Gar Alperovitz: The Prehistory of the Next Possible Progressive Era

At a time of acute pain for working people – when wages are stagnant, unemployment is high and levels of inequality are without precedent – historian and economist Gar Alperovitz sees not just despair, but hope.

Providing rich details of grassroots experimentation born out of necessity, Alperovitz argues that the United States may become the birthing ground for a new, radically transformative politics that has the potential to empower local communities, democratize wealth, provide meaningful employment and move the country toward true environmental sustainability.

Alperovitz is Lionel R. Bauman Professor of Political Economy at the University of Maryland. He is one of the founding principals of The Democracy Collaborative. Previously, he was a fellow at King's College at Cambridge University, a founding fellow of the Institute of Politics at Harvard University, a fellow at the Institute for Policy Studies, a guest scholar at the Brookings Institution and a guest professor at Notre Dame University. He has also served as a legislative director in the US House of Representatives and the US Senate, and as a special assistant at the Department of State.

Keane Bhatt: You are perhaps most well known as a historian who revised the dominant narrative of the bombing of Hiroshima and Nagasaki. Does your work analyzing nuclear disaster and government policies during World War II provide any insight into Japan's most recent catastrophe?

Gar Alperovitz: There are several broad questions: at the outset of the nuclear era, these kinds of problems were predicted by most of the top scientists. It was recognized that there was great danger with nuclear power, and that it had to be controlled very carefully, probably through an international agency with much greater restrictions and controls. So, as soon as the nuclear weapon became a possibility, some scientists, like Robert Oppenheimer, but many other officials in the federal government, were preoccupied with controlling its dangers.

There's a different connection, not so much with Hiroshima, but with economics. And that's why I actually stopped doing work on nuclear weapons. If you look back at the history of the bombings of Hiroshima and Nagasaki, you will find that this was all in the context of a larger attempt to help stabilize the world political-economic system along the lines of an American-dominated plan – what we now call globalization, though the term was not used at the time. But Hiroshima was almost certainly not necessary to end World War II. Most historians understand this, and that it was probably in significant part related to the Russians and their potential dominance over parts of Asia and Europe.

The underlying idea for all of this was how to run the global economy in a way that would both achieve American goals and prevent another depression, and the theory policymakers had was to open up the world and make sure it was run on American principles. For better or worse, they had what they believed to be a good vision, but I think their economics was wrong. Hiroshima was intimately related to that larger vision of what to do in the Asian mainland, the open-door policy with China, and in Eastern Europe. It's a complex issue; I've tried to unravel the tale in some detail in my book, “Atomic Diplomacy.”

What do you mean when you say that planners meant well, but their economics was bad? Are you referring to the impetus to rebuild war-torn societies to the benefit of the US manufacturing base?

The priority was to develop models that were open to American trade and American investment, but not simply as a way to further American goals – that was the first element. They also saw this as a way to manage the global economy. They had been through two world wars and a Great Depression, in part, they thought, caused by trading blocks – both the German and Soviet – that broke down free trade. And their whole argument, like today's argument, was to open up trade – that this is healthy for the global economy and healthy for peace. That was the larger theory that they were operating on, and it's a theory that poses many challenges and many problems.

You are one of a few prominent economists today who says unequivocally that protectionism is a good thing. Can you explain that?

Well, protectionism is a strange term. The term I normally use is planned trade – and actually, many economists have been moving quietly in this direction, including people like Dani Rodrik and even the late Paul Samuelson, and, in modest ways, Paul Krugman. There is a role for some open trade, certainly. What's happened in American policy is that it has developed in a way that has wiped out a good deal of American manufacturing. With the exception of a much-ballyhooed recent uptick due to the low value of the dollar, trade strategy has permitted massive inflows of Chinese and other products, and has often also meant setting up American companies abroad in China in order to re-import here, with the bottom-line result that American jobs are lost, American technological capacities are lost and American manufacturing capacities are lost.

There are a number of major business leaders, too, like Andy Grove of Intel, who are beginning to challenge the wisdom of this general strategy … I also recently read an interesting piece by a former Wall Street investment banker, John Fullerton, who was making the same case: that the whole trade strategy was essentially undermining our industrial base. And I think it's quite obvious. If you want to alter that, you have to massively expand trade – and in a way that restricts Chinese and other imports, in order to begin redeveloping the industrial base. People call it protectionism or planned trade, or an alteration in trade policy. But one way or another, the current approach is obviously not the best for the American industrial or technological base.

