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A Growing Movement Shows There Is an Alternative to Capitalism

There is literally a new economy being born, and we have decades of history proving the efficacy of these models.

There is literally a new economy being born, and we have decades of history proving the efficacy of these models.

The profit-driven economy is being tested by new visions of wealth-building models outside of mainstream capitalism. These cooperative structures form part of a new system that envisions a service to the public good instead of the shareholders’ balance sheets. As global demands for economic justice grow, can this new economy reshape the way we think about ownership and pension strategies? What are the setbacks in implementing these programs, and who is doing the work on the ground? Helping to unpack these ideas are Marjorie Kelly and Ted Howard of the Democracy Collaborative and co-authors of the book, The Making of a Democratic Economy.

Laura Flanders: Congratulations first on the book. Let’s start with the breakdown part: You see this as a period of breakdown, but also deep redesign. How do you see it?

Marjorie Kelly: Well, you know, we’re told the economy’s doing well. GDP is growing, the stock market’s up. Unemployment is low, but in fact, there’s really two economies. Forty-five percent of jobs today are insecure. They’re part-time, contract, Uber’ized-type jobs. And that’s the number we’re not talking about. Wages have been stagnant for decades and there are reasons for that. That’s what we talk about in the book, is that the economy is designed for the outcomes that we have where three billionaires have more wealth than the bottom half of Americans combined. But a different kind of economy is growing. And that’s what we travel around and visit.

Is it an economy, Ted, or is it just like a smattering of lots of different types of things?

Ted Howard: Well, within the overall hyper-casino that we live in, our thesis and our belief is there is literally a new economy being born. It’s showing up in different models and innovations in different places. It reminds us of the period as the Great Depression was gearing up. The government at the time under Herbert Hoover was not coming to save anybody, said the free market’s going to handle the Depression. So, people in communities started innovating and creating really exciting new models to really take care of themselves.

And when the politics changed under Franklin Roosevelt in the New Deal, his government looked around the country at these little models and scaled them up into things like the Social Security system, our most important social safety net. So, our view is that every community has many, many innovative models — public banking, cooperatives, land trusts, employee ownership, social enterprise. And they just need to be developed so that when the time’s right, they can take center stage in the economy — not be the alternative — be the defining characteristic of America’s economy.

I mean, that’s very interesting. The New Deal wasn’t brought to us by government. Really, government got it from us. That makes us feel kind of–

Howard: You know, we often think, Well it’s the wise men sitting around the table in Washington, D.C., with Franklin Roosevelt. But it wasn’t. It was people in their communities creating the ideas … in the United Kingdom, the National Health Service came from a very small model in Wales that was then lifted up decades later by Aneurin Bevan and became one of the great health systems in the world. And that’s how these things happened.

At the other end of the spectrum, you have plans around the Federal Reserve and “quantitative easing for the planet.” How do you explain quantitative easing for the planet?

Howard: Well, very simply what we looked at was defined. If we don’t get on top of the climate crisis, this country and countries around the world are going to be swamped with the crisis … The problem is we have these large energy companies that are in the way of any meaningful change. They will block it consistently. So, we asked ourselves: How do we get them out of the way? And then we recalled 10 years ago at the height of the Great Recession when the Treasury Department and the Federal Reserve basically implemented something called quantitative easing. They literally created money out of nowhere in order to bail out banks, insurance companies [and] auto companies to stabilize the economy. They created over $3 trillion.

It happened in Europe as well.… So we said, Well, if they could do that, we have a much greater crisis now, the climate crisis. What would it take to buy out all the oil companies and just strand the oil in the ground? Just take them over, get them out of the way, and leave the fossil fuel in the ground. So, we created a [phrase] called “quantitative easing for the planet.” How many hundreds of billions or trillion dollars, perhaps, need to be created in order to take over America’s oil infrastructure and just leave the oil in the ground?

It was a completely outside-the-box idea, but we realized that even if every country in the world did everything it’s committed through the Paris accords (and of course the U.S. pulled out them) … we still don’t make it to 2°C or less. We need some radical interventions. So, the democratic economy is just being built in communities through models and innovations. But we need a new order of thinking. You know, Albert Einstein said, ‘We can’t solve the problems we are facing with the same thinking that created the problems in the first place.’ So [quantitative easing] for the planet is a very new approach to handling the biggest crisis of our time.

Are there practical applications to your making of a democratic economy that people are fighting for today, Marjorie?

Kelly: Oh, all over. Lots of people are working for more employee ownership. For example, right here in New York City, the mayor has put millions of dollars behind growing worker co-ops and there have been over 100 started. There are other cities [in which] people are talking about publicly owned banks. In North Dakota, they have the Bank of North Dakota – [this] helped that state survive the recession in great shape. And the [current] governor of California is talking about state-owned banks. Cities are talking about city-owned banks. And that would help bring lending back to small- and medium-size businesses, which are not getting loans from the big banks. They’ve essentially become hedge funds. So, yes, we’re talking about really practical things.

We’ve covered Cooperative Home Care Associates here in New York, one of the largest worker-owned cooperatives in the country. Why is it still so alone in scale in the U.S., do you think?

Kelly: Well, that’s starting to change, Laura. I mean Cooperative Home Care Associates employs 1,200 people, mostly Latinos and African American women. It’s been around 33 years and there is now a movement to replicate it. So, there are 15 of these companies that are either in formation or have already been formed. But you’re right. Why isn’t worker ownership more of a phenomenon? I think it’s because a lot of it is the mindset that Ted talked about. We’re so focused on Wall Street. We’re so focused on what capital is doing and where can you invest in these capital-owned companies that this idea that workers can own their companies and that can be a successful profitable model that it doesn’t kind of penetrate the mind. So, I think that mind shift is critical.

