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Building a Democratic Economy and Culture: Second Thoughts
Beth Raps interviews Len Krimerman

Following his lead article on “Worker Ownership’s Uncertain Future” in the recent Dollars and Sense-GEO joint issue (GEO #33), Len Krimerman felt more needed to be said. Here he starts where he left off, after first summarizing his original piece. Note: all resource organizations mentioned are listed with full contact information in a resource section on page 8 of this issue.

Len: My intention in that initial article was to start taking stock of a whole period, two or more decades, of initiatives aimed at building a strongly democratic economy and society—as we said in the very first issue of GEO, “in the shell of the old.” I wanted to ask how far we’ve come in the past 25 years, and what our impact has been. This is different from the usual GEO article, which profiles some specific and promising enterprise or local “best practice.”

Beth: Your original title was put as a question, “Still Marginal After All These Years?” What did you mean by that?

Len: I wanted to engage in some reflective self-assessment, and to engage our readers in this process as well. We need to ask ourselves, I think, whether we are really making a difference, whether the main stream economy is being reshaped by our grassroots initiatives.

More specifically, the piece examines some troubling gaps that have hindered our efforts from the outset and which in my view are not being addressed very directly or fully. These involve fragmentation within the movement for a democratic economy, capital starvation, and what I called “the education gap.” To the extent that these gaps continue, our efforts to redirect economic life will be undermined and our voices will remain marginalized. (By “education”, as we’ll see below, I meant something deeper than formal education, i.e., the process by which new, and particularly younger, people are brought into this movement, rather than seeing it as something some crazy elders got involved in and which has no meaning for their own lives).

I didn’t try to reach any definite conclusion in the GEO-D&S piece—that we are or aren’t marginal, can or cannot cope with capital starvation. Instead, I was trying instead to raise a red flag or two and alert people to some issues which to some extent seem to plague us much as they did 10 or 15 years ago.


Beth: But has there been any real progress, for example, in building critical mass?

Len: Yes, there has been measurable progress. Very definitely. This was mentioned in the D&S-GEO issue and in my article, but let me underscore it here. One of the best examples is the work accomplished by the Ohio Employee Ownership Center (OEOC) and the growing network of union-based employee-owned manufacturing firms in Ohio. Seven years ago, the OEOC wrote for us in When Workers Decide (available from GEO, see order form on page 14) saying, “Well, you know we’re not much like Mondragon, but we do have a few enterprises that come together from time to time.” Today, it’s far more substantial and getting much closer to Mondragon in terms of numbers of workers and numbers of employee-owned firms, especially if you consider the entire state of Ohio. They still lack the internal sources of capital that Mondragon developed through its Caja, but they are linked to the newly emerging Heartland Industrial Fund [see below], so perhaps things will get better on this dimension as well. In any case the OEOC provides a good example of what a few people with relatively limited resources can do even in the belly of the beast. We shouldn’t forget that.

Beth: Employee ownership certainly seems like a democratic idea that has found a place within the mainstream. What about that?

Len: In some of its forms, it certainly is a “democratic idea,” and these forms do have a presence today that they lacked two decades ago. Recently, the National Center for Employee Ownership has reported on several different studies indicating that both workers and businesses benefit from large-scale employee ownership. For example, a Washington-based study by Peter Kardas and Jim Keogh of that state’s Department of Community, Trade, and Economic Development and Adria Schiff of the University of Washington matched 102 ESOP (employee stock ownership plans) companies with 499 comparable companies without ESOPs. In terms of both retirement benefits and wage levels, the ESOP companies outperformed non-ESOP firms. [See more on this study in this issue, page 5. For ordering information, see p. 13.]

Now this doesn’t mean that those ESOP companies are ideal; their wage levels and retirement assets could well be improved upon. What it does mean, as the Employee Ownership Report put it, is that “on average, the ESOP firms in this study provide a significantly higher total compensation to their employees than do their [non-ESOP] competitors.”

A second study indicated that 31 of the “Best 100 Companies in America to Work For” have at least 10% of their stock owned by employees. Included in this list were several majority employee owned companies, such as W.L. Gore Associates, Publix Supermarkets, and the Bureau of National Affairs (a recent employee buyout of a federal government agency). Thirdly, Margaret Blair of the Brookings Institute along with Douglas Kruse and Joseph Blasi of Rutgers compared publicly traded companies that are 20% or more employee-owned with those without employee ownership. Contrary to many expectations, the former were significantly less subject to bankruptcy, liquidation, or private buyouts. Though based on a relatively small sample, this finding suggests that employee ownership does not diminish and may increase a company’s overall stability and productivity. Finally, there is a statistic generated by American Capital Strategies, which describes itself as “an employee-owned investment banking firm specializing in ESOPs.” They maintain what they call the Employee Ownership Index, which they compare with the Standard & Poor 500 and Dow Jones Industrial Average indices. Over most of the past six years, their Employee Ownership Index has consistently been about 15-20% higher than the other two indices.

