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Ownership, full employment and community economic stability

The great British economist the late Joan Robinson once observed that the only thing worse than being exploited by capitalism is not being exploited by capitalism. This truth is felt acutely by anyone who is unemployed and looking for work. As the pain of the economic crisis continues and millions struggle to find employment there is an obvious imperative to create jobs—any jobs. But we shouldn’t stop there. In Back to Full Employment, Robert Pollin makes the essential point that “a workable definition of full employment should refer to an abundance of decent jobs.” Poor jobs that keep workers minimally employed but leave them in precarious circumstances and unable to participate fully in civic and political life are better than no jobs at all. But in terms of public policy we can and should aim higher—especially as decent jobs not only benefit the workers that hold them but also the communities in which they live. Absent a stable economic base, community itself is compromised.

Three elements of the instability challenge lend critical perspective to the issue. The first can be seen in the long-term results of the decline of manufacturing industry in the rust belt. We have in fact been quite literally “throwing away” entire cities—cities like Cleveland, Detroit and St. Louis. Since 1950, Cleveland and St. Louis have each lost half a million people, drops of more than 50 and 60 percent respectively; in Detroit, the fall in numbers has topped a million, more than 60 percent. The uncontrolled corporate decision-making that results in the elimination of jobs in one community—leaving behind empty houses, half-empty schools, roads, hospitals, public buildings, and so forth—implicitly requires that they be rebuilt in a different location. Quite apart from the human costs involved, the process is extremely costly in terms of capital and also of carbon content—and at a time when EPA studies show that greenhouse gas emissions caused by human activity in the United States are still moving in the wrong direction (having jumped by over 3 percent between 2009 and 2010 alone).

A second aspect relates to democracy. Substantial local economic stability is clearly necessary if democratic decision-making is a priority. A local population tossed hither and yon by uncontrolled economic forces is unable to exercise any serious interest in the long-term health of the community. To the extent local budgets are put under severe stress by instability, local community decision-making (as political scientist Paul E. Peterson has shown) is so financially constrained as to make a mockery of democratic process. This becomes still more problematic if we recognize—as theorists from Alexis de Tocqueville and John Stuart Mill to Benjamin Barber, Jane Mansbridge, and Stephen Elkin have argued—that an authentic experience of local democratic practice is also absolutely essential for there to be genuine national democratic practice.

Thirdly, and straightforwardly, it will be impossible to do serious local “sustainability planning”—mass transit, high-density housing, and so forth—that reduces a community’s carbon footprint if such planning is disrupted and destabilized by economic turmoil.

So yes, we need jobs. And yes, we need good jobs. But we also need an approach to good jobs that will allow us to grapple with the challenges indicated above while at the same time begin tackling the grotesque maldistribution of wealth in this country—a distribution that has reached literally medieval proportions. The top 400 individuals now control as much wealth as the bottom 180 million Americans taken together.

How to go about all this? As we—hopefully—begin to adopt smarter public policies aimed at reaching full employment, we should maximize the impact of these policies by choosing strategies likely to economically stabilize our cities and regions. A decent job should be understood as one which not only pays well, but which is anchored in a community, and which in turn anchors a worker and participant in the civic life of that community. If the culprit behind economic destabilization, and its catastrophic effects in terms of employment, is capital mobility, the solution will require increasing the proportion of capital held by actors with a long-term commitment to a given locality or region.

The problem, however, is that major footloose corporations are not only able but willing to jump from one city to another as they chase “incentives”—and mayors and governors waste taxpayer dollars in endless bidding wars. This raises the question of alternative ownership forms (something Pollin also began to take up in a 2012 article in the Cambridge Journal of Regions, Economy and Society). By rooting ownership broadly in the community, jobs stay put. And jobs that stay put create more jobs, through the multiplier effect of money circulating within a community as well as by expanding the tax base of cash-strapped local governments.

Worker and community ownership—whether through employee stock ownership plans or more egalitarian or community strategies—are forms of ownership relevant to thinking about jobs, job creation, and local economic stability. Crucially, community or cooperative ownership of jobs appears all but certain to yield more stable long-term employment than traditional corporate strategies, and is thus more valuable as part of a package of policies aimed at full employment. Companies owned by people who live in the community rarely if ever get up and move.

Traditional employers also have an incentive to keep labor costs low and will use workers only for as long as they are needed on a particular job. A number of community enterprises now aim to maximize employment over the long term. Instead of treating employees as disposable, such employers seek ways to find new work for their workforce or share existing work. (The BBC recently provided a striking example of this in their coverage of the resilience of the Basque country’s Mondragón cooperatives. In the regions where Mondragón has a significant presence, the unemployment rate is around half that of the rest of Spain.)

Worker ownership works in the US, as well. It’s not often realized that there are over 10 million Americans who work at jobs they also own—more than are members of unions in the private sector. In Cleveland an innovative complex of worker owned cooperatives, linked through a revolving fund and a non-profit corporation—and in part supported by procurement from non-profit hospitals and universities—has become a model for several other community efforts. A large part of this recent boom in worker ownership is due to federal policy; specifically, legislation that created substantial tax advantages for business owners who sell their ownership stake to their workers.

Another example of how smart policy has been used to cost-effectively support a worker-ownership job retention strategy can be found in the Ohio Employee Ownership Center (OEOC). The OEOC has used a relatively modest amount of state and federal funding (less than $1 million annually) to facilitate worker takeovers of firms whose owners are retiring or that are threatened with closure. Such firms, owned by workers, are city (and tax base) stabilizers: they do not get up and move. The OEOC has created enormous economic returns—retaining jobs at a cost of less than $800 per job and helping stabilize thousands of jobs in Ohio cities. This is in sharp contrast to traditional economic subsidies aimed at job retention, which cost far more, deliver less, and often lead to a destructive—and destabilizing—subsidy arms-race between different cities and states.

How might we begin, on a national level, to build a strategy to mobilize worker and community ownership as a means of reaching full employment? One policy intervention that could go a long way intersects with another of Robert Pollin’s concerns in Back to Full Employment. He notes that while successive rounds of economic stimulus have kept interest rates low, they have not always succeeded in making credit available to small businesses. Small worker owned businesses could benefit from policies that specifically expanded their access to credit. (In addition to the general reticence around lending Pollin highlights, these kinds of projects, especially cooperatives, have to deal with lending institutions that are often unfamiliar with or even hostile to democratized enterprises.)

Legislation has also been proposed that would start to modestly address this problem: Chaka Fattah’s National Cooperative Act or Bernie Sanders’ United States Employee Ownership Bank Act. But there are also existing programs that could be expanded: the Small Business Administration, for example, is running a very interesting initiative, the Intermediary Lending Pilot Program, which leverages existing local and regional community-oriented nonprofits to decentralize the loan-making process. One of the intermediaries here is the Cooperative Fund of New England, which is using the funds made available to the program to fund cooperatives; we can imagine, with adequate support, similar local cooperative funding initiatives across the country.

In short, if we’re serious about full employment, and about creating and preserving decent jobs, we shouldn’t limit ourselves to traditional conceptions of the kinds of companies that create jobs. Indeed, by leveraging worker and community ownership strategically, we’re not just embracing a potentially transformative strategy to democratize wealth in the long term, we’re picking potentially one of the most effective strategies available to support a long-term process of job creation that could lead us back both to full employment and community stability. At the same time, we can also help develop concrete ways to begin the long, hard task of democratizing the ownership of wealth in the United States.

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