America Beyond Capitalism

What a "Pluralist Commonwealth" Would Look Like

BY GAR ALPEROVITZ

This article is from the November/December 2004 issue of Dollars and Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/2004/1104alper.html


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This article is from the November/December 2004 issue of Dollars & Sense magazine.

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Many books in recent years have portrayed promising grassroots economic alternatives in the United States and around the world, many have forwarded visions of what an alternative to capitalism might look like, and many have analyzed the recent sharp rightward turn in American politics. Gar Alperovitz's new book, America Beyond Capitalism, does all three of these things—and much more. It also suggests a strategic political-economic path for long-term change. Alperovitz, a University of Maryland political economist and president of the National Center for Economic and Security Alternatives, argues that the decay of liberal politics in the United States, combined with the evident inability of the existing system to meet our most basic policy challenges, could well open the door to a conversation about our political-economic system and how to restructure it—starting with who owns wealth. This brief excerpt from the book outlines a desirable and efficient alternative system and discusses why fundamental progressive change should be seen as an achievable aspiration in the decades to come. To order America Beyond Capitalism, visit www.americabeyondcapitalism.com.    —Thad Williamson

The United States is the wealthiest nation in the history of the world. By the end of the 21st century it will have the technological capacity to increase the income of all its citizens many times over or to radically reduce work time and thereby allow a new flowering of democracy, liberty, and personal and community creativity. The new century could be—should be—one of innovation, hope, even excitement.

Few Americans approach the century this way. The future is clouded by problems rather than opportunities; it appears as an era of great political difficulty and danger. At the most obvious level is the threat posed by terrorism and war—and the many challenges to liberty that overly zealous responses to both have produced. At another are a whole series of worsening social, economic, racial, and other predicaments. Critically, confidence that the great traditional values at the very heart of the American experience can be sustained has been declining rapidly.

A political-economic system can continue to violate the values it affirms for a very long time without major consequences. It is unlikely, however, to be able to do so forever. Over time, ever greater cynicism is sure to develop; and with it, an ever deepening sense that American society has lost its moral compass, that government policies are merely the result of power-plays and brokering between interested parties which do not and cannot claim any deeper democratic or moral legitimacy. The question is: Can a meaningful, morally coherent, and ultimately positive politics be constructed in the emerging era of technological abundance?

Can a new direction be set which acknowledges the systemic nature of our problems and openly posits a concrete alternative and a process that might move in a new direction? Can the system be changed?

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It is possible to define the underlying structural building blocks of a model political-economic system which differs in fundamental ways from both traditional capitalism and socialism.

The schematic model outlined here is termed a "Pluralist Commonwealth"—"pluralist" to emphasize the priority given to democratic diversity and individual liberty; "commonwealth" to underscore the centrality of new public and quasi-public wealth-holding institutions.

At the heart of this model is a robust vision of community democracy as the necessary foundation for a renewal of democracy in general. The model prioritizes a variety of strategies to undergird local economies, thereby creating conditions favorable to the growth of local civil society associations and an increase in the power of local government to make meaningful decisions.

The model also projects the development over time of new ownership institutions, including locally anchored worker-owned and other community-benefiting firms, on the one hand, and various national wealth-holding bodies, on the other. These ultimately take the place of current elite and corporate ownership of the preponderance of large-scale capital.

At the national level, a major new institution—call it a "Public Trust"—is projected to oversee the investment of stock on behalf of the public as state and other pension boards commonly do today. The proceeds could flow to individuals, to states, to municipalities, to the federal treasury—or perhaps to fund such basic public services as education or medical care for the elderly.

A fundamental shift in the ownership of wealth over time slowly moves the nation toward greater equality: directly, for instance, through worker-owned enterprises, and also indirectly, through a flow of funds from the large-scale public investments. (Capital would likely be assembled both by the taxation of elite income and wealth and through new loan guarantee strategies to finance the broadened public ownership of new investments.) Over time, these flows of funds are allocated to finance a reduction in the work week so as to permit more free time, which in turn bolsters both individual liberty and democratic participation. In addition, ownership structures and strategies that stabilize the local economy strengthen the traditional entrepreneurial foundations of liberty while also enhancing individual job security.

Finally, the emerging model implicitly moves in the direction of, and ultimately projects, a radical long-term devolution of the national political system to some form of regional reorganization and decentralization. The region is the most logical locus for economic planning aimed at securing jobs in particular communities and for handling ecological, transportation, and other issues in a rational and democratic fashion.

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Neither traditional socialism nor traditional capitalism deals well with the power problems presented by large-scale enterprise. Significant economic actors in the socialist state are commonly unaccountable either to market forces or to the public; they are power systems within a power system. The modern for-profit corporation under capitalism is for the most part unaccountable to the public—and, contrary to traditional theory, in most cases unaccountable to its shareholders as well. As the Enron and other scandals have shown (and many scholarly studies demonstrate), managers and top executives largely run the system, dominating boards and annual meetings alike. Rarely are challenges to their power successful, even by major shareholders.

