Talking with the Paul Jay from the Real News about public ownership

My discussion with the Real News’ Paul Jay about my recent article in The Nation (with Thomas Hanna), “Beyond Corporate Capitalism”

Part 1

Part 2

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.

There was an interesting moment during the 2008 presidential elections. The last couple of weeks, President Obama was ahead, and summoning up all the demons of the Cold War, John McCain fired what he thought might be a decisive shot. He called President Obama socialist. Obama’s reaction was rather interesting. He kind of stared it down. He said, I read my Bible; it says I should be my brother’s keeper. Well, I don’t think we’ve seen much of that President Obama since that moment. At the same time, he did go on to win the election, in spite of all of that rhetoric.But the issue of public ownership keeps reasserting itself. During the crisis there was a lot of discussion about the importance or need for nationalizing banks and such. But now, two years after the crisis—supposedly after the crisis—the issue of public ownership seems to be back off into the margins of the discussion. Well, we think it should be back up front and center.And now joining us is someone who’s done some work on this issue of public ownership, Gar Alperovitz. He’s a professor of political economy at the University of Maryland, College Park. He’s the founder of the Democracy Collaborative at the University of Maryland and a member of the board of directors for the New Economics Institute. And he served as a legislative director in the U.S. House of Representatives and the U.S. Senate. He’s the author of the book America Beyond Capitalism. Thanks for joining us, Gar.

GAR ALPEROVITZ, COFOUNDER, DEMOCRACY COLLABORATIVE: Glad to be with you. Thanks, Paul.

JAY: So what prompted you to write this piece? This was an article recently about public ownership you wrote in The Nation.

ALPEROVITZ: Well, several things. One, the new poll data on all this is kind of very interesting. You know, the Cold War is over, and younger people, the people in the age 18 to 29, a recent pew study said, say they are 49 percent more favorable to the word socialism and 43 percent for capitalism. Isn’t that interesting? There is a change going on. In fact, there’s been a trend: a couple of polls earlier had been even, and now it’s moving in this direction. The numbers for capitalism in general have been falling down. And this is a generation that’s going to make the new politics. Also saw a poll just recently, just the other day: 36 percent of all Americans, not just young people, believe that capitalism is incompatible with Christianity—”my brother’s keeper” line. So what that really means we don’t know.And, finally, the other reason was—and I, frankly, get tired of this, the word is thrown around so much—anything at all that is progressive is now being labeled with the word socialism. And it’s just ridiculous, because the right-wing language and rhetoric has gotten out of hand. It has no meaning whatsover [inaud.]

JAY: Yeah, I guess it’s a little—. I guess “greed is good” is not to be found in the New Testament. Now, in your piece you talk about the—.

ALPEROVITZ: In fact, I think the line is that a rich man has more chance of going to heaven then a camel getting through the eye of a needle.

JAY: Right. That’s actually more Jesus’s message, which today certainly would be branded socialism. More than that, I think it would probably be branded class warfare to talk like that.

ALPEROVITZ: And if you go a little further, Acts 2 has everyone laying down their private ownership to join collectively in the common Christian effort. So there’s a lot of love thy brother that is much more prevalent, and the preference for the poor is much more prevalent in the Old and New Testament than the notion about socialism that we’re talking about.

JAY: So the basic thesis of your article is that public ownership, at least in certain critical sectors of the economy, is actually the only way to solve some of these problems facing the country. What’s your point?

ALPEROVITZ: [incompr.] the only way, and it’s much more efficient. Now, that’s—that goes right directly contrary to the argument of many conservatives. And so take number one, you cannot anymore regulate the large banks. Theoretically you could regulate them, but they are far more powerful than any regulator. And the swarms of lobbyists on Capitol Hill—this is now conventional wisdom. Right wing, left wing, academics, everyone really knows this. They just don’t say up the implications out loud. The lobbyists are writing the regulations and rewriting them. And the possibility and the likelihood we’ll have another financial crisis, every expert that I read, left, right, and center, expects a crisis to happen again because the regulations just can’t be done, there’s too much power on the other side.So I suspect what’s going to happen in the real world—we may have another crisis. And maybe the first reaction will be, okay, if people get angry enough, they’ll break up the big banks. And then, obviously, the big fish will eat the little fish and we’ll be back with the big banks trying to run the game again. And at some point I think it is all but inevitable that, someplace, we’re going to turn some of these big banks into public utilities. And I think that’s the only way to actually manage it. It’s the only practical way to deal with the problem. I think it’ll take us a decade, two, and a lot of pain to get there, but I suspect it’s going to—it’s obvious, because there aren’t any other real-world alternatives that are workable. The head economist of Citicorp, no less, Citicorp, biggest bank, said before he became head economist that if the public’s paying the bills, we really ought to be public utilities. And I agree with him.

