How to Make a Democratic Economy

“Our view is that every community has many innovative models…public banking, cooperatives, land trusts, employee ownership, social enterprise…these need to be developed and when the time is right they need to take center stage in the economy. Not be the alternative, be the defining characteristic of America’s economy.”

— Ted Howard

Marjorie: It’s all designed in. Capital matters, workers don’t matter, the environment is invisible, communities are powerless.

Ted: There is literally a new economy being born. It’s showing up in different models and innovations in different places.

Marjorie: So we have this hyper-individualized economy, and getting back to a community-oriented economy, and we call it a new economy, but really it’s a return to what their ancestors always knew.

Laura: Its all coming up on The Laura Flanders Show, the place where the people who say it can’t be done take a back seat to the people who are doing it. Welcome. It’s scary out there, from Putin’s Russia to Trump’s US, right wing demagogues are riling people up around a sense that the system is broken or rigged. Polls suggest that 71% of Americans actually agree, leaving Democrats and Liberals defending a status quo that’s produced a level of inequality that’s frankly pretty hard to defend. The authors of a new book agree that all sorts of systems are broken from our economy to our democracy, but that’s no reason for despair or fighting with our neighbors over the wreckage. New models are out there and they just may be adding up to a new system. Marjorie Kelly and Ted Howard of the Democracy Collaborative are the coauthors of “The Making of a Democratic Economy”. Kelly’s previous book on “The Divine Right of Capital” helped inspire the B Corp movement. Howard’s been deeply involved in the Evergreen Cooperatives in Cleveland and helped develop the community wealth building model in Preston, England, the one we’ve reported on on this show. I’m so glad to have you actually both here in studio. The last time I saw you, we were trekking around the mountains of the Basque Country, visiting the Mondragón co-ops together.

Marjorie: Well, thanks Laura, it’s great to be here.

Laura: So congratulations first on the book. Let’s start with the breakdown part. You say in it, “This is a period of breakdown, “but also deep redesign.” How do you see it Marjorie?

Marjorie: Well, there’s really two economies. 45% of jobs today are insecure. They’re part time, contract, uberized type jobs, and that’s the number we’re not talking about. Wages have been stagnant for decades, and there are reasons for that. And that’s what we talk about in the book, is that the economy is designed for the outcomes that we have where three billionaires have more wealth than the bottom half of Americans combined. But a different kind of economy is growing, and so we travel around and visit.

Laura: Is it an economy Ted, or is it just like a smattering of lots of different types of things?

Ted: Well, within the overall hyper-casino capitalism that we live in, our thesis and our belief is there is literally a new economy being born. It’s showing up in different models and innovations in different places. It reminds us of the period as the Great Depression was gearing up. The government at the time under Herbert Hoover was not coming to save anybody. It said, the free market’s gonna handle the depression. So people in communities started innovating and creating really exciting new models really to take care of themselves. And when the politics changed under Roosevelt and the New Deal, his government looked around the country at these little models and scaled them up into things like the Social Security system, our most important social safety net.

President Roosevelt: We must face the fact that in this country, we have a rich man security and the poor man security, and that the government owes equal obligations to both. But national security is not a half and half measure. It is all or none.

Ted: So our view is that every community has many, many innovative models: public banking, cooperatives, land trusts, employee ownership, social enterprise, and these need to be developed so that when the time’s right, they can take center stage in the economy, not be the alternative, be the defining characteristic of America’s economy.

Laura: I mean that’s very interesting. So the New Deal wasn’t brought to us by government, really government got it from us. That makes us feel kinda of-

Ted: You know we often think, well it’s the wise men sitting around the table in Washington DC with Franklin Roosevelt, but it wasn’t. It was people in their communities creating the ideas. Or in your country, in the United Kingdom, the National Health Service came from a very small model in Wales that was then lifted up decades later by Bevin and became one of the great health systems in the world. And that’s how these things happened.

Laura: So you start in South Dakota on the Pine Ridge Reservation. Why there, and what did you learn there about how the new economy is maybe not so new?

Marjorie: We go to Pine Ridge, which is of course an Indian reservation and see the regenerative community that’s being built there, which is building all kinds of community wealth and youth skills.

