[Written in the fall of 2010. About 3,300 words.]
Even as President Obama is labeled a Marxist by critics on the right, an actual Marxist is quietly teaching future generations anti-capitalist ideas whose implications are as profound as they are revolutionary. Born and raised in the eastern countryside of Ohio and now a professor at Loyola University of Chicago, Dr. David Schweickart is using his double-PhD (mathematics and philosophy) to develop a fundamentally novel theory of infrastructure for society he calls Economic Democracy. One of the main tenets? You should be able to fire your boss.
Schweickart challenges traditional capitalism with these thorny questions, “Why is it that when you go to work you lose your democratic rights? Why is it that we have no control over the investments being made that determine our future?” Under economic democracy employers are held more accountable because in order to attain management positions they must be chosen by their employees in yearly elections using a one-man one-vote system. America is strangely inconsistent in that citizens are considered competent enough to elect their congressmen and president, but when it comes to choosing corporate superiors people have little to no representation in the companies where they work.
Schweickart’s model has salaries at all levels of a company democratically decided by the employees. Instead of wage labor people are paid by fixed percentage profit shares. What this means is the more money a company makes, the more all its employees get paid. This motivates people to work harder because their work is directly tied to getting a bigger paycheck, rather than getting a set in stone pay rate regardless of how well the company does. While shareholders can currently vote on executive pay in America, that isn’t true democracy because only those with the money to buy stock shares are represented, thus it is a pay-to-play model. Economic democracy is a legitimate equal representation majority-rules system, rather than a money-rules system dominated by a wealthy capitalist minority.
If there is doubt of an elite capitalist class existing in America, let it be known that the common American earns near $35,000 per year yet the country’s top 400 income earners rake in salaries averaging $330,000,000 annually; a 6,660 to 1 ratio. In Modragon, Spain – a real world example of Schweickart’s ideas in action – the the highest paid executive earns the salary of 9 average workers. “It’s insane to think your namesake is worth $900 million [referring to Ken Griffin, one of Chicago's most lucrative hedge fund managers].” Schweickart says, “For what? Buying and selling securities? Can you imagine workers voting to say ‘My boss is worth 1000 times more money than I am?”
An experiment of historically significant proportions, according to Schweickart, Mondragon is living proof that even the largest of companies can be run successfully using economic democracy. This gem hiding in the Basque region of Spain boasts community-provided healthcare, education and social security all through cooperative worker-owned companies. In effect private ownership has been abolished in Mondragon, with companies paying a capital asset tax to the state, as if leasing company property from the public to whom it ultimately belongs. This revenue goes into a community investment fund to be distributed through their cooperative bank. Stocks aren’t offered by these companies in the traditional sense because selling them would pollute the democratic ownership central to the groups ideology.
Companies in Mondragon may be sold only to the community government, though this model differs sharply from the failed Soviet centralized model. In the Soviet system free markets were replaced with state-control, yet wage labor and private ownership were unchanged. Economic democracy by contrast abolishes wage labor and private ownership of the means of production, but it keeps the free market. In essence it is a form of market socialism that keeps only the most effective traits of capitalism while not using the unsuccessful aspects of previous socialist experiments. To be fair, America’s is less a free market and more a rigged market with government subsidy giving powerful advantages to already-established monopolies.
Mondragon is composed of more than 100 worker-owned cooperative corporations that collectively employ more than 50,000 workers and whose sales exceed $6 billion per year, with total assets valued at more than $13 billion. Fundamentally these companies provide more job security than their capitalist counter-parts because the community is a closed loop system that reinvests all of its capital locally, preventing outsourcing [of both capital and jobs] scenarios where a region’s economy withers and unemployment skyrockets, such as what’s happened in Detroit. Additionally the productivity of workers at Mondragon is higher across the board as compared to conventional capitalist firms.
