Capitalism is the Enemy of Democracy

Originally published at

Perhaps the most significant accomplishment for #OWS to date is that the occupiers have managed to poke a hole in the legitimacy of neoliberal capitalism and its central claim that unregulated markets provide opportunity and freedom.   They have accomplish this feat in a surprising way, with their persistent presence, and with home made signs, signs that say things like, “If I had a lobbyist, I wouldn’t need this sign.” Occupy Wall St. has poked this hole by having the audacity simply to gather in public, in bold defiance of the police and to demonstrate, by their solidarity and cooperation, that a different world is possible.


Phil Rockstroh puts it this way: “the walls of the neoliberal prison are cracking…We are no longer isolated, enclosed in our alienation, imprisoned by a concretized sense of powerlessness; daylight is beginning to pierce the darkness of our desolate cells.”

At the core of this neoliberal ideology is a simple assertion – economic exchanges promote freedom because they are voluntary, and thus they only occur if both parties believe they will benefit.  Unregulated market exchanges thus allow individuals to engage with others in complex social arrangements without coercion, without impinging on individual liberty.  Government is needed, but only to define and enforce property rights, and to create and regulate the currency individuals need to undertake market exchanges.


Liberals, who argue for expanding government in order to regulate or oversee individual exchange, necessarily interrupt these free and voluntary agreements and therefore undermine individual liberty.  This view of markets underlies Reagan’s famous dictum: “Government is not the solution to the problem; Government is the problem.”  In this extreme libertarian view, capitalism is the champion of democracy, the champion of freedom.


The flaw in this neoliberal reasoning is not hard to see.  Ownership of wealth obviously confers power; it gives some individuals an upper hand in the ‘voluntary’ exchanges they make with others.  Lacking the means otherwise to support ourselves, most of us must hire out our ability to do work in exchange for wages.  We might do quite well if we are educated and talented, lucky or white, but even so, we ultimately produce more value than we are paid – that is, after all, the reason we are hired.  Wealth ownership thus gives an upper hand to employers in these voluntary exchanges.  The extra value we create flows steadily into the hands of wealth holders, and we don’t have a say over what it is used for.


This upper hand in these so-called voluntary exchanges provides an ongoing and increasing source of wealth accumulation that is self-reinforcing.  Money begets money.  That is after all what capital is, money advanced for the purpose of making more money.   Excluding people from having a say over what happens to the wealth we create is the first, and the most fundamental, way that any capitalist system undermines democracy.  We are fundamentally disenfranchised in the places we work.  Wealth owners control the levers of investment and thus the “needs” of capital trump those of workers when it comes to making decisions about what gets produced, how and for whom.


Beyond this, neoliberal capitalism goes further – it uses the value you and I create to enforce a virtual dictatorship-by-wealth in the political sphere.   The most obvious manifestation of this dictatorship-by-wealth is the unlimited corporate financing of our elected representatives.  But this financing is only the tip of the iceberg.  Not only must candidates pander to corporate interests to successfully raise the funds needed to run for office, once they are in office they are plied and courted with unrelenting advances designed to ensure that they do not do lose their focus and begin to think about something other that promoting a favorable business climate.


Even deeper in the subsoil of this treasonous takeover of our democracy is the ownership and influence over the main vehicle of public discourse, the news media.  The manufacture of consent is accomplished by narrowing the acceptable range of debate to the question of how best to support economic growth (read profits) and American imperialism (read war).   Where do the millions, or billions, that candidates raise end up?  Primarily this money ends up in the coffers of the corporate media – campaign advertising is the single most important source of revenue for the corporate media.


So it is an odd fact of American life, that capitalism is equated with democracy while at the same time acting as democracy’s most corrosive force.  But think about it, if capitalism really supported democracy, if it really welcomed open, honest, wide-ranging debate about the values and practices of corporations and their elected representatives, why would they be sending their police in with bats and pepper spray to prevent the free open exchange of ideas?  Why would they not be handing out microphones, providing open access to the airwaves, organizing televised debates?  If capitalism really were the champion of democracy, the Occupiers and their many allies would be celebrated.  Instead we are disdained.