Laura: But people don’t think South Dakota, Indian country, and wealth very often?

Marjorie: No, absolutely not. You’ve got 80% unemployment on Pine Ridge. You’ve got beaten down community where there aren’t jobs, there aren’t houses. First of all, if you can get something started on Pine Ridge, you can get something started anywhere. So that’s very, very hopeful, what’s being built there. But the other thing is that this is really where our economy took a big turn. When you’re talking about the American economy, used to be Native Americans with a community spirit. And that economy was supplanted by the robber barons who came in and brought the railroads west and pushed the Indians off the land. So we start with the robber barons who were trying to make themselves rich, and that is the ethos that we still have today in our economy of billionaires in Silicon Valley, where their own neighborhoods, one out of three children are going hungry. So we have this hyper-individualized economy and getting back to a community-oriented economy, we call it a new economy, but really it’s a return to what their ancestors always knew.

Laura: At the other end of the spectrum, you have plans around the Federal Reserve and quantitative easing for the planet. That’s been a surprisingly exciting and popular topic. How do you explain it, and how do you explain quantitative easing for the planet?

Ted: Well very simply, what we looked at was the following. If we don’t get on top of the climate crisis, this country and countries around the world are gonna be swamped with the crisis and not just the water, but everything is going to be effected. The problem is we have these large energy companies that are in the way of any meaningful change. They will block it consistently. So we asked ourselves, how do we get them out of the way? And then we recalled, 10 years ago, at the height of the Great Recession when the Treasury Department and the Federal Reserve basically implemented something called quantitative easing. They literally created money out of nowhere in order to bail out banks, insurance companies, the auto companies to stabilize the economy. They created over $3 trillion.

Laura: That’s a lot of it.

Ted: And out of nowhere, it happened in Europe as well. Got those institutions righted, they were publicly owned for a while, and then gave them back. So we said, well, if they could do that, we have a much greater crisis now, the climate crisis, what would it take to buy out all the oil companies and just strand the oil in the ground? Just take them over, get them out of the way, and leave the fossil fuel in the ground. So we created a term called quantitative easing for the planet. How many hundreds of billions or trillion dollars perhaps need to be created in order to take over America’s oil infrastructure and just leave the oil in the ground? It was a completely outside the box idea, but we realized that, even if every country in the world did everything it’s committed to through the Paris Accords, and of course the US pulled out of them, even if we did that, we still don’t make to two degrees or less. So we need some radical interventions. So the democratic economy is just being built in communities through models and innovations, but we need a new order of thinking. You know, Albert Einstein said, “We can’t solve the problems “we are facing with the same thinking “that created the problems in the first place.” So QE for the planet is a very new approach to handling the biggest crisis of our time.

Laura: And I touched on how interested people are in this, you’ve been on book tour with your book. Rumor has it, you had a pretty successful event right here in New York, where people see real need for change. Are there practical applications to your “Making of a Democratic Economy” that people are fighting for today, Marjorie?

Marjorie: Oh, all over, all over. Lots of people are working for more employee ownership. For example, right here in New York City, the mayor has put millions of dollars behind growing worker co-ops, and there’ve been over a hundred started. There are other cities that are supporting that, people are talking about publicly owned banks. In North Dakota, they have the Bank of North Dakota, helped that state survive the recession in great shape. And the new governor of California is talking about a state owned bank, cities are talking about city owned banks, and that would help bring lending back to small and medium sized businesses, which are not getting loans from the big banks. They’ve essentially become hedge funds. So yes, we’re talking about really practical things-

Laura: I mean you were here during blackout season.

Marjorie: Yes, right? I mean-

Laura: New York is still in the dark thinking surely we could do energy differently.

Marjorie: Right, so who made the decision to blackout which communities? It was Con Ed, it was an investor owned utility. People are talking about here in New York, they’re saying, “We need public ownership of this utility.” And there are already utilities all over the country that are owned by the people. And you can have a different kind of economy with that kind of ownership.

Laura: We’ve covered Cooperative Home Care Associates here in New York. One of the largest worker owned cooperatives in the country. Why is it still so alone in scale in the US, do you think?

