At the end of our last episode, we learned that the principle that government has a central role to play in the economy implies a fourth principle -- that democracy must be widespread within the continental system in order to prevent government from rapidly accumulating power to the point that it destroys everything in its path. After all, what I called the “neoimperial” philosophy, the joining of “neoliberal” ideas about the perfection of the market, with “neocon” ideas, advocating that one must use the military to intimidate or take over as much of the world as possible, is the philosophy of unrestrained power. Corporations unrestrained, working hand-in-hand with militarism unrestrained, is actually the definition of a much older word: fascism.  Real democracy is the opposite of fascism.

Global Warning

The two weeks between August 28, the anniversary of the flooding of New Orleans, and September 11, are a time for reflecting on two possible futures, one catastrophic, the other hopeful.  

On the one hand, Katrina and its aftermath were a prelude to the inevitable effects of global warming: according to Gore’s book and movie, An Inconvenient Truth,  Shanghai and Calcutta, lower Manhattan and Florida, will eventually go the way of the lower Ninth Ward of New Orleans. On September 11, 2001, Osama bin Laden and George W. Bush began a dance of death, each unleashing destructive forces that the other can use to further the cause of yet more destruction.  The catastrophes of August 28 and September 11 were made possible by oil, one by heating up the atmosphere, the other by giving the combatants the economic and military resources to spin their opportunistic web.

On the other hand, it should be clear that an alternative vision of the future needs to be articulated, because otherwise we are doomed to a future of war and ecological catastrophe. Such was the fate of the Easter Islanders, a lesson told most recently by Jared Diamond in his book Collapse.  The rich and powerful on that remote island seem to have destroyed their fragile environment in selfish efforts to outshine each other by putting up progressively larger and more environmentally expensive statues; as the ecosystems collapsed, war convulsed the island.  As Diamond laconically writes about this and other examples of collapse, being powerful only conferred the opportunity to be the last to starve to death.

Democracy, New and Improved

Had this article been a TV show, as the title suggests, the advertisers would be now pulling the plug, because a brooding public does not shop (or so they suspect, even if, as usual, they don’t really know what motivates people).  But wait! There is hope!  For as the faithful reader may be aware, the first two installments of this series[1]  argued for three principles of a global makeover:

1)    Economies are continental, not global

2)    Manufacturing and machinery are at the center of a continental economy

3)    Governments must be stewards of the manufacturing economy.

At the end of our last episode, we learned that the principle that government has a central role to play in the economy implies a fourth principle -- that democracy must be widespread within the continental system in order to prevent government from rapidly accumulating power to the point that it destroys everything in its path. After all, what I called the “neoimperial” philosophy, the joining of “neoliberal” ideas about the perfection of the market, with “neocon” ideas, advocating that one must use the military to intimidate or take over as much of the world as possible, is the philosophy of unrestrained power.  Corporations unrestrained, working hand-in-hand with militarism unrestrained, is actually the definition of a much older word: fascism.

Real democracy is the opposite of fascism.  Fascism is a political structure of both politics and economics; power is concentrated in the corporate sphere as well as in the political domain.  Therefore, in order to flourish, democracy must inhere in both the economy and polity.  When political democracy coexists with economic tyranny, all of the energy of a vigilant public must be applied in order to prevent the government from slipping into the dictatorial tendencies from which democracies emerged.  One can point to the efforts of the Populists and Progressives a century ago, the union movements of fifty years ago, and the effects of a feeble Left in the U.S. today.

What is economic democracy? The most basic answer is: workplace democracy, that is, firms that are owned and operated by their employees as a whole. Workplace democracy for the firm achieves what political democracy accomplishes for a nation; the individuals making up the governing elite can be replaced by other individuals chosen by the population. This has a beneficial effect on the machinery of government, the bureaucracy, who are given rules and commands by the elite.

In a kingdom, the king literally reproduces himself.  In both a corporation and a Communist country, a group of people, either the board of directors or the Politburo, respectively, select as their replacements only those who are directly concerned about the interests of the elite.  The difference can be represented schematically in the following way:

If GM and General Electric were owned and operated by their employees, why wouldn’t they push the U.S. government to pursue the same corporate-driven policies, such as lobbying for NAFTA, the WTO, less taxes for the rich, and support for a huge military-industrial complex.  The current corporate elite are driven by a high level of class consciousness and belief in class warfare, and the constituents of democratically elected officials would not be tolerate such selfish behavior.

