Monday, December 29, 2008


Kwanzaa, which takes its name from the Swahili word matunda ya kwanza meaning “first-fruits”, was started in 1966 by Ron Karenga to "...give Blacks an alternative to the existing holiday and give Blacks an opportunity to celebrate themselves and history, rather than simply imitate the practice of the dominant society." (Source: Wikipedia)

The holiday is divided into seven days in which each day represents one of the seven principles of Kwanzaa. The principle of Ujamaa, or “Cooperative Economics”, is celebrated on the fourth day of Kwanzaa and occurs on December 29th. According to the official Kwanzaa web site this principle means, “To build and maintain our own stores, shops and other businesses and to profit from them together.” (Source: Official Kwanzaa Web Site.)

One of the early African-American advocates of cooperative economics was W.E.B. Du Bois. Du Bois was born in 1868 in Great Barrington, Massachusetts. In 1888 he graduated from Frisk University and later received his Ph.D. from Harvard in 1895. As a professor at Atlanta University between 1897 and 1914 he published 16 research monographs; most notably the landmark sociological study “The Philadelphia Negro: A Social Study”, which was the first of its kind. Du Bois’ extensive work helped to establish him as one of the pioneers in the study of African-American society.

Early on W.E.B. Du Bois found himself in conflict with Booker T Washington when he concluded that the only way African-Americans could achieve equality was through demanding it and through protest. Du Bois laid out in his opposition to Washington’s views in his landmark book “The Souls of Black Folk.” It was his book that established Washington and his supporters as “conservatives” while Du Bois and his supporters were labeled as “radicals.” History, of course, ultimately proved Du Bois right and Washington wrong.

In 1905 Du Bois was one of the prominent founders of the Niagara Movement, which helped lead to the establishment of the NAACP. In addition to the founding of the NAACP he edited the magazine The Crisis. Du Bois is also widely known for being a pioneer for the Pan-African movement. Plus, he’s known for his support of black literature and the recognition of “Beauty in Black” through his editing of The Crisis.

For Du Bois, cooperatives were the wave of the future for African-Americans. He was able to show that since the early days after the end of the Civil War cooperatives had played a major role in the economic survival of African-American communities. He used as an example the Dry Dock Cooperative and the African-American cooperatively-owned railroad in Wilmington, North Carolina. Du Bois recommended that African-Americans use these cooperative enterprises as models to develop an alternative economy to capitalism in which African-Americans would cooperatively own and operate their own enterprises.

While I disagree with some of his views that he held (later in life he advocated the Soviet model and gave up his US citizenship) Du Bois was without a doubt a great man and a great advocate of cooperative economics.

Monday, December 15, 2008

The Health Care Crisis

The cost of health care has skyrocketed in the last few years. Americans spend more on health care than food. In fact, 16 percent of our GDP goes to health care (as of 2004). Compare this to 1960 in which it was only 5.2 percent. This is bad enough but it’s really severe if one doesn’t have health insurance. In America there are 46 million without health insurance. 8 million of those uninsured are children. Not having health insurance can be a death sentence if one becomes seriously ill. According to one study those individuals who were diagnosed with colorectal cancer were 70 percent more likely to die if they lacked health insurance than those who were covered.

Usually the debate over health care is presented as being between just two alternatives. One choice given is to leave the current system of private insurance and private providers essentially the same. Possibly add a safety net here or a tax deduction there but not do much else. The only alternative to the status quo is usually presented as the specter of “socialized medicine” with the entire medical system owned and operated by the Federal government. According to this scenario all doctors would become government employees while all private hospitals and clinics become government facilities.

But as my regular readers should expect I believe that there is a third way to solving this crisis. A major component of this third way alternative would be a single-payer health care system. According to the Physicians for a National Health Care Program (PNHCP), the “National Health Insurance Act” HR676, which is currently up before Congress, introduces a “publicly financed, privately delivered health care program that uses the already existing Medicare program by expanding and improving it to all U.S. residents, and all residents living in U.S. territories.” PNHCP states at their web site, “This program will cover all medically necessary services, including primary care, inpatient care, outpatient care, emergency care, prescription drugs, durable medical equipment, long term care, mental health services, dentistry, eye care, chiropractic, and substance abuse treatment. Patients have their choice of physicians, providers, hospitals, clinics, and practices.”

