Concerning Cooperatives

Thinking about how to make an economic system that is more humane, and less riven by class struggles, many thinkers have advocated for workers' cooperatives (the Distributists being one example). Cooperatives differ from the traditional capitalist firm in that workers share ownership and management of the company, as opposed to being salaried employees with no participation in the profits besides what management feels like giving them. They differ from a socialist commune in that there is still private property, and individuals can benefit directly from the success of the firm, which tends to mitigate the typical Socialist tendency of "They pretend to pay us, and we pretend to work" and lead to more creativity and enterprise.

With these advantages, why hasn't the cooperative become more popular in the United States? In part, because cooperatives come with some drawbacks. First, if workers share ownership in the company, what happens when you hire new people? Does that mean that you've just diluted the ownership of the existing employees? If so, then there will be a tendency of the owner-employees to delay hiring more people, even if it means sacrificing business opportunities. Or do different classes of employees have different shares of ownership? If so, then the cooperative differs from a typical capitalist firm only by degrees.

How much of the ownership of the firm accrues to the investors, as opposed to the employees? After all, without the initial investment, there would likely be no business in the first place. And asking employees themselves to buy in, as some cooperatives do, places a high bar in front of poor job-seekers.

Additionally, there will always be a place in a large-sized firm for experts of some kind, who will be paid more for their expertise. Should such experts, be they management or whoever, also get a disproportionate share of the company?

All of these questions have answers, and the answers will vary depending on the particular needs of each cooperative. But even if you could come up with an ideal structure for your own situation, it is far from clear that existing law could support the ownership structure you want. To my knowledge, in the United States the most common means for employee ownership of their company is the ESOP, or Employer Stock Option Plan, and these are typically structured so that employees have partial ownership without true control. While American law has well-understood prototypes for traditional capitalist firms, like the C-Corporation or the S-Corp, there are few prototypes for worker-owned cooperatives.

If such prototypes existed, then new insights could be gained as people experimented with them and figured out what works and what does not in different contexts. And cooperatives could become more accepted in modern industrial economies—which is not to say that they would displace the typical capitalist firm entirely, or even mostly. Each firm structure solves different problems. The best structure depends on your own situation, and the imperatives of your industry. Still, more options are good.

One handicap of your typical utopian social reformers is that they tend to focus on parapolitics, action outside the system, rather than trying to work within the system. True, such parapolitics often has an effect, but you only get mass adoption of your ideas in the face of total collapse of the system you are opposing. In this case, those who seek to have the cooperative form catch on in society ought to be lobbying for its inclusion in the tax code, the same way that a C-Corp or S-Corp is. With an off-the-shelf model to work with, with well-understood procedures for sharing ownership and profits, more entrepreneurs may elect the cooperative model without any political or social goal at all—which is how you win.

Those who have read my previous pieces, advocating for a populist politics based on left-anarchism (to which I am presently giving the working title of "Arcadianism"), will not be surprised to read that such reforms of the tax code ought to be a major part of such a movement's platform. Cooperatives match very well with the social mindset of the Left, and they also cut directly against the Progressive agenda of corporate titans serving as intermediaries of the state, dictating terms to their subservient workers on behalf of grand social policies. Aside from which, cooperatives or other forms of alternative organization such as sociocracy address the problem where capitalist firms become "indigestible lumps of socialism" (a quote variously attributed to David Friedman or Kevin Carson), because of internal power hierarchies that mitigate the advantages of free trade.

Those on the libertarian right ought to be pushing for such reforms as well—but I doubt they will, which is why we need Arcadianism or something like it to play the same role in the Democratic Party that the Tea Party groups have done in the Republican Party.

The Politics of Crowds

If the characteristic method of collective action for Libertarians is the free market, then I submit that the characteristic method of collective action for left-anarchists is the crowd.

By "crowd," I do not mean "mob"; I mean more in the sense of "crowdfunding," "crowdsourcing," and the like. In a mob, individuals lose their individuality, submerging themselves in an unstoppable group tidal wave that breaks the bounds of civilized behavior without any sense of responsibility. In a crowd, on the other hand—at least in the sense that I mean—actors retain their individuality, and indeed can act to further it in ways that otherwise they could not have. The crowd allows you to participate in collective endeavors that would be beyond individuals. (Burning Man, for example, is not known for its oppressive uniformity!)

