A cooperative New Era in Chicago

 

Workers at the New Era Windows Cooperative [ht: ke]—which, as I reported, was formed one year ago—are celebrating the grand opening of their new unionized, worker-owned and -operated business.

AMY GOODMAN: What are you making at the New Era Windows Cooperative? I mean, how do people get involved? What are the products you’re making?

ARMANDO ROBLES: We’re going to start making replacement windows, vinyl windows and commercial windows—it’s our goal—and for affordable price and a good-quality product for the workers. At the beginning of this, I think we, us, know how to make windows. But after all work done we have at this point, I learned so much in this year. We put a factory in place in all the right spots. Yesterday, we have our check from the city. They checked—the inspector, they inspect the whole building, and they approve us our job. So, not even do just windows, but we would like to make a New Era for the United States, helping people creating cooperatives and create our good-quality and affordable windows for the region and for the United States.

JUAN GONZÁLEZ: And, Brendan Martin, I would have to assume that the labor unions alone and labor union members could provide a steady demand for the products of the factory. Have you gotten any—any bites or orders yet from—pressed by other unions or other—or unionized workers?

BRENDAN MARTIN: We have actually gotten early interest in the windows from people in unions, from housing cooperatives, and just from people across the United States and in the Chicago area who support jobs being saved by their workers rather than destroyed by their owners. But without a doubt, we still need more support to come in. So, anybody out there—these are residential windows. Anyone who’s listening can buy them. They fit in anyone’s home. They’ll save you money on your energy bill and pay for themselves in a few years. So, please come to our website, newerawindows.com, participate in this project by buying some windows, and then go out and start your own cooperative. We do have a lot of interest from the community, but we need more of the community to pile in and make this happen.

Inequality and the current crises

Mainstream economists (like Brad DeLong) can’t seem to find any connections between growing inequality and the current crises. But it’s not a problem for Federal Reserve Board Governor Sarah Bloom Raskin.

Yes, this is the same Raskin who recently decided to look beyond capitalism for a solution to the current crises. In an extension of those remarks, she set out to examine how “economic marginalization and financial vulnerability, associated with stagnant wages and rising inequality, contributed to the run-up to the financial crisis and how such marginalization and vulnerability could be relevant in the current recovery.”

Here’s her argument in a nutshell:

at the start of this recession, an unusually large number of low- and middle-income households were vulnerable to exactly the types of shocks that sparked the financial crisis. These households, which had endured 30 years of very sluggish real-wage growth, held an unusually large share of their wealth in housing, much of it financed with debt. As a result, over time, their exposure to house prices had increased dramatically. Thus, as in past recessions, suffering in the Great Recession–though widespread–was most painful and most perilous for low- and middle-income households, which were also more likely to be affected by job loss and had little wealth to fall back on.

Moreover, I am persuaded that because of how hard these lower- and middle-income households were hit, the recession was worse and the recovery has been weaker. The recovery has also been hampered by a continuation of longer-term trends that have reduced employment prospects for those at the lower end of the income distribution and produced weak wage growth.

This is a remarkable thesis, better than 99 percent of what we have heard from mainstream economists throughout this sorry spectacle (although Raskin does stumble a bit in repeating the mainstream penchant to invoke “technological change that favors those with a college education and globalization” as the causes of inequality).

And Raskin is well aware of how novel her thesis is, at least in mainstream circles:

To be clear, my approach of starting with inequality and differences across households is not a feature of most analyses of the macroeconomy, and the channels I have emphasized generally do not play key roles in most macro models. The typical macroeconomic analysis focuses on the general equilibrium behavior of “representative” households and firms, thereby abstracting from the consequences of inequality and other heterogeneity across households and instead focusing on the aggregate measures of spending determinants, including current income, wealth, interest rates, credit supply, and confidence or pessimism. In certain circumstances, this abstraction might be a reasonable simplification. For example, if the changes in the distribution of income or wealth, and the implications of those changes for the overall economy, are regular features of business cycles, then even an aggregate model without an explicit focus on distributional issues would capture those historical regularities.