While HR 676 would be a great leap forward the business model of medical providers also needs to be changed. Rather than corporate ownership, medical facilities and clinics must be converted into non-profits institutions. Many should be community-owned while others should be established as non-profits.

In addition to removing corporations as medical providers there needs to be an end to Big Pharma. Unfortunately, how to change the way we create pharmaceuticals requires far more than this one post can address and will have to wait until another time.

It’s important to note that in such a health care system with single-payer insurance, non-profit and community-owned medical providers and a reformed pharmaceutical system there would still be private practitioners. Americans would still be able to choose their own doctors.

In a third way medical system the power over life and death of Americans would no longer be a commodity controlled by a corporate oligarchy nor would it power belong to the State. That power would rest where it belongs; with the American people.

To learn more about HR676 visit the RESULTS web site.

Sunday, December 7, 2008

Baby You Can Drive My Car

The astronomer Fred Hoyle once wrote that “Space isn't remote at all. It's only an hour's drive away if your car could go straight upwards.” Last week the auto industry executives went before Congress to tell them that there would likely not be any new Americans cars to go anywhere, much less to outer space, unless they were soon given billions of dollars in government loans.

The financial woes of the Big Three, and their request for aid, have sparked a national conversation as to what should be done to help the American auto industry. Everyone seems to have an opinion on what to do.

One choice is to do nothing at all. The classic capitalist mantra is that if these companies can’t survive in the jungle of the marketplace then they don’t deserve to exist. The graven idol of Smith’s Invisible Hand demands a blood sacrifice so what better one is there than the jobs of thousands of American auto workers.

Others take a more Keynesian and less Social Darwinist approach. They say that we should go ahead and give the auto industry the money they’re asking for. Those that support this position point out that when Chrysler was on the ropes in the late 70’s they were granted loans, which pulled them out of a similar tail spin. The government even made a profit by doing so. Though bailout advocates fail to explain why if it was such a success that this same company is in need of another bailout. The bailout advocates say that regardless of the Big Three’s poor track record and the high cost being requested, the massive loss of jobs if nothing is done would be too great with the economy in the midst of a recession, which might be heading into a depression, to handle.

What the media isn’t saying is that we aren’t limited to just these two choices. The acclaimed filmmaker Michael Moore has proposed an intriguing alternative. At his web site he recommends a three point plan. One element of his plan is that because transporting Americans is an important responsibility of the government the president along with Congress should direct the automakers, “to build only cars that are not primarily dependent on oil and, more importantly to build trains, buses, subways and light rail (a corresponding public works project across the country will build the rail lines and tracks).” The second element of Moore’s plan is for the government to buy all of the common shares of General Motors, which are worth only about $3 billion. The third element would be, rather than government officials running the auto industry, to hire the greatest minds of the transportation industry to develop a 21st century Marshall Plan that would, “switch us off oil-dependent vehicles.”

To read the details of Moore's proposal visit his web site:
Saving the Big Three for You and Me: A Message from Michael Moore

While I strongly endorse Moore’s plan I would add something to the third element of his proposal. After purchasing the stocks the government should turn the ownership and management of the enterprises over to the auto workers. In other words, GM and any others purchased should be reorganized as worker-owned cooperatives. It’s an established fact that employee-owned enterprises are more efficient than investor-owned firms, which would solve the American auto industry’s historic problems of quality and overhead. In addition, while cooperatives have a history of being more socially responsible than IOF’s the government could mandate that their cooperative bylaws include a clause that would require them to operate as a public trust. This would insure that they make socially responsible products such as Moore addressed in his three point plan.

We can solve the problem with the American auto industry. All it takes is the political will to do so.

Sunday, November 23, 2008

Thanksgiving Day

Thanksgiving is right around the corner. Thoughts fill with the images of friends and loved one’s gathered around the dining room table. There will be the sharing of good food and good conversation. Afterwards, many of us will sit back, stuffed and happy, and fall asleep on the couch in front of the television. Others will go outside and toss a football around. Heck, maybe we’ll even play a little dominoes. A day filled with the joy of hearth and home that warms the heart.