Let me explain. In a free market, the actions of individuals are coordinated with each other through the pricing mechanism, so that as each individual seeks his own interest, a larger social balance is achieved in an undirected, emergent process. (For details, read practically anything by Hayek.) In the pure form, free markets do not have collective action per se, in the sense of groups of people united around a particular goal—unless you consider "making money" to be that goal, and even then individuals compete with each other to achieve that goal. While there is some cooperation in the free market, usually around shared resources and institutions, the primary focus is on the individual's interests, which "automatically" generates social optima in a meta-interaction with the surrounding economy.

In a crowd, on the other hand, people do engage in united behavior around a shared goal—but of a special kind. Take crowdfunding, where someone publicizes a project that he wants to carry out, and others choose to contribute or not to contribute, as their own desires and identities impel. The point is not to submerge your own identity in a collective, as the Progressive corporatists tend to do. Rather, by contributing to a project you like, you are expressing your own individuality by what you choose to affiliate with. Importantly, you can choose to contribute to any number of projects if you like them, even if they might seem to be expressing different values, reflecting the multifarious nature of our identities.

The crowd is not coerced. It is free behavior, but it is also group behavior—where free individuals come together to do something as a community. And it is that aspect of community that distinguishes crowd behavior from markets.

Now, to say that crowd behavior is characteristic of the anarchist left is not to say that Libertarians, or anyone else for that matter, do not use crowdfunding from time to time. And likewise, left-anarchists do not eschew the market entirely. But they are skeptical of it at best, and it seems that they take to crowd activity much more readily than do anarcho-libertarians or the Right in general. Take Open Source Software development, an example of crowd activity in that people can contribute code to projects they like in an uncompelled manner. (Indeed, most successful crowds are structured like the "Bazaar" model  of famed OSSer Eric S. Raymond.) Engineers in general tend to lean to the Right, but it appears from casual observation that the OSS subculture has a stronger left-anarchist contingent than its anarcho-libertarian one.

Or, consider that in the last week, TechCrunch went live with its new crowdsourced sight for citizen involvement in legislation, Project Madison. Despite Madison's origins in the office of the impressive Republican congressman Darrell Issa, of the websites linked in my sidebar only the relatively left-anarchist sites BoingBoing and Slashdot reported on Project Madison going live. The conservative blogs I read did not cover the story, that I noticed. (This seems to be a strategic mistake, as the tool seems a fantastic way for small-government conservatives to get more input into active lawmaking.)

I last wrote on this blog of the need to develop a left-anarchist analogue to the Tea Party, which would contest the Democratic Party and challenge the Progressive corporatists for control, much as the Tea Party is wresting control of the Republican Party from the big-government faction. Such a left-anarchist movement (and what would it be called?) needs a platform for how it would govern differently from the Progressives. I believe that the concept of crowd action is a fruitful place to start.

Suppose, for example, that a portion of tax revenues (say 10%) were allocated not by Congress, but by the choices of individuals. Suppose that Amy Taxpayer can allocate $2000 in tax revenue between any government projects she feels like. In such a system, government departments that don't get their desired funding from Congress would be compelled to appeal directly to the people, and justify their value. If they are convincing, they may get fully funded or even overfunded, for example if Amy and her friends all decide to allocate their taxes to the Department of Education. At the same time, this would be a great way for disconnected citizens to become more engaged and knowledgable in the business of government, as they can feel more control over their own political efficacy.

The funding choices that people might make could be a useful corrective to the dysfunctions of Congress, as well as being a valuable source of information on voter preferences. In short, it would appeal to the left-anarchist values of involvement, freedom of choice, and community action in a way that might actually make government run better.

Nothing stops libertarians from seizing on this idea themselves, of course, and I wish they would. I don't think they will, however, and that is why we need a left-anarchist voter bloc to correspond to them.

Critiquing Progressivism from the Left?

It will be no secret to the readers of this blog that I have strong sympathies for libertarianism and other positions usually called "small-government conservative." At the same time, I'm becoming more and more convinced that the libertarian Right is running up against serious limits to its ability to reach out to new voters. These limits are why the Progressive Left has has such electoral success, managing to build a durable coalition of 45%+ of voters even while people are becoming more and more angry with the corporatist big-business/government nexus. (Indeed, the progressives have gotten away with making populist calls against Wall Street, even while pursuing policies meant to favor Wall Street as the handmaiden of government!)

