On the Possibility of a Pluralist Commonwealth and a Community-Sustaining Economy

* Essay: The Possibility of a Pluralist Commonwealth and a Community-Sustaining Economy”. Gar Alperovitz with Steve Dubb.

“The current issue of The Good Society, the long-running journal of the Committee on the Political Economy of the Good Society (PEGS), is devoted in its entirety to “Alternatives to Capitalism,” a symposium built around my essay (with Steve Dubb) on “The Possibility of a Pluralist Commonwealth and a Community-Sustaining Economy”.

The essay also serves as an important foundational document for a new Democracy Collaborative venture, The Next System Project, a multi-year initiative aimed at developing the carefully researched and comprehensive proposals required to deal with the systemic challenges—environmental, economic, social and political—the United States faces.”

Excerpted from Gar Alperovitz:

“It is increasingly obvious that the United States faces systemic economic and political challenges.1 Income and wealth disparities have become severe and corrosive of democratic possibilities. Ecological decay deepens day by day. A record number of Americans are in poverty and full employment is nowhere on the horizon. Corporate power now dominates decision-making through lobbying, uncontrolled political contributions, and political advertising. The planet itself is threatened by global warming. The lives of millions are compromised by economic and social pain. Many of our communities are in decay.

Is there any way forward?

For the most part, serious scholars and activists have addressed the possibility of progressive change in capitalist systems from one of two perspectives. The “reform” tradition assumes that corporate institutions remain central to the design and structure of the system and that “politics” in support of various “policies” (e.g. taxation, spending, incentives, regulation) will contain, modify and control the inherent dynamic of a corporate dominated system. Liberalism in the United States and social democracy in many countries are representative of this tradition.2 The “revolutionary” tradition assumes that change can come about only if the major corporate institutions are largely eliminated or transcended, usually but not always by violence. This is often precipitated by a crisis collapse of the system, leading to one or another form of revolution. But what happens if a system neither “reforms” nor collapses in “crisis”?

This is essentially where the United States finds itself today. Put slightly differently, we believe the United States is entering a potentially decades-long period characterized by a situational logic of this kind. In a context of “neither reform nor crisis collapse” very interesting strategic possibilities may sometimes be viable. Such possibilities are best understood as neither “reforms” (i.e. policies to modify and control, but not transcend corporate institutions) nor “revolution” (i.e. the overthrowing of corporate institutions), but rather as a longer term process that is best described as an evolutionary reconstruction—that is, systemic institutional transformation of the political economy that unfolds over time.

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”), increasingly owns more and more of the nation’s productive assets.

We suggest that a growing number of openings for evolutionary reconstruction are becoming observable in many parts of the current American system, and that these openings could, if progressives seize upon them, become a potentially system-altering force over time.

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, for example, 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.”3 The President chose to opt for a soft bailout engineered by Treasury Secretary Timothy Geithner and White House Economic Adviser Lawrence Summers, but that was not the only choice available. Franklin Roosevelt attacked the “economic royalists”4 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 the one after that)—and in the judgment of many experts, it may occur soon—a different political resolution with more system changing consequences may well be 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.”5 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 re-concentrate as ‘the big fish eat the little fish’ and restore their domination of the system. So what can be done when breaking them up fails?

The potentially explosive power of public anger at financial institutions could be seen in May 2010 when the Senate voted by a stunning 96–0 margin to audit the Federal Reserve’s lending (a provision included ultimately in the Dodd-Frank legislation)—something that had never been done before.6 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 offered by figures on both the left and right. For instance, a “Limited Purpose Banking” strategy put forward by conservative economist Laurence Koltikoff would impose a 100 percent reserve requirement on banks.7 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.

