Democratizing the Private Sector for Fun and Profit

There is a fundamental rift in Western society that is causing tremendous instability and damage. The rift is more fundamental than the one between Left and Right, which, as I’ll argue, is a false dichotomy. Rather, it is the rift between two often incompatible power systems: the democratic republic structure of government, exemplified by the U.S. Constitution, and the hierarchical business structure that tends to characterize the private sector. In the first, power and control are ideally regulated by democratic processes: one person, one vote. In the corporate world it is one share, one vote, which is linearly proportional to one dollar, one vote. As a result, critical decisions, which may have serious externalities, are made by the largest shareholders – the ones who have the most dollars invested in the company. Therefore the accumulation of power in the public sector comes from the accumulation of popular support, while in the private sector it is from the accumulation of capital*.

This rift, then, causes an unavoidable tension as two very different forms of power contend with each other. The United States in particular has tended to defer more and more power to the private sector in recent decades. Almost any tendency for a stronger government role in the economy today, including by adding tighter regulations, is decried as a form of “socialism” or “coercion,” and the private sector of course has a vested interest in perpetuating that perception. Ironically the fear of “socialism” has led many voters to support policies that make them less free, as, crucially, the private sector leverages its own form of coercion: it requires capital to survive in America, and for most people, that means employment by a hierarchical (non-democratic) organization. On the other hand, those who wish to further democratize society see as their only option an appeal to government power, the only serious democratic power in contemporary Western society. But neither side has any illusions as to shortcomings of government: it is only a matter of whether one believes whether (relatively) democratic government power or hierarchical corporate power is preferable. This, as I’ve said, is a false (and tragic) dichotomy, or at least ought to be.

I wish to sidestep the interminable debate as to whether increased governmental intervention is appropriate for solving Western civilization’s many urgent problems, other than to say that it would seem that the private sector as it stands will not take drastic, or even significant, steps to save a sinking ship unless the market demands it (and it may even try to convince the market that the ship is, in fact, not actually sinking).

Instead, I would like to argue that the best approach, at least in a culture that is currently and historically deeply suspicious of government power, is the democratization of the private sector. In practice, this means one person, one vote, instead of one dollar, one vote, in the private sector. There are precedents for this: a for-profit democratic cooperative structure, for example, in which the board of directors is elected by the membership, but not in proportion to the shares held by each member. Another example is the non-profit, which can be hierarchical or member-controlled, like a cooperative. In both cases, decision-making in the private sector can be democratized and wealth inequality can be addressed, without any sort of tax adjustments, income redistribution, or any government intervention whatsoever.

A democratized private sector addresses many of the problems brought about by the status quo: first, the demand for endless growth of each individual publicly-traded company, and the corresponding endless financialization that has accompanied that demand, has ironically destroyed many otherwise financially sustainable companies that were making products that people wanted. Rushkoff uses the example of Twitter, which was making half a billion dollars a quarter, or two billion dollars a year, for a fairly simple messaging application. But, as Rushkoff points out, once Twitter went public, its stock had to grow. And grow. And grow. So all of a sudden, a fairly stable and popular business bringing in $2 billion a year had to mutate, or “pivot”. Its initial stock price was based on the assumption of much higher revenue, many times higher than what Twitter was making. So Twitter was legally obligated to change, to transform the company in order to justify its enormous valuation to investors.

This sort of pivoting, incidentally, is one of the main driving forces of surveillance capitalism: the notion of making money spying on people, profiling them, and selling their data (including to the government**), who, meanwhile are becoming more and more suspicious (and rightfully so) of the big tech companies, who depend on surveillance technologies to sustain the growth they are required to deliver. And, as Rushkoff points out, many of the people who are unhappy with this situation depend on these companies to grow for their 401k’s. To quote Laura Penney, “it’s the genius of capitalism,” folks! But I would argue that that takes us back to the false dichotomy: it’s not so much capitalism, in my view, that is the issue here as much as its current growth-oriented, debt-oriented, hierarchical form. Had Twitter remained private, or better yet, become a cooperative, it might not have raised quite the same amount of money, but it also would have been able to provide a stable income to many people, in addition to making many people rich, without pivoting.

