I've always loved this idea but the fact that the bill has lay dormant since 2012 tells you the political will makes this a fantasy. I wonder if we couldn't shift the mission of unions. Instead of being soley a negotiating body for wages with basically strikes as their only weapon, perhaps unions could help employees buy out employers or fund new worker owned business like the employee bank would. Unions could directly negotiate with the government for additional funds, giving employees a stronger advantage to buy out failing businesses. Just a thought. Do you know if this has been tried, Joe?
That's a great idea! I don't know of any attempts like this off the top of my head, but I'm sure I can find some. You just gave me an idea for a future article. Thanks Tina!
Thanks for this very informative article. I strongly intuit that the public benefit model of incorporation is another possible path toward an economy that puts people and the planet before profit. What do you think?
It is a newly emerging model of incorporation that creates a path for entrepreneurship that puts public benefit on, at least, equal footing with profit in terms of duty to shareholders etc. I think most, if not all, states have enabling legislation often based on a model provided by these folks. https://www.bcorporation.net/en-us/movement/. I
Oh nice! I have heard of B Corps, but this is the first time I've seen the full process laid out. It's an interesting concept - a strong modification to capitalism that seeks to reduce its most harmful elements. Hopefully it gains traction!
The general principle of abolishing capitalism by making everyone a capitalism is not easily comprehensible for people like me. In addition, there are some particular details that niggle.
1.Can employees sell their stock? But if they can't, are they truly owners? What happens to the effective managerial power of the workers when this inevitably happens?
2.Can employees use their stock as collateral to buy other ESOPs or real estate? Or do they loan their profits to capitalists offering a higher interest rate?
3.When an ESOP goes bankrupt, what happens to the employees? How does a failing ESOP deal with losses save by layoffs or substituting part-time employees to lower labor unit costs? This does not seem to help labor solidarity.
4.How are capital gains taxed? If capital gains are not to be taxed, how is this helpful to society as a whole?
5.Don't ESOPs in some areas benefit from the increase in real estate value and network effects by higher growth in the area, while ESOPs in poor areas suffer losses and lower income, an inequality that will not be touched by
Thanks for the questions, I'll answer them best I can in kind.
1. While my preference would be no, that's more of a decision for the workers in individual cooperatives to decide. Of course, workers can sell collectively, as they have done in the past.
2. I believe that's contingent on the answer outlined in #1.
3. Just like any business, if it fails, the business closes. Tough questions like layoffs/downsizing will be determined by leadership, which is elected from the workforce.
4. I think all regular taxation laws apply so that wealth can be evened throughout society.
I don't think so. Credit Unions are member-owned banks that operate for profit. They may offer ESOPs, but it will come with the high interest rates and fees of other private banks.
There is nothing wrong with worker owner co-operatives, provided they don't require taxpayer funding, rely upon government force and coercion or abandon the competition inherent to the market. The largest co-operative company in the world is Mondragon, the Basque co-operative in Northern Spain. According to 2019 data it had 81.5K employees. However, it's a mistake to label it socialism- community capitalism would be a better descriptor. The CEO and finance types get paid about five times as much as the average worker, but they get paid in psychic profits- they are heroes to a small nation-sized community.
One of your other commenters mentioned socialism and the environment/climate. Actually, Socialism is worse for both. The incentives are different. It's far easier from the point of view of moralistic public stances to regulate the excesses of a greedy capitalist. When the state claims to act on behalf of the people, and there is choice between living standards and environmental/climate concerns, then in a socialist system the people win and one gets environmental disasters like the Aral Sea.
And no, the Nordic Model countries are not socialist. They run free market systems which are friendly to capital, and which simply have higher taxes on the middle class and the poor (VAT) as a means of providing more extensive social safety nets. In many ways, their markets are freer than America's, because their political class is less prone to picking large corporations to be the beneficiaries of crony capitalism.
I disagree. I think cooperatives should be funded with public money (through the Bank this article discusses) as it is a net-positive to society for them to exist. IMO, that's a valiant use of taxpayer funds.
I plan to write about the Nordic Countries one day, so I'll save my disagreements for that.
