Revolution ’67

Is nonviolence in response to violent oppression practical? How much progress has America made in terms of achieving racial harmony in the decades since the 1967 riots? How is what happened in Ferguson, Missouri this summer a continuation of a seemingly endless race war in the U.S.? PBS’s excellent “Revolution ’67” attempts to answer these kinds of questions and more.

http://www.veoh.com/iphone/#_Watch/v46353206MTkJmsQa

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Shareholder vs. Stakeholder Management

All too often, critics of the contemporary economic order, who rightly bemoan the inequality, un and underemployment, etc. of modern American capitalism, fail to offer immediately viable and meaningful economic alternatives. For example, such critics tend to either highlight the successes of small-scale or foreign alternatives (i.e. worker cooperatives in the case of this writer) to the traditional shareholder business model and/or demand the prompt popular overthrow of the American, and/or world, capitalist system writ-large. As virtuous as these, and other similarly radical, initiatives are, many laymen are left alienated by the apparent irrelevance of such proposals to their own individual experiences. Specifically, the average American wage slave is simply generally too caught-up in the undeniably arduous monotony of their own daily struggle to subsist within the economic system (i.e. whether they can retain their hated job, whether their child is feed sufficiently, etc.) to seriously contemplate whether or not to personally engage in experimental economic living or revolutionary behavior. That said, the revolutionary potential, indeed necessity, of the masses cannot be ignored and must be gradually cultivated through education, organization and mobilization if the rule of contemporary economic elites is to ever be seriously undermined, let along discontinued.

While radicalism is necessary in the long term, there are reforms to the economic system that can be implemented tomorrow in order to immediately and practically improve the conditions under which most people find themselves enslaved by shareholder capitalism (both a morally and practically attractive goal in so far as doing so will help to empower workers and ease their suffering). One potential reform is the expansion of the German shareholder business model into the U.S. and U.K. (the modern bastions of shareholder capitalism). Though by no means the only nation in which co-determination, as stakeholder corporate governance is also known, can be found widely (see Japan, France, Scandinavia, etc), Germany and its Mitbestimmung offers arguably the most successful and relevant example.

The 1976 Co-determination or Mitbestimmungsgesetz act, passed in the West German parliament or Bundestag, mandated that West German, and later all German, large companies maintain near parity between employee and shareholder representation on their supervisory boards or Aufsichtsrats (a body that elects a company’s management board). Furthermore, German companies maintain works councils or Betriebsrats that serve as employee elected “shop-floor” representative bodies, the members of which generally serve for four year terms. These councils tailor and implement the general labor agreements reached by national German unions and employer associations to their own constituent workers’ objective circumstances and also, most importantly, educate, organize and mobilize those same constituent workers. By institutionalizing employee organizing and mandating that workers have a concrete say, even if it is limited, in company management, German co-determination represents a significant improvement over the shareholder business model (which almost exclusively prioritizes the interests of investing shareholders in company decision making [with hasty pay-cuts, layoffs, and closures resulting in situations of short-term business hardship]) in terms of safeguarding the interests of workers.

Studies of the impact of German co-determinism indicate that such firms usually retain equal or better productivity and significantly superior longevity, wages and benefits compared to parallel shareholder firms in the same industries. However, they also warn that since stakeholder companies decrease the maximal profitability of firm assets, such firms are less attractive to outside investors on the globalized capital market. For this reason, the blunt instrument of government policy should be used to punish shareholder firms and reward stakeholder firms (with subsidies, tax breaks, etc.) in an effort to correct this market imbalance. Additionally, stakeholder firms should follow the example of various worker cooperative networks by practicing inter-firm lending and risk pooling. Given the fact that the practice of co-determinism enhances the general economic welfare more-so than usage of the traditional shareholder model, it should not be difficult to muster popular support for public and private measures aimed at promoting and protecting stakeholder firms.

German co-determinism represents an improvement over the hierarchical dictatorial nightmare that is American corporate governance. Still, it is just that, an improvement. The interests of capital are still disproportionately prioritized in the stakeholder model relative to those of labor. This will always be the case so long as firm ownership, and thus societal wealth, remains concentrated among an elite few, as it does in both shareholder and stakeholder economies. Only by fully linking a company’s ownership, management and labor among the same individuals (I.e. worker cooperatives) will the incentive structure governing that firm’s behavior align in a harmonious and maximally socially beneficial way.

