Brian, are you sure you're
on the right list?
Ed
----- Original Message -----
From: "Brian McAndrews" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Thursday, November 20, 2003 12:08 PM
Subject: [Futurework] FW Fwd William Greider: Beyond
Scarcity A New Story for American Capitalism
Brian McAndrews
ps i hope you appreciate the 'senior's' font size
Beyond Scarcity
A New Story for American Capitalism
by William Greider
This cover story is based upon William Greider's new book, The Soul
of Capitalism: Opening Paths to a Moral Economy, published recently
by Simon & Schuster. The book is available in bookstores, or can be
purchased at www.simonsays.com.
If we can step back from the troubled headlines of the day, we can
see that a breathtaking new fact of history is upon us. It is so
obvious one hesitates to announce it as news: The U.S. has solved the
economic problem. We have conquered the dark forces of scarcity,
hunger, and elemental suffering that have stalked societies across
the millennia. Basic human needs are now eclipsed by the overflowing
abundance produced by modern capitalism. Scarcity need no longer be
the central premise of economics. The new premise is abundance. Yet
the U.S. continues to press on, like a long-distance runner who has
won the race and keeps running beyond the finish line.
We are caught in a strange contradiction. While there is plenty to go
around, it doesn't feel like the best of times. Anxiety, insecurity,
and real desperation for many expand along with material plenty. By
official measure, one-fifth of America's children live in poverty.
For a broad swath of Americans who are not poor, the economic problem
remains a month-to-month struggle of keeping up with the rent or
mortgage payment. More than a third of workers are worried about
losing their jobs. Households have seen $3 to $4 trillion in putative
wealth lost with the bursting of the stock market bubble.
Most Americans, I am convinced, have a sense that something is wrong
in the contours of supposed prosperity. Even in affluent living
rooms, one hears conversations about stress and disappointment, a
sense of confinement, as though people's lives are trapped rather
than liberated. Many who live well financially are unable to live
well in human terms. The hunger is unnamed, and seems part of what
the system demands.
The only remedy, we are told, is more. More output, more cost
savings, and still more sacrifices to achieve them. Stuck in a
mindset of scarcity, businesses continue to accumulate surplus by
imposing harsh human and ecological costs. But what now justifies the
sacrifice?
The operating principles of capitalism have become dangerously
obsolete. The house of economics, I suggest, is due for major
renovation, if not a complete tear-down.
John Maynard Keynes predicted this moment would arrive, when advanced
economies could step back from ancient economic imperatives and be
free to concentrate on how to live wisely and agreeably and well. The
economy's purpose, as Keynes put it, is to generate the material
basis to support civilization to enable society and citizens to
explore the higher dimensions of human existence, to discover the
fullest possibilities within themselves. In our prosperity, we seem
to have that backwards. Lives are confined by harshened terms of
work; the common assets of community are degraded in the name of
pursuing more.
The question is: Can we alter the basic operating values of American
capitalism so that the priorities of society become dominant? Can we
realign financial power relationships so people have greater voice
and responsibility in determining the conditions of their own lives?
While such bedrock changes will not be quick or easy, I believe they
are within reach.
Indeed, early fragments of substantive progress are already visible,
thanks to unsung pioneers working in business, finance, and social
activism. It's no accident the locus of change is not the federal
government, for it is not equipped to invent the terms of this new
economic world. In order to endure, changes must originate within
capitalism. They must be organic to the system, not exterior
commands. If they are to be emulated widely, they must meet the test
of practical reality.
Already many experiments pass these tests, from employee ownership to
socially responsible investing. In these fledgling and uncoordinated
efforts, what is being built is a prototype for a new prosperity --
one in which financial, social, and ecological needs can all be met.
Once our pioneers succeed in generating this new prototype, the
politics is sure to follow.
There is no utopia in our emerging new story. But there is great
reason for hope.
We begin with ownership, for this has always been the magic word in
capitalism. Whether the property is a home or business, the owner
bears the risks and the responsibilities and thus exercises intimate
control. If one's stewardship is sound, one reaps the surplus value
in greater returns. The core of this analysis is the owner's
responsibility to property, which is a bedrock principle. The essence
of reform is restoring and expanding the connective qualities of
ownership beyond the few, so that workers, investors, consumers,
managers, and citizens are empowered.
Half a century ago, conservative economist Joseph Schumpeter observed
that the complexities of modern industry and finance weaken the
strands of owners' personal responsibility. Its meaning becomes
distanced by layers of absentee ownership, while property itself --
factories, machines Ðdematerializes when represented only by shares
of stock. Responsibility evaporates.
In our new circumstance, I suggest it is possible to re-stitch the
strands of responsibility and control, extending the power and
obligations of ownership to ordinary Americans. If we start with a
larger expectation of people's capabilities, we will discover they
can handle it.
