Remaking Our Economy

...The critical point is that if we imagine a society that had made these four reforms, its politics would be radically different from our acquired conceptions of both "socialism" and "capitalism...

...The efficiency argument is that in an integrated world economy, capital must be able to flow across international lines in response to market signals...

...This was, after all, the lesson of the Bank for Commerce and Credit International (BCCI) scandal...

...They would make their arguments for less redistributive taxation, for fewer rights for employees, and for less environmental regulation, and they would likely lose every vote...

...These reforms would also contribute to the kind of highly productive economy that I analyze in Postindustrial Possibilities: A Critique of Economic Discourse (Berkeley: University of California Press, 1990...

...In a word, international electronic fund transfers make more oversight a necessity, and with that increased oversight, the range of legitimate capital transfers could be narrowed...

...The blueprint must be based on reformist principles, so that the bounds of what is possible within the existing society are being pushed forward step-by-step...

...To be sure, this process of designing blueprints forces us to confront the danger of totalitarianism—the risk that even a wellintentioned vision of a good society could degenerate into dictatorship...

...Yet critique without some sense of alternative is ultimately empty...

...In these new banks, money managers would be rewarded for nurturing productive enterprises over five to ten years...

...Bill Clinton's advocacy of extensive federal investment in infrastructure, training, and education is a vast improvement over anything else on the horizon, but it represents only a first step...

...Our insistence that claims of necessity are false rests on the argument that there is a better way to do things in which we would not have to engage in one of the false choices —for example, protecting jobs or having a clean environment—that defenders of the present system insist are inevitable...

...There would still be private ownership of the means of production, but the degree of "privateness" of control over corporate property would be greatly diminished by the need to create effective governing coalitions out of different constituencies...

...This is another important way in which class power is exercised: those who control the flow of money engage in "strategic nonlending" —the refusal to make capital available for certain activities in certain political circumstances...

...The problem, of course, is that they exert disproportionate influence over politicians through campaign finance and through their control over the economy...

...Such a regime would be resisted by nations or islands that have built their economies as tax and banking havens, but the risks to the world economy of unregulated banks operating in such locales are now so great that the resistance could be overcome...

...Political Action Committee (PAC) money from corporations and business associations has corrupted the Congress, and loopholes in the law allow substantial flows of "sewer money" —large contributions by individuals directly to the political parties to finance presidential campaigns...

...If the U.S...

...The left's suspicion of markets is rooted in the romantic critique of commodification and an underlying nostalgia for feudalism...

...168 • DISSENT Remaking Our Economy Restructuring the Corporate Form The U.S...

...Since such returned funds would be confiscated if the owner was convicted of illegal capital exports, such an internationally sanctioned system would provide a powerful deterrent...

...And if the government persists, lo and behold, the predicted capital exodus takes place...

...However, the task is not to eliminate markets but to block certain types of socially undesirable exchanges while regulating those that are organized through markets...

...An Alternative Vision In constructing an alternative economic vision, it is necessary to establish some principles of design—what do we want this new institutional structure to do...

...In short, when social movements of the left demand institutional changes, resistance to those changes is based on the claim that they would be economically irrational...

...The left should devote a portion of its 166 • DISSENT Remaking Our Economy energies to this critique of economic ideology...

...q SPRING • 1993 • 171...

...The CEO decides on the fate of the firm's managers...

...These banks would be insulated from partisan interference, but they would be subject to government oversight to assure that they fulfill their mandate to lend money in the public interest...

...Third World countries in the aggregate have been net exporters of capital...

...It involves, as well, rejecting the implicitly totalitarian dream of a New Socialist Man or Woman in favor of a multiplicity of visions of what it is to be human...

...The most reliable means to transform the firm from dictatorship to democracy is to restructure the corporate board to make it represent a variety of different constituencies...

...I leave it to others to judge whether these four reforms could be implemented in the foreseeable future...

...However, rights and liberty are rooted in political communities, and such communities must be able to keep their members from engaging in behavior destructive of the social fabric...

...The practicality arguments assert that such capital flows cannot possibly be controlled and that an international agreement to establish such controls is highly unlikely...

...New Banking Institutions Though our democratized firms would be willing to invest at high levels, the commercial and investment banks that provide them with capital might be unwilling to lend...

...with all kinds of subtle qualifications, they retain the idea that the economy is determinant in the last instance...

...The dangers of the free international movement of capital are understood abroad much better than they are in the U.S...

...They insist instead that higher taxation will damage the overall economy...

...This restriction in the scope of democratic politics exacerbates each of the other problems...

