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1. Has any research been done on the various ways in which the worker co-ops/ WSDEs can distribute surplus in different ways than the capitalist firms and change the wealth distribution of the society as a whole?
Yes, some of our UMass students investigated alternative distributions of the surplus from those normally chosen by capitalists, alternatives that would be available to WSDEs. No direct examination of impacts on income and/or wealth distribution were undertaken. That would be an important theoretical inquiry and in places like Mondragon would also be possible empirical inquiries as well. In all likely scenarios, a collective/democratic distribution of the surpluse as in a WSDE would never consider or enact the sorts of unequal distributions of the surplus to some workers vis-a-vis others that have become the capitalist norm…hence WSDEs mean at least significantly less inequality in income and wealth distributions than in capitalism. Indeed, given the stunning long-term failure of capitalist societies to reduce inequality (except when surges of populist political rage from below forces it temporarily), WSDEs emerge as the only serious mechanism to structurally do something lasting about capitalist inequalities.
2. Isn’t it true that a WSDE economy may not provide better job security than a Capitalist economy?
The argument against freeing slaves went the same way. Slaves, it was said, did not want the burdens of freedom, ran from them, and preferred that all the responsibility for life stayed with the masters. A decent society, more likely with than without WSDEs, but either way, would not allow unemployment because of its patent irrationality on countless scores. Job security will arrive once enough people see the absurdity and costs of not provided it as a right (as FDR’s “second bill of rights” proposed over half a century ago).
3. Why do many successful WSDEs (as seen in Silicon Valley) transition into Capitalist enterprises?
While it is true that some WSDE’s, when they grow, shift into capitalist enterprise, many do so without the vocabulary or concepts to understand what they are doing in those terms (they dont think in terms of alternative class structures….something I encountered in Silicon Valley repeatedly). If WSDEs had a different understanding of what their enterprise was and a historical grasp of the transition away from capitalism that they had embarked upon, they could have held on to their WSDE structure rather than abandoning it. In the real world political struggles will ensue over whether and how the government supports capitalist vis-svis WSDE enterprises (something well illstrated already by the Italian experience).
4. Would scarce resources limit worker self-directed enterprises?
Entire Question: Would scarce resources limit worker self-directed enterprises?
5. Would pure capitalism work?
Entire Question: Would pure capitalism work?
6. Can raising the minimum wage cause poverty or hurt people?
Entire Question: Can raising the minimum wage cause poverty or hurt people?
7. What is the difference between Obamacare and a public option?
Entire Question: What is the difference between Obamacare and a public option?
8. How would competition work in worker-owned businesses?
Entire Question: How do you address the issue of competition in capitalist systems and how would it work in worker-owned business?
9. Could you talk more about the bank bailouts and the Cayman Islands?
Entire Question: Could you talk more about the bank bailouts and the Cayman Islands?
10. Is the crisis of capitalism caused by underconsumption or the tendency of the rate of profit to fall?
Entire Question: Is the crisis of capitalism caused by underconsumption or the tendency of the rate of profit to fall?
11. What happens when a WSDE wants to relocate?
Entire Question: How do we deal with a WSDE that may not leave the country, but may choose to leave for another community. What happens when a WSDE wants to relocate?
12. Is labor always the source of value?
Entire Question: Is labor always the source of value?
13. Are capitalism and democracy opposed to one another?
Entire Question: Are capitalism and democracy opposed to one another?
14. Are Workers Self-directed Enterprises ends in themselves, goals that, when achieved, will bring about the better society so many progressive folk seek?
Entire Question: Are Workers Self-directed Enterprises ends in themselves, goals that, when achieved, will bring about the better society so many progressive folk seek?
Answer: No, a social movement such as Democracy at Work aims for a transition to Worker Self-directed Enterprises (WSDEs) but not ends in themselves. The stress we give to such a transition to WSDEs in our work is driven by the studied neglect of them in the work of so many who work toward other social goals we agree with heartily. In other words, for examples, we stress transition to WSDEs precisely because we think ecological sustainability, a genuine democratic politics, and a far less unequal distribution of wealth, income and cultural access are social goals that would be significantly advanced in and by an economy based on WSDE’s rather than stymied, as they have been, by a system of capitalistically organized enterprises.
15. What are your thoughts on raising the minimum wage?
Entire Question: What are your thoughts on raising the minimum wage?
Answer:The argument for an increase in the minimum wage ought not to rely on or focus on economics. The political, ethical, and social reasons for higher minimum wages make the case better, more clearly and more definitively.
Economists have accumulated a vast literature on the minimum wage. That literature is divided into two opposing schools. The first, comprised of paid spokespersons for business and their various allies in politics, media and the academy, strives to establish the following sort of argument. Raising minimum wages will reduce the number of jobs available to those earning the pre-rise minimum wage. This is because of the “law” of supply and demand which holds that demand for anything fall as its price rises. Raise the price of labor power, less will be demanded. In short, raising the minimum wage will push more workers out of jobs into unemployment. It is thus bad for just those in whose name the minimum wage is to be raised.
Such arguments provoked liberal, labor, and radical economists to seek to prove the contrary point. They questioned the theoretical assumptions about supply and dermand as it pertains to wage determination. They also offered empirical analyses to show countless cases where wages rose and no unemployment followed, etc.
Excluding unrepentant ideologues, most economists now acknowledge that the end product of the vast literature on both sides is a kind of stalemate. That is, it is not at all clear whether raising the minimum wage would help or hurt employment numbers. There is no one-to-one correlation, no clear-cut cause-and-effect relationship, between raising a wage, on the one hand, and increasing versus decreasing the number of workers employed at the raised wage, on the other.
Thus, to make arguments for raising the minimum wage on the grounds that it will necessarily have a determinate effect on employment is unsustainable and therefore ill advised. The simple truth resolves into these two points. (1) Raising the minimum wage always occurs together with countless other changes occurring in any economy. All those changes influence employment so that the effect of raising the minimum wage cannot be usefully isolated to be known. (2) Raising the minimum wage causes an immense number of other changes across an economy in the present and into the future…and all those changes will in turn exert their effects on employment. What the net effect will be is unknowable in advance. Making definitive claims will always invite and get refutations leading into endless debates that few will follow or be persuaded by. Not the way to go!
Given that we dont know how raising the minimum wage will play out on employment in advance, that the employment outcome will vary from case to case, the decision about raising the minimum wage ought to be made on other, non-economic grounds (political and ethical and social) where the positive effects of doing so can be more confidently described, predicted, and/or advocated.
16. What are the differences between ESOPs and WSDEs?
Entire Question: What are the differences between ESOPs and WSDEs?