RJR Nabisco is another compelling example: even though the company was extremely successful, its stock price was pretty flat, because people will buy only so many Oreos, and smoke only so many cigarettes. And it had no prospects of serious growth on the horizon. And why should it? The company made the products it made, it made them well, and made a lot of money doing it. The market was saturated. But when there is an incessant demand for growth, changes have to be made. The company was famously acquired in 1988 in a leveraged buyout, through which it took on enormous debt to justify its buyout price, and once again, had to “pivot” to pay it all back. That meant selling off large portions of the company, and more importantly, layoffs.

Then there’s Boeing, where corporate decisions cost lives. Robert Prentice discusses Peter Robison’s “Flying Blind: The 737 MAX Tragedy and the Fall of Boeing”: “As Robison explains it, Boeing’s downfall began when it merged with McDonnell Douglas in 1997 and managerial power over the new combined company shifted from the engineers who had run Boeing to the financial engineers who had already run McDonnell Douglas into the ground.”

The danger now is that democracy, society and the planet itself are being run into the ground. This is financialization at work: a stable company is disrupted or destroyed, as are the lives of many who depend on these companies for their products or services, or for employment, for the sake of open-ended growth which doesn’t actually makes sense for the company or its business. Again, to quote Rushkoff, “it’s bad business.” The list goes on: stock buybacks, where executives use the company treasury to purchase billions of dollars in the company’s stock, so that their own stocks (often given to them as bonuses) go up in value. Planned obsolescence, where products are built to fall apart so consumers have to come back and buy them again (this topic alone merits its own essay, for both its ecological impact as well as its more subtle impact on morale). And certainly outsourcing is a cost-cutting measure that society has learned to live with. But it is hard to imagine a worker-owned cooperative voting to outsource their own jobs.

Cooperatives still need accountants, managers, lawyers, marketers, designers, engineers and so on, not to mention electricians, plumbers, drivers, custodians, skilled laborers, etc. For the vast majority of employees, there is no reason their income should be affected whatsoever working for a stable and successful cooperative. After all, who makes how much would be the employees’ own decisions. Their main concern would instead be on stable production and revenue, and remaining competitive. That alone would increase morale and pride, not to mention a larger share of the company’s profits as dividends (if the employees so choose), and vastly increased empowerment.

There are several major obstacles to the adoption of democratically-managed businesses that I can see. The main one, though, is the need for capital and people to kickstart these projects. Most of the big money is either in hierarchical corporations or the public sector. Billions need to go into founding and growing democratic organizations that produce. Also, (I assume) the majority of business literature presupposes hierarchical ownership or management structures. Much more research has to be done on how to build and run a democratic company successfully, and people who are interested in working for these sorts of organizations need a way to learn more about how to do it, whether in business school or elsewhere. And to me the most urgent question is how to scale the democratic private production model. Can democratic private institutions scale to meet civilization’s many needs? If so, how? I suspect that what may be needed is a federated model (similar to the United States itself), where many smaller cooperatives elect representatives to a larger body that serves the purpose of coordinating them. And there may be many such bodies, competing with each other.

Trebor Scholtz has coined the term platform cooperativism (https://platform.coop/about/vision-and-advantages/), which seeks to bring the cooperative model to the tech industry, especially when it comes to things like social media, ride-sharing, video conferencing, etc. Platform cooperativism appeals to me at least partially because of its potentially low startup cost. But platform cooperativism, while urgently critical and highly feasible, is not nearly enough. There should be cooperatively-owned infrastructure, cloud computing, hardware production, and software development in the tech industry, for starters. The latter is already well underway: while not necessarily incorporated as cooperative structures, many prominent free and open source projects can easily be imagined as being developed by cooperative or otherwise democratic ventures**. Many are managed by non-profit foundations.

