An Economy that Works for All

The election is over and we’re in desperate need of new ideas to revive the nation’s businesses in the wake of the pandemic.  But great ideas have a way of coming to the fore in desperate times.  Democracy Collaborative’s Marjorie Kelly has a plan to jumpstart the economy and save the American dream—employees as stakeholders and values as the new bottom line.

Listen to our podcast about five ways we can reinvent the corporation, spread the wealth and recognize employee contributions.  Full transcript below.

Welcome to Reinventing Home, a podcast about Culture, Creativity and Character.  Today we’re going to be looking at our larger sense of home as we experience it at work.    

I’m your host Valerie Andrews and my guest is Marjorie Kelly, one of the leading economic thinkers in Washington.  Marjorie is the author, with Ted Howard of The Making of a Democratic Economy: Building Prosperity for the Many, Not Just the Few.  

A senior fellow and executive vice president of The Democracy Collaborative, Marjorie is a leading voice in “next generation enterprise design.”  That means reinventing the corporation so it doesn’t measure success solely by its profit margin, but by the wellbeing of its employees and the health of the environment. 

The fate of our planet depends on moving away from the old Robber Barron, winner takes all model of capitalism to a more enlightened one, where the bottom line consists not just of profits sent to absentee shareholders, but of the people who actually do the work.  

Marjorie has been tracking some very promising developments And she has a five-point plan to help jump-start the economy. Marjorie, thanks for joining us today.

Marjorie Kelly and Ted Howard of The Democracy Collaborative

I’m glad to be here, Valerie.

We’re in a crisis right now. We’re facing huge economic losses as a result of the pandemic. Just how bad is the situation?

The best number I’ve seen, Valerie, is that half of small businesses say they’re afraid they’re going to go under, and that’s huge. I mean you’re talking about local economies losing half their businesses. So, it’s pretty dire.

Right now you can be sure that private equity is out there buying up companies for pennies on the dollar. And they have an estimated two point five trillion dollars in what’s called dry powder–cash laying around they’re going to go out and buy the best of what’s left.   So you’re right. We’re going to be left with a few big companies and the loss of most small business is huge.  

What do we know about the top 10 US corporations’ net worth compared to this smaller sector of the economy?

That’s a great question. When you just look at the top 10 US corporations, we’re talking Apple, ExxonMobil, Walmart, and so on, they have revenues of about 2.2 trillion right now. You compare that to the US government which has total revenue of about
3.1 trillion. These are big numbers and they’re hard to make sense of, but think about it this way. If you look at the ten corporations that are the biggest they are two-thirds as large as the world’s most powerful government. So we already have this massive corporate control and it’s poised to get much worse.

What is this mean for the state of our nation if this wealth gap continues?

I’ve talked about how corporations, particularly publicly traded corporations in the stock market, are designed to maximize profits to shareholders, which is predominantly the wealthy—84% of stock market wealth is held by the richest ten percent, and most of that is held by the one percent–and they do that by minimizing expenses. And, of course, labor is an expense. And so what you have is built into these companies is to pay working people as little as possible and to pay wealthy people as much as possible.

So is this going to translate into social unrest, into thousands more unemployed and how does this ricochet?

You know, there are miles-long lines at food banks and we’re going to see the loss of homes. We’re seeing people being pushed out of rental properties. Landlords have had some down payment on rent, but that’s going to stop. We’re heading for a depression.

You say that we’ve been trying for four decades to fix the problem with regulations, to try and rein in some corporate self-interest behavior. But that never really gets to the heart of the matter.

Well, I like to start with this analogy Valerie. Let’s imagine that we’re in a town that’s crisscrossed by a giant train and the owners are paying drivers to drive as fast as possible.  So the town puts up speed limits put some flashing lights brings out police keep pedestrians off the tracks, but invariably these trains are going to crash; they’re going to cause injury and death. So how does the town respond? It repairs the crossings and puts up more fences.