Then comes the day after. Aptly named “Black Friday,” the day after Thanksgiving many Americans will swarm to the stores to go on a buying binge. In some major cities people even line up outside the stores over night. We’ll spend millions of dollars, mostly on credit, at stores such as Wal-Mart, Target, and the numerous mega-malls around the country.

Black Friday is also a big day for the corporate news media. Reporters will loiter around the stores to video tape shoppers as they stampede through the opening doors, pushing and shoving each other as though their lives depended on it. The TV stations will consider themselves lucky if they catch a shot of an elderly person or child who falls during the stampede as people mindlessly stomp on them. Plus, they always build it up as such an important event that, according the newscaster, the very fate of our nation rests on whether we will show up and spend. “Go out and shop for your job depends on it!” they’ll exclaim as they show scenes of the crowded parking lot taken from the helicopter hovering over the mall.

But there is another way to spend the day after Thanksgiving. Sponsored by Adbusters, November 28th, 2008 is also known as “Buy Nothing Day.” Rather than being another lemming at the mall we can do something else. Stay home. Go for a walk. Read a book to a child. Volunteer at a charity.

Don’t let the capitalists and the corporate media control you. Rather than participate in Black Friday join me in Buy Nothing Day instead. You’ll feel better that you did.

Sunday, November 9, 2008


Without a doubt, history was made on November 4th 2008. With the election of Barack Obama to the White House our country crossed an important milestone in its history. From now on when we say that any child can grow up to be president it’s not just a feel good axiom. While we shouldn’t fool ourselves into thinking that all is suddenly rosy in race relations, there are still many challenges, President-elect Obama shows that our nation has truly changed in a positive way.

Barack Obama brings with him many other positive changes to Washington as well.

Since the Reagan administration Washington has been enamored by a radical laissez faire capitalist economic theory championed by the economist Milton Friedman. Known as the Chicago School, Friedman’s theory openly despised any governmental intervention in the economy.

Compare the Chicago School to that of the economist John Keynes. Keynes held that governmental intervention played a very positive role in an economy. The government, according to Keynes, could stabilize the economy and encouraging growth through lower interest rates and public projects.

With the election of Barack Obama we will see the return of Keynesian capitalism. According to various press releases and public statements President-elect Obama’s agenda includes dramatically increased government investment in the creation of the next generation of biofuels, the further development of plug-in hybrids, and in renewable energy. In addition, he would provide a $1,000 energy rebate for families to offset the cost of energy as well as other “middle class” tax breaks so as to pump more money into the economy. These proposals along with new job training programs, targeted tax breaks for small businesses, raising the minimum wage, greater access to health care and increased regulation of the financial industry places him firmly within Keynesian economics.

Without a doubt the Keynesian school of thought is far superior to that of Friedman. Though Keynesian theory still maintains the class system it reduces the distance between the classes by redistributing the wealth downwards. Such redistribution provides some economic relief to the working class. In addition, Keynesian capitalism helps to reduce the risk of economic recessions and depressions by pumping money in through the consumer-side and by regulating the supply-side, which helps to prevent the financial scandals as has recently occurred.

The problem with Keynesian capitalism is that it’s still capitalism. This means that no matter how successful President-elect Obama is during his term in office we will still have the same socio-economic system based on class division, alienation, domination by the market and by capital.

While my prayers are with our new President-elect I’m very much aware that for all of the good that he certainly will bring to the office he is still a capitalist. Economic democracy is still just a dream.

Sunday, October 26, 2008

Social Deficits

In his book, The Culture of the New Capitalism, Richard Sennett states that large scale structural changes currently occurring in the corporations are resulting in increases in three social deficits: low institutional loyalty, diminished informal trust among workers, and weakening of institutional knowledge.

Sennett explains that in the modern corporate world the employee is viewed to be on his or her own. If you need health care don’t look to the corporation, instead you need to buy your own. Want a pension? Forget it, better start putting money in a 401K and an IRA. Don’t even think that you have job security for there is someone in India that your job could be sent to tomorrow.