17. Where do WSDEs acquire funding?
Entire Question: Where do WSDEs acquire funding?
18. Can you comment on the the representation of Marx in the advocating of violence and worshiping the state as the Utopian mechanism to lead to a better society?
Entire Question: Can you comment on the the representation of Marx in the advocating of violence and worshiping the state as the Utopian mechanism to lead to a better society?
19. Libertarian-leaning people have asked why criticize capitalism as if it really existed in the US?
Entire Question: Libertarian-leaning people have asked why criticize capitalism as if it really existed in the US?
20. The very important differences between ESOPs and WSDEs
Entire Question: What are Employee Stock Ownership Plans (ESOPs) and how do they differ from worker cooperatives or workers self-directed enterprises (WSDEs)?
Answer: ESOPs are very different from WSDEs.
In ESOPs, the crucial dimension is that employees become owners of shares of stock in the company/corporation that employs them. The specific arrangements for such stock ownership may vary. Individual employees may obtain shares as part of their remuneration or as part of a partial or total buyout of the company by its employees (often occurring to prevent a corporation from closing or moving. Shares may be held in trusts for employees until they retire or leave employment when they may be sold and the proceeds provided to the employee, and so forth.
As share owners, workers with ESOPs are not members of the boards of directors that hire and fire those workers. As non-members of the board of directors, such workers are usually excluded from participation in deciding which precise commodities the corporation will produce and what technologies it will deploy to produce those commodities. Of special importance, such worker-owners do not participate in deciding how and to whom to distribute the corporation’s net revenues (including profits). The worker-owners in ESOPs, individually or via share-owning trusts established for their benefit, can vote for who sits on a corporation’s board of directors. In practice, the vast majority of ESOPs place workers in the position of rather passive share-owners (like most relatively small shareholders who are not employees). In that position, they leave the running of the corporation to the usual, professionally credentialed individuals who comprise the boards of directors of most corporations. In rare cases, worker-owners actively use their ownership positions to closely monitor and control how the boards of directors actually run the company.
In contrast worker- or producer-cooperatives (WSDEs) place workers in the positions of a collective board of directors. Workers are thus self-directed. They may or may not also own shares of the company of the company, and they may or may not own all the shares of the company. In WSDEs, what matters is that the workers take an active role in the directorial decisions: what, how, and where to produce and what to do with net revenues. That active role may occur in a direct form such that the workers all meet regularly to decide together all directorial matters. Alternatively, it may be indirect as when workers elect from their own numbers a committee or board that makes directorial decisions subject and accountable to the totality of the workers. In a WSDE, if there are owners who are not workers (itself a matter decided by the workers), the owners do not participate in selecting the board of directors. That is the exclusive power/authority of the workers.
Of course, there can be exceptional examples of ESOPs that come close to replicating WSDEs and likewise exceptional examples of WSDEs that resemble ESOPs, but they are usually quite clearly distinct. Ownership and directorship are separated functions in capitalist corporations. That difference may usefully be kept in mind to distinguish an ESOP (where workers become owners) from a WSDE (where workers become directors).
21. How does the education system serve a capitalist workplace and how would it have to be different to support worker-owned businesses?
Entire Question: How does the education system serve a capitalist workplace and how would it have to be different to support worker-owned businesses?
22. What is the difference between Keynesian and Marxian economics?
Entire Question: What is the difference between Keynesian and Marxian economics?
23. What are the prospects for the US and global economies for 2013?
Entire Question: What are the prospects for the US and global economies for 2013?
24. What are markets and what do they do?
Entire Question: What are markets and what do they do?
25. I believe that there is such a huge discrepancy between secretarial/lawyer wages because employers can convince secretaries that there is a disconnect between the secretarial output and the actual business/services provided by the firm.
Entire Question: I believe that there is such a huge discrepancy between secretarial/lawyer wages because employers can convince secretaries that there is a disconnect between the secretarial output and the actual business/services provided by the firm.
Answer: Your intuition here is spot on: the basic causes for the disparity between secretaries’ pay packages and those of “professionals” lie in the realm of culture, namely the systems of beliefs, expectations, and assumptions about how the world works and ought to work that people in a community hold. Culture includes language, and the very word “professional” applied, say, to a lawyer could just as well be applied to a secretary. Whether it is or not and whether salaries differentiate the two lines of work is shaped in and by culture. If and when secretaries stopped accepting the cultural rationales for their situation, they could ally with other workers similarly unjustly treated to change the whole system.
The secretary’s pay being less than that of other “white-collar” employees is not more economically justified than the lower pay of all production line workers compared to what corporate executives get, compared to what corporate shareholders get. When production workers get paid, say, $20 per hour, that is only ever because in each hour of their labor, they add to the output of their employer – that the employer will then sell – a value greater than $20. This difference between the value paid to production workers for their labor and the value their labor adds to what their employer sells is the source of the employer’s “net revenue” or, in simple language, the capitalist’s net earnings. Those earnings are the fund from which the capitalist pays the top executives, doles out the dividends to shareholders, expands the enterprise, etc.
Yet why should production workers forever produce more by their labor than they earn for doing that labor? Ands why should other people – many of whom have nothing to do with the labor that generates everything the employer has to sell-get their hands on portions of that net revenue? Again the answer is culture. Workers have to accept the position of producing more value than they get for doing so. If and when workers stop accepting their position – rejecting the various cultural rationales for their position – then the system stops working, a new system emerges, and the whole arrangement for wages and salaries gets reorganized along new and different lines.
Such cultural rationales include, for example, that employers provide “the capital” (literally the tools, equipment, and raw materials with which workers produce outputs) and that they “deserve” a share of the output (those “net revenues”) because they make capital available. The flaw in this rationale is simple: the tools, equipment and raw materials were NOT produced by the employers, but in fact by other workers who also did not get the value of all they produced, and so on. In other words, the exploitation of workers now (that they must produce more value than they get for doing so) is rationalized by reference to the results of exploitation in the past. However, if repeated often enough, and if exposure of the flaw in the reasoning is repressed well enough, then that rationale can make workers accept an economic system that rips them off just like the secretaries you ask about are ripped off.
26. In your book you state, “WSDEs exclude surplus enablers from the one board activity of appropriating and distributing the surplus”. Can you explain please?
Entire Question: On page 166 (of your book Democracy at Work), regarding determination of compensation, you state that a WSDE board of directors would need to include surplus-producers and surplus-enablers, while the penultimate sentence in the note on the following page seems to contradict this princple, stating that “WSDEs exclude surplus enablers from the one board activity of appropriating and distributing the surplus”. Can you explain please?