Capitalism creates what Marx called “the reserve army of the unemployed” because the threat of being fired is how corporate leaders keep their workers in line – the typical worker is easily replaceable. Economic democracy undermines this dictatorial power in more ways than one. Beyond corporate elections it differs from capitalism in its basic priorities. One of capitalism’s primary goals is to maximize profits with a focus on the individual, but instead of that economic democracy’s guiding light is employment creation with a focus on the community. Ideally this system would enable every able-bodied worker who wanted a job to get one. Furthermore because workers are the authorities in their companies they would never vote for executive decisions that would jeopardize their own jobs. This is stark contrast to capitalism where companies like G.E. can triple their profits while cutting the number of jobs they offer in half (as happened from 1987 to 2002).
Instead of dividing citizens into classes of extreme wealth and poverty, economic democracy renews the middle class by creating social control of investments. Currently investments in America are at the whim of Wall Street, but in Schweickart’s model citizens get to collectively vote on how the nation’s surplus money is spent. For context, the finance market accounts for roughly 40% of all profits made in the U.S., yet the bulk of America’s extra money goes into private pockets rather than being invested toward creating new jobs (and the capitalists want to keep it that way). This widens the gap between rich and poor by draining the country’s coffers to sustain an elite class of millionaires. It also sets up a system where entrepreneurs must impress capitalist investors to acquire the funds necessary to start their own business. This limits American job growth because instead of no-strings-attached grants from the state, new businesses are subject to repay loans with interest in service of the capitalists; creating a major debt risk should the new business be unsuccessful.
Schweickart argues that interest earned on today’s stock market is harmful to the economy because it is profit gained without sacrifice. The U.S. stock market actually pays out more money each year than the total dollars invested into it. How can this be possible? Schweickart contends, just as Marx would, that the extra money comes from the exploitation of the working class’s labor. To make matters worse for the U.S., speculative finance leads to gambling and out-right scams, which have occurred because there was not enough market regulation.
These problems produced devastating consequences such as the 2008 housing market collapse that destroyed millions of jobs and cost the country trillions of dollars. The situation has further been worsened by the argument that tax breaks for millionaires is good for the economy, an assertion which ignores the fact this approach has historically failed nearly every time it has been tried. When allowed to keep that extra money mega-corporations mostly create bigger CEO bonuses and hand-out McJobs; poor wages and dependence, ineffective substitutes for honest independent innovators creating new opportunities that would truly serve the country’s best interests.
Schweickart asserts that much of the money on American finance markets is not “investment” at all, but rather a clever form of savings. Investment, by Schweickart’s standards, is money put toward entrepreneurial activity like a loan or grant with which to start a new business. The vast majority of money circulating around Wall Street is paid to shareholders as interest and does nothing to stimulate entrepreneurs, a process actually harmful to the overall economy despite the powerful minority class of millionaires it produces.
In his book, After Capitalism [Printed in 2002 by Rowman and Littlefield Publishers, Inc.], Schweickart refers to entrepreneurs as the ‘white knights’ of capitalism (in that they are often cited as evidence of capitalism’s success), but he draws an important distinction between capitalists and entrepreneurs. A small business owner for example is not a capitalist because they work as managers rather than only fulfilling the role of the initial investor. For this reason traditional private-ownership, wage labor capitalism works just fine for small businesses and economic democracy need not be forced upon them. Capitalism’s fable of the innovator-entrepreneur, the self-made millionaire, is a rarity in America compared to the capitalists who use their already pre-existing fortunes to make more money by investing in (and in turn demanding a share of the profits from) other people’s work.
With this in mind comes the classic Marxian question so unacceptable to the ruling capitalist class, “If labor is the source of all value, why should land-owners or capitalists get anything?” To counter this potent attack supporters of capitalism have run a smear campaign against socialism, labeling it inaccurately as welfare and a government-takeover. “It’s not a government takeover, it’s an extension of democracy.” Schweickart defends, “Savings and loan associates would not be nationalized, only control over investment.”
Though democracy is the last thing capitalist elites want, especially evidenced by the recent Citizens United supreme court decision allowing unlimited political donations which are today exploited to secretly influence elections away from legitimate democratic control. This money-as-votes concept is often cited as being democracy, with its defenders declaring consumer purchases are equivalent to the ballot box. Yet because the distribution of money in America is horribly slanted (with less than 1% of the population owning more than 40% of the nation’s wealth) this is anything but democracy – there is little to no representation at all for average citizens without millions to spend on financing their preferred politician’s campaign. Voters have become apathetic as they feel their self-governing power slowly slipping away from them. At risk is literally the country’s independence and sovereignty.
