (though the substantial stability of a nonetheless decaying system is likely to work against formal change in the direction of an American form of repressive state—what the late Bertram Gross termed "friendly fascism.")

Critically, however, it is also well within the possibilities of a sustained era of stalemate and decay that a reasonably coherent new strategic direction may slowly be developed—one that in its institutional thrust begins to achieve critical mass moving beyond, but also complementing, traditional lines of politics and policy. Such a direction would logically bring together (1) traditional liberal reforms to the extent feasible, with (2) growing populist anger and movement agitation aimed at corporate power, the extreme concentration of income, failing public services, continuing ecological decay, and military adventurism, with (3) an explicit approach that aims self-consciously at slowly building the new institutional basis of a more expansive democratizing politics.

Such a direction would likely also converge with a wide range of environmentally inspired "new economy" efforts that involve community-building cooperative, small business, and related strategies. New organizations like the Business Alliance for Local Living Economies (BALLE) and the American Sustainable Business Council (ASBC) have been quietly developing momentum in recent years. Key environmental leaders like Gus Speth, former adviser to two Presidents, now declares: "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." And environmental business leaders like Jeffrey Hollender, former CEO of Seventh Generation, now attack the U.S. Chamber of Commerce for "fighting democracy and destroying America's economic future."

Three final thoughts: The first is that although two chapters of "America Beyond Capitalism" deal with environmental issues, were I writing the book today I would develop more fully the sections that concern ecological sustainability in general and climate change in particular. The second is that although the book proposed Public Trust ownership for some truly large scale industry, this is an area where a great deal more work is needed by activists and by scholars alike. In particular, we need to understand much more clearly which industries (for technological, marketing, financial, institutional power or other embedded reasons) appear inherently likely to reach large scale under any system—and with such scale, sufficient power to compromise the effectiveness of traditional anti-trust and regulatory strategies unless taken much more directly into the public domain.

Similarly, questions of overall economic management, including democratic planning, are assumed but not specified in any detail in the following pages—except, critically, to stress the importance of deep community-based democracy as a precondition of democratic planning in general. (In the Note that follows I offer some suggestions on these and other related matters.)

The final and concluding thought is this: Part I of this work stands back to consider questions of fundamental democratic theory concerned with how over the long haul a "system" might ultimately be organized to provide institutional support for values of equality, liberty, and democracy. It suggests the inherent logic of a very American community-based and community-sustaining direction that moves beyond the theoretical approaches at the heart of both traditional corporate capitalism and traditional socialism. I have characterized the overall approach as a "Pluralist Commonwealth"—"Pluralist" because it involves diverse, plural and decentralized institutional forms of democratizing wealth; "Commonwealth" because common to all the forms at the various levels, though in different ways, is the concept of wealth ownership by the many rather than the few.

Often activists and academics alike shunt aside questions of fundamental political vision and democratic theory. Traditional reformers think systemic change impossible; hence the questions irrelevant. Radical activists sometimes fall back on largely unexamined rhetorical statements as they demand a different "system." Alternatively the focus may be on the merits of one or another institutional form (e.g. worker ownership; nationalization), or on the question of markets versus planning. My urging is that we integrate such explorations with a much more direct confrontation with explicit matters of political theory, and in particular the theory of democracy attendant upon different forms of economic institutional change. Doing so, I believe, is ultimately likely to add both rigor and new energies to the long term "evolutionary reconstruction" of our nation: We need to know clearly where we are going and where we want to go. And we need to begin to face and debate matters of principle and theory, now and as we go. It is the only way to guide action wisely in the here and now.[9]

In many ways "America Beyond Capitalism" is best thought of as a "tool-box" of practical precedents that can be built upon, along with theoretical work than can perhaps help guide a coherent integration of the parts. 

Footnotes:

1. Seymour Martin Lipset and Noah M. Meltz, The Paradox of American Unionism (Ithaca, NY: Cornell University Press, 2004) p. 7.

2. Alexander Hicks, Social Democracy and Welfare Capitalism: A Century of Income Security Politics (Ithaca, NY: Cornell University Press, 1999), quotes on p. 233. David R. Cameron, "The Expansion of the Public Economy: A Comparative Analysis," American Political Science Review, v. 72, no. 4 (December 1978), p. 1257.

3. See Chapter 7 for a discussion of the limitations and evolving possibilities of current forms of such ownership.

4. The leaders of the Youngstown effort were fully aware of the implications of what they were doing: they judged that even if it failed, the dramatic effort might help suggest possibilities for other, future efforts that built upon its central themes. For further information, see: Gar Alperovitz and Jeff Faux, "Rebuilding America" (New York: Pantheon Books, 1984); Staughton Lynd, "Fight Against Shutdowns: Youngstown's Steel Mill Closings" (San Pedro: Singlejack Books, 1982); Terry F. Buss and F. Stevens Redburn, "Shutdown at Youngstown: Public Policy for Mass Unemployment" (Albany: State University of New York Press, 1983).

5. Full disclosure: I was one of the chief planners of the Youngstown steel effort, and The Democracy Collaborative, an organization which I co-founded, played a major role in helping develop the Cleveland effort.

6. Edward N. Wolff, "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze-An Update to 2007" (Annandale-on-Hudson, NY: Levy Economics Institute of Bard College, March 2010, Working Paper No. 589).

7. In addition to the numerous illustrations offered in Part II, see www.Community-Wealth.org for ongoing reporting of the many different forms of wealth-democratizing now underway throughout the nation.

8. See Chapter 10 on public investment strategies and on public banking in North Dakota.

9. Nor should it be forgotten that issues of 'liberty' and 'democracy'—not simply economics—are central to the rhetorical appeal of the Right in general, and the Tea Party in particular—in significant part because the current system, in fact, is failing to deliver on its promises in both areas.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Gar Alperovitz

Gar Alperovitz is the co-founder of the Democracy Collaborative, and the author, most recently, of What Then Must We Do? Straight Talk About The Next American Revolution (Chelsea Green, May Day 2013).


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