Answer: The history of economic systems over the centuries (the slave, feudal, and capitalist “modes of production”) is one of continued exploitation. Its forms change but its substance persists. An exploitative system is one in which the producers of surpluses are excluded from receiving/appropriating them and then distributing them. Those latter functions – appropriation and distribution – are performed by others: by slave masters instead of slaves, by lords instead of serfs, and by capitalists instead of the productive (i.e. surplus-producing) workers they employ.
Democracy at Work seeks a clear, historic break from all such systems by ending exploitation. That means unequivocally assuring that those who produce surpluses are likewise the people who appropriate and distribute that surplus. Hence we need to insist that surplus producers – and not surplus enablers – do the appropriating and distributing; that way those who do not produce a surplus cannot (can no longer) be in a position to receive or distribute that surplus.
Democracy at Work is, at the same time, concerned to democratize economics from the ground up and thus inside the enterprise as well. Democracy applies to the enablers and well as producers of the surplus. To achieve a democratic workplace we thus likewise insist that both sets/types of workers inside enterprises together and democratically decide the following:
1. The size of the surplus
2. The mix of outputs to be produced
3. The technology to be used
4. Who will receive distributions of what portions of the appropriated surplus
In conclusion: the surplus producers alone will literally appropriate and distribute the surplus but the surplus producers and surplus enablers will democratically share the decisions about the size of the surplus and the specifics of surplus distributions. This achieves both the end of exploitation and the democratization of enterprises. A full social democracy then requires that democratic, non-exploitative enterprises (or enterprise communities) share social decision-making with democratic organizations of residential communities: together codetermining all decisions in either social site that impact significantly on the other site.
Point of clarification: the position described above parallels a certain tension within democratic communities between decisions to be decided by all democratically and those left to the individual. True, each individual’s decisions do impact the community as a whole, but that does not warrant community-wide democratic decision making to determine everything each individual does. To deprive individuals of individual decision making would destroy the individuals in whose name democracy is advanced. So key individual choices of friends, mate, career, leisure time pursuits, and so forth are largely left to them (as individuals or in families, etc.) and are not decided democratically by the entire community. Many other decisions affecting individuals are decided by their communities. Similarly, each enterprise’s productive laborers retain – for themselves alone – the functions that finally end exploitation and affirm their enterprise’s non-exploitative nature. Both surplus producers and surplus enablers participate democratically in other enterprise decisions.
27. Is it possible to socialize the private sector in a sense through government regulation without having the government directly involved?
Entire Question: I understand that the worker based cooperatives that you envision are democratically run – but are they socialist in the sense that you may still be talking about private capital? Is it possible to socialize the private sector in a sense through government regulation without having the government directly involved?
Answer: Ownership is one thing; the organization of the enterprise is something else. For example, if a society’s laws specified that all enterprises had to be run as workers’ self-directed enterprises, WSDEs (rather like saying that enterprises have to be run as ecologically safe worksites or sites free of sexual harassment or sites free of child labor, etc.), that would be workable with or without private property. To explain: it would be possible for private owners of wealth to provide the capital to such WSDEs – by buying shares of stock in them – and get a share of their profits as dividends. Alternatively, such WSDEs might be owned, qua property, collectively or individually by the workers in them, by a church community, by a locality, or by regional or the national government. As you can see, an array of alternative property arrangements/laws/conventions can co-exist with enterprises in which workers self-direct themselves without the usual capitalist apparatuses of shareholders selecting boards of directors, etc. Finally, this array of alternative property arrangements shows the parallel array of degrees of government involvement that are possible.
28. How will you get people to be enthused about having to manage the surplus and running of their companies?
Question: How will you get people to be enthused about having to manage the surplus and running of their companies?
29. Can you talk about how individuals can do something about the growing economic dislocation and disruption around us?
Question: Can you talk about how individuals can do something about the growing economic dislocation and disruption around us?
30. What do you understand “capitalism” to mean?
Entire Question: What do you understand “capitalism” to mean?
Answer: Capitalism, for me as for many others, refers to a system of production in which a small minority monopolizes the means of production requiring the mass of people to work for them in order to secure their means of life (food, clothing, shelter, etc.). The work is organized such that the workers produce more – a surplus – than they are paid, a surplus appropriated by the employers as profit. The employers then use that profit so as to reproduce the capitalist system and their favored position therein.
Notice that this definition of capitalism leaves open whether or not the state has a large or small role, whether enterprises are large or small, etc. All such variations simply mean different kinds of capitalism if and when the basic organization of production common to all variations is that described in the first paragraph above.
Lastly, there is something sad and self-defeating in right-wing arguments about “real capitalism.” The trajectory of the capitalism that emerged in western Europe in the 17th and 18th centuries – and that has spread globally ever since – has always been movement from small-scale, not-financially dependent, largely private capitalism in the direction of large-scale, financialized, and state-connected capitalism. This latter capitalism is surely as “real” as the more primitive earlier capitalism that is always left behind. What the right-wingers celebrate is that kind of capitalism that is no longer “real,” but has been everywhere shown to evolve (out of its own mechanisms) into the capitalism that is now “real” and hence quite rightly the object of criticism when it proves unbearably unstable as the crisis since 2007 only teaches us all yet again. Right-wingers’ longing for a return to “real” capitalism is a utopian sort of nostalgia with limited contemporary relevance.
31. Where is the money, the capital, going to come from to start and sustain WSDE’s? You can’t expect that capitalists will provide the money to a competing kind of enterprise.
Entire Question: Where is the money, the capital, going to come from to start and sustain WSDE’s? You can’t expect that capitalists will provide the money to a competing kind of enterprise.
Answer: Not a problem because in a WSDE-based system it would not be capitalists who gather into their few hands the profits of enterprises, the funds from and with which investments are made. Profits would rather accrue to workers self-directing themselves. They would decide how much of enterprise profits would be allocated to providing start-up and supportive capital to new and existing WSDEs. If and when capitalist enterprises shrank, closed or left, their profits and capital funds could continue to emerge if the enterprises were reorganized as WSDEs. Other WSDEs could and would take portions of their enterprises’ profits and form “venture capital” committees that would assess new enterprise proposals and choose the most promising for their investments. Their standards of “most promising” would again be far wider, more inclusive and social as against the narrowly individual profit standards government capitalist enterprises.
32. How can organizations be set up to encourage and enable people to work in a co-operative manner while at the same time setting up structures where everything does not need to be discussed by everyone?