...In our current financial institutions, money managers are rewarded for their successes in producing high quarterly returns on their portfolios...

...it will lead to inflation, higher unemployment, or trade deficits...

...This could be done by requiring all corporations above a minimal size to incorporate at the federal level, and the federal statute would mandate a board chosen as follows: 35 percent of the board members by the shareholders, another 35 percent by the employees, and the remainder by other constituencies — bondholders, creditors, suppliers, consumers, and advocates for the natural environment...

...To be sure, market participants sometimes exercise coercive power over others, but effective regulation can limit the extent of coercion in markets...

...The looting that occurred in the United States in the savings and loan scandal that was made possible by lax regulation will continue to happen internationally on an even larger scale if national authorities do not cooperate to regulate international capital flows...

...It is for this reason that the blueprints must be thoroughly pluralist...

...This shows that the market mechanism cannot assure that finance flows to the regions where it is most needed...

...At the same time, universal voter registration and Sunday elections would help to overcome the current class bias in electoral participation...

...This essay is intended as part of a broader effort to make up this deficit...

...In this exercise of power, we encounter again our old friend—the prevailing economic ideology...

...People would no longer have to see the amount of leisure time or the quality of the jobs in the economy as factors over which they had no control...

...However, the experience of market-mediated capital flows to the Third World has been disastrous...

...Winning gains for these movements rests—in part—on their ability to challenge this dominant economic ideology...

...But the most important point is that if they happen to lose this battle, and their taxes are raised despite their warnings, they usually have the ability to make their predictions come true...

...When the major commercial and investment banks start cutting back sharply on loans and new underwritings in response to government policies that they do not like, they also have the power to bring the economy to a halt...

...A CEO is often able to stack the board with friends and supporters, eliminating the last legal barrier to unlimited power...

...It is not until we have imagined the institutional framework of a better kind of society and have persuaded millions of people that ours is an attractive vision that we can expect any radical social change...

...If rich people simply had one vote like everybody else, there would be no problem...

...Even in the sphere of personal liberty, our ability to support reproductive freedom or to eliminate the stigmas on gay lifestyles are limited by resource constraints that are, in turn, linked to the exercise of class power...

...While this does not eliminate hard choices about political priorities, it eliminates the radical separation between the present and the future that troubled the Marxist tradition...

...To be sure, not everything should be sold on the market—human beings, medical care, and the attention of politicians are some of the obvious exceptions...

...any of them can be thrown overboard for crossing the big boss...

...The economy needs reforms on the scale of the New Deal, but Roosevelt and his Brain Trust were able to draw on a rich vein of bold reform ideas that had previously been advanced by Progressive and Socialist reformers and intellectuals...

...A board of directors that is—in theory—chosen by the shareholders appoints a chief executive officer (CEO) who has virtually absolute power over the firm...

...If the costs to the larger community of allowing full capital mobility are too high, there is every reason to restrict the exercise of that right...

...The solution here is to make the banking industry more competitive so as to reduce the opportunities for the collusive behavior that underlies strategic nonlending...

...After all, the great virtue of democracy is that it gives us the capacity to learn from mistakes...

...search for corporate profit is unpersuasive on two grounds...

...Tradeoffs would remain...

...In short, a new regime governing international capital flows could be developed that 170 • DISSENT Remaking Our Economy combined reduced mobility for private capital and new mechanisms for assuring real capital transfers to developing areas...

...The modest postWatergate campaign reforms in the United States have been a total failure...

...it is only a set of practices that appears to be coherent because we share certain cultural beliefs...

...It is only for investment in less developed countries and the former Soviet bloc that these restrictions on capital export would significantly interfere with commerce...

...Although this proposal could have significant economic benefits, the greatest payoff would be in reducing the possibilities of economic blackmail...

...Yet these traditions mislead because there is nothing inherently wrong with buying and selling things at prices determined by a market...

...If IBM wants to build a new facility within the boundaries of the European Economic Community, it can borrow the needed money in Europe, and the same goes for Japanese or European-based firms...

...However, the economy does not have a necessary logic of its own...

...It is significant that the early drafts for the IMF (International Monetary Fund) agreement written in the Roosevelt administration contained provisions for precisely these measures to assure the return of illegal flight capital...

...The argument from liberty is that taking away someone's ability to shift $100 million of wealth from dollars to deutsche marks interferes with basic rights...

...On issues of central concern, the CEO would no longer be able to decide unilaterally to slash the firm's planned investments in response to what he or she perceived as an unfavorable business environment...

...The result would be that CEOs would be much more like democratic leaders than dictators...

...Second, the calculations of what is profit and of how much profit is enough are themselves the products of prior assumptions that vary significantly across countries...