Absent a national initiative to resolve the issue of a hollowed-out industrial base, you have said that local democracy is one way to combat the ravages of the highly financialized, highly globalized economic system. Could you explain that a bit more?

Regarding your question of local development, one interesting thing is an absence of any policy at the national level that can stabilize jobs, except the fading remnants of a small-scale Obama stimulus policy. There is no program aimed at creating jobs in communities around the country in a significant way, be it through trade policy, investment policy, stimulus policy or industrial policy. So, people are hurting really badly in many areas. I have been doing a lot of work in the Midwest, and there is devastation in cities like Cleveland, which has gone from a population of 900,000 to less than 400,000. Detroit has had even larger losses. There is simply no alternative: either there is new development from within the local base, or there is further decay. So, we're seeing all sorts of experiments and very interesting innovations at the local level and sometimes using state policy.

You have said that services have become much more critical to the US economy than manufacturing. One benefit, you note, is that services are more locally oriented, and “many service-sector industries are also much less dependent upon and responsive to the vagaries and instabilities of global trade.” Could you explain this position and how it relates to the on-the-ground initiatives you are involved with in the Midwest?

The service sector has been expanding relative to the manufacturing sector. Part of that is the decline in manufacturing, partly that has to do with trade, technology and the inability of the political system to manage any serious policy to support those jobs. So, there are several factors involved in the decline. On the other hand, certain sectors have been expanding, most obviously medical care and education. Health care is now at 16 to 17 percent of GDP [gross domestic product] and is projected to go even higher, despite the current legislation. The elderly population is growing at this point, which means a greater presence of nursing homes and health care for the elderly. This expanding service sector provides streams of funding and is anchored around hospitals and nursing homes in big cities. Those institutions, incidentally, rarely get up and move the way that corporations may move, depending upon incentives and other business calculations. Often, they are called anchor institutions.

In Cleveland, we're drawing upon the hospitals and, to a certain extent, the universities. They buy $3 billion in goods and services a year, and we're trying to focus some of their purchasing power on community-owned and worker-owned cooperative production on a much more significant scale than has been done in the past, as a means of multiplying the given stream of income that is coming out of the service sector.

So, for instance, the Evergreen Cooperative complex of institutions produces green laundry services on a very large scale. Instead of the typical three gallons of water required to wash a pound of laundry, the Evergreen Cooperative Laundry does the same job with eight-tenths of a gallon, likely making it one of the greenest services of its kind in the Midwest. There is also an industrial-scale greenhouse for food services which will be on-line shortly; it will produce five million heads of lettuce a year. Another part of the complex is Ohio Cooperative Solar, which installs solar panels on the roofs of the city's largest health, education and municipal buildings, and weatherizes them as well. There are other support systems, but they're focused in significant part on the spending streams from the expanding sectors.

So, you're focusing on generating income from anchor institutions whose design and imperatives are different from those of corporations.

In the nonprofit sector, which includes many hospitals and universities, the value system is not as aggressively commercialized. Some of the hospitals they call nonprofit operate like profit-making institutions, and so do some universities. But there are other values involved, like community service. Also, they're anchored – they can't move. So, they simply must respond. That's one piece of it.

The other piece is that the structures that are being developed in the Cleveland model are attempting to be community-building structures as well as cooperative structures. And they're quite sophisticated. Some people know about the Mondragon cooperatives in the Basque region of Spain, which have something like 100,000 employees – very large-scale cooperative efforts and very technologically sophisticated. That model is in part being integrated into the Cleveland model so that you get efficiency and scale, but also worker-oriented values: pay rates are 5 to 1 from top to bottom instead of 200-300 to 1, as you would find in a corporate division of labor. There's also worker participation and control. And, even more importantly, cooperatives that are linked together through a revolving fund using a nonprofit structure, rather than existing individually, are necessarily oriented to the larger issue of the development of the community. This is crucial, but rarely understood. So, the structures have a different value of community as well.

You've pointed out that even if a firm is participatory and democratic in nature, if its economic activity is mediated through market relations, it will necessarily need to expand, compete and demonstrate socially unwelcome tendencies. So, the Cleveland architecture aims to bypass those antagonistic relations, right?

The attempt is to use the quasi-public market – the anchor institutions, in this case – to help stabilize these cooperatives and undercut some of the driving forces that they encounter as necessary pressures of the open market. I use “somewhat undercut” because I think you can't do it totally or you will end up with the problems of traditional socialism, in which the market is so stable, so guaranteed, that there's no incentive to innovate. So, there's a balance that we're trying to achieve where there is partly an external market which includes the usual market forces. But there is also a more stabilizing market – that's the role of the quasi-public market. So, we're looking to try to do that, and I think it's an important principle to experiment with, develop and define further.