America’s current political system is actually a form of “Might makes right” a philosophy identical to the one Middle Eastern dictators such as Libya’s Gadhafi are trying to use as they attempt to crush popular resistance to their regimes by brute force. When demonstrated with weapons instead of dollars it becomes painfully obvious how immoral this line of thinking really is. “Already the electoral system is totally corrupt.” Schweickart says, adding what he would like to see America do is “Democratize labor, democratize capital, democratize democracy.”
Ryan Haas, a former student of Schweickart’s and now practicing attorney for Chuhak & Tecson, as well as instructor of philosophy at Columbia College Chicago adds, “McCarthy’s witch hunts in the 1950’s automatically and dogmatically delegitimized any socialist critique of our social and economic problems by immediately associating such a critique with the Soviet bloc. It was an ultimate red herring [because it demonized socialism as being inherently associated with America's Cold War enemy].”
Regarding the viability of Schweickart’s theories in modern America Haas says, “A comprehensive change in our current legal framework [would be necessary]. Laws related to corporate ownership would need to be completely changed. I don’t see that happening in the current political climate.” Though he also mentions that some aspects of economic democracy have already been adopted by the U.S., such as profit sharing via stock options in tech companies and the occasional cooperatively owned firm.
Haas reflects on his graduate level course taught by Schweickart 11 years ago, “In short, his class was tough. From what I recall, Dr. Schweickart was a very clear minded philosopher who has an understanding of social, political, economic and philosophical problems in a way many people do not. His class was intense because he wanted his students to stop compartmentalizing problems into ‘philosophical’ or ‘economic’, but see the connections and think in more comprehensive terms. This can be very difficult because academia is not traditionally structured to address problems across disciplines.”
Carl Davidson, the National Co-Chair for the Committees of Correspondence for Democracy & Socialism, offered to give further perspective on the profile of this contemporary thinker, “David is an old and good friend, and we share common views. If you had to pick someone who is very organized and rigorous in his thinking, while at the same time very lucid, calm, warm and approachable as a teacher, David Schweickart would be among those at the top of any list.” Davidson penned an in-depth review of Schweickart’s most recent book, writing, “[He] has given us an excellent breakthrough in finding the road to a new socialism for the 21st century. Using both practical and ethical arguments, his main objective is to take on the ‘TINA’ argument-’There Is No Alternative [to capitalism]‘-of the neo-liberals. He convincingly shows there is at least one alternative, a ‘successor system’ that he calls ‘Economic Democracy.’ His critics will find it hard to dismiss his ideas lightly.” Economic democracy he continues, “is a working hypothesis, and not a rigid or doctrinaire model.” One of his most salient points: “Labor is not a cost, as it is under capitalism. Rather, labor gets its return from the local profits. This means there is no pressure to keep the workers’ compensation low.”
Schweickart proposes another interesting idea to promote job growth and better wages; a fair trade policy of socialist protectionism. Instead of the current unregulated free trade policy, a tariff would be placed on all imported products from poor countries where the lack of labor protection laws are exploited. This added cost would eliminate the advantage of outsourcing U.S. jobs by leveling the playing field with domestically made products in America, the world’s most lucrative market.
Truly novel is Schweickart’s suggestion that the extra money produced by this tariff would be sent, not to the U.S. treasury, but instead back to the countries from which the products were imported. This would help alleviate global poverty by freeing up poor countries to develop local projects instead of forever being slaves to producing products to meet the consumer demands of rich countries (an addiction that is one of the leading causes of mass deforestation of rainforests, one of the planet’s most critical environmental threats).
The constant expansion required to compete in a globalized capitalist society contributes to recurring and worsening economic recessions and environmental crises, exactly as Marx predicted it would. Alas, the devil is in the details of exactly to whom that tariff money would be sent; to the foreign workers themselves, their often corrupt governments, or to NGOs (Non-governmental organizations)? While conceptually intriguing and potentially beneficial however, this tariff is not part of the essential foundations of his theory.