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.”8 Most striking is the argument of Willem Buiter, the Chief Economist of Citigroup no less, that if the public underwrites the costs of bailouts, “banks should be in public ownership.”9 In fact, had taxpayers demanded voting stock in return for their investment when bailing out major financial institutions in the Great Recession, one or more major banks would, in fact, have become essentially public banks.10

Nor is this as far from the current political tradition as many may think. Unknown to most, there have been a large number of small and medium-sized public banking institutions for some time now. They have financed small businesses, renewable energy, co-ops, housing, infrastructure and other specifically targeted areas. There are also 7,500 community-based credit unions. Further precedents for public banking range from Small Business Administration loans to the activities of the U.S.-dominated World Bank. 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. Through its various farm, housing, electricity, cooperative and other loans, the Department of Agriculture alone operates the equivalent of the seventh largest bank in America.11 And just recently, in spring 2012, under pressure from American business, Congress reauthorized the Export-Import Bank to support U.S. trading interests.

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. Between 1996 and 2008, the bank returned $340 million in profits to the state.13 The Bank enjoys broad support in both the business community and among progressive activists. Since 2010, activists and legislators have introduced public bank legislation of one form or another in twenty states. Efforts are concentrated in the Pacific Coast and Rocky Mountain states, but legislation has also been introduced in New England, the Mid-Atlantic, the Midwest, and in Southern states.14 How far the various strategies develop is likely to depend on the intensity of future financial crises, the degree of social and economic pain, political anger in general, and the capacity of a new politics to focus citizen anger in support of major institutional reconstruction and democratization.

That a long era of social and economic austerity and failed reform might open the way to more populist or radical ‘evolutionary reconstructive’ institutional change—including various forms of public ownership—is also suggested by emerging developments in health care. Here, the next stage of change is already underway. Even though the Affordable Care Act survived challenge in court, cost pressures continue to build. Shortly after its passage, the federal Center for Medicare and Medicaid Services estimated that health care costs would rise from the 2010 level of 17.5 percent of GDP to 19.6 percent by 2019.

It has long been clear that the central question is to what extent, and at what pace, cost pressures ultimately force development of some form of single-payer system—the only serious way to deal with the underlying problem. The Affordable Care Act expanded coverage, but because it propped up rather than replaced a dysfunctional private insurance system, Obamacare promises, at best, to only modestly reduce costs. Peter Orszag, who served as President Obama’s first Director of the Office of Management and Budget, observed that, “with reform, total health care expenditures as a percentage of the gross domestic product will be 0.5 percent lower in 2030 than they would otherwise have been.” But national health care expenditures in 2030 are projected to exceed 25.0 percent of GDP! While 24.5 percent of GDP may be better than 25 percent, it is vastly higher than countries like Canada that have single-payer and maintain health care costs below 12 percent of GDP.

New solutions are likely to emerge either in response to a burst of pain-driven public outrage, or more slowly through a state-by-state build up to a national system. 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 2014.17 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 2014.18 In all, nearly twenty states appear likely to consider bills to create one or another form of universal health care.

One can also observe a developing institution-changing dynamic in the central neighborhoods of some of the nation’s larger cities, places that have consistently suffered high levels of unemployment and underemployment, with poverty most commonly above 25 percent. In such neighborhoods democratizing development has also gone forward, again paradoxically, precisely because traditional policies—in this case involving large expenditures for jobs, housing and other necessities—have been politically impossible. “Social enterprises” that undertake businesses in order to support specific social missions now increasingly comprise what is sometimes called “a fourth sector” (distinct 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 three 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, important new “land trust” developments are using an institutional form of nonprofit or municipal ownership that develops and maintains low- and moderate-income housing.

Although the financially stressed popular press covers very little of this, the various institutional efforts have also begun to develop innovative strategies that suggest broader possibilities for change. In Cleveland, Ohio, an integrated group of worker-owned companies has developed, supported in part by the purchasing power of large hospitals and universities.20 The cooperatives include a solar installation and weatherization company, an industrial scale (and ecologically advanced) laundry, and a greenhouse capable of producing over three million heads of lettuce a year. The Cleveland effort, partly modeled on the 83,000-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. However, its goal is not simply worker ownership, but the democratization of wealth and community-building in general in the low-income Greater University Circle area of what was once a thriving industrial city. Linked by a community-serving non-profit corporation and a revolving fund, the companies cannot be sold outside the network; they also return ten percent of profits to help develop additional worker-owned firms in the area.