Entire Question: It can be highly stressful and tiring for workers in a membership organization to try to get their heads around the complexities of running the business. I know one worker co-operative where the volume of decision-making meetings was stunting the business. In my religious community, I have frequently experienced this tendency (the six-months-to-decide-chairs nightmare). How can organizations be set up to set up to encourage and enable people to work in a co-operative manner while at the same time setting up structures where everything does not need to be discussed by everyone?
Answer: Every study of workplaces in the US today that I know of documents that they are now “highly stressful and tiring” for workers. The point of WSDE’s is to give workers the positions and powers to reorganize work – including its more interesting design and directorial aspects – so that it better suits their physical and mental and psychological needs. The point of WSDEs is not to add new tasks for already overburdened workers but rather to change, adjust, and accommodate work to better serve the needs of the majority of workers inside enterprises.
Often workers shy away from design and directing activities out of fears they do not know enough (reflections of schooling and previous time doing only subordinate work in enterprises). Yet an economic system with WSDEs would need to change school curricula as well as change the range of jobs all workers perform (including both subordinate and also directing positions) and thereby provide precisely the experience and learning that would qualify workers to participate as part of the collective self-direction by workers in their enterprises. Interestingly, capitalist corporations developed ways to divide decision-making among the various constituent groups in capitalist enterprises. The problem arose for capitalist corporations when they grew from the original family business into the modern corporation with its major shareholders and its top executive decision makers in the purchasing, production, sales, advertising, legal and other departments necessary to run corporate capitalism. Corporations developed the following system to divide decision-making. The owners of the business would buy shares entitling them to information about the business and the right to choose the top directors typically at an annual meeting where owners have votes equal to the number of shares they own. The board of directors makes all the basic strategic decisions about running the business (what, where, and how to produce and how to use of the profits). Owners do not make those decisions in most cases. To run the daily affairs of the business as it carries out the strategic decisions of the board, another group is designated: managers. In a sense, the many in a capitalist corporation worked out a way to distribute decision-making among them in a typically capitalist hierarchical fashion.
WSDEs would likewise divide the decision-making precisely to avoid the interminable problem of everyone involved in every decision. But unlike capitalist enterprises, WSDEs have a goal of democratic participation that is central to their existence and self-definition. WSDEs cannot and would not make a few people (major share-owners, directors and top managers) the decision-makers while most people – the workers – are forever decision-takers.
WSDEs would solve the decision-making problem by creating a division between workers and managers who would have different sets of decisions they made about the daily running of the enterprise. However, since both workers and managers are alike coop/WSDE members, they would both meet once or a few times a year to jointly and equally make the large, basic, strategic decisions that managers and workers then carry out daily. Finally, a WSDE would differ from a capitalist enterprise in further making sure that no permanent, deep divisions between workers and managers develop by systematically rotating individuals between the two positions, say annually, so they understand each other since they alternate positions. In these ways, WSDE’s can organize limited sets of decisions for different members to make at any one time and yet simultaneously sustain the genuinely cooperative kind of enterprise in which they believe.
33. How do coops of all types actually work in the real world? Unlike other kinds of enterprises, they seem to frequently fail because the workers are too inclined to put up with poor business practices.
Entire Question: My questions are about how coops of all types actually work in the real world. I know that frequently they fail. Unlike other kinds of enterprises, they seem to frequently fail because the workers are too inclined to put up with poor business practices (for example, taking pay cuts rather than deal with inherently unsustainable business practices or an unrealistic market) – perhaps a form of the ‘tragedy of the commons’. I don’t think this is just because we’re ideologues, but that may be a big part of it!
The term “coops” covers many different things: collective buying institutions (e.g. food coops), collective selling institutions (individual small capitalist enterprises who get together to sell their products), collective owners (farmers who own collectively the land they farm in individual farms). We are mostly interested in yet another type or meaning of coop: when workers in an enterprise collectively function as their own board of directors, thereby not needing any separate group of people functioning as a board of directors. We call this sort of coop a Workers Self-Directed Enterprise or WSDE.
There really is little broad evidence that compares businesses that are otherwise alike (what, how and where they produce) except that some are run as top-down hierarchical capitalist enterprises whereas others are WSDEs (coops in the sense of worker self-directed enterprises). WSDEs still remain relatively few compared with capitalistically organized enterprises. In any case we don’t have grounds to say that WSDEs, for example, fail at any greater rate than capitalist enterprises. Where we do have some evidence – for example, with the huge Mondragon Cooperative Corporation in northern Spain – it is quite clear that its member coops (WSDEs) have failed at lower rates than their capitalist counterparts over the last 50 years.
Historical evidence suggests that enterprises are very complicated and complex things utterly dependent for their survival on the interplay of external conditions (over many of which they exert little or no control) and internal conditions (all the technical and interpersonal aspects of producing and distributing goods and services). Special sets of conditions bring enterprises into existence. Changing conditions change those enterprises. And new conditions often end the useful lives of many enterprises. No one aspect of a business (whether it is hierarchical/capitalist versus WSDE) ever determines success or failure; those results always depend on the interplay of many factors.
Also, we need to be careful about the word “fail.” It means different things for capitalist enterprises than for WSDEs. Capitalistically-organized enterprises focus on “bottom lines” such as profit rates or growth rates or market shares. If they don’t get those big enough, they “fail.” Quite differently, WSDE’s do not focus on one, two or three measures. They are concerned about profits and growth but also about the welfare of workers and their families, of surrounding communities where they live, of the quality of life and personal development on the job, and so on. In a word, a WSDE that did well on many of those issues even if its profit rate was low would not be viewed or treated as a failure. From the WSDE perspective, a capitalist enterprise that scored high on profits and growth but treated its workers and the surrounding community badly might well be judged a “failure.”
Capitalist enterprises and WSDEs are basically different ways of organizing production. They likely produce correspondingly different ways of working, thinking, relating to other people, and so on. They have different ways of serving people’s needs. Likewise, if and when an enterprise “fails” and disappears, the two systems differ in how they handle that failure. Capitalist enterprises typically dissolve in bankruptcy where capitalists and workers are on their own to search for alternative livelihoods. Coops – for example in the Mondragon Cooperative Corporation in northern Spain – are more likely to work out elaborate systems for finding other work in partner cooperatives for workers from a failed enterprise. If there is not enough work for all, for example, then unemployment is shared (everyone does 2 hours less work per week rather than some being completely unemployed). Secure employment is a major priority for WSDEs in ways that it is typically not for capitalist enterprises.
34. If a company threatened to move overseas, the workers could respond by telling the company that they will run the company and compete with them. Is this realistic in a globalized economy?
Entire Question: As you discussed in your program, if a company threatened to move overseas, the workers could respond by telling the company that they will run the company and compete with them. Is this realistic in a globalized economy where capital can go to countries with the cheapest labor without either a union, labor rights, environmental regulations, etc.?
