Gar Alperovitz's Blog, page 13

If You Don’t Like Capitalism, and You Don’t Like Socialism, What Do You Want?

If You Don’t Like Capitalism, and You Don’t Like Socialism, What Do You Want?
The Possibility of a Pluralist Commonwealth and a Community Sustaining Economy

 

Purchase as a Kindle e-book




Read for free online

 

It is increasingly obvious that the United States faces systemic problems. Income and wealth disparities have become severe and corrosive of democratic possibilities. Unemployment, poverty, and environmental challenges deepen day by day. Corporate power now dominates decision-making through lobbying, uncontrolled contributions, and political advertising. The planet itself is threatened by global warming. The lives of millions are compromised by economic and social pain. Our communities are in decay.

Is there any way forward?

In this accessible introduction, Gar Alperovitz and Steve Dubb outline the principles of an emerging alternative system, one based on projects emerging all across America which democratize wealth, decentralize power, rebuild communities, and help create a sustainable future.

Purchase as a Kindle e-book or read for free online

Gar Alperovitz is a historian and political economist and the author of America Beyond Capitalism. He is the Lionel R. Bauman Professor of Political Economy at the University of Maryland, and the co-founder of the Democracy Collaborative.

Steve Dubb is the research director at the Democracy Collaborative.

You Really Didn’t Build That

As Mitt Romney and the Republican establishment continues to attack President Obama for daring to claim that business owners depend on public infrastructure to make a profit, many commentators on the left are pointing out the irony of how such and such Republican business person decrying the “you didn’t build that” line received such and such direct subsidy from the government.  But this misses the larger point: in a technologically advanced society like our own, gains in productivity are overwhelmingly attributable first and foremost to the rapidly growing common inheritance of human knowledge, a point I explored in depth in my book with Lew Daly, Unjust Deserts.

More about the book: Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back

Podcast:  A discussion of Unjust Deserts at Washington, D.C.’s Politics and Prose:

[ Download this segment * Subscribe on iTunes * Podcast link ]

Article in Truthout: How the 99 Percent Really Lost Out – in Far Greater Ways Than the Occupy Protesters Imagine

The biggest “theft” by the 1 percent has been of the primary source of wealth – knowledge – for its own benefit.

Knowledge? Yes, of course, and increasingly so. The fact is, most of what we call wealth is now known to be overwhelmingly the product of technical, scientific and other knowledge – and most of this innovation derives from socially inherited knowledge, at that. Which means that, except for trivial amounts, it was simply not created by the 1 percent who enjoy the lion’s share of its benefits. Most of it was created, historically, by society – which is to say, minimally, the other 99 percent.

Interview about the book: Dissent Magazine

Basically the story is that we have moved from a labor-intensive, small-scale farming economy to a knowledge-based information economy. In the process, the sources of growth have changed, but it’s important to understand that individuals have not really changed. We work no harder today than our ancestors did in 1800 or in the ancient past, and just the same, we are no more intelligent, in terms of basic brain capacity and reasoning ability. The cave paintings of earliest human culture are works of roughly the same basic intelligence as the theory of relativity. Let’s hold that thought: Essentially, we work no harder and are no more intelligent than our ancestors from the near or even the ancient past.

And yet our economy is more than 1,000 times larger than it was in 1800, and the best measure of prosperity, per capita Gross Domestic Product (GDP)—the amount of output the economy generates for every person—is twenty times higher today than it was in the early nineteenth century (it was $42,000 in 2006, the equivalent of almost $170,000 for a family of four). The key to this growth, experts agree, is rising productivity, usually measured in terms of the amount of output per hour of work, which rose more than fifteen-fold since 1870.

 

 

Anchoring Wealth to Sustain Cities and Population Growth

This article, co-authored with Steve Dubb and Thad Williamson, originally appeared in Solutions Journal

Americans face a unique challenge in solving the climate crisis. Unlike other Western countries and Japan, where population is projected to be relatively constant, the U.S. population is set to grow by at least 100 million—and likely 150 million—people by 2050. Where and under what conditions these people live present serious challenges to sustainability planning. American cities today are so spatially and economically unstable that anything beyond superficial sustainability planning is impossible.

Alternatively, we can radically change existing community and regional planning strategies to more sustainably house and serve the growing population. Fortunately, emerging approaches are capable of helping with this shift. One involves building local economies that anchor capital in place through community, worker, or public forms of ownership—so-called green community wealth strategies. By linking such stabilizing forms of economic organization to democratic forms of local, regional, and national planning, cities can regain the capacity to target jobs and investment to specific locations.

Beyond Throwaway Cities

A good starting point is a clear understanding of America’s “throwaway city” habit. Simply put, as jobs move in and out of cities in uncontrolled ways we literally throw away housing, roads, schools, hospitals, and public facilities—only to have to build the same facilities elsewhere at great financial, energy, and carbon costs. All the while, the instability makes it impossible to carry out coherent transportation and high-density housing planning.

The most dramatic examples are places like Detroit and Cleveland, where the devastated landscape in many areas looks like bombed-out World War II cities. But these cases are not exceptional. Of the 112 largest U.S. cities in 1950 with populations over 100,000, 56—fully half of them—had experienced population decline by 2008. The people moved elsewhere, where all the usual facilities had to be built anew to serve them—and, built under conditions that were inherently likely to be subject to future instability and disruption.

Cities in general, of course, have gained population since 1990, but the long-term trend of instability is dominant. Between 1990 and 2008, 35 of 111 cities lost more than 5,000 people, including such cities as Pittsburgh, Cincinnati, Syracuse, Birmingham, Norfolk, and New Orleans (which had been losing population even prior to Hurricane Katrina in 2005).

Central to the climate change problem is that, at present, 39 percent of U.S. carbon emissions come from buildings, 33 percent from transportation, and the remainder from industry.1 So the built environment and transportation are critical to climate change mitigation efforts.

Nancy McGuckin, in Transportation Management and Engineering Magazine,2 reports that carbon emissions in communities with very high densities (5,000–9,999 households per square mile) have half the per capita carbon emissions of rural residents (0–50 households per square mile). And a report by the International Institute for Environment and Development3,4 found that New York City had a per capita average of 7.10 metric tons of carbon emitted per resident, compared to 23.92 metric tons nationwide; likewise, London residents emitted 6.18 metric tons of carbon each, compared to a British national average of 11.19 metric tons.

While, in theory, rural development could be highly sustainable, as McGuckin notes, in the United States today rural families “own twice as many vehicles as households in high density areas—and these are likely to be less efficient.”2 Moreover, average vehicle miles traveled for rural households exceed those of metropolitan households by roughly 7,000 a year (28,238 vs. 21,187).3

There is no question that reducing carbon emissions will require public policy support. But achieving serious reductions requires focused attention on the questions of how our communities are developed. Given that the economic fate of most cities is dependent on decisions made by mobile investors of capital, this will require major efforts, first, to improve quality of life within cities; second, to reduce gaping social disparities within cities (a major cause of “urban decline”); and third, and critically, to stabilize the economic underpinnings of cities—that is, the job base. As we shall see, the solutions to problems in existing cities intersect with strategies needed to deal with the unique U.S. problem noted at the outset—namely, America’s unusual population growth.

One solution involves fostering “green community wealth building”—that is, linking green development to institutions that inherently increase stability. This kind of wealth building can take a variety of forms, including employee ownership, nonprofit ownership, public ownership, and locally based private ownership. Most vibrant cities already have a substantial number of institutions that are inherently far more anchored than ordinary business firms. Among these, for instance, are universities, government agencies, and hospitals.

The goal of green community wealth building is to increase the proportion of capital held by actors with a long-term commitment to a given locality or region. In publicly traded firms, the central objective is to maximize profit for shareholders, whether it involves moving from one city to another or not. Green community wealth, on the other hand, is tied to place. Public enterprises, employee-owned firms, neighborhood-owned enterprises, and nonprofits all are rooted in particular communities. Communities with a higher proportion of such capital are better positioned to achieve economic stability and plan effectively for a low-carbon future.

A dramatic illustration of the new approach has been developed in Cleveland, historically one of the leading cities of American capitalism. Home to John D. Rockefeller, Cleveland was known as the world’s “nuts and bolts” capital. At one time it was second only to New York City in headquartering Fortune 500 companies.5 In 1950, Cleveland’s population exceeded 914,000.

