When we come out of this COVID crisis, we will face a challenging economic reality, yet one also full of opportunity. By expanding our conceptions of economic growth, we can develop sustainable and thriving businesses that not only build on our standard of living, but encourage our full human potential. Economic thinking has evolved and changed with the tides of history. I will argue that we can move beyond the traditional capitalist growth model to a sustainable cooperative model.
19th century industrial capitalism was a tidal wave of production: privately run factories using hired labor to produce goods aiming to maximize profits and expand. Then came working class revolts against concentrated wealth and power in capital owners, and intensifying inequality. Coupled with other factors, we also saw a significant rise in the standard of living, and mass-consumption became associated with freedom and liberty.
Some countries tried another form of growth: socialism. Hoping to thrive with non-market mechanisms, these states used state planning to organize production and distribution through cooperatives and private enterprise. This took different forms, the most influential being in the Soviet Union. The economic and political legacies there have left many questions of what could have been with greater democracy.
Non-statist ideals were found in European countries where democracy allowed for workers’ parties and socialists to influence policy. These later became exemplars of welfare capitalism, providing socialized healthcare and higher education opportunities for all citizens.
Major economic thinkers have attempted to make sense of both of the systems’ problems. The writings of JM Keynes in the early 20th century created a paradigm shift in economics by acknowledging that government investment is necessary to sustain an inherently unstable capitalism, curbing the worst crises. For Keynes, investment stimulated demand that could prevent another Great Depression, as well as lay the groundwork for future, humane forms of capitalism.
Criticizing Keynes, the economist FA Hayek argued that using policy to stimulate suppliers over government investment would create the lasting recovery needed from economic downturn. He further criticized central planners in socialist countries, arguing they cannot possibly gather all the information needed to plan something so complex as the economy. How can government planners understand the intricacies of putting a business together with all their unique, local concerns?
In the 1860s, economist and philosopher Karl Marx argued that capitalism contained inherent contradictions, creating its own demise: overproduction and business failure, resulting recessions, and the increased alienation and inequality of wage-earners. He studied existing theory and business trends to understand the system’s long-run collapse. Marx said little to nothing about what ‘communism’ would look like. His work, spanning thousands of pages, was devoted to analyzing capitalism. While seeing capitalism as historically necessary, there were limits to its usefulness; society would have to evolve to a different model of production and distribution.
We can synthesize from this history and theory forms of progressive and sustainable change. Today, we must recognize that by returning to ‘normal’ by means of opening a traditional business or a local corporate chain, we are continuing economic trends that will in the long term perpetuate crisis and inequality.
But we can choose an alternative within our markets: a worker-cooperative, owned and run democratically by its workers. These businesses dismiss hierarchy during weekly meetings, planning out and determining their unique, individual business goals. Then, during the workday, they work as a manager, front desk worker, or maintenance person. Cooperatives can decide to put profits toward growing the business, hiring more worker-owners, raising worker pay, or investing in R&D. Income is determined democratically, and is more likely to have pay disparity limited to around 9:1, 4:1 or lower, rather than 278:1, as seen in traditional corporations.
Evidence on cooperatives points to their continued efficiency and promise. Data shows that these businesses survive better during crises, job satisfaction is higher, and they have lower income disparity. What we don’t know is largely due to not trying cooperatives on a larger scale. To remedy our massive unemployment, laborers could join together by trade and take small business loans to established cooperatives in their communities. Economists and business professionals could help these workers in the transition to self-sufficiency and growth.
This change represents an evolution in market systems, incorporating democracy into our present institutions. It is not a presumptuous state-planner, it is not a distant and ruthless CEO. These are the marketing, business, and accounting students who organize and crunch numbers. They are the chefs, electricians, and artists who provide for others and pursue their passions.
We can grow the economy, sustain ourselves, and more significantly, give everyone the chance to be full agents in their economic life. We can have democracy, not only in the voting booth, but in the workplace. We can emerge from this crisis a more stable and participatory society.
Jonathan Chenjeri teaches social studies in Klamath Falls, Oregon.