An exciting feature of the Cleveland model is the amount of wealth being generated among groups that are unfairly marginalized economically, such as African-Americans, those with lower educational attainment and ex-convicts. What's the importance of community wealth creation, and why isn't it an end to itself, but, as you claim, a motor through which we can achieve meaningful democracy?

We're in the stage of developing institutional experimentation. It's reached a significant stage of development in the Cleveland area, but many other cities are trying to replicate and expand beyond that. So, these are innovations that will hopefully continue to develop. Also, there is legislation which will shortly be introduced in the Senate that we hope will continue the learning process and developmental trajectory.

Having said that, over a period of the next ten years, we expect that workers in the Cleveland effort will accumulate a stake of about $65,000 in assets. And the wage structure is above the minimum wage, and it's also above the wage structure at other comparable institutions. So, this in an important distinction: it is an attempt not simply to create jobs; it's an attempt to create wealth in individuals and wealth that will stay in the communities.

Many development strategies like small business creation, for instance, create a fairly wealthy small businessman when they're successful. But often, he moves out to the suburbs, leaving the community behind. Or, if you have successful development of a different kind, you get gentrification, which forces out people who can't afford to stay there. So, we're attempting, as a strategy, to stabilize the community as well as focus on job creation, and this also involves implementing a land trust.

Can you discuss how land trusts work? How they build community wealth and alleviate pressures of gentrification?

A land trust is simply a nonprofit corporation or a government agency that owns land, so that when development occurs, the profits of that development accrue to the owner, which in this case is public or nonprofit. And that's very important in the context of gentrification, because if there's a housing boom and the prices go up, poor people are kicked out because the prices are too high. So, if the land trust owns the land under the housing, it can stabilize housing costs. They already do this in many parts of the country because they are nonprofit corporations committed to low- and moderate-income housing.

Another example: when a city builds a subway system, land prices go up and the land becomes very valuable around every exit, because it's a high-traffic area and commercial development is possible. So, who should own that land? If the city gives it away or sells it, then profits are made by the real estate developers. Many, many cities don't do that now. They own the land and lease it so that they can make the profits from that implicit form of land trust, and pour it back, usually, into support for the mass transit system. That's conventional now. What's interesting about these various forms of democratizing ownership is that they've spread around the country in the last decade and a half and their numbers have gone from just a handful to hundreds. They answer a problem nothing else can. So, land trust development is an interesting example of what happens when there's great pain. Traditional answers don't work, and democratizing ownership in one or another way very often becomes a pattern.

You're very worried about income inequality, which has gotten worse over time. But you put a lot more stress on wealth inequality. So, you've noted that the richest 400 people in the US own more wealth than the bottom 50 percent of the population. You also pointed out that the top 1 percent owns almost 50 percent of the society's productive investment assets. Why is wealth inequality a more pressing issue for you?

Obviously, we'd be very interested in the income distribution aspects, too. But wealth distribution is so much more unevenly allocated in American society, and so little attention has been paid to it. Just think of those numbers: 1 percent owning just under 50 percent of the productive assets of the society. This means corporate stock, bonds and privately held businesses, and excludes a car or house. But even when you include a car or house in statistics of net worth, the numbers change somewhat, but the overall pattern is still extraordinary.

So, when you're asking who owns the productive assets of the society, you're asking who owns American capitalism. And that's the top 1 percent, which owns just under half of it. So, that is literally a medieval structure. I don't mean that figuratively. It is a feudalistic structure of extreme power and wealth. And it is anathema to a democracy to have that kind of concentration. I think many people are beginning to realize the control of corporate power and those who own the corporations. The Koch brothers get a lot of publicity, but as a general phenomenon, there is extraordinary ownership concentration.

If we're interested in the question of democracy, then at some point over the long haul, wealth distribution – or as I call it, the democratization of wealth – needs to be one of the basic principles. Worker-owned cooperatives are one way to do that, land trusts are another, municipal part-ownership and public ownership like Medicare are among the various strategies to democratize ownership. There are likely to be many more in future, in my judgment.

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You've noted that the recognition of illegitimate corporate control over sectors of the economy and political decisionmaking is a component of honest conservatives' views as well. Do you see your framework and proposals transcending traditional divisions between left and right?