Times have changed. By the 2010 U.S. census, Cleveland’s population had fallen below 400,000.6 But the legacy institutions remain—namely, the city’s leading hospitals and universities. Daily, more than 50,000 people commute to the Cleveland Clinic, University Hospitals, Case Western Reserve University, and the other so-called anchor institutions (“eds,” “meds,” and other place-based, mainly public or nonprofit, institutions) within the University Circle, a small business district located roughly four miles (6.4 kilometers) northeast of downtown Cleveland. The purchasing power of these institutions (in addition to salaries and construction) exceeds $3 billion a year. But surrounding the University Circle are low-income neighborhoods with 43,000 residents, whose median household income is only $18,500.

Can this pattern be changed? Its economic consequences in low-income neighborhoods are devastating, and the pattern is equally damaging from an environmental standpoint. Cleveland also exhibits a classic pattern of sprawl. A new strategy spearheaded by the Cleveland Foundation, and involving neighborhood groups, major hospitals and universities, as well as city government, aims to reverse both the economic and environmental devastation. (The Democracy Collaborative, home to two of this article’s authors, was involved in the planning.)

In what has come to be called the Cleveland model, the goal is to leverage the city’s existing anchors—in this case, hospitals and universities—to provide a long-term market for new worker-owned cooperatives while providing living-wage jobs and access to business ownership to employee-owners situated in surrounding low-income, largely African American communities. The first point is to recycle purchasing power to achieve greater stability. The second—and critical—point is to target firms owned by people who live in the community and create an ongoing stabilizing effect.

The first of Cleveland’s planned network of cooperatives opened its doors for business in September 2009. The co-op industrial-scale laundry is a state-of-the-art, ecologically green commercial facility capable of handling ten million pounds of health-care linen a year. Its sophisticated business plan provides all employee-owners a living wage and health benefits. After seven years on the job, if current projections are realized, each employee will have a $65,000 equity stake in the enterprise.

In October 2009, a second employee-owned, community-based company began large-scale installations of solar panels for the city’s largest nonprofit health, education, and municipal buildings. (The company also provides home weatherization services.) Another business scheduled to start operations within six months is a year-round hydroponic greenhouse capable of producing three million heads of lettuce and approximately 300,000 pounds of basil and other herbs a year. Many other enterprises are in the planning stage.

Each business focuses on the specific procurement needs of hospitals and universities as well as the local market. Local foundations, anchor institutions, banks, and city government have all committed resources to stimulate business growth. A cooperative development fund, currently capitalized by a $3 million grant from the Cleveland Foundation, expects to raise an additional $30–40 million to support a growing network of cooperatives.

New Forms of Planning

The Cleveland model is important not only for its own sake but because it points in the direction of community-based economic planning for long-term, stable jobs. (Related efforts are being discussed in other cities, including Amarillo, Texas; Atlanta, Georgia; Pittsburgh, Pennsylvania; and Washington, DC.) The relatively informal arrangements of the Cleveland model, in which nonprofits cooperate with public institutions and private employers, also indicates that “planning” need not mean remote government officials drawing up a blueprint and then imposing it. Rather, community economic planning can be collaborative, with multiple institutional actors involved—indeed, if such planning is going to succeed, it will need to be.

In general, green community wealth building strategies are also an important tool in neighborhood revitalization that benefits existing residents and reduces poverty (rather than moving poor people around). Reducing poverty improves the quality of life in both central city and older suburban neighborhoods, making them more attractive options for residents and thereby helping in a second way to achieve stability.

The overall economic impact of place-based community wealth building strategies has become increasingly important in recent years. More than ten million employees, for instance, own all or part of 10,900 companies through employee stock ownership plans (ESOPs)—firms that employees finance and increasingly own through pension contributions. These ESOPs have so far generated equity benefits of $869 billion for their employee-owners.7 Cooperatives, according to a 2009 University of Wisconsin study, now operate 73,000 places of business throughout the United States, own $3 trillion in assets, employ 857,000 people, and generate over $500 billion in revenue for their member-owners.8

Because such efforts spread business profits among a large number of owners, green community wealth strategies also bring equity benefits—an important additional element in the strategy. Economic security of individuals is essential to building political support for a sustained green transition. If low-income and minority constituencies fail to embrace the green economy, urban politicians will continue to place other priorities higher.

Finally, community ownership of green jobs appears all but certain to yield more long-term employment than traditional corporate strategies. Traditional employers have an incentive to keep labor costs low and hence will use workers only for as long as they are needed on a particular job (such as weatherizing homes). Community enterprises, in contrast, aim to maximize employment over the long term. Instead of treating employees as disposable, such employers commonly seek ways to find new work for their workforce.

Important policy-support efforts have also been developing in different regions of the nation. An example is the Ohio Employee Ownership Center (OEOC), which has used a relatively modest amount of state funding (less than $1 million annually) to facilitate worker takeovers of firms whose owners are retiring or that are threatened with closure. Such firms, owned by workers, are city (and tax base) stabilizers: they do not get up and move. The OEOC has created enormous economic returns—retaining jobs at a cost of less than $800 per job and helping stabilize thousands of jobs in Ohio cities.

Another strategy aimed at stabilizing communities and furthering sustainability goals involves new forms of regional and national planning—indeed, given the continental scale of the United States, regional planning will be particularly important. Economic planning takes place today through government procurement, regulatory, and incentive programs, as well as through the provision of public infrastructure. A comprehensive agenda to stabilize America’s urban areas will require drawing on these existing policy instruments in a coordinated manner.

A central premise of contemporary urban policy encourages communities to become more attractive investment sites. Even when this approach succeeds, however, the communities concerned remain fundamentally dependent on the investment decisions of outside parties, whose concern is profit making, not community well-being—and, critically, often with little regard for sustainability.

www.cnsphoto.com/NewsPhoto/ShowNewsDe....

Speech at Strategies for a New Economy Conference

I had the honor of being invited to speak to the audience of the New Economics Institute’s “Strategies for a New Economy” conference from June 8-10 at Bard College in New York:

Gar Alperovitz – Our Time in History: The Possibility of Fundamental System Change from New Economics Institute on Vimeo.

Bob Massie and Susan Witt of the New Economics Institute provided this gracious summary of the talk in a post titled, “Twenty Years From Now“:

At our recent conference “Strategies for a New Economy” at Bard College, [Gar Alperovitz] had planned to speak about the role of multi-national corporations.  However when he arrived early to Olin Auditorium, and saw the hundreds of people from more than 300 organizations who had come from around the world to participate and to create change, a new talk formed in his mind.  He stood up and spoke from the depth of his wisdom.

To paraphrase Gar’s remarks:  Twenty years from now, those of us here will look back at this conference, this time in history, and will recognize that it marked a turning point in the way economics is conceived and practiced.   What started as isolated projects in communities around the country, have grown in scale and visibility and are now seen as part of a single movement for change.  What were long-standing assumptions about our banking and financing system, about the way corporations are structured, about ownership of the commons, about the way money is issued, about the imperative of growth — have all been effectively questioned and challenged.  The practical programs placed before us at this conference affirm the possibility of a fair and sustainable economy and the power of engaged citizens to implement it.

A threshold has been passed.  There is no turning back to an old and failed economic system.

He went on to say that the knowledge that we are at a turning point implies a responsibility to act to the scale and consequence of that knowledge.  Our behaviour should reflect the certainty of change.  Our strategies no longer need to focus on criticizing the old, but rather on defining and catalyzing the new economy.

MP3:

Download this segment

[Subscribe on iTunes * Podcast link]

 

Wall Street Is Too Big to Regulate

Originally published in the July, 22nd edition of the New York Times

THE Barclays interest-rate scandal, HSBC’s openness to money laundering by Mexican drug traffickers, the epic blunders at JPMorgan Chase — at this point, four years after Wall Street wrecked the global economy, does anyone really believe we can regulate the big banks? And if we broke them up, would they really stay broken up?

Most liberals in Washington — President Obama included — keep hoping the banks can be more tightly controlled but otherwise left as is. That’s the theory behind the two-year-old Dodd-Frank law, which Republicans and Wall Street are still working to eviscerate.