The corporate elites fear and resist any questioning of their core beliefs because their ideas do not hold up to scrutiny and reasoned debate.  That’s how we all know – capitalism is the enemy of democracy.


But is there any alternative?  It is tempting to think that if we can only regulate capitalism effectively, we can harness its virtues and contain its vices.  In fact, there is some evidence to support this view.  The 99% were much better served in the post-war era in the United States and they continue to benefit from efforts to reign in capitalism’s excesses in Scandinavia and Northern Europe.  But these efforts to regulate are under constant attack, and a return to regulations is ultimately a brief inconvenience to the corporate elites.


As Richard Wolff and others have noted, as long as the value you and I create is credited to the owners of capital, these owners have both the means and, given their distorted values, the incentive to undermine and neutralize any effective regulation and oversight we attempt to impose.  Capital will continue to corrode democracy, as certainly as oxygen corrodes iron, as long as a few hold sway over investment and jobs and are committed to using the wealth that we generate to undermine the will of the people.  In the words of Supreme Court Justice Louis Brandeis, “You can have wealth concentrated in the hands of a few, or you can have democracy; you cannot have both.”


Fortunately, a proven alternative to corporate capitalism already exists.  For over fifty years it has provided a practical example of how we can extend democracy to the workplace as a means of preserving democracy in our political lives.  The basic idea of this experiment is to address the root of the problem, to uncover the means by which capitalism undermines democracy, and to provide new institutional rules governing how we organize our economic lives.


Over fifty years ago, the Mondragon Cooperatives in northern Spain developed their poverty-stricken regional economy by developing worker-owned and managed cooperatives.  Co-ops place the ownership of wealth and the decisions concerning how wealth is invested in the hands of the people who produce the wealth.   These institutions recognize that the wealth generated by an enterprise is the result of the collective efforts of all, and that those most affected by the decisions of the enterprise, workers and community members, ought to have the principle say in what happens to the wealth, how it is distributed and the purposes to which it is put.


Many people argue that co-ops are impractical but this simple democratic principle rests at the heart of this highly successful, internationally competitive, stable and flourishing regional economy.  It is an economy based on democratic management, worker ownership and democratic oversight and it faces its own challenges, yes, but has certainly proven the lie that there is no alternative to corporate capitalism.  It shows that people, acting together, can use democratic principles to imbue their economic lives and their political lives with agency and meaning.


And this effort is spreading to America’s heartland.  The Evergreen cooperatives in Cleveland have successfully applied the principles of the Mondragon experiment to develop a successful urban development project.   As Gar Alperovitz argues, the linking of large anchor institutions with worker-owned enterprises offers a practical economic development strategy that is politically feasible in the context of our current economic crisis.


Many people are uncomfortable with the idea that working people can do without their corporate bosses.  Quite a bit of time and energy has been spent trying to convince us that the idea that workers can manage themselves is preposterous.

Occupy Wall St. has provided the opening for us to consider, debate and discuss what has previously been off the table.  Economic democracy is not only possible, it is essential if we are to realize that peculiar American Dream of a government of, by and for the people.

So let’s not overlook the significance of what Occupy Wall St. is doing.  We need to step through the hole they have opened in the shiny façade of our glad-handled, Madison Avenue, faux democracy and take up the challenge of creating the real thing, right here and now, in this unlikely place we call America, as a means of reclaiming our own dignity, our own liberty and a livable world for those who come next.



Occupy Cherry Alley Interview with Mark Lawrence and Robin Jarrell

This interview highlights the importance of worker participation in corporate decision-making and the connection between Occupy Wall St. core principles and Christian values.  Robin Jarrell is rector at the Diocese of Central Pennsylvania.


A Change of Life

Yeah, it’s mostly truckers, I guess, though

I don’t always know – how could I? – but don’t

Buy that bullshit that they’re all the same.

Sure, some are “slam-bam, thanks ma’am,” but not

All, and maybe even those guys are driving

Tight to the hour, their bosses holding damn

Stop-watches on them.  They may look raw and mean

On the road, but they’re slaves like the rest of us.


Anyway, this sure beats working the check-out.