Answer: Your question quite correctly lists the advantages capitalist enterprises have when they move (which is usually why they move). But you need also to consider the list of advantages that are available to a competing workers’ self-directed cooperative enterprise set up by and for workers collectively.
First, such an enterprise would not likely have external shareholders to whom a share of profits in the form of dividends would have to be paid. Compared to a capitalist competitor – whose prices have to be high enough to generate the profits paid out to shareholders – a workers coop enterprise could charge lower (and hence more competitive) prices since it does not need to pay dividends.
Second, the productivity, creativity, innovativeness, and sense of personal responsibility (for all that happens inside an enterprise) of workers who direct and control their own enterprise will outpace and likely overwhelm what a capitalist enterprise can ever get from its cheap labor. That will give the coop enterprise a major competitive edge likely to grow over time.
Third, a workers coop can appeal to customers in ways a capitalist competitor cannot as follows: a coop can ask customers to buy its output not only to consume that output but also to thereby support and grow cooperative enterprises in general. The argument might be put this way: when you buy a coop product you increase the number of jobs people can have in coops, a real choice for Americans who do not want to be cheap labor in capitalist enterprises and who do want to be democratic participants in their workplace. Buying a coop product is a vote for a new economic system in the US other than the one now dumping unemployment, reduced benefits, and job insecurity on Americans left and right. Properly done, this appeal could give workers’ self-directed enterprises all sorts of advantages in the market place versus capitalist corporations.
Fourth, a workers’ self-directed enterprise (either alone or with others like itself) could approach local, state, and national governments in the US with an appeal (quite likely effective and popular) for all kinds of supports, financial and otherwise, to “level the playing field between coops and those US capitalists who have abandoned the US to exploit workers elsewhere by paying them less.” This would simultaneously build support for the workers coops and turn political and public opinion against those capitalists.
Fifth, workers in coops will bring all their knowledge, friendships, connections with resources throughout the community into the support of the enterprise in a thousand ways precisely because it is theirs; nothing comparable can be expected from capitalists’ foreign cheap laborers.
Sixth, workers in the capitalist enterprise that threatens to move abroad have a deep knowledge of how the capitalist enterprise’s products are made, problems in the production of whatever goods or services are produced, flaws in their design and performance. This knowledge can become very useful both in exposing the weaknesses of the capitalist enterprise that moves abroad and in producing a better version of the product in the workers cooperative enterprise that replaces the departed capitalist enterprise.
In concluding, let me also note that the above is just a partial list of real advantages a workers coop would wield. Moreover, consider that when a capitalist firm threatens to move abroad, it is often just that, merely a threat. Its purpose is to obtain some tax or other advantage from local authorities or perhaps a wage or benefit concession from workers or unions afraid the threat might be carried out. Often the capitalist firm never really intended to move because of the high costs and risks of moving to foreign countries; it just wanted more subsidies from government and workers. That kind of threat would lose much of its attractiveness for capitalist corporations (who do this all the time across the US and have done so through the nation’s history) if the firm’s bluff were called by the determination of workers (perhaps with the support of local authorities angered by the capitalist threats) to establish a competing local coop enterprise.
And take this line of argument another step: capitalist firms have to spend much money closing operations here and opening them in another society and the move is always risky. They will be less likely to take those risks if added to them is the risk of a deft competitor composed of their former workers now working for themselves in a workers’ coop. That is why I stressed on the program that a new strategy for labor should have two parallel parts: the traditional bargaining for better wages and benefits for capitalist employees side-by-side with establishing competing workers’ self-directed enterprises when traditional bargaining is not enough or when capitalists threaten to close up shop unless……
35. One major problem for the restructuring of the capitalist workplace and system is money. Seeing as how the lender(s) would hold power in the form of influence or the collection of interest accrued, how do you get around this issue?
Entire Question: One major problem for the restructuring of the capitalist workplace and system is money. Any seed money for starting an employee self-directed enterprise would likely either be borrowed or come from a few individuals. Seeing as how the lender(s) would hold power in the form of influence or the collection of interest accrued, how do you get around this issue?
Answer: One key goal of converting enterprises from stock and other types of capitalist corporations into workers self-directed enterprises is to end the concentration of wealth that comes from having tiny minorities appropriating the profits created by the work of huge numbers of employees. To the extent that is accomplished, profits will form a pool of wealth whose disposition is never in the hands of such tiny minorities but is rather determined democratically by large numbers of people, namely the workers collectively. Moreover, as our work stresses (e.g. on democracyatwork.com and also in our new book just released: http://www.
Such considerations could lead to a general convention governing how and when any sort of debt relationship is to be allowed. Such a convention would have options running from the total abolition of debt as an allowable economic relationship (as an illustration, think of the abolition of slavery, the relationship of one person owning another as property) on through rule-governed debt where it cannot exceed a certain percentage of the borrower’s income and/or wealth or it cannot carry an interest rate above a certain level, etc. Even in capitalism, some of these rules have been imposed as offsets to the very issues you raise.
The point is that in an economy generally characterized by workers self-directed enterprises, a more democratic decision-making apparatus over the funds available for lending as well as the lending process altogether offer us a far greater chance at solving these problems than has ever been the case in capitalist systems whose regular cycles have almost always been provoked and/or worsened by the out-of-control debt maneuvers that are so blatantly visible in the run up to and enduring horror of the current crisis that broke in 2007.
36. In your latest Economic Update, you dealt with the question of innovation and capitalism. I was hoping you could expand a bit more.
Entire Question: In your latest Economic Update, you dealt with the question of innovation and capitalism. I was hoping you could expand a bit more, namely on the assumption that the capitalistic competitive system has been by far the best driver of innovation and scientific and technological progress ever invented by man.
Answer: This case is only true if you use capitalism’s own measures, but not if you take a step back and realize that capitalism drives some sorts of innovations quickly and ignores others. If you highly weigh those it counts and minimally weigh those it ignores, then you get capitalism’s self-congratulatory appreciation of its innovativeness. Perfect examples include capitalistically-driven food production, emphasis on private automobile versus mass transportation mechanisms, and so on. Lastly, suppose one’s measure of innovativeness were the following: the gap between what innovations an economic system makes possible versus those which it actually achieves. Such a measure might find capitalism scoring very, very poorly. Each system before capitalism (slavery, feudalism etc) had its “organic intellectuals” who praised it as the most advanced, civilized, innovative etc. Capitalism is like them and hence subject to same presumption of uncritical and unsustainable self-congratulation.
