The New Physics of Inequality: Compounding Advantage for the Rich and Accelerating Disadvantage for the Bottom 60 Percent
Researchers examine how inequality is becoming more durable and intractable.
With worker-owned co-ops and other forms of democratic enterprise, veteran analyst Gar Alperovitz is helping America see, we can create wealth without creating a super wealthy.
In the struggle against economic inequality, historian and political economist Gar Alperovitz tends to take the long view. That may be at least partly because Alperovitz has been at that struggle for quite a long time.
Back in the 1960s, for instance, Alperovitz worked with Dr. Martin Luther King Jr. and his aides to explore the potential of an alternate economic order built upon community-owned enterprise.
Alperovitz has always had a foot in both the activist camp of what could be and the political reality of what we can accomplish right now. His many books have linked those two camps — and punctured the pretenses of those who defend America’s astoundingly unequal distribution of income and wealth.
Alperovitz has been a legislative director in both houses of Congress and also worked with a wide range of groups and institutions to fashion an organizational infrastructure for a more democratic “New Economy.” In the Great Recession’s wake, those efforts have begun picking up considerable momentum.
Alperovitz lives in Washington, D.C. Too Much editor Sam Pizzigati spoke with him there about his long-haul perspective on how we can go about shearing inequality down to democratic size.
Too Much: You see capital — who gets to own it, to benefit from it, and derive political power from it — as a key to both understanding and ending our staggering levels of contemporary inequality. What do you mean by capital?
Alperovitz: In the formulation I use, capital amounts simply to wealth ownership of any kind, ownership that can be translated into power. You can sell it to get income. You can hire people with it. It’s another word for wealth ownership.
Too Much: We’ve become so unequal, you’ve also noted, that we’ll never become significantly more equal unless we have a fundamental shift in who controls capital, in who owns wealth. A shift to what?
Alperovitz: Wealth brings power, political power, institutional power. Wealth on its own gives people the capacity, as a friend of mine likes to say, to “rent” politicians and control the political process. Wealth gives the wealthy access — access to political levers that alter the way the economy works.Wealth gives the wealthy the capacity to ‘rent’ politicians and control the political process.
In all the advanced countries, labor organizations used to provide a counterbalance to this wealth. On the shop floor and in the political system, unions directly challenged capital on wages and the distribution of income.
But in the United States we’ve always had a much weaker labor movement than most other advanced capitalist nations, and today our labor counterweight is disappearing. Increasingly, we have no institutional counter to the political power of capital.
Many activists today think that building a movement will solve this problem. We obviously need a movement. But at the heart of the movement that helped make America more equal in the middle of the 20th century, we also had an institution, labor unions.
Unless you can build both institutions and a political movement, you won’t have the power and wherewithal to really challenge capital.
Too Much: With unions under so much siege, what other institutions could provide a counterweight to capital?
If you set up a worker co-op, you don’t have a capitalist firm. You have a worker firm. And if you have 10,000 worker co-ops, you may have the beginnings of a new economic order. And if you can begin to develop the idea politically that, yes, ownership can be public or worker or community rather than private and capitalist, then you can move to other forms of common wealth and democratic ownership like city and state banks.
Too Much: So how do we go about developing that idea politically?
Alperovitz: I think that starts with a counter-institutional strategy. If they have institutions and we don’t, and labor is no longer there in the strength we need, either we build an institutional substructure or we lose.
Too Much: We have a number of alternate institutions already operating in our economy, everything from co-ops to employee stock ownership plans, or ESOPs. How significant have these alternate institutions become?
Alperovitz: Not very significant at all, not at their current stage of development.
We do now have in the United States today 130 million people involved in co-ops, but mostly as credit union members. We have some agricultural co-ops as well and about 500 or so worker co-ops. We also have several hundred land trusts.
ESOPs have maybe 10 million people. But these worker-owned firms typically don’t involve democratic decision making. They could, however, be democratized.
But things are developing, particularly because mayors in a number of cities are beginning to help set up co-ops. We’re seeing worker co-ops and city-owned banks. Philadelphia and Santa Fe may be the furthest along with setting up a bank. North Dakota has had an effective state-owned bank for a hundred years. Boulder has just about taken over the local utility.
So in many cities now, we’re beginning to generalize the idea that we can have community forms of ownership, we’re beginning to generate structures — from the bottom up — that socialize ownership in one form or another.We’re beginning to generalize the idea that we can have community forms of ownership.
Too Much: What’s driving all this?
Alperovitz: The pain levels in our society are growing. Our economic system is creating so much pain, and we have no good liberal or social democratic policy in place that can alleviate that pain.