However, the narrative I have emphasized places economic inequality and the differential experiences of American families, particularly the highly adverse experiences of those least well positioned to absorb their “realized shocks,” closer to the front and center of the macroeconomic adjustment process. The effects of increasing income and wealth disparities–specifically, the stagnating wages and sharp increase in household debt in the years leading up to the crisis, combined with the rapid decline in house prices and contraction in credit that followed–may have resulted in dynamics that differ from historical experience and which are therefore not well captured by aggregate models. How these factors have interacted and the implications for the aggregate economy are subject to debate, but I have laid out some possible channels through which there could be effects and that I believe represent some particularly fruitful areas for continued research.

I’m certainly not going to hold my breath—and I doubt Raskin is, either—until mainstream economists decide to actually pursue these lines of research.

Debt, unemployment, and alternatives to capitalism

This is by far the best piece I’ve seen by Mark Thoma.

Building on a recent speech by Federal Reserve Governor Sarah Raskin, Thoma takes a clear stand against the idea that the national debt is our most important problem. We need to focus, instead, on “reversing the polarization of the labor market – the hollowing out of the middle class and the associated rise in inequality over the last thirty years or so.”

As everyone surely knows by now, the last few decades have not been kind to workers in the middle and lower parts of the income distribution. Technological change, globalization, and the decline of unions that gave workers political clout and countervailing power in negotiations over wages, benefits, and working conditions have eroded the economic opportunity and security that the post World War II era brought to working class households.

During that time it was possible, with little formal education, to get a relatively secure job offering decent pay and benefits. But those days are mostly gone, and changes in labor market conditions during the recent recession highlight the longer-term trends. Consider, for example, four facts from a recent speech by Federal Reserve Governor Sarah Raskin.

First, around two-thirds of the jobs lost during the recession were in moderate-wage occupations, but more than one-half of subsequent job gains have been in low wage jobs. As she says, recent job gains have been largely concentrated in lower-wage occupations. Second, since 2010 the average wage for new hires has actually declined. Third, about one-quarter of all workers are “low wage” (just over $23,005 per year in 2011 dollars). Finally, involuntary part-time work is increasing, and more than a quarter of the net employment gains since the end of the reces-sion involve part-time work.

But then Thoma misses what is probably the most important—and certainly most surprising—part of Raskin’s speech: her support for alternatives to capitalism.

Yes, that’s right: after acknowledging the limits to Federal Reserve policy (“while monetary policy can help, it does not address all of the challenges that low- and moderate-income workers are confronting”), Raskin looks beyond capitalism for a solution:

The Evergreen Cooperative in Cleveland, Ohio, is an example of a network of worker-owned businesses, launched in low-income neighborhoods, to support local anchor institutions. The cooperatives were initially established to provide services to local hospitals and universities that had agreed to make their purchases locally. This model is effective because it capitalizes on local production, and because it forges a local business development strategy that effectively meets many of the anchor institutions’ own needs.

It’s also effective because, in the midst of the Second Great Depression, the model of worker-owned businesses represents an alternative to the economic and social system that has failed us so badly in recent years.

Lemon socialism

Back in the day, we called it lemon socialism—when workers were allowed to take over or at least own some stake in enterprises that were failing. And we never thought it was a particularly good test of whether or not worker-owned enterprises were a viable alternative to capitalism.

I was thinking about this after I heard one of the exchanges between Bill Moyers and Richard Wolff last evening:

BILL MOYERS: But how do you answer this viewer? “In 1994 when United Airlines was on the brink of financial collapse a deal was made creating the biggest employee-owned company in the US. In 2002 the airline filed for bankruptcy.”

RICHARD WOLFF: My answer is the following and it’s very important. For workers to own something is one thing. For workers to become the directors of their own enterprise is something else. Worker ownership means for example, and we have lots of examples both in the United States and around the world, that the workers become in a sense shareholders. They are the technical owners.