37. If capitalism has been in a serious crisis for 5 years, why hasn’t this affected ‘corporate’ profits?
Entire Question: You have stated on your show that to speak about the current crisis as a ‘financial’ one is incorrect, and that this is a crisis affecting capitalism in its entirety. But while the banks are in serious trouble, with the largest seeing falling profits, “corporate” profits have seen record highs for the last three years. AP recently reported that this is unlikely to continue. Is this sustainable or do you see a turn in the future, and what how does all this relate to the Marxist argument that there is always a tendency for the rate of profit to fall?
Answer: Regarding corporate profits, they have done well during the crisis since 2007-2008 for several reasons: (1) because of previous investments in computer technologies, etc. productivity (output contributed per worker) has kept rising while real wages (what is paid to workers) has either fallen or been stagnant; (2) corporations reduced their workforces while pressuring the worker who remained to compensate by doing some of the work of those laid-off for no more pay (those who remained feared being laid off and thus did the extra work); (3) government stimulus money paid to major corporations was supposed to “trickle down” to everyone else but never did so (it went instead to fatten corporate bottom lines instead), (4) as the purchasing capacity of US citizens fell (because of 1 and 2 above), US corporations have increasingly shifted their focus toward other, more profitable markets (Europe, Asia, etc.) and done reasonably well until 2012 when the declines in those areas ended that.
For the above reasons, corporate profits went up as labor’s position deteriorated, but the latter always eventually undermines the former. That historical lesson was poorly learned (when learned at all) by the devotees of capitalism and of “repairing” capitalist crashes by focusing on the top and counting on “trickle down” economics.
Regarding the argument of Marx about the “tendency for the rate of profit to fall” (TRPF) – in his Capital, Vol 3, Chapters 13-15, as I recall – Marx shows that this tendency is just that: something that “tends” to happen unless and until contradictions with that tendency and/or “counteracting tendencies” undermine the TRPF.
Items (1) through (4) above represent some of the contradictions and counteracting tendencies that transformed the TRPF into a short period when profits instead rose. As the European crisis persists and draws the already crisis-weakened world economy back down into broad decline – after an incomplete and weak recovery for a few months before April, 2012 – the TRPF reasserts itself.
The subtelty of Marx’s arguments is lost if readers transform what he calls a “tendency” into some absolute that must always occur. Those chapters in Capital, Vol 3 are entitled tendency, contradictions in the tendency and counteracting tendencies precisely to avoid the interpretation that Marx was describing something that would always occur.
38. Is it possible, at present circumstances, to ‘implement’ a self-conscious anti-capitalist alternative at the global level?
Entire Question: You recently visited the Basque Corporation Mondragon, one of the ten largest in Spain, which is owned by its employees, with assets amounting to around 40 billion euros. Is it possible, at present circumstances, to ‘implement’ a self-conscious anti-capitalist alternative at the global level?
Answer: Absolutely. The Basque people have shown that it can be done, that cooperatives can compete successfully against capitalist corporations, that workers’ self-directed corporations can prosper and grow. In the Mondragon Corporation the workers collectively hire and fire the managers and chief executive, not the other way around, and therefore work and life are quite different there from the capitalist norm around the world.
39. How do you, theoretically, see ‘occupation of the economy’ and what methods can we use to come to this ‘occupation’?
Entire Question: Inspired by the famous movement emerged in America, your latest book carries a symbolic name “Occupy the Economy: Challenging Capitalism”. How do you, theoretically, see ‘occupation of the economy’ and what methods can we use to come to this ‘occupation’?
Answer: To occupy the economy means to change the leadership and direction of the enterprises that produce the goods and services we all depend on. It is capitalist boards of directors and the major owners of shares in capitalist enterprises whose decisions generated this capitalist crisis.
The solution is NOT a change to government ownership and decision-making; that has not and will not work. The change needed now is to convert capitalist into cooperative enterprises where the workers themselves collectively function as their boards of directors. Then the people will, for the first time, directly control the productive base of society.
Real economic democracy inside every enterprise can be the necessary counterweight to excessive power concentrated in the state. A new socialism for the 21st century mist learn from the mistakes of the past and build such a counterweight around “occupying” the economy in this way.
The Occupy Wall Street movement is an important first new step to recreate a mass movement with the power to fundamentally challenge US capitalism. That is why it has been so important.
40. What is the worst possible scenario that you think might happen if it continues in this political and economic direction?
Entire Question: What is the worst possible scenario that you think might happen if it continues in this political and economic direction?
Answer: The latest data show the US economy turning down again even as the European, Japanese and Chinese economies decline. The scenario is turning very bad. We are in the second worst capitalist collapse in the last century. It is now increasingly possible that we are headed into another Great Depression. Dysfunctional governments that aim to protect business and the rich and impose austerity on the masses only make the problems worse. This is the worst set of global economic conditions that I have seen as a professional economist in my lifetime.
41. What is in your opinion on the actual cause of the global economic crisis?
Entire Question: What is in your opinion on the actual cause of the global economic crisis?
Answer: The crisis emerged from the way in which corporations (both banks and non-banks) interacted with workers and consumers and the way in which corporations, workers, and consumers interacted with governments. No one of them is “to blame” since all of them behaved according to the economic system’s rewards and punishments. Thus the proper cause of the crisis is the economic system: capitalism. The problem is that for many years it has been unfashionable or even dangerous to question, let alone criticize the system itself. Capitalism, we were endlessly told, was “efficient” and “optimal” – the best possible system – and so on. Only criticism of this or that economic actor was possible. Hence we called one actor “greedy” or another one “imprudent” and so on. However, like all previous economic systems (e.g., slavery or feudalism), capitalism has its time of growth and prosperity and then it has its time of decline. The real and basic question for the world today is this: has capitalism peaked? Are we now on the downward phase of a capitalism that is increasingly unable to serve peoples’ needs. Today, hundreds of millions of people are unemployed and want work. Economists estimate that 20-30% of our capacity to produce (machines, tools, factory, store and office space) are sitting idle, gathering rust and dust. Yet global poverty could be eradicated with the output we could have if those who wanted to work could be placed together with available industrial capacity. Yet it is the capitalist system driven by profit that is failing to produce the wealth we need and are capable of producing. It is capitalism that cannot find a proper balance between people and nature that does not destroy both. The economic crisis is a problem of the system. It is above all a capitalist crisis.
42. Has the historical moment for a challenge to capitalism arrived? Can a movement for democracy now arise and succeed?
Entire Question: Do you think a real struggle for democracy could now unite Europe’s masses against the old governments? Could a movement for a Europe-wide plebiscite for real democracy galvanize Europeans? Might we focus on organizing a new European constitutional convention? Would there be threats against that?
