So 47% of American have said they will vote for a socialist and that is with most people having almost no understanding of what the traditional definition of socialism is in America because of an educational system which failed almost everyone because of the Red Scare in the 1950s.
Socialism is not merely some idea advanced by Karl Marx, and it IS NOT the state ownership of the means of production. That is state capitalism as Lenin identified the system of ownership the Bolsheviks implemented in the former Soviet Union. Lenin considered the revolution incomplete and Stalin said they had done enough because he needed to placate a population facing hardships and preparing for a likely war with Nazi Germany. Stalin's decision to accept state capitalism as socialism has confused the definition of the word ever since.
Traditionally, socialism is much more in line with the thinking of libertarian intellectual John Stuart Mill. Mill, the author of "On Liberty" argued in his book, "The Principles of the Political Economy" for a market economy dominated by worker owned cooperative enterprises, managed upon the principle of one worker, one vote, with profits being distributed to the workers in accordance with the percentage of total hours they worked.
Mill argued that capitalism enslaved workers as much as traditional slavery did, and it is hard to disagree with his logic. In the capitalist system, the majority of people spend their waking life working, and answerable to an autocratic boss who reaps the majority of the rewards from their labor. Even President Lincoln acknowledged that labor was superior to and preceded capital creation, which was amongst the reasons he so strongly opposed slavery.
If Abe Lincoln and one of the intellectual forefathers of libertarianism both support democratic enterprises owned by workers in a market economy -traditional socialism, then perhaps socialism deserves some more consideration by the American people.
Socialism is not government ownership of enterprise, that is state capitalism, and its failure rate is as bad as traditional capitalism. 90% of traditional capitalist enterprises fail within the first five years and 90% of those that survive five years fail by year ten. Based on the limited data available from cooperative enterprises in the US, but in particular the Marcora Law cooperatives in Italy, the failure rate for cooperative enterprise is only about 10%.
The best example of cooperatives and their success are the Mondragon cooperatives in Spain.
Mondragon started in 1956 with 6 worker owners making paraffin heaters, and within 2 decades had more than 17,000 worker owners. At the time it started the Basque Region of Spain was one of the most depressed regions in Europe. Today the Mondragon cooperatives have more than 100,000 worker owners, each with approximately a half million dollars in equity in the company on average. The average Mondragon worker also earns on average 40 percent more than the average European worker. The company has rules which limit the salary of the highest paid worker with a formula that prevents them from earning more than 5 times the amount of the lowest paid worker.
The Mondragon cooperatives run their own bank, manage technical schools and a university. They own and operate 14 world class research and development centers that Microsoft and GM both pay for the privilege to work with and gain insights from their cutting edge research. The cooperatives operate their own private unemployment benefits plan because as worker owners they are ineligible for government benefits if they were to become unemployed, BUT even when a major portion of the cooperative suffered a bankruptcy because of the bad timing of a new factory investment, they have never laid off a worker owner.
The bankruptcy happened because they had just taken out a large loan to build a new state of the art factory in Poland before the finanicial crisis hit. The crisis caused housing starts to evaporate in Europe, and their appliance manufacturing wing Fagor had almost no sales of washers or refrigerators because of the general economic conditions which made loan repayment a losing proposition. The cooperatives were able to reassign the 5600 worker owners to other cooperatives, or provide retirement packages too all of the displaced workers.
The Basque region today has the lowest unemployment rate in Spain and is one of the wealthiest regions in Europe. Most economists attribute the region's success to Mondragon's reinvestment in the community.
The cooperative/socialist economic model practiced by Mondragon proved so successful that in Cleveland, the local leadership has been working with key anchor institutions to help develop new worker cooperatives to supply needed goods and services for institutions such as the Cleveland Clinic and Case Western Reserve University which spend $3 billion annually on goods and services as an economic development tool. This approach has been called the Cleveland Model and the first three Evergreen Cooperatives have experienced some adversity, but are proving themselves successful.
Ohio Solar was profitable within months. The company installs solar panels on not-for-profit institutions facilities and takes advantage of tax credits to do so as a for profit enterprise, then resells the power to the not-for-profits at a discount rate. During the winter months, they winterize low income housing. Evergreen Laundry, cleans linens for local hospitals, hotels, and other institutions. It is one of the most energy and water efficient laundries in the nation. The only one of the three initial cooperatives to suffer a hiccup was the Greenhouse, which produces specialty lettuces and vegetables grown in a large hydroponic greenhouse. There was a brief period when they needed to secure additional distributors to purchase their food before they were breaking even and beginning to show a profit, when management changes were made. Shortly after new managers were brought into the company new contracts were secured and the greenhouse is doing well since securing those contracts.
In Italy, the government has used and encouraged worker owned cooperative enterprise with their Marcora Law. Since 1985, when a worker becomes unemployed in Italy, if they can find 4 other unemployed workers who want to start a cooperative, they can get their entire unemployment benefit in a lump sum. With a 90% success rate, these worker cooperative enterprises have been a beneficial economic development tool in Italy at a cost equal to unemployment benefits that would have otherwise been paid out. The US has tried a similar approach to unemployment benefits for entrepreneurial activities for some workers here on a limited basis, but offered no where near as significant support for worker owned enterprise as Italy, and the US has never offered the lump sum approach to provide adequate startup capital.
You've heard about some successes and some government efforts at the edges to encourage these kinds of enterprise, but what are the collateral benefits?