But if the workers who become owners, and I’m not against that, but if the workers who become owners don’t change the way the enterprise is operated it remains a capitalist enterprise. It still has a board of directors, a handful of people who make all the decisions. It’s true that the workers may vote for who those people are, but they’ve left the structure of the enterprise in the old form, hierarchical, top-down. That’s what was done in United Airlines. I was involved in that. I actually know.

BILL MOYERS: How so?

RICHARD WOLFF: They called me in at a couple points to participate in some of the discussions, the International Association of Machinists, which was the union that was part of that. So they left the old capitalist structure, they weren’t willing to go beyond saying, “We, the workers, become owners, but we leave the running of the enterprise, the directing of it, the day to day decisions in the old form made by the old experts.” Part of a movement away from capitalism to a cooperative enterprise requires that the people of the United States stop believing that the folks at the top have some magical entitlement to give them that position.

To give a bit of history: United Airlines was losing a great deal of money in 1991 and 1992 (after taking over some of Pan Am’s operations during the 1980s and as a result of increased competition from low-cost carriers). So, in 1994, it created an Employee Stock Ownership Plan, through which United’s pilots, machinists, bag handlers, and non-contract employees came to own 55 percent of United’s stock in exchange for 15–25 percentage salary concessions, accompanied by a mountain of tax breaks. In May 2000 United went through a bitter contract dispute with its pilots’ union over pay cuts and concessions to fund the ESOP and overtime work. And it continued to lose money ($2.14 billion in 2001), leading to Chapter 11 bankruptcy in December 2002, when the ESOP itself was terminated.

Now, it’s probably true the unions could have done much more with their ownership share in United. But United created the ESOP not to make the transition to an employee-controlled enterprise but in order to raise capital to run the airline much as it had before, although on a lower-cost basis (because of employee concessions and the tax advantages associated with ESOPs). And, because of its finances, it was heading toward bankruptcy anyway. No employee decisions, at least in a short period of time, were going to overcome that.

So, in my view, United isn’t a particularly good example of the potential success but actual failure of democratic enterprises. It’s just an example of why the possibility of workers owning and controlling the places where they work needs to encompass much more than lemon socialism.

Economist of the day

Economist Richard Wolff returns to Bill Moyers’s television show (as a follow-up to his previous appearance) to discuss a democratic alternative to capitalism.

BILL MOYERS: Here’s a synopsis, Richard, of a lot of similar questions that bring us to your book,Democracy at Work: A Cure for Capitalism. A viewer who identifies himself as a longtime fan of Dr. Wolff writes, “You’re passionate about workers’ self-directed enterprises. Can you explain briefly why you think these are the way to save capitalism? Critics say your alternative may work in theory but not in practice.”

RICHARD WOLFF: My point is that workers ought to be– all of us who work in an office, a factory or a store—ought to be in the position of participating in the decisions governing that enterprise. And I do that not only because I believe in democracy. And let me say that if you do believe in democracy, it’s always been a mystery to me why that democracy that you believe in doesn’t apply to the place where you work. After all, five out of seven days of every week, most of your adult life, you’re at work.

So if democracy’s an important value it ought to be at your job because that’s where you are most of the time. And democracy at the job means the following. If you have to live with the decisions that are made in a job, what you’re producing, what technology’s being used, what the health conditions of your workplace are, what’s done with the fruits of your labor, literally whether your factor or your office continues, since you have to live with those decisions you ought to participate, the basic idea of democracy.

So I like the idea of cooperative enterprises because it fulfills my value commitment to democracy. Whereas a capitalist enterprise doesn’t because it keeps all the decision making in a tiny minority. We all who go to work have to live with their decisions, but we don’t participate in them, not even to speak of the community that has to live with the decisions.

But the second reason is I see concrete results coming from an enterprise that was run by the workers collectively, and let me give you a few examples. First, most of us believe that if the workers themselves made a decision that they would close the enterprise and move it to China, I don’t think so.

