The American jobs machine is broken. To fix this, we need to bring more cooperation to capitalism and make it a team sport.
In our previous two blogs we looked at the condition of labor and workers in the United States and recommended worker cooperatives as a means to address that condition. In our final blog in this series, we explore why this is an essential action at this point in time and what cooperatives of all types can bring to the table.
America has always prided itself on rugged individualism and the benefits of the free market system -- as well it should for the contributions that many individual entrepreneurs and capitalism have made to advance the American dream over the past half century or so. Times have changed.
Now, we live in an era when self-centered individuals and extreme capitalism are extracting rather than adding value for society. As a result, the American dream is at risk for the vast majority of workers.
Stagnant wages, high unemployment and increasing income inequality have been the standard bill of fare for workers since the end of the Great Recession and the beginning of the ever-so sluggish recovery.
The most recent job numbers released by the Bureau of Labor Statistics (BLS) were disappointing. Only 169,000 jobs were created in August - barely enough to exceed the number of new participants entering the workforce. More significantly, the job growth numbers for July were revised downward from 162,000 to a miserly 104,000 and June was revised down as well for a total reduction of 74,000 fewer jobs for those two months. This was on top of the subtraction of 26,000 jobs in the BLS' previous jobs report.
Adding insult to this injury, was a new report from economists Thomas Piketty and Emmanuel Saez which showed that in 2012, the top 10 percent of Americans earned more than half of the nation's income. More revealing, income for the bottom 99 percent went up by just one percent over the prior year. That compares to a 20 percent increase for the top 1 percent of earners and a stunning 32 percent plus increase for the top 0.01 percent.
There has been a flurry of incisive postings and articles reporting on and responding to these and other desultory economic results. One of the best that we have seen was a Huffington Post story by Mark Gongloff, Jan Diehm and Katy Hall titled "The Totally Unfair and Bitterly Uneven 'Recovery' in 12 Charts" which does an excellent job of capturing and presenting this story in pictures.
The bottom line when you look at all of those pictures it becomes painfully clear that the invisible hand has done a good job in increasing the bottom lines of the very wealthy and fattening their checkbooks. In contrast, the invisible hand has been writing checks to the American worker also but they have been in invisible ink.
The underlying question is: what are the reasons for this degradation of the American dream? There are many contributing factors and it would take a book to detail them all. (Which we do in our new book, Working the Pivot Points: To Make America Work Again that will be published in October.) We want to highlight two here: the changed or changing nature of the labor market; and, the changed value system of corporate America.
Drawing upon the work of University of Arizona economic historian, Price Fishback, in a Labor Day opinion piece for The Washington Post, Robert J. Samuelson observes that over the past century there have been three broad labor regimes.
The first regime in the early part of the century was "unfettered labor markets" with little governmental or union influence or regulation. The second regime began after World War II with substantially increased influence from both these actors and greater benefits and guarantees for workers. This regime lasted unabated until the early '80's when due to a variety of factors it began to unwind. We are now in the third regime in which "we may be drifting toward unfettered labor markets" again according to economist Fishback.
The consequence is that as Samuelson notes in the opening sentence of a subsequent article, "In the struggle between capital and labor, capital is winning - and that's hurting the feeble, economic recovery." That brings us to the changed value system of corporate America.
"It used to be," as Jia Lynn Yang points out in a masterful article for The Washington Post, "a given that the interest of corporations and communities such as Endicott (birthplace of IBM) were closely aligned. But no more. Across the United States as companies continue posting record profits, workers face high unemployment and stagnant wages.
Driving this change is a deep-seated belief that took hold in corporate America a few decades ago and has come to define today's economy -- that a company's primary purpose is to maximize shareholder value."
Ms. Yang examines this transformation in detail in her article and traces its origin to Milton Friedman and the "Chicago school" of free market economists. We don't know if the University of Chicago economists deserve the credit -- or blame -- for this change.
We do know that it used to be that workers bled IBM blue, John Deere green, or International Harvester red. Today, workers are "free agents" and disposable -- they just bleed.
The question becomes what do you do to stop the bleeding? We don't expect most large corporations to grow a conscience. We know that many small businesses can't get loans or credit. We know that government at all levels is shedding jobs rather than creating them.
So, we need to turn elsewhere. One of the primary answers, as we proposed in our previous post, is for workers to take matters in their own hands by forming worker cooperatives and becoming business owners. In that post, we featured the Mondragon Corporation from Spain, the world's largest industrial, worker-owned and run cooperative with more than 80,000 employees world-wide and revenue in excess of $14 billion euros.
Cooperatives may sound like an un-American or unrealistic proposal or solution. Nothing could be further from the truth. They are as American as mom and apple pie.
In the U.S. today, member-owned organizations account for $3 trillion in assets, $500 billion in revenue, and more than 1 million jobs. Cooperatives take a variety of forms including: 900 rural electric coops with 42 million clients in 47 states; two million farmer-members in 3000 farmer-owned cooperatives who provide over 250 thousand jobs and annual wages of $8 billion; 7500 credit unions providing financial services to nearly 90 million members; 250 purchasing coops offering group buying and sharing to more than 50,000 independent businesses, and approximately 8000 housing coops providing one million homes.
Cooperatives already have muscle and mass in America. They are supported by the National Cooperative Bank, a congressionally chartered financial institution, whose singular mandate is to "strengthen America's cooperatives, their members and other socially responsible organizations through the delivery of social impact banking products and services."
Cooperatives exist at the junction of society, community and worker. They understand the need for teamwork and social responsibility in order to rebuild the American economy and renew the American dream. Because of their share the wealth philosophy, worker cooperatives are especially well-poised for growth and to make capitalism work for the benefit of the many rather than the few by being leaders in sustainable job creation and retention.
President Obama sent a message to the recent labor convention in Los Angeles that "This country owes you a debt of gratitude for your efforts to make sure that everyone who works hard has a chance to get ahead, whether they are in a union or not." Unfortunately, over the past several years, workers have received a lot of "debt" but very little "gratitude."
Worker cooperatives and other cooperative organizations can correct this because they believe in the power of we instead of the power of me. They approach job creation as a team sport and with team spirit.
Spirit is the invisible force that moves organizations. In an America of hollowed-out organizations with no hearts, no souls, and little spirit, cooperatives can become the first best hope for carrying the concerns of American workers forward and addressing the degrading demands of an "unfettered labor market."
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