There, your feet about ready to drop off by

The end of the day, your head full of numbers,

Bargains, coupons, all the dopey housewives.

With a bum salary, no benefits, forget about

A union.  I decided the market’s for idiots.


Took this up a couple of years ago.  We live

Just off the interstate in a nice house,

And one day I thought, “why not go into

Business for myself instead of busting ass

For the rich ones?” So I drove down to

The terminal, let it be known I was free

Form 10 to 5, Mondays through Fridays.

Sounds almost official doesn’t it? No time

Before a guy or two showed up, a little shy

At first, but I made them easy.  Soon after

Too many came, bumping into each other, and I

Had to figure a way of making things clear,

So I bought this American flag in a yard sale,

And when I put it in the window it meant

That I was “free,” get it?  I took it down

When I had a customer and they caught on real

Fast, sped on to Ontario or Ohio, somewhere.


All those dumb years I didn’t understand

That I was sitting on a fortune.  That’s changed,

Of course, I’m not really rich, but I can buy

Pretty much whatever I want and share some

Of my money around, and I think I truly am

Free.  At least, I’m my own boss these days.


From Irreplaceable You and Other Poems

By Karl Patten




I seldom write in the voice of a woman, but sometimes it’s tempting and necessary, as in “A Change of Life.”  I well know the basic elements here.  Each week we shopped at a supermarket and one of the check-out people was an attractive woman in her thirties, and by the highway we used was a house which frequently had a truck parked outside.  I put these two simple facts together to create the poem.  No doubt I had back in my mind those Godard films of the sixties in which Parisian housewives became prostitutes.


Once I heard the woman’s voice in my head this was an easy poem to write, for she could merely tell her story, which allowed me to speak for the oppressed working class, both the check-out woman and the truckers.  The detail that surprised me here was the flag bought at a yard sale; I had not anticipated this when I began the poem, and it delighted me (this was only a few years after Bush’s hysterical patriotism).

If Obama were a Socialist

Obama favors a public option to provide most Americans with health insurance; for this he has been labeled a socialist. In fact, what Obama is suggesting is a far cry from socialism. Here is what Obama would be saying and doing if he were a socialist.

If Obama were a socialist he would try to change the system of property rights that allows wealthy individuals to own the means of production on which we all depend for our livelihoods. He would argue that by owning and controlling these means of production, the wealthy are able, systematically, to take advantage of us as working people.

If Obama were a socialist he would point out that each of us, in our work, produces more value than we receive but that this extra value becomes the property of the owners of the firms. For example, according to the Bureau of Labor Statistics an unskilled manufacturing worker in the U.S. produces about $160,000 of new value annually and receives $30,000 in wages. The extra value of $130,000 is claimed by the owners and used to meet the operating expenses of the firm. As working people we don’t get to participate in decisions concerning how the extra value we create is used. We also don’t get to participate in decisions concerning how the work we do is organized or how much of the value we create we get to keep.

If Obama were a socialist he would know that owners comprise a very small segment of the population and their ability to confiscate this extra value allows them to make themselves wealthier at our expense. The very wealthy, just a sliver of the population, own and control most of the business wealth. It gives them enormous power and placing us, the working people who created that wealth, in a situation of subservience. Milton Friedman, Ronald Reagan and other advocates of capitalism celebrate ‘free choice’ and ‘freedom from tyranny’ but in reality, those who control the extra value we create have considerable power over the rest of us – power to determine how the workplace is organized and controlled, power to influence the laws that regulate the market, power to withhold access to the means of production on which we all depend if their interests are not being served. If Obama were a socialist he would work to reduce or eliminate the influence of these owners on our elected representatives and on the powerful constituencies of government including the military and prisons.

If Obama were a socialist he would try to change our undemocratic and exploitative system by giving working people a say over how the extra value we create is used and by giving us real influence in politics. He would advocate for publicly funded elections so that we could elect representatives to take real steps to curb corporate power. He would also argue that we have a right to participate on the boards of directors of firms because the extra value we create results from our work effort and thus should belong to us. He would say that when you or I do something or make something we ought to have the right to have a say in what happens to it; if we are denied that right we are being treated as an object, not as a subject imbued with a conscience and a will. He would point out that giving working people these rights is entirely feasible, as has been demonstrated by the productivity and viability of worker-owned enterprises both at home and abroad. If Obama were a socialist he would want to use his considerable influence to convince working Americans that we are being duped when we think our system is democratic or that it makes us free.