Beth: What do you conclude from all of this research on employee ownership? What does it really mean?

Len: It means that employee ownership is acquiring a lot of business credibility. We all know ownership and control are very different things; so this research doesn’t indicate that a new democratic economy controlled by its workers is getting ready to emerge. It does show that employee-owned firms, which can lead in that direction, have delivered the goods both for workers and for investors. They can be quite stable, outperform conventional companies, and involve no sacrifice of wages or retirement benefits. This kind of market success is a plus that no one could have predicted with assurance two decades ago.

Beth: What other arenas of progress do you see?

Len: There’s a lot of clearinghouse support on-line, on the World Wide Web, for a wide variety of democratic economic initiatives. For example, readers could check out HUD’s “What Works in Other Communities” page (www.hud.gov/whatwork/html), and from there connect to Habitat II’s “Best Practice Database” (www.bestpractices.org), which provides brief summaries of what they call “proven solutions to common urban problems worldwide.” Then there’s the Community Information Exchange in Washington, DC, which now has a Website (www.comminfoexch.org) as well as an immense array of hard copy resources. There’s our own Website (www.geo.coop), and HandsNet, which has a community and economic development clipping service along with its Web page (www.handsnet.org). Most of these have annual subscriber or member fees, but they’re quite minimal. As a result, useful information on and sometimes substantial studies of well-functioning alternative economic arrangements are now available on a scale unimaginable a decade ago. And over time, this is bound to pay off.

Sustainable America and Other Groups

Beth: What about the isolation factor?

Len: One new organization, not discussed in the D&S-GEO issue, which has the potential to make a positive impact on the isolation of different components of the movement is Sustainable America (SA); in its first three years SA has attracted over 80 organizational members. Looking at their list, you first of all see groups that are from all over the nation—their members are more geographically diverse than our subscribers!

Beyond this, SA’s constituent organizations represent “very different parts of the elephant”: environmental justice groups, welfare reform groups, school-based groups, clean water groups, groups advocating voluntary simplicity and diminished consumption, highly industrially focused, labor-oriented groups, and so on. The diversity of their individual programs and priorities is astonishing to me, as is the work SA has done to get these usually isolated groups talking and working with one another.

For example, SA has established a “Technical Assistance (TA) Bank” which allows its members to draw on one another’s skills and experience, at relatively low or no cost in terms of dollars. Some of the opportunities available through the TA Bank: the Campaign for a Sustainable Milwaukee offers “a 2-4 hour in-person training in the fundamentals of community organizing.” ACORN provides a consultation on how “your group can initiate and carry out a Living Wage Campaign.” “Economic Literacy Workshops,” tailored to the specific needs of the recipient member, are offered by the Center for Popular Economics. I’m not sure how well this TA Bank idea has been working; it’s quite new. We’ll want to cover it in an upcoming issue, especially now that GEO is itself a member of SA. But it seems the sort of more-than-local strategy which can definitely help to overcome fragmentation in the movement.

Sustainable Milwaukee is one of the charter members of SA. We did an article on them in 1995, and they have apparently come quite a way since then. When I first interviewed Sustainable Milwaukee’s coordinator Bill Dempsey back in 1995, I was struck by the level of collaboration they had achieved: a coalition organization of over 100 different Milwaukee groups, gay and lesbian organizations, church, union, community development, anti-war, etc. There are now over 200 organizations involved, supported by a staff of 15. Monthly meetings, Bill told me, are well-attended, drawing an average of 50 groups. So here too, you have a very diverse coalition coming onto the scene and saying, “you’re not going to develop (in this case) Milwaukee without our voice, our voice is an important part of that process.” I think it’s a very fertile model. One of its more intriguing projects is a “Workers’ Center,” which has now been identified as a major site in Milwaukee for worker retraining, having taken over these tasks from certain state and city agencies. This Center is run on a clear democratic principle: one worker, one member, one vote. So even if it does not generate worker-owned and controlled enterprises immediately, it has built in this firm commitment to democratic development.