...Here again, they have the power to make their prophecies self-fulfilling...

...But why can't we have more democracy, more equality, more liberty, and a healthier environment within our present institutions...

...Even when the board is not in the CEO's pocket, the CEO's power is still formidable...

...Today's left has failed to produce a comparable body of ideas...

...Institutional reforms to create more equality— across class, gender, and racial lines—are made far more difficult by the obstacles to measures that would redistribute resources from the rich to everyone else...

...First, there are many different strategies by which corporations can attempt to increase their profits—sweating workers and smashing unions is only one of a range of options now being pursued...

...Not only are major structural reforms kept off the political agenda, but even minor reforms— higher corporate taxes, tighter environmental regulation, labor law reforms—are rarely advanced because capitalist interests insist that they will have dire economic consequences...

...The movements need to show that these assertions about what we cannot afford or what would be economically irrational are rooted in "claims of false necessity," which are intellectually incoherent and empirically unsustainable...

...However, the technological ease makes it all the more important that such flows be carefully monitored by regulatory authorities...

...This broader debate and discussion should measurably improve the quality of executive decision making...

...The board might well decide that this is precisely the time to increase investment so as to gain market share from competitors who might reduce the size of their investments...

...This would make it far more difficult to launch an investment strike against government policies...

...Still, objections to capital controls might be raised on grounds of economic efficiency, liberty, and practicality...

...position on international capital mobility were to shift, the prospects would be good for negotiating a new international regime governing capital movements...

...The first argument rests on the idea that if technology has made something easy to do, then it cannot possibly be regulated...

...The decision as to how much emphasis to place on the protection of the environment could be made without a threat of economic blackmail...

...The new technologies meant that thieves operating in the cracks between national banking regulations could steal billions...

...The classic answers of the left—the anarchy of the market, private ownership of the means of production—are no longer adequate because they flow from a vision of a socialist alternative that is now empty of content...

...The CEO also decides which of the firm's divisions are sold off, which are exploited as "cash cows," and which are targeted for future growth...

...The federal government can do this by launching ten new SPRING • 1993 • 169 Remaking Our Economy commercial banks and ten new investment banks that would operate as semipublic entities...

...This can be done by a system of internationally negotiated stand-by controls on capital flight that require countries to return capital that has moved abroad in violation of a nation's laws...

...Across the developed market economies, there are distinctly different institutional arrangements for providing health care, for organizing scientific research, and so on...

...For example, why should the firm cut back its investment plans just because of higher taxes on rich people...

...From the start, these new banks would be oriented toward long-term results and sustained cooperative relations with their clients...

...For this reason, it is essential to eliminate this weapon from the arsenal of wealthholders...

...The claim, for example, that the broad outlines of the society are determined by the This article is part of an ongoing series on the American economy for which funding has been provided by Harry Kahn...

...they would have to develop convincing rationales for their choices...

...In short, these new banks would play a role that is similar to the role of banks in the German and Japanese economies...

...That they would make the right choices is certainly not assured, but that danger is inherent in democratic government...

...With no single constituency able to dominate the board, the firm's direction would be shaped by an open process of debate...

...It is well known, for example, that employee-owned firms often find it extremely difficult to borrow money even when they have good collateral and good prospects...

...Public funding for all federal offices, the elimination of PACs, free time for candidates on television and radio, and a $100 contribution limit could help restore an even playing field...

...The last step is to move beyond broad visions of alternatives to imagine the specific institutional arrangements of a new kind of society...

...Capital Controls Even with all of these steps, wealthholders and firms would still be able to sabotage the economy through capital flight...

...enthusiasm for international laissez-faire is not shared by many in Europe and Japan, or by much of the Third World...

...The strategy works even if the logic of their economic arguments is deeply flawed...

...By their reluctance to finance "deviant" organizations, the bankers reinforce the idea that the dictatorial corporate firm is the only way to do business...

...A somewhat different answer is that the central flaw in our current institutions is the exercise of class power by those who own and control most of the society's productive wealth...

...Yet this same argument also points to a radically different conclusion...

...Although the economy is not determinant in bourgeois society or any other society, economic ideology does play an extraordinarily central role in market societies...

...We can draw on these experiences to imagine new institutional arrangements that could assure a highly productive economy without compromising democracy, equality, and the protection of the environment...

...My own starting point is to combine a highly productive advanced economy with institutions that would give much broader scope to democracy, equality, personal liberty and autonomy, and environmental protection than existing arrangements...

...People of wealth do not simply say, "Please do not increase taxes on our incomes and on the corporations because we do not like it...