Obama is not a socialist. In the health care debate he is not fighting the stranglehold that insurance and drug companies have on politics. He is not arguing that doctors, nurses, technicians and staff should own and operate hospitals; that insurance companies should be run by the adjusters themselves, or even that as citizens and taxpayers we have a right to form a state-run single payer health insurance provider – a right that is enjoyed by working people in every other industrialized nation.

You may not like what Obama is doing; you may not approve of the modest protections he is trying to include in our wasteful and immoral privately owned health care system. But don’t call him a socialist.

What is a Progressive Bookstore?

submitted by Charles Sackrey

This article follows up a related story by David Kristjanson-Gural in The Guardian on May 9th about the Mondragón Co-op Bookstore and Meeting Place in Lewisburg. In the earlier piece, David explained that we named the bookstore to honor a network of democratic workshops that emerged in northern Spain in the 1940s and now constitutes a global firm whose operations are controlled by its 40,000 worker-members. Using the Mondragón co-op as the model, our members pay monthly dues and receive an equal vote in operating the bookstore. We solicit the donation of books that, as we describe in our Mission Statement, “support the progressive ideals and practices of democracy, and the democratic rights of all people.” We also say that we offer books to adults and children that “tell the story of the struggle to bring those values to life, and that help sustain and enhance that vision.” For the past few months, I have coordinated efforts of a small cadre of members to gather, categorize, select, and shelve books for the grown-up section of the bookstore (and, I am confident that they would agree with the gist of what follows). As the books have poured in they have represented a wide range of genres and have been of every imaginable shape, color, length, breadth, and depth. Soon, we had many more than we could put in our shelves and were faced with the tough task of picking those that most appropriately embodied our mission. Tough job, indeed. Before we started, I assumed casually that a “progressive” bookstore would contain predominately the usual fare of political and social commentary, including tomes from Marx, Engels, and like- minded writers. It would also have relevant history, biographies of famous allies, and other accounts of a point of view that we wanted to encourage our readers to consider. Of course, rounding it all out would be a few shelves of literature and art books that complemented the others. However, the majority of the books donated early on were from the libraries of literature professors and were thus mostly novels, drama, poetry, literary theory, and philosophy. We also received about 200 books from a retired high school art history teacher. And, to add to this mix of materials, co-op members accepted the proposal by The Guardian’s jazz critic, Jonah Walters, to compile a collection of LPs for the store, most of them jazz and folk music. While we were sifting through this material to determine what to use, I began to fashion in my mind an expanding notion of how a bookstore might best spread the word about democracy. I came to see the word itself – democracy — as an increasingly limited way to express the longing for liberation and freedom, and the struggles to get there. One of the first books I retrieved from a box of donations was Hemingway’s A Farewell to Arms, given to the bookstore by the family of Lou Casimir, an old friend. This book is based on Hemingway’s World War I experiences, and as the story ends, its narrator and principal character, Lt. Henry, is leaving a hospital where his new son was stillborn and his great love, Catherine, has died giving it birth. The last sentence of the book goes like this: “After a while, I went out and left the hospital and walked back to the hotel in the rain.” No explanations, no excuses, no blame, just a walk back to the hotel in the rain; just eighteen words fit for a lovely poem. I was absolutely stunned by that ending and that last sentence. And until I had read the book, still in my mid-twenties, I did not know that a novel could leave me needing to stand up and get more air. Thus, picking up that donation from an old friend began to sharpen my view of what kinds of books should be in the bookstore. It was also a vivid reminder of why, when I finished getting an M.A. in economics, and before entering the PhD program in that field, I considered switching to literature. By that time, the thrill was gone with economics, to put it mildly. I had come to believe that no social analysis or commentary could describe as well such aspects of life as Hemingway’s implicit argument that necessary to our freedom – at work, home, or anywhere — was an ability to keep on trucking in the face of the bitter losses that make up so much of life. A very big lesson, indeed. Regarding novels, recently I read Ann Pancake’s Strange As This Weather Has Been (2007). In it, she describes the struggle of a West Virginia family to withstand the assaults of vast mountain-top removal operations by coal companies. Pancake’s telling of this story breaks and lifts your heart from page to page and can make you weep with admiration for the grit of this family’s efforts to protect its past and its pride against truly heartless adversaries. I’ve read other accounts of mountain-top removal, yet until I read this novel I remained emotionally distant from what it really means to have one’s world shredded by rapacious coal companies and their