Economic development promotes democracy, but there’s a catch | WashingtonPost.com

From The Washington Post’s Monkey Cage:

“I provide evidence for another. Paradoxically, high economic growth and the high national income it—ultimately—causes have counterposed effects: the first entrenches the dictator, while the second undermines the dictatorship. Vigorous growth—which boosts household incomes and government revenues—enhances the incumbent’s survival odds. Thus, dictators have a personal interest in growth. But over time that same growth changes society and the ruling elite in ways that make it more likely the regime will collapse after the dictator is gone. What’s good for the dictator is not so good for his dynasty.”

Read the post, “Economic development promotes democracy, but there’s a catch.”

CUNY Law Community Economic Development Clinic Partners with Mondragon Corporation on Union Coops | CUNY School of Law

New York, NY – The City University of New York School of Law’s Community Economic Development (CED) Clinic has launched a new partnership with the Mondragon Cooperatives, the largest worker-owned cooperative in the world.

Under the new partnership, the CED Clinic, in collaboration with Pennsylvania-based Regional Housing Legal Services, will help launch the Pittsburgh Clean & Green Laundry, an eco-friendly laundry based on Mondragon’s cooperative model. Pittsburgh Clean & Green aims to re-employ 100 primarily minority laundry workers, who were laid off when their Sodexho Corporation laundry closed. They will work in a new state-of-the-art facility in Pittsburgh’s Central District.

CUNY’s CED Clinic will provide legal support for a new model of unionized worker cooperatives—called “union coops”—recently launched by Mondragon, the United Steelworkers union (USW), and the Ohio Employment Ownership Center (OEOC).

“Union coops can create well-paying, democratically run workplaces in communities hard hit by the economic recession,” explains Carmen Huertas-Noble, associate professor and director of the CED Clinic. “The union component of the model provides front line worker-owners with the security of a collective bargaining agreement and leverages the organizational expertise and economic power of the labor movement.”

By partnering with Mondragon USA, the CED Clinic aims to become a national leader in the integration of cooperative and labor law and to help union coops like Pittsburgh Clean & Green Laundry get off the ground.

The CED Clinic will collaborate with Mondragon USA to:

•  Develop the legal framework for the USW-Mondragon-OEOC union-coop model nationwide
•  Support other ongoing union-coop projects following the USW-Mondragon-OEOC model
•  Connect with key sources of U.S. financing, such as the National Cooperative Bank, foundations, advocacy groups, and public sector labor departments
•  Contribute to union-coop project strategy and roll-out
•  Ensure union-coop model legal standardization in both design and execution

“We are inspired by the news that CUNY Law’s CED Clinic will be working with us to develop the union coop model legal framework,” said Michael Peck, Mondragon’s North America Delegate. “Professor Huertas-Noble and CUNY Law students bring to this project a wealth of ‘hands-on’ experience and a deep commitment to community service and economic justice.”

Read the press release from CUNY School of Law.

Growing the Wealth | Center for American Progress Report

How Government Encourages Broad-Based Inclusive Capitalism

By David Madland and Karla Walter

American companies use a variety of financial incentives, from broad-based profit sharing and stock options to worker cooperatives and employee stock ownership plans, to reward their employees with a portion of the wealth those workers help generate. This kind of compensation goes well beyond simply paying wages or providing individual incentives, but rather involves granting workers ownership stakes in the company or a share of its profits based on workers’ collective performance—a concept we describe as inclusive capitalism.

Inclusive capitalism, when partnered with democratic workplace practices, has a proven record of helping workers and businesses alike in a myriad of ways. Additionally, it is an economic philosophy that can draw bipartisan support. Yet policy to advance inclusive capitalism has not been part of the national dialogue for quite some time.

The purpose of this report is to change this dynamic and jump-start a policy conversation aimed at promoting inclusive capitalism. While we do not advocate for specific policy changes in this report, our hope is that it will spark dialogue among policymakers and advocates about how inclusive capitalism can help address some of the most fundamental problems facing our economy; what government can do to encourage employers to use it more; and how to ensure that inclusive capitalism is done right so workers can enjoy the upsides of broad-based sharing and having an increased say on the job without being exposed to undue risk.

Inclusive capitalism is by no means a new or rare phenomenon in the United States. Companies and workers have practiced inclusive capitalism since the founding of our nation. Today almost half of U.S. workers receive some sort of inclusive capitalism compensation—though in most firms its use is quite limited.