But this lack of loyalty works both ways. As corporations abandon any loyalty to their employees then the workers begin to lack any sense of loyalty to their employers. Hence, when times get tough for the corporations management is shocked when employees refuse to take cuts in pay or benefits.

Trust is also passé in the new capitalism. Sennett points out that trust takes time to develop. But in the high-paced modern corporation employees struggle to keep up with demands of both the market and shareholders. Reorganization has become the norm, which prevents employees from forming informal bonds of trust.

Finally, the new capitalism creates conditions where institutional knowledge is lost. In the old bureaucratic capitalist businesses employees on the floor learned the system. In fact, the lower employees often better understood how to work the system than management. The rise of distance and the high turnover of employees this knowledge is now being lost. Corporations try to compensate for the lost with new technologies but it doesn’t solve the problem.

As it turns out these three social deficits are not unique to the new capitalism. It’s simply that these deficits are dramatically increasing in magnitude. So what is the source of these three deficits? Sennett references to Mark Roe, a legal scholar, who states that the source of the three social deficits is due to “separation of ownership from control.” Managers try to build loyalty, trust, and institutional knowledge within corporations but the shareholders, who have no day to day control of operations, have the ultimate power.

The problem of the three social deficits wouldn’t occur in an economic democracy because the workers of the cooperative enterprises would have both ownership and control over the operation. Workers could insure their needs are taken care of. The workers of the cooperative enterprise would naturally develop loyalty because the economic enterprise would be their own creation. Trust would develop naturally between the workers of the enterprise because cooperative enterprises by nature are stable allowing for long term relations to develop. Finally, this long-term stability would also translate into the retaining of institutional knowledge by the workers.

Sunday, October 12, 2008

The Real Alternative Part 2

In part 1 of this series I pointed out that Treasury Secretary Paulson was wrong when he said on Meet the Press that taxpayers bailing out the financial markets was “far better than the alternative” because the real alternative is to replace capitalism with an economic democracy based on worker-owned cooperatives supported by a system of social investment. I also explained that while such a conversion would be possible by simply passing the appropriate laws, and possibly constitutional amendments, to accomplish this there would be problems for the middle-class along with the non-profits that are vested in the financial markets. It’s these problems that I wish to address.

In an excellent web article David Schweickart recently wrote, “There’s one more thing we should do. A lot of people have seen their pensions disappear. Let’s restore those pensions. We’ll pick a date before the crash. Whatever value a person’s holdings in a pension fund was at that date will be transferred to that person’s social security account, to be paid out as an annuity supplement to that person’s basic social security income, when s/he retires.”
(I’d like to send a special thank you to activist Carl Davidson for providing this link.)

In his book, After Capitalism, Schweickart provided an expanded version of this solution. In his book he proposed that the government would, “exchange all outstanding stock certificates and corporate bonds for long-term government annuities – guaranteeing a steady income to each holder until the value of his investment portfolio has been redeemed. “ Schweickart also wrote that the government would, “bail out those pension funds invested in the stock market – and all other stockholders as well, capitalists included.” (Emphasis is mine) To pay for this he recommended a sharply graduated tax on the annuity. (pg 174 - 175)

While his web article was very good I believe that his proposal as he presented it in his book to be far better. I’ll let Schweickart himself make the case from me. On pages 175-177 of his book he gave six arguments in support of this expanded buy-out:
* These payments would not be paid forever but would end once the value of the investment has been recovered or once a set date is passed, such as a maximum of thirty years.

* The pension funds would be exempt from the annuity tax. This would protect the retirees while taxing what would have been reinvested by the capitalists

* While we may recoil at propping up the rich in their lifestyle there is something to be said about the economic benefits of their consumption. Allowing them to spend would help continue providing jobs.

* To answer the objections over the cost of such a bail out Schweickart points out that we currently pay for the lifestyle of the rich since part of what should be paid to the workers are instead siphoned off to pay dividends and interest to the capitalists.