Another group not mentioned in the GEO-D&S article is COG, the Capital Ownership Group. This is is an organization of technical assistance providers for employee-owned enterprises from around the country, with an international Advisory Board. Right off the bat, an association of TA providers is sort of a breakthrough; these providers are usually disconnected from one another, and sometimes find themselves in competition.

But it’s their platform that is most startling. In the past, many, if not most, TA providers for worker-owned businesses have been self-muzzled as far as taking a stand on corporate capitalism. They have seemed to say, “OK, let’s just set up worker-owned businesses and not make any critique of the way the trans- or multi-national corporations are plundering the earth, exploiting children, downsizing.... etc.” COG, however, is explicitly opposed to transnational corporations. It maintains that one virtue of employee owned firms is that they offer a way to counter and diminish the power of transnational corporations involved in corporate globalization. Deb Olson, coordinator of COG, has written: “COG’s mission is to change the...structure of the economy from one primarily controlled by huge multi-national corporations to one owned and controlled by workers and local families, in which prosperity is shared more broadly.” (From her newsletter, ESOP/FYI, February-March, 1998).

As with Sustainable America and Sustainable Milwaukee, we can’t tell at this point how far they will go, but COG’s formation seems to me a very clear shift both away from fragmentation and towards a more explicitly and strongly democratic economy. A third development which could reduce fragmentation is the national network of Centers for Cooperative Development, of which there are now apparently 10, each in different regions of the country, and each with a constituency of co-ops of various sorts—agricultural, producer, consumer, energy, credit unions, etc. They provide technical assistance to, and also help build supportive collaborations among, their clients. These were established, with a small amount of federal (USDA) funding in the early ‘90’s, and so we’re again looking at something that is of very recent vintage. These Cooperative Centers run from from Massachusetts to Washington, and from North Dakota down to Alabama and Arkansas. They cover a good deal of the country, and if someone wants to set up a co-operative in Kansas or Colorado, in Maine or California, they can access resources and a support system that were not available even 10 years ago.

Reducing the“Education Gap”

Beth: So where does all of this leave us? And what more can be done now?

Len: Overall, despite some disappointments and continuing gaps, we have made substantial progress over the past 25 years. In addition, the new organizations recently created have the potential, I believe, to move our diverse visions of a democratized economy onto increasingly more local, regional, and national agendas. On the other hand, there may be a time constraint here. In the early 1970s, so-called free schools and democratically run educational alternatives were beginning to make an impact, but a decade later they had mostly vanished, many without a trace. The current corporate-dominated economy is now in a defensive posture; its critics and those with alternative economic arrangements are legion. But unless we act quickly, e.g., in the next two to five years, that system may retain its dominance and obstruct any further democratic progress.

More specifically, I think we need to concentrate—in many different ways—on reducing what I called “the education gap” and on overcoming capital starvation. As for the former, we are definitely underrepresented in formal educational environments. Hands-on programs like those in community economic development at New Hampshire College and at the Pratt Institute should be replicating themselves across the country: they not only provide networking opportunities, excellent and current information, and a body of democratic economic development skills, but are ways to recruit new folks into careers.

In addition, every School of Business in the country should be provided with electronic and hard copy materials focused on successful and not-so-successful cases of employee ownership and community-based enterprise development. Our educational tools for this purpose, and for reaching the general public, are simply abysmal. Recently, I talked with a group on the West Coast that is getting ready to develop its own worker-ownership job creation strategy. What videos, they asked, could I recommend that would both be instructive and augment their momentum? I had a very hard time identifying any, and they finally wound up using a two-decade old, excessively didactic, BBC video on Mondragon!

Does anyone know of a video on Co-op Atlantic, on the Ohio Employee Ownership Center’s achievements, on those of the flexible manufacturing networks in northern Italy or the worker-owned ambulance co-ops in Québec (in English)? Which friendly foundations will support the development and dissemination of these and similar sorts of urgently needed materials?

Whenever I raise this question about an education gap I’m reminded of George Benello’s classic article on Mondragon [“The Challenge of Mondragon,” reprinted in Krimerman and Lindenfeld, From the Ground Up, available at a discount from GEO. See order blank, p. 14]. One reason Mondragon works so well, George contended, is that it has created a system where one can learn, work, shop, and live within a cooperative environment. Wherever you look, whether it be in consumption or production or education, there is a culture of mutuality and democratic control, so that each part of a person’s life reinforces the others.

