From Moral Hazard to Virtuous Cycle

If events of the last three years have taught us anything, it’s that America needs a new business plan. Main Street has suffered outsourcing, foreclosures and pink slips, while Wall Street has secured a taxpayer-financed lifeline and awarded its executives mega-bonuses. This doesn’t pass civic decency muster or the economic patriotism smell test. Fortunately, more enlightened national leaders are showing us another way.

At an event in Pittsburgh in October 2009, United Steelworkers International President, Leo Gerard, announced that his union was taking a historic first step to partner with Spain’s famed Mondragon Cooperative Corporation, the world’s largest worker-owned industrial cooperative, to transform manufacturing practices in North America.  Mondragon is Spain’s seventh-largest corporation and among its most profitable. By embracing its worker empowerment principles, the USW hopes to make union cooperatives a viable business model that can create good jobs, transform workers and support next generation manufacturing communities throughout the United States and Canada.

On March 26, 2012, the USW, Mondragon, and the Ohio Employee Ownership Center (OEOC) announced that a new “union co-op ”model template ( and is available for organizations wanting to combine worker equity with a progressive collective bargaining process. This template was created as follow up to the original USW-Mondragon framework agreement launched in October 2009 to collaborate in establishing Mondragon-like industrial manufacturing cooperatives that adopt collective bargaining principles to the Mondragon worker ownership model of “one worker, one vote” within the United States and Canada. You can view the announcement ceremony held at the USW headquarters in Pittsburgh here.

Titled “Sustainable Jobs, Sustainable Communities: The Union Co-op Model,” this new public domain template offers a road-map primer for competitive and equitable employment creation based on fifty-five years of Mondragon principles put into marketplace practice. Aimed at creating an economy that can work for everyone who works, the union co-op model shows how “doing well by doing good” reflects core American values of self-reliance, community solidarity, and ownership as an ineluctable component of the American dream based on competitive business practices.

The underlying union co-op principle is that this model will result in improved, self-reinforcing, virtuous cycle worker and customer satisfaction through higher accountability, productivity, and efficiency because all workers will have an equal equity stake in the company, will share common goals, and adhere to common principles and practices that broaden the definition of value beyond the “bottom line.” Additionally, union coops through this model are structured to benefit from lower overhead costs while potentially accessing higher impact union benefit plans, such as healthcare and pensions. Simply put, union co-ops are a better way of doing business.

On a moral and spiritual level, we are seeing a national ecumenical movement to inspire congregations and faith-based practitioners to shift their funds from mega-bonus-paying Wall Street banks to local community banks and credit unions, proclaiming a new era of values-investing. President Barack Obama, during his first White House Jobs Summit which included a field trip to Pennsylvania, referred to “virtuous cycle” job creation strategies. These measures engender both employment and economic growth in ways that reinforce each other’s upward tendencies where the whole becomes greater than the sum of the parts.

Indeed, the very structure of how we produce and reward needs to be reset and resold. As current unemployment figures and backed-up lending patterns prove, trickle-up and trickle-down strategies have lost all credibility. “Too big to fail” has become shorthand for socializing local losses while privatizing profits somewhere else.

We know firsthand on Main Street that global outsourcing has reached its tipping point — that supposed cost efficiencies and profits realized by U.S. global corporations overseas are overly offset by lost domestic opportunities and structural unemployment affecting generations of our neighbors. If we want to revive the polluted and betrayed American Dream, we need to build a more enlightened social compact, an equal-opportunities equation based on workers and communities as stakeholders equal to shareholders.

In this election year, Americans are yearning for something real, for trustworthy institutions, leaders who start and finish with their own examples, companies that put people and neighborhoods before profits, and financial institutions that are free of myopic, self-serving greed and who exist to serve our common society, instead of the reverse.

The change we need can be dramatic and effective. We have seen how the coming together of progressive labor and environmental movements transformed the energy and climate debate during the last national election cycle. Now, we anticipate another national movement emerging where unions and cooperatives, perhaps joined by faith-based organizations, form new collaborative models that adapt collective bargaining principles to cooperative models and worker ownership principles, that combine local investments with the promotion of locally-owned credit union strategies, and that add affiliated benefit packages as a technique to lower overhead and induce more competitiveness and shared prosperity.

Structuring finance in this way could set up a reoccurring, multiple bottom-line win (quality, innovation, empowerment, competitiveness, profitability, community enhancement) for a new generation of stakeholders holding local economy jobs that stick and sustain.

The United States is not hardwired to endure poverty, either politically or socially. We will never be able to compete purely on a basis of lowest cost (nor should we want to), because lowest cost usually means lower safety, health-care, environmental, and compensation standards and has little to do with actual productivity. But, we can compete on a basis of highest quality through innovation, where cost, while always important, becomes secondary and where local rejuvenation becomes the norm, not the exception.

Only Wall Street believes its model will self-perpetuate — the rest of us are moving on so that no community is left behind. We need to reactivate the winning aspects of our culture to bring forth the widening and deepening benefits of democracy when competing against other more top-down and rigid national models.

There is a new playing field to construct coming to your neighborhood that is altruistic, symbiotic, transparent, equitable, meritocratic, profitable, and above all – local – for the people, by the people.