I think that the whole running away of enterprises out of the United States was made possible because the decisions to close enterprises here and to open them in another part of the world where you could get away with paying workers much less was a decision that was very good for the folks who make the decisions, but not for the average workers there.

So if we had decision making made by the workers in place they wouldn’t undo their own jobs and they wouldn’t move. And that would make a very different economic system from the one we have today. Second example, suppose a technology was being considered by the corporate heads who make the decision, the board of directors, and it was one that wasn’t safe, it created too much noise, too much air pollution, despoiled the water, whatever. If it’s a bottom line decision of the typical sort the board of directors and the shareholders seeing profit using that technology might go ahead and use it because it’s profitable and that’s what they’re called upon to do, make profits.

If the workers collectively made the decision knowing that they had to breathe that air, they had to hear that noise, they had to live with that water and so did their spouses and their children and their neighbors, I bet you you’d get a different decision because they would weigh the costs and benefits of that decision differently. And my third example, although I could give you many, Bill, if you want them.

The third example, when it comes to deciding what to do with the profits, suppose instead the workers themselves made that decision democratically, how do we divide the profits?

You think they would give a handful of top officials wild sums of money to buy $40 million apartments on Fifth Avenue while everybody else was having to borrow money to get their kids through school? I don’t think so. I think that people collectively would distribute the wealth more to some than others for all kinds of reasons, but they would do it in a much less unequal way than we have in a capitalist system.

So I challenge all of those who are concerned with a more equal system, with less inequality, to come up with a better way of achieving it than having workers be in a position to make the decisions as to how we divide the profits because that is the single most important determinant of the inequality of income in our society.

 

Cooperatives and football

 

In this, the International Year of Cooperatives, it is worthwhile imagining noncapitalist, cooperative ways of organizing many different dimensions of economic and social life—including the “beautiful game,” football.

Choose your capitalism

Eduardo Porter [ht: sm] is right: this election is all about what kind of capitalism we want.

In trying to reconcile the entrepreneurial spirit that the American brand of capitalism provides with its social costs, American voters must choose between Mitt Romney, the businessman who offers to move the economy forward by making government smaller and more efficient, and President Obama, who offers the government as an agent to assist the less prosperous, to put a thumb on the scale on the side of the have-nots.

What’s amazing is that, given the spectacular failure of the U.S. form of capitalism, the polls are indicating a very close election.

Yet for all the riches we have amassed, by the O.E.C.D.’s calculation, the income of Americans of working age in the middle of the distribution has grown less since the mid-1980s than in virtually every other developed nation. Perhaps unsurprisingly, we suffer from some of the worse social ills known to the industrialized world.

It is not just that income inequality is the most acute of any industrialized country. More American children die before reaching age 19 than in any other rich country in the O.E.C.D. More live in poverty. Many more are obese. When they reach their teenage years, American girls are much more likely to become pregnant and have babies than teenagers anywhere else in the industrial world.

We understand the importance of early childhood development. Yet our public spending on early childhood is the most meager among advanced nations. We value education. Yet our rate of enrolling 3- to 5-year-olds in preschool programs is among the lowest among advanced nations. Our 15-year-olds place 26th out of 38 countries on international tests of mathematical literacy, according to the O.E.C.D. The first nation to understand the value of widespread college education, the United States has dropped from the top to the middle of the pack of our economically advanced peers in terms of college graduation rates.

The American way has produced a high-tech health care system that offers sophisticated cures for those who can afford them, yet is astronomically expensive and poor at combating many run-of-the-mill ailments, and leaves millions uninsured.

Our safety net — to protect the most vulnerable from globalization’s ravages — is threadbare. Where would you rather lose your job to cheap competition from China? In the United States you would lose health care, too — unless you had the money to buy private insurance. If you were the breadwinner in a family of four earning the average wage, benefits would replace only 52 percent of it, even including any extra welfare payments you were entitled to, the O.E.C.D. found. And they would drop to 37 percent of your last wage after two years tops. In Britain, by contrast, you would still receive over 70 percent of your wage for 60 months after you lost your job. And your health care needs would be addressed by the public, universal National Health Service.