Marjorie: Well, that’s starting to change, Laura. I mean, Cooperative Home Care Associates, I mean employs 1200 people, mostly Latinas and African American women. It’s been around 33 years, and there is now a movement to replicate it. So there are 15 of these companies that are either in formation or have already been formed, so there is a movement for that. But you’re right. Why isn’t worker ownership more of a phenomenon? I think it’s because a lot of it is the mindset, you know that Ted talked about. We’re so focused on Wall Street. We’re so focused on what capital is doing, and where can you invest in these capital owned companies, that this idea that workers can own their companies and that could be a successful profitable model, that it doesn’t kind of penetrate the mind. So I think that mind shift is critical.

Laura: You talk about corporations. I mentioned that you’d been instrumental in sort of sparking this B Corp movement. That’s kind of a middle stage. Do you want to tell people what B Corps are?

Marjorie: Well, you know, if you step back for a moment and you say, “What do we think the purpose of companies is today?” Maximize returns to shareholders. This is kind of taught in the business schools, enforced in the courts. Well, what if there were different purpose inside companies, to serve the public good, to create public benefits? So that’s what B Corps are. They’re saying, “These are for-benefit companies, “and they’re companies that take into their bylaws, “their articles of incorporation, “this legal commitment to serving the public good “as well as serving employees and shareholders.” And there are thousands of these companies out there all over the world, and they’re succeeding. And they’re some of the most exciting companies, particularly when they’re combined with broad-based ownership.

Laura: Does it require a particular kind of shareholder, somebody that doesn’t really want that much money back?

Marjorie: It requires, I think, leaders and investors who think that there’s a broader and more important purpose of business, but yes you can still make money, you can still make plenty of money for investors.

Laura: We last talked, I think, Ted, on camera when we were reporting on the Preston Model, which has also been about leveraging investment capital, some of it public money, to invest locally and create local employment and better living conditions. How’s that going, as far as you know?

Ted: The Preston Model is really an extraordinary representation of what can occur in a place when a full range of community wealth and democratic economy tools are deployed. Preston is an older industrial city of 150,000 people in Lancashire. Five, six years ago, they began this journey that they’re on to create a new model for the local economy. At the time, the high street was shuttered, unemployment was high, there was really no future for the city. They’ve leveraged £100 million of public employee pension funds. They’re creating cooperatives in the city through the university, they’re creating a public bank that will be capitalized by the reserves of the city council, they’ve changed purchasing so that £70 million of purchasing is brought back to the city that used to go internationally or to the city in London. The end result is, when this all began, Preston was listed in the bottom 20% of the most deprived cities and communities in all of the United Kingdom. That this very radical left-wing group called PricewaterhouseCoopers did an assessment-

Laura: Hard irony there.

Ted: Did an assessment of the most improved communities in the United Kingdom, and the number one listed was Preston, which is extraordinary in such a short period of time. Now there’s a long way to go, but it shows what’s possible when people put their shoulder to the wheel and institutions start to work for local benefit.

Laura: And were there qualms about putting pension funds into programs like that? I mean, we’ve heard since we broadcast that show, anxieties about responsibilities having to do with pension funds. If you’re the pension fund manager, what do you do with your responsibility to get the maximum possible return, particularly in this country, for people who are relying on their pensions, if they’re lucky enough to have them for their futures? They may not have a welfare system to support them.

Ted: You know, in the United States, there is a movement to use public pensions, like in California, CalPERS. It’s multi, multi billion dollar investments being made, and they’re not taking all of their money out of Wall Street, but they’re taking some for local impact. And the history is showing that these are returning very good value to the pension funds. So it’s not that the laborers whose pension funds are invested are now taking dramatically lower returns. So it can be done well, and it’s being done around the country. I mean, it’s very interesting, this whole field that we’re talking about here, if we’d sat here 40 years ago, first I’d have dark hair, but we wouldn’t be talking about employee stock ownership plans. They didn’t exist. People were not talking about public banking. Community land trusts had not started. So all of these innovations, impact investing, B Corp, all of these were to be invented, and now we have decades of history proving the efficacy of these models.