You talk about corporations; I mentioned that you had been instrumental in sort of sparking this B-Corporate movement. That’s kind of a middle stage. Do you want to tell people what B-Corps are?

Kelly: Yeah, well, if you step back for a moment and you say, What do we think the purpose of companies is today? Maximize returns to shareholders. This is kind of taught in the business schools, enforced in the courts. Well, what if there were a different purpose inside companies to serve the public good? To create public benefits? So that’s what B Corps are. They’re saying these are for-benefit companies. They are companies that take into their bylaws, their articles of incorporation, this legal commitment to serving the public good as well as serving employees and shareholders. And there are thousands of these companies out there all over the world, and they’re succeeding. They are some of the most exciting companies, particularly when they’re combined with broad-based ownership.

Do they require a particular kind of shareholder — somebody who doesn’t really want that much money back?

Kelly: It requires, I think, leaders and investors who think that there’s a broader and more important purpose of business. But yes, you can still make money, you can still make plenty of money for investors.

We last talked, Ted, on camera when we were reporting on the Preston Model, which has also been about leveraging investment capital — some of it public money — to invest locally and create local employment and better living conditions. How’s that going as far as you know?

Howard: The Preston Model is really an extraordinary representation of what can occur in a place when a full range of community wealth and democratic economy tools are deployed. Preston is an older industrial city of 150,000 people in Lancashire [in the U.K.]. Five, six years ago, they began this journey that they’re on to create a new model for the local economy. At the time the high street was shuttered, unemployment was high. There was really no future for the city. They’ve leveraged a hundred million pounds of public employee pension funds. They’re creating cooperatives in the city through the university. They’re creating a public bank that will be capitalized by the reserves of the city council. They’ve changed purchasing so that 70 million pounds of purchasing is brought back to the city that used to go internationally or to the city in London.

The end result is when this all began just five, six years ago, Preston was listed in the bottom 20 percent of the most deprived cities and communities in all of the United Kingdom. Earlier [in 2019] … PricewaterhouseCoopers did an assessment of the most improved communities in the United Kingdom, and the number one listed was Preston, which is extraordinary in such a short period of time. Now, there’s a long way to go, but it shows what’s possible when people put their shoulder to the wheel and institutions start to work for local benefit.

Were there qualms about putting pension funds into programs like that?

Howard: Yeah. Well, Marjorie may have something to say about this, too, but you know, in the United States, there is a movement to use public pensions. In California, multibillion-dollar investments [are] being made [via the California Public Employees’ Retirement System], and they’re not taking all of their money out of Wall Street, but they’re taking some for local impact. The history is showing that these are returning very good value to the pension funds. So, it’s not that the laborers whose pension funds are invested are now taking dramatically lower returns. It can be done well, and it’s being done around the country.

It’s very interesting, this whole field that we’re talking about here, if we’d sat here 40 years ago … we wouldn’t be talking about employee stock ownership plans. They didn’t exist. People were not talking about public banking. Community land trusts had not started. So all of these innovations — impact investing, B Corp, all of these — were to be invented. And now we have decades of history proving the efficacy of these models.

The question of service, who are you serving, takes me back to Mondragon and to your book. You mentioned at the beginning this question of mindset. Talk a bit about your takeaways from that trip. We should say Mondragon is the world’s biggest federation of cooperatives, a thousand cooperatives in the Basque Country of Northwest Spain. It’s been around for over 50 years. [It] grew up under fascism and is still there today, bringing on new types of industries as well as maintaining some old ones.

Kelly: And $11 billion of income coming in to those companies. So they’re quite substantial. I was struck by how ordinary these companies are. They’re making things like elevators, like packaging, packaging machines — and they’re doing it well. They’re selling all over the world and they’re just 100 percent owned by their workers. And that’s just an ordinary business there. That was very striking to me.

Howard: And for me, that was my sixth trip to Basque Country, and every time I learned something. But for me the fundamental lesson was on one trip I asked a Basque leader: What’s the difference between your system and our system in the United States? And he said it so eloquently, he said: In your system, capital is in first place over labor, so if you get in trouble during a recession or downtime, the drive is preserve capital for the investors, and a way to do that is shed as much labor as you can. It’s a rational decision in your system.

In our system, we know capital’s essential, but we place labor above capital. So, when we get into trouble, we find ways to keep everybody working. We absorb them into different companies. We have a different kind of social safety net because their purpose is not to generate a maximum shareholder value, their purpose is to provide decent, ongoing, secure work for the Basque people. And that’s just a very fundamental difference.

It goes back to the “divine right of capital” that you’ve talked about. We have to topple it. You say sexism is still bad, racism is still bad, every other kind of -ism is still bad, but seen as bad. Pro-capital bias somehow is still okay.

Kelly: Yeah. Right. Capitalism is that form of capital bias where we just think capital comes first. Maximizing returns to shareholders is the purpose of the company. Only shareholders are represented on corporate boards and even in the income statement. You define profit as income to shareholders; that’s good. You’re supposed to have as much of it as possible. Income to workers is an expense. You’re supposed to have as little of that as possible, so it’s all designed in. Capital matters. Workers don’t matter. The environment is invisible. Communities are powerless.

That’s designed into the basic structures of the economy. One of the things we’re trying to do with this book is to help us all wake up and just see that all this that we take for granted, in fact, is not legitimate.

Not legitimate and not the only option.

Kelly: Right.

You tell a lot of stories in this book as well as giving us a lot to think about. Thank you so much, both of you.

This interview has been lightly edited for clarity and length.

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