The Real Alternative Part 1

On September 21^st, 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.