Some economists in and around the University of Chicago, who founded the modern conservative tradition, had a surprisingly different take: When it comes to the really big fish in the economic pond, some felt, the only way to preserve competition was to nationalize the largest ones, which defied regulation.

This notion seems counterintuitive: after all, the school’s founders provided the intellectual framework for the laissez-faire turn against market regulation over the last half-century. But for them, “bigness” and competition could easily become mutually exclusive. One of the most important Chicago School leaders, Henry C. Simons, judged in 1934 that “the corporation is simply running away with our economic (and political) system.”

Simons (a hero of the libertarian idol Milton Friedman) was skeptical of enormity. “Few of our gigantic corporations,” he wrote, “can be defended on the ground that their present size is necessary to reasonably full exploitation of production economies.”

The central problem, then as now, was that very large corporations could easily undermine regulatory and antitrust strategies. The Nobel laureate George J. Stigler demonstrated how regulation was commonly “designed and operated primarily for” the benefit of the industries involved. And numerous conservatives, including Simons, concluded that large corporate players could thwart antitrust “break-them-up” efforts — a view Friedman came to share.

Simons did not shrink from the obvious conclusion: “Every industry should be either effectively competitive or socialized.” If other remedies were unworkable, “The state should face the necessity of actually taking over, owning, and managing directly” all “industries in which it is impossible to maintain effectively competitive conditions.”

At the height of the Depression, eight major economists (including Frank H. Knight) put forward a “Chicago Plan” that called for outright ownership of Federal Reserve Banks, the nationalization of money creation, and the transformation of banks into highly restricted savings-and-loan-like institutions.

To be sure, Simons later revised some of his views, and in the main he and others weren’t focused on financial crises. After all, in the mid-20th century, banks were far less concentrated than they are today, when the five biggest — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — dominate the industry, with combined assets amounting to more than half of the nation’s economy.

It’s also true that not all Chicago School economists (not to mention their descendants) agreed with Simons, especially on the controversial issue of nationalization. But the logic of his argument remains: With high-paid lobbyists contesting every proposed regulation, it is increasingly clear that big banks can never be effectively controlled as private businesses. If an enterprise (or five of them) is so large and so concentrated that competition and regulation are impossible, the most market-friendly step is to nationalize its functions.

What about breaking up the banks, as many on the left favor? Recent history confirms another Chicago School judgment: while a breakup might work in the short term, the most likely course is what happened with Standard Oil and AT&T, which were broken up, only to essentially recombine a few decades later.

Nationalization isn’t as difficult as it sounds. We tend to forget that we did, in fact, nationalize General Motors in 2009; the government still owns a controlling share of its stock. We also essentially nationalized the American International Group, one of the largest insurance companies in the world, and the government still owns roughly 60 percent of its stock.

Of course, it would probably take another financial meltdown to make banking nationalization politically tenable. But given how the sector has behaved since the last crisis, a repetition seems inevitable, and sooner rather than later. When it comes, we would do well to keep the work of Henry C. Simons and his acolytes in mind when we contemplate how to rebuild a more equitable economy.

Gar Alperovitz, a professor of political economy at the University of Maryland, is the author of “America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy.”

A version of this op-ed appeared in print on July 23, 2012, on page A21 of the New York edition with the headline: Wall Street Is Too Big To Regulate.

 

Podcast: Discussing Public Ownership on The Real News

The Real News Network conducted an in-depth, two-part interview on the themes of “Beyond Corporate Capitalism: Not So Wild a Dream,” a piece in The Nation magazine on public ownership.

Listen now:

Download this segment

[Subscribe on iTunes * Podcast link]

On Democracy Now!: My keynote address to the 2012 Green Party convention

(From Monday, July 16th’s Democracy Now!)

AMY GOODMAN: [T]he keynote address was given by—at the Green Party’s National Convention, in Baltimore—by Gar Alperovitz. Gar Alperovitz is a professor of political economy at the University of Maryland, co-founder of the Democracy Collaborative, author, most recently of “America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy.”

GAR ALPEROVITZ: First I want to say is I am from Wisconsin. Some Wisconsin people back there. Wisconsin knows something about third parties. The Republican Party, original Republican Party, was a party to end slavery started in Ripon, Wisconsin and it got lost along the way, but it showed one big push on the really important issue of slavery in its early days. Fighting Bob La Follette from Wisconsin. Another historical issue that you may remember coming out of that state and starting very small and making a powerful impact. Third, if you look closely at what became the best parts of the New Deal, the labor law legislation, some parts of Social Security, some parts of health care and some parts of the other welfare programs, a lot that came up and was was incubated in Wisconsin. I am proud to be a Wisconsin guy, but the bottom line there is not about Wisconsin, it is about historical change. How you begin fighting small and you expand when the time is right, and you make an impact because the other things are failing. That is what has happened in many, many cases. Revolutions are as common as grass and world history, and they begin in rooms like this.

So, so I say that really as a historian, not trying to blow smoke in your ear. That is how it works. That is how it works. When I say I take you all seriously, first, I’m talking to the person in your personal seat. So when I say I take you seriously, you, maybe more seriously than you take yourself, I mean to say that the beginnings of the next great historic change come from a us taking ourselves that seriously. So, I urge—-and I think many people here do—-but I urge that you sit back and say, am I up to that or am I just doing politics, or am I really up to that. Now the that is transforming the most powerful corporate capitalist system in the history of the world. That is what it is about. And to say that I take you seriously is to say that that is what you’re stepping up to, not simply a gesture, not simply a new party, not simply a green movement. It is that, and that is the challenge. Now, I am very cold eyed realist. I did run House and Senate staffs, I’ve even done stuff for my pains and for my sins, planning U.N. policy in the State Department before I left that world many years ago. I have been involved in the nitty gritty of ugly politics. I am no naive guy. And I say again that we have the possibility, if we look at the stage we are at and what is happening to the era and who we are existentially—-I am talking to the person in your chair—-and if we know who we are and take ourselves that seriously, we have that possibility. So, let me go on. The second thing I want to say is, I don’t think that is always true. But I do think that the emerging era of history into which we are living our lives, the era into which we are living, may well be the most important period of American history bar none. Now, I say it as a historian and others would disagree, but I don’t say it lightly. And when I say bar none, I mean including the American Revolution and including the 1960’s and the Civil War. Whoa, that is a heavy rap, as we to say in the 1960’s. What I mean is that in many ways, the system is running out of options, and we are beginning to see more and more people aware of the difficulties that cannot be managed the old way.

Very briefly, all too briefly, in the 19th century when you ran into problems, you threw land at it, and took more and more land when there was a problem until you’d taken the whole continent, killing a lot of Indians and others on the way, but managing a system that was a tiny sea-board colony and then took over a continent as it tried to solve problems, and they ran out of land at the end of the 19th century. In this century, not by design, in the first quarter of the century there was the beginning of a major recession, probably a depression in 1914 and World War II solved the problem in the first quarter of the century. I am not offering a conspiracy theory, that is just what happened. In the second quarter of this century, it collapsed again, and World War II bailed out the system but not by design. That is how it worked in the second quarter of the century. And in the third quarter of the century, having defeated the Germans, having defeated the Japanese and having lost the productive power of many other corporate competitors plus the Cold War, plus the Korean War, plus the Vietnam War, plus high defense expenditures, that boom third quarter of the century was run that way. We are in a different era. Think about it this way. It is all but impossible to have massive industrial scale war like the first and second world wars, land wars, 42% of the economy spending on war expenditures, and the reason is, nuclear weapons now make that impossible. It isn’t going happen that way, we my blow ourselves up. But, we’re not going to have that massive injection of economic power into the economy to solve the problems. In fact, big/small wars are also getting less and less powerful; people don’t like them, they don’t like sending their kids, they don’t like spending money on that. It isn’t just us. And if you look at those expenditures, they are very big. But, as a percentage of the economy, they are declining to 3% already and going down. A lot of waste there. But you are not solving economic problems that way. I could go into great detail, but I won’t; globalization, etc., competitors, of all sorts of problems coming up that are economic. The bottom line is, you cannot solve the problem any more by throwing land at it, and we are running out of war, which means lots of problems grow because the political system can’t manage it the way it is structured, and the opposition that can’t get themselves together to make things happen, and the Republicans stopping and Tea Party stopping and you know all the contradictions, but the bottom line is, you can’t solve problems. That is obvious.

