There are a number of reasons to doubt the maxim that capitalism as currently practiced, particularly in its finance capital formulation, fulfils its self-proclaimed mission of guiding investment and resources to the most socially useful or socially desirable ends.
There are anecdotes like these, describing Wall Street's efforts to pour its resources into entrenched, legal unaccountability:
Foreign corporations could sue to undermine US protections for consumers’ health, safety and financial security under a provision added to the proposed Trans-Pacific Partnership trade deal (TPP) after executives of big banks pressed the nation’s chief trade negotiator, himself a former big-bank executive, to include it.
A series of emails, obtained under the Freedom of Information Act and released last week by Rootstrikers, an organization that opposes the trade deal now pending before Congress, confirm the push by financial service companies for the “Investor-State Dispute Settlement” provision. ISDS, as it is referred to by the cognoscenti writing the emails, would, in the words of one critic, Public Citizen’s Lori Wallach, “elevate individual investors to the status of a nation-state” in trade disputes.
The emails also are bound to reinforce the suspicion that US trade policy is being set by what might be called an “executariat” of corporate and government leaders who periodically swap positions for their mutual benefit. “They’re written as if they are being sent between colleagues,” says Dennis Kelleher of the watchdog group Better Markets. “That’s because the writers all have been, currently are or will be colleagues at major Wall Street firms.”
That's why, under the current paradigm, we can't have nice things.
Rather than beating that dead horse, I wanted to raise the matter of how to finance alternatives to those kinds of practices. This is a convergence of several alternative approaches to economic practice, two of which continue to fall into my lap: public banks and worker-owned cooperatives.
Michelle Chen's excellent March 28 article "Worker Cooperatives are More Productive than Normal Companies," is a good reminder of what should headline every conversation about worker ownership: It works better. I have yet to see contrary data. Chen lists both the results and the reasoning behind them.
. . . research on French cooperatives showing that “in several industries conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organizing.”
By prioritizing worker autonomy, co-ops provide more sustainable long-term employment, but not only because worker-owners seek to protect their own livelihoods. If a company runs into economic distress, Perotin says, co-ops are generally more adept at preserving jobs while planning longer-term adjustments to the firm’s operations, such as slowing down expansion to maintain current assets—whereas traditional corporations may pay less attention to strategic planning and simply shed jobs to tighten budgets.
. . . Of 162 non-agricultural cooperatives in one study, 44% of the respondents said they could not have opened their business had it not been organized as a cooperative . . .
. . . Cooperative businesses have lower failure rates than traditional corporations/small businesses: after the first year (10% failure versus 60-80%) and after 5 years in business (90% still operating versus 3-5% of traditional businesses) (World Council of Credit Unions study in Williams 2007). Evidence also shows that cooperatives both successfully address the effects of crises and survive crises better . . .
and of special interest to fans of public banking:
Since most cooperatives are owned and controlled by local residents, it is more likely to promote community growth than an investor-oriented firm. Since cooperative business objectives are needs oriented, cooperatives are more likely to stay in the community (Zeuli, Freshwater et al 2003).
Cooperative businesses stabilize communities because they are community-based business anchors; and distribute, recycle, and multiply local expertise and capital within a community. They enable their owners to generate income, and jobs; accumulate assets; provide affordable, quality goods and services; develop human & social capital (Gordon Nembhard 2002, 2004b, 2008a; Fairbairn et al 1991; Logue and Yates 2005).
There are several loan funds for worker-owned cooperatives now. But obviously, since extremely wealthy people don't stand to become extremely wealthier under an expanded system of worker ownership, funding is hard to come by.
In some previous posts I have mentioned the legislation Bernie Sanders sponsored prior to his presidential candidacy. These proposals could be issued again, and if a few more economic progressives get themselves elected to congress in 2016, they might have a fighting chance. In 2014, after meeting in Burlington with representatives from worker-owned cooperatives, Sanders proposed two funding mechanisms for worker-owned businesses. Under one bill:
. . . the U.S. Department of Labor would provide funding to states to establish and expand employee ownership centers. These centers would provide training and technical support for programs promoting employee ownership and participation throughout the country. This legislation is modeled on the success of the Vermont Employee Ownership Center which has done an excellent job in educating workers, retiring business owners, and others about the benefits of worker ownership.
Under the second bill, the federal government would create:
a U.S. Employee Ownership Bank to provide loans to help workers purchase businesses through an employee stock ownership plan or a worker-owned cooperative.
There's a little history to these models of financing, and the results have been mixed, mainly because of the force and lure of shareholder-profit based economic decisionmaking. One of the institutions that emerged from Israel's strong Kibbutz movement is Bank Hapoalim (literally "Worker's Bank") which is actually Israel's largest bank. Established by the "General Federation of Laborers in the Land of Israel" (Histadrut) in 1921, it was nationalized in 1983, then sold to a group of investors in 1996--an unfortunate act of privatization. The original mission of the bank was to "assist, adopt, further and grant financial or any other assistance to all branches of activity of the institutions, federations or groups organized by the workers for the purpose of improving the conditions of their members in accordance with cooperative principles.” The bank set out to provide capital to the Histadrut’s agricultural, industrial, and marketing cooperatives. Some writers note that Hapoalim was not always managed in a way that was supportive to cooperativism, though, and so its eventual privatization was something like dropping the other shoe.
The National Cooperative Bank in the U.S. was created by congress in 1978. The NCB has been criticized even by one of its former board members, the well-known public-interest-capitalism advocate Peter Barnes, for catering to high-end cooperatives (housing coops in New York) and, in general abandoning its mission to help build a genuinely cooperative economy. In fairness, NCB partnered with Mondragon, the world's largest worker-owned cooperative, in 2014 to build "cooperative stakeholder businesses in local living economies" in 2014, and still receives some good reviews of its ability to fund cooperative endeavors, so it's not as if they've gone the way of Hapoalim. Both examples suggest, though, that capitalization itself is the fly in the ointment of financial support for cooperatives. Both emerge from the need to sell to or placate shareholders or otherwise "compete with" private banks (Barnes says the NCB was seduced by the desire to gain lucrative market shares of the banking industry).
Public banks based on the BND model need no shareholders, are in no danger of later being sold to investors provided they fulfill their mandates, and would have no incentive to let market share dictate their investment decisions. So as apologists for private finance continue to dance around all kinds of questions, from the way money is created in the first place to the problem of negative externalities that they can't solve, it's useful to examine the kind of cooperative economic endeavors fundable by public banks--which could, themselves, be run cooperatively, under the supervision of elected officials and democratic accountability.
All of which is simply to say that if you're a proponent of one, you may want to be a proponent of the other, as so many people in the new economy movement are. Obvi, as the kids say these days.