The Making of a Democratic Economy: Community Wealth-Building for a Sustainable Future
Following is an excerpt from The Making of a Democratic Economy by Ted Howard, co-founder of the Democracy Collaborative, and Marjorie Kelly, author of Owning Our Future: The Emerging Ownership Revolution.
When the U.S. Constitution was written, the Industrial Revolution, engineered by the new aristocracy of the railroad barons and kings of capital, had not yet emerged. The word “corporation” appears nowhere in that document. But by 1813 John Adams was writing to Thomas Jefferson, “Aristocracy, like Waterfowl, dives for ages and then rises with brighter plumage.”
We’ve seen that happen throughout American history, from the Gilded Age of the late 19th century to the “new Gilded Age” of the 21st. Today we live in a world in which 26 billionaires own as much wealth as half the planet’s population. The three wealthiest men in the U.S. — Bill Gates, Jeff Bezos, and Warren Buffet — own more wealth than the bottom half of America combined, a total of 160 million people. Meanwhile, an alarming 47 percent of Americans cannot put together even $400 in the face of an emergency, leaving most of us unprepared to face such ordinary mishaps as a flat tire or a child’s twisted ankle.
Our economy is not only failing the vast majority of our people; it is literally destroying our planet. It’s consuming natural resources at more than one-and-a-half times the Earth’s ability to regenerate them. We are razing the only home our civilization has, yet we remain caught inside a system designed to perpetuate that razing, in order to feed wealth to an elite.
The reason is that the system has a capital bias at its core, a favoritism toward finance and wealth-holders that is woven invisibly throughout the system. We might call it an “extractive economy,” for it’s designed to enable a financial elite to extract maximum gain for themselves, everywhere on the globe, heedless of damage created for workers, communities, and the environment.
Capital bias is often advanced by policy — as with lower taxes on capital gains than on labor income, bailouts for big banks but not for ordinary homeowners, or tax breaks given to large corporations that put small locally owned companies out of business. Yet capital bias also lies more deeply in basic economic architectures and norms, in institutions and asset ownership. Speculative investors holding stock shares for minutes enjoy the rights of owners, while employees working at a corporation for decades are dispossessed, lacking a claim on the profits they help to create.
We haven’t fully confronted the fact that corporations believe they have a fiduciary duty to systematically suppress labor and labor income in order to increase profit for wealthy shareholders. But that confrontation is starting, with an eye toward building a more democratic economy. These new approaches — such as chartering corporations to make them accountable to the public and giving equity shares to worker ownership funds, placing public ownership of utilities at the center of a Green New Deal, and creating public banks to finance a new, bottom-up community development paradigm — don’t seek to simply put back what’s being destroyed. They point to how a whole new system is being born now, in the belly of the beast. They herald a potentially profound shift from an extractive economy to a democratic economy.
The problem is that people by and large don’t see this — not even the people who are part of it. The work of employee-owned companies, impact investing, public banking, racial justice in economic development, local purchasing by anchor institutions, and more is being done in siloed activities all over the world.
It’s not that the new system hasn’t been named. It has too many names: “stakeholder capitalism,” the “solidarity economy,” “new economy,” “sharing economy,” “regenerative economy,” the “living economy.”
The struggle for new language is a sign of the times. We stand at a turning point where many share a sense of peril about the possibility of systemic collapse. As the old system fails, we’re losing the conceptual world that has given our lives meaning. We need new vision and new naming.
Socialism isn’t it. Capitalism isn’t it. An economy adequate to today’s challenges just isn’t there in those 19th-century paradigms. The “democratic economy” isn’t yet a term in common use. It’s offered here as a unifying frame for the movement that doesn’t know it’s a movement, aiming to help more of us recognize the potential for system-level transformation.
A democratic economy isn’t a top-down command economy. It isn’t capitalism plus more regulations and social safety nets, nor is it capitalism plus green technologies. Building a democratic economy is about redesigning basic institutions and activities — companies, investments, economic development, employment, purchasing, banking, resource use — so that the core functioning of the economy is designed to serve the common good.
Democracy needs to move inside the economy. Putting such values as sustainability or fairness on the outside of the system through regulation and social safety nets is like attaching barnacles to the side of a whale. These values need to be in the DNA. Anything less than deep redesign will likely fail to see us through the tumultuous era ahead for the earth community.
This is excerpted from the book The Making of a Democratic Economy by Ted Howard and Marjorie Kelly.