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The Foundation of a New Democratic Economy Is Worker Self-Directed Enterprises

(Photo: Andy / Flickr)

A commitment to democracy logically should extend to the place where adults spend most of their lives. Workers in control of their own workplaces are much less likely to ship their own jobs overseas, underpay employees or pollute their own communities.

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The economic collapse and slow recovery that has led to high unemployment and under-employment, coinciding with an extreme wealth divide in which workers have a shrinking share of the GDP, means people are looking for new approaches. How can we create an economy that works for all Americans?

Through his new project, Democracy at Work, economist Richard Wolff strives to develop a social movement that puts in place a reorganization of the economy built on a foundation of employee control of the workplace. Employees would act together as their own bosses in a fully egalitarian, democratic workplace where workers run the business, share the assets and create a workspace that runs in harmony with not only its workers, but the entire community.

We join him in this effort through our project, It’s Our Economy, which seeks to create economic democracy, with worker ownership at its foundation. Economic democracy is consistent with the democratic ideals of the United States. And employee ownership is an all-American approach to problem-solving that has been supported by people on the Right and Left. Workers will relish the democratic structure; businesspeople will appreciate its entrepreneurial spirit. In our next column we will review the history of worker ownership and communalism that dates back to the founding of this country, indeed, pre-dates European settlement of North America.

We are not starting from scratch. There are thousands of successful, majority worker-owned businesses in the United States. The largest majority employee-owned business is Florida-based Publix Super Markets, a $27 billion company that employs 152,000 people. That’s more workers than Costco and Whole Foods combined. As we finish the international year of the co-op, worker ownership is growing. One in five adults in the world are members of co-ops; and a majority of Americans find cooperatives to be less expensive, more trustworthy and to provide better service than traditional businesses.

As political economist Gar Alperovitz reports, “There are 120 million members of cooperatives in the United States; 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 approaches, 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.”

Wolff argues that workplaces need to go beyond majority ownership, to “Worker Self Directed Enterprises” (WSDE). He makes a strong case that workers in control of their own workplaces are much less likely to ship their own jobs overseas, underpay employees or pollute their own communities. As workers’ enterprises become fully functioning, they benefit those who participate as workers as well as the customers and communities they serve.

Much of what goes wrong in US-European capitalism is due to how corporations are organized – hierarchical and undemocratic. As Wolff says “people go to work and do what they are told rather than participate.” The undemocratic workplace is dominated by a handful of people – owners, stockholders or a board of directors. Those who make the decisions create greater wealth and power for themselves, usually at the expense of their workers; and not surprisingly they get involved in politics to ensure that they continue to keep their power and wealth.

Worker Self Directed Enterprises are a new way of organizing. Workers have the capacity to direct decisions in their workplace. As decision-makers they have to live with the decisions they make, like moving jobs overseas, replacing workers with technology or polluting their environment. Wolff says: “If we are committed to democracy, then the workplace where people spend most of their adult lives should be democratic.”

Especially when an economy is not working, it is time to say “this system does not do what we need, we can do better.” Throughout history, there has been a gradual move to self-governance. As Wolff notes, “We don’t need kings, nor do we need to be governed by a few at the workplace.” To accomplish this transition to a decentralized and democratized economy, we need to build a social movement that takes this message to the American people.

A large portion of the population already agrees with us. These ideas are majoritarian, but are not realized because wealth is in the hands of a few and politicians need concentrated wealth to sustain them and remain in office. This wealth also controls the media and limits discussion. Thus, we also need to continue building an independent, citizen’s media to broaden discussion and understanding.

Worker Self Directed Enterprises are built on the experience of the worker cooperatives. The phrase WSDE is used to emphasize that workers make the decisions. The largest cooperative in the world is the Mondragon Cooperative – a network of 250 co-op enterprises that makes up the 7th largest corporation in Spain, with 85,000 worker-members who make the decisions. Mondragon defied the economic collapse in Spain. And now Mondragon is joining with US steelworkers to develop worker-owned steel mills in the US.

There is experience-based evidence that worker directed enterprises can have advantages over traditional corporate models. According to a study by Harvard and Rutgers researchers, companies with substantial employee ownership often outperform those without, because of lower staff turnover, stronger trust relationships at work and greater innovation.

The companies that succeed do so in large part because of the “innovation engine” that is unleashed by worker ownership. Group innovation is free fuel for a business that is created when people’s passion is ignited toward innovating together and employees are engaged in creating better products and better ways to deliver them. This strategy seeks to create a competitive advantage in the marketplace.

What are the some of the keys to success? Research shows successful businesses realize that innovation comes from differences in thinking, therefore engaging many workers encourages innovation. Most of the time innovation does not mean new technology, but new solutions to problems, rearrangements and improvements in operation. Allowing experimentation, trying new approaches and sharing the lessons from these efforts means all can learn and innovate further. And success comes from sharing information not only with employees, but also with suppliers and customers. The entire organization is rewarded for its innovation and values of teamwork and sharing. Worker ownership is a practical, not utopian, model of organizing workplaces.

Changing the workplace is not only about more successful business; it is about people living more fulfilled lives. Wolff points out that many workers view work and workplaces negatively because they are not organized to be positive experiences for workers; that “Happy Hour” is something that takes place outside of work. “If more enterprises were employee-owned, fewer workers would face daily exploitation. The ratio of average CEO pay to worker pay (currently, an astounding 380:1) would shrink. Inequality, which harms society and hampers economic growth, would lessen.”

Employee Self-Directed Enterprises will also change politics as they put democratic power in the workplace and build wealth among workers. As the balance of power shifts, majoritarian solutions to the challenges the country faces will no longer be taboo. The foundation of political democracy will move from a small number of owners, to worker directors thereby broadening the base of government.

This article is based on a radio interview with Richard Wolff on Clearing the FOG (Forces Of Greed). You can listen to the interview here.

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