Band-Aid

So the politicians are finally admitting that there is a recession. It took them long enough to figure that one out. Unfortunately the suffering of the working people hasn’t been the cause of their concern. It was only when the value of their stock portfolios started going down then they realized there was a problem. It makes one wonder if the market hadn’t tanked whether they would ever have admitted there was a recession. Probably not.

To understand the recession we should remember that there are three essential components to capitalism: the central position of private investment (i.e. capital), a primarily two-tiered class system of Laborers and Capitalists, and a totalitarian dictatorship by the markets. This market dictatorship, which is detached from society and is propped up by the State, is the means by which wealth is redistributed from the laborers to the capitalists.

The recent problems of the bursting housing bubble and rising gas prices helped caused the current recession because they drained money from the market, which therefore meant that there was less redistribution of wealth from the workers to the capitalists. Less redistribution meant less accumulation of wealth and therefore the less likely that the capitalists were going to reinvest. This lack of investment results in a vicious cycle of more layoffs, which in turn results in reduced consumer spending and a further reduction in the redistribution of wealth.

In an attempt to kick start this redistribution of wealth the politicians have decided upon a “stimulus package” that will consist largely of rebates. Critics on both the Left and Right have pointed out the numerous problems with this solution. Many of the recipients won’t use the rebates to make new purchases but to pay off their debts from their previous. Those that do spend it will buy many products that are foreign made so that much of this money will just leave the country rather than result in new domestic jobs. Even if the rebate helps it doesn’t go to the root of the problem, which is an economy based on consumption rather than production.

Contrast this with an economic democracy. In an economic democracy the goal would not be the redistribution of wealth from one class to another but instead would be the constant creation and maintenance of high quality jobs for everyone. Therefore, if signs of a recession began to appear then action would be taken to head it off by the social investment system so as to create new cooperative enterprises and to boost entrepreneurial activity.

This difference shows the superiority of economic democracy over capitalism. In capitalism a recession isn’t a problem until it begins to hurt the capitalists. In an economic democracy the welfare of everyone is a concern so a recession is never allowed to happen. Recovery in capitalism is based on a hope and a prayer that token efforts like tax rebates will spur consumers to spend the economy into recovery. While recovery in an economic democracy goes to the source of the problem and insures that everyone has high-paying employment opportunities.

The Time Has Come

The day was January 11th, 1944. The Battle of Monte Cassino was waging on the Italian front in Europe while the 1st Marine Division had successfully taken Aogiri Ridge on a small island in New Guinea. Across the world President Franklin Delano Roosevelt gave what was to be his last State of the Union address. As he neared the end of the speech, he presented a vision for America. “It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known.” FDR pointed out that while the original Bill of Rights served us well it was insufficient for the reality of our industrial economy. He then stated that it was time for a “second Bill of Rights.”

This Economic Bill of Rights, as it would become known, included:

• The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;
• The right to earn enough to provide adequate food and clothing and recreation;
• The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
• The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
• The right of every family to a decent home;
• The right to adequate medical care and the opportunity to achieve and enjoy good health;
• The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
• The right to a good education

The time has now come when, through the establishment of an Economic Democracy, we can finally create the America that President Roosevelt dreamt of.

TINA – Part 4

Q&A
Following are concerns and questions that have been raised by readers in previous postings about public investment as alternatives to capital.

Democratic Accountability
It’s been asked whether public investment system would be democratically accountable. The CDC’s and the CDFI’s would be accountable to the local and community level along with the state in some cases. The national social investment system would be established by democratic mandate through Congressional action. I would expect that the social investment banks would operate independently much like the Federal Reserve. Currently Congressional oversight is to, “clearly establish a viable objective for the Federal Reserve and to ensure the Central Bank is fully accountable for achieving this goal.” http://www.house.gov/jec/fed/fed/fed-impt.htm Democratic accountability of the social investment system would be similar.

Should Social Investment be Profitable?
Another question that was asked was whether the public investment system would be required to make the best possible use of the tax money. Without a doubt the social investment system would be expected to meet the requirements of its mandate, which would be to insure universal employment through the ongoing creation of profitable cooperative and family-owned enterprises.

At one point that questioner used the P-Word: profitable and whether it would need to “show evidence of actual growth.” In answer to profitability the social investment system would not operate to make a profit in the same fashion as business. Instead, the success of the public investment system would be in whether it’s meeting its mandate. If it wasn’t then the leadership would be replaced with those who would insure that the mandate was met.

Risk of Bureaucratic Control
It was also asked whether public investment would leave control in the hands of the politicians. The concern being that the system might cause the only way to get investment would be through backdoor politics. This concern is another reason why the social investment banks would need to operate independently plus the reason for the existence on the CDC’s and CDFI’s.

Availability of Investment
Another questioner pointed out that capitalism is a good way to make money available to companies. I would point out that actually most of the money in the system moves through the Secondary Market, which means it moves between the shareholders without actually reaching the companies. It’s the Primary Market, which involves direct investments with the businesses, that provides money to businesses. Take venture capital, for example, which is important for the creation of new enterprises. In 2007, according to a report by PricewaterhouseCoopers and the National Venture Capital Association, there was $29.4 billion invested into business ventures by venture capitalists. The social investment system along with the CDC/CDFI would be more than sufficient.