That’s what we’re doing with corporations. I mean, we’re not looking at the fact that CEOs are paid to drive these corporations as fast as possible. They’re paid to bring in profits for shareholders. And if they don’t do that, then they get fired.

This is the point that I’ve been making and three books I’ve written over the last twenty years. It’s that we need to change the nature of the corporation itself. And we need to change the nature of investing so we get companies that are designed to serve the public good.

One company that I love is Recology. This is in California. It’s one point two billion dollars, so it’s a substantial company. It is a waste hauling recycling and composting company that serves three states. It’s one hundred percent owned by its workers. It’s a place where a garbage truck driver gets paid $100,000 a year because if you’re not siphoning off all these profits for absentee shareholders, you have more to give workers.  

So they’re benefiting the environment. They’re controlled by and benefiting the workers, competing in today’s marketplace and doing very well.

I love to look at B Corps or benefit corporations which means companies that exist to create public benefit in addition to being a real business and having profits. One example is Eileen Fisher. It’s a women’s clothing company it’s employee-owned. It’s a big Corporation and it is aiming to change supply chains across the entire industry. So it’s saying,  “Let’s buy green fabric. Let’s have more ecologically responsible practices.”

I would love to hear the top values that you think we should have in addition to the bottom-line.

This is what we talk about in our book The Making of a Democratic Economy. We talk about values that are really at the core of every social architecture. Sustainability is a key one now that just people are getting we have to have a sustainable planet. Inclusion is another one. There’s this outcry that people of color have been excluded from the economy and need to be deliberately included.  Community is a core value. I mean, we’re not just isolated individuals trying to each become a billionaire. We exist only in community and we thrive only when our communities are healthy. These are the values that people instinctively care about today.

We are talking about the nature of any human enterprise.

I think that’s exactly right, Valerie. I mean we have there’s a widespread sense that things are not right in our economy. I would argue is that the reason that equality is in trouble is that we’ve never democratized our economy.

The economic system has become overblown and is seeking to overpower the government in order to protect its own wealth creation capacity. So we need to do the opposite. We need to bring democracy into the economy.

In your book, The Divine Right of Capital, you explored our reverence for the almighty dollar and the almost god-like projections we have onto money. Can you tell us how the notion of profit got to be the measure of our worth?

I went back and I read a great deal about the monarchy. The King was called your Royal Highness because he was considered at the very top of this great vertical chain of being, he was closest to God, and so I think all of the ideas about cast and racism colonialism the view of indigenous peoples as savages and lesser humans—it’s all part of this world view. We got rid of the monarchy, but we still have this basically plutocratic view of our economy, where we think it makes total sense to Jeff Bezos has more wealth than anyone could possibly envision.

You’re essentially saying that we have an economic monarchy.

We do, we do.  A few people that like the Dukes and The Barons, they have all this power and control all the assets. That’s the order that we have now. It’s very much an economic monarchy.

I’m thinking about Adam Smith who in the 18th century spoke about the invisible hand guiding the economy. Do you think we’re trying to redefine that invisible hand as a social conscience?

This is really fascinating. In probably the last five to ten years there has been a revolution in thinking about evolution. We have been taught, and this is certainly true at a certain wage scale, that competition among individuals leads to survival of the fittest.  And what evolutionary theory is now realizing is that when you look between groups, cooperation leads to more success.

Now this hasn’t found its way totally out into the public awareness, but it’s pretty well accepted by a lot of evolutionary scientists that at a higher level of scale, cooperation is superior to competition.

I’m thinking about the work that you and Democracy Collaborative have been doing lately to try and help us make these shifts away from what we have rightly called social Darwinism.  You have come up with a five-point plan to jumpstart the economy after the pandemic and I would really appreciate hearing the broad outline.

The Democracy Collaborative—we’re a non-profit. We work nationally and we call ourselves an R&D lab for a democratic economy because we’re making this broad point that it’s not enough to regulate companies or regulate investment. We need an economy designed to benefit all of us.