Let me explain. Modern libertarianism came of age during the struggle against Communism and socialism. As such, it took on certain characteristic attitudes in opposition to those of Communism. The Reds preached the virtues of sacrificing for the collective; therefore, libertarianism developed a focus on "rugged individualism" and the virtues of greed. (This partly reflects the influence of Ayn Rand, who was hostile to all forms of collectivism.)

The problem here is that credos such as "greed is good" run counter to the experience and beliefs of a lot of people. Furthermore, most religious or philosophical traditions explicitly attack greed as a corrosive vice, and selfishness as the expression of hatred toward your fellow. Followers of these traditions believe that altruism and charity is the truly good life, and the libertarian program is harmful to the human spirit. Libertarians will argue that greed and selfishness can actually embody a second-order altruism, but many people are congenitally predisposed to doubt them.

Yet opposing tyrannical government need not require embracing greed, or rejecting all collectives. Some followers of the Catholic Church, for example, advocate a political economy called distributism, which focuses on the role of worker collectives as opposed to the domination of rich capitalists and governments both. More to the point, there are some political traditions on the Left that are hostile to the grand corporatist project of the state that has become the conventional wisdom among the Progressive Left. The tradition of Left-anarchism has many followers today; Jane Jacobs remains hugely influential, and you can find anti-statist attitudes among such movements as the Maker Movement and the like. The important thing is that you needn't be an individualist to be anti-Progressive.

But it is hard to perceive this, when the Progressives have so thoroughly dominated the Left that "progressive" is now used as a synonym for "all that is right and good." In part because of the wholesale libertarian rejection of collectives and embrace of entrepreneurialism as the highest expression of human creativity, the Progressive movement has managed to portray itself as the defender of communities, charity, solidarity, workers' rights, art, and lots of other things that people find appealing and meaningful. This is a tragedy; the good news is, it is also a sham and a deceit.

Progressive government—that is, corporatist government—inexorably destroys communities and families. It attenuates the bonds between people, replacing them with bonds between a single person and the all-powerful State. To truly defend the human spirit, in accordance with the highest ideals of the Left, must mean to crush Progressive/corporatist power structures and replace them with human bonds between people.

The libertarian movement sometimes makes references in this direction, noting Tocqueville's admiration for the (now-attenuated) American impulse toward private, local associations instead of relying on government. But because of the libertarian embrace of individualism, they lack some of the vocabulary necessary to truly build alternatives to government that require organizing people in society, to take on some of the functions that governments claim to provide. At best, libertarians hope that private industry will step in. But that does not work in all cases, and besides, many voters find such visions unacceptable.

It is for these voters that a new approach must be developed. The next stage of the campaign against Progressive Corporatism must come from within the Left: a populist blend of Left-Anarchism and "doing what works" (as the grand Progressive projects have consistently failed, over and over again, and only persist because the Left has been colonized by Progressivism).

To give a simple example: Our present educational system is an industrial process, stamping out compliant factory drones well-suited for a 19th-century economy, or a 20th-century totalitarian society. (See here for details, among other places.) The anarchist Left despises modern schooling, as they and all good people should. A political platform based on Left-Anarchism could attack modern Progressive education in terms that would nevertheless resonate with the half of the voting public whose sympathies lean Left. In this way, a coalition of interest can perhaps form between the small-government Right and the anarchist Left to reform our education, to the benefit of everyone.

To advance the cause of freedom from Progressive Corporatism, we must reach beyond the Right. If we do not rebuild the tradition of Anarchism, and reclaim the Left from the colonization of the Progressives, we will never be able to reach out to half of the country. I think the next great battlefield of this conflict is for the soul of the Left.

When Power Breeds Deceit

It occurred to me, as I was reading about yet another government official trying to downplay the poor economic reports that came out recently, that governments have very strong incentives to lie about nearly everything these days. And that is because government is exerting power over nearly everything, and therefore we expect it to perform well at nearly everything.

Let me explain by way of an example. There once was a time when the government collected statistics about employment. This was necessary, because the government had taken on the role of stewarding economic growth, and therefore it needed to know when people were losing their jobs (and conversely, when “too many” people had jobs, which as everyone knew at the time would increase inflation). So the government wanted its statistics to be accurate, so that it could make good decisions based on them.