Most people know Washington is broken. They have not quite realized that the systemic problems are coming to the surface, that it’s a systemic crisis. You may get ripples of increased gain and jobs and so forth, but you can’t deal with climate change, you can’t deal with unemployment, you can’t deal with poverty, and we keep getting more and more decay. That’s light bulb time. That’s when people begin to asking very serious questions. Now, remember, when I say that I come at it as a historian. You got to throw a couple of decades of your life on the table, not a couple of weeks and not a couple elections. But, there is growing sentiment on all sides that either we transform the system or profound difficulties, violence, probably repression, possibly something like fascism when the violence begins, there is great danger. But lots of folks sense something is wrong. The first in my adult life that you find millions of people responding. Listen to the response; Occupy. Occupy was critical, far more important. The American people responded to Occupy. They got it, they know, they know who runs this game. It’s no secret, and it’s a new kind of awareness that something is going on with those big banks and something’s going on with these corporations that don’t quite know how to get a handle on it, but it is not like if we just elect a Democrat it’s all going to be fine and the progressive era will start again. There is a sense that is very deep, and in my view, given the inability to solve the problems, that’s going to be worse, and the pain is going to increase and the number of people saying, there has got to be a better way, something different has got to happen, somehow we’ve got to start in a different place, somehow either we build something new or this thing is a sham. That’s a big deal in history. That’s a big deal when people begin asking those kinds of questions. Now, it takes a long, painful process, but notice this system probably does not reform in the old liberal way for all the reasons we know including the labor movement has collapsed from 35% to down to 7% in the private sector. But, probably it doesn’t have a classic revolution, because government is 30% of the big floor under the economy. You get decay and stagnation, pain and difficulty. That is a very unusual moment in history because it goes on and gives time for people to be aware and to build democratically from the bottom up. If it collapsed tomorrow, the right wing would take over. And if it collapsed to the left, we wouldn’t be prepared. And above all, we wouldn’t know from the bottom of our own experience how to build and run and change and transform the system. This is an era where things are beginning to open up over time. Time for us. Including the person standing here and in your seat. Let me put it another way—-the third thing I want to say—-systems in history are defined above all by who controls the wealth; no secret. In the feudal era, land was the critical piece. If you had the land and you were the lord, you commanded.

In the 19th century, there was the kind of capitalism that was sort of free enterprise. Most of the free enterprise small business capitalists of the 19th century were actually farmers. They ran a small business called a farm. That was a different, maybe a free time in some ways, but a very different time. State socialism was a different way to own capital throughout the system. That is another way to go about it, and we live now in essentially what is called corporate capitalism. And if you look at who owns the system and the power, you all know the income number distribution numbers, they’re pretty obvious. It’s gone from about—-the top 1% has gone from about 10% to 22% and then bobbling around given the recession in the 20% range. Think of that, it’s gone from 10% to 20% in 30 years. Who lost that money? But wealth is even worse.

The way you define the system is who owns the capital wealth, and 1% owns just about half all the investment business capital, 1%. 5% owns 70%. And the top—-this is a number you got to get your head around, really odd and I checked many times—-think about this, the top 400 people, not percent, people, 400 own more wealth now than the bottom 185 million Americans taken together. That is a medieval structure. I don’t mean that rhetorically, I mean that technically that is the way you concentrated wealth in the medieval era, really. So, the question becomes—-and here is the third thing I think a lot about we do a lot with—-is there any sign if you don’t like state socialism, you don’t like corporate capitalism that we can build a democratic system from the bottom up that also changes the ownership of capital and is also inherently Green? How do we do that? We—-we. One of the things happening, and this is exciting stuff going on, and the press simply does not cover, they don’t have an interest. If they had any interest, they’d be able to look at the other way because they—-but they don’t have any money to do it. The press is being stripped of all capacity to report. But on the ground there are now, what, 10 million people involved a worker owned companies. Did you know that? 10 million, in America. 130 Million are involved in co-ops and co-op credit unions. 40% of society. Four or five thousand neighborhood owned corporations, thousands of social enterprises. Odd bits and pieces here and there like Sarah Palin’s Alaska; they use the oil revenues as a matter of legal right, everybody gets a piece; it’s a maverick country but there it it. They don’t do that in Texas. We’re going to do that a lot elsewhere when we get to where we’re going to get.

If you look carefully on the ground, there are these social enterprises popping up, credit unions, etc., etc. and there are many, many more experiments. Something like 20 states now have legislation before them like the Bank of North Dakota, a state owned bank, and many other states, another 20 approximately are considering single payer. And here is the issue, as the pain deepens—-that’s why the era is critical—-as the pain deepens and we have time to build, and we work to build, more and more people begin to see, you’ve got to come up with a new answer. My judgment is—-and I think I’m not blowing smoke—-those kinds of experiments are the only way to build the popular base with the politics and the projects, with the politics and the projects.

There is a really beautiful thing going on in Ohio in Cleveland, we have been involved with. I was involved with the Youngstown workers in 1977 when the first big steel closing occurred, the workers tried to take over and they got clobbered. But, they organized their politics and got a lot of people involved. So, in Ohio, the idea of worker ownership is a bigger idea. Lot’s of people understand it. And in Cleveland, building on the Mondragon model, we know about the Mondragon model and other ideas, there are a series of worker owned integrated co-ops in Cleveland in a neighborhood where the average income is $18,000 per family. And they have these co-ops not just standing alone, but linked together with a non-profit corporation and a revolving fund. The idea is to build the community and worker ownership, not just make a couple workers richer, to say the least, not just rich but to build a whole community, and to use the purchasing power of hospitals and universities, tax money in there, Medicare, Medicaid, education money, buy from these guys and build the community. That model, and it’s the greenest—-for one of the things—-the greenest laundry in that part of the country, that uses about one-third of the heat, about a third of the and electricity and about a third of the water. They’re on track now to put in more solar capacity that exists—-one of the other worker owned companies that exists in the entire state of Ohio; these are not little thinking co-ops.

There’s another one they’re just about to open which is a greenhouse; 3.25 acres. The greenhouse hydroponic will be the largest in the United States in an urban area, the largest in a worker co-op, worker-owned, in a community building structure, capable of producing something like 5 million heads of lettuce a year. A— capable of producing something like 5 million heads of lettuce a year. That’s happening. You could do that, and you could force the politicians to help you do that. They’re pointing out I’m getting limited time so I’m going to go quickly. All I wanted to say is there is a website, Community-wealth.org, put the dash in, and you will find thousands of things that are happening on the ground that change the ownership of wealth and begin to green the economy, and it is part of the new deal that we’re going to build forward as we go on through the decay. That’s the direction.

So, let me say a few—-given the time available—-just a couple of other things. Those are the kinds of things that are the prehistory of the next great revolution. That is how you build it. You generate the ideas and then you begin to protect national ideas out of real experience and out of real commitment. So, did you happen to notice, we did not nationalize the two big auto companies when those crises came, and we pretty much nationalized the banks before we gave them back. So when those crises come, and they will come, if we’re prepared with a highly democratic vision and if we know something and if we build the politics, I’m not just talking about communities, that’s is critical; if you don’t have democratic experience in local communities you’ve got nothing. But, the ideas like Wisconsin pointing to the New Deal, those ideas also generate vision for the long, larger scale when time goes on and we build forward.

So, now that’s also a heavy wrap. I am saying that we are laying the foundations bit by bit in an extremely unusual period of history, the most important moment in history because we’re running out of options, in my view. And mine is suggesting we can take it forward in a positive way. He says I got one minute left so let me tell you. I want to say something far more radical than I have said before. This is the most radical thing you’re going to hear. I think there is hope. I’m no Utopian. I don’t mean it is going to be hard and tough and a lot of stuff is going to go wrong and a lot of pain and a lot of difficulty, but I don’t think they’ve got all the answers and I don’t think that they’ve got all the power and I don’t think they can solve it. And I do believe—-the person in your chair, why I take you seriously—-can you wrap your heads around, really, I mean, really, that we are in a position to lay down the foundations for the next great transformation? Really? Not just doing token politics, not just building the party. All that is critical. Not just laying the foundations. But really laying the groundwork for transformation into a highly democratic new system beyond the old traditions, one that is sustainable, one that give a climate change, but also alters the ownership and democratizes wealth. That is our question.

