By Nyegosh Dube
United Steelworkers Blog

We’re once again witnessing an American election campaign dominated by big money and wealthy candidates.

The Republicans are trying to sell unregulated, low-tax (for the rich), free-market capitalism as the solution to the nation’s economic woes, when in fact it’s exactly this system that has landed the country in deep water. They blame government, when the problem is Big Business and Wall Street – and their influence over government.

Newt Gingrich has accused Mitt Romney of “vulture capitalism,” but Gingrich and other Republicans have done everything in the past 30 years or so to give vulture capitalism free reign. The result is a major economic crisis that has badly affected tens of millions of middle and working class Americans.

What’s the real solution to America’s economic troubles? I believe it’s economic democracy, taking the economy out of the hands of the super-rich 1 percent (and the mega-rich 0.1 percent) who siphon off a disproportionate share of the nation’s wealth.

Who makes the big investment, financial, production, and hiring decisions in America? An unaccountable, unelected oligarchy – wealthy owners, shareholders, investors, executives, bankers. They own and control the country’s corporations, banks and investment firms, and have tremendous power over the political system as a result.

Let’s change this by democratizing the economy; for example, turning corporations into worker-owned cooperatives, like Mondragon in Spain (with whom the USW has teamed up – a laudable initiative), and by turning investment into a social mechanism that serves public priorities, rather than those of an oligarchy.

I’d like to go into more detail now about what economic democracy involves and how unions fit into the picture.

 

As we all know (well, maybe, except for a few Republican presidential candidates!), America’s economy is on the rebound and unemployment is falling – thanks in no small part to the massive federal stimulus packages and bailouts of 2008-2009. Of course, this is welcome news for American workers. But what isn’t good news is that the economy remains largely under the control of a corporate and financial oligarchy, and wealth and income differentials remain huge. In fact, a recent study by a UC Berkeley economist reveals that in 2010, a staggering 93% of income growth went to the top 1%.

This sobering statistic along with a job situation that’s still very serious, with unemployment over 8%, is an illustration of the fundamental problem: the economy is hostage to the business oligarchy’s power. With this class controlling companies and the investment process, and dominating the political system, average working people don’t have much power to steer the economy to their benefit. Economic democracy would change this. So, let’s have a look at what this concept is all about.

The cornerstone of economic democracy is empowerment of working people. This means working people gaining control over the economy at all levels and ensuring that economic processes serve their best interests, rather than the interests of a wealthy minority.

More specifically, I see economic democracy at three main levels:

First, at the micro or company level, workers gaining greater control of the workplace and participating in management, and going further, democratically managing and owning their companies;

Second, at the meso or intermediate level, workers on a wider scale collectively controlling investment funds to benefit local and regional economies and in the process gaining equity in companies and influence over their operations;

Third, at the macro or societal level, working people as citizens democratically allocating resources through a national investment fund to achieve social goals (e.g. supporting specific industries, helping depressed regions, promoting green energy, building high-speed rail), and also vetting investment decisions through state-level investment councils.

Within this tri-level framework there can be plenty of diversity, with various forms of democratic ownership and governance of companies as well as a range of democratic investment mechanisms and financial institutions.

Fortunately, there are some good models out there. We have co-determination and works councils in Europe, the Mondragon group of industrial cooperatives in Spain, the worker coops of Emilia-Romagna in Italy, and Britain’s Scott Bader chemical company (whose employees own the firm through a charitable trust).

But worker ownership can also take a multi-company form like the Quebec Solidarity Fund, a labor-sponsored pension fund that holds equity in small and medium-sized companies across the province, or the Meidner Plan proposed in Sweden in the 1970s where worker ownership in whole sectors is built up over time through annual allocation of shares to wage-earner funds. These two, along with the Coopfond in Italy (which funds development of the coop sector), are at the same time examples of meso-level worker-based investment funds. 

A particularly intriguing idea would be expansion of the Scott Bader trust model to ownership of multiple firms by a national-level public trust or union-sponsored workers’ trust, or a network of single-firm trusts linked under a common umbrella. In fact, the national investment fund (with governance representing a range of stakeholders) could serve as the public trust – getting funds from taxation of corporate assets, wealth taxes on the top 1%, and earnings from share ownership, and then disbursing funds in accordance with democratically set social priorities.

While there are no existing models for this kind of fund, we have a few partial models such as the State Pension Fund of Norway. (The Norwegian fund invests globally and is not focused on assisting sectors of the economy or particular communities or funding public projects.)

Large corporations are at the heart of the U.S. economy – and are the power base of the oligarchy. A fairer, more democratic society can’t be built unless they are transformed. This can be done through economic democracy, the antidote to corporate power.

I propose a “pincer movement”, from inside and outside, from below and above:

1) instituting co-determination (i.e. putting worker representatives on boards of directors), or even setting up workers’ councils as a counterweight to boards;

2) placing one-third of each of the top 200 American corporations under public trust ownership (in exchange for abolishing corporate income tax for these companies);

3) instituting the Meidner Plan to build up worker ownership to a point where wage-earner funds and the public trust together own a majority of equity. The state investment councils I mentioned before (also with multi-stakeholder governance bodies) add another layer of democratic control, ensuring that major investment decisions don’t harm workers and communities.

Finally, what would be the role of labor unions in all of this?

Without strong unions, it will be hard to build a more democratic economy, but I think unions can become stronger if they take up the cause of economic democracy. This concept provides a compelling vision of the future, a clear set of goals to work towards.

Trade unions should push for workers’ empowerment on all the levels I’ve identified. To a considerable degree, the three levels are independent from each other, but if we want to seriously tackle corporate power and reduce the 1%’s control over capital, we need to move on all three levels simultaneously. So, labor unions will not only carry on defending and expanding workers’ rights as they do at present, but they’d gain a major new set of tasks aimed at the transformation of the economy and its power structure.

I’m aware that the USW has been active in developing strategies for investing workers’ capital to revitalize local economies (especially through the Heartland initiative) and, in collaboration with Spain’s Mondragon, is exploring the idea of establishing unionized manufacturing cooperatives in the United States and Canada. These are both excellent initiatives, but the USW and other unions should go much further and promote full-scale economic democracy.

Let me add that in a democratic economy, unions would of course continue to play important roles as defenders of workers’ rights and as guarantors that the structures of the system are functioning properly and benefiting working people. In short, labor unions and economic democracy are a perfect fit!

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Nyegosh Dube, an American citizen who lives in Poland, is currently developing a project that looks at existing examples of economic democracy in Europe and elsewhere within the broader context of promoting a democratic alternative to the prevailing economic system among certain constituencies, such as trade unions, political parties, and the co-op movement. For 8 years, he coordinated a pan-European project promoting an enabling legal-fiscal environment for foundations and other civil society organizations.

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