enablers at every level of government. Good literature (good, if it works for you), can do that sort of thing; it can take you from where you are and set you down in a place you never even knew was there. We have also been shelving many books by philosophers, including Existential and Human Emotions, by John Paul Sartre (1957) , and Albert Camus’s novel, The Plague (1947). I read Sartre’s book in the early 1980s, and he convinced me with clear and unapologetic prose of the idea that in a meaningless, godless universe – my own view of it, and one influenced by another philosopher, Bertrand Russell — I would come to be the person I am more by the walk I walk than by the talk I talk. That’s another useful lesson, if you care to learn it. In Camus’s novel, his protagonist, Dr. Rieux, ministers to the dying needs of the plague’s victims, some of them friends and loved ones. (One character says: “But what does that mean – plague? Just life, no more than that”). Each of the characters in the book reacts to the plague in his or her own fashion, and Dr. Rieux’s stance is engrained in a powerful notion, that “In the time of pestilence…there are more things to admire in men than to despise.” Reading Sartre and Camus suggested to me much that was useful, especially a plan about how to go forward with a progressive stance, at times even a radical one, amid the timid legions that peep from so many corner of the academic world. How, indeed, could a progressive bookstore not have shelves of books by philosophers? The books from the retired art teacher included a multi-volume set from the 1960s covering “great artists.” One of these volumes, about the French sculptor August Rodin, includes a section on “The Burghers of Calais.” The story behind this work, one of his most famous, is the Hundred Years War between France and England that ended in 1347. Having lost this struggle, the French government decided to abandoned its port city of Calais to the mercy of the English. The English King, Edward III, commanded that, in order to save the city, six of its most prominent citizens must come out of the city gates, with ropes around their necks, and the keys of the city in their hands. In Rodin’s statuary, the six men are gathered in a circle as they make their exit, apparently certain that they will be executed (they were actually later spared at the bequest of the English queen). The monument evokes unforgettably critical elements of life: fear, courage, resolution, the grim consequences of nations at war, and the corruption and mercilessness of power. The sight of the six men, each in his own way, add extraordinary depth to a written version of this story, and provide an unforgettable testament to the possibility of dignity in the harshest of circumstances. Regarding the LPs we offer to our customers. I do not know of any more moving demand for liberation and freedom than Beethoven’s Ninth (or Fifth, or Third) Symphony. Or is there a clearer call for freedom than in the whole corpus of music that comes to us from Black gospel singers and the blues? This music continues to shape much world music, and at its very heart is an insistent demand for liberation and freedom. Even the mournful songs about “She left me down and out, and maybe done in,” are cries for a kind of dignity that we all understand. Three years ago, Hugh Masekela, an influential South African jazz musician, made this point in the middle of a concert he gave at Bucknell. About half way through, he stopped, I think because he was provoked to comment on the virtually all-white audience in front of him. He said, simply, “If those Black musicians had not come north from New Orleans to Chicago, America would be the squarest country in the world.” Eventually, those Black brothers were followed on that path by rock musicians, such as the Beatles. Bob Dylan described their music as a brand new kind of joyful invitation to enter a place where the times are good and the spirit is free. For his part, Dylan exemplified the popular musician as poet and prophet, encouraging other songsters to write honestly about the angst of modern life, about its many injustices, and of course, about the heartaches that are the insistent traveling companions of love. Can anything better than a song make it more clear to us that we’re not alone with gains and losses, our woes and our joys? Throughout this selection process I have, for sure, maintained the view that our bookstore must have ample offerings from social theorists and commentators, and the historians, about all the things that matter. From the best of these writers we can learn about what people have done and are doing, and strategies about how to work for justice, to protect a fragile environment; and to make the world less violent and barbaric. Yet, for the reasons I’ve given, I have come to believe that we co-op members can best meet our stated goals if we add to this usual fare of the progressive bookstore the broad range of books and music that I’ve been describing. In the best of them, we always find people who share our own insatiable longing for liberation from the barriers to democracy and freedom. Won’t learning that lesson incline us to join them in a common struggle to strive for the freedom that we, too, want most of all? Last of all, because Mondragón Co-op Bookstore is a functioning democracy, I will send this article to all our members. I need to make sure that what our cadre is choosing for the bookstore is consistent with their views of what our collection ought to be. (I would like to thank Saundra Morris, also a member of the Mondragón Co-op Bookstore, who provided her typically excellent editing for this article.)