JAY: One of the points you make in your article: if you do make the main emphasis on breaking up the big banks, that even if you’re successful, like the phone companies, once you break them up, over a matter of so many years, depending, they wind up reemerging as the big Goliaths again.

ALPEROVITZ: Yeah, that’s just the process, because the advantage is to them controlling more and more markets, more and more capital, more and more deposits, and as soon as they get rolling, they get more momentum, and, as I said, the big fish eat little fish, and we’re back where we started.You know, another point about this, and I mentioned it earlier: efficiency. You know, right-wing economists or kind of what I call old-school conventional economists say that these big public enterprises are not efficient. Well, compared with what is always the question. These banks have cost us trillions of dollars in lost output, massive economic collapse, people thrown out of work, thrown out of their homes, the economy slipping to 10, 12, and in the real world, if you count everybody, 20 to 25 percent unemployment as a result of their so-called efficiency. It is ridiculous to look at whether or not, internal to some bank, the way in which they do accounting is more or less efficient than whether or not a public utility does accounting, more or less efficiency within the bank, and the outcome of the big efficiency—massive unemployment, loss of economic output, loss of—is neglected. We don’t look over there. They are massively inefficient because they cause so much cost and so much waste by any standard at all.

JAY: Right. The generalized cost of, for example, the fossil fuel industry is not taken into account when you look at the efficiency internally of the fossil fuel industry.

ALPEROVITZ: Exactly. If you look narrowly, then—and this is the argument that’s always put up on the other side—look inside. These guys are much more efficient than some government bureaucrat. Maybe so. But if you can maintain stability in the economy rather than crash the whole airplane, which has massive costs, that’s the place to look. And we’ve got to balance those two. And the balance always comes out: obviously we’ve got to get some way to control these guys. And if you can’t regulate them, and if you can’t break them up so they stay broken up, there’s only one logical—.You know, the people who made this argument are not liberals and they’re not socialists. It was the founders of the Chicago school, the most conservative school of economics, that pointed out, if you can’t regulate them, in the end the only way you get a free market is to socialize or nationalize some of the big ones in order to have the market to function. That was H. C. Simons, the founder of the Chicago school of economics, Milton Friedman’s teacher and a very conservative economist who understood that these guys capture the regulatory organizations if they’re that big, so you’ve got to deal with it.

JAY: Well, President Obama has said many times, you know, in his last State of the Union and out on the campaign trail, that there is effective regulation now. He talks about Dodd–Frank, he talks about the Volcker rule. I mean, isn’t—doesn’t that show some evidence that regulation is possible?

ALPEROVITZ: In theory, regulation certainly is possible. And, indeed, when we had a stronger progressive liberal movement, maybe in fact it was possible for a while. But the movement that supported that really at its heart had organized labor as the muscle, the economic muscle behind the movement. And labor has dropped from 35 percent of the labor force to 11 percent, and only less percent less than 7 percent in the private sector. And the muscle in the movement that really could make effective regulation, unfortunately, it’s gone, which means that, you know, we either have to deal with the fact that regulation doesn’t work or we’re going to have another recession, which I think we will have. We’ll have more crises. And at some point we’ll wake up to say, look, the only answer is to make them into utilities, some of the really big ones, and that’s the only way to make the system work efficiently at all, or just work.

JAY: Well, now, there were some moments in the last couple of years, last four years, that presented themselves that one would’ve thought was the time when you could have had some assertion of public ownership. I mean, let’s start in the financial institutions with AIG. And, I mean, we’ve essentially nationalized. But what happened?

ALPEROVITZ: Well, AIG, which is the largest insurance company in the world, is in fact owned substantially—a majority of the stock is owned by the U.S. government today. But instead of using it as a way to really control it, we set up proxy votes and set up trustees who are kind of beholden to Wall Street, who are the people who, arm’s length away from the public, are managing this operation, even though the public still owns it. Same thing could have happened with some of the big banks. We bailed them out. We could have bailed them and taken stock, and voting stock, and made them into public utilities instead of, you know, massively subsidizing them from the federal treasury and the Federal Reserve board, and then giving them back to the people who made all the trouble. So this is a possibility once you have to bail them out. That’s the time to actually assert control and do what, as I say, the chief economist of Citicorp said: if the public pays the bills, you know, it’s time to just turn them into utilities and make them run—kind of hold the line and be a stable system.