Laura: We have, as you said, a wide array of stories to tell, and you pick some great ones. You also leave out some that have gotten a lot of attention, and I wanted to talk to you about that, because I do sometimes feel as somebody who’s a partner of yours often, and feels very much like you, that these stories need to be lifted up to give people models of change. I sometimes feel, am I exaggerating the scale of some of these initiatives, because we’re so starved for good examples? And I noticed that Jackson, for example, in Mississippi, isn’t in your book. A story that was lifted up and celebrated a lot in the last few years, and that we covered at the very beginning when it was still an idea with the former mayor Chokwe Lumumba before he died.

Chokwe: I think, what are some of the most significant things happened in history? When you get the right people in the right place at the right time. And I think that’s where we are. When you talk about a building, which is designated as being built by slaves, that’s the right place. When you talk about people who have been under this oppression all of their ancestors lives, under their lives, those are the right people to make the change.

Laura: It’s an idea that has had challenges, and I don’t think anybody involved would deny it. And I only mentioned it as an example that some of these things aren’t easy, they don’t work so well, the narrative is not so simple. As people that cover this, who intimately involved, how do you approach it? And what do you think is the best way for us all to approach it?

Marjorie: Well, Laura, we need to talk about the challenges and the hardships of all these projects, and we do that in every chapter. For example, Cooperative Home Care Associates, they told us that they are in the fight of their lives. The minimum wage went from 11 to 15, Medicare reimbursement went up, Medicaid reimbursement went up, but it’s not all being passed through to them. It’s a rough time for them right now. Also, their worker ownership, even though they’re 100% owned by workers, only about half their workers decide to become owners. We’re the first ones who’ve written about that. And there are reasons you have to buy in, it’s complicated. So yes, there are challenges. And in other chapters, we talk about Step Up to UH, which is University Hospitals in Cleveland, deliberately hiring disadvantaged people from the low income neighborhoods around the hospital. And this program is every year on the verge of going out of business because they can’t afford it.

Laura: And the hospital sometimes is the very institution that is pricing those low income people out of their neighborhoods by encroaching into it.

Marjorie: Yeah, it’s true. There’s lots of challenges here, and we don’t need to whitewash that. And I think, yeah, it’s important to talk about-

Laura: Any thoughts on sort of a healthy approach for journalists to all of this? ‘Cause we don’t just wanna do happy stories.

Ted: No, we shouldn’t do happy stories.

Laura: I’m all for a little happiness.

Ted: Especially in these times. I think your point is really good, this is not just positive news. What we need to do to tell authentic stories of the struggle within this, you know, what some have called a casino capitalist society and economy, to build an alternative. And literally almost everything is going against this trend, but the trend is continuing to escalate. With Evergreen in Cleveland, that I’ve been intimately involved in, I like to say, since we started Evergreen, we probably have made literally every mistake you could make, and yet we’re still standing. But none of the mistakes we made are as big as the mistakes that Enron made. So, you know, the thought that well, Cooperative Home Care is having this problem or Evergreen had that problem, and so therefore these models don’t make any sense, well, there’s a much bigger history to look at.

Laura: What are our chances of getting these ideas into popular discourse at the level of political candidates’ campaigns?

Ted: Well, yes, and in fact, at the Democracy Collaborative, while we’re a nonprofit, and therefore nonpartisan and don’t endorse candidates, so far many candidates, mostly Democrats, it’s true, are coming to us, people running for state senate or US Senator, city council, saying we wanna build these ownership ideas into our strategies.

Laura: Go on, give us a few names, who’s come to you?

Ted: So one of the offices we’ve worked with is Senator Sanders, Bernie Sanders’ office. In the United Kingdom, the Labour Party announced something called the Inclusive Ownership Fund, and we had a role in that over there. And this is an idea to create a share levy each year for 10 years that we transfer 1% of the ownership of companies overturned at 50 employees to a trust that would be for the benefit of their workers. So after a decade, it would be 10% of the company. Very interesting way to build broader ownership among workers.

Laura: I think you wanna add to that, Marjorie?