* The fundamental problem with capitalism isn’t supply side. It’s the power that capitalist have that is the problem. Paying off the capitalists is a small price to pay to transfer economic power to the workers.

* We should not demonize individual capitalists. Providing the annuity to everyone would help create a spirit of generosity to the economic conversion. This could also mollify many capitalists who may otherwise try to prevent such a conversion.

I would add to Schweickart’s six arguments a seventh. By providing this annuity it would take into account those non-profits that are invested as well as the individuals who depend on their earnings from investments.

In conclusion, not only do we know what the real alternative that Paulson failed to mention is (economic democracy) but we also have a good idea of the democratic, peaceful and equitable means by which to achieve it. The only question then that remains is how long do we have to wait until we see an economic democracy, this Third Way alternative to capitalism, become a reality? How long?

Sunday, September 28, 2008

The Real Alternative Part 1

On September 21st, 2008 Treasury Secretary Henry Paulson said on Meet the Press that while he hated putting the taxpayers in the position of bailing out the financial markets (which as of this posting appears will indeed happen) it was “far better than the alternative.” To say that our choices are limited just to either a bail-out or doing nothing is simply not true. Replacing capitalism with an economic democracy based largely on worker-owned cooperatives and supported with a system of social investment is the true alternative.

Advocating such a massive undertaking as replacing capitalism with an economic democracy leads to the question of how such a conversion might take place. David Schweickart in his landmark book, After Capitalism, describes four possible steps that could be taken. (Note: In my opinion all of these steps would likely require constitutional amendments.)

  • First, Congress could pass a law that would outlaw the payment of either dividends or interest to individuals or institutions.
  • The second step for Congress would be to declare that the authority for all businesses that employ more than a set number of employees would be with the employees of those same firms.
  • Congress could then establish a flat-rate capital asset tax on those newly created cooperative enterprises so as to fund the social investment system.
  • The forth step would be to nationalize all of the banks, cancel all loan interest obligations, and have these banks begin dispensing the revenues from the capital asset tax with the goal of ensuring full employment and profitability of the cooperative enterprises.

Schweickart also correctly points out in his book that while this four step plan sounds easy there would be serious problems implementing it. Aside from the massive opposition that we would face from the capitalists there is an ethical challenge for there are many people who are not capitalists, mostly middle-class families, who do own some shares of stocks and financial notes. While some securities are owned by individuals many people are invested indirectly through pensions, mutual funds, trusts, or small estates. In addition to these non-capitalist shareholders there are many non-profits, such as religious and civic organizations, that are heavily invested in the financial markets. Eliminating investment proceeds could cause serious hardships for many of these middle-class families and non-profits.

In part 2 of this series I will explore possible answers to these problems. Stay tuned.

Monday, September 15, 2008

Freddie and Fannie Sitting in a Tree…

As the media has reported the mortgage giants, Freddie Mac and Fannie Mae, were recently placed in conservatorship by the Federal Government. First, what are Freddie Mac and Fannie Mae?

According to Wikipedia:

The Federal Home Loan Mortgage Corporation (FHLMC) (NYSE: FRE), commonly known as Freddie Mac, is a privately-owned and run government sponsored enterprise (GSE) of the United States federal government. It is a stockholder-owned corporation, authorized to make loans and loan guarantees.

The Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, is a publicly owned government sponsored enterprise (GSE). It is a stockholder-owned corporation authorized to make loans and loan guarantees.

Both enterprises play a major role in the US housing market. According to Wiki, “As of 2008, Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) own or guarantee about half of the U.S.'s $12 trillion mortgage market.”

Now that the Federal government is managing these enterprises how should it proceed? There are several good options:

State Agency: One good option is to convert them both into government agencies. By doing so, the government can insure that everyone has access to good, affordable housing.

Worker Cooperatives: Rather than make these enterprises government agencies another good possibility is to give them to the workers of those agencies in the form of worker-owned cooperatives. These co-ops could be chartered as non-profits with mandates to insure quality housing for everyone.

There is a difference between how the government should proceed and how it will. The problem is that the federal government is highly unlikely to keep them as state agencies and is certainly not going to make give them back to the workers.