The coarse nature of the current elite can be summarized in an anecdote provided by Jeff Faux in his book Global Class War .  Faux was giving a group of steel executives a rundown of the destructive consequences of the Reagan administration for their industry.  When an executive protested that they knew all this, an exasperated Faux asked them, why did they support Reagan?. “You have to understand”, Faux quotes the executive, “He cut our taxes.  And we’re a country club crowd.”[2]

Remaking Mondragon 

The most sophisticated example of workplace democracy is in the Mondragon part of the Basque region of Spain,[3] and one cannot imagine the heads of the various firms of the Mondragon system of cooperatives behaving like the “country club crowd”.  At the center of the Mondragon system is a bank, which allows the over 100 employee-owned and controlled firms to operate without being pressured by the mainstream financial establishment. In addition, the bank provides technical and managerial assistance to the various member firms. There is no public stock for Mondragon firms. When an employee, who is really a co-owner, leaves, his or her share of the firm stays with the firm. An economy made up exclusively of Mondragon-style cooperatives would have no stock market, that is, no trading of equities for a firm.

Workplace democracy is a democratic solution at the firm, or micro level, but what about the economy-wide, or macro level?  The Mondragon example again shows a way to proceed.  For each major metropolitan subregion of a continental economic system, a public industrial development bank could be established, which would be controlled by a combination of elected officials from the region and by member firms, with some representation from the employees of the bank.  For instance, in the U.S. the Federal Government provides statistics for consolidated metropolitan statistical areas, or CMSAs, such as the greater New York City area (encompassing much of northern New Jersey and southern New York).  One could envision neighborhood or town development banks within each CMSA, culminating in a CMSA-wide bank, with members appointed by mayors and Congresspeople, and some members elected by the population as a whole.  

Another alternative would be to have each Congressional district be the domain of a bank, with the bank board headed by the Congressperson of the district. The advantage of this scheme would be to achieve for an industrial bank system what the military-industrial complex achieves for the military -- a political machine with built-in support from local interests. Each bank, in either scheme, would be staffed with people who could help entrepreneurs to create new businesses, to expand existing ones, and to help firms work together to achieve economies of scale.  

A bank whose regional task would be to coordinate firms across industries would be particularly effective for rebuilding and even transforming the physical infrastructure.  In the United States, the physical infrastructure is deteriorating, as Katrina made clear. In order to avoid global warming and other environmental catastrophes, as well as to head off the chaos of the end of the era of cheap oil, it is imperative to transform the energy and transportation infrastructures, world-wide.  This would be made easier if there was a network of industrial and infrastructure banks helping to coordinate and finance the effort.

Brought to you by 99% of the population

For various reasons, corporate and political global elites do not care about the long-term well-being of the global economy and environment.  People in employee-owned firms who would vote for boards of directors of their local firms would be much more attuned to the long-term environmental and economic problems of their regions than would global elites. Global elites can always move their assets from one devastated area to another, and stay rich and powerful.  Local people cannot.  Unless they are starving, locals tend not to pursue actions that turn their local environments into deserts. They also don’t want their firms to close and be moved abroad.  

It is useful to model global elite behavior as similar to the behavior of heroin addicts.  No one would trust a heroin addict to pass up a large sum of money that they could convert into heroin in the short term so that they might have more money in the long-term.  So it is, that with rare exceptions, global elites cannot pass up a greater share of power and money – for instance, lower taxes – even if it means possible Katrinas in the future. Similarly, one would not expect them to stay clear of the corruption of the occupation of Iraq, even if it means possible September 11’s in the future. The 99% plus of the population who are not members of the global elite are not tempted to destroy their own region in pursuit of power, simply because most people cannot thereby obtain greater power. Instead, most people must remain concerned with the problems of time and space, the long-term health of their economy and environment in the space in which they live. For global elites, space and time virtually does not exist, only power does. While co-owners of a democratic firm may be tempted to lobby for destructive policies, they also must consider their own region.  In fact, an economy that was made up of employee cooperatives could probably get away with less government regulation because the firms could be depended on to act more according to the long-term interests of the whole society.[4]

The tale of the U.S. points to one more necessary element of economic democracy – public ownership of resources.  All across the globe, governments have nationalized oil, for instance.  Companies that act like money junkies cannot be expected to mine, drill, fish, log, or farm the planet in a sustainable manner.  The resources of the Earth must be treated as long-term assets, and short-term market thinking has to be limited as much as possible in this case, by the state if necessary.  At least if a democratically elected government controls natural resources, there is a chance that a concerned public can draw on those resources in a sustainable manner