Answer: Partly, I agree with you. The traditional capitalist system in Europe and North America is in a long, dangerous period of decline. Its leading capitalists are (and have been for years now) making two basic decisions contributing to the decline: (1) they have moved production out of these areas to new locations in Asia and elsewhere to boost profits by paying lower wages and lower other costs of business, and (2) they have reoriented their marketing toward selling to the two kinds of rising-demand situations in today’s world economy: (a) rising high-income sectors of Europe and North America and (b) rising mass-income sectors in Asia and wherever else production has moved. This is producing a fast-deepening division inside Europe and North America between a minority whose incomes rise with rising corporate profits and a majority whose incomes fall with shrinking job markets, stagnant falling real wages, rising debts, and loss of pubic services. The global capitalist crisis that erupted in 2008 has intensified this deepening division.
Where I may partly disagree is with your conceptualizing the problem in such political terms – rather than the political economy terms that respond better to the crisis. Of course, in societies with widening gaps between capital and labor, capital will need more authoritarian state power to contain the situation. As western governments get less in taxes (as corporations pay taxes elsewhere and use their enlarged profits increasingly to control western politics) they respond by firing workers, cutting pensions, and reducing services. Their populations resist. The state turns to force against the mass of its own citizens. The activities of western governments against “terrorists” abroad are skirmishes whose lessons can and will be used against the looming domestic resistance to the ongoing decline.
It is therefore capitalism as an economic system that is the problem the issue. If that is not changed along with movements toward democracy, then either (a) the latter will fail, or (b) the latter will temporarily succeed only to be then undone and reversed by a corporate capitalism unable and unwilling to live with any democracy that hampers their efforts to achieve their goals.
Conclusion: so long as enterprises – the institutions that produce the goods and services on which we all rely – are organized in the traditional capitalist way, our current decline will continue. So long as the mass of people produce surpluses (profits) gathered by small groups of people (corporate boards of directors and major shareholders) who can then distribute those surpluses/profits, the decline will continue. Those boards of directors and major shareholders distribute their surpluses/profits to (1) move production and marketing abroad, (2) buy politicians and parties and governments to serve their needs, and (3) shape the public discourse with their control of media, foundations, public relations mechanisms. The solution follows from this conclusion: (1) enterprises must be reorganized such that the workers in each of them collectively replace the traditional capitalist boards of directors and major shareholders, (2) these workers-as-also-directors must henceforth make all the basic decisions about how to distribute and use the surpluses/profits their work generates, (3) the workers’ decisions must occur together with the decisions of residents in local, regional and national communities, (3) work-based decision-making and residence-based decision-making must occur democratically; each must have veto power over the other to underscore the interdependence of their decisions. The democratization of work and thereby the economy is the condition for the real democratization of politics. Traditional socialism also failed because it relied on nationalized means of production and government economic planning without the simultaneous democratization of work sketched above.
If workers had directed their own enterprises, the last decades in the US and western Europe would have seen far less movement of jobs overseas, far less widening of the gap between rich and poor, far less drop in public services, etc. If workers had directed their own enterprises in the countries of “actually existing socialism,” their societies might have realized their stated goals rather than diverging from them into collapse.
To struggle for democracy and for “socialism” without a simultaneous, integrated struggle to transform the underlying political economy of our workplaces – for example, in the way briefly summarized above – is to reproduce the failed efforts of all those who struggled since 1789 for liberte, egalite et fraternite. Honest people have wondered ever since (as Marx did) why capitalism was never able to realize the slogans it claimed to endorse. One key problem was the fundamentally capitalist and undemocratic division between the mass of workers who produce the surpluses/profits and the minority (whether private representatives of shareholders or official representatives of a state apparatus) who appropriate and decide the social uses for them. As capitalism now moves ever further away from realizing liberte, egalite et fraternite, it is time to understand that transforming our workplaces is a key part of any real and durable solution.
43. Can worker cooperatives possibly be the foundation for socialism, given that the most modern historical efforts such as the Israeli Kibbutzim have failed or become capitalist corporations? The idea might be called Utopian.
Entire Question: Can worker cooperatives possibly be the foundation for socialism, given that the most modern historical efforts such as the Israeli Kibbutzim have failed or become capitalist corporations? The idea might be called Utopian.
Answer: I can live with the charge of utopianism. The left could use a bit more utopianism, since too much of that important “vision thing” got wrung out of too much of the organized left. Engels’ critique of utopian socialism never intended to expunge the utopianism from socialism; his criticism rather overemphasized the “scientific” in order to get what he thought (and I agree) would be a better balance. And that is what I aim at now, in the reverse direction.
You are probably right that I need to be more careful to avoid sounding as though I think worker’s self-directed producer collectives/cooperatives are “the” answer (what you refer to as “the foundation for socialism”). I agree that without other changes – e.g., socialization of means of production, planning, etc. – such coops alone will revert to capitalism much as you describe the kibbutzim. But, again, the reverse holds as well. Without collectivizing enterprises at the base of a socialist society – and that is not achieved by substituting state officials/commissars for private capitalist boards of directors – the socialization of property and planning too will revert to capitalism as happened in the USSR etc.
The trick that has so far eluded socialist experiments – notwithstanding their many achievements which I see and applaud – is the combination of macro-level socialist change with micro-level change of the sort I stress.
44. Why is it we Americans have significantly fewer demonstrations than those in Europe, like in France or Greece?
Entire Question: Why is it we Americans have significantly fewer demonstrations than those in Europe, like in France or Greece?
Answer: Well, I certainly hear you. The truth is, as I see it, we are early in a serious, long decline for the standard of living of the US working class unless it finds some way to become an organized political force. And part of that process is education and organization to undo the ideological job that has been done on the American people – making them deeply suspicious of collective action and political organization and often unable to see their own predicament in social and political terms.
So my conclusion has been to do everything I can to provide information and analysis that would otherwise be missing. That is the same as many others in the US are doing. Analyze and organize. We don’t have the analytical left tradition of the French and we likewise lack their much stronger union, left political, and social organizations, so we are not yet ready to mount the actions that they have. We have to start at an earlier stage. But what other choice is there? There really is no individual escape from a social crisis, just as it is a truism that you cannot solve a social crisis with individual solutions…hard as such lessons are for US citizens to learn or accept.