It is my hope that I’ve demonstrated how democratic private production is not only an alternative to the tired, polarizing and unnecessary socialism/capitalism debate, but may alleviate the costs, especially social costs, that either extreme bring with them.

A very quick afterword about blockchain, crypto, and other such developing technologies: I have little idea which technologies would best suit more democratic business structures. I consider the web to have tremendously rich potential in this regard, but by virtue of being more decentralized the blockchain may have some democratic advantages.

* Of course, the accumulation of capital tends to require popular support in the form of the market, but this form of “democracy” is largely an illusion: a consumer’s purchasing power, which again is largely determined by how much capital (or credit) they have, determines how much influence they have on the market. When it comes to yachts and skyscrapers and large-scale advertising, most people have zero influence on those markets. So we are back to one dollar, one vote, and obviously the votes are therefore distributed unevenly.

The lines blur, unfortunately, in that a political candidate must raise capital in order to reach mass audiences, but that has more to do with the realities of the private media landscape and its role in popular culture than the structural nature of the democratic process. That problem would be solved by an educated, informed and proactive electorate.

** In the 21st century, software freedom (aka free software) is an essential component of human freedom, and tends to make much more sense in a cooperative structure than in a hierarchical one. After all, proprietary software is first and foremost about control.

Avoiding Catastrophe

Please Help Save The Planet.

The heat is rising. The oceans are rising. Hatred is rising. We do not have much time left. Humanity must, as a collective body, get it together in love and respect if we are to avert total catastrophe on our planet, whether in the form of a nuclear war or unsurvivable climate change, either of which would render our beautiful crystal planet uninhabitable for Life in general. And that would be a tragedy that would reverberate throughout the Universe.

Whatever your priorities are at the moment, be they family, career, a project or a “cause,” your aspirations depend on a livable planet.

All the many crises humanity is facing right now is a reflection of the collective human consciousness. All people must now look to their own role in the collective consciousness if humanity, if this planet, is to survive. As Phyllis Krystal writes in her 1998 book, “Reconnecting the Love Energy,” [a] worldwide catastrophe could occur due to our lack of awareness of the seriousness of the imbalance resulting from the universal absence of caring… It has become desperately important for all of us to do whatever we can to help bring about a change, but we must do it first in ourselves.”

It would be too simple to call it sin. What is really going on is cause and effect: a global “me first” ideology that separates and isolates people and encourages endless competition in all spheres of human life, growing tribalism and nativism, and an unprecedented worldwide distortion of truth are reflected and manifested as chaos, turmoil and suffering.

The global religions have largely failed in their various missions to end suffering, spread goodwill and love to all, repair the world and/or bring humanity and all life closer to G-d. Instead they have too often engendered bickering, exclusion and even persecution of “others” outside their circles. How many ethnic and religious minorities are being persecuted today! It is appalling.

Many people who read this, including the author, wonder what they can possibly do to elevate consciousness and to save humanity and the planet. Human beings are powerful individually, and even more powerful collectively. The first thing is to pray: pray for the welfare and survival of humanity and the planet. The second thing is to treat all – and that means all, even your so-called enemies – with love and respect. Forgive those who have offended you, whether out of ignorance or even malice. That does not mean you condone destructive acts, but it does mean that you forgive. Act not out of anger or retaliation: that will simply lower consciousness for everyone involved. Third, talk to your friends, family members, loved ones, neighbors and acquaintances. Ask them: “The world is in dire peril, due to greed, hatred and apathy. What can we do?” Keep talking and keep asking. Be proactive and anti-racist.

Dwight Eisenhower said in his final address to the American people as President, that “[a]s we peer into society’s future, we — you and I, and our government — must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.” This was in 1961.

The times are desperate. If you wish for your family, friends and loved ones to survive, you must act.