If you were going to fund cooperatives through public funds, you would either want workers to set-up competitors to existing businesses, or fund worker buy-ins when a company has made bad decisions and would normally require a corporate bailout- most bailouts only rescue the shareholder- letting workers buy-in at these moments actually makes a lot of sense, as you're actually buying in at a moment when the value of the company is horribly depressed. Both of these approaches make sense because there is every chance the workers would be able to repay a low interest credit facility.
But buying Amazon, for example, wouldn't make a lot of sense. Marx was dead wrong about 'living labour'. Social progress aside, most material progress in the past two centuries has been achieved by the elimination of 'living labour'. The economies of the West were once 50% agricultural and agricultural labour now accounts for only 1% or 2% of the total workforce, whilst also being seven times as productive as in 1920. The upshot? Food is cheap, to the extent that obesity rather than the malnutrition (which was once a semi-permanent feature of human life), is the major problem besetting the West.
Don't get me wrong. I've been at the coalface. I worked manufacturing and one of the reasons why I left was because I understood that my work was likely to be used to facilitate the redundancy of fifty year old plus men, thrown on the scrapheap prematurely (and who don't well in terms of labour reallocation). So I know capitalism can be brutal- but attempts to champion or promote labour in the present will invariably lead to our descendants being confronted with the remaining hardships of the modern age instead of living fundamentally better lives. A better approach to capitalism and the market would see workers more fairly compensated for productivity and also see a return to a LIFO system, but would do little to nothing to prevent the ruthless elimination of labour through innovation. A more humane system of transition in which workers could keep insurance and pension accruals would also be advisable.
If you're covering the Nordic Countries I would make sure you cover the Nordic 30% tax rebate on debt interest paid on loans. It's just as much a benefit for students as it is for mortgage holders. Despite my name, I'm Anglo-American by parentage and have lived in the UK for most of my life. My brother is now living in Sweden with his Swedish wife. They are beneficiaries of the tax rebate.
The reason why I mention the tax rebate is because it shows that homeowning Swedes don't actually pay the high rates of tax most focus on. Apart from Rawlsian redistribution towards the lower income band, it is one of the primary reasons why most Nordic states have such low Gini coefficients (income inequality) but also have quite high wealth inequality.
But it's a genius move at a pragmatic level. The tax rebate incentives both higher education and home ownership. The home ownership incentive actually allows the Nordics to achieve levels of home ownership very similar to the UK and the US. What's smart about it that it also saves taxpayer funds for reallocation to other areas. Although most advanced economies are always going to need public housing, it's an atrociously high expenditure to maintain, because people don't treat property they don't own with respect. It only takes around a 30% of private home ownership in a community to drastically change the dynamics through social enforcement and significantly cut public maintenance requirements.
The tax rebate serves another purpose. It's highly doubtful that the Swedes would be able to run the hospitality sector at its current level, or enjoy their coffee culture, if it wasn't for their tax rebate. The home improvements sector is also vital- middle income homeowners with their rebate explain the successes of companies like IKEA and an entire flourishing sector.
But the real reason why you should cover it is because the American alternative is diabolical. Treating houses like a wasting product (depreciating asset) is one of the reasons why the likes of Blackrock have entered the homeownership market with a view to establishing a Gilded Age 2.0, through rentier economics. In the American system, corporations benefit. In the Swedish system people are encouraged to invest in themselves and a better life for themselves. America could enact huge social changes for the better through a few simple changes to the way tax is paid and rebated, as opposed to allowing corporations to treat houses like a depreciating asset. Both systems accomplish the same end, but the Swedish system is incredibly socially beneficial whilst the American system is highly socially destructive.
This McKinsey source lays out exactly what they had planned for American housing. Obviously, they don't mention housing explicitly, but it explains exactly why so many aspiring homeowners are finding it difficult to find a house they can actually buy.
I've tried writing essays on this subject, but because it happens to be a subject I care about, they usually just end up as rambling discursives. I wish you better luck , because this one simple shift in public policy (along with the building of a fleet of starter homes for America) could massively shift the American way of life back towards something better.
I've always loved this idea but the fact that the bill has lay dormant since 2012 tells you the political will makes this a fantasy. I wonder if we couldn't shift the mission of unions. Instead of being soley a negotiating body for wages with basically strikes as their only weapon, perhaps unions could help employees buy out employers or fund new worker owned business like the employee bank would. Unions could directly negotiate with the government for additional funds, giving employees a stronger advantage to buy out failing businesses. Just a thought. Do you know if this has been tried, Joe?