Taken together, the basic elements of the Pluralist Commonwealth's political-economic architecture offer an integrated approach for dealing with these fundamental problems of power.

First, over time the model steadfastly attempts to nurture and rebuild democratic experience by supporting policies and institutions designed to make democratic practice real in the lives of citizens. The development of a meaningful democratic culture is foundational: Without attention to nurturing an active and engaged citizenry, very little can be done to achieve larger democratic goals.

Second, the model opens a steadily expanding wedge of time for individuals to participate in democracy. This is one of the Pluralist Commonwealth's most important elements: Without time to participate, authentic democratic processes to constrain economic actors (be they private or public), and to monitor a revitalized public sector, are simply not possible.

Third, the model's financial mechanisms also aim to translate technological gains into greater equality—thereby offering long-term possibilities for equality of democratic participation in general and for challenging and containing the power of large-scale enterprise in particular.

Fourth, as in the case of modern public pension fund management, the change in ownership legitimizes the public's inherent right to ensure that major firms are made accountable to larger concerns—even as competitive practices are encouraged through a variety of well-established techniques. New ownership forms also facilitate greater openness, transparency, and accountability in enterprise management and governance.

Fifth, the Pluralist Commonwealth vision ultimately reduces the scale of the public institutions that hold firms to account. It is increasingly difficult to achieve effective continent-wide political associations; units at a regional scale (as exist now in certain large states) offer important strategic possibilities for greater political control of corporate practices.

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It is commonly held that free enterprise capitalism is the most efficient of all systems—certainly more efficient than traditional socialism—and that other possibilities must inevitably also be inefficient. Even at this stage of development, however, there are reasons to believe the Pluralist Commonwealth could equal or possibly surpass the efficiency of real-world capitalism.

First, although some of the inefficiencies and wastes of capitalism are occasionally highlighted in the media, we are just beginning to grasp just how vast these may be. The electricity crisis in California in 2000 and 2001 cost the state tens of billions of dollars. A conservative estimate is that over $10 billion was directly attributable to market manipulations by private firms. Corporate scandals in 2001-2003 cost New York state alone an estimated $13 billion. The Enron scandal cost workers and pension-holders $1 billion. Lobbying by the oil, pharmaceutical, insurance, television, banking, and other industries regularly generates further billions of dollars of questionable federal subsidies.

Second, various quasi-public and public firms (e.g., worker-owned firms, municipal electric utilities) have been shown to be at least as efficient as traditional corporations—and in many instances more efficient. Public pension management strategies have also been shown to be as efficient or more efficient than those of private pensions.

Third, salaries paid to public managers in comparable positions are far lower. For instance, William J. McDonough, then president of the Federal Reserve Bank of New York, received $297,500 in 2001, while William Harrison, CEO of J.P. Morgan Chase, took home over $21 million. Top executives managing large state-run pension investments (e.g., CalPERS) received average compensation of less than $450,000 in 2001, while William Foley, chairman and CEO of Fidelity, garnered more than $13 million.

Fourth, additional strategies to achieve economic efficiency are already being developed. Louis Kelso, John Roemer, James Meade, and Leland Stauber have all suggested ways to combine the public's interest in important economic activity with strategies to insure the independence of strictly business decisions and the use of market discipline; new variations and refinements are likely to be put forward as time goes on.

Critics of public involvement in economic matters often implicitly compare new approaches with the efficiency properties of an abstract and rarefied free market model. The result is a self-serving "heads-I-win, tails-you-lose" argument: Traditional political-economic practices are evaluated as if they were (or should be) purely efficient free market operations, ignoring what everyone knows to be the actual dynamics of corporate political-economic behavior. Meanwhile, alternatives involving proposed public strategies are evaluated as if they must inherently involve grave political-economic market distortions—ignoring studies that demonstrate the measured efficiencies of a wide range of available alternative practices.

The truth is, various forms of market manipulation are central to the current corporate-dominated political-economic system, not peripheral to it. They come with the territory—as everyone knows full well when they shift their gaze away from abstract theory to the real world of oil company lobbying, drug company political pay-offs, Microsoft anti-competitive maneuvering, Enron corruption, and Andersen accounting complicity.

The Pluralist Commonwealth model breaks the logic of the traditional argument, first, by challenging the utopian idea that most firms keep away from government in the current system; second, by developing various strategies which allow for both competition and increased citizen accountability; and third, by structurally changing ownership patterns in ways that achieve greater transparency so that when the inevitable problems arise, in either public or private settings, they can be openly debated and corrected. Finally, of course, the model's shift to new ownership forms inherently recaptures for broader public use excessive funds which might possibly be garnered through corporate political maneuvering.

We may add that to the extent the political-economic system defined by the Pluralist Commonwealth is able to achieve greater equality, it would likely also achieve much greater efficiencies in the development and use of human resources. Leaving aside the morality of the implicit choices of the present system, countless studies demonstrate that we currently throw away literally millions of productive people whose contribution to the economy could be enormous.