Capitalism does the same thing, in spades. It starts off with the household (over-consumption) and the school (competition). It builds a total system. To change that system, we need more than piecemeal alterations, we need to develop a full democratic culture, one that encompasses all aspects of a person’s or a family’s life. We have to be looking at the other parts of what we want to build, not just worker-owned firms or community-based enterprises, but the whole culture—and education (in many senses) is an important part of that.

So beyond the formal dimension of education, we need as well to think through the issue of how to create an ongoing and widening demand for a strongly democratic culture. Perhaps this could be done by developing our own self-managing arrangements as in the German residential “Youth Education Centers” or the folk school model adopted by the Highlander Center in Tennessee. Both of these are aimed especially at those for whom conventional compulsory schooling yields little benefit, or is largely a time-consuming drag.

But in addition there are ways to develop “education for democracy” within public schools as well. GEO should devote an entire issue, at the least, to this topic. Let me mention just one good example: Study Circles. These have been developed nationally by the Pomfret, CT group, the Study Circle Resource Center (SCRC). The Center offers materials, consultations, and other technical assistance to communities or groups faced with deep-seated problems, e.g., racial tensions or failing criminal justice systems. Their goal is to help set in motion an inclusive community-wide process of “deliberative democracy” that can bring opposed factions to the table to discuss and work through their disagreements, and where possible, reach a working consensus on what positive steps to take. Though they ordinarily focus on adults, one breakthrough program in Portland, ME has enabled young people to participate in this process, with many of them becoming trained Study Circle facilitators for younger students. Almost 5,000 Portland students, including some at correctional institutions, have gone through the program, and about 500 high-schoolers have acted as facilitators for middle-school students, down to the sixth grade. If we want young people to be aware of and receptive to—actively participate in—a democratic workplace and culture, study circles may be a good place to start. Education for democracy, or better, in democracy, cannot begin too early.

More broadly, study circles are a relatively inexpensive way to raise and work on issues near and dear to grassroots activists and which often lack a forum elsewhere: Why don’t we have stable, high wage jobs? What can be done to make our community more self-reliant economically? Why are we paying for energy that we could produce ourselves? In Connecticut, for example, the Secretary of State’s office has begun a Study Circle initiative throughout the Greater Hartford Region concentrating on “Race and Economics.” Our issues and our models could readily deepen and sharpen this initiative.

Need For Co-op Capital

Beth: What about capital starvation?

Len: This too merits a full-scale discussion, a whole issue of GEO. Perhaps I could help start such a discussion by advancing, without much elaboration or justification, a few intentionally provocative ideas:

• First, though I’m an avid supporter of Time Dollar and local currency programs, and a member of one here in Willimantic, CT, I don’t think we can rely on them to overcome capital starvation. Whether it be worker-owned airlines or community-based enterprises that replace fossil fuel products with ones made from discarded plant materials, large sums of capital will be required to build a new and democratic economy. Millions, indeed, billions of dollars. Time dollars and local currencies do not have that sort of potential, though they can help build cohesive communities and create certain sorts of job and income opportunities.

• We need more-than-local financial arrangements or intermediary associations. This is confirmed by the Mondragon experience, which gained momentum only after its founder, Father Arizmendi, came up with the idea for a region-wide Bank of the People’s Labor (Caja Popular Laboral), and it lies behind the economic successes of Emilia-Romagna and the Lega in northern Italy, as well as those achieved through Canada’s labour-sponsored investment funds. The latter have now emerged in virtually all Canadian provinces and one of them—Québec’s Solidarity Fund—has amassed over 3 billion dollars to invest in local and, in a broad sense, democratically shaped economic development. We need to walk on two legs here, rather than focusing exclusively on local and small-sized initiatives or on ones that are large in scale but centrally controlled and out of touch with local needs. How to combine the local and the more-than-local, the small-scale and the large-scale, is the sticky question, but there are some good models out there, like the ones I’ve just mentioned.

• Walking on two legs doesn’t have to mean giving up our own grassroots initiatives in favor of lobbying recalcitrant labor unions or state and national governments to turn around their present policies. Hundreds of communities across the country have established Community Loan Funds over the past decade. There are also examples of state-wide progressive alternatives (such as MaineShare) to United Way, based on payroll contributions. Both of these initiatives could be utilized to help fund small or medium-sized locally owned and worker run enterprises. Some already do. If those who invest in them were given the same sorts of tax breaks that have made Canada’s labour-sponsored funds so successful, and if they began to proliferate and to combine their resources and develop internal forms of technical assistance, we’d have the makings of an insurgent financial structure, built from the ground up.

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