The High Road to Sustainable Development
Markets as a Tool for Change
By Matt Hancock
Markets are a dirty word for many on the Left. Markets are equated with capitalism, “free market” or neo-liberal ideology, and exploitation. Yes, markets can be mechanisms of exploitation, and are currently shaped by the values of a capitalist economy, but they do not equal exploitation and capitalism. In fact, markets have been around for 10,000 years—long before capitalism. Markets were a part of the feudal system, just as they are a part of capitalist and socialist systems. Under any system, they can be a tool for democracy and development; or exploitation and de-development. It depends on who is calling the shots.
In his February 2003 article in In These Times, “Playing the Market,” G. William Domhoff called on the Left to build a cross-class “egalitarian movement” that makes “planning through the market” its central strategy. The Left should abandon ideas of central planning, embrace the market as a tool for change, and use the power of the state to build a more equitable economy.
But in the age of globalized capital, a successful movement must also address the fundamental issue of who's producing wealth. To build a really sustainable economy, labor and communities need to actually contend in the market, to start taking responsibility for producing wealth. A successful egalitarian movement must also use the power of the state to make labor and community the driving force in wealth production.
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Social and labor movements in the United States have almost always focused their demands on issues of wealth distribution, while ceding to the private sector the undisputed right to make decisions about management, about wealth production. Whether the struggle was militant or conservative in nature, the demands always focused on distribution of wealth: a pay raise, better health benefits, fewer working hours, better pension plans etc.
This was the basis of the social contract: labor would negotiate a greater share of the wealth it produced, while agreeing to stay out of management. To a great extent, this worked. With an expanding economy the wealth was there and the corporate leaders were willing to share it, within limits. There was a good deal of truth to the expression, “what's good for General Motors is good for the country.”
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The advent of the microchip and the end of the Bretton Woods agreement unleashed capital from its national chains. Some managers learned quickly that they could make substantial returns in speculation and other short-term investment strategies. This gave way to the Low Road business strategy: rather than making a product, managers began gambling with a company's assets or moving production abroad. Management let profitable factories slowly die, while pushing labor as far as they could for give-backs, and then opened up shop in foreign countries to exploit cheap labor.
These strategies were not required by the market in order for the companies to survive. Managers could have continued to aim for long-term profits by boosting productivity and increasing standard of living. Instead they chose to maximize short-term shareholder returns by deliberately destroying productive capacity. They became the equivalent of slum lords in the housing market—making a big return with strategies that destroy the assets over time.
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These dramatic changes in the global economy, and the ruling class' abandonment of its role as “steward of the economy,” require a major shift in strategy for the Left. First, those pursuing a Low Road, speculative strategy must be blocked and prevented from continuing their destructive practices. Second, labor and communities must take full responsibility for driving the creation of wealth. We must pursue a High Road strategy that creates businesses that make a return in ways that build the company and increase society’s productive capacity, promote a healthy environment, fair treatment of workers, and build strong communities. Labor and community, through their own initiatives including alliances with High Road business leaders, need to seek greater control of the firm and the economy at both the micro and macro level.
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The success of this strategy depends on creating a cross-class, mass movement that can muster the political will to build a High Road economy. Labor and community need a political movement that can help them block the Low Road, encourage High Road development and leverage the creation of worker and community-owned business.
To this end, planning through the market is essential. Taxes, incentives, regulation and government procurement are the tools with which to effectively and justly organize the economy. The state should favor High Road businesses that pursue a policy of financial transparency, allow employees to organize unions, seek to make a profit by building productive capacity and contribute to making communities healthy and sustainable.
An effective movement must also use its muscle to give labor and communities the tools it needs to successfully contend in the market.
To start with we need to strengthen the existing tools that labor and communities have, like the Employee Stock Ownership Plan (ESOP) legislation. The ESOP legislation provides tax incentives to companies that give employees a percentage of stock in the company. Unfortunately, the legislation is filled with holes and does not require the company to actually give its employees any say in managing the company. The ESOP legislation should be changed to make it a genuine tool for increased worker-participation and ownership.
Currently, Low Road companies receive billions of dollars each year from local, state and federal governments through tax breaks and incentives, including funds to help American companies move production out of the country. An egalitarian movement should end these Low Road practices and use economic development subsidies to invest in High Road and worker-owned enterprises. Imagine if the billions spent each year on corporate welfare were used to help labor and community organizations buy out companies from Low Road management and start their own enterprises from scratch, revitalizing inner-city economies and breathing new life into our communities.
We can also learn much from the international experience. For example, in a number of countries, like Canada, labor-based mutual-benefit-funds have been set up to provide venture capital for cooperative startups and employee buyouts. These private investment funds can be started with seed money from the local, state or national government, union pension funds and private investors. Individuals can be encouraged to contribute to these funds through tax rebates or incentives.
Italy and Spain also provide some great examples. In Northern Italy, regional governments, under the leadership of the Italian Communist Party for 30 years, provided direct assistance to the infrastructure that supported local manufacturing companies and clusters. As a result, the Emilia Romagna region, for example, went from one of the poorest regions in Europe after World War II to one of the wealthiest.
In Spain a small manufacturing coop was created in the 1950s by 5 workers and a local priest. There was a ceiling and floor to wages and decisions were made on the basis of one worker, one vote. They expanded and today over 65,000 people work in the Mondragon Cooperative Corporation complex and represent the leading edge of the Spanish industrial and retail economy. Eroski—a coopertive retail store—defeated Walmart from entering the Spanish economy.
Eminent domain is another powerful tool that government can use to build the High Road economy. Why shouldn't a city use the power of eminent domain to prevent Low Road managers from destroying a community's productive capacity? Imagine if, during the 1980s, the government had used eminent domain to keep profitable factories open by buying them, at fair market value, from their Low Road owners or shareholders and then turning them into community or worker-owned businesses. What better use of eminent domain than to save the life of a community?
Finally, a successful egalitarian movement must be able to train future High Road business leaders. Too often public universities are training the next generation of Low Road managers. Management schools that receive public money must train people to build and run businesses that strengthen society's productive capacity, increase the standard of living and build strong communities. There should be no place for the Low Road at a public university or management schools that receive public money. We need a student movement that isn’t anti-corporate but is focused on forcing business schools funded by public monies to become centers for High Road business practices and intellectual work, not troughs for the Low Roaders to continue to feed at the public expense.
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To be sure, this is a bold strategy. But if we're serious about building a better society, we need to be bold. We need to re-evaluate everything, get rid of outdated strategies, and keep what works. One of the most significant first-steps we can take is to rethink our ideas about the market. We need to lose our knee-jerk rejection of the market and build a courageous, new strategy that sees the market as the terrain on which, in addition to the state, we contend for our vision of a better society.
The Center for Labor and Community Research has been a champion for these kinds of approaches and has a longer strategy paper—Building the Bridge to the High Road—on its web site: www.clcr.org
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