That's a great idea! I don't know of any attempts like this off the top of my head, but I'm sure I can find some. You just gave me an idea for a future article. Thanks Tina!
I’ve never heard of this. Cool idea
Glad you appreciated it!
I love this. All, the more why we need another term of Bernie as Senator. Thanks Joe!
I'm glad you appreciate it! You're in luck, as he just announced he's running again.
Now I need to quickly become a Vermont resident.
Thanks for this very informative article. I strongly intuit that the public benefit model of incorporation is another possible path toward an economy that puts people and the planet before profit. What do you think?
Your welcome! I'm unfamiliar with "public benefit model of incorporation." What is it?
It is a newly emerging model of incorporation that creates a path for entrepreneurship that puts public benefit on, at least, equal footing with profit in terms of duty to shareholders etc. I think most, if not all, states have enabling legislation often based on a model provided by these folks. https://www.bcorporation.net/en-us/movement/. I
Oh nice! I have heard of B Corps, but this is the first time I've seen the full process laid out. It's an interesting concept - a strong modification to capitalism that seeks to reduce its most harmful elements. Hopefully it gains traction!
The general principle of abolishing capitalism by making everyone a capitalism is not easily comprehensible for people like me. In addition, there are some particular details that niggle.
1.Can employees sell their stock? But if they can't, are they truly owners? What happens to the effective managerial power of the workers when this inevitably happens?
2.Can employees use their stock as collateral to buy other ESOPs or real estate? Or do they loan their profits to capitalists offering a higher interest rate?
3.When an ESOP goes bankrupt, what happens to the employees? How does a failing ESOP deal with losses save by layoffs or substituting part-time employees to lower labor unit costs? This does not seem to help labor solidarity.
4.How are capital gains taxed? If capital gains are not to be taxed, how is this helpful to society as a whole?
5.Don't ESOPs in some areas benefit from the increase in real estate value and network effects by higher growth in the area, while ESOPs in poor areas suffer losses and lower income, an inequality that will not be touched by
Thanks for the questions, I'll answer them best I can in kind.
1. While my preference would be no, that's more of a decision for the workers in individual cooperatives to decide. Of course, workers can sell collectively, as they have done in the past.
2. I believe that's contingent on the answer outlined in #1.
3. Just like any business, if it fails, the business closes. Tough questions like layoffs/downsizing will be determined by leadership, which is elected from the workforce.
4. I think all regular taxation laws apply so that wealth can be evened throughout society.
5. Yes.
Isn’t this the same concept as Credit Unions?
I don't think so. Credit Unions are member-owned banks that operate for profit. They may offer ESOPs, but it will come with the high interest rates and fees of other private banks.
There is nothing wrong with worker owner co-operatives, provided they don't require taxpayer funding, rely upon government force and coercion or abandon the competition inherent to the market. The largest co-operative company in the world is Mondragon, the Basque co-operative in Northern Spain. According to 2019 data it had 81.5K employees. However, it's a mistake to label it socialism- community capitalism would be a better descriptor. The CEO and finance types get paid about five times as much as the average worker, but they get paid in psychic profits- they are heroes to a small nation-sized community.
One of your other commenters mentioned socialism and the environment/climate. Actually, Socialism is worse for both. The incentives are different. It's far easier from the point of view of moralistic public stances to regulate the excesses of a greedy capitalist. When the state claims to act on behalf of the people, and there is choice between living standards and environmental/climate concerns, then in a socialist system the people win and one gets environmental disasters like the Aral Sea.
And no, the Nordic Model countries are not socialist. They run free market systems which are friendly to capital, and which simply have higher taxes on the middle class and the poor (VAT) as a means of providing more extensive social safety nets. In many ways, their markets are freer than America's, because their political class is less prone to picking large corporations to be the beneficiaries of crony capitalism.
I disagree. I think cooperatives should be funded with public money (through the Bank this article discusses) as it is a net-positive to society for them to exist. IMO, that's a valiant use of taxpayer funds.