The argument that we're making is essentially a progressive one, so there should be no doubt about its implications in terms of equity, distribution of income, and changing and democratizing ownership. But I think that the left in general ignored certain points that the honest conservative critique offered, as opposed to the political hacks that we see running around spouting rhetoric. And the genuine conservative critique really was about how you preserve liberty. And I think that requires many things, including decentralization, democratic processes, free time, and sufficient economic stability so people are secure. In “America Beyond Capitalism,” I wrote about the development of the institutional theory of liberty – not simply the legal or civil libertarian theory. And the genuine conservatives were better in focusing on this issue, at least. I don't think they offered good answers; but they asked some of the important questions.

For instance, genuine conservatives, such as Milton Friedman's teachers at the Chicago School of Economics, knew that the large corporation was anathema to genuinely free enterprise capitalism. So, if you read people like Henry C. Simons, founder of the Chicago School and Friedman's most revered teacher, he says small business is good; community decentralization and democracy are very important, and many corporations are too big to be regulated – they will control the regulators. And this ardent conservative then calls for nationalization of certain corporations as the best way to preserve a conservative, private enterprise society. So, if you read the serious conservatives as opposed to the modern hacks, there is much to learn on the questions of liberty and even nationalizing companies.

The modern hacks you refer to have imbued the discipline of economics with a patina of high-level mathematical rigor, so that economics appears to be more a hard science than a social one. One of the points that you make in your writings is that foundational concepts like “efficiency” are so narrowly construed that models promoting unfettered capital mobility often overlook very serious inefficiencies for infrastructure.

I was trained as a traditional economist, and this is one of the greatest weaknesses: not to recognize the power relationships and the inefficiencies of the traditional system. So, for instance, take the financial and banking structures now. From a technical, economic point of view, it is inefficient to regulate them; that would be the argument of many neoclassical economists. But in the real world – taking into account the institutional power questions that are the focus of serious political economists from Adam Smith to Karl Marx – it is obvious that leaving this to the “efficient” free market may lead to trillions of dollars in losses because you've produced a massive recession. That is a massive inefficiency, so we need to calculate and integrate that into the analysis of “efficiency” rather than look at it as something of an occasional phenomenon when we know it's a regular phenomenon.

Secondly, and most interestingly, it is theoretically efficient for companies to move around as they deem to be efficient and in their interest, even though the result may be to, quite simply, throw away entire cities and then have to have them rebuilt in new locations. The schools, the housing, the roads, the hospitals, the government structure in a city like Detroit, Cleveland or St. Louis are simply thrown away, and the companies move elsewhere. We need new cities, new roads, new schools, new hospitals, new city structures, with massive capital costs that are never calculated as efficient or inefficient: they're just ignored. Much of the economics profession has an extremely narrow conception of what they call efficiency, and it's a conception that's disastrous for the society and the economy.

The issue of what are sometimes called “externalities,” the toll that these decisions have on others, applies to the beginning of our interview. What are your thoughts on how nuclear energy's costs and benefits are assessed, and the role of public money?

Classical economics does recognize this, but they often don't talk about it in as serious a way as it deserves. There would be no nuclear facility built anywhere in the world, including in the US, without some form of a government-guaranteed insurance or liability-limiting program. And both are classical interventions in the market that people shy away from mentioning, but they are there.

The implosion of the financial sector and its subsequent bailout, the recession and unconstrained capital mobility all deprive the government of funds. You argue that the US is experiencing a slow decay, a long trend toward stagnation. What do you mean by that?

This is now becoming almost the conventional wisdom, that the economy is stagnating in the sense that it neither booms, and – strangely enough – it doesn't collapse, so that you get ever higher percentages of unemployment. The real unemployment rate is probably in the 16 percent range rather than the 9 percent range that is being discussed. That many people out of work means a massive loss of productive capacity. So, there's a system that is, in fact, stagnating, and very few economists see an easy way out of this. Perhaps a long, long period of decay is what we're in for. It would be well within the possibilities of liberal, left-Keynesian economics to solve this problem, but the political system is not able to deal with this, so we're facing a political stagnation as well as economic stagnation.

Some economists contend that the stagnation tendencies of the economy can sometimes be averted or at least delayed by epoch-making innovations, like the car, which spurred a continent-wide infrastructure project. Could you foresee another innovation to push US capitalism out of this phase?

