Building community wealth and democratising the economy in the United States

By Thomas Hanna and Joe Guinan

For a glimpse of the future, look across the Atlantic to the United States. If the current direction of travel for Europe’s eroding social democracies continues, the end-point is increasingly clear: deepening economic inequality, social pain and fragmentation, political polarization and stalemate, and the rise of the carceral state.

U.S. data makes for grim reading. Real wages for around eighty per cent of American workers have been virtually flat for at least three decades.  The income share taken by the top one per cent has jumped from ten per cent in 1980 to more than twenty-two per cent today. Wealth is even more concentrated, with the top ten per cent now commanding over three quarters of the total. Together, the richest four hundred individuals now have more wealth than the bottom 186 million Americans combined.

In other words, for decades, virtually all the gains to the economy have been captured by the very rich. At the same time, for more than forty years there has been virtually no change in the percentage of Americans in poverty. If anything there is evidence of a worsening trend—from a historic low of 11.1 percent in 1973 to 14.8 percent in 2014 with the percentages for African Americans and Hispanic Americans almost double the national average at 26.2 and 23.6 percent, respectively.

Over the same period, the proportion of the population in federal and state prisons has more than quintupled, from 93 to almost 500 per hundred thousand (471 in 2014). The ratios for African American and Hispanic American men are even more outrageous (2,724 and 1,091 per 100,000 respectively). The United States now criminalizes more conduct than most other countries in the world.

Gender discrimination remains intractable with progress on narrowing the gender pay gap basically stalled for more than a decade. Health inequality is on the rise, with the life expectancy gap between rich and poor people born in 1950 up significantly over those born in 1920. The labor force participation rate has fallen steadily for the better part of two decades and is projected to decrease further. Union density, historically an important measure of countervailing power, has fallen from a post-war high of 34.7 per cent in 1954 to just 11.1 per cent in 2015 – and a mere 6.7 per cent in the private sector. These are the contours of long-term systemic crisis.

Just as with a decaying American liberalism, the writing is on the wall for residual social democracy. Europe’s increasingly deregulated, marketised, and privatised economies continue along their own neoliberal path of subordinating employment and social protection to goals of low inflation, debt reduction and increased competitiveness. There is however some good news that can be gleaned from recent American experience – if only we can see past social democratic stalemate to more radical political-economic strategies and solutions.

As U.S. federal and state fiscal transfers have been drying up, social pain has been intensifying in communities that have long suffered high levels of unemployment and poverty. Precisely because traditional liberal remedies such as large public expenditures for jobs and housing are politically stymied, more and more people have been turning to alternative approaches in which capital becomes more widely owned and controlled and new wealth is built collectively and from the bottom up.

The United States’ somewhat decentralised federal governance allows for a diversity of approaches at different levels of the system, and this is permitting a variety of different ownership forms to develop and even prosper. Economic democracy has begun to establish toeholds across a range of sectors and geographies.

In the conservative Midwestern state of Nebraska, for instance, every single resident and business receives electricity from one or another commonly-held provider among a constellation of 121 publicly-owned utilities, 10 co-operatives, and 30 public power districts – a legacy of the Populist and Socialist movements that swept across parts of the country in the late nineteenth and early twentieth centuries. Roughly 120 million Americans are members of one or another form of cooperative, and more than 10 million are employee-owners – mostly through Employee Stock Ownership Plans, or ESOPs.

Our own organisation, The Democracy Collaborative (TDC), was founded in 2000 as a research centre dedicated to studying and pursuing democratic renewal, civic participation, and community control and development in line with democracy_collaborativea long-term vision of creating a more just, equitable, and sustainable political economic system. Through our community wealth building approach – which seeks to build community-controlled, inclusive, and collaborative local economies – we have extensively documented and mapped the extent and spread of efforts that fall firmly within the framework of democratisation of the economy, usually from the bottom up. These include broad-based ownership strategies such as worker cooperatives, ESOPs, social enterprises run by non-profits and community development corporations, public/municipal enterprises, and community land trusts, as well as other intersecting strategies and institutions, including community development financial institutions, sustainable local small businesses, shifting the practices of large non-profit anchor institutions, and leveraging public funds (including pension funds).

In 2008, inspired in part by the Mondragón cooperatives in the Basque region of Spain, TDC joined with several organizations and institutions (including the city government) to launch the Evergreen Cooperative Initiative in Cleveland, Ohio – a city hard hit by deindustrialisation and population loss. The Evergreen Cooperatives are linked together with a community-building nonprofit corporation and a revolving fund designed to help create more such connected, community-building cooperative businesses as time goes on. These linked worker-owned companies include, at present, a large-scale ecologically-advanced laundry, a solar panel installation and weatherisation business, and a three-and-a-quarter-acre hydroponic greenhouse.

One component of this strategy is to use the city’s anchor institutions – including hospitals and Universities in Cleveland’s University Circle business district that purchase more than $3 billion a year in goods and services – to provide a long-term market for the new worker-owned cooperatives. These businesses provide living-wage jobs and the benefits of collective ownership to residents in the surrounding low-income communities. This in turn creates an ongoing stabilising effect on neighborhoods and on the local economy. The Cleveland Model has given rise to a similar effort in Preston, Lancashire, that has itself become a touchstone for Shadow Chancellor John McDonnell’s New Economics.

Currently, in addition to continuing to work in Cleveland, TDC is involved with a variety of on-the-ground economic democratisation efforts. Some of these include working with Native American communities – some of the most disenfranchised in the nation – in the Midwest and Pacific Northwest and a new effort designed to bring a wide variety of organisations and institutions together around the goal of increasing the number of worker-owners in the US economy from around 11 million to 50 million by 2050 – a goal that, if achieved, would represent a significant restructuring of the U.S. economy in a more democratised direction.

Simply expanding the number and scale of exiting alternative ownership forms, while exciting and necessary, is clearly insufficient in and of itself to bring about genuine economic democracy and systemic transformation. It must be accompanied by a focus on democratic participation, transparency, community engagement, environmental sustainability, and much more. To this end, in March of 2015 we launched the Next System Project (NSP), an ambitious multi-year initiative aimed at thinking boldly about what is required to deal with the systemic challenges – economic, political, social, and ecological – the United States faces now and in coming decades. Responding to real hunger for a new way forward, and building on innovative thinking and practical experience with new economic institutions and approaches being developed in communities across the country and around the world, the goal is to put the central idea of system change, and that there can be a “next system,” on the map.

Working with a broad group of researchers, theorists, and activists, and using the best research, understanding and strategic thinking and on-the-ground organising and development experience, NSP seeks to refine and publicize comprehensive alternatives and approaches that are different in fundamental ways from the failed systems of the past and present and capable of delivering superior social, economic, and ecological outcomes. By defining issues systemically, we believe we can begin to move the political conversation beyond current limits.

There are real alternatives. Arising from the unforgiving logic of dead ends, the steadily building array of promising new proposals and alternative institutions and experiments, together with an explosion of ideas and new activism, offer a powerful basis for hope. There is obviously still a great deal of hard work to be done, and there will doubtless be many setbacks along the way. But as we shrug off the legacy of dead ideas and connect to the new institutions and experiments emerging across the United States and around the world, it is becoming possible to believe, for the first time in a good while, that we may yet come to see the establishment of widespread economic democracy in our lifetimes.


Thomas Hanna is Director of Research at The Democracy Collaborative. Joe Guinan is a Senior Fellow at The Democracy Collaborative and Executive Director of the Next System Project. They are based in Washington, DC.