Screwball Letters 4


Jim to Tony: Creating jobs, raising incomes
There’s been a lot of media noise lately about a book called Capitalism in the 21st Century by the French economist Thomas Piketty. [Most people won’t read it, even the ones who say they did, but in this case it’s hardly necessary. The work has been so thoroughly reviewed in so many places that only the very unread will escape some understanding of it.] He attributes growing income inequality almost everywhere to the inherent tendency of capitalism to deliver higher returns on capital than it does on labour. Owners of capital, both cash and hard assets, get richer much faster than workers, who sometimes go????? backwards in purchasing power even as capital assets keep appreciating. He advocates things like a global tax to fix this, but a recent NY Times Magazine article suggests a better remedy — co-operatives. The fundamental democracy of worker co-operatives militates strongly against capital returns flowing to the top. In worker co-ops when the business grows so do worker incomes. The opposite actually happens often in typical capitalist enterprises; outsourcing increased production, for example, slashes local jobs, while boosting returns to owners. Of course, the co-op model doesn’t work for all businesses, especially ones with high start-up costs or other major barriers to entry. But there are lots of labour-intensive businesses with low start-up costs that have little or no need to innovate or pursue risky development strategies. All many have to do is manual labour, like sweeping, washing or driving trucks. The NYT article cites several cases in U.S. cities where groups of hospitals and universities have banded together to fund the creation of co-ops which then become their providers of services such as laundry, cleaning, and fresh produce deliveries. The co-op services are competitively priced, and the workers are better paid than workers at owner-operated alternatives. As anxiety about income inequality continues to escalate, this looks like a promising opportunity for the co-op movement. The new apex organization (Co-operatives and Mutuals Canada) should publish a manifesto and distribute it to institutions of all kinds, outlining the ways labour-intensive co-ops could create local jobs, raise manual worker incomes, and offer a little counter-balance to prevailing inequality trends. It will do nothing to solve the problem at the top, but it offers some relief to those who can use it most at the bottom. It’s time for the co-op movement to focus on the kinds of bottom-tier businesses where worker democracy can have the most beneficial effects. Isn’t that where the movement began?

Tony to Jim: Interesting fit with Lonergan
You’ll remember from days of yore Bernard Lonergan SJ, CC. At the time I first encounteresd his work I wasn’t aware that he had some history as an economist, or economic analyst I should say since economics is one degree he didn’t have. But he delved deeply into economic thought and what he came up with isn’t far off the NYT trail. From a bio of the great philosopher that I recently updated on another site: “Lonergan’s interest in economics was stimulated by social disruption in the first instance and, in the second, by the quandaries that the profession was experiencing. These instances were separated by some forty years. ‘When I came back to Canada in 1930,” he said, “the rich were poor and the poor were out of work. The rich were trying to get money selling apples on the street. Many theories were floating around.’
His response was to identify two separate but interactive levels in the economy that produce wealth and income in different ways. The surplus sector produces goods for further production, e.g. rails for railroads. The basic sector produces goods for consumption. As well, when prices rise, workers demand more and the wage-price spiral begins. When prices fall, producers pull back from investing and recession begins. The result is often panic and “panic doesn’t get you anywhere; it is just stupidity, loss of nerve.” He proposes an economic policy based fundamentally on a strategy of education, generating widespread understanding of the way these cycles work and the natural interconnection between them.
This isn’t far from the conclusion that persuaded Moses Coady at St. FX in Nova Scotia to lead the Antigonish Movement. Coady thought a local economy could be revitalized if the right type of learning was cultivated by ordinary people: especially critical thinking, scientific methods of planning and production, and co-operative entrepreneurship.
Lonergan was far from embracing socialism, “which doesn’t work very well.” He believed that “the trouble with the welfare state is that it crowds out investment, and if you crowd out investment the economy goes to pot.” But he favoured creation of benevolent enterprise, small-scale industries that employ people who can’t be taught much, or who can’t find jobs elsewhere. Also, “If you can have government deficits to conduct wars, you can have government deficits for a war on poverty, a war on ignorance, a war on ill health, and so on.”

Jim to Tony: Co-ops against income inequity
I like the idea of co-ops as counters to capitalism’s tendency towards income inequality for two reasons.
One, it shows how co-op democracy delivers a key benefit regarding income equity by favouring labour over capital. Democracy is a necessary aspect of the co-op model, but one that can often hamper or warp decision-making. That can be a major weakness in some industries (such as management of co-op housing?), but there are many others where labour-biased democracy is clearly beneficial and only marginally harmful.
Two, it focuses on the stable, labour-intensive businesses that don’t suffer from democratic management’s inability to innovate. Co-ops belong in sectors where they can thrive under worker ownership because they don’t need much visionary management. Beyond agriculture, retailing and finance, where co-ops are broadly established, there’s a broad range of service occupations, from babysitting infants to emptying wastebaskets to embalming corpses, that fit this description. They all ought to be organized into co-ops that deliver most of their revenue to the workers, because it isn’t needed anywhere else. There are no new products to develop, or bells and whistles to be added; the workers themselves are the product, so their earnings ought to belong to them. Under capitalist ownership, there’s a built-in incentive to minimize the payroll and maximize the bottom line; co-op ownership reverses this situation.
The following links will take you to Screwball Letters or Screwball Letters 2 or Screwball Letters 3 or Screwball Letters 5.