TINA -Part 3

In the prior installments of this series I’ve presented three real world examples of alternatives to capital. We can now build on those models to create a possible alternative to capital on a national scale. Luckily much of the work has already been done.

In his book, “After Capitalism”, author David Schweickart proposed replacing capital with social investment. His model involves a "capital asset tax" levied on all of the cooperative enterprises, which would then be returned back in the form of start-up and expansion grants provided by a social investment banking system.

Schweickart mentions a variety of ways that this banking system might function. His preference, which is the same as mine, is that the system should be set up to distribute the funds via regional authorities rather than distributed directly by the Federal government. The various regional authorities would then distribute these funds down to community level non-profit banks. These banks would operate on a mandate to provide the funds to the various economic enterprises for start-ups and pro-growth expansion investment in the form of grants with the goal of universal employment. This grant money would be added to the capital value of the enterprises, which would then be subject to the capital asset tax.

Along with Schweickart’s social investment network I would also want to see a dramatic expansion of the Community Development Corporations and the Community Development Financial Institutions mentioned in part 2. One reason for these additional bodies would be to expand the sources of capital for entrepreneurs and cooperatives. If the social investment banks miss an opportunity with an entrepreneur then a CDC of CDFI might take a chance and provide the needed investment. The more investment money from more sources the better the chances for innovation. Plus, they would provide political pressure on the social investment banks because they would be forced to compete for applicants to satisfy their mandate. In addition, their existence would help insure that investment isn’t controlled by bureaucrats.

I don’t mean to imply that Schweickart’s model is the only possible alternative. For example, Venezuela uses loans rather than grants as social investment for new cooperatives, which was a method advocated by John Stuart Mill. But Schweickart’s model does show that, along with CDC’s and CDFI’s, there are indeed viable alternatives to capital. TINA has been proven false and the final objection to the establishment of a successor system has been removed.

In the next and final installment of this series I’ll address some concerns expressed by readers.

TINA? Part 2

In the part 1 I addressed the Caja Laboral Popular (CLP) of the Mondragon Cooperative Corporation as one example of an alternative to capital. In this posting I want to address other alternatives.

According to Gar Alperovitz, in his book “America After Capitalism”, a Community Development Corporations (CDC) is a “self-help entity that operates at both the community-building level and the economic level.” He goes on to say that the CDC, “initial goal involved a community-building vision and included the provision of services, the ownership of productive enterprises, and advocacy on behalf of local residents.” Along with CDC’s there are Community Development Financial Institutions (CDFI’s), which are meant to provide credit and capital to low income and economically distressed communities.

One example of a CDC is the Bedford Stuyvesant Restoration Corporation (BSRC) in New York City. The BSRC provides start-up capital along with other assistance to local businesses as well as training programs for local residents. The BSRC is self-funded through its ownership of Restoration Plaza, a construction firm, a property management company, a supermarket, and a theater.

http://restorationplaza.org/

Another example is the Kentucky Highland Investment Corporation (KHIC), which seeks out and provides venture capital as well as ongoing support for entrepreneurs in areas of Southeaster Kentucky with high poverty. One of the requirements of these new enterprises is that they must promise to hire unemployed residents from those areas.

http://www.khic.org/

We’re now prepared to explore a possible model of non-capital investment mechanism to replace capital, which will be covered in a future installment.

TINA? - Part 1

There’s a popular myth that in 1899 the Commissioner of the U.S. Patent Office, Charles H. Duell, was to have written, “Everything that can be invented has been invented.” An equally absurd comment is often attributed to Margaret Thatcher in reference to global capitalism, “There is no alternative,” which is often reduced to the acronym TINA.

The use of TINA proves that the capitalist apologetics are simply out of ammo in the war of words with critics. It further shows that there is a serious need for us critics to provide that better alternative that we claim is out there. If we fail to do so then we run the risk of proving that the Iron Lady was indeed right and that there is no alternative to capitalism.

There are several real world examples in operation today by which a framework can be built of a better alternative system of investment. In this posting I will address just one example, which is the Caja Laboral Popular (CLP) of the Mondragon Cooperative Corporation.

An important aspect of the CLP is its Empressarial Division, which is responsible for establishing new cooperatives within the MCC. It provides the needed investment and then provides support, such as product development, until the new cooperative is established and is fiscally sound. The CLP is self-sustaining for it funds itself and the ongoing creations of additional cooperatives largely through the deposits made by those same cooperatives that it had helped to create, which have nearly a 100% success rate.

The Caja Laboral Popular provides us one glimpse of an alternative investment system. In future postings I will address other examples of alternatives to capital.

What Would Jesus Buy?

Once in a while a movie comes along that is so important that it must be seen. One such movie is “What Would Jesus Buy”, which follows Reverend Billy and the Church of Stop Shopping. The good Reverend along with his choir travels the country calling the corporations to repent for their greed and for people to “stop shopping!” During the movie he clarifies that this hyperbole is actually a call to get us to moderate our shopping, choose our goods wisely, buy American, and spend our dollars locally so that the money stays in the community.

If you see no other movies this holiday season go see this one.

Visit the official movie site at http://wwjbmovie.com/