It's impossible to predict technological change, obviously. The railroads were the most important one of the 19th century, and probably computing technologies in the 20th century. So, it's impossible to predict whether a burst of innovation will open the way to a reinvigorated capitalism in the West. Certainly in the East, there is a massive capacity to run the capitalist system using state power, as the Chinese have demonstrated. So, it is not that the systems are impossible to develop and run – the Chinese are essentially running an export-oriented Keynesian system with an authoritarian state. So, it is possible to do that, but it isn't possible, apparently, within the American political economy.

Krugman considers this moment a reversion to the Dark Ages in macroeconomic understanding. Do you think that the elites in thrall to the ideology of austerity are a major impediment to a political solution? In the short term, it seems they're content with a booming stock market and unprecedented corporate profits, unworried by the long-term issues that plague the health of the overall system, like high unemployment and reduction in demand.

I think it's more complex than that. I think that, in fact, the “general rule” in the 20th century is the picture you just painted. This would be a long discussion, but in the first quarter of the century, I think stagnation tendencies were interrupted by World War I; in the 1920's they began to return with a vengeance, and then you had the Great Depression in the second quarter of the century, interrupted by World War II. The third quarter of the century is boosted by the aftereffects of the war, and global US dominance, for a while, until the other countries came back. Plus, there was the cold war, the Vietnam War, the Korean War and large military budgets. I see those periods as aberrations within a larger stagnating or near-stagnating long-term frame. That's a very unconventional view, but I think what we're returning to is a period characterized by the inability of the elites to organize a political consensus. And I think they've actually only been able to do that in times of crisis, in times of war and during the postwar boom. Other historians are coming to this view; economists haven't studied it, but the historians are looking at the long patterns and seeing this overarching pattern in a cultural, as well as a political, perspective.

Today, many CEOs, and people like Alan Greenspan, are Ayn Rand devotees. In the postwar era, there was a culture that allowed elites to agree to a more stable Bretton Woods system that managed demand and curbed speculation.

We're in agreement; the only point I'm making is that the current set of growing challenges and failing politics is much more the norm than many think if you look at the 20th century as a whole – excepting the wars, depression and the postwar boom. I think that historically, elite shortsightedness and inability to consolidate viable solutions is more like the norm. And the elites are returning to this more fragmented posture, sadly.

You've talked about liberalism as a failing effort to partially subdue these relentless, long-term trends of wage stagnation, income and wealth inequality, and the rise of politically powerful corporate oligopolies. So, you note that liberals congratulated themselves when the minimum wage was raised from $5 an hour to $7.25 an hour in 2007. But in general, real wages have stagnated or declined slightly since the 1970's.

Actually, I mentioned also the decline of minimum wages. So, even with the raising of the minimum wage, which I certainly support, the larger trend has gone down so that the real minimum wage is lower today – even with the “improvement” – than it was during the Kennedy era. There are numerous progressive policies that are resisting the trend, but not altering it in a progressive or positive way. You also see that in the environment; you see that in income distribution – the top 1 percent has gone from gaining 10 percent of the country's income to 23.5 percent.

I come out of liberalism – I ran House and Senate staffs at an earlier point in my life. But what is obvious is that the capacity of traditional liberalism to alter the most significant trends in the society is declining. So, either a new politics comes out of the pain of the economic hardship, or the decline continues.

So, how do you propose to go beyond liberalism and put forth an affirmative vision that doesn't simply stave off the absolute worst aspects of economic pain?

First, what I think is most interesting is that people are waking up to the fact that something is profoundly wrong with the traditional model – not only the economy, but also traditional reform strategies. And a great part of that also has to do with the decline of the labor movement, which is weakening traditional liberalism enormously in all societies, but particularly in this one. In the private sector, unions account for only 6.8 percent of the labor force.

So, I think the long trend, roughly a 30-year period, will mean that the economic pain either continues without resolution, or the next several decades will be the birthing ground of new strategies and new politics – not simply more activist politics in support of traditional liberalism. While such liberal politics would be positive from my point of view, it's not sufficient, because the power base – labor – is not there.

But I do think that what's happening at several other levels is important. Most people have not been paying attention to what's going on at the local level. The press doesn't cover it, nor does it have any resources to cover it. There are literally thousands and thousands of various forms of community-building efforts. This includes 4,000 to 5,000 community development corporations and something like 13,000 worker-owned companies. There are more employees involved in this in one way or another than there are members of unions in the private sector. There are 120 million members of cooperatives; 20 percent of the American electric system is either co-op or municipal, essentially socialized. Land trusts are developing at the local level. At the state level, there are many strategies going on, like public pension funds, for example. California's is the most well-known, but the state of Alabama is heavily using its pension funds and even investing in some forms of worker-owned companies.