A critical element of the strategy, moreover, 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, purchased from the immediately surrounding neighborhood. 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. The taxpayer funds that support programs of this kind do double duty by helping, too, to support the broader community through the new institutional arrangements. The same, of course, is true for a range of municipal, state, and other federal policies available to local businesses, including employee-owned firms.

Numerous other cities are now exploring efforts of this kind, including Atlanta, Pittsburgh, Amarillo, and the metropolitan Washington, D.C. area. Related institutional work is also underway through the leadership of the 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 project of the Jacobs Center for Neighborhood Innovation, Market Creek Plaza is a mixed-use, commercial-retail-residential development, anchored by a supermarket. The project was conceived, planned, and developed by teams of community members working with the Jacobs Center. Together they assembled a diverse package of public and private funding for the $23 million Phase I project (ultimately, the total value of the project, which involves master planning and redevelopment of a total of 52 acres of land, is estimated to reach $700 million in public and private investment).

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 40 percent ownership stake in the project, and generated $42 million in economic activity in 2008.

Yet another arena of institutional growth involves municipal development. By maintaining direct ownership of areas surrounding transit station exits, public agencies in Washington, D.C., Atlanta and other cities 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 revenues and jobs. There are roughly 500 similar projects nationwide.24 Many cities have established municipally owned hotels. There are also nearly 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).

Although such local and state ownership is widespread, it can also be vulnerable to challenge. 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.

How far continuing financial and political pressure may lead other officials to attempt to secure revenues by selling off public assets is an open question. On the other hand, public resistance to such strategies, although less widely publicized, has been strong in many areas. Toll road sales have been held up in Pennsylvania28 and New Jersey29, and newly elected Chicago Mayor Rahm Emanuel recently rejected an attempt to privatize Midway Airport as previously attempted by Daley.30 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.

At the heart of the paradoxical strategies of development in these varied and increasingly widespread illustrations is one or another form of democratized ownership—a form at the national, state, municipal and neighborhood level that stands in contrast to traditional ideas that only corporations or private businesses can own and manage productive wealth.

Nor should it be forgotten that at the height of the recent financial and economic crisis one of the nation’s largest manufacturing corporations—General Motors—was placed under majority government ownership (with the government also taking a minority share of Chrysler) because the alternative was all but certain to be the collapse of the heart of the U.S. manufacturing economy in general.

How far might these various kinds of evolutionary reconstructive developments go if ongoing difficulties continue to create ever-deepening social and economic pain, and traditional policies, both liberal and conservative, fail to deal with it?

One thing is certain: traditional American liberalism, dependent on expensive federal policies and strong labor unions, is in a moribund state in the United States. The government no longer has much capacity to use progressive taxation to achieve equity goals or to regulate corporations effectively. Congressional deadlocks on such matters are the rule, not the exception. At the same time, ongoing economic stagnation or mild upturns followed by further decay—and “real” unemployment rates in the 15–16 percent range—appear more likely than a return to booming economic times.

Paradoxically, evolutionary reconstructive processes of institution-shifting change over an extended period of time may be more viable in the United States than in many European nations—in part because of American traditions of decentralization, and in part because American liberalism’s reform capacity has historically been weaker than most social democratic political formations in Europe. Moreover, the decline of American labor unions from 34.7 percent of the labor force in the 1950s to 11.3 percent now (and only 6.6 percent in the private sector) continues to further weaken traditional progressive reform capacities.32

To be sure, some hold out hope for a reversal of this decline. California, where labor has benefitted from a “powerful mix of the awakening militancy among the mushrooming low-wage, largely immigrant workforce, the growing political strength of labor in local and state elected bodies, and the use of that political clout to improve the climate for organizing” provides perhaps the best-case scenario.33 But even in California, union density, after a brief surge between 1997 and 2002, has fallen from 18.2 percent in 2002 to 17.4 percent in 2012.

Most observers agree with the judgment of Georgia State economist Bruce Kaufman that the long-range trend of decline will likely persist, which could leave “union density in the next decade at five percent or less of the workforce.” Kaufman acknowledges that “a 1930s-style resurgence” is possible, but only in the event of “war or economic disaster.”35 Many unions themselves see long odds, leading some, such as the United Steelworkers, as noted above, to experiment with employee ownership.