Most Americans, in current life, go to work daily and submit to what
is essentially a master-servant relationship inherited from
feudalism. The feudal lord dominated the serfs on his land and, if
they resisted his every command, he expelled them. Now the lord is
called a CEO. His powers are somewhat constrained by law, but the
basic relationship endures. If this provocative comparison seems too
harsh, it has struck a chord of recognition with readers of my book,
The Soul of Capitalism. I have heard from business owners, lawyers,
doctors, rank-and-file employees, even business-school professors,
all seconding the observation and excited that someone has stated it
in plain English.
The malformed power relationship at work explains a good deal about
the injuries and confinements people experience. But it also produces
the fundamental deformity at the heart of democratic society: gross
inequalities of wealth and income. Does anyone imagine that the
excesses of CEO pay could have occurred if employees had a voice in
the matter? So long as the corporate structure is the engine for
maldistribution, wealth inequalities will never be significantly
ameliorated by government.
The solution is for workers to own their work. The forms for doing so
-- employee-owned firms, partnerships, cooperatives and other hybrids
-- are alive and growing. To be effective, they must incorporate not
only employee ownership but collaborative decision making as well.
United Airlines, though employee-owned, failed to meet this second
requirement. Southwest, on the other hand, with its strong culture of
employee ownership and engagement, has soared while the big airlines
stumbled.
Joe Cabral, CEO of Chatsworth Products Inc. in the San Fernando
Valley, discovered the power of employee ownership in adversity. The
electronics conglomerate that owned the Chatsworth division was
selling it off, pennies on the dollar, because it seemed too low-tech
(CPI makes the metal racks for stacking computers in data-processing
centers). Cabral, fellow managers, and shop-floor workers rebelled
against their fate, contributed personal savings, secured a loan from
the National Cooperative Bank, and became 100 percent owners. That
was 1991. Their holdings have since grown from $4 a share to $121.
"We valued ourselves higher than any outsiders would value us,"
Cabral said.
"We have a wonderful capitalistic society," he continued. "But the
wealth that's created ends up in too few hands." He believes that
isn't sustainable. "At some point, capitalism is going to burst
because we haven't done right for the folks who have actually created
the wealth." At Chatsworth, he added, everybody is sharing in the
wealth that they're creating, and people are aligned with the success
of the company.
Chatsworth is one among America's 11,000 employee-owned firms, most
of them small. Many were launched by populist-humanist-capitalists,
as consultant Chris Mackin puts it. But there are much larger
companies, like $2.2 billion furniture maker Herman Miller, that have
proved the idea can be sustained across generations. All of Herman
Miller's 7,500 employees are shareholders, encouraged to act like
owners by a bonus system based on the creation of new economic value.
They collectively hold just 15 percent. But there are mechanisms for
their input into decisions at every level, through work teams,
caucuses, councils, monthly business reports, and state of the union
tours by executives. In a sector notorious for pollution, Herman
Miller became an environmental pioneer because a committee of
employees urged it.
Companies like Herman Miller and Chatsworth are just two among many
impressive models for the new capitalism. The trouble is, they are a
scarce minority. That shortcoming is partly explained by inertia and
ignorance. But it's also a function of power.
The operating values in capitalism emanate from the commanding
heights of finance capital, where Wall Street may impose conditions
on credit and capital transactions that alter the social contract for
workers and communities far away. Mandatory twelve-hour shifts.
Disappearing benefits. Arbitrary plant closings for balance sheet
reasons that have nothing to do with the productiveness of the
victims. The financial system is the most formidable front for
systemic reform, yet also perhaps the most promising.
Americans were deeply educated -- and angered -- by the boom-and-bust
stock market which revealed a lot about how Wall Street manages their
money. The injured public still has a smoldering anger that could be
mobilized for a more aggressive era of reform. The operative goal is
for people to take control of their own money and make sure the
collective wealth of working Americans is invested to serve -- not
injure -- their long-term interests.
Socially responsible investing, I believe, is the bow wave for a deep
change in American consciousness. In the 1990s, leading funds like
Domini and Calvert established a startling and potentially explosive
record of beating the broad market in returns. The socially screened
Domini 400 Social Index gained an average of 20.83 percent annually
during the 1990s, compared to 18.7 percent for the S&P 500. Even Dow
Jones has gotten aboard with the new global sustainability index it
launched in 1999, tracking the top 10 percent of the best
environmentally conscious companies worldwide. It is outperforming
Dow's broader global index by 2 or 3 percentage points.
Evidence is emerging that socially well managed firms are simply
better managed firms. This is borne out by the pioneer research firm
Innovest, which has developed an EcoValue environmental risk rating
for thousands of corporations (much like the credit-risk ratings by
S&P or Moody's), and uses it to analyze stock returns. In three- and
four-year studies of cumulative stock performance, Innovest found
that above-average rated firms outperformed below-average firms in
sector after sector: in U.S. chemicals by 15.9 percent. In oil, by
17.2 percent. In electric utilities, 12.4 percent. Morgan Stanley
tested the Innovest model and confirmed the advantage.