JAY: Well, unfortunately, most of the leadership of Wall Street is saying the public should bail us out and we should keep our bonuses and great payments and keep things as they are—and, in fact, as we can see from JPMorgan, go right back into the risky derivatives trading again, never mind any kind of change at all.

ALPEROVITZ: Yeah, it’s much larger now than it was before the crisis, and I think we’re going to see the results of that.But I’m an—in one sense, I think we’re going to have the pain lessened. At some point, I think, this is not an issue just of liberals and left and right. As I say, the real ideas that I’m talking about came out of the Chicago school of economics, the most conservative economists, who were at least sophisticated enough to face the problem directly that you couldn’t regulate them. And I think, as people are angry—even the Tea Party people get really angry at these big banks—at some point, the only obvious logical answer that’s going to be left is, you know, make them into utilities. That’s the only, you know, practical way to do it.

JAY: Okay. Well, we’re going to carry on our discussion in the next segment of this interview. So please join us for part two of our interviews with Gar Alperovitz on The Real News Network.

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And we’re continuing our discussion with Gar Alperovitz. He’s a professor at the University of Maryland—political economy—at College Park. He’s a founder of the Democracy Collaborative at the University of Maryland, a member of the board of directors for New Economics Institute. He’s served as a legislative director in the House and the Senate. He’s the author of the book America Beyond Capitalism. Thanks for joining us again, Gar.

GAR ALPEROVITZ, COFOUNDER, DEMOCRACY COLLABORATIVE: Glad to be with you, Paul.

JAY: So in your article you talk about one of the problems with private ownership, particularly in critical parts of the economy (some people call it commanding heights of the economy) is this kind of dictum, especially on Wall Street, but not only: grow or die. So the issue of growth in the short-term sense becomes the only imperative. Why is that a problem? That’s supposed to help drive the dynamics of capitalism.

ALPEROVITZ: Well, and certainly it has been. A great achievement of modern capitalism has been productivity and growth and the generation of income and wealth. That’s the plus side.

We’re now running into climate problems. We’re running into global warming that’s coming out of high growth. We’re running into eating up water resources, oil, energy, land. We’re running into, as some—the ecologists put it, we’re running out of planet, that there is a resource limit that many, many of the environmental folks and the ecologists suggest we’re going to have to slow down growth at some point or we’re going to pay the consequences in terms of lost life and lost energy and the terrible difficulties that come with climate change.

So without going in great depth into that argument, the question that you’re asking is about why the big corporations are a problem here. Well, the large corporations—. And, you know, I think there’s a big role for small- and medium-sized business and co-ops and worker-owned companies. But the large corporations who have the Wall Street problem on their back, they’ve got to do their quarterly earnings increases no matter what, and if they begin to slip, if they stop growing, if they stop producing those quarterly returns, they’re out of a job—those companies go down and their stock goes down. So they’re under tremendous pressure. Even the good guys in those companies who want to do well by the environment cannot do so because they will lose their power. So the company—these animals, these big corporations have to continue to grow. And that’s at direct odds with the ultimate limits of resources and climate that we face. So at some point you can’t regulate that. The primary motivation and structure and dynamics of these entities, large corporations, is what it is.

And the only way to deal with it, frankly, is to change that structure. And what that means is they have to be turned into either some kind of not-for-profit or public enterprise, because that doesn’t have to do that. It can be stabilized, it can be managed, and it doesn’t have to have this growth internal dynamic that just continually has to grow no matter what. So I don’t think there’s a way out of that logic either over time, and I think it’s forcing us to ask really profound questions about the long-term future of these big companies that are at direct odds with the problem of planetary limits.

JAY: Now, one of the things you point out in your article is that this isn’t actually quite so radical, the departure, in the sense that public ownership of big enterprises is not so new to the United States.

ALPEROVITZ: No, it isn’t, indeed. I mean, you can look at it in different parts of the economy. And people tend to forget this.

