Frank

I read a book by William Greider called the Soul of Capitalism. He argues that Capitalism is flawed, but not as a system. It is flawed because we Americans have allowed our version of it to get messed up. It's messed up by companies, the government, etc. But the solution is not an (un)glorious revolution. The solution lies within the system.

This book is brilliant and won't change your life. But its one of the most pragmatic texts I've ever read. Greider understands more than how to compromise – he understands how to get things done.

One problem that he sees is that "in the economic sphere, efficiency trumps community." On page 35, Greider expounds, "Maximizing returns comes before family or personal loyalty. What seems priceless in one realm may be wasted freely or even destroyed by the other. Human experience is sacred to society, a marketable commodity in capitalism."

He says that often managers and CEOs believe that if the company doesn't do well, everybody loses: a plant might close, and then 200 workers lose their jobs, for instance. One must be a slave to the bottom line – otherwise shareholders, employees and everyone else loses out. This makes companies aloof and unconcerned for anything but one figure: the stock quote. Then, companies try to "externalize" operating costs wherever possible: dumping waste into ponds, squeezing more work out of employees without compensation, etc.

Greider quotes one Reverend Emil Brunner as having said, "This system is contrary to the spirit of [Christian] service. It is debased and irresponsible, indeed we may go further and say it is irresponsibility developed into a system" (35). At this point Greider admits that his book will likely not offer new ideas but rather will revive "valuable ideas and insights from the distant past" (36).

Nowadays, firms are not so roguish. Even so, they still do not act in the public interest. "As the era of deregulation reduced legal restraints on firms, as new technologies and globalization quickened the competition, one major corporation after another was persuaded to back away from its long-standing commitments to employees and communities, even to national identity. The corporation's unwritten ‘social contract' was torn up. Some firms who hesitated suffered the disfavor of financial markets. Others charged ahead enthusiastically and boosted returns enormously, often by pushing their costs onto others – their workers and communities, the environment and, more discreetly, their own customers. The most aggressive companies became the most esteemed" (37).

But, wait, there's a counterpoint, Greider argues. "Many large and small firms resisted and prospered nonetheless. Whether this choice reflected the personal values of managers and owners or simply smarter business strategies, their success does hint that there is much more space for successful alternatives, even in the global context, than the stern sermonizers of the free-market culture are willing to acknowledge" (38).
And so Greider agrees with Reverend Brunner: Irresponsibility is the heart of the American problem. One of the solutions Greider proposes is the Employee Stock Ownership Plan. "Instead of capital hiring labor, labor hires capital" (64). This is feasible, he argues, because "Many large and successful companies today do not own great assets themselves. Their control derives from the insider's role in organizing the contractual relationships among all of the various elements that contribute to production: the employees; the suppliers; the providers of capital; and the firm's controlling insiders, who may or may not own the factory or contribute much of their own capital to the enterprise" (64). Therefore, labor, if it banded together, would also be able to wield these same resources.

Greider argues that if employees own the company, they will feel more invested in it and therefore go out of their way to help it. For instance, employees may not share with management suggestions for improvement that they notice because management will use it against them: If they notice that four people a job that could be done by three, one is fired. However in an ESOP, what is good for the company is good for the employee, and so those sorts of improvements are made. Greider cites Solidarity, a temporary employment agency, as a good example of a working ESOP. However, it is still in its infancy. Another caveat Greider throws out is that employees must be given substantial decision-making opportunities in order for this system to work.

So what do I think of all this? I think its fascinating. Does it work? I think it depends. It depends on so many other factors. It's like saying whether the right offense will help a football team win the Super Bowl. Yes, it certainly helps and is even crucial, but there are so many other factors: quality of players, dedication, coaching, funding, etc. In the same way, having an ESOP is no guarantee of success.

But an ESOP system seems to do one critical thing for society: it begins to put the power back in the hands of those to whom it belongs. It begins to heal the labor vs. capital divide in our economic system. It would theoretically, bloodlessly, do what Marx dreamed of doing – putting labor and capital on equal footing. And the change wouldn't be overnight; it would certainly take time. But it appears promising.

One fallacy in citing Solidarity is that in its current state, it is relatively young. Big splashes turn into tiny ripples: what looks big in 2007 could easily fade away by 2017. Reality erodes more steadily than water. Perhaps the workers, after ten or fifteen years of delayed gratification will say, "Enough is enough." It seems all too probable that big ideas die softly and complacently, and this could be one of them.

But I hope that ESOP's gain ground and popularity. I am so sick of corporations influencing America for the worse that anything that limits a few powerful, greedy guys in suits sounds fine by me. I want to stick it to the man. But I want to be practical. I don't want to pull a Bolshevik revolution where the people who were getting oppressed suddenly find themselves doing the oppressing. I don't want to pursue narrow ideals so far that I lose my innocence. And so that's what I like about this idea. It works within the system. There's no glorious revolution, no need of thought police. Greider seems to understand the art of pragmatism. It's not even compromise. It's just tweaking the current system to do what we want. And Greider's book is full of these sorts of solutions. The ESOP suggestion is just tool in the shed.

Winston Churchill said something interesting about Democracy. He said that Democracy was the worst form of government except for every other form of government. I feel that way about Capitalism. It's the worst except for every other system. And so Greider, arguing for benevolent Capitalism, struck a chord with me. I want benevolent Capitalism, and Greider lays the groundwork, it seems, for that to happen. I love the idea that if mutual fund companies would stop investing in companies that practice antisocial behavior that they would better fulfill their mission statement. That sounds too good to be true, but he demonstrates thoroughly how it would make sense.

I would exaggerate if I said that Soul of Capitalism changed my life. But I would not exaggerate if I said that it gave me economic perspective and emblazoned my hope in Capitalism and gave me a buffet of healthy, pragmatic remedies to our current problems.