One last thing, because she’s waving me down and I’m trying to be good about this. I give you just a little fragment more of the book. Two fragments, actually. this is a really interesting one. They have been polling under people, not people my age, but people in the range of 18-29. These are people who really will build the next politics; a lot of them in this room. Now, it turns out that in the latest polls, it turns out that when you look at it, about 45%, 43% have a positive reaction to the word capitalism and 49% of a positive reaction to the word socialism. I don’t know that any of those folks actually know what the word socialism means, but the idea that they understand something different really that has got to happen is embedded in those politics. But, one last one I saw just the other day, I did a piece for Sojourn Magazine, one of the real radical activists group of religious Christians. One of the pieces of poll data I saw was this, said that 36% of all Americans polled—-one of the big polling agencies, not a side one, not a biased one—-36% decided and were quite sure that capitalism, Christianity and capitalism cannot be reconciled. So, my urging, I am pleased to be here, but I don’t think anybody moves the ball like people in this room when they get serious. I urge you to remember this Wisconsin kid who has all this weird history of Gaylord Nelson and these parties that actually did something and all these precedents actually built and laid foundations, my suggestion to you is that we together are in fact capable if we rise to that level of existential self awareness; real hard, real hard. People want to do projects, they want to do politics, they don’t want to get as serious as it takes to really transform the system. So, that I think that is our challenge and I see a lot of people in this room up and ready to do it. Thank you for having me.

More Bullish Than You Think

This article appeared in the August, 2012 issue of Sojourners

Want some economic good news? Credit unions, employee-owned business, public banks—the “new economy” is breaking out all over.

HISTORICALLY, MOST ECONOMIC systems revolve around who owns the wealth. As an economist and historian, this is the question I bring to any discussion about our current economic crisis and any future “new economy” we might imagine.

While income distribution is important, wealth distribution is much more unevenly allocated in American society, and it gets very little attention. Let’s quickly look at the numbers.

The richest 400 people in the U.S. own more wealth than the bottom 60 percent of the population. That’s more wealth (stocks, bonds, and businesses, but also houses and cars) than the bottom 150 million Americans. And the top 1 percent owns almost 50 percent of the society’s productive investment assets (corporate stocks, bonds, and privately held businesses, excluding cars and houses).

When you ask who owns the productive assets of the society, then you’re asking who owns American capitalism. The answer is: The top 1 percent owns just under half of it.

With this kind of wealth distribution, what we have is literally a medieval structure. I don’t mean that figuratively. It is a feudalistic structure of extreme power and wealth. And it is anathema to democracy to have that kind of concentration. This distribution of wealth—and the the fact that the top 1 percent has, over the last 30 years, increased its share of income from about 9 percent to about 20 percent—tells you something about the political/economic power harnessed to achieve that end.

The “new economy movement” that is building momentum around the country asserts that you can’t have a democratic society unless you democratize the ownership of wealth as well.

Here are six examples of where that’s happening right now:

1 More than 130 million Americans are involved in co-ops or credit unions—that’s 40 percent of society. The key concept in co-ops and credit unions is the democratization of ownership in some form. Take credit unions, for example: They are democratized “banks” that suggest practical ways to begin to build, however tentatively, in the direction of a more democratic economy. These kinds of alternatives are not marginal. Credit unions hold roughly $1 trillion in deposits. All told there are more than 29,000 cooperatives in the United States; they have more than $3 trillion in assets, employ 857,000 people, and indirectly support 2 million jobs.

2 Most people don’t realize there are more than 10 million Americans involved in worker-owned companies—another way to change and democratize ownership. Ten million is 2.8 million more than are members of unions in the private sector. There are also more than 4,000 neighborhood corporations whose purpose is to, well, serve their neighborhood. There are 2,000 public utility companies in the country; 25 percent of American electricity is “socialized” and produced by co-ops and public utilities.

3 Land is also being owned in a new way. Twenty years ago land trusts were really on the margin. A land trust is formed when you draw a circle around a group of buildings in scattered sites in a specific community and put those properties under a nonprofit corporation or city ownership.

If you own land through a nonprofit or municipal land trust, you can control the gentrification process, so that housing prices don’t go up, driving out the poor. This used to be a very unusual strategy. Now Irvine, California, is using the model for what it ultimately hopes to be 5,000 land trust housing units. Cities around the country are beginning to realize that land trusts are a good way to deal with gentrification. And they help deal with revenue problems, because through land trusts, housing subsidies are recycled in a way that makes them go much further.

It used to be the case that when a public investment was made—mass transit being the most obvious and common one in many cities—businesses would settle around the stations, and land prices would go up there. A city would let the developers take over the development process, and then try to tax back the gains made from the public investment. But that’s a declining trend, an old model. Now what’s happening—in places such as Washington, D.C.—is that municipalities are setting up public ownership of the land and capturing the revenues directly through leases to businesses that reflect the high value of being near the stations. This model and the land trust model involve a change in ownership; both democratize it through some public or quasi-public ownership.

4 Companies that are set up to do social good are developing in many parts of the country. In 2010, Maryland became the first state to establish “B Corporations.” B Corps are another form of using productive wealth to benefit society. What does that mean? If you set up a traditional corporation, legally you are required to use the profits to benefit shareholders. If you put too much money into good social programs, you are subject to a legal challenge, because that’s not your job under the corporate charter. However, a B Corporation is a special corporation set up so that investors know from the outset that part of the business’ mission is to serve a socially beneficial purpose. Six other states have now established B Corps. This emerging pattern of democratization is happening in various parts of the country.

5 Banks are another example. The banking crisis got people very upset about banking problems. North Dakota, for more than 90 years, has had a state-owned bank. It’s a public bank set up in the Progressive Era. Operating with the support of business leaders, farmers, co-ops, and others, it’s a very successful, highly respected enterprise—and its profits go back to the state. Many are now asking, “Can we move in this direction at the state level in other parts of the country?” Now, 19 states have introduced legislation to start or explore similar kinds of banks.

Additionally, several cities are looking at using city deposits in a new way. Most recently, San Francisco and Portland, Oregon, have proposed legislation that would use city deposits to create either a credit union or a public bank. The funds would be directed back into the community, and preferably invested in various kinds of social enterprises.

6 Another stream of the new economy movement is primarily concerned with the environment. For instance, the Business Alliance for Local Living Economies (BALLE) is comprised of about 22,000 businesses that are devoted, as a matter of principle, to community and environmental sustainability. BALLE is growing by leaps and bounds, all over the country. Another example is the American Sustainable Business Council, which has 140,000 businesses members. The ASBC supports small- and medium-sized businesses, and it regularly attacks the U.S. Chamber of Commerce for its ecological blindness.

Almost all of these models are oriented toward community. The reconstruction and stabilization of the community is an explicit goal in the new economy movement. One reason is that worker-owned companies and other locally anchored democratized efforts do not pull up stakes and leave. The workers live in these communities. When major corporations come into a state, studies show they are often lured with between $200,000 to $300,000 of tax incentives per job. When a better deal comes along, these corporations often leave. Worker-owned companies stay in the communities where people live.

IN 1977, I worked with a Youngstown, Ohio-based coalition of religious leaders, including Catholic Bishop James W. Malone. I was called to help them when the first major steel collapse in the U.S. occurred. Five thousand people lost their jobs in one day when Youngstown Sheet and Tube closed down. Today, that’s not news, but in 1977 it was a gigantic story because it was the first big steel closing. Bishop Malone called together an ecumenical coalition, saying, “This city will decay if we can’t bring our industry back.” One steel worker suggested, “Why don’t we take over this mill and put it to work, and why don’t we do our politics in support of that?”

That sounded crazy at the time, but in fact, they really did their homework. They persuaded the Carter administration to finance very sophisticated studies, then came forward with plans—the kind of plans that are now found in many modern steel mills. They also got the administration to promise $100 million in loan guarantees. They secured support from every major politician in the state of Ohio, including the conservative Gov. James Rhodes. They were ready to move forward with a serious plan. Alongside this they had a second, very sophisticated idea, one critical to the new economy movement. They said, “Even if we fail, we may put forward an idea that may help other people who might try to do this in other situations.” As a result they put a major emphasis on getting the word out and teaching people about their process and their plan. They knew they were injecting an important idea into political consciousness.

