We need a new economic system

Gar Alperovitz

Politics as usual can’t solve massive inequality or climate catastrophe

As the 2016 election begins to come into focus, economic populism appears to be the order of the day. The Center for American Progress, the Campaign for America’s Future and National People’s ActionHillary ClintonBernie SandersBill de Blasio and the Roosevelt Institute have all in the last few months released programmatic calls to action highlighting the need to tackle economic inequality. This is, of course, laudable — it’s not every day that virtually the entire spectrum of Democratic Party insiders and outsiders concurs that our increasingly unequal distribution of income and wealth is a central problem to be addressed. But are calls for reform and redistribution enough?

I am opposed to very little of what is being presented in these various platforms and proposals. They are, for the most part, perfectly sensible ideas — such as financial transaction taxes, increases to the minimum wage and using government funds to build and repair infrastructure such as roads and railways — that would be, for the most part, noncontroversial if we were living in an era of sensible politics. But the fundamental fact is that we are not.

Instead, we are living in the era in which the corporate institutions at the core of our politics, along with the radical financial inequalities our system now produces, have undermined the power relationships that once allowed for traditional reforms. The labor union — the fundamental institutional power base for tempering the excesses of a corporate economy — is regrettably in terminal decline, down to 6.6 percent of workers in the private sector. Long-term structural shifts in the political economy have rendered the program of regulation and reform more or less inoperative. How long, for example, did it take for the banks to undo and neutralize even the modest post-financial crisis attempts to regulate their activities? Just four years, to judge from their recent success gutting new derivatives regulations before the Securities and Exchange Commission could even implement them. Only when contradictions emerge between different segments of an otherwise consolidated pro-corporate bloc — as they have around net neutrality and LGBTQ inclusion — we may be able to achieve a few victories here and there.

But such modest contradictions between corporate actors will not open up the political space needed to confront the underlying systemic drivers of increasing economic inequality. It’s commendable that economic inequality is on the Democratic Party’s agenda for 2016, but what’s missing is an understanding of the magnitude of this problem in the current context — that any real change will require not just regulatory redistribution, but a fundamental shift in the dynamics of wealth accumulation. The long-term economic trajectory is one that continues to return an indefensibly low share of income to working people even in an era of increased productivity, and that has maintained a more or less constant proportion of families below the poverty line since the 1970s — not to mention continuing to pump dangerous amounts of carbon into the atmosphere and incarcerating an obscene and unprecedented number of Americans. If we want to reverse this trajectory — if we want an economy that delivers democratic rather than plutocratic outcomes — we need to democratize the economy.

If this sounds radical, it is — in the sense of that word’s origin, as something that goes to the root of the problem. In a system in which political power flows, ever more unabashedly, from wealth, the increasing hyperconcentration of that wealth is the root cause that needs to be treated — and while educational disinvestment, crumbling infrastructure, and low wages are all important and pressing problems to tackle, they remain symptoms of the underlying dysfunction.

But this idea that we urgently need to democratize ownership of the economy is not really all that “radical” in the normal sense. It does not reject all private ownership; it merely demands that more people share in it, and that the public undertake new ownership strategies. Even in the recent flood of proposals for reform and regulation, elements of such a next system shine through. Economist Joseph Stiglitz’s “Rewriting the Rules” report for the Roosevelt Institute, for instance, suggests that a public option for mortgages could do much to address the deficiencies in a home-financing landscape where public welfare too often bows to private profit. Stiglitz also recommends a public option for savings banks, organized through the post office, and a public option in health care (“Medicare for all”). These and other kinds of public enterprises, designed to be owned democratically by the nation as a whole, would not aim simply to regulate the consequences of the profit-maximizing behavior of corporations — they would aim to displace them.

Further suggestions in other documents go straight to the heart of the relationship between labor and the ownership of capital. Remarkably, democratic socialist Bernie Sanders, in his presidential campaign economic agenda, and former Treasury Secretary and centrist’s centrist economist Lawrence Summers, writing inside the Beltway for the Center for American Progress, agree that worker ownership, including worker cooperatives, can and should be encouraged through federal policy initiatives.

At the local level in the “laboratories of democracy,” this kind of shift —toward models for economic development that prioritize democratic cooperative and community ownership — is already well under way and picking up steam. In Mayor Bill de Blasio’s New York City, the formation of worker cooperatives in economically marginalized communities is now a funded component of his administration’s business-development strategy.  Following the example of Cleveland, cities such as New Orleans, Rochester, New York, and Jacksonville, Florida, are pushing to develop community-owned cooperative businesses as part of municipal efforts to use the procurement of large non-profits to anchor inclusive local economic planning. Cities such as Chattanooga, Tennessee, have developed world-class municipal broadband networks that far outperform the paltry services on offer from the reigning corporate incumbents. And thanks to superb grass-roots organizing, the voters of Boulder, Colorado, are moving forward with an ambitious plan to deprivatize their local energy utility. 

Efforts to democratize the ownership of our economy are becoming an increasingly mainstream part of our national conversation. The Next System Project, which I co-chair along with former presidential environmental advisor Gus Speth, is an attempt to do what we feel is necessary as a next step — take all these elements, promising local models and isolated policy proposals, and begin the careful work of knitting together broad, pluralistic conceptions of what a transformed system might look like. Without a systemic approach, acknowledging and aiming squarely at the basic ownership patterns that underlie the inequality we see manifesting in so many tragic ways, we run the risk of just tinkering around the edges. Ultimately, the clarification of a new systemic direction is also critical to political organizing and other activist strategies. A new momentum is quietly building, and it’s not a moment too soon.