“The Pluralist Commonwealth”

Part of the Series

Gar Alperovitz | America Beyond Capitalism

Alperovitz suggests the “Pluralist Commonwealth” model offers a way to enhance equality, liberty, democracy, economic efficiency, transparency, enterprise accountability and human development.

This Chapter Six, is Part 10 of Truthout’s continuing series of excerpts from Gar Alperovitz’s “America Beyond Capitalism.”

This is 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. Donate to Truthout.

Increasing numbers of Americans concerned with equality, liberty and democracy have begun to despair that traditional strategies to achieve the nation’s most fundamental values simply no longer work. If corporate capitalism (to say nothing of the socialist model) appears unable to sustain equality, liberty and democracy, is there any conceivable, logically coherent way forward?

It is possible to bring together critical elements of the evolving foundational thinking, and project and extend others, to define the underlying structural building blocks of a political-economic system “model” that is different in fundamental ways from both traditional capitalism and socialism.

The schematic model flowing from the various considerations emphasizes the systematic development of a robust vision of community democracy as the necessary foundation for a renewal of democracy in general. It prioritizes a variety of strategies to undergird local economies and thereby establish conditions favorable to nurturing local civil society associations and to increasing local government’s power to make meaningful decisions.

Partly to achieve such local democracy objectives – but for much larger reasons as well – the model also projects the development over time of new ownership institutions, including locally anchored worker-owned and other community-benefiting firms, on the one hand, and various national wealth-holding, asset-based strategies, on the other. These ultimately would take the place of current elite and corporate ownership of the preponderance of large-scale capital.

At the national level a major new institution – call it a “Public Trust” – would be projected to oversee the investment of stock on behalf of the public, as state and other pension boards commonly do today. Variations include allowing the proceeds to flow to individuals, to states, to municipalities, to the federal treasury – or perhaps to fund such basic public services as education or medical care for the elderly.

Over time, a fundamental shift in the ownership of wealth would slowly move the nation as a whole toward greater equality directly – through, for instance, worker-owned enterprises; and also indirectly – through a flow of funds from the larger asset-based strategies and investment on behalf of the public. (Capital would likely be assembled both by the taxation of elite income and wealth and by Kelso-type loan-guarantee strategies to finance the broadened ownership of new investments.)

Over the long arc of the twenty-first century and beyond, the flow of funds from such sources would also be allocated to help finance a reduction in the work week, so as to permit greater amounts of free time, thereby bolstering both individual liberty and democratic participation. In addition, the traditional entrepreneurial foundations of liberty are strengthened in the model by the strategies that stabilize the local economy (as, of course, is individual job security as well).

Finally, the emerging model implicitly moves in the direction of, and ultimately projects, a radical long-term devolution of the national system to some form of regional reorganization and decentralization – a strategic move important not only to democracy and liberty, but to the successful democratic management of ecological and other issues as well.

The overall system model defined by the critical structural elements might be termed a “Pluralist Commonwealth” – “Pluralist” to emphasize the priority given to democratic diversity and individual liberty; “Commonwealth” to underscore the centrality of new public and quasi-public wealth-holding institutions that take on ever greater power on behalf of the community of the nation as a whole as the twenty-first century unfolds.

Although at this stage of development the model is obviously general in form, certain features of the Pluralist Commonwealth’s political-economic architecture are striking. Of particular interest is that its basic elements, taken together, offer an integrated approach to dealing with a number of the fundamental power problems presented by large-scale economic enterprise in any system – capitalist, socialist or other.

First, over time the model steadfastly attempts to nurture and rebuild democratic experience by supporting various mechanisms to make democratic practice real in the lives of citizens. The development of a meaningful democratic culture is foundational: a guiding judgment is that without attention to nurturing the conditions needed to support an active and engaged citizenry, very little can be done either in theory or in practice to achieve larger democratic goals.

Second, the model opens a steadily expanding wedge of time for individuals to participate in democracy. This is one of the Pluralist Commonwealth’s most important elements. Without time to participate, authentic democratic processes to constrain economic actors (be they private or public), and to monitor a revitalized public sector, are simply not possible.

Third, the model’s financial mechanisms also aim to translate technological gains into greater equality – thereby offering long-term possibilities for equality of democratic participation in general, and for challenging and containing the power of large-scale enterprise in particular.

Fourth, as in the case of modern public pension fund management, the change in ownership legitimizes the public’s inherent right to ensure that major firms are made accountable to larger concerns – even as competitive practices are encouraged through a variety of well-established techniques. New ownership forms also inherently facilitate accountability measures requiring greater openness and transparency in enterprise management and governance.

Fifth, the longer-range Pluralist Commonwealth vision ultimately, and over the long haul, also reduces the scale of public institutions that hold firms to account. Though it is increasingly difficult to achieve effective “vertical” political associations across a continent, regional scale units (as, for instance, now in certain states) offer important strategic possibilities for greater political control of corporate practices.

Neither traditional socialism nor traditional capitalism deals well with the power problems presented by large-scale enterprise. Significant economic actors in the socialist state are commonly unaccountable either to market forces or to the public; they are power systems within a power system. The modern for-profit corporation is for the most part unaccountable to the public – and contrary to traditional theory, in most cases, is unaccountable to its shareholders as well. As the Enron and other scandals have shown (and many scholarly studies demonstrate) managers and top executives largely run the system, dominating boards and annual meetings alike. Rarely are successful challenges to their power successful, even by major shareholders.