They did fail. In 1978, after the election, the Carter administration pulled back the money. Youngstown Sheet and Tube closed, and the city of Youngstown lost a massive amount of its population.

However, there are probably more worker-owned companies per capita in the state of Ohio now than in any other place in the country. A center was set up at Kent State University that began giving technical assistance to worker-owned companies. The Ohio Employee Ownership Center has mushroomed, helping hundreds of companies and retaining thousands of jobs. And along with many others, including the Cleveland Foundation and the Democracy Collaborative at the University of Maryland, the center has helped build an exciting new model for worker ownership: a network in Cleveland of green worker co-operatives, linked to a larger structure that includes metropolitan anchor institutions such as hospitals and universities. This successful project is now dubbed the “Cleveland model.” It’s catching on all over the country. There are explorations of this in Amarillo, Texas; Atlanta; Pittsburgh; Richmond, California; and Washington, D.C.

TRADITIONAL CHRISTIAN TENETS—as well as values from the Jewish tradition to which I belong—offer a powerful challenge to the wealth inequities we are currently experiencing. What is striking is that new economic and historical efforts provide new affirmations of ancient moral wisdom in ways particularly appropriate—and of great political relevance—for us today.

Leviticus 25 provides for a jubilee every 50 years to restore broadly distributed ownership of the commonly inherited land. While at other times the land may be traded and sold, “in the jubilee it shall be released, and the property shall be returned” (Leviticus 25:28). Under this law, a property right is always a temporary entitlement. God’s original gift of the land, Leviticus 25 holds, instills in all productive resources the moral imperative of common access, if not equal benefits. Extreme inequalities of ownership and economic well-being can only mean that we have defaulted on the debt owed to God for the original gift of creation.

You may think I’m a utopian, but let me say this: I’m a cold-eyed political realist. If we’re interested in jubilee and the human freedom at the root of democracy, then at some point the democratization of wealth needs to be one of our basic principles. And we need to build for the long haul, step by step.

Worker-owned cooperatives, land trusts, municipal part-ownership, and public ownership are among the various strategies to democratize ownership. It is possible, of course, that these innovations will simply remain modest though useful changes. But it is also possible that they will build over time to become forerunners of something far more important.

Many of the large national changes that occurred during the New Deal simply scaled up and applied the principles that had been developed locally and in state “laboratories of democracy” in the preceding decades. It is possible—perhaps even likely—that many related efforts and the work of thousands of committed people are preparing the groundwork of the next great progressive political era.

Gar Alperovitz, author of America Beyond Capitalism, is the Lionel R. Bauman Professor of Political Economy at the University of Maryland and co-founder of the Democracy Collaborative. This article was adapted from a speech he gave at the 40th anniversary of the Center of Concern in Washington, D.C.

Talking with the Paul Jay from the Real News about public ownership

My discussion with the Real News’ Paul Jay about my recent article in The Nation (with Thomas Hanna), “Beyond Corporate Capitalism”

Part 1

Part 2

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.

There was an interesting moment during the 2008 presidential elections. The last couple of weeks, President Obama was ahead, and summoning up all the demons of the Cold War, John McCain fired what he thought might be a decisive shot. He called President Obama socialist. Obama’s reaction was rather interesting. He kind of stared it down. He said, I read my Bible; it says I should be my brother’s keeper. Well, I don’t think we’ve seen much of that President Obama since that moment. At the same time, he did go on to win the election, in spite of all of that rhetoric.But the issue of public ownership keeps reasserting itself. During the crisis there was a lot of discussion about the importance or need for nationalizing banks and such. But now, two years after the crisis—supposedly after the crisis—the issue of public ownership seems to be back off into the margins of the discussion. Well, we think it should be back up front and center.And now joining us is someone who’s done some work on this issue of public ownership, Gar Alperovitz. He’s a professor of political economy at the University of Maryland, College Park. He’s the founder of the Democracy Collaborative at the University of Maryland and a member of the board of directors for the New Economics Institute. And he served as a legislative director in the U.S. House of Representatives and the U.S. Senate. He’s the author of the book America Beyond Capitalism. Thanks for joining us, Gar.

GAR ALPEROVITZ, COFOUNDER, DEMOCRACY COLLABORATIVE: Glad to be with you. Thanks, Paul.

JAY: So what prompted you to write this piece? This was an article recently about public ownership you wrote in The Nation.

ALPEROVITZ: Well, several things. One, the new poll data on all this is kind of very interesting. You know, the Cold War is over, and younger people, the people in the age 18 to 29, a recent pew study said, say they are 49 percent more favorable to the word socialism and 43 percent for capitalism. Isn’t that interesting? There is a change going on. In fact, there’s been a trend: a couple of polls earlier had been even, and now it’s moving in this direction. The numbers for capitalism in general have been falling down. And this is a generation that’s going to make the new politics. Also saw a poll just recently, just the other day: 36 percent of all Americans, not just young people, believe that capitalism is incompatible with Christianity—”my brother’s keeper” line. So what that really means we don’t know.And, finally, the other reason was—and I, frankly, get tired of this, the word is thrown around so much—anything at all that is progressive is now being labeled with the word socialism. And it’s just ridiculous, because the right-wing language and rhetoric has gotten out of hand. It has no meaning whatsover [inaud.]

JAY: Yeah, I guess it’s a little—. I guess “greed is good” is not to be found in the New Testament. Now, in your piece you talk about the—.

ALPEROVITZ: In fact, I think the line is that a rich man has more chance of going to heaven then a camel getting through the eye of a needle.

JAY: Right. That’s actually more Jesus’s message, which today certainly would be branded socialism. More than that, I think it would probably be branded class warfare to talk like that.

ALPEROVITZ: And if you go a little further, Acts 2 has everyone laying down their private ownership to join collectively in the common Christian effort. So there’s a lot of love thy brother that is much more prevalent, and the preference for the poor is much more prevalent in the Old and New Testament than the notion about socialism that we’re talking about.

JAY: So the basic thesis of your article is that public ownership, at least in certain critical sectors of the economy, is actually the only way to solve some of these problems facing the country. What’s your point?

ALPEROVITZ: [incompr.] the only way, and it’s much more efficient. Now, that’s—that goes right directly contrary to the argument of many conservatives. And so take number one, you cannot anymore regulate the large banks. Theoretically you could regulate them, but they are far more powerful than any regulator. And the swarms of lobbyists on Capitol Hill—this is now conventional wisdom. Right wing, left wing, academics, everyone really knows this. They just don’t say up the implications out loud. The lobbyists are writing the regulations and rewriting them. And the possibility and the likelihood we’ll have another financial crisis, every expert that I read, left, right, and center, expects a crisis to happen again because the regulations just can’t be done, there’s too much power on the other side.So I suspect what’s going to happen in the real world—we may have another crisis. And maybe the first reaction will be, okay, if people get angry enough, they’ll break up the big banks. And then, obviously, the big fish will eat the little fish and we’ll be back with the big banks trying to run the game again. And at some point I think it is all but inevitable that, someplace, we’re going to turn some of these big banks into public utilities. And I think that’s the only way to actually manage it. It’s the only practical way to deal with the problem. I think it’ll take us a decade, two, and a lot of pain to get there, but I suspect it’s going to—it’s obvious, because there aren’t any other real-world alternatives that are workable. The head economist of Citicorp, no less, Citicorp, biggest bank, said before he became head economist that if the public’s paying the bills, we really ought to be public utilities. And I agree with him.

JAY: One of the points you make in your article: if you do make the main emphasis on breaking up the big banks, that even if you’re successful, like the phone companies, once you break them up, over a matter of so many years, depending, they wind up reemerging as the big Goliaths again.