I plan to write about the Nordic Countries one day, so I'll save my disagreements for that.
If you were going to fund cooperatives through public funds, you would either want workers to set-up competitors to existing businesses, or fund worker buy-ins when a company has made bad decisions and would normally require a corporate bailout- most bailouts only rescue the shareholder- letting workers buy-in at these moments actually makes a lot of sense, as you're actually buying in at a moment when the value of the company is horribly depressed. Both of these approaches make sense because there is every chance the workers would be able to repay a low interest credit facility.
But buying Amazon, for example, wouldn't make a lot of sense. Marx was dead wrong about 'living labour'. Social progress aside, most material progress in the past two centuries has been achieved by the elimination of 'living labour'. The economies of the West were once 50% agricultural and agricultural labour now accounts for only 1% or 2% of the total workforce, whilst also being seven times as productive as in 1920. The upshot? Food is cheap, to the extent that obesity rather than the malnutrition (which was once a semi-permanent feature of human life), is the major problem besetting the West.
Don't get me wrong. I've been at the coalface. I worked manufacturing and one of the reasons why I left was because I understood that my work was likely to be used to facilitate the redundancy of fifty year old plus men, thrown on the scrapheap prematurely (and who don't well in terms of labour reallocation). So I know capitalism can be brutal- but attempts to champion or promote labour in the present will invariably lead to our descendants being confronted with the remaining hardships of the modern age instead of living fundamentally better lives. A better approach to capitalism and the market would see workers more fairly compensated for productivity and also see a return to a LIFO system, but would do little to nothing to prevent the ruthless elimination of labour through innovation. A more humane system of transition in which workers could keep insurance and pension accruals would also be advisable.
If you're covering the Nordic Countries I would make sure you cover the Nordic 30% tax rebate on debt interest paid on loans. It's just as much a benefit for students as it is for mortgage holders. Despite my name, I'm Anglo-American by parentage and have lived in the UK for most of my life. My brother is now living in Sweden with his Swedish wife. They are beneficiaries of the tax rebate.
The reason why I mention the tax rebate is because it shows that homeowning Swedes don't actually pay the high rates of tax most focus on. Apart from Rawlsian redistribution towards the lower income band, it is one of the primary reasons why most Nordic states have such low Gini coefficients (income inequality) but also have quite high wealth inequality.
But it's a genius move at a pragmatic level. The tax rebate incentives both higher education and home ownership. The home ownership incentive actually allows the Nordics to achieve levels of home ownership very similar to the UK and the US. What's smart about it that it also saves taxpayer funds for reallocation to other areas. Although most advanced economies are always going to need public housing, it's an atrociously high expenditure to maintain, because people don't treat property they don't own with respect. It only takes around a 30% of private home ownership in a community to drastically change the dynamics through social enforcement and significantly cut public maintenance requirements.
The tax rebate serves another purpose. It's highly doubtful that the Swedes would be able to run the hospitality sector at its current level, or enjoy their coffee culture, if it wasn't for their tax rebate. The home improvements sector is also vital- middle income homeowners with their rebate explain the successes of companies like IKEA and an entire flourishing sector.
But the real reason why you should cover it is because the American alternative is diabolical. Treating houses like a wasting product (depreciating asset) is one of the reasons why the likes of Blackrock have entered the homeownership market with a view to establishing a Gilded Age 2.0, through rentier economics. In the American system, corporations benefit. In the Swedish system people are encouraged to invest in themselves and a better life for themselves. America could enact huge social changes for the better through a few simple changes to the way tax is paid and rebated, as opposed to allowing corporations to treat houses like a depreciating asset. Both systems accomplish the same end, but the Swedish system is incredibly socially beneficial whilst the American system is highly socially destructive.
This McKinsey source lays out exactly what they had planned for American housing. Obviously, they don't mention housing explicitly, but it explains exactly why so many aspiring homeowners are finding it difficult to find a house they can actually buy.
I've tried writing essays on this subject, but because it happens to be a subject I care about, they usually just end up as rambling discursives. I wish you better luck , because this one simple shift in public policy (along with the building of a fleet of starter homes for America) could massively shift the American way of life back towards something better.
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/pricing-the-next-frontier-of-value-creation-in-private-equity