A Brief Manifesto for Economic Reform

With another announcement of a major manufacturing plant moving south – on the premise that highly skilled fabricators should work for $15 (US) an hour – perhaps it’s time that Canada re-examines its industrial strategy. Instead of a corporate tax-cut agenda that worsens competitiveness and employment, or a free-trade mentality that exposes our major industries to pillaging, let us consider a very different approach, one that improves equality, stabilizes ownership, and spreads the entrepreneurial spirit amongst a broader range of Canadians.

The strategy I believe we need to pursue is something called “market socialism” or “co-operative capitalism”. In the version I favour, the economy remains enmeshed in a capitalist system where firms compete with each other based on the standard axes of supply and demand. Both the responsibility for losses and the distribution of profit (savings, investment, research, dividends, etc.) reside solely with each firm. The key difference from our current system is that these firms would be cooperatively owned and controlled by its members; managers – if necessary – would be employees of the workers. I do not favour a conception in which the state owns the firm; my key objective is not just market efficiency but the connection of worker to ownership, and the expansion of flexibility, stability and responsibility that results from this connection. State ownership does not accomplish these goals, but worker ownership does.

So, what exactly are some of the unique benefits of this approach to co-operative capitalism?

  • Cooperative ownership would help address the worsening moral and economic crisis of inequality. It would redistribute wealth – not just income – because a much greater proportion of citizens would be direct owners of capital and assets, and it would  reduce the negative effects associated with forced income redistribution.
  • Cooperatives are usually able to tolerate lower profit margins. Unlike enterprises built on the assumptions of shareholder capitalism (e.g. that ever greater profit margins are the sole reason for operating), cooperative enterprises are usually built on the assumption that sustained shared ownership is its raison d’être. As such, lower profit margins are not a reason to panic; there will be no sudden urge to close the shop and move the business to China or Bangladesh. Its existence is the most important thing, not increasing profit margins. Profit is necessary to provide other ends, but is not the chief end-in-itself. And given a future where outsourcing will surely guarantee lower profits for all internationally competitive businesses, I think we need to promote those types of firms that are comfortable with lower margins.
  • Worker-owned businesses are not likely to move out of the country. Workers, unlike investment capital, are tied emotionally and culturally to their country and community. It’s difficult for them to move to another province, let alone another country. As such, they will provide the long-term stability that foreign-owned corporate subsidiaries cannot. And investing in them is less of a risk when you know they are motivated to stay.
  • In times of economic turmoil, cooperatively owned enterprises will be able to compromise more easily. Given the motivations above, and direct access to the enterprise’s key financial information, we’re likely to see workers agree to reduced pay, shared work and other sacrifices for the sake of the collective good. We don’t see this in traditional North American businesses because management-union relationships are usually too hostile, and management rarely shares its information with workers or unions. As such, workers in current businesses are not normally willing to make sacrifices when management asks the workers to “trust them”. Actual ownership is the best way to build trust.
  • If the entrepreneurial spirit is a virtue, then why not maximize it? I do believe that taking risks and shouldering economic responsibility is a powerful path to maturity. But in a system like we have now, so many of our workers do not taste this tempering agent of entrepreneurial responsibility. So I say, let entrepreneurialism flourish! Let us renew our commitment to the entrepreneurial spirit, but demand a much broader definition of the concept. Admittedly, cooperative ventures might not capture the imagination like the old captains of industry once did, but rugged individualism is surely not the only path to economic maturity. And working together in a common venture can also expand the scope of democracy, which in turn increases the engagement and loyalty of a nation’s citizens.

Some other things will need to change if our economy and culture is going to fulfill this vision of the future .

Unions may need to play more of a “midwifery” role, helping to organize its workers to take on a greater share of power and control. [I do not favour anarcho-syndicalism, as this usually implies large organizations of unions, which – to me at least – means just another form of the hegemonic, hierarchical corporation.] As a result, traditional unions may eventually be obsolete, and this will be a major challenge for any progressive political party willing to make market socialism part of its platform.

Governments will also play an important role. As a gradualist, I cannot see this evolution of the work place occurring without serious government involvement, particularly if tax breaks and other government incentives are to play a role in the gradual pre-eminence of worker-controlled capitalism. Workers themselves may need protection from other workers, or from businesses that only pretend to be worker-owned (WestJet comes to mind) and the government’s essential role as legal referee will probably need refinement as the legal needs and issues of cooperatives multiply. And, of course, the state will still need to play a role in providing social services and providing checks on enterprises (cooperative or not) that transgress the rights and entitlements of all citizens.

To bring this to a conclusion, I hope this brief sketch makes sense. I’ve certainly missed a lot of pieces, but perhaps I can add them in later posts. At the very least, I want people to know that progressives are not simply about defending social programs. [Does that make the NDP conservative? Hmm…] There are some interesting and constructive policies that can make a difference, and provide a substantive counterpoint to the self-serving policies of pro-corporate political parties.

…………

Books on this topic:

Robert Dahl: A Preface to Economic Democracy

John Stuart Mill: Principles of Political Economy, 3rd Ed. (1852)

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1 Comment to "A Brief Manifesto for Economic Reform"

  1. Paul Steer's Gravatar Paul Steer
    February 16, 2014 - 7:16 pm | Permalink

    What’s required is a means of preventing the exploitation of labour by capital which is clearly apparent these days in the steady diminishing returns to those who trade their labour for cash. This cooperative approach will go a long way toward addressing the problem, mainly by distributing ownership completely throughout the entire enterprise.

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