First of all, you need to preserve local economies. We’ve suggested, for example, the creation of local economy preservation funds where communities can come together and in businesses and help keep them alive, favoring ownership by employees or ownership by people of color.

So, how would you set up those funds?

We’ve heard from dozens of cities who are interested in this and we’re working with three cities now setting them up. You could do it a couple of ways—at the city, county or state level or you could even do a consortium of cities coming together.

We’re going to be proposing federal legislation to support these kinds of funds empowering local communities to get back to work, rather than waiting for private equity and corporations to go in there, using the power of capital as a lever.

New York City is in a very interesting position right now because of all the shuttering of the restaurants and small businesses. and there was an article in The Times last week that said, Isn’t it great Silicon Valley is moving in. Does that mean that it’s going to be harder for the local businesses to regrow?

This idea of giving incentives to travel to attract absentee corporations—that’s exactly the opposite of what you want to be doing, That’s a lose-lose form of Economic Development.  But what I would also say is this: New York City is looking at potentially doing a preservation fund that would be focusing on people of color and employee ownership, and the assistant mayor Phil Thompson is a leader in this.

New York City, photo by Florian Wehhe on Unsplash

That’s good to hear. I know number two on your list is to extend public ownership. So please tell us about that.

Our five-point plan: First you have to preserve our local economies and then extend public ownership. Here’s an example, and that is the public option for pharmaceuticals. Why don’t we have the vaccines that we need? Well, there isn’t enough money in it. It’s you know better to make a drug that somebody has to take every month forever. You’re going to make more profit on that than you are giving somebody a vaccine and then they’re immune forever. So the incentives are not properly aligned. But if you had a pharmaceutical that was owned by the public, owned by the government, then you could put the public purpose at the heart of it. And we have created a report proposing this. There’s a lot of uptick in interest and so this is moving ahead pretty well. So

You mentioned PG&E with the fire problem in California, and I really zeroed in on that because I know Governor Newsom has been talking about taking over that function so it’s no longer in private hands.

 This was an amazing story. PG&E sparks the Camp Fire and burns down the city because there was this one wire that was running through a wooded area. It was a hundred years old and they hadn’t checked it in ten years, right?  Now why would a company with $17 billion dollars in revenue not get its act together to go out and check a line that hasn’t checked in ten years? Well, what it was doing was buying back its own stock. It spent literally billions of dollars buying back its own stock. And that’s just a mechanism to drive up your share price.

And then on the other hand you had SMUD, the Sacramento Municipal Utility District.   Its purpose is to serve the people, to give them reliable power at low cost. And it’s widely accepted that it does provide better power at lower costs and they have no fires. And they did not have blackouts like PGE did.

So are we finally waking up to the fact that the public sector is terribly important?

I think so, Reagan said, What are the most terrifying words? “I’m from the government and I’m here to help.”  And so there has been this concerted campaign to discredit government, to discredit public ownership.

We need government to organize the production of masks and get the ventilators in the right place, You can’t do away with government and give everything to the private sector and I think that is that has been a myth that has been told for a very long time and it’s so obvious today that it’s not true.

Let’s go into number three: build community wealth.

How do we actually build back better?  I mean we need to build back so that wealth stays home local and recirculates locally and it’s held broadly in many hands This is a form of economic development our organization, the Democracy Collaborative, has pioneered and we call it community wealth building.  An example of that is the Evergreen cooperatives in Cleveland—three employee-owned companies that have large contracts with anchor institutions, like non-profit hospital systems and the university. It’s about keeping wealth circulating locally and hiring from inner cities.  At the Evergreen Cooperative laundry, a great number of people employed there were formerly incarcerated. So that’s an example of community wealth-building.

We worked also in Preston, England, which is another Rust Belt city that was pretty beaten down, and they were named the most improved city in the UK. They moved the needle on unemployment. They did this with anchor institutions and by declaring themselves a Living Wage City.

We’re taking back our economy from the 1% and we’re doing it by action at the community level through Economic Development.