Companies practicing broad-based inclusive capitalism range from unionized American steel manufacturers and air carriers to leading technology firms to growing, socially minded companies. The United States Steel Corporation, for example, pays quarterly cash profit-sharing payments to its unionized workforce, while a significant portion of Southwest Airlines’ stock is owned by its employees.3 Likewise, the high-tech firm Intel Corporation rewards its employees with both cash profit sharing and broad-based stock ownership through restricted stock and stock options. And then there are the socially minded companies such as the tea and coffee purveyor Equal Exchange and the beer maker New Belgium Brewing that are both employee-owned, the former through a worker cooperative and the other through an employee stock ownership plan.

Read more and download the report from the Center for American Progress.

The Mondragón Cooperatives: An Inspiring Economic Hybrid | Tikkun

by Georgia Kelly

Members of the Mondragón Cooperatives vote on a proposed 2013-2016 socio-corporative policy. Credit: Mondragón Corporation.

Riding from the Bilbao Airport to the small town of Mondragón, one is struck by the sheer beauty of the forested hills and verdant valleys in Spain’s Basque Country. The roads are as smooth as if they were paved yesterday, and there is nothing in this bucolic landscape to suggest anything is amiss in Spain.

However, the economic woes in this country are well known. As of November 2012, unemployment has risen above 25 percent and calls for more austerity have been greeted with demonstrations and widespread popular opposition. But, in spite of the country’s financial crisis, there is a solution quietly thriving in northern Spain—a solution that has nothing to do with austerity.

Sixty years ago, the Basque region was the poorest area of Spain. Today, thanks to the cooperative culture, it is the wealthiest. The dramatic transformation leads directly back to the arrival of a visionary Catholic priest, Father Jose Maria Arizmendi, who was sent to oversee a parish church in the small town of Mondragón. Though he questioned the wisdom of this appointment, it didn’t take long for Arizmendi to discover his mission in the impoverished town.

Because of the high unemployment in Mondragón, Arizmendi decided to open a school that would provide skills to some of the unemployed men in the area. The polytechnic school trained workers to make machine parts and provided an ethical foundation for the formation of cooperatives. In 1956, a handful of worker-owners who were trained in this school opened the first cooperative, ULGOR.

From such a modest beginning grew the world’s largest consortium of worker-owned businesses—a consortium that now comprises 120 businesses and more than 83,000 worker-owners.

In 1959, the Mondragón Cooperatives formed their own bank, Caja Laboral. It is this financial institution that has been the engine behind the expansion and financial stability of the cooperatives. In 2009, when 25 percent of all businesses in Spain failed, less than 1 percent failed in the Mondragón Cooperatives.

Read the full article from Tikkun.

State-Wrecked: The Corruption of Capitalism in America | New York Times

By David A. Stockman

The Dow Jones and Standard & Poor’s 500 indexes reached record highs on Thursday, having completely erased the losses since the stock market’s last peak, in 2007. But instead of cheering, we should be very afraid.

Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

Since the S.&P. 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.

THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.

As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.

The culprits are bipartisan, though you’d never guess that from the blather that passes for political discourse these days.

Read the full op-ed from The New York Times.

SOCIAL-REPUBLICAN PROPERTY | UCLA Law Review

by William H. Simon

UCLA Law Review, 38 UCLA L. Rev. 1335, August, 1991

Copyright 1991 by the Regents of the University of California; William H. Simon

INTRODUCTION

Economic democracy is the idea that the norms of equality and participation that classical liberalism confines to a narrowly defined sphere of government should apply to the sphere of economic life. Economic democracy thus entails a challenge to the classical liberal notion of property. In classical liberalism, property defines a realm of private enjoyment. No particular property right is a prerogative of, or a prerequisite to, citizenship, and the exercise of property rights by those who have them is not assessed in political terms.

One alternative to classical liberalism responsive to the ideal of economic democracy is classical socialism. Classical socialism opposes to the liberal notion of private property the notion of state property—property controlled by the officials of a democratically constituted state. Another alternative to classical liberalism inspired in part by the ideal of economic democracy is social democracy or welfare-regulatory liberalism. Social democracy retains the classical liberal notion of private property rights, but it both qualifies them by regulatory restrictions on their exercise and supplements them with welfare rights to minimal subsistence funded and administered through a tax-transfer system.