The pain and anger that resulted from the financial crises have also already produced efforts to move beyond regulatory policies in the direction of institutional change. Thirty-three senators voted in 2010 for a proposal to break up large Wall Street investment banks, and, for the first time in history, legislation was approved to audit the Federal Reserve Board. Here the long-term question is obvious: even if efforts to break up big banks were to one day succeed, the history of antitrust in general, as well as that of modern banking, strongly suggests that, over time, major banks would likely find ways to regroup and reconcentrate. This ultimately implies that some form of more far-reaching change will be necessary – implicitly some form of public ownership would likely become the only serious option for dealing with the issue.

The main point is that there's a whole series of developments which I see as the prehistory or the beginning points for an alternative vision for how you organize economic life in a more democratic, stable form. The dominant theme of what might be called, “the prehistory of the next possible Progressive Era” is changing who owns the society and who owns the wealth. Democratizing new forms of wealth is the preliminary step, hopefully, of a much larger effort to build beyond that. But it's a long process – not simply of political populism, but of institution-building and of changing the nature of how we think of institutions and who owns them.

A critic might say that it's mechanistic to think that just because the financial sector is set to create yet another catastrophe in the future (as the flaws of its fundamental architecture have been left unchanged), this will necessitate a national public banking system. Inertia would seem the likeliest option, especially considering the political power wielded by finance capital.

It's interesting, because I wear these two hats as a historian and an economist. If you think of it in narrow economic terms, you're absolutely right. You've had a catastrophe, and a regulatory process was established which they are likely to dominate. If you think of it historically, there was a massive outpouring of anger at these banks, and rightly so.

A new president didn't really know what to do with it, and his advisers were taken from Wall Street. His chief economic adviser was on its payroll for years. The strategy at that stage was doomed to become solely regulatory; however, the anger levels were unprecedented, which was reflected in the votes of 33 senators. I think there are very few specialists who watch this process who do not predict massive collapse again.

As a historian, I believe what you're going to see is increasing anger and distrust of the regulatory system. And the first step of that is a call to break up the banks. The second step will involve the places where there is no funding – no funding is going into the housing market, and small businesses are having trouble. So, either another source of funding appears, or there will be continued death. And I think the anger in those areas is also going to build up.

There are many precedents, ultimately, both at the state level and at the federal level. The Bank of North Dakota is a good example, and there are about nine other states, I believe, that are considering establishing such banks. At the federal level, there are about 140 precedents operating today that are essentially sector-specific banks. One of the most obvious ones is the Small Business Administration (SBA), which is essentially capital provision for small business, but there are many in agriculture, cooperatives, environment and energy. And there are a lot of precedents which I believe are going to expand over time and as the pain increases. For example, there is the current national Cooperative Bank.

The 1960's tend to be glorified, but your takeaway as a historian is that the liberal achievements in civil rights, women's rights and the environment were crucial, but stopped short of confronting economic power. You're a native Wisconsinite. Do you see the outpouring in Madison and throughout the rest of the state as a movement that can effectively challenge the feudalistic status quo that you mention?

First, every one of those efforts you mention from the 1960's, with the exception of the environmental movement, was essentially an effort to get into the economic and political system. For better or worse, the civil rights movement's demand was, “Let us in” on an equal basis, and the same goes for feminism. None of those movements attempted to address the problems of the structure of power of the American corporate system. The environmental movement is the only one that touched it, briefly, and then the reaction has set in since. Martin Luther King Jr. attempted to confront this issue with the Poor People's March, and of course was assassinated, but there is now a great deal of evidence that he knew very well that he was just playing on the edges of trying to deal with the system, that the system had to be changed. But don't misunderstand – every one of those movements was important, and I certainly support them.

I view this current period as the most interesting period of American history bar none, because we've run out of options in the traditional models. I think that means we're in for a major, major period of debate, experimentation and ferment about how to run the richest political economy in the world. This is more interesting than the American Revolution, because the principles on which the system is run are being challenged at every level, and where that comes out is by no means obvious, but there are many, many places where progressives can build, I think.

You've talked about the drastic decline of organized labor. Union membership hovers at around 7 percent in the private sector, 12 percent overall. You foresee this declining further still, to a lower level than that seen before the Depression. If more individuals are in some way involved in worker ownership than are members of unions in the private sector, do you see this as a way forward?