Equipped with such data, pension funds can begin to choose between
good guys and bad guys. The first U.S. pension fund to use Innovest's
data as a positive screen is the $3 billion public employee pension
fund in Contra Costa County, Calif.
Peter Camejo, who is a trustee of the Contra Costa fund and founder
of Progressive Asset Management in San Francisco, thinks the Innovest
model may inspire others to examine company performance on different
social issues, like employee satisfaction and community relations.
"The theory goes that what you're really discovering is something
fundamental about the company," Camejo said. "With a company that has
a very high rating on the environment, what you're seeing is that the
management team has its head on straight: they avoid litigation;
they're thinking ahead. With a company that's bad, you may be
discovering internal management problems."
Should the value of environmental or social screening catch on with
institutional investors, it has the potential to shift capital flows
on a large scale -- and eventually impose capital-risk penalties on
poor performing companies. Institutional investors, after all,
control 60 percent of the largest 1,000 U.S. corporations.
If finance represents one source of pressure for change, another is
the clout of financially sophisticated activists. Rainforest Action
Network and allies, for instance, triumphed this summer after years
of struggle, when Boise Cascade agreed to phase out its worldwide
commerce in old-growth forest products. Boise has notoriously
resisted environmental regulation, but the activists surrounded this
timber company with a circle of heavyweight consumers -- firms like
Kinko's, Home Depot, IBM, and hundreds of companies and universities
who are major buyers of paper and wood products. When some of them
began canceling contracts, Boise caved.
A similar jujitsu was at work a few months earlier, when McDonald's
announced a new dedication to food safety and told its poultry
suppliers to stop using growth antibiotics in chickens. In that case,
the consumer was McDonald's itself, which put the squeeze on
agribusiness. Outside politics, ecology agitators are in effect
creating an architecture for protogovernance -- rules of behavior,
enforcement techniques, and new public values gaining influence
without benefit of law.
Another promising network of affiliated interests is developing at
state and local levels, as activists attack the deranged practice of
government subsidies to businesses that total at all levels $300 to
$400 billion a year. In Los Angeles, the Figueroa Corridor Coalition
for Economic Justice negotiated a milestone agreement with developers
of the new Staples Center. In return for $75 million in city
subsidies, the agreement stipulates union organizing rights,
affordable housing units for 20 percent of the development, living
wage standards, plus $1 million for parks and job training.
Also ripe for reinvention is the corporate institution itself. Since
it is the central actor in economic life, Americans are not likely to
achieve human-scale aspirations until the corporation is reformulated
in fundamental ways. Deeper reforms ultimately will require
government action. But first we need broad public inquiry and
argument, working out the large questions of how the business
organization should be constrained and reoriented. Only then can we
arrive at agreement on core changes needed -- like reducing limited
liability protection for insiders, increasing their exposure to
personal loss. Or changing internal governance, to give voice not
only to shareholders but to employees and the community as well.
The only way to make such reforms plausible in politics is to
generate many socially oriented corporations, large and small, that
adhere to these new values. If we now have cutting-edge companies
like Herman Miller and Chatsworth, we need many to make the issue
real for Americans at large.
Above all, we need a new narrative of American capitalism. Our nation
tells itself a strangely masochistic version of the American dream:
If you want to be truly happy, you need to be truly rich. Most
understand this is a mirage. In our new condition beyond scarcity,
the economy of more has turned upon itself, tearing the social fabric
and weakening family and community life, piling up discontents
alongside the growing plenty. We need a new story, suitable for a new
abundance.
As it presently functions, capitalism encourages human pathologies --
embodying irresponsibility as a central requirement in its operating
routines. But a new narrative beyond more is beginning to emerge
organically within capitalism. Central to this story is the fact that
people themselves can make change, despite the inertia of government
and the overbearing power of established economic interests. Pioneers
in many sectors are showing the way to dismantle or reengineer the
status quo. If they are scattered and marginal, they are nonetheless
making real progress. As more people come to understand new options,
change will spread.
What we are after is more room for life itself. More power for
ordinary people to control their lives and work. More equity in the
distribution of rewards. More nurturance of society's softer assets:
babies and children, the fate of the Earth and other living things,
the grace notes of community life.
Imagine this narrative: Inventive Americans, having conquered
scarcity and accomplished great plenty, set out to discover how to
live wisely and agreeably and well with abundance. Secure in material
terms, they hope to learn at last what it means to be fully human.
That was Keynes' prophesy. It is America's new story.
This article is adapted from The Soul of Capitalism: Opening Paths to
a Moral Economy, by William Greider ([EMAIL PROTECTED]), published by
Simon & Schuster. Greider is national affairs correspondent for The
Nation.
This article first appeared in the Fall 2003 issue of Business Ethics.
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