The place I like to start is there are 2,000 public utilities in the United States, municipally owned utilities. They’re all over the place. In fact, 25 percent of American electricity is, quote, “socialized” because of co-ops and municipal utilities. Twenty-five percent is delivered that way, not through private corporations. So that’s a very conventional form. If you look at that Tennessee Valley Authority, one of the largest energy producers in the country, it is a publicly owned entity, and it also does river maintenance, ecological maintenance in the Tennessee Valley, and it is a very significant scale public entity. Health care, half the health care system, Medicare, is a public insurance program, and it’s a very large insurance company under public ownership, if you like. And everybody—nobody wants you to mess with—as that famous line, we don’t want the government to mess with my Medicare. Well, it is a government program, a government corporation, a government business. Similarly, Social Security is a government pension fund or pension insurance program. So if you look [inaud.] 27 states now invest directly in companies and own shares in companies.

If you peel back the rhetoric, we do a lot of this [anyway]. And around the world, you know, public ownership is conventional—you know, railroads in France, high-speed rail very efficient in France and Japan and Italy, many parts of the world; much better telecommunications and internet service in most parts of the world, both private and public, and they use public ownership of internet as a way to kind of keep a checkpoint, a kind of a way to balance off the corporations so that they have to keep up to, really, standards. Again, 60 percent of the oil companies of the world are owned by the public. It’s very common around the world, even though our press doesn’t cover it. And by and large there are more and more efficiencies—a recent Harvard business—international business review study suggests more and more efficiencies are possible in the public sector than many people have thought, despite the right-wing critique and the right-wing rhetoric about this.

JAY: Right. Of course, the part of the public sector that doesn’t get critiqued so much and is probably, I guess, the biggest piece of the public sector, or certainly one of the biggest pieces, is the Pentagon and the whole military budget, which is essentially all publicly owned, but it’s a massive part of the American economy.

ALPEROVITZ: Yeah, a huge part of the economy. And in that case we take—and also make profits—wasteful profits, in many cases, these big military contractors pushing unnecessary weapons. But there it is. It’s a public sector entity as well, running that whole big part of the economy.

JAY: But part of the critique of public ownership—and many of the—you can certainly hear it from libertarians, who I think are consistent about all of this, where they do critique military expenditure, as opposed to the sort of Republican conservatives that critique everything public but the military. But, anyway, part of that critique is that you need that discipline of an owner that has to report to shareholders, that has to worry about going bankrupt, and that, you know, that gives a kind of internal discipline that creates an efficiency and competitiveness that gives rise to creativity and better efficiency and so on. So, you know, is that not true?

ALPEROVITZ: Well, look, as I said earlier, I think there’s a role for small business, local role for small business. There’s a role for these high-tech, high-performing small businesses. There’s a role for—you know, there are 130 million Americans involved in co-ops and co-op credit unions around the country, and there are 10 million Americans involved in worker-owned companies.

The bottom line: the deep kind of community base of our economy should be small business, co-ops, high-tech industries. That’s very creative stuff. But the ones, the big giants that—you know, we talk about banks having systemic risk. Well, that’s a key large industry that [inaud.] role in the economy that it can really—you know, it can make big trouble for the economic system. And that’s a place where they can create massive losses. And [inaud.] you can’t break them up because they’ll regroup and you can’t regulate them because they’re too powerful, well, then the only choice left is to make them public.

Take another one, health care. The way in which we run the health care system in this country, we are moving towards 20 percent. Just a little under 20 percent of the economy is going to be health care in a couple of years. That’s a fifth of the economy. In most parts of the advanced world, much better health services, much better health statistics, much better outcomes for half the cost. That is to say, about 5—instead of 20 percent, it’s about 10 percent of the economy. Well, that’s $1 trillion a year of waste for the whole economic system. And maybe you can afford that, but I don’t think this economy can afford $1 trillion here and another trillion or several trillion because the banking industry screws up.

These are massive, massive inefficiencies, massive pain to the American public. And in the case—even if they were less efficient internally, they didn’t do their accounting as well or the management, if you can save $1 trillion on health care and you can save several trillion by preventing recessions, I will accept little inefficiencies even if it were true. And by and large the studies are very complicated. It isn’t necessarily so that the public banking systems around the world—many parts of the world, have public banking—are more or less efficient. They may be more efficient on balance, even internally, than ours, and certainly internals of the health care system—much more efficient.

JAY: And some of the people that make this argument against nonprofit and public ownership and for for-profit, they have no problem heading off to Johns Hopkins and Mayo Clinic and other places that are nonprofits when they need to save their lives. In fact, studies I’ve seen show that the safest hospital you can go to is a nonprofit, the next safest is state-owned, and actually the least good results are actually privately-owned hospitals, partly, they think, because of pressure to do unnecessary surgeries and such.