Why Mondragon?

What is a co-op?

A co-op is a group of people who come together to serve a purpose and who agree to govern themselves according to the principles of democratic participation. The goal of a co-op is to provide for some human need while at the same time creating a viable livelihood for its members. Realizing that value comes from human labor, a co-op naturally seeks to use its members’ labor well – not to waste effort. Co-ops act on what Thorstein Veblen called the instinct of workmanship – the natural human propensity to do things well. Recognizing that we exist in relation to others, co-ops also seek to create flexible work arrangements in order to allow their members the opportunity to care for others – their children, their elders, their neighbors and friends. And also to have time for reflection, creativity, worship and play. Co-ops seek, in other words to allow their members to realize their full human potential, through creative work, active participation in decisions and fulfilling relationships.

How can co-ops flourish?

The question naturally arises: why are co-ops not more prevalent? One common response is that they are more wasteful than authoritarian enterprises; that we need a strong leader to take charge, make decisions, to tell us what to do. Only then can we effectively compete in a global marketplace. Of course a democratic organization of work is threatening to powers that be in business and in government and every effort is made to disparage the idea that people can effectively come together to make decisions and organize their work lives. People who study co-ops, however, consistently show that this type of organization is, in fact, more efficient, mostly for two reasons. People are naturally motivated to work hard when they have a stake in the enterprise – this dedication and effort results in better products at lower prices. Second, much effort is wasted in authoritarian firms trying to monitor and manage people because they are excluded from decision making. When people are included this otherwise wasted effort is instead directed toward investment and product development and firms are much more successful.

All that is really needed for co-ops to flourish is this: a thoughtful consideration of the scale, scope and design of the co-op in order to avoid difficulties that naturally arise when people try to work together; a careful thinking through of the interrelationships among different types of co-op enterprises, be they manufacturing, financial, retail or service in order that these various types of enterprises might work together instead of being, as we currently see, at odds. In our economy while the first condition is sometimes achieved the second has not been and as a result worker co-ops are not prevalent. An example of how each of these two requirements for success in co-operative endeavors can be realized may be helpful to illustrate what needs to be done.

The Mondragon Co-ops

Mondragon is an example of a highly successful system of co-ops that has managed to realize these two important elements of co-op success. Each individual co-op is organized in a way that allows each worker to have a say in the decisions affecting the enterprise as well as having a say in the policies and regulations by which each of the co-ops abides. In so doing, Mondragon has created a highly flexible and effective organization of work. Instead of paying inflated salaries for executive officers, the workers in the co-op themselves elect managers to make decisions concerning the operation of the enterprise. These workers gather prior to their work hours, make the necessary decisions and then return to their positions as workers in the enterprise. In this way their experience on the shop floor informs their decisions as managers. They do not receive additional compensation for this effort but are rewarded, instead, by the additional responsibility and satisfaction associated with contributing to the firm. These savings accrue to the firm and add to its competitiveness.

Workers, as owners of the co-op, receive their dividends in the form of supplements to their stock ownership; in other words, a considerable part of the earning of the co-op is retained within the firm as equity and is therefore available to the firm for re-investment. Instead of having to pay outside investors, workers essentially pay themselves and these earnings remain available to the co-op until the worker retires and withdraws his or her investment in the form of a (surprisingly considerable) nest egg. Rules concerning payments for work, ownership, governance are discussed and modified by a general assembly of all workers in the co-op system.