When I was living in Massachusetts there was something called the Common Capital fund based in Holyoke. They would reinvest in community housing especially in areas that that were underserved. They would reinvest in local businesses and in local agriculture.   

Common Capital wasn’t just a banker who came and looked at your bottom line. They would actually walk you through your next phase of development and be there with you every step of the way.

I love that story Valerie. That’s exactly right. We need financial institutions that are designed to serve the community and not designed to extract as much as well as possible for absentee owners. Another great example is Bank of North Dakota. This is a bank that’s owned by the state and it’s been around four hundred years and it acts like a mini Federal Reserve inside the state,

In the 2008 downturn this locally rooted network of financing,  they kept lending in a crisis when the big banks, like Bank of America, and so forth, all pulled back. So you’re absolutely right you need we need finance in the public interest.

Let’s go into number four: a green stimulus package. Tell me what interesting things you’re doing with energy.

So we know that in addition to Covid, the other big crisis we face is climate change. We’ ve got to move to a green economy. And we need to focus on the physical technologies that are needed like renewable power and so forth. But who’s going to own the next economy? Is it just going to be corporations owning it again or can we use this transition to a green economy as a way to also transition to a more democratic economy?

And this is what we argue for with the green stimulus, paying attention to who receives these contracts.   Can you be contracting with employee-owned companies and can you have Community ownership of power rather than having corporate ownership? In fact, our organization is in dialogue with the green New Deal’s various groups and bringing these this democratic ownership into the framework, so I’m happy to say  there’s some great progress being made there.

That’s number five—to establish a next-generation Institute to support a democratic economy at this point when we’re having to revise everything from the ground up.

Kelly:  Well exactly, We want to create an Institute that would systematically train people in this kind of information. The models are proven. The approaches are known.

President Obama spoke about the need to look at how fast the American public can adjust to Innovation. You’re saying that Americans can adjust pretty fast as long as they have a stake in something, right?

Yeah. I think that’s right. I have a very good friend who is a Trump supporter and when she read my latest book, The Making of Democratic Economy. One of her friends said to her, “Well, employee ownership—that’s socialism.”  And she said,  “No it’s not. This is about ordinary people having a stake in their own in their own businesses and having some self-control over their own destiny.” 

I loved that because we do find that employee ownership is one of those ideas that crosses the aisle. It’s the only policy idea I know of that has been promoted by both Ronald Reagan and Bernie Sanders.

Ronald Reagan at his ranch, the National Archives and Records Administration 198600. Public Domain, Bernie Sanders by Gage Skidmore CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=87733803

We’ve had this debate about socialism. But what I’m hearing from you is that we can reframe this and talk about a model that is actually based on a long tradition of close cooperation and sharing of resources, which is very American.

Yes, I think that’s right. We have this idea somehow that there’s just two economies. There’s either capitalism or socialism, right? But why are there just two? To me, that’s crazy. Those are both ideas that go back to the 18th and 19th century. We’re in the twenty-first century. What we need is a democratic economy. We need an economy that is for all of us.

Human beings tend to get creative at the darker turning points in history. And I’m thinking of all the hardship again that we endured during the Depression and how that resulted in a host of social legislation from the WPA and people going back to work on the infrastructure and the roads and the bridges to the creation of social security.

I think in a way people are coming together in community and working together, I think that’s absolutely true. I think it’s also unavoidable Valerie that there are going to be struggles. I mean, I don’t think any elite is going to let go of power without a struggle and the part of the way that that struggle manifests itself is with misrepresentation and clinging to Old myths that are no longer true. 

One of the most powerful tools we possess is is legitimacy. I mean, we hold the tools of legitimacy, “We the People.”   If we see that racism is no longer a legitimate, that’s going to have a huge impact.  That is going to spiral through so many projects and initiatives. The same is true with our economy. We need to recognize that the way the economy now is designed is not legitimate. 

Once we see that and we recognize that and we learn how to language that I think that’s going to create huge momentum for change.

 

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