ALPEROVITZ: Yeah, that’s just the process, because the advantage is to them controlling more and more markets, more and more capital, more and more deposits, and as soon as they get rolling, they get more momentum, and, as I said, the big fish eat little fish, and we’re back where we started.You know, another point about this, and I mentioned it earlier: efficiency. You know, right-wing economists or kind of what I call old-school conventional economists say that these big public enterprises are not efficient. Well, compared with what is always the question. These banks have cost us trillions of dollars in lost output, massive economic collapse, people thrown out of work, thrown out of their homes, the economy slipping to 10, 12, and in the real world, if you count everybody, 20 to 25 percent unemployment as a result of their so-called efficiency. It is ridiculous to look at whether or not, internal to some bank, the way in which they do accounting is more or less efficient than whether or not a public utility does accounting, more or less efficiency within the bank, and the outcome of the big efficiency—massive unemployment, loss of economic output, loss of—is neglected. We don’t look over there. They are massively inefficient because they cause so much cost and so much waste by any standard at all.

JAY: Right. The generalized cost of, for example, the fossil fuel industry is not taken into account when you look at the efficiency internally of the fossil fuel industry.

ALPEROVITZ: Exactly. If you look narrowly, then—and this is the argument that’s always put up on the other side—look inside. These guys are much more efficient than some government bureaucrat. Maybe so. But if you can maintain stability in the economy rather than crash the whole airplane, which has massive costs, that’s the place to look. And we’ve got to balance those two. And the balance always comes out: obviously we’ve got to get some way to control these guys. And if you can’t regulate them, and if you can’t break them up so they stay broken up, there’s only one logical—.You know, the people who made this argument are not liberals and they’re not socialists. It was the founders of the Chicago school, the most conservative school of economics, that pointed out, if you can’t regulate them, in the end the only way you get a free market is to socialize or nationalize some of the big ones in order to have the market to function. That was H. C. Simons, the founder of the Chicago school of economics, Milton Friedman’s teacher and a very conservative economist who understood that these guys capture the regulatory organizations if they’re that big, so you’ve got to deal with it.

JAY: Well, President Obama has said many times, you know, in his last State of the Union and out on the campaign trail, that there is effective regulation now. He talks about Dodd–Frank, he talks about the Volcker rule. I mean, isn’t—doesn’t that show some evidence that regulation is possible?

ALPEROVITZ: In theory, regulation certainly is possible. And, indeed, when we had a stronger progressive liberal movement, maybe in fact it was possible for a while. But the movement that supported that really at its heart had organized labor as the muscle, the economic muscle behind the movement. And labor has dropped from 35 percent of the labor force to 11 percent, and only less percent less than 7 percent in the private sector. And the muscle in the movement that really could make effective regulation, unfortunately, it’s gone, which means that, you know, we either have to deal with the fact that regulation doesn’t work or we’re going to have another recession, which I think we will have. We’ll have more crises. And at some point we’ll wake up to say, look, the only answer is to make them into utilities, some of the really big ones, and that’s the only way to make the system work efficiently at all, or just work.

JAY: Well, now, there were some moments in the last couple of years, last four years, that presented themselves that one would’ve thought was the time when you could have had some assertion of public ownership. I mean, let’s start in the financial institutions with AIG. And, I mean, we’ve essentially nationalized. But what happened?

ALPEROVITZ: Well, AIG, which is the largest insurance company in the world, is in fact owned substantially—a majority of the stock is owned by the U.S. government today. But instead of using it as a way to really control it, we set up proxy votes and set up trustees who are kind of beholden to Wall Street, who are the people who, arm’s length away from the public, are managing this operation, even though the public still owns it. Same thing could have happened with some of the big banks. We bailed them out. We could have bailed them and taken stock, and voting stock, and made them into public utilities instead of, you know, massively subsidizing them from the federal treasury and the Federal Reserve board, and then giving them back to the people who made all the trouble. So this is a possibility once you have to bail them out. That’s the time to actually assert control and do what, as I say, the chief economist of Citicorp said: if the public pays the bills, you know, it’s time to just turn them into utilities and make them run—kind of hold the line and be a stable system.

JAY: Well, unfortunately, most of the leadership of Wall Street is saying the public should bail us out and we should keep our bonuses and great payments and keep things as they are—and, in fact, as we can see from JPMorgan, go right back into the risky derivatives trading again, never mind any kind of change at all.

ALPEROVITZ: Yeah, it’s much larger now than it was before the crisis, and I think we’re going to see the results of that.But I’m an—in one sense, I think we’re going to have the pain lessened. At some point, I think, this is not an issue just of liberals and left and right. As I say, the real ideas that I’m talking about came out of the Chicago school of economics, the most conservative economists, who were at least sophisticated enough to face the problem directly that you couldn’t regulate them. And I think, as people are angry—even the Tea Party people get really angry at these big banks—at some point, the only obvious logical answer that’s going to be left is, you know, make them into utilities. That’s the only, you know, practical way to do it.

JAY: Okay. Well, we’re going to carry on our discussion in the next segment of this interview. So please join us for part two of our interviews with Gar Alperovitz on The Real News Network.

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And we’re continuing our discussion with Gar Alperovitz. He’s a professor at the University of Maryland—political economy—at College Park. He’s a founder of the Democracy Collaborative at the University of Maryland, a member of the board of directors for New Economics Institute. He’s served as a legislative director in the House and the Senate. He’s the author of the book America Beyond Capitalism. Thanks for joining us again, Gar.

GAR ALPEROVITZ, COFOUNDER, DEMOCRACY COLLABORATIVE: Glad to be with you, Paul.

JAY: So in your article you talk about one of the problems with private ownership, particularly in critical parts of the economy (some people call it commanding heights of the economy) is this kind of dictum, especially on Wall Street, but not only: grow or die. So the issue of growth in the short-term sense becomes the only imperative. Why is that a problem? That’s supposed to help drive the dynamics of capitalism.

ALPEROVITZ: Well, and certainly it has been. A great achievement of modern capitalism has been productivity and growth and the generation of income and wealth. That’s the plus side.

We’re now running into climate problems. We’re running into global warming that’s coming out of high growth. We’re running into eating up water resources, oil, energy, land. We’re running into, as some—the ecologists put it, we’re running out of planet, that there is a resource limit that many, many of the environmental folks and the ecologists suggest we’re going to have to slow down growth at some point or we’re going to pay the consequences in terms of lost life and lost energy and the terrible difficulties that come with climate change.

So without going in great depth into that argument, the question that you’re asking is about why the big corporations are a problem here. Well, the large corporations—. And, you know, I think there’s a big role for small- and medium-sized business and co-ops and worker-owned companies. But the large corporations who have the Wall Street problem on their back, they’ve got to do their quarterly earnings increases no matter what, and if they begin to slip, if they stop growing, if they stop producing those quarterly returns, they’re out of a job—those companies go down and their stock goes down. So they’re under tremendous pressure. Even the good guys in those companies who want to do well by the environment cannot do so because they will lose their power. So the company—these animals, these big corporations have to continue to grow. And that’s at direct odds with the ultimate limits of resources and climate that we face. So at some point you can’t regulate that. The primary motivation and structure and dynamics of these entities, large corporations, is what it is.

And the only way to deal with it, frankly, is to change that structure. And what that means is they have to be turned into either some kind of not-for-profit or public enterprise, because that doesn’t have to do that. It can be stabilized, it can be managed, and it doesn’t have to have this growth internal dynamic that just continually has to grow no matter what. So I don’t think there’s a way out of that logic either over time, and I think it’s forcing us to ask really profound questions about the long-term future of these big companies that are at direct odds with the problem of planetary limits.

JAY: Now, one of the things you point out in your article is that this isn’t actually quite so radical, the departure, in the sense that public ownership of big enterprises is not so new to the United States.

ALPEROVITZ: No, it isn’t, indeed. I mean, you can look at it in different parts of the economy. And people tend to forget this.

The place I like to start is there are 2,000 public utilities in the United States, municipally owned utilities. They’re all over the place. In fact, 25 percent of American electricity is, quote, “socialized” because of co-ops and municipal utilities. Twenty-five percent is delivered that way, not through private corporations. So that’s a very conventional form. If you look at that Tennessee Valley Authority, one of the largest energy producers in the country, it is a publicly owned entity, and it also does river maintenance, ecological maintenance in the Tennessee Valley, and it is a very significant scale public entity. Health care, half the health care system, Medicare, is a public insurance program, and it’s a very large insurance company under public ownership, if you like. And everybody—nobody wants you to mess with—as that famous line, we don’t want the government to mess with my Medicare. Well, it is a government program, a government corporation, a government business. Similarly, Social Security is a government pension fund or pension insurance program. So if you look [inaud.] 27 states now invest directly in companies and own shares in companies.