Of course, it is natural for disagreements to arise whenever people act together to achieve some common purpose. In order to ensure these disagreements to not come in the way of the co-ops success, a number of further arrangements are needed. The co-ops are prevented from achieving a size that would interfere with co-op members being able to know each other and to develop some loyalty or affection for one another. The current limit of 500 employees, about the size of a small high school, allows for people to know each other. Successful co-ops that grow beyond this size are split into separate enterprises in order to avoid becoming too large to operate co-operatively. In addition, each co-op elects a number of workers to represent their interests to the elected managers, in case those managers fail adequately to take into account the implications of their decisions on the other workers.

Perhaps most importantly, workers attend schools that are based upon and teach co-op principles of cooperation. Without a commitment to cooperation, experience in cooperative learning environment and knowledge of cooperative principles workers are ill equipped to handle the challenges of self-government. But the Mondragon experience shows that when these conditions are provided, workers are more than able to handle the demands of competing in the global marketplace. Over the past sixty years, the Mondragon cooperatives have grown in size from a small handful of co-ops to represent an entire regional economy. They have yet to experience a single co-op failure. This remarkable record is largely due to the way the various co-ops within the system are designed to be mutually supporting, always striving for win-win solutions to the problems they encounter.

A key element of the interrelationships of the various types of co-ops (industrial, financial, retail and service) involves the representation of a wide spectrum of stakeholders on the managing boards of the various firms. The managing board of the bank, for example, in comprised of bank workers but also of workers from the industrial co-ops that they are designed to serve. The earnings of the bank workers depend in part of the profitability of the bank and thus the interest charged to the industrial co-ops for loans. The interest rate is itself tied to the profitability of the industrial co-ops; hence, if the industrial co-ops succeed, the bank workers also succeed.

To this end the bank has created a consulting division which meets with workers who wish to start a new co-op venture. Though a process of planning and problem solving the bank assists the co-op and continues to meet with its board of managers regularly over the first few years of operation in order to overcome any initial difficulties. The success rate of new co-ops is therefore due in great part to an alliance between industrial and financial capital that is quite strikingly different from what is found in authoritarian firms whose success is often linked to the demise of other enterprises. Similar relationships exist between industrial and retail co-ops.

A similar commitment to balancing the needs of the workers and the needs of its clientele exists in the other non-industrial co-ops. The managing board of the university is comprised of its workers but also in part by students in part by representatives of the other co-ops who require educated workers. Students work half-days in industrial co-ops and half-days in study in order both to help finance their education, but also to gain experience working in a co-operative enterprise. Workers who require retraining are paid to attend classes to obtain new skills, as are workers who are laid off as a result of the contraction or restructuring of a particular co-op. By directing the efforts of the educational co-op to the needs of the co-operative system, workers do not bear the burden of educational debt nor do they experience a loss in their livelihood due to unemployment. Instead the co-op system acts to provide opportunities for workers to advance and a strong safety net in the event that circumstances preclude workers from supporting themselves.

Health care, insurance, day care and other social services are organized in a similar manner, the principle being that those who are providing these services and those for whom the services are intended should act together to determine the policies and to manage the enterprises for the good of all concerned. In the authoritarian economy, in contrast, workers are excluded from participating in these decisions along with other important stakeholders. Managers are legally obligated only to serve the interests of the shareholders (although the managers own interests are rarely overlooked). Authoritarian firms thus externalize costs onto those who are unrepresented and internalize the benefits to those who already enjoy considerable wealth and privilege. It is no wonder that the authoritarian economy so successfully reproduces poverty and want, ecological collapse and the waste associated with planned obsolescence and conspicuous consumption.
Are co-ops the way forward?

