Time for a Change


unemployment1Capitalism, as we know it, is having major problems – and none of this should surprise anyone.

Capitalism is a system developed back during the mid 1700’s, formally introduced by one Adam Smith and in the coming centuries grew and expanded into what it is today. Contrary to popular belief, in the years prior to what we regard as capitalism, much of the world’s economies were a tightly regulated affair, falling into various versions of feudalism / state control or simply having an impact unlike what we experience today as frankly, most folks back then didn’t have a whole lot of what we call money or capital as the vast majority of what “loose” capital that existed was held by an elite, regardless if they part of a merchantile class or part of the ruling class. Thus, the notion of a truly unregulated and open / competitive market was, at the time, a radical notion when it was first propagated by Adam Smith.

But let’s face it: capitalism is getting old. Really:

We are to believe (…) that an economic system with endlessly repeated cycles, costly bailouts for financiers and now austerity for most people is the best human beings can do? Capitalism’s recurring tendencies toward extreme and deepening inequalities of income, wealth, and political and cultural power require resignation and acceptance – because there is no alternative?

Garbage.

There is an alternative.

Modern societies have mostly chosen a capitalist organization of production. In capitalism, private owners establish enterprises and select their directors who decide what, how and where to produce and what to do with the net revenues from selling the output. This small handful of people makes all those economic decisions for the majority of people – who do most of the actual productive work. The majority must accept and live with the results of all the directorial decisions made by the major shareholders and the boards of directors they select. This latter also select their own replacements.

Capitalism thus entails and reproduces a highly undemocratic organization of production inside enterprises. Tina believers insist that no alternatives to such capitalist organizations of production exist or could work nearly so well, in terms of outputs, efficiency, and labor processes. The falsity of that claim is easily shown.

Which brings me back to the point that I was referring to in my prior posting: cooperatives. One outstanding example is that of the Mondragon Cooperative (MC) located in Arrasate-Mondragon, in the Basque region of Spain:

MC is composed of many co-operative enterprises grouped into four areas: industry, finance, retail and knowledge. In each enterprise, the co-op members (averaging 80-85% of all workers per enterprise) collectively own and direct the enterprise. Through an annual general assembly the workers choose and employ a managing director and retain the power to make all the basic decisions of the enterprise (what, how and where to produce and what to do with the profits).

As each enterprise is a constituent of the MC as a whole, its members must confer and decide with all other enterprise members what general rules will govern MC and all its constituent enterprises. In short, MC worker-members collectively choose, hire and fire the directors, whereas in capitalist enterprises the reverse occurs.

But critics would point out, the MC is in Spain – and the Spanish economy sucks.

Yes, save that the MC is one of the very few bright lights:

Far better than merely surviving since its founding in 1956, MC has grown dramatically. Along the way, it added a co-operative bank, Caja Laboral (holding almost $25bn in deposits in 2010). And MC has expanded internationally, now operating over 77 businesses outside Spain. MC has proven itself able to grow and prosper as an alternative to – and competitor of – capitalist organizations of enterprise.

And this growth was done without having to slash wages or jobs:

MC displays a commitment to job security I have rarely encountered in capitalist enterprises: it operates across, as well as within, particular cooperative enterprises. MC members created a system to move workers from enterprises needing fewer to those needing more workers – in a remarkably open, transparent, rule-governed way and with associated travel and other subsidies to minimize hardship.

So how does this MC / Mondragon Cooperative work?

MC is composed of many co-operative enterprises grouped into four areas: industry, finance, retail and knowledge. In each enterprise, the co-op members (averaging 80-85% of all workers per enterprise) collectively own and direct the enterprise. Through an annual general assembly the workers choose and employ a managing director and retain the power to make all the basic decisions of the enterprise (what, how and where to produce and what to do with the profits).

As each enterprise is a constituent of the MC as a whole, its members must confer and decide with all other enterprise members what general rules will govern MC and all its constituent enterprises. In short, MC worker-members collectively choose, hire and fire the directors, whereas in capitalist enterprises the reverse occurs.

But here’s a really revealing statistic: In US corporations, CEOs can expect to be paid 400 times an average worker’s salary – a rate that has increased 20-fold since 1965. Within the MC, that rate is strictly controlled at 6.5 times, underscoring one of the key aspects of MC: working within a cooperative, it’s in everyone’s interest to makes things work and truly be a part of something – not just in name (as some of the typical company ‘seminars’ or ‘rah-rah’ sessions try to impose).

But cooperatives are more than just “happy worker’s paradises”: there’s a real immediate economic benefit for the region as well:

Given that MC has 85,000 members (from its 2010 annual report), its pay equity rules can and do contribute to a larger society with far greater income and wealth equality than is typical in societies that have chosen capitalist organizations of enterprises. Over 43% of MC members are women, whose equal powers with male members likewise influence gender relations in society different from capitalist enterprises.

So, in other words, not only is the MC producing jobs and managing fair wages and effective – and profitable – business practices, it is also insuring local / regional economic benefit; what most capitalistic societies fail to realize that no workers mean no one is actually buying things.

A cooperative that is actually growing in the midst of one of the worst economy since the years prior to World War II? How come we haven’t heard of this before?

Because it’s a scary notion: change and how things need to evolve.

Growing up in a rural portion of the United States, we had entities known as ‘supper clubs’.  In some areas (such as ours) things were such that restaurants were few and far in between; hence, the notion of a ‘supper club’ was where people would come together, build a place with a dining room, dance hall and a kitchen where people came together and hang out. Later on as the population grew, these supper clubs remained in the hands of the original families who’d still come together and enjoin one another while inviting outsiders to come in and partake. Any profits made (after costs) were then turned over to the expansion or improvement of the supper club; more often than the ‘supper club’ would hold fundraisers or simply donate profits to the local fire department, schools or medical facilities: the money raised by the community stayed where it doing the most good (although in fairness it should be noted that a number of supper clubs also functioned as after hour gatherings and speakeasy, still their involvement with the local community made them regular fixtures).

In time, the notion of a supper club has largely disappeared, replaced by regular restaurants, owing to rising population base lessening the need for supper clubs, not to mention stronger regulation regarding the management of food establishments.

Along those same lines, during the height of the Great Depression of the 1930’s, then President Franklin Roosevelt sponsored legislation recreating rural utility cooperatives enabling rural areas to receive electricity / energy owing to the costs associated to running lines in isolated areas. And with significant success, these cooperative were weaned off of federal subsidies and now are free-standing entities managing and producing energy services for operating areas regular energy companies bulk at. Now, with the rising importance of green energy, a number of utility cooperatives are breaking new and interesting ground.

Some could argue that cooperatives are a form of communism: a throw back to a failed system – and yet examples such as the Mondragon Cooperative exist and do so quite well, operating on notions of fair employee representation, open market competition and effective business management.

Expecting an economic system to constantly break down and fail to function – if not only is absurd on the surface – is also dangerous, for every time we do suffer economy setbacks / crashes, one outgrowth of such failures is ultimately social unrest – and wars.

Some folk just need to ask themselves: how much is enough?

As for the rest of us, there has got to be a better way.

Read more about the Mondragon Cooperative here: http://www.guardian.co.uk/commentisfree/2012/jun/24/alternative-capitalism-mondragon

Read more about supper clubs: http://en.wikipedia.org/wiki/Supper_clubs

Check out more about electrical cooperatives: http://en.wikipedia.org/wiki/Utility_cooperative

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