This essay is about aspects of a further alternative to classical liberalism inspired by the ideal of economic democracy. This alternative can be found in converging elements of the traditions of republicanism and market socialism. Like social democracy, the alternative rejects both state property and the unrestricted accumulation and exercise of private property rights. However, to a greater extent than social democracy, it pursues its concerns by encouraging a politically desirable primary organization of economic activity and distribution of income and wealth. The distinctive notion of property in this alternative view is sometimes called social property in the market socialist tradition, but its simultaneous affinity with the republican tradition leads me to call it social-republican property.

The distinctive feature of social-republican property is that it is held by private individuals subject to two types of conditions—one requiring that the holder bear a relation of potential active participation in a group or community constituted by the property, and another designed to limit inequality among the members of a group or community. Among the more familiar forms of social-republican property are interests in certain producer cooperatives and “limited equity” housing cooperatives.

In contemporary American society, the characteristics associated with social-republican property are routinely imputed to a narrow set of political or citizenship entitlements, such as voting rights, but these characteristics seem anomalous in private economic life. Nevertheless, there are some interesting examples of social-republican property in the private sphere, and there has recently been a variety of proposals that would increase its importance there. 81 Moreover, a variety of regulatory and welfare policies, such as certain forms of tax relief and rent control, create interests that resemble social-republican property and may be inspired by social-republican principles.

This essay has both historical and political purposes. One historical purpose is to clarify certain distinctive aspects of the republican and market socialist traditions and to emphasize an affinity that accounts for their frequent convergence in 19th century radicalism. Part I develops the notion of social-republican property as a heuristic designed to serve this purpose.

Another historical purpose is to illustrate that, while social-republican principles are usually treated as utopian and marginal in American public discourse, there is in fact a wide variety of property rights in the American economy that express such principles. Parts II through IV thus survey some contemporary examples of social-republican property in America (with some references to Europe for purposes of comparison).

The essay’s political purpose is to contribute to contemporary debates about radical economic reform, in particular to debates over the possibility of a “third way” between capitalism (both its classical liberal and social democratic versions) and socialism. The social-republican vision may be the closest thing we have to a reform model that is both distinguishable from the capitalist and socialist models and at least moderately institutionally concrete.

To be sure, the sophisticated contemporary response to the question of the “third way” is to assert the indeterminacy of all general reform models, and to insist that any plausible program for a particular economy would have to be an amalgam of a diverse variety of forms of property. General models do not generate concrete programs by themselves, and no single general model could plausibly serve as a unique inspiration for the restructuring of an entire economy. Nevertheless, general models inescapably influence even the most contextual thinking about particular reforms. Enlarging our repertory of general models thus seems likely to enhance the flexibility of our thinking and the range of particular alternative possibilities we can summon in appraising particular practices and institutions.

Thus, the essay concludes in Part V with a tentative normative appraisal of the social-republican vision. It defends social- republican institutions against the charge that they have strong general tendencies toward economic inefficiency. On the other hand, it concedes that such institutions have a troubling tendency toward exclusiveness. The cultural exclusiveness attributed to republicanism in some recent critiques has a counterpart in the economic logic of social-republican property. Plausible applications of social-republican principles would have to confine or neutralize this tendency.

Find the article from the UCLA Law Review.

Social Democracy in the Age of Austerity | Renewal

by Joe Guinan

Democratic wealth-holding can give social democracy a new set of economic institutions and political power bases.

Social democracy at a crossroads

Historians joke that, no matter what the period, the middle class is always rising. In the same vein, social democracy seems perpetually at a crossroads. This may not be surprising, given the revisionist origins and protean political tendencies of a tradition whose leadership has always been prepared to hedge and trim and accommodate to the prevailing political winds. But today, more than a hundred years after the first of the parties affiliated to the Second International won a plurality in a parliamentary election (in Finland in 1907; Anderson, 1992, 307), social democracy may finally be running out of rope. All the main European social democratic parties are facing a crisis, registering at long last endlessly postponed questions about their fundamental purpose and programme. The strategic choices they make now and in the next few years could determine whether social democracy survives as the principal political force on the left or finally gives up the ghost, expiring not with a bang but a whimper and with scarcely a mourner at the funeral. (more…)