I do not mean to suggest that co-ops do not also have their difficulties. In any co-operative enterprise there is a tendency for a core group of individuals to coalesce and attempt to have their interests prevail. Work may be specialized and monotonous and it may be difficult to distribute tasks in an equitable way. In Mondragon, co-ops have outsourced work to low wage countries in order to compete with authoritarian firms and the co-ops have been unable thus far to operate these firms as co-ops. To their credit, Mondragon is trying to overcome this obstacle by exploring the possibility of developing co-operative education centers in these low-wage regions. The continued success of the Mondragon co-ops however, belies the claims of those who say that co-ops are not a viable or desirable means of organizing our work effort. To the contrary, co-ops provide for the needs of their members because they are designed and directed to meeting these needs, rather than the needs of shareholders. That is the key difference and that is why co-ops continue to be denigrated, discouraged and ignored by those who favor an authoritarian economy.

The authoritarian economy may get back on its feet; it may resume its exploitation and disenfranchisement of workers, its rape of the ecosystem, its provision of mind-numbing tasks and its tireless destruction of relationship and community. It may even manage to do so in a less harmful and destructive way. But as long as work is directed in the service, not of workers, but of shareholders, as long as people are systematically excluded from decisions affecting their lives and their livelihoods, we will not have achieved the full measure of our humanity and we will continue to suffer for it. Joining a co-op may not be sufficient to bring the economy to sanity but it is most certainly a necessary step.

Keeping Jobs at Home: Give the Workers Control

by John Peeler (originally published by the LA Progressive November 20, 2008)

Robert Reich, writing on the LA Progressive (November 19, 2008), calls for a “Bottom-Up Bailout,” by which he means not aiding the auto manufacturers, but rather providing direct credit and loan guarantees to small businesses and individuals, and supporting those big companies whose managers and workers are willing to put up their own resources and to restructure the companies. That approach would certainly be better than what we’ve seen from an administration that is as much lame-brained as lame-duck. But we can do still better.

To right this listing economy, we must do more than rescue large corporations that are “too big to fail.” We must redress a gross imbalance between management authority and worker rights, and to give the government a fundamental role in defending the public interest. Corporations are publicly chartered institutions that are supposed to serve the public interest even as they make profits for their stockholders. Obviously, the Big Three automakers-and hundreds of other corporations-have ill-served the public interest by making decisions like sending millions of jobs overseas, in pursuit of larger profits.

Rather than bailing out companies that have been consistently mismanaged and have failed to serve the public interest, and rather than just letting them fail, Congress should provide for the option of having the employees of the company take control, and reserving bailout funds as loans to worker-controlled corporations. In a bankrupt company, stockholders have already lost their stake, but employees have a very direct interest in correcting mismanagement in order to keep the company in business. In particular, employees have an interest in making management decisions that will maintain their jobs where they are, rather than sending them overseas. This might mean accepting lower wages or benefits in return for job security, but that would be a better bargain than workers now get, when they make concessions without any assurance that their jobs will thereby be saved.

There are obviously pitfalls to be avoided. The mere fact of worker ownership and control does not guarantee that management will serve either employee interests or the public interest. United Airlines, for example, came under employee ownership in an earlier crisis, but it was managed just the way other airlines were managed, and as a result continued to have poor relations with the employees who supposedly owned the airline! Go figure! What this means is that the leaders who are charged with managing the company need to be both competent and accountable.

Accountability is easy enough to arrange. The employees ought to have a direct, voting voice (one employee, one vote?) in selecting the chief executive, should receive regular, frank communication from the chief executive, and should have the right, under specified procedural conditions, to dismiss and replace the chief executive.

Competence is tougher. We know from our political system that democracy does not guarantee competence. If we didn’t know that before, eight years of George W. Bush should be convincing. But the right of dismissal allows workers who were manipulated initially to rectify their error after they have seen a chief executive in action. There is still a risk that employees would put short-term gains ahead of strategies intended to enhance long-term viability of the firm, but in this they would scarcely be any more short-sighted than the present management.

The government, as defender of the public interest, could have an important role as an external monitor of management competence. The Commerce Department, for example, could be vested with a seat on the board of the corporation, with the right to full information about its affairs, and the obligation to report both to the employees and to the public as to how well the company is being managed. The government representative could have the authority to order an employee vote on dismissing a chief executive.

Giving employees direct ownership and control of failed corporations, with government loans to let them regain their footing, is the best approach to a “bottom-up bailout.”

John Peeler