If you peel back the rhetoric, we do a lot of this [anyway]. And around the world, you know, public ownership is conventional—you know, railroads in France, high-speed rail very efficient in France and Japan and Italy, many parts of the world; much better telecommunications and internet service in most parts of the world, both private and public, and they use public ownership of internet as a way to kind of keep a checkpoint, a kind of a way to balance off the corporations so that they have to keep up to, really, standards. Again, 60 percent of the oil companies of the world are owned by the public. It’s very common around the world, even though our press doesn’t cover it. And by and large there are more and more efficiencies—a recent Harvard business—international business review study suggests more and more efficiencies are possible in the public sector than many people have thought, despite the right-wing critique and the right-wing rhetoric about this.

JAY: Right. Of course, the part of the public sector that doesn’t get critiqued so much and is probably, I guess, the biggest piece of the public sector, or certainly one of the biggest pieces, is the Pentagon and the whole military budget, which is essentially all publicly owned, but it’s a massive part of the American economy.

ALPEROVITZ: Yeah, a huge part of the economy. And in that case we take—and also make profits—wasteful profits, in many cases, these big military contractors pushing unnecessary weapons. But there it is. It’s a public sector entity as well, running that whole big part of the economy.

JAY: But part of the critique of public ownership—and many of the—you can certainly hear it from libertarians, who I think are consistent about all of this, where they do critique military expenditure, as opposed to the sort of Republican conservatives that critique everything public but the military. But, anyway, part of that critique is that you need that discipline of an owner that has to report to shareholders, that has to worry about going bankrupt, and that, you know, that gives a kind of internal discipline that creates an efficiency and competitiveness that gives rise to creativity and better efficiency and so on. So, you know, is that not true?

ALPEROVITZ: Well, look, as I said earlier, I think there’s a role for small business, local role for small business. There’s a role for these high-tech, high-performing small businesses. There’s a role for—you know, there are 130 million Americans involved in co-ops and co-op credit unions around the country, and there are 10 million Americans involved in worker-owned companies.

The bottom line: the deep kind of community base of our economy should be small business, co-ops, high-tech industries. That’s very creative stuff. But the ones, the big giants that—you know, we talk about banks having systemic risk. Well, that’s a key large industry that [inaud.] role in the economy that it can really—you know, it can make big trouble for the economic system. And that’s a place where they can create massive losses. And [inaud.] you can’t break them up because they’ll regroup and you can’t regulate them because they’re too powerful, well, then the only choice left is to make them public.

Take another one, health care. The way in which we run the health care system in this country, we are moving towards 20 percent. Just a little under 20 percent of the economy is going to be health care in a couple of years. That’s a fifth of the economy. In most parts of the advanced world, much better health services, much better health statistics, much better outcomes for half the cost. That is to say, about 5—instead of 20 percent, it’s about 10 percent of the economy. Well, that’s $1 trillion a year of waste for the whole economic system. And maybe you can afford that, but I don’t think this economy can afford $1 trillion here and another trillion or several trillion because the banking industry screws up.

These are massive, massive inefficiencies, massive pain to the American public. And in the case—even if they were less efficient internally, they didn’t do their accounting as well or the management, if you can save $1 trillion on health care and you can save several trillion by preventing recessions, I will accept little inefficiencies even if it were true. And by and large the studies are very complicated. It isn’t necessarily so that the public banking systems around the world—many parts of the world, have public banking—are more or less efficient. They may be more efficient on balance, even internally, than ours, and certainly internals of the health care system—much more efficient.

JAY: And some of the people that make this argument against nonprofit and public ownership and for for-profit, they have no problem heading off to Johns Hopkins and Mayo Clinic and other places that are nonprofits when they need to save their lives. In fact, studies I’ve seen show that the safest hospital you can go to is a nonprofit, the next safest is state-owned, and actually the least good results are actually privately-owned hospitals, partly, they think, because of pressure to do unnecessary surgeries and such.

Let’s actually get to the politics before we get to what the structure might look like. I mean, isn’t the politics of achieving the kind of public ownership you’re talking about even more difficult than achieving regulation?

ALPEROVITZ: I actually think it’s just the reverse. Now, this is paradoxical. It kind of puzzles people. But I think that the—take the banking industry. I think these guys are so out of control that they are going to create another crisis. And the anger that that already has generated in the last crisis on the right and the left against Wall Street, Main Street against Wall Street, I think at some point is going to be overwhelming.

And then the fact is the logic takes place: you can’t regulate them. They’re too powerful. If you regulate them, they will undo the regulations through the back door. If you break them up, they’ll regroup.

I think at some point that anger’s going to build up and people are going to say, enough is enough, we’ve had it, we’ve got to stabilize this system, stop playing with our lives. So I think that politics—now, remember, I don’t think that’s going to happen this week, but I think that’s the direction over the next several—and I think we’ve begun to talk about it directly. You know, that’s the direction. The logic of the direction suggests that, as we go forward, there’s going to be only one way out of this way, and that is to make them into utilities.

And health care [inaud.] pain and a lot more costs. I think the pain is really—you know, the last time around, we saw people thrown out of hospitals and left on the street because they didn’t have—ran out of insurance, and people dying and the pain levels of families. So I think the anger level’s there. And the cost problems, many companies who face these cost problems in international competition, there is a pressure building up on the cost side that I think is going to lead us inevitably, because the costs are so bad and the personal costs and the pain levels are so high, towards step-by-step, maybe state-by-state—like, Vermont is setting up single-payer, Hawaii has 90 percent in one form or another of a kind of quasipublic structure, and I think we’re going to move slowly, state-by-state, as the pain gets worse, and having some of the corporations on the side of trying to change this ’cause they don’t want to spend costs either.

Over time, I think the health care system—and those are two biggies—banking and health care over time could become very powerful change. And then I think we’re going to start thinking about what other industries are important. As I say, I’m not—I think [crosstalk] should never be in the public sector, small business and big—and creative new high-tech industry, not at all. But some of these things are so dangerous to the economy, we really ought to be talking about them.

JAY: One of the arguments that libertarians make which I think has a lot of truth to it, and one—their critique against regulation is that the biggest corporations can afford regulation. They often use regulation to actually drive out competition from mid-size, smaller-size companies. And you have somewhat the same argument that if there isn’t a shift in who has power in the society, that even if you had, say, for example, some kind of public ownership or some banking as a public utility, that it wouldn’t really shift the balance of power, that what you would have is that side/piece of the economy would kind of be used as a patch because the crisis was so severe. But the actual concentration of political power would remain in very few hands, and they would kind of make use of this public ownership to sort of reinforce their strength. Does there not also have to be some democratization of the politics at the same time?

ALPEROVITZ: Yeah, you need a politics and you need to—. That’s why it’s important to start talking about this, so we have an informed politics. I think the progressive politics right now in the banking is, let’s break them up. And I’m for that, but I think it’s going to result in—as I said, they won’t—even if you break them up, like, the insurance industry or, like, the oil industry, they’ll get back—the big fish will eat the little fish, they’ll be back and doing the same thing. So we need an informed politics that understands some of the logic of all this as well.

But it’s absolutely true. When regulated, many of these companies use the regulations to destroy other small competitors. There was a famous study of this done. The early part of the regulatory commission set up at the beginning part of the 20th century, it’s called triumph of the conservatives because they’ve used the regulations in order to control their part of it. And often—you see this in cable television, too—the big guys control it through—even if they’re regulated, they use the regulations indirectly to keep out the small fry. So there’s a small-business argument and a very interesting one, an efficiency argument, really, to challenge this as well.

JAY: Okay. Well, we’re going to continue the discussion with Gar, but we’re going to wait until you, our viewers, send us your questions, your challenges, your comments. So you can put them below the viewer here, below the video player, and we’ll collect some of the best questions. And we may open up a special page for questions for Gar as well. And then we’ll invite Gar to come back again and respond to some of your, as I say, comments and challenges. So we’ll continue, ’cause this issue of public ownership is a rather profound and big issue facing the society. Thanks very much for joining us, Gar.

ALPEROVITZ: Good. Thanks. Glad to be with you, Paul.

JAY: And thank you for joining us on the The Real News Network.