Source(s): 1) Rebecca Page, “Co-determination in Germany – A Beginner’s Guide,” Arbeitspapier 33, http://www.boeckler.de (2009): accessed August 19, 2014, http://www.boeckler.de/pdf/p_arbp_033.pdf
2) Gary Gordon and Frank Schmid, “Class Struggle Inside the Firm: A Study of German Codetermination,” Nber Working Paper Series, National Bureau of Economic Research (2000): accessed August 19, 2014, http://www.nber.org/papers/w7945.pdf?new_window=1
3) Matthew Yglesias, “Should Workers be Represented on Corporate Boards?” Slate (2012): accessed August 19, 2014, http://www.slate.com/blogs/moneybox/2012/10/03/corporate_co_determination_should_workers_be_represented_on_corporate_boards_.html

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Government Policy and Neoliberal Globalization

Industrial policy is a defining and vital aspect of state capitalism. It refers to all the actions that a government can take in order to facilitate and shape the economic activity of its country. Often times, industrial policy focuses on publicly funding research and development in prospective industries that the private economy is unable or unwilling (due to cost, risk, lack of short-term profitability, etc.) to invest in itself, generally converting the fruits of their innovations into private hands later (i.e. antibiotics). Other times, industrial policy is characterized by measures designed to protect the country in question’s major industries from changing market circumstances (through bailouts, subsidies, tax breaks etc.), namely increased international competition resulting from neoliberal globalization and trade. Although many argue that industrial policy is largely futile and damaging to a country’s economy in the long run due to the government’s inherent lack of economic intelligence and propensity to favor certain politically active private interests over others (i.e. bailouts for General Motors and subsidies for agribusiness, but relatively little help for the now nonexistent American textile industry), the fact remains that such policies are necessary for the maintenance of a functioning society under a state capitalist system, especially when factoring in a now globalized marketplace. As impoverished former farmers in the global south and often government-dependent wage-slaves in the U.S’s. post-industrial cities and struggling suburban communities will attest, capitalism creates very clear winners and losers. The economic dislocation (i.e. un and underemployment, depressed wages, increasing living costs, etc.) suffered by those losers must be mitigated if those individuals are to continue to consume goods and services to the extent necessary to drive the overall capitalist system. Easy credit alone, which for sometime has been increasingly utilized to offset the negative impacts of recent changes to the American economy, can only somewhat and temporarily address such economic dislocation.

Trade policy refers to those measures undertaken by a government in order to facilitate, hamper, or shape its country’s trade with the rest of the world. For most of the 20th century, the General Agreement on Tariffs and Trade (or GATT), an informal international system of economic norms focused primarily on eliminating all barriers to free trade and pushed for by the U.S. after World War II in order to shape an economic world order that was conducive to its own comparatively (when compared to the decimated Europe and the underdeveloped post-colonial global south anyway) unprecedented industrial capacity, has informed the trade policies of most governments in the latter half of the 20th century. The GATT and subsequent transnational economic institutions and treaties have been so remarkably successful at expanding free trade in the long-term that the U.S.’s trade deficit stood at a whooping $378 billion in 2009. This stark fact coupled with other disturbing trends in the U.S. and abroad resulting from neoliberal globalization have thankfully helped to chip away at the problematic conventional wisdom among policy makers of the eternal infallibility of free trade (or at least the unevenly free global system [defined by American and European economies relatively shielded from global competition and a persistently impoverished global south with little to no such protection] that is contemporarily called free trade). If governments are to both maintain expected standards of living in their countries and ensure that there is sufficient economic demand on the part of increasingly poor consumers to the extent that the capitalist system is able to sustain itself, a revaluation of GATT-rooted trade norms will need to take place.

So long as globalization occurs along neoliberal lines, wherein the economic system priorities short-term profitability, efficiency and shareholder/investor interests (i.e. capitalism) over economic sustainability, efficacy and stakeholder/worker interests (factors prioritized by alternate economic models, including those found under the umbrella of libertarian socialism), industrial policy aimed at offsetting the destructive byproducts of that economic system will be necessary. Additionally, as the private capitalist economy is ill-suited to both provide certain goods and services (i.e. healthcare and education) and make long-term investments in areas needed to facilitate technological innovation (i.e internet) and commercial activity (i.e. infrastructure), the practical need for at least some level of industrial policy in a contemporary context is undeniable. Furthermore, it is perversely gratifying to see the United States and other Western countries, who historically ignored norms of free-trade that threatened their own state capitalist (protected) economies while facilitating the vicious exploitation of the economically unprotected and underdeveloped post-colonial global south (with their IMF induced vulnerability to the global competition and lack of domestic public spending due to structural readjustment packages designed to make their economies more attractive to foreign investors and implemented in exchange for IMF loans) by American and European investors and firms, fall victim to the long-term results of neoliberal globalization that they themselves championed. Ultimately, the United States, and other (what Immanuel Wallerstein’s Dependency Theory would call) core countries, will need to increasingly rely on active industrial policy in reaction to the long-term failure of their respective trade policies.

Source: Richard Lehne, “Government and Business: American Political Economy in Comparative Perspective” [Third Edition] (London, UK: SAGE, 2012).

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