Many of those people are working in ESOPs, or employee stock ownership plans, and ESOPs have many problems we could discuss. But one of the things that is not a problem is that, in fact, they develop a notion that workers should own their own companies. To use more radical language, workers should own the means of production. This is as conventional as apple pie in America today. There are millions of workers who own their own companies – a much overlooked fact. And within the ESOP structure there is growing participation, though very flawed and faulty. Progressives have been right to challenge some of the difficulties. But for the most part, most have simply ignored the larger fact about ownership. These, however, are preliminary experiments from the point of view of a historian. From a historical perspective, they've reached a stage where they're very widespread and they're becoming more democratized and that may lay groundwork for something in the future. So, that's one step that's very important, as are the cooperatives and community development corporations. They're all demonstrating new models – many flawed as they develop – but that's only one stage.

At the city and state level, there is currently a battle for control, but some very interesting experimentation is also going on because the pain is so high, so people are willing to try land ownership under public control; cities are setting up public enterprises to turn methane from garbage collection into electricity. There are cities in Texas owning hotels, partly because of the fiscal crisis. So, you're seeing very interesting developments at the city and state level that can serve as possibilities for the future.

How do you connect the local with the macroscopic? Do you see a way for the experimentation in local communities to provide insight and power to tackle issues like international trade or the decline of US manufacturing?

I think what's possible – but not inevitable – is a left-right populist reaction on the trade front. I think several domestic manufacturers will be involved, and the Chinese will force the issue. Over the next decade, I think we could see what's called, in conventional economic, terms protectionism. The left and the right are going to demand protection.

That doesn't mean you solve the economic problems. As I've said, I think there is likely to be substantial stagnation because you can't get a coherent policy through the political system. In fact, our political system is doing just the opposite: it's cutting spending and undercutting serious economics. So, I think we're going to see a lot more stagnation.

I think that will force even more painful experimentation at the local and state levels, and it's already happening, but hasn't been reported on and hasn't been studied by scholars. The programs that ultimately became the New Deal were often developed at the state and local level first in principle, and then became the basis for national policy. In my judgment, efforts based on the principle of democratizing ownership are likely in health care – as “single payer” – in banking and in other sectors. Indeed, we have already successfully nationalized – jointly, with partial worker-ownership – two major auto producers, only, this time around, to sell them once they became profitable! What may happen with high-speed rail production is an open question, since we have literally no domestic producers. In a longer-term perspective, I think the buildup of new local models may begin to build understanding of principles of importance at higher levels. At this stage, the hopeful prospect for the long haul, and the centerpiece of real-world experimentation, involves radical decentralization, democratizing wealth ownership and the political power that goes with it.

At the same time, it's important, quite simply, to keep in mind that Rome declined. It's possible that the decay will continue and there will be violence and right-wing takeover. There are no sure answers. I believe the appropriate progressive strategy is one that both continues traditional efforts to the extent feasible, but also forcefully attempts to develop and build upon the positive efforts that are stirring at the grassroots level throughout the country, if you dig a little below the surface. This is where we are developing principles that could ultimately inform a new politics.

I must emphasize that, as a historian, I see these developments in 30-year swatches. The timing for the near-term is to hold back as much of the pain as you can, while at the same time developing for the future. I don't see easy answers, politically, and it's naive to expect them. The best you can expect in near-term politics is trying to resist the worst attacks on traditional efforts.

And let me say that this also applies to my home state of Wisconsin. What's ignored about its great recent popular uprising is that almost all of it was defensive, not “progressive,” in the sense that it tried to hold the line against further cuts, rather than to advance new demands. Its main demand was a negative one: “Don't hurt us anymore.” A new and powerful forward-moving thrust is so far not evident in these efforts, much as I welcome and applaud them and hope they can help move toward achieving forward-moving power.

In my judgment, however, the elements of what could one day become a positive, new direction just possibly are being quietly developed at the state and local levels institutionally. They might also one day provide the basis for political and programmatic demands … but that would be a later stage. They are not political at this stage; they're institutional, but they are beginning to develop the content of what could become critical elements of the next politics.

You advocate for a kind of regional integration, particularly economically. Do you see any conflict between a push toward regionalism and the problem you described in “America Beyond Capitalism”: “Increasingly the largely white suburban middle class is simply no longer willing to pay for a progressive agenda it believes will mainly benefit the black and Hispanic poor?” Does federalism in some way mitigate this tendency?