Marjorie: Yeah, I would. Elizabeth Warren has the Accountable Capitalism Act, and she’s saying companies over $1 billion in revenue need a federal charter, as opposed to right now, companies are chartered at the state level. And they would have a new fiduciary duty, not just to shareholders, but to communities, employees, and the environment. And that takes us beyond, for example, antitrust. We need antitrust, but the only issue is not size of companies, it’s their purpose. Who are they serving at their very core? And she’s suggesting they need a broader fiduciary duty. That’s radical.

Laura: The question of service, who are you serving, takes me back to Mondragón and to your book. You mentioned at the beginning, this question of mindset. Suffice to say the thing that I took away most strongly from our visit was the mindset change in that part of Spain, in Basque Country, such that when we talked to some people who had just started a new company, was immediate co-op, I asked them, why did they make it to co-op, and they said, “Well, that’s just what people do here.”

Man: It is like something that we understand, that if we own, and we work better, and we can be stronger.

Marjorie: What was striking about visiting some of the companies of Mondragón.

Laura: We should say Mondragón is the world’s biggest federation of cooperatives, 1,000 cooperatives in the Basque Country of Northern, Northwest Spain. It’s been around for over 50 years, grew up under fascism, and is still there today bringing on new types of industries, as well as maintaining some old ones.

Marjorie: And $11 billion of income coming into those companies. So they’re quite substantial. I was struck by how ordinary these companies are. They’re making things like elevators, like packaging machines. And they’re doing it well, they’re selling all over the world, and they’re just 100% owned by their workers, and that’s just ordinary business there. And that was pretty striking to me.

Ted: And for me, that was my sixth trip Basque Country, and every time I learned something. But for me, the fundamental lesson was, on one trip I asked a Basque leader, “What’s the difference between your system “and our system in the United States?” And he said it so eloquently, he said, “In your system, capital is in first place over labor. “So if you get in trouble during a recession or a downturn, “the drive is preserve capital for the investors. “And a way to do that is shed as much labor as you can. “It’s a rational decision in your system. “In our system, we know capital’s essential, “but we place labor above capital, “so when we get into trouble, “we find ways to keep everybody working. “We absorb them into different companies. “We have a different kind of social safety net, “because their purpose is not to generate “a maximum shareholder value, “their purpose is to provide decent, ongoing, “secure work for the Basque people.” And that’s just a very fundamental difference. And you could imagine… You know, I live in Cleveland, Ohio, and outside of Cleveland, there’s a town called Lordstown. And one of the big auto companies closed the plant there. 3-4,000 people lost their job, it’s just natural. And Mondragón, a few years ago, one of their biggest companies collapsed, called Fagor. In this country, we probably just would let all those people be unemployed. Who knows what would happen to ’em. The Basques said, no, our commitment is to keep people working. And after several years of effort, there are only about 150 people from those couple thousand, who yet have not been absorbed into new companies. Very different strategy for an economy.

Laura: It goes back to the divine right of capital that you’ve talked about. We have to topple it. You say sexism, still bad, racism, still bad, every other kind of ism, still bad, but seen as bad. Pro-capital bias somehow is still okay.

Marjorie: Yeah, right, capitalism is that form of capital bias where we just think capital comes first, maximizing returns to shareholders is the purpose of the company. Only shareholders are represented on corporate boards. And even in the income statement, you define profit is income to shareholders, that’s good, you’re supposed to have as much of it as possible. Income to workers is an expense, you’re supposed to have as little of that as possible. So it’s all designed in. Capital matters, workers don’t matter, the environment is invisible, communities are powerless. That’s designed into the basic structures of the economy. One of the things we’re trying to do with this book is to help us all wake up. Let’s just see that all this that we take for granted, in fact, is not legitimate.

Laura: Not legitimate and not the only option.

Marjorie: Right.

Laura: You tell a lot of stories in this book, as well as giving us a lot to think about. Thank you so much, both of you. The book, “The Making of a Democratic Economy, “Building Prosperity for the Many, Not Just the Few,” is out now from Berrett-Koehler, an employee owned company. Ask for it at your local independently owned bookstore. Thanks.

Marjorie: Great, thank you.

Ted: Thank you.

Laura: For more on this episode and other forward thinking content, and to tune into our podcast, visit our website at LauraFlanders.org, and follow us on social media @TheLFshow.