In a sense, we’re living in a maze. We can’t get out through social democracy and liberal strategies and labor. The system hasn’t collapsed, so we don’t have a revolutionary crisis. And the pain continues. Many people are concluding that we either build from the bottom up or things are going to gets worse.
Too Much: We typically think small in the United States when we think about alternate economic structures like worker co-ops. But some alternate institutions elsewhere in the world have grown quite large and are making an appreciable egalitarian statement. The Mondragon worker co-op network in Spain, for instance, has 75,000 workers and six-to-one ratios between top management and worker pay. Could such a robust cooperative network come to be in the United States?
Alperovitz: I think we may actually have greater possibilities in the United States than in the Basque area of Spain — that’s the geographic base for Mondragon — and in the Emilia-Romagna area of Italy, another global co-op center.
Mondragon has an unusual political history. And so does Emilia-Romagna. Both had intense and violent anti-fascist struggles. Out of these struggles grew a strong hothouse environment for organizers, who then went on to build alternate institutional developments.
We don’t have that context in the United States, so I think we’re not going to get a Mondragon. But we have a localism of a different sort. We have a very decentralized system that offers our communities unusual possibilities.
Too Much: What sort of possibilities?
Alperovitz: In Cleveland, we have the Evergreen model. It’s neighborhood-based, it’s community- as well as worker-owned.
Evergreen’s worker cooperatives are leveraging the purchasing power of local hospitals and universities. They are selling these “anchor institutions” everything from lettuce to laundry services. When you have publicly funded hospitals and universities purchasing from your local worker cooperatives, you have the potential for an expansive system that can really begin to have some power to it.
These anchor institutions provide a somewhat guaranteed market that can stabilize worker companies.
Too Much: And these mostly nonprofit “anchor institutions” can’t threaten to pick up and leave, as corporations do when their CEOs start pressing their workers for concessions on wages and benefits.
Alperovitz: Yes, they’re quasi-socialist. And they have so much public money in them — Medicare, Medicaid, hospital, and education subsidies of various kinds — that people just naturally come to understand that taxpayer dollars can indeed help build your community.
Too Much: How is the community ownership element in the Evergreen model reflected in the structure of the worker cooperative enterprises?
Alperovitz: Evergreen functions as a nonprofit that links together the worker-owned companies.
The workers in a free-standing worker-owned company can sell their enterprise to the highest bidder. You can’t do that in Evergreen, unless the central co-op body says okay. Evergreen is working to build the community, not just make a couple co-op guys rich.
A second point: Some part of the profits the Evergreen worker co-ops earn gets contributed to the community nonprofit central organization, with a view to building the community. So Evergreen has a community as well as a worker vision.
And a third: Some part of the profits the worker co-ops earn also goes to a loan fund, with the notion of building more and more co-ops.
Too Much: And all this happens democratically?
Alperovitz: The Evergreen model is actually operating as a demonstration project, set up by foundations and worker groups and hospitals. Evergreen doesn’t have an elected body in the traditional sense, so it’s not a democratic structure at this stage.
But other people are experimenting at the next stage. A new development in Rochester that’s building on similar principles will probably be much more democratically structured.
Too Much: In New York City, the di Blasio administration has appropriated some money for worker-owned enterprises along these lines?
Alperovitz: Yes, di Blasio has budgeted $1.2 million to help set up co-ops. And Madison is also putting up money, and Austin, Richmond, and Jacksonville are moving down this road, too. So you’re seeing mayors finding it useful politically to encourage worker co-op development.
At the Democracy Collaborative, we just issued a big report on what mayors are doing. Combine this work with what nonprofit institutions are doing and you can begin to see a supportive structure for experimentation and development.
Too Much: Ultimately, if you want to challenge the most powerful elements of our economic power structure, you have to go to big banks and big corporations. How do we generalize the notion that these all ought to be democratized?
Alperovitz: In 2008, we had a national crisis, and we did, in effect, nationalize General Motors and Chrysler and AIG and, de facto, many of the big banks. Basically, the federal government controlled who got appointed to those boards.
We are likely to face more crises in the next three or four decades. We should be thinking about how we take advantage of crises.
Too Much: In a way we did not take advantage in 2008?
Alperovitz: Yes, and that requires building up the idea that it’s time for democratic ownership. How do we get that idea into common discussion? How do we have people see public municipal utilities, worker-ownership, land trusts, and public banks as sensible economics and not wild-eyed socialism?
Too Much: And your answer becomes that local, incremental efforts begin to create this understanding?
Alperovitz: These local, incremental efforts certainly contribute to it. So do books and articles and political moves by mayors and governors, lots of different levels involved here.