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It is important to stand back from the difficulties of the current moment to consider underlying issues of principle which will frame the politics of the coming era—through times of war and terrorism and beyond. Four quite fundamental contentions are suggested by evolving political-economic developments.

First, that there is no way to achieve movement towards greater equality without developing new institutions which hold wealth on behalf of small and large publics.

Second, that there is no way to rebuild democracy with a big "D" in the system as a whole without nurturing the conditions of democracy with a small "d" in everyday life—including in economic institutions which allow and sustain greater stability of local community life.

Third, that there is no way to achieve democracy in a continental-scale system moving towards 400 million people, and possibly a billion or beyond, without radical decentralization, ultimately in all probability to some form of regional units.

Fourth, that there is no way to achieve meaningful individual liberty in the modern era without greater individual economic security and greater amounts of free time—and that neither of these, in turn, is possible without a change in the ownership of wealth and the income flows it permits.

These four contentions stand on their own. Indeed, at this point in American history, the ball is in the court of those who hold that equality, liberty, and meaningful democracy can be achieved without meeting the challenges suggested by the four basic points. Further related questions are whether there is any other way to achieve gender equality, ecological sustainability, and sustained, meaningful community.

The Pluralist Commonwealth model holds, beyond this, that democratic control of large economic enterprise, a central problem confronting all political-economic systems, can never be achieved without transforming and making public the ownership of large-scale wealth and without developing a new culture—and, further, that this can only be done by building on the four key elements: Without local democracy there can be no culture of democratic practice; without security and time, there can be only a weak citizenry; without decentralization it is difficult to mobilize democratic practice and accountability; and without major and far-reaching new forms of wealth-holding, there can never be adequate support for the conditions and policies needed to build a more egalitarian and free democratic culture in general.

Finally, the model is based on the judgment that greater equality, greater individual economic security, greater amounts of free time, and—upon this basis—the reconstitution of a culture of common responsibility are ultimately required if we are ever to reorient our community and national priorities in general.

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The prospects for near-term change are obviously not great, especially when such change is conceived in traditional terms. Indeed, although there may be an occasional "progressive" electoral win, there is every reason to believe that the underlying trends will continue their decaying downward course. In many ways times are likely to get worse before they get better.

On the other hand, for precisely this reason we are likely to see much deeper probing, much more serious political analysis, and much more fundamental institutional exploration and development. Already states and municipalities in all sections of the country have moved forward to create—and systematically build political support for—many new political-economic experiments and strategies. Federal fiscal and other decisions are now producing pain and reassessment at every level.

In fact, just below the surface of conventional reporting, literally thousands of on-the-ground efforts which illuminate new principles have been quietly developing for the last several decades. In California, the state pension fund plays a significant role in state development. In Glasgow, Ky., the city runs a quality cable, telephone, and Internet service at costs far lower than commercial rivals. In Harrisonburg, Va., a highly successful company owned by the employees makes and sells cable television testing equipment. In Alaska, every state resident as a matter of right receives dividends from a fund that invests oil revenues on behalf of the public at large. In Alabama, the pension fund directly helps finance worker-owned firms.

Traditionally, a distinction has been made between "reform," on the one hand, and "revolution," on the other. The former implies nonviolent improvement in the outcomes of a given system, with no fundamental change in its basic institutional structure: It cleans up around the edges of the existing system, as it were, sometimes slowly, sometimes in major political outbursts. The latter, revolution, commonly implies abrupt and often violent change—above all of the fundamental institutional structures of the system.

The kind of change suggested by these emerging efforts involves an unusual combination of strategic approaches. Like reform, in the main it involves step-by-step nonviolent change. But like revolution, the process is oriented to the development of quite different institutional structures to replace traditional corporate forms over time. It might appropriately be called "evolutionary reconstruction."

A politics based on evolutionary reconstructive principles does not abandon reform when it can achieve important gains. On the other hand, such a politics explicitly seeks to understand and to foster the longer-term foundational requirements of the values it affirms. It is not satisfied with, nor misled by, occasional electoral gains that do little to alter the direction of long-term trends. It is a politics of historical perspective and commitment to the long haul.

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Institutional restructuring, we tend to forget, is exceedingly common in the long sweep of world history. The difficulty lies in pulling ourselves out of the present moment to consider our own possibilities in broader historical perspective.

There have been five large-order political realignments over the course of American history, from before the Civil War to the Progressive era and beyond. Each has occurred in the face of arguments that nothing of great political significance was feasible. Further realignments over the course of the 21st century are not only possible, but likely.

Long before the civil rights movement, there were many years of hard, quiet, dangerous work by those who came before. Long before the feminist explosion were those who labored to establish new principles in earlier decades. It is within the possibilities of our own time in history that—working together and openly charting an explicit new course—this generation can establish the necessary foundations for an extraordinary future and for the release of new energies.

It may even be that far-reaching change will come much earlier and much faster than many now imagine.

Gar Alperovitz teaches political economy at the University of Maryland and leads the National Center for Economic and Security Alternatives.

Adapted from America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy (Wiley & Sons, 2005), www.americabeyondcapitalism.com.