America’s democracy deficit

Workplace democracy, regional development banks, and economy-wide governmental stewardship and ownership of resources would go a long way toward the goal of economic democracy.  Political democracy, unfortunately, is not altogether healthy in the United States, where the power of corporate money is tearing away at the foundations of democracy.  In Japan the fact that electoral districts have not been changed since the end of World War II helps explains its semi-authoritarian politics, rooted in a minimization of urban power.  Because of the Electoral College in presidential elections and the existence of the Senate, urban power in the U.S. is also shortchanged.  The European Union has a “democratic deficit” because of the convoluted way its elites are appointed.

One way of making over the political structure of most continents would be the following: Each continental region would have two legislative chambers of the same size that would jointly elect a head of state. 

• One chamber would be territorial, based on population, such as the U.S. House of Representatives. 
• The other would be chosen according to proportions received by political parties, as many European parliaments are chosen today. 

In such a way, each small region would elect a government official who would represent and fight for local interests, and at the same time, the proportional legislative chamber would enable the views of many political parties and viewpoints to be heard.  

The King and U.S.

The United States has shown that a large, powerful nation with an independent king-like President is a recipe for disaster.  Hopefully, the republic will survive, even though the son of one President is now the occupant of the White House and acts like his namesake, the king of England, when last a king had American colonies.  

George W. Bush joins Richard Nixon and Ronald Reagan as recent grave threats to the United States (and the world).  Perhaps the founders of this country, who were much more attuned to world history than the current power holders, would appreciate that the President is beginning to resemble the proconsuls and dictators of ancient Rome, who were also elected for fixed terms, leading to the fall of the Roman Republic.  The huge military and intelligence apparatus that has been built up since World War II provides too tempting a target to the power junkies of the American elite.

U.N.-likely?

Let’s imagine that the world is composed of continentally-based political and economic systems, that firms are democratic, political systems are modernized and manufacturing is considered a priority of government.  We still have the problem of improving the lives of most of the world’s population so that they are not close to starvation, but at the same time avoiding a world that would be too hot for the dinosaurs.  Long-term global problems require the action of a global, democratically elected entity.  So let us imagine a United Nations whose Security Council is permanently made up of elected representatives from each of the nine continental systems that I proposed in the first episode of “Extreme Makeover, Global Edition”.  The General Assembly could have two chambers, one regionally based, the other proportional, both of which would elect a Secretary General.  Such a body could have the following powers and responsibilities:

1)    Stewardship and co-control of world parks, which would include huge areas such as the Amazon rain forest, large parts of Africa, Borneo, and most of the area of the world’s oceans

2)    Environmental regulatory power such as the right to ban or significantly reduce certain chemicals, control over fishing, and the ability to ban or limit agricultural or other activity that threatened the sustainability of soils, forests, or water

3)    Establishment of inter-continental transportation networks of rail, and regulation of airline activity, including subsidization of tourism, in order to encourage multicultural understanding as well as nondestructive ecotourism

4)    A transformed IMF and World Bank that would help continents to become sustainable manufacturing and technology centers, with the World Trade Organization merged with the International Labor Organization, based on labor and environmental standards, not free trade

5)    A military force that could prevent genocide and civil war,[5] which would have to operate in conjunction with the institutions set up for 4), in order to eliminate the long-term causes of such conflicts.

I said this was an alternative vision, not a short-term policy agenda. 

You can contact Jon Rynn directly on his jonrynn.blogspot.com . You can also find old blog entries and longer articles at economicreconstruction.com. Please feel free to reach him at This email address is being protected from spam bots, you need Javascript enabled to view it .

Notes

[1]   Extreme Makeover, Global Edition, Episode One,  and Extreme Makeover, Global Edition, Production Episode Two .

[2]  Jeff Faux, The Global Class War,  2006, p. 75. 

[3] The classic treatment is William Foote Whyte and Kathleen King Whyte, Making Mondragon: The growth and dynamics of the worker cooperative complex,  Cornell Institute of Industrial and Labor Relations Press, 2nd edition, 1991. 

[4]   I would like to thank Brian D’Agostino for making this point. 

[5] This has actually been proposed, see the following link .