05/09/2014 05:21 pm ET Updated Jul 09, 2014

Capitalists in the 21st Century: Workers Must Step Forward

Thomas Piketty's new book, Capital in the 21st Century, which examines the nature and forecasts the consequences of wealth and income inequality has shot to the top of the best-seller's list since its release here in the United States on April 15.

Based upon his analysis of two decades of data from 20 countries, Piketty, a French economist paints a rather gloomy picture of the U.S. In an article for The Financial Times, he writes that prior to World War I wealth inequalities were far greater in European countries than in the U.S. but throughout the rest of the 20th century till today that "situation was reversed."

Piketty observes that inequalities reach "extreme levels" when "returns accrue to owners of capital faster than the economy grows, handing capitalists an ever larger share of the spoils..." He reports that, based upon Forbes global billionaire rankings, wealth of the very richest grew more than three times as fast as the world economy between 1987 and 2013.

His solution to this problem would be to implement a global progressive tax on individual net worth. We see that as a novel idea and recommendation but not a very practical one. Indeed, Piketty himself states, "U.S. inequality may now be so sharp, and the political process so tightly captured by top earners, that necessary reforms will not happen..."

We agree with Piketty's surmise about the potential for reforming the U.S. tax system -- at least in the near to mid-term. With the rare exception, however, we don't see much of an appetite from the wealthiest capitalists here in the U.S. to engage in a new form of capitalism that would "redistribute" or change the manner in which income or wealth is presently being shared.

That's why we have come to the conclusion that for the American economy and democracy to renew itself fully in the future, our nation needs a new breed of capitalists in the 21st century. Those capitalists must be workers. Let's look at why and where things stand returning to Piketty's perspective for a moment.

In an article in the New York Times, Steve Erlanger states, "... "Mr. Piketty says that inequality by itself is acceptable to the extent it spurs individual initiative and the generation of wealth. But extreme inequality, he contends will have a deep and deleterious effect on democracy."

We concur with Piketty's contention and believe that because of current conditions our American democracy and the American economy are on a slippery slope today. Wealth and income inequality and the perception of a lack of opportunity in combination are making them more fragile crucibles.

Here's selected evidence to support that assessment:

  • Drawing upon a report from the U.S. Department of Commerce, Floyd Norris of the New York Times reports, "Corporate profits are at their highest levels in at least 85 years. Employee compensation is at the lowest level in 65 years."
  • According to David Leonhardt and Kevin Quealy, "...a New York Times analysis shows that across the lower and middle income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades."
  • A new report from The National Employment Law Project shows that during the recession, higher wage industries lost 3.6 million jobs and have restored only 2.6 millions jobs during the recovery. In contrast, lower wage industries gave up 2 million but have added back 3.8 million.
  • According to the Center for Labor Market Studies at Northeastern University, The "mal-employment rate" (employment in a low paid job that does not require a degree) for college graduates in 2013 hit a high of 36% compared to 26% in 2007.
  • 3.7 million Americans had been out of a job for more than six months as of March 2014
  • A new poll of "millenials" (18 to 29 age cohort) from the Harvard Institute of Politics reveals that they are "cynical about the political process, increasingly distrustful of the institutions of American government, and concerned about economic inequality in the United States."
  • The jobs report for April was good news - 288,000 jobs created - and bad news - 806,000 people dropped out of the work force and were no longer actively engaged in a job search.

That's just the tip of the inequality and opportunity iceberg. There is no magic wand that can be waved or a major national initiative, given the current political and business environment that will be launched to transform the diminished state of America's middle and working class.

That is why American workers must step forward and act as capitalists and change agents by forming, financing and managing their own enterprises. In a phrase, they must initiate a "shift change."

Fortunately, as a new documentary with that title attests a Shift Change is already underway. Shift Change tells how worker-owned businesses are competing successfully in today's economy.

It features the Mondragon, Corporation (Mondragon) from Spain which is the world's largest industrial, worker owned and run cooperative. Mondragon has more than 80,000 worker-owners employed in an integrated group of over 280 cooperatively owned businesses, subsidiaries and affiliated organizations around the world and over $14 billion sales. (See our earlier blog on Mondragon.)

Because we knew the Mondragon success story, the more interesting stories for us in Shift Change were the ones about the smaller cooperative businesses from across the United States and the entire industry spectrum that are quietly making a difference in the lives of their worker-owners and communities.

On the West Coast, there are businesses in the dough - both literally and figuratively. They are the Arizmendi Association of Cooperatives located in San Francisco, Oakland, Emeryville and other Northern California locations. Started 30 years ago, there are now six of these independent worker owned and managed cooperative bakeries that work together to provide the financial and legal services they need, and to incubate new coop bakeries

In the Midwest, in Madison, Wisconsin, there is Isthmus Engineering. It's a 45-member firm of engineers, machinists, electricians, assemblers and others who are into making things rather than baking them. Isthmus provides custom automation solutions and has delivered thousands of automation machines and systems to industries such as automotive, medical and solar since its establishment in 1980.

Staying in Madison, there's a worker cooperative that doesn't bake, or make, it takes - folks safely from one place to another. That's Union Cab. The business was formed in 1979 by five workers from another cab company who "felt that they had enough expertise to be successful in the taxi business." They were right. The company grew to 230 members and 65 cabs within 20 years and is still operated successfully today.

Moving east, in Cleveland, Ohio, there are the Evergreen Cooperatives, that are not baking, making or taking, but shaking up the status quo. Evergreen is a group of worker owned companies launched by Cleveland institutions in 2008 to create living wage jobs in six low income neighborhoods. The companies are green businesses creating "green jobs." They include a solar panel installation operation, an institutional laundry service, and a hydroponic greenhouse.

There are other stories in Shift Change that deserve to be seen and listened to. Shift Change premiered on Seattle's PBS station, KCTS 9 in April. KCTS 9 will be distributing the documentary to PBS nationally beginning in July 2014. Check with your local PBS station for broadcast dates and times.

But, as Paul Harvey, would have said, here's the rest of the story, throughout the United States, workers are stepping forward. According to Gar Aperovitz in 2011, "more than 13 million American have become worker-owners of more than 11,000 employee-owned companies, six million more than belong to private-sector unions." (See our earlier blog on the size and scope of the cooperative movement in the United States.)

Capitalists in worker cooperatives are not the only answer to the country's current economic woes but they will definitely be a part of the solution. That's because they have a fundamental grasp of the fact that democracy invented capitalism and not vice versa. They understand core democratic principles and concepts such as one person/one vote; equality of opportunity; and civic responsibility.

Many years ago, Supreme Court Justice Louis Brandeis (Justice from 1916-1939) asserted, "We must make a choice. We may have a democracy, or we may have wealth concentrated in the few, but we can't have both."

Today wealth and power is in fewer hands. Supreme Court rulings that equate corporations with personhood and money with speech for campaign finance purposes exacerbate this imbalance and inequality.

As Justice Brandeis might opine, we are at a critical choice point. Worker-owners in worker cooperatives can help us improve those choices and our decision-making. There is no question that we need to do so for the future of this economy and democracy.