Has Treasury Secretary Timothy Geithner been reading this blog? It sure sounds like it from this NY Times story:
“Our system failed in fundamental ways,” Mr. Geithner told the House Financial Services Committee. “To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game.”
Sec. Geithner and I differ on the nature of that failure, and I don’t think that he is really considering things at the fundamental level he claims to be. More dangerously, he may believe that he is down to fundamentals, when he is not. For example, later in his statement, he calls for “a single entity with responsibility for consolidated supervision of systemically important firms and for systemically important payment settlement systems and activities.” (emphasis added).
As I argued last week, we need to get away from the whole concept of systemically important firms. We must urgently move our funds (as individual decisions) away from these dangerously centralized entities and into those which have some degree of accountability.
If something is systemically important, it should probably be part of the government. At the very least, it should be governed democratically like cooperatives are. If we want to protect people from this sort of mess, the first line of defense should be the opportunity to protect themselves. Regulation will still be needed, but not quite so desperately. And it will not be fighting against a current of self-reinforcing greed and power that is way stronger than regulation will ever be.
Also last week, I said that I would look into the question of whether cooperative models are up for taking over for capitalist enterprise. Unfortunately, two corporate credit unions have failed since then; this was very distracting and has made credit unions collectively riding to the rescue much less likely.
We also face some serious obstacles in terms of using employee ownership models to keep factories open on a not-for-profit cooperative basis (that is, paying the employees without a need to pay non-employee investors). We have such severe concentrations of wealth in this country, that it is hard to imagine the average worker being able to buy their share of the business – whether that is 1/10th of a family-owned restaurant or 1/58,000th of Chrysler.
Insurance looks quite a bit better with a large and healthy multi-level global federation of independent mutual insurers, none of which are systemically important. There is real competition among them, and real accountability within each.
I’m not a big fan of government funded cooperatives. But if government is going to be throwing all sorts of stimulus money at business, shouldn’t it do it in ways that have internal accountability and a tendency not to concentrate wealth and create systemic importance?
We are facing a downturn for a while here, and the biggest task I see for us is finding ways to avoid having more people fall deeper into poverty. If we do not address poverty issues, we are likely to see unrest, which is not going to help anyone (except maybe the investors who profit from security companies like Blackwater).
Some may argue that we actually need to get the money to the rich so they can invest it and it will trickle down, but they’ve already had their chance. We need to try something else now.
So how do we make that transition? I recently had an email exchange with a writer named David Kendall, who asked, “Did you ever see a movie called ‘Speed’? Passengers must transfer from a moving bus that is armed with a bomb to safety on a rescue bus that is traveling at the same high speed. I view the capitalist system as the armed bus and the cooperative system as the rescue bus which has hardly even started its engine. We need to get that engine started, bring the rescue bus up to speed alongside the armed bus, and safely transfer as many passengers as possible from one bus to the other. But ‘access’ to the rescue bus is impossible until it comes up to speed.”
A big part of what will get that rescue bus moving is money, but there is also a desperate need for expertise and coordination. Existing cooperative groups in the U.S. (and elsewhere) need to make a unified case for how they can help. The public (and especially public officials) must be educated about places where cooperatives do rival capitalist business: Mondragon, the Co-operative Group (UK), the Calgary Cooperative and the various Italian federations like the one in Trentino. We also have models right here: rural electric co-ops, Best Western, REI, Ocean Spray and (one of my favorites) the Association of Kentucky Fried Chicken Franchises. I humbly offer the models described in this blog as some ideas for serious and urgent consideration.
Nearly half of us are already members of some sort of cooperative, and all of us have the opportunity to educate ourselves about what businesses are co-ops, and then vote with our dollars in a real and meaningful way. Capitalism is not the only way and socialism is not the only alternative. The rescue bus already exists.