A particularly telling statistic speaks of how we deal with social dysfunction: there are 743 Americans in jail for every 100,000. That’s more than in any other country in the world, according to the International Center for Prison Studies. The next country down the list is Rwanda, with 595.

Social ills like obesity and child mortality have, of course, multiple and complex causes. But the battery of dismal statistics suggests, at the very least, a troubling pattern. Yet though we seem to suffer more than our fair share of social ills, by the O.E.C.D.’s calculation our public spending to address them is smaller as a share of the economy than in any other country in the developed world.

Unfortunately, there’s a third option not even on the table in this election: an alternative to capitalism.

Where capitalism doesn’t kill

 

Apparently, there’s a place where capitalism doesn’t kill people early: the Greek island of Ikaria [ht: bn].

 Seeking to learn more about the island’s reputation for long-lived residents, I called on Dr. Ilias Leriadis, one of Ikaria’s few physicians, in 2009. On an outdoor patio at his weekend house, he set a table with Kalamata olives, hummus, heavy Ikarian bread and wine. “People stay up late here,” Leriadis said. “We wake up late and always take naps. I don’t even open my office until 11 a.m. because no one comes before then.” He took a sip of his wine. “Have you noticed that no one wears a watch here? No clock is working correctly. When you invite someone to lunch, they might come at 10 a.m. or 6 p.m. We simply don’t care about the clock here.”

Pointing across the Aegean toward the neighboring island of Samos, he said: “Just 15 kilometers over there is a completely different world. There they are much more developed. There are high-rises and resorts and homes worth a million euros. In Samos, they care about money. Here, we don’t. For the many religious and cultural holidays, people pool their money and buy food and wine. If there is money left over, they give it to the poor. It’s not a ‘me’ place. It’s an ‘us’ place.”

What an idea!

Capitalism and “predistribution”

Chris Bertram beat me to it.

After following the insipid Ayn Rand-inspired debate about “moochers” and “producers,” and learning that nearly all Americans (96 percent) have relied on the federal government to assist them, I was going to argue that it’s time to move beyond the distributive and redistributive implications of government programs to discuss the prior, “predistributive” effects of capitalist production.

Bertram reminds us of Marx’s “Critique of the Gotha Programme“:

Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labor power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?

Bertram then explores the implications:

This standard social-democratic response to capitalist inequality – welfare-state capitalism – has a lot of drawbacks. Not only does it fail to address the basic causes of inequality; it also puts in place, on a permanent basis, a politics of envy and resentment in which “makers” (tax-payers and self-styled “wealth creators”) are pitted against “takers” (scroungers and “welfare Queens”). Rentiers and coupon-clippers, the very people Marx saw as parasites, can form political alliances with hard-working ordinary people against “dependency culture” as an all too human reaction to the state seeming to come along and take away their money to fritter on the indolent and wasteful. Nor does the litany of plutocratic moaning stop there: by taking money off “entrepreneurs”, the state takes away their incentives and makes it harder for them to make the right investment decisions. The ideologists of the free-market right – people like Nozick and Hayek – are successfully tapping into some deeply embedded images of how our societies work.

Bertram heads in the direction of Rawls. In my view, we might be better off if we began to imagine different ways of organizing production, including the enterprises where the surplus is “predistributed” from workers to capitalists, and then redistributed to still others who, as Marx wrote, share in the booty.

A different initial distribution would result if the direct producers themselves appropriated the surplus. It’s not that the workers would keep all the surplus (as Marx also explained in his 1875 critique). But such a noncapitalist “predistribution” would require a very different set of subsequent distributions, and therefore a fundamentally different kind of state.

 

After capitalism

 

[ht: ms]

For an alternative animation of this piece narrated by John Holloway (which is the first in the Guardian’s new series, After Capitalism) click here.