45. How would the hypothetical Silicon Valley startup change with growth, such as having thousands of employees?
Entire Question: The other problem — demonstrated in some of your remarks — is the departure of economic reality from the classical models we all came to know. Many large corporations seek rents from government — depending on long-term government contracts. People engage in long-term contracts with their mortgages. Labor contractshave a long-term duration. Perfect competition, instantaneous adjustments and all the wonders and advantages of “free-markets” don’t apply, or don’t adequately apply. I also noticed your reference to advertising — cannot remember for sure, but I thought that Frank Knight had also raised that point about firms “manufacturing” consumer demand for their own products.
Ultimately, attempting to correct the economy faces populist myths based on oversimplification of those old models. At the center of it: imperatives of property rights. People cite a “demand” for CEO talent that mandates the excessive bonuses — but demand by whom? There is quite a pool of so-called “talent” willing to work for much less. Since the firm is a “team” with all elements contributing to a production process, it would seem that the market for labor is undercompensated for its marginal product– based on an arbitrary allocation of returns by decision-makers in another so-called market.
Answer: On the point of scale, let me modestly suggest the following. There ought to be public debate and public expression of opinion as to how the benefits of scale stack up against the costs. If hierarchy is one of those costs then we ought at the very least to weigh their negativity )and that of their social consequences) against the gains flowing from cheaper cost per unit output. We don’t do that in this culture, and that too is a cost of capitalism (however unrecognized or repressed).
The free market that adjusts in Walrasian or Marshallian ways has always been a theoretical construct with heavy utopian dimensions, one a long way from realization, ever. I always chuckled when hearing some learned colleague explain to students the utopian contents of Marx’s criticism of capitalism as if what neoclassical economics proposes is one whit less utopian. They are just very different utopians, and that, of course, makes all the difference.
Frank Knight was brilliant in that as in so many things he taught. He certainly had little time or respect for the apologetic theories of the firm that came after him.
46. What can I do other than vote to contribute in a positive way and promote change – in particular, while having limited free time to spare?
Entire Question: What can I do other than vote? Right now I have a good job and am working full-time and don’t have a lot of time to read or do much else. But I’m bothered by the way things are going, even by the way I’m working and consuming and essentially contributing to the current system/problems by doing that. Can I do something and still keep my current job? I’m not really comfortable quitting, going back to school and paying tuition as I’ve seen what happens when you graduate in a bad economy.
Answer: The society we live in is now dysfunctional. The economy tanked and left most of to cope with tough consequences. The gap between rich and poor widens and thereby deepens social tensions. These are social problems that cannot be solved individually. They need social solutions that are worked out and pursued by social movements. Individuals are responding in the US chiefly by trying to escape from social problems (into careers, personal lives, schools, travel to distant places, alcohol, facebook, and so on). Individual responses rarely work. Our society’s problems find their ways into our lives no matter which escape routes we try. The sooner we realize that social problems and crises demand social responses, the better. So what I have to suggest may frustrate you since it does take time and effort.
Voting is an individual act in the US. If we had multiple political parties all actively organizing sizable groups of people to pursue specific goals of social change (like, say, France and Germany), then you could participate in whichever of them came closest to expressing your thoughts and goals, help build its social appeal, win votes and so move society toward the changes you seek. But we don’t have such a situation. Our two major political parties are quite similar – especially in their basic responses to social problems – and run campaigns based more on costly TV ads than on mass participation.
Economic decline and political disengagement in the US will not likely change until enough people decide to gather with others to generate social efforts/movements for change. Form a group if one to your liking is not already there. Find groups to ally with around shared projects and goals. Maybe start by getting together to talk about your lives, your jobs, your fears for the future, or the quality and quantity of pubic services provided in your community. The topic matters less than assembling others so act as part of a social effort and movement. This is happening now – think about the recent events in Wisconsin –more than has been the case for years.
47. How could a large company possibly work if all workers ran it together?
Entire Question: How would large companies with unskilled and uneducated workers actually function in a democratic socialist system? These workers would be making decisions democratically, but might not understand the workings of the entire company and therefore make decisions that damage the company. If they have the majority, it could make the situation even more dangerous. Is this a problem?
Answer: It would certainly be a major social change/transition to move from the traditional, top-down, hierarchical capitalist organization of corporate enterprise to the very different model of workers functioning democratically as their own enterprises’ boards of directors. As with all social changes of such magnitude, there would need to be all sorts of adjustments along the way. The same was true of the social transition from monarchy to parliamentary democracy in Europe, from slavery to free labor in the US south, and so on. In this case, there would need to be education and training for workers so they could properly carry out their new duties as directors alongside their traditional duties as hired workers. Nowadays, a tiny minority of citizens are trained in colleges and business schools to become directors of capitalist enterprises. In the new system, a majority would have to be similarly trained. Just as once only a tiny minority of people attended any school – when kings ruled everything – so now we require public education of everyone in what we like to call a democratic political system. Well, the proposed transition to a democratic economic system inside each enterprise can and will require comparable education and preparation for all.
Mass public education and preparation were worth it to support political democracy. I have no doubt that the parallel education and preparation will be worth it to support economic democracy.
48. If we had a system where enterprises were directed by the worker’s themselves, how would we arrange for innovations if we don’t provide individuals who make those breakthroughs with big rewards?
There are and always have been breakthroughs – in means of producing as well as in new products and services – by people who want to make a lot of money and are driven by that goal. There are also major breakthroughs made by people with access to money of their own or of rich friends and associates. We wouldn’t have some of those breakthroughs without rich people and rich rewards for innovations.
But innovations do not only happen that way. Suppose all sorts of social recognition – awards, public honors, opportunities provided for further innovation, etc. – were heaped on innovators; there would be innovators who would respond to them. Let me offer a real world example of yet another way to organize innovation in an economy where workers’ self-directed enterprises prevail. I learned about this when I visited the Mondragon Corporation in Spain in May, 2012. It is a very dynamic technologically advanced corporation with 85,000 worker-members – people who both work in but also collectively direct the many different enterprises that together comprise the Mondragon Corporation. Each of these worker-directed enterprises contributes a small amount of its net revenues into a fund that is administrated by the collective of workers to support innovation. The fund provides capital to explore, produce, and introduce into production new innovations by creative innovators – and yes it could also provide some direct personal rewards to the innovators. This is a democratic way to provide support innovation. It certainly has worked well for the Mondragon Corporation.
And if we need more evidence, here’s a plan: (1) lets organize a significant sector of the US economy as workers’ self-directed enterprises (perhaps providing such jobs to folks now unemployed because capitalist employers wont hire them) and (2) lets compare how well they might work to support innovations in their lines of work. After some years we can make some comparisons and see what ways or combinations of ways work best to encourage, stimulate and reward innovation. We supporters of WSDEs would welcome such a competition but we doubt many capitalist enterprises would.