Let’s Have a Worker Ownership Stimulus to Create Jobs and a More Democratic Economy

Editor’s Note: This article was submitted to the Democratic Left magazine but for reasons of space only is published as a blog post. Three other articles submitted to the magazine will follow in the next few weeks, as well as articles that also appear in the printed version.

In the 2012 Presidential debates, President Obama expressed admiration for the “free enterprise system.” While I know it’s obligatory for every American president to heap praise on “free enterprise”, the fact is that the system has let American workers down in a major way. Truly speaking, “free enterprise” is the freedom of wealthy business owners, investors, executives, and Wall Street speculators to act as they please regardless of the consequences for working people and society. Their aim is not to create jobs but to make loads of money for themselves, so they create or eliminate jobs as they see fit.

The ultimate cause of the ongoing unemployment problem is that most investment and hiring outside the public sector is in their hands – but of course public sector employment is also affected when a recession leads to cutbacks in private sector jobs and hence to shrinking tax revenues. These “job creators” are currently engaged in a de facto investment strike, as evidenced by the $2 trillion dollars that corporations are sitting on instead of investing and creating jobs.

The “free enterprise system” is all about boom and bust, and when things go bust the government has to step in to jumpstart the economy. When the system unraveled in 2008-2009, Washington had to take massive action to prevent it from collapsing – and in the process saved a couple of million jobs. So, public investment is essential to make up for the deficiencies of “free enterprise” or what Reagan called the “magic of the marketplace.” Left to its own devices, the system can go into free fall.

The 2009 stimulus package, which should have been much larger,  consisted of a variety of measures, including money for infrastructure projects   This sort of public investment creates lots of jobs in the manufacturing, construction, engineering and other sectors, which is great. But at the same time, by putting public money into private corporate pockets it reinforces an unequal, undemocratic economic structure that will inevitably produce another crisis.

This is why there should also be public investment of a different sort – one that contributes to changing the economic power structure and distribution of wealth, and gives working people themselves a significant role in job creation, while helping to create tens of thousands of new jobs in the short run. We need a large-scale program to aggressively support the creation and expansion of democratically managed, worker-owned companies, especially worker cooperatives.

US Senator Bernie Sanders has introduced two pieces of legislation designed to boost worker ownership. One would give states funding to establish and expand employee ownership centers that would assist with promotion of worker ownership and participation. The other would establish a U.S. Employee Ownership Bank to provide loans to enable workers to buy a majority stake (or increase an existing majority stake) in companies through an employee stock ownership plan (ESOP) or a worker-owned cooperative, and to enable worker-owned companies to expand and increase employment.

However, I think a much more ambitious approach should be taken. Given the state of the economy, we need a worker ownership stimulus – to fund the creation of worker-owned companies (including the conversion of traditional firms to worker ownership), the expansion of existing worker-owned firms, and the creation of employee ownership centers. Let’s set up a new federal body, the Worker Enterprise Agency (WEA), to provide such support in the form of loans and grants, with particular attention to cooperatives and the manufacturing sector. At least $10 billion should be allocated through the WEA with the aim of creating 1,000 new worker-owned companies and 100,000 jobs (at new and existing worker-owned companies) within the first year.

Going beyond what the senator proposes, the WEA would also play a key entrepreneurial role by helping to organize and fund start-ups. It’s hard for worker-owned companies to acquire adequate capital, but it’s even harder to set up such companies from scratch. Generally speaking, worker ownership needs good infrastructure, both financial and organizational, in order to prosper. This is why public help is essential. WEA funding would target cities and regions with high unemployment, with a key goal being the creation of good, stable jobs for those currently unemployed. Worker-owned firms are a great social investment because they’re much more rooted in their communities, much less inclined to lay off employees in leaner times or to export jobs to foreign countries, and much less susceptible to takeovers by companies like Bain Capital, and contribute to greater income equality by not enriching wealthy shareholders or paying executives exorbitant salaries.

A type of worker-owned enterprise that should be strongly supported by the WEA is the union coop. This new model of enterprise was unveiled in March 2012 by the United Steelworkers (USW) together with Spain’s Mondragon cooperative and the Ohio Employee Ownership Center. The union coop is a cooperative business where all the worker-owners are union members and are covered by collective bargaining. As USW president Leo Gerard said when the USW-Mondragon collaboration was launched in 2009: “Too often we have seen Wall Street hollow out companies [and] communities. We need a new business model that invests in workers and invests in communities.” Ideally, the WEA would work closely with unions to set up such coops. Unions and worker coops share the same values, and both help to strengthen communities, so combining them makes sense!

Ultimately, the worker ownership sector has to acquire the infrastructure that would enable it to take action to increase investment and employment in response to economic conditions and social needs, working with communities, citizen groups, and the legislative and executive branches at federal and state level. A stimulus to build up worker ownership will help expand economic democracy, giving working people and citizens a greater role in the process of investment and job creation.

Dube3.jpgNyegosh Dube, an American citizen who lives in Poland, is currently developing a project that looks at existing examples of economic democracy in Europe and elsewhere as potential building blocks for a democratic economy. For over a decade, he worked for the European foundation sector – coordinating a project on legal reform, editing a journal, and writing for a sectoral publication. He has degrees in economics and political science from Yale and Columbia universities.