Cooperatism is a new economic system, the first non-adversarial one and badly needed in the present economic and financial crisis. While it is unlikely to be implemented in full, parts of Cooperatism can be adopted or adapted to meet the present economic and financial crisis.
The Beatles had a song titled, “What the world needs now is love, sweet love.” In the economic and financial spheres, however, what the world desperately needs now is a new economic system, one which works to the advantage of all segments of society, avoiding or minimizing the inherent defects of past systems. The present major malaise afflicting the economies of many nations can best be understood as a direct consequence of our reliance on outmoded, adversarial, and indeed unworkable economic models. Therefore, that malaise cannot be cured by more of the same, by reliance on outmoded monetary, fiscal, and other policies which, indeed, have been major contributors to the disastrous financial and economic situation now confronting us.
Playwright George Bernard Shaw, tongue in cheek, once said that the difference between capitalism and communism is that in capitalism man exploits man, whereas in communism it is the other way around. The entire West is cheering at the demise of the former Soviet Union, hailed as the triumph of the market economy over communism, sounds somewhat hollow today. Perhaps capitalism’s so-called victory was hailed a bit prematurely and uncritically. This article presents a better alternative: Cooperatism.
The vast majority of the human race, whether in the West or in the East, whether in advanced post-industrial societies or in primitive ones, whether in democracies or in dictatorships, shares one common viewpoint: economic dissatisfaction and frustration. Indeed, economic distress is so pervasive and universal that it has come to seem normal, even inevitable. While our present system has produced great wealth for the few, it has also resulted in misery for the many, and has contributed to the rise of intolerance and a narrow fundamentalism increasingly expressed through terror tactics against innocents. There is, of course, nothing new about our economic systems failing to meet the needs of most people. When we review the world’s economic history – from tribalism to the early civilizations, from mercantilism to merchant capitalism, from utopian socialism to State socialism, from idealistic communism to repressive communism, and from that form of communism back to modified capitalism with its numerous variants – the actual application of each and every one of these economic systems, and others, is based on adversarial relationships. Individuals are pitted against each other, groups battle with other groups, classes struggle for ascendancy or at least a major “piece of the action.”
Karl Marx had a point when he stressed the class struggle as our economic basis, but he failed to see that the same struggle would continue just as strongly under communism. Consider the American economy in the much-heralded Brave New Millennium. The middle class is eroding as the wealthy own and control an ever-larger share of our resources. Small business, the sine-qua-non of capitalism, is squeezed into a declining portion of the economy, only temporarily redeemed by new start-up firms and innovative ventures. Those start-ups and innovators, in their turn, will join giant conglomerates if successful, or will disappear if unsuccessful. Average wage gains fall behind inflation, while millions of our jobs are lost to low-wage foreign firms or U.S. subsidiaries running sweatshops, often with child labor. The American dream of home ownership is lost to many. Decent medical care is unaffordable for millions of the uninsured or underinsured.
Meanwhile, we abuse the environment as if North America – and even the earth – are expendable: more and more plant and animal species disappear, land and resources are depleted, waters are polluted and made hazardous, the air is increasingly full of toxic gases, the holes in the ozone layer enlarge, while we contemplate such disastrous actions as drilling for oil in the last major wilderness on the continent. The list of environmental abuses is virtually endless, ranging from the horror of radioactive waste to the State of North Carolina’s new role as a gigantic pig farm. The United States, with less than one-twentieth of the world’s population, uses up something like one-quarter of the world’s resources, and in that process generates a gross national “byproduct” of wastes which may well exceed our thirteen-trillion-dollar gross national product. Yet, all is not doom and gloom. What is desperately needed is a whole new economic model, one which is non-adversarial, non-exploitive, and environmentally-friendly. Cooperatism is just such an economic model, a system which has the capability to bring out the best in all segments of our society, to give all of us a stake in our economic future. This is a workable economic system, based on the realities of human behavior rather than on some appeal to our “higher sensibilities,” whatever those might be.
Adam Smith’s Invisible Hand doctrine, which leads each business firm, following its own self- interest, to do what is best for society, is inoperative in a world of mega-corporations and immensely-concentrated economic and political power. Rather, Cooperatism substitutes a functional system of checks-and-balances in the economic sphere, comparable to the checks-and-balances which have served political democracies quite well for centuries.
Essentially, under Cooperatism, corporate boards or comparable governing bodies would be mandated to have balanced representation from the four major groups interested in each business: stockholders, workers, consumers, and community. Top professional management would be hired by an appropriate personnel committee with a structure parallel to that of the board itself, and these top managers would in turn hire the subordinate managers and other staff. Hence, workers, consumers, and the community (or, for corporations not selling to consumers, the general public) would have a vital say in the modus operandi of the firm – just as they have a vital stake in the firm‘s outcomes. Decision-making would be far more representative of all valid interests than it is today, and far more balanced and effective as well. When workers, consumers, and community are left out of vital decision-making processes, it is not surprising that decisions are poor. Indeed, the nature of the problems with the present market economy model has been known for decades and is a frequent subject of discussion in corporate circles, MBA programs, and both popular and learned journals. For example, there is the old chestnut called “the principal-agent problem” which refers to the difficulty of keeping corporate managers responsive to their boards, let alone the stockholders. Professional managers have their own motivations and goals, which do not coincide with those of the company they manage – nor can all the profit sharing and stock option plans in the world resolve these issues. Managers work towards the next rung on the corporate ladder in each job they hold. They mostly do what is best for themselves, rather than for their companies, let alone for the broader society. The recent “bailout” mainly bailed out selfish CEOs.
Cooperatism aims at resolving many of these concerns and issues by bringing all relevant parties into the decision-making processes in a meaningful way. Not only is it applicable to the corporate sphere, it is perhaps even more relevant to rural and agricultural settings. In smaller communities, there are already face-to-face relationships in place, and a history of mutually-supportive and productive relationships. For example, the New England Town Meeting and the complex interweaving of local Town committees and boards provide a structure which already mirrors the structure and processes envisioned under Cooperatism. Another approach, the Ombudsman in Scandinavia, provides for the voices and views of those affected by government and other decisions to be clearly incorporated into the decision-making process and its results. Of course, Cooperatism would require fundamental legal and societal changes in our present economic system – but, in reality, such changes occur continually, as models are modified to meet new and different social and financial needs.
Today’s market economy is far from what Adam Smith envisioned in The Wealth of Nations, published in England in 1776. Business activity took place on a small scale, except for the exploration of the New World and the exploitation of its resources. Government was much less involved in the business sector than is the case today. Technology was primitive, in its early stages. Just as today’s market economy evolved out of those early stages existing several hundred years ago, a broadened system including all elements with an interest in the results of economic activity needs to be developed now. We need to expand business governance from stockholders to all stakeholders. That’s what Cooperatism is all about.
Eugene F. Elander is an economist, currently lecturing at Brenau University in Gainesville, Georgia.
Cooperatism was the focus of his doctoral dissertation at Columbia Pacific University.