The fragility of our economic foundations has become a universal concern. Not only are these still nerve rattling after-shocks from the last crisis in 2008, but every day’s news warns us that there is the risk of a serious economic implosion around the corner. The truth is that our global economic system cannot long endure debts of $200 trillion — or three times the gross global product when the interest rates and inflation are both close to zero and QE (Quantitative Easing/printing money) is pumping billions into economies whose currencies continue to be devalued. As Stephen King, the HSBC economist, dramatically cautioned: “The world economy is a Titanic without lifeboats.”
I consistently argued in my book, Dollars or Democracy1, that we have to face up to the fact that after two centuries of undisputed advance, corporate capitalism has had its innings. Yes, it had great achievements: Corporate capitalism took most of humanity out of an agricultural existence into an industrial one and then into our own technological era. However, at no stage was corporate capitalism concerned with human well being. It was focused on the interest money could earn and the profits that could be made through goods and services. It never had an answer to nagging unemployment nor the entry of robots. Indeed, it was never responsible for the stewardship of our planet nor the equitable distribution of clean air, water and food. All those problems were left to the political sphere.
In many ways corporate capitalism sowed the seeds of its own predicament. It fostered ever-faster growth and changes which have had revolutionary consequences manifest in the populist upheaval in politics which we are currently experiencing. In a system which promoted naked self-interest, one of the major human problems which arose was that many world’s peoples adopted much of the ethos of corporate capitalism as an integral part of their perspective. Helped by the technological wonders of the Internet, we developed ever-mounting expectations. The popular focus turned to celebrity, wealth and the self. The highest “value” was no longer human nor divine but monetary. In this process humanity also became hooked on speed: fast travel, fast transactions, fast cars, ever-faster communications as well as mobility (which included upward mobility.)
The electorates, whose hopes had been advanced by the promotions of an elite, began to feel deeply alienated from an economic system that produces unacceptable inequalities. They started to recognize that terms like “growth” and “free trade” might just be the deceitful expressions of wishful thinking on the part of the politicians and the media. However, the populace have yet to recognize that in the 21st century the dollar has become the golden calf that much of humanity worships. Amen!
How much longer can the voters accept such an unbalanced economic system where less than one hundredth of one percent owns more than half of the entire global population, where robotics are putting ever increasing millions out of work, and where global giants are free to produce such high levels of pollution on this planet that the survival of most living species is now threatened?
Yes. The time has come to restructure an economy which feeds on the mathematically unsustainable, namely, Growth. Without it, corporate capitalism would have a short life span. And even the statistic dependent “economists,” whom few members of humanity now trust, admit that the levels of growth of the past 50 years cannot continue.
At the basis of an economic reconstruction stands the globalized corporations whose principal concern is profit for their shareholders and ever-higher pay for their executives. Corruption is rife in the biggest firms as evidenced by VW’s diesel emission scandal and the collapse of Enron. Moreover, corporations have had minimal tax demands put on them by nation states and have almost no legal responsibilities to the populations. When not in collusion with other corporations, competition for their product forces them towards innovation and changes which customers may initially welcome but whose overall long-term impact is unknown and may be damaging.2 The impact of corporate capitalism on the workings of the mind and on the environment we live in has been corrosive.
The reckless “short-termism” of corporate managements has corroded those very same virtues that capitalism originally was based upon: trust, honesty, craftsmanship, family values and cooperation.
Considering what an emotional creature Homo sapiens is, perhaps my desire for a degree of order in the world with a system which is rational may be unrealistic. All too often the “values” that society has established are not determined by the hard, cold facts and as a consequence our economic constructs are irrational, transient and often chaotic, Symbolically, words like “policy”, “program”, “plans” when uttered by politicians arouse immediate public cynicism.
I am fully aware that corporations are and will continue to be firmly opposed to any change in their select and privileged status. The environmental pollution they produce may be challenged and corrected by political forces, but their social responsibility will remain close to nil. Corporations have accumulated power by such tactics as emasculating the labor unions, and avoiding retribution for non-payment of national taxes by establishing opaque offshore tribunals. So what is to be done? My own response is that the coordinated decisions of governments must legally and gradually make it necessary for corporations to be transformed into cooperatives. The power must shift from the shareholders and investors to those who are the actual workers and their self-selected leaders. Yes, this could lower both effectiveness and competition. Yes, it would slow down the globalization of the economy. Yes, it would also diminish social change and innovation. And it would absolutely diminish the ever increasing inequalities: Please note that in the co-operative world the ratio of top pay to the lowest is around 12 to 1.
How could such revolutionary transition be achieved? I believe the first step could be to start repealing the 150 years of anti-cooperative legislation now on the books. The second would be to give powerful tax incentives to corporations to shift their legal structures away from the shareholders and in favor of the society at large. The third could be to pass restrictive legislation to end all the favoritism which has been shown to corporations in large measure through their lobbying. The final step would be to place vastly increased taxes on those remaining corporations which refused to comply. In all probability it would take more than a decade to effect such a major shift – especially on organizations now perceived as “too big to fail,” where breaking these up into much smaller units would be challenging.
These basic changes can only come about when faced with such a serious economic meltdown as we are likely to experience in the highly unstable future ahead of us. I do not see this as an apocalyptic economic prediction. However, the corporations at the center of the capitalist system will also become the focus of popular discontent. Even now less than a quarter of the American electorate has confidence in corporate business — or in Wall Street, for that matter. Large corporations are resented for the way they have behaved towards the blue-collar workers. As Robert Reich has pointed out: “The corporate and financial elite has been able to influence the rules by which the economy run.3 Which means that the unacceptable compensation packages of the top executives of big companies are now 300 times greater than that of their average employees.
Corporate executives have been shifting risks on to their workers for the past 30 years. They have reduced payrolls, used part-time and contract workers, steadily introduced automation and outsourced from abroad. This has prevented wages of their work force from rising hand in hand with productivity gains which have gone towards higher corporate profits. Since the recession eight years ago, corporate profits have markedly increased as a sector of the US economy while the wages of their work force have declined. My contention is that corporations are no longer fit for purpose.
What all nations must do is to build a more cooperative superstructure which is not prone to the periodic economic swings of capitalism. Cooperatives would take fewer risks and would be far more conscious of the need for consumer protection. Their normal function would entail a general reduction in competition. (Which is anathema to capitalists.) But a more cooperatively run economy would result in a less anxious, less ostentatious but far more equal and stable society for all.
I have pointed out in past essays that cooperatives, such as Mondragon in Spain or John Lewis in the UK, are far more concerned with long-term planning than today’s corporations. They tend to create and keep more artisanal jobs. They are governed with greater openness and less secrecy. Foremost among all of these is that the workers enjoy greater individual empowerment and security. I believe this is a formula for future generations who are far more conscious of the need to end the frightening pollution which corporations have produced over the past two centuries. The time is ripe for drastic change. In the long term, Homo sapiens can do a lot better than being manipulated by the global corporate powers promoting ever greater inequalities.
1Yorick Blumenfeld, Dollars or Democracy, (2006). This book promoted an alternative called ”The Incentive Economy.”
2There is a feeling amongst the older generations that they have less and less free time, that the demands of the Internet and their mobiles actually increases their anxieties and isolation. There is also mounting concern about its effects on the younger generations.
3Robert Reich, Comment, The Observer, November 8, 2015, p.34