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Gar Alperovitz is the author of What Then Must We Do?, America Beyond Capitalism, and The Decision to Use the Atomic Bomb, and an advocate for a new, community-sustaining economy.

Debating public ownership of too big to regulate banks in the New York Times

The New York Times’ Room For Debate recently featured an exchange around the question Are Big Banks Out of Control?  My contribution to the debate follows (originally posted here):

Nationalize Banks That Overwhelm Regulation

The announcement of a settlement with JPMorgan Chase in connection with the Bernie Madoff Ponzi scheme brings into focus one of the most important, if unexpected, strategic ideas of the early, highly conservative Chicago School of Economics. The key judgment: Contrary to the conventional wisdom calling for stronger regulation, a number of early conservative economists held that some institutions were simply too big and too powerful to regulate. They would always find a way around government efforts to keep them in line in connection with certain critical economic issues. George Stigler, for one, received a Nobel Prize for illuminating the institutional power relations involved in what is commonly referred to as “regulatory capture” — the informal way in which regulations always get watered down sufficiently so that somehow things tend to slip through the cracks.

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10 Steps You Can Take to Democratize Your Community

An interview with Abby Martin of Breaking the Set about my recent article “What Then Can I Do?” highlighting strategic organizing opportunities for building a new economy:

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Mondragón and the System Problem

fagor(with Thomas Hanna, originally published at Truthout)

As America moves more deeply into its growing systemic crisis, it is becoming increasingly important for activists and theorists to distinguish clearly between important projects and “institutional elements,” on the one hand, and systemic change and systemic design, on the other. The recent economic failure of one of the most important units of the Mondragón cooperatives offers an opportunity to clarify the issue and begin to think more clearly about our own strategy in the United States.

Mondragón Corporation is an extraordinary 80,000-person grouping of worker-owned cooperatives based in Spain’s Basque region that is teaching the world how to move the ideas of worker-ownership and cooperation into high gear and large scale. The first Mondragón cooperatives date from the mid-1950s, and the overall effort has evolved over the years into a federation of 110 cooperatives, 147 subsidiary companies, eight foundations and a benefit society with total assets of 35.8 billion euros and total revenues of 14 billion euros.

Each year, it also teaches some 10,000 students in its education centers and has roughly 2,000 researchers working at 15 research centers, the University of Mondragón, and within its industrial cooperatives. It also actively educates its workers about cooperatives’ principles, with around 3,000 people a year participating in its Cooperative Training program and 400 in its Leadership and Team Work program.

Mondragón has been justly cited as a leading example of what can be done through cooperative organization. It has evolved a highly participatory decision-making structure, and a top-to-bottom compensation structure in a highly advanced economic institution that challenges economic practices throughout the corporate capitalist world: In the vast majority of its cooperatives, the ratio of compensation between top executives and the lowest-paid members is between three to one and six to one; in a few of the larger cooperatives it can be as high as around nine to one. Comparable private corporations often operate with top-to-median compensation ratios of 250 to one or 300 to one or higher.

Although it has been criticized for violating its cooperative principles through somewhat “imperial” control of some of its foreign operations, for its use of non-cooperative labor, and for a less-than-active concern with environmental problems, in recent years Mondragón has begun to address deficiencies in these areas.

Bankruptcy for Fagor Electrodomésticos

Mondragón Corporation’s historically most important unit is Fagor Electrodomésticos Group, which makes consumer appliances – “white goods” such as dishwashers, cookers and other related household items. It is the fifth-largest manufacturer of such products in Europe. It employs roughly 2,000 people in five factories in the Basque region and has and additional 3,500 in eight factories in France, China, Poland and Morocco. Its direct predecessor (ULGOR) was the first-ever Mondragón cooperative – established in 1956 by five young students of José María Arizmendiarrieta, the spiritual founder of Mondragón cooperative network.

Mondragón recently announced that Fagor was failing and that the company would be filing for bankruptcy protection. Ultimately, Fagor was unable to find financing to pay off debts of around $1.5 billion related to a 37 percent slump in sales since 2007 that resulted from Spain’s economic crisis and housing market collapse. Under Spanish law, the company now has four months to negotiate with its creditors – which include the Basque government, banks and others – and formulate a restructuring plan.

As part of any restructuring or liquidation, Mondragón will provide jobs and income security for a certain period for some its workers in Spain. This is one of the cooperative network’s great advantages. It has announced that its internal insurance company Lagun Aro will pay 80 percent of the cooperative member’s salaries for two years and the corporation will strive to relocate as many employees as possible to other cooperatives in the network.

The fate of the roughly 3,500 non-Spanish wage laborers (i.e. not cooperative members) in other countries, however, is unclear.

Some Specific Problems

Given its importance, we are certain to see any number of economic reports on the specific problems that created the failure of Fagor. The larger questions posed by the failure, however, are the relationship of large-scale economic institutions to the market in any system, and the lessons for long-term systemic design for people concerned with moving beyond the failings of corporate capitalism and traditional socialism.

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Bioneers Radio (with Ted Howard)

The good folks at Bioneers Radio recently put together this great short program featuring myself and my Democracy Collaborative colleague Ted Howard:

A Parade of Dwarves: Democratizing Wealth for a New Economy

GAR ALPEROVITZ and TED HOWARD
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The Next America: The Emerging New Direction as the Old Order Decays

Video from my recent talk at the Schumacher Center for a New Economics:

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