Too Much: The federal Securities and Exchange Commission last summer adopted regulations that require publicly traded corporations to annually report the ratio between their worker and top executive compensation. If governments started to give preferential treatment in the procurement process to enterprises that have a modest worker-CEO wage gap, would something like that have a significant impact on the growth of alternate enterprises?
Alperovitz: We’re in the beginning phases of this shift to a democratic economy, a stage where we’re introducing new ideas like that — and legitimating them. It’s important to have very concrete things like this that can be done.
Too Much: Bernie Sanders has shoved the “s” word — socialism — on the political center stage. How helpful has his candidacy been to your vision of a New Economy?
Alperovitz: I’m not sure most people have any idea what the word “socialism” means. But socialism doesn’t scare people anymore. I have a new piece in the Nation magazine on this.
Bernie has put forward legislation for worker-owned co-ops, but he hasn’t talked about this much in his campaign so far. He’s basically talking about tax changes, raising the minimum wage, traditional left-liberal programs. But he is concentrating on attacking the distribution, and that’s important.
But what’s really important, he’s demonstrating that in the United States today — amazingly! — you can talk about socialism, about very radical changes in at least taxation and income. He’s blown that open. That’s a big deal. He has demonstrated the weakness of the dominant ideology, and that’s really a big deal. And other politicians are going to pick that up.
Too Much: So what’s the lesson here?
Alperovitz: The system is delegitimating itself, by virtue of its failures. It no longer has ideological control. This may be one of the most important times in American history, bar none, because I think the system is running out of options.Our economic system is running out of options.
Too Much: If the winning candidate for the White House came to you next November and asked you what should we do on January 21, the day after the inauguration, to move toward a New Economy, what would you advise?
Alperovitz: The winner will likely face a Republican Congress that won’t let the new administration do anything. So, at the political level, the new President would have to do what Harry Truman did in the years right before the 1948 election: run against the Republican “do nothing” Congress, something Obama did not do.
Secondly, the new President would have to build a political movement, and Bernie certainly understands the need to do that. After his election, Obama essentially dismantled the grassroots movement that elected him.
These steps, of course, would not change the reality the new President would face next January. The new President would still be facing a Republican Congress that’s not going to let the new administration pass major legislation.
But the new administration would have options.
Worker-owned companies, after all, are businesses, and the business community has been very good at getting lots of different regulations and programs in place that help business, everything from small business loans to economic development grants. By administrative authority, and without having to go to Congress, the new President could use these existing programs to build up a new infrastructure of institutions friendly to more democratic enterprise.
Too Much: You’re co-chairing a new national initiative called the Next System Project. Our current system seems incredibly locked into place. What gives you the most hope that we may actually see a more egalitarian New Economy?
Alperovitz: If you think about the 20th century, we had some major problems in the century’s first quarter: stagnation, big banking crises, unemployment, recessions. World War I then bailed the system out.
The same thing happened in the second quarter of the century. Massive crisis, World War II bailed the system out. In the third quarter, Vietnam and the Cold War stabilized the system. Now our system has run out of stabilizers.
People generally don’t analyze our situation the way I just did, but in the real world people see that nothing works. And the pain gets worse and the politicians talk. I think that’s the result of a system running out of the capacity to solve problems.
Now if the system should out and out collapse, I think we would go to the right, not the left. But I don’t see a collapse. The government is currently underwriting 30 percent of the economy. That sort of stability makes a complete collapse unlikely.
So that leaves us with our ongoing decay and delegitimation, and people sense that something is really wrong. Everything’s coming out of this context.
So if we throw the next three decades onto the table and work at building democratic economic structures wherever we see opportunities for transformation, we have the possibility of laying down the infrastructure for a New Economy, piece by piece.
We have the opportunity, I think, to lay the groundwork for an irreversible transformation. I didn’t say this generation can actually do a transformation. But I think we can lay the groundwork, at many different levels for an ultimate transformation.
Too Much: We don’t normally think of incremental change as radical change. But you make the case for incremental change as potentially incredibly transformative.
Alperovitz: Incremental change of a particular kind. We’re talking about changing the structures of ownership and control.
But I think it’s particularly important to break down the idea that we either have only incremental reform or revolution. We have another way. I like to call it “evolutionary reconstruction.” It’s a way of thinking about transforming institutions within a context that isn’t collapsing, isn’t revolutionary. It’s a different way of thinking about the possibilities — and the future — we face.
For more information, check online with the Democracy Collaborative and the Next System Project. For a deeper leap into the written work of Gar Alperovitz, visit GarAlperovitz.org and the Pluralist Commonwealth.
Sam Pizzigati edits Too Much, the Institute for Policy Studies online monthly on excess and inequality. His latest book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970 (Seven Stories Press).