The Steelworkers’ employee ownership efforts, though nascent, speak to a different kind of progressive change that is emerging—one that involves an extended, slow and difficult transformation of institutional structures and power. Such efforts, over time, are also likely to offer possibilities for the bolstering of progressive political relationships. Liberal activists and policy-makers since the time of the New Deal and the Great Depression have implicitly assumed they were providing one or another form of “countervailing power” against large corporations. With the decay of this approach, evolutionary reconstructive efforts aim either to weaken or displace corporate power. Strategies like anti-trust or efforts to “break up” big banks aim to weaken corporations by reducing their size. Public banking, municipal utilities and single-payer health plans attempt slowly to displace privately owned companies. At the same time, community-based enterprises offer local public officials alternatives to paying large tax-incentive bribes to big corporations.

To be sure, a several decades long developmental trajectory of “evolutionary reconstruction” may fail to or only modestly alter fundamental institutional relationships and political power balances as have most kinds of top-down national reforms. The era of stalemate and decay might simply continue and worsen. Like ancient Rome, the United States could simply decline, falling into the status of a nation fundamentally unable to address its social ills.

The alternative possibility—that a painful and sustained era of stalemate and decay may allow for the development and ultimate politicization of a coherent new long-term progressive strategic direction—is not to be dismissed out of hand, however. Such a direction would build upon the remaining energies of traditional reform, animated over time by new populist anger and movements aimed at confronting corporate power, the extreme concentration of income, failing public services, the ecological crisis, and military adventurism. And it would explicitly advocate the slow construction of new institutions run by people committed to developing an expansively democratic polity—an effort that could give political voice to the new constituencies emerging alongside the new developments, adding a new, potentially powerful and growing element in support of longer term progressive change.

New organizations like the Business Alliance for Local Living Economies (BALLE) and the American Sustainable Business Council (ASBC) have also been quietly developing momentum in recent years. BALLE, which has more than 22,000 small business members, works to promote sustainable local community development. ASBC (which includes BALLE as a member) is an advocacy and lobbying effort that involves more than 150,000 business professionals and thirty separate business organizations committed to sustainability. Leading White House figures such as former Labor Secretary Hilda Solis have welcomed the organization as a counter to the U.S. Chamber of Commerce. Jeffrey Hollender, Chair of ASBC’s Business Leadership Council and former CEO of Seventh Generation, has denounced the Chamber for “fighting democracy and destroying America’s economic future” because of its opposition to climate change legislation and its support for the Citizens United decision.36

At the heart of the spectrum of emerging institutional change is the traditional radical principle that the ownership of capital should be subject to democratic control. In a nation where one percent of the population owns nearly as much investment wealth as the bottom 99 percent (49.7 percent of total), this principle is likely to be particularly appealing to the young—the people who will shape the next political era.37 In 2009, even as Republicans assailed President Obama and his liberal allies as immoral “socialists,” a Rasmussen poll reported that Americans under thirty were “essentially evenly divided” as to whether they preferred “capitalism” or “socialism.” The finding has been confirmed in additional polls. A December 2011 Pew survey, for example, found those aged 18 to 29 have a more favorable reaction to the term “socialism” than “capitalism” by a margin of 49 to 43 percent. A 2010 Pew Research Center poll also found a majority of Americans now have an unfavorable view of corporations—down from nearly three quarters holding favorable views only twelve years before.

Even if many of the youth who prefer socialism to capitalism may well be unsure what “socialism” is, they are clearly open to something new, whatever it may be called. A non-statist, community-building, institution-changing, democratizing strategy could well capture their imagination and channel their desire to heal the world. It is surely a positive direction to pursue, no matter what. And plausibly it could open the way to an era of true progressive renewal, even one day perhaps step-by-step systemic change or the kind of unexpected explosive movement-building power evidenced in the “Arab Spring” and, historically, in our own Civil Rights, feminist and other great movements.

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