...This means retaining many of the inherited techniques for avoiding the concentration of power while also inventing new ones...

...For a fuller discussion of these reforms, see "Capitalism Without Class Power," Politics & Society, September 1992...

...If fifty of the CEOs of the largest firms reach the same conclusion, they can put a powerful brake on the entire economy...

...Hence, the next step is to move beyond the false dichotomy of plan versus market to imagine the broad range of possible institutional structures for organizing the economic dimension of society...

...increasing leisure time or cleaner air might mean diminished output...

...At the same time, the ability of private wealthholders to prevail in political conflicts would be greatly diminished because they could no longer credibly threaten to pick up their marbles and go home...

...They could broaden the sphere of democratic politics and create a terrain on which struggles for equality, for the environment, and for liberty would have far broader opportunities for success.* Campaign and Registration Reform This is familiar territory...

...However, it is possible to have open and vigorous international trade including complex networks of cooperation among international firms operating in different countries without huge and continuing capital flows...

...But what of the prospects of international agreement...

...When we ask why we cannot have more democracy or more protection of the environment, the inevitable answer is that it would interfere with the efficient workings of the market...

...It seeks to sketch out a series of structural reforms that could contribute to both a stronger economy and increased democracy and equality...

...But the citizenry would gain the ability to decide how much of one variable to trade against the other...

...But first it is necessary to reconsider some of the intellectual assumptions that shape our thinking about the economy and our vision of the good society...

...Contrary to the utopianism of both classical liberalism and classical Marxism, the idea is not to make all allocation dependent on either the market or "the plan," but rather to combine markets with various forms of regulation to achieve desired ends...

...By slashing new investment, they can push up unemployment or they can raise prices faster than they previously planned to increase the rate of inflation...

...Moreover, the public banks would be less likely to discriminate against "deviant" borrowers such as employee cooperatives and local governments engaged in productive investment...

...Since the message of the revolutions of 1989 is that dictatorship is inferior to democracy, it is time this lesson was also learned in corporate boardrooms across North America...

...In this new political space, a democratic citizenry would have far more freedom to shape the economy as it wished...

...The resulting balance of payments crisis is usually enough to force governments back into line...

...If the CEO is persuaded that a particular government initiative—increased regulations or higher taxes—is undesirable, he or she acting alone has the power to cut back the firm's investment plans...

...Moreover, requiring that such investments be financed with locally raised capital will help to preserve the ability of national or regional monetary authorities to use interest-rate policies for macroeconomic stabilization...

...If private banks reduce their lending activities, the public banks could be expected to step in aggressively to steal those clients...

...Are there institutional reforms that could eliminate this systematic exercise of class power...

...To assure positive capital transfers to poorer regions requires reducing the role of market flows and reorienting the activities of international development agencies...

...Since new technologies make it easy to shift a billion dollars from one country to another in a few seconds by typing on a keyboard, then it is impossible to prevent people from carrying out such electronic shifts of capital...

...This dictatorial form makes it far easier for corporations to exert economic blackmail...

...It is this SPRING • 1993 • 167 Remaking Our Economy exercise of class power that restricts and narrows the range of democratic politics...

...All of this could be accomplished without centralizing control over investment decisions in the hands of the state...

...Although the former channel of undue influence has been closed in some democratic societies through legal reforms, the latter remains a potent weapon to limit democracy...

...Then they can go back and say, "We told you so," and the likely result is that they will win the next round...

...Moreover, bankers as a group are even more effective at exercising economic blackmail...

...The board would consider such cutbacks long and hard, and it would be likely to question the rationale behind economic blackmail...

...The four reforms proposed below would leave many of our existing institutions untouched, but they could radically diminish the exercise of class power by the wealthy...

...Many on the left continue to hold on to a vestigial Marxism that sees the economic realm as somehow "more real" than everything else...

...The government would provide the banks with their initial capital, and they would compete with private banks to raise money on the capital markets and to find customers in need of finance...

...corporation is one of the last bastions of dictatorship on earth...

...Since employees would also need open political debate to choose their representatives, discussions among employees would interact with debates within the board...

...They argue that if the government pursues its redistributive course, it will damage the investment climate and lead to a huge shift of capital abroad...

...Similarly, when we ask why women cannot be paid the same as men or why we cannot spend more money to combat the AIDS epidemic, the answer is that as a society we simply "cannot afford" to do these things...

...The environmental regulations that we have are not the result of a broad democratic debate but rather those that people have the courage to support in the face of economic blackmail—the threat that tighter regulations will lead to a disappearance of jobs and economic opportunities...

...The reality is that U.S...