The Pluralist Commonwealth structurally tethers large-scale firms at the top, by lodging stock ownership in a Public Trust entity accountable to (and open to scrutiny by) the public – and it steadily expands four major vectors of activity and structure (robust community democracy, steadily increasing free time, greater citizen equality, regional decentralization) that over the long haul offer expanding opportunities for democratic control from the bottom. Additional elements of the model include new public chartering requirements, the addition of specific stakeholders to corporate boards, and the democratization of corporate structures from within.

That the emerging system model leaves numerous questions unresolved is obvious. On the other hand, the Pluralist Commonwealth clearly defines a series of strategic propositions around which debate is already beginning to form. As research, dialogue and further development continue over time, specific issues are likely to be increasingly clarified and answers found to the most important unresolved questions. Driving the process is the fact that traditional solutions simply no longer even attempt to offer theoretically plausible responses to many critical questions.

It is commonly held that free-enterprise capitalism is the most efficient of all systems – certainly more efficient than traditional socialism – and that other possibilities must inevitably also be inefficient. Even at this stage of its development, however, there are reasons to believe the Pluralist Commonwealth could equal, or possibly surpass, the efficiency of real-world capitalism.

First, although some of the wastes and inefficiencies of capitalism are occasionally highlighted in the media, we are beginning to grasp just how vast these may be. The electricity crisis in California in 2000 and 2001 cost the state tens of billions of dollars. A conservative estimate is that over $10 billion was directly attributable to market manipulations by private firms. Corporate scandals in 2001 to 2003 cost New York State alone an estimated $13 billion. The Enron scandal cost workers and pension holders $1 billion. The savings and loan bailout in the first Bush administration cost taxpayers $125 billion in direct costs, plus an estimated additional $275 billion in subsequent years for interest and increased service of the national debt. Lobbying by the oil, pharmaceutical, insurance, television, banking, and other industries regularly generates further billions of dollars of questionable federal subsidies. This is to say nothing of numerous widely publicized scandals and bankruptcies that have illuminated many other obvious and well-known, but commonly ignored, costs routinely associated with current economic practices.

Second, various quasi-public and public firms (e.g., worker-owned firms, municipal electric utilities) have been shown to be at least as efficient as traditional corporations – and in many instances, more efficient. Public pension management strategies, of the kind that would likely be used in the proposed public asset management systems, have also been demonstrated to commonly be as efficient, or more efficient, than those of private pensions.

Third, salaries paid to public managers in comparable positions are far lower. For instance, William J. McDonough, then the president of the Federal Reserve Bank of New York, received $297,500 in 2001, while William Harrison, the CEO of J.P. Morgan Chase, took home more than $21 million. Top executives managing large state-run pension investments (e.g., California Public Employees’ Retirement System (CalPERS) received compensation of less than $450,000 in 2001 – while William Foley, the chairman and CEO of Fidelity National Financial, garnered more than $13 million. Compensation for top executives in the Tennessee Valley Authority is regularly much less than compensation for executives managing major private electric utilities.

Fourth, it is clear that additional strategies to achieve economic efficiency are already being developed – and are likely to continue to be developed. Louis Kelso, John Roemer, James Meade, and Leland Stauber, all have suggested ways to combine the public’s interest in important economic activity, with strategies to ensure the independence of strictly business decisions and the use of market discipline – and additional variations and refinements are likely to be put forward as time goes on. Investment managers who oversee endowments for universities and other public institutions have also developed strategies that can be drawn upon to balance longer-term growth objectives with the need to ensure against cyclical fund-flow downturns.

Critics of public involvement in economic matters commonly implicitly compare new approaches with the efficiency properties of a competitive, but exceedingly abstract and rarefied, free-market model. The result is a self-serving “heads-I-win, tails-you-lose” economic argument: Traditional political-economic practices are evaluated “as if” they were (or should be) purely efficient free-market operations, ignoring what everyone knows to be the actual dynamics of corporate political-economic behavior. Meanwhile, alternatives involving proposed public strategies are evaluated “as if” they must inherently involve grave political-economic market distortions – ignoring studies that demonstrate the measured efficiencies of a wide range of available alternative practices.

The truth is, various forms of manipulating the market are central to the operation of the current corporate-dominated political-economic system, not peripheral to it. They come with the territory – as everyone knows full well when they shift their gaze away from abstract theory to the real world of oil company lobbying and drug company political payoffs.

The Pluralist Commonwealth model breaks the logic of the traditional argument – first, by challenging the utopian idea that most firms keep away from government in the current system; second, by developing various strategies that allow for both competition and increased citizen accountability; and third, by structurally changing ownership patterns in ways that achieve greater transparency – so that when the inevitable problems, public or private, arise, they can be openly debated and corrected. Finally, of course, the model’s shift to new ownership forms inherently recaptures for broader public use, excessive funds that might possibly be garnered through corporate political maneuvering.

We may add that to the extent the political-economic system defined by the Pluralist Commonwealth is able to achieve greater equality through the overarching wealth-holding changes it contemplates, it would likely also achieve much greater efficiencies in the development and use of human resources. Leaving aside the morality of the implicit choices of the present system, countless studies demonstrate that we currently throw away literally millions of productive people whose contribution to the economy could be enormous. To cite only one instance, recent research reveals that minority and other low-income students with high test scores are five times as likely not to attend college than high-income students with comparable scores. A mind, as the saying goes, is a terrible thing to waste – as are the contributions that might be made by so many Americans whose potential skills and capacities are left behind by the current system.