In a capitalist enterprise when the company can make more money by moving a factory to Vietnam, there is a duty to the shareholders, for the board of directors, at least as present US law is written, to make more money for their shareholders, so the chances are pretty good that they will move the factory from America, leaving workers desperate and unemployed. In a worker owned cooperative the same results would never happen, with a possible exception occurring when the workers have a new opportunity that they want to pursue which could be made possible by creating a new cooperative in that foreign jurisdiction. I mean seriously, are you ever likely to vote to have your place of employment close if it is profitable, and able to pay a livable wage?
In a capitalist corporation when the board of directors is asked whether or not to pollute the area of a factory they own, and that board lives one thousand miles away from the factory, their own health and their family's health is never factored into their equation. The same is not true of a democratically controlled worker owned cooperative. The workers and their families live in the community. They will value their health and the health of their family and their community above the short term profits they may make most of the time. In close cases where the risks of harm are small, and the costs are great, the results might differ, but most of the time, workers will vote for the safer measures, even when they are more expensive.
Now let's consider the impact of the worker owned cooperative model on income inequality. If the workers own and manage a business, are they going to pay a CEO a massive salary at the expense of their own economic gains? No! This business model results in a much fairer distribution of wealth by the very nature of the enterprise.
Let's consider the strategic advantages of the worker owned cooperative enterprise over a traditional capitalist corporation. In a capitalist company you are hired to do a job for the lowest wage an employer can pay you and accomplish their desired results. They pay you just enough to show up and you do your job, but the majority of employees do not care about the success of the business beyond its ability to pay them a paycheck. They are not vested in the company's success. In a worker owned cooperative, productivity goes up dramatically because when the company succeeds the workers know they will earn more and do better financially. Their interests and the company's interests are completely aligned. The worker owners of a company are more likely to smile at work, because of the pride of ownership and when they are dealing with customers, they know making the customer happy helps them in not only the short term, but long term.
Are their limits on this kind of enterprise? Yes, presently raising capital for new investments is difficult, but not impossible. New regulations could help ease that issue. Some exemptions for worker/consumer hybrid cooperatives to the securities law would help financing the startup of cooperatives. Better funding for the federal cooperative bank to finance additional cooperatives would also likely be helpful. Activist community leaders taking a more active role in the management of credit unions and creating cooperative friendly loan policies would also probably prove useful in the development of new cooperatives in America. Adopting the Marcora Law here in the United States and publicizing it to unemployed workers, especially displaced factory workers could prove very useful in terms of growing cooperatives here in the US.
The other great disadvantage presently is the fact that capitalist enterprises, and in particular enormous capitalist enterprises dominate our business community. The size of capitalist enterprises in the US and their monopolist or oligopolist practices hinder competition from most small enterprise, but given the difficulties in financing cooperatives, it presents an even greater challenge.
Sensible disincentives in the tax code for capitalist enterprise coupled with sensible incentives for cooperatives could start to change that reality. In addition to an American version of the Marcora law, local governments working with local institutions to deploy the Cleveland Model in communities around the country could also begin to change the reality on the ground.
The cooperative business model encourages local reinvestment. The stimulative effect of this new economic model could rapidly improve the U.S. economy.
As final food for thought, if Apple -you know the phone and computer manufacturer-operated as a worker cooperative, each of its 98,000 employees would have on average taken home as percentage of the companies profits last year, about US $400,000.
Imagine Ford, General Motors, Chrysler, Caterpiller, McDonald's, Walmart, or other major businesses run in a similar manner and the impact that would have on wealth inequality in America. With approximately one million employees, and around $14 billion in annual profits, the average Walmart employee would see a $14,000 bump in earnings under the worker cooperative model. Even if most of those earnings were retained by the company for reinvestment and only $2,000 per employee were recirculating through the economy as dividends paid to worker owners it would have a massive economic stimulus effect.
While it may be impractical to convert all large enterprises into worker owned cooperatives, we have the ability through regulatory reform to give workers a greater say in the management of large companies in America almost immediately, and over time, we have the ability to encourage conversion through tax policy. Corporations are a creation of the state, and nothing precludes Congress under the Interstate Commerce Clause from requiring corporations with 500 or more employees from having those employees elect 50% of the company's management. Germany has similar requirements, why doesn't the United States?
The US charges citizens seeking to avoid US taxation who renounce their citizenship an exit tax equal to 50% of the value of their estate, why don't we as Europe does, charge corporations seeking to close a factory or other facility and move it overseas charge that corporation the value of the subsidies the federal, state, and local governments have given them over the years as an exit tax? Why don't we have a similar rule for corporations that domesticate overseas in a non-tax jurisdiction such as the Bahamas or Bermuda that we have for citizens who renounce their citizenship? If corporations are people, when they seek to avoid taxes by renouncing their American status, shouldn't we treat them like we treat citizens who do the same thing?
We have the regulatory and tax tools to transform our economy to work towards greater equity and greater democracy, so do you agree? Can we do better than Capitalism?
I've already suggested that worker cooperatives have productivity gains and efficiencies that capitalist companies will never enjoy, but I want to give you a concrete example.
New Era Window and Door is a Chicago company that in late 2008 was the site of a worker strike for back pay that made national headlines in December. Shortly thereafter it became a worker owned cooperative, in competition with their former capitalist employer who reorganized. When moving their equipment to a new cheaper factory building, they spent about $100k less than the professional movers estimated it would cost them to move their equipment, and they did it in about a half of the time, with about half the equipment the professionals estimated would be necessary. That's what happens when a worker owner is doing something to make their business succeed. They do it much faster, and with a lot less expense.
It is amazing how much better workers with a vested interest in a business perform. Just think about that the next time you experience lousy customer service somewhere.