Let’s actually get to the politics before we get to what the structure might look like. I mean, isn’t the politics of achieving the kind of public ownership you’re talking about even more difficult than achieving regulation?

ALPEROVITZ: I actually think it’s just the reverse. Now, this is paradoxical. It kind of puzzles people. But I think that the—take the banking industry. I think these guys are so out of control that they are going to create another crisis. And the anger that that already has generated in the last crisis on the right and the left against Wall Street, Main Street against Wall Street, I think at some point is going to be overwhelming.

And then the fact is the logic takes place: you can’t regulate them. They’re too powerful. If you regulate them, they will undo the regulations through the back door. If you break them up, they’ll regroup.

I think at some point that anger’s going to build up and people are going to say, enough is enough, we’ve had it, we’ve got to stabilize this system, stop playing with our lives. So I think that politics—now, remember, I don’t think that’s going to happen this week, but I think that’s the direction over the next several—and I think we’ve begun to talk about it directly. You know, that’s the direction. The logic of the direction suggests that, as we go forward, there’s going to be only one way out of this way, and that is to make them into utilities.

And health care [inaud.] pain and a lot more costs. I think the pain is really—you know, the last time around, we saw people thrown out of hospitals and left on the street because they didn’t have—ran out of insurance, and people dying and the pain levels of families. So I think the anger level’s there. And the cost problems, many companies who face these cost problems in international competition, there is a pressure building up on the cost side that I think is going to lead us inevitably, because the costs are so bad and the personal costs and the pain levels are so high, towards step-by-step, maybe state-by-state—like, Vermont is setting up single-payer, Hawaii has 90 percent in one form or another of a kind of quasipublic structure, and I think we’re going to move slowly, state-by-state, as the pain gets worse, and having some of the corporations on the side of trying to change this ’cause they don’t want to spend costs either.

Over time, I think the health care system—and those are two biggies—banking and health care over time could become very powerful change. And then I think we’re going to start thinking about what other industries are important. As I say, I’m not—I think [crosstalk] should never be in the public sector, small business and big—and creative new high-tech industry, not at all. But some of these things are so dangerous to the economy, we really ought to be talking about them.

JAY: One of the arguments that libertarians make which I think has a lot of truth to it, and one—their critique against regulation is that the biggest corporations can afford regulation. They often use regulation to actually drive out competition from mid-size, smaller-size companies. And you have somewhat the same argument that if there isn’t a shift in who has power in the society, that even if you had, say, for example, some kind of public ownership or some banking as a public utility, that it wouldn’t really shift the balance of power, that what you would have is that side/piece of the economy would kind of be used as a patch because the crisis was so severe. But the actual concentration of political power would remain in very few hands, and they would kind of make use of this public ownership to sort of reinforce their strength. Does there not also have to be some democratization of the politics at the same time?

ALPEROVITZ: Yeah, you need a politics and you need to—. That’s why it’s important to start talking about this, so we have an informed politics. I think the progressive politics right now in the banking is, let’s break them up. And I’m for that, but I think it’s going to result in—as I said, they won’t—even if you break them up, like, the insurance industry or, like, the oil industry, they’ll get back—the big fish will eat the little fish, they’ll be back and doing the same thing. So we need an informed politics that understands some of the logic of all this as well.

But it’s absolutely true. When regulated, many of these companies use the regulations to destroy other small competitors. There was a famous study of this done. The early part of the regulatory commission set up at the beginning part of the 20th century, it’s called triumph of the conservatives because they’ve used the regulations in order to control their part of it. And often—you see this in cable television, too—the big guys control it through—even if they’re regulated, they use the regulations indirectly to keep out the small fry. So there’s a small-business argument and a very interesting one, an efficiency argument, really, to challenge this as well.

JAY: Okay. Well, we’re going to continue the discussion with Gar, but we’re going to wait until you, our viewers, send us your questions, your challenges, your comments. So you can put them below the viewer here, below the video player, and we’ll collect some of the best questions. And we may open up a special page for questions for Gar as well. And then we’ll invite Gar to come back again and respond to some of your, as I say, comments and challenges. So we’ll continue, ’cause this issue of public ownership is a rather profound and big issue facing the society. Thanks very much for joining us, Gar.

ALPEROVITZ: Good. Thanks. Glad to be with you, Paul.

JAY: And thank you for joining us on the The Real News Network.