The term “regionalism” often refers to a metropolitan region; that's not what I'm talking about. I'm skeptical about metropolitan regionalism. What I have suggested is that the population of the country is over 300 million and projected to grow to at least 500 million by mid-century. It's also continental in scale. Roughly speaking, you can drop Germany into Oklahoma, or France into Montana. Those are very small countries compared with ours. It is all but impossible to run such a system from Washington in a democratic manner, even under the best of circumstances. Decentralization is inevitable if there is to be a successful system. Most states are too small; the nation is too big; the region is the logical direction for a solution. There's a whole literature dedicated to this that is likely, I believe, to become important as decisionmaking at the center continues to fail, and as population increases.

I think the blockages in Washington are so intense that ultimately, over the long haul, a major reorganization of our national political structure may occur. We are operating with a constitutional system devised in the era of the plow and mule and a population of a mere four million residents largely scattered along the Eastern seaboard. Major reform of this system may ultimately occur in a positive way, as certain large states like California take matters into their own hands as the levels of pain keep increasing due to the failings in Washington. There are several scenarios of ultimately decentralizing real power constitutionally that are possible. On the other hand, continued failure and decay is also possible – i.e. no solution to our problems, period. But the scenario that is least likely, I believe, is successful management without major change in systemic patterns.

A good question in this society is whether long-term regional or other decentralization would undermine civil rights. The answer is by no means obvious. It used to be thought that Washington, DC was the savior of civil rights. But it turns out that the period for which this was true for the most part is a very, very brief moment of postwar history. By and large, the record of the Supreme Court has been extremely conservative throughout the century – with the brief aberration of the Warren court. If you look closely at its progressive “moment,” what you'll find is that the FDR [Franklin Delano Roosevelt] appointees who briefly dominated that court system were largely the implicit product of New Deal politics – a very unusual progressive political moment that must be traced inevitably to the Great Depression, which created the New Deal. It's obviously more complicated than this, but in general, the progressive 20th-century moment of Supreme Court history is in many ways best understood as a secondary reflection of the New Deal values. In general, the norm is more like the Roberts court. Bottom line: Washington is not necessarily the place to look for court decisions to solve the civil rights problem in general. In future, Washington could make matters worse.

So, taking all of this into consideration, if, at present, Arizona's state government began to assert greater economic and political independence, would you find this problematic?

Don't misunderstand – I think that whatever can be held together by national norms should be maintained. The Europeans have the European Court of Human Rights, which helps establish a baseline. Many of the progressive states in the US go well beyond the national norm: Vermont is about to pass a single-payer health care system, and it allows gay marriage. It is a complex and messy business, but I think substantial regional self-determination is ultimately likely to be the only answer for a democratic system, because the continent is inevitably going to be run by corporate elites. The only place you can have meaningful democracy is at a more local and regional level.

Finally, you talk about this current moment with a level of optimism that's lacking among many progressive activists and intellectuals. What do you believe engaged citizens should be thinking about and doing to bring out the changes necessary for a more just society?

I think the crisis is very severe, and I wouldn't want to minimize the pain that people are experiencing. As a historian, however, I would note that if you were to suggest something positive about Egypt's future four months ago, you would have been laughed out of court.

And indeed, there's an explosion throughout the Middle East; something was stirring below the ground, something that is likely to take decades to develop from its first explosion.

As I've mentioned, I'm from Wisconsin. In the 1950's, Joe McCarthy, the reactionary Republican senator from Wisconsin, dominated everything. In the state, you couldn't see anything happening, but in the 1960's, Wisconsin exploded, which was completely unpredicted.

You can find similar patterns throughout history. The feminist movement was unpredicted. The environmental movement was unpredicted. The explosion of the civil rights movement was generally thought likely, but it was unpredicted when it happened. The Populists, the Progressives, the American Revolution – all unpredicted. But such explosive change is as common as grass, historically.

That doesn't mean it always happens, but I see developments that are very encouraging at the grassroots level, and I think of them in historical terms instead of what is going to happen in tomorrow's election. And in that sense, many of the elements for building a movement are there. One is great pain; two is a reassessment of the failure of traditional strategies; three is experimentation with new models and new policies; and four is younger people being totally turned off by the process.

One poll I saw recently indicated that people under 30 find themselves evenly divided, essentially, over whether capitalism or socialism is a better system. This tells you very little about capitalism or socialism, but a great deal about the hunger for something fresh and new. We're seeing that with these Cleveland experiments – they are exciting to people. They know that something different is being talked about, like changing who owns wealth. Those ingredients – together, too, with a reinvigoration of traditional progressive strategies – do not predict the inevitability of major change, but they are very important elements that could, over time, very well contribute to the next American explosion. Working in that direction creates positive things on the ground and lays the foundation for something that could well become very important.