The alternative to allowing Ayn Rand disciples like Alan Greenspan to promote the spending of America’s natural capital as if it were unlimited, is for the U.S. to adopt an investment policy toward the environment to grow more natural wealth instead of consuming it all faster and faster with each passing year. While individualists at our core, Americans cannot continue to deceive themselves for much longer that it is rational to care only about one’s own profits even to such excess that the entire national community suffers.
At the heart of America’s economic malaise are two hitherto unanalyzed topics; negative externalities and the allocation of wealth. To decipher those big fancy words, the first means the prices of products that stores charge are actually lower than the cost of production for those items. The true costs are often outright ignored, transferred to the environment or to the citizens of impoverished areas. A good example of this is that the GDP does not take pollution or quality of life into account in its assessment of America’s economic health. The other issue is the way in which most of our money is spent; it goes toward consumption that depletes money rather than into genuine investment that in the long run creates more money. A simple change in our spending habits coupled with new taxes to internalize externalities would be fundamentally good economics. As for our military budget, oversized as it is, the argument for reducing offense spending tends to fall on deaf ears in the face of fear-based propaganda now broadcast on a historically unprecedented massive scale.
The case for economic democracy is made even stronger by comparing it to traditional means of economic recovery. For example raising minimum wage, as Marx put it in his Alienated Labor, “amounts to nothing more than a better slave salary.” Only through true democratic control can the value of the nation’s labor be realized as money in middle class pockets rather than being directed to record CEO bonuses year after year without regard to corporate failures. Socialism, despite being a dirty word to many a conservative, is actually capitalists’ preferred method to transfer corporate losses to middle class tax payers as debt (remember the bank bail-outs?). Using government subsidy, corporations effectively socialize all of their losses while privatizing the vast majority of their gains. America already has forms of socialist welfare, but they only benefit a minority rich at the expense of the majority working class.
With respect to these facts capitalism is simply not sustainable. Capitalism is dependent on two contradictory things; the need for consumers to buy products and the need for unemployment to keep the workers in line. “Capitalism can’t provide full employment, because it relies on threat of firings to maintain authoritarian power structure.” says Schweickart. Capitalism’s transfer of wealth from working class to elite capitalist owners wipes out consumer purchasing power, in turn increasing unemployment and further reducing consumer demand, creating a never-ending cycle of decay until corrected, usually with strong government economic intervention.
The tricky issue is how to move forward to reform our current system. Ultimately there are just three conceivable methods. First, a political party supporting economic democracy is elected by a majority of voters and they institute the changes using our legal system. Second, a collective of worker-owned cooperatives develop inside America’s current capitalist system and they spread and grow as they become more successful by continuing to provide more jobs. The last method Schweickart does not mention, though it is worth noting, is that a violent revolution could be attempted to foment economic changes.
Economic democracy may not be the only solution to America’s current unemployment and poverty woes, but it is one of the only original ideas to have been suggested. Working examples of it around the world are seeing success. It may not be certain that this model will be a cure-all for America’s problems, but one thing is certain: That without fundamental change our capitalist system is fast heading toward eminent collapse. Middle class wages have stagnated, hardly rising at all since the 1970s while executive [read – capitalist] salaries have skyrocketed exponentially. In trying to reduce labor costs and maximize only their own profits employers have not only begun, but drastically accelerated the process of transforming the U.S. into a 3rd world country for the poorest of our working class.
As politicians bicker about superficial issues like the debt ceiling, abortion, gay marriage, and Obama’s birth certificate the most essential obstacles to job creation remain unchallenged and undiscussed. The mass media, one of America’s most powerful tools, is largely owned by corporate monopolies. Only six major companies own 90% percent of the major newspapers and tv stations in the country, thus the media refuses to seriously address the problems Dr. Schweickart has devoted his life’s work to solving. It is reassuring to know that light may be at the end of the tunnel, but Americans will have to be willing to work toward getting there before the country truly starts to see recovery and strong progress.