Over time, however, the government discovered that when it published bad employment numbers, the people blamed the government. Conversely, when the government published good employment numbers, the people praised the government. Never mind that the government had little control over day-to-day employment changes. Now, it is true that government policy can affect employment through tax rates, burdensome regulation, changes in inflation or trade policy, and the like. But let’s face it: that’s all hard stuff to change quickly, and you have to fight entrenched constituencies who like the policy as it is.

So, it was far easier to simply fudge the numbers to make them look good. In the US, this began in earnest in 1994, when “discouraged workers” (those who had stopped looking for work entirely) were simply excluded from the unemployment rate. Unfortunately, people accepted the new numbers uncritically, leading to major electoral dividends for the politicians in power (Democrat or Republican). Today, if you want to know the state of actual employment in this country, you have to turn to the Employment-Population Ratio, which is dismal right now. Oddly, the same government that publishes the misleading unemployment rate is also publishing the more accurate numbers in an obscure location, hoping that the mass of voters is not savvy enough to dig down.

Similar distortion of statistics occurs all the time, under all governments. This can be seen on a smaller scale as well. The Obama Administration forced Solyndra to delay laying off workers until after the 2010 elections. Was this good business? No, but it was good politics. Similarly, defense contractors are being pressured not to send out layoff notices just before the election (as the law requires them to do—given that the “sequestration cuts” of the defense budget are scheduled to come into effect on January 2). Why? Because the government was intimately involved in setting up the situation, and wants to escape blame.

Obviously, one could castigate the deceit of those involved and bemoan their hoodwinking of the American people—and feel free to do so. But let’s not miss the larger point. The government is induced to lie about the state of the world because it has asserted responsibility for the state of the world, and asserted power over the world. Therefore, we are apt to blame the government even for things outside of its control, such as hurricanes or earthquakes! Given the tremendous political gains for lying under these circumstances, and the undeserved costs of telling the truth, is it really surprising that politicians lie constantly?

There is only one solution: give up the belief that the entire world is government’s responsibility. Force the government to hand back much of its power, and it will have fewer reasons to lie to us. This is the choice we have: the more powerful our government, and the more responsibility we give it, the more it will deceive and deceive until finally it can deceive no more, and we all suffer the consequences of our mistaken beliefs about the world.

Standing Desks and Health Policy

I don't normally do this, but over on my other blog I've thrown up a post with some current-events political content. That blog is mostly focused on the theme of structuring your environment; today I wrote about standing desks and such, and couldn't resist discussing some implications for government health regulation. Go check it out.

Happy Fourth of July

Anything I might have said about Independence Day was said better by the MIT-educated Prime Minister of Israel, Binyamin Netanyahu:

God Bless America.

Greecing the Skids

It is superfluous at this point to rehash the usual news bits about the Euro crisis. Suffice to say that states have consistently borrowed too much in order to fund their social welfare benefits, and now they are running up against the limits of such borrowing.

Yes, the immediate crisis was brought on by a fall in tax revenue, from the recent and continuing depression. However, we must ask how healthy a fiscal system is that fails whenever everything stops going right, all the time. Governments have grown accustomed to mortgaging their futures (or more to the point, someone else's futures) in order to pay for their present. Sadly, the future is now.

How will this play out? Smarter people than I are puzzling through the intricacies of how bad the car crash will get; but in general, we are about to return to the era of recurring sovereign defaults. Whether through an outright repudiation of their debts, or through monetary debasement of the Euro which would fund "grants" to the debtor countries, the problem children of Europe are going to escape their obligations for now, at the cost of driving up borrowing costs in the future.

An interesting question that I haven't seen addressed elsewhere is: how will the bond investors be compensated for their loss? It is one thing when you are a Latin American country borrowing from overseas banks; you can expropriate from them without pity and even with glee. But when your major lenders are German and French banks, and you have to live with these people even after you default, there needs to be something in it for them.

In earlier eras, when a profligate government had to periodically default on its debts, it would do so by borrowing from its own banks, who would face the certain prospect of losing their money every decade or so. In exchange, they were given lucrative monopolies over domestic lending and money creation. (An example of this can be seen in Mexico under Porfirio Diaz and thereafter.) The deal was worth it to the banking elites, for whom the periodic defaults became just another cost of doing business.

So what concessions will the big European banks extract from their governments? Or will the governments simply nationalize the banks, as many are itching to do? And if they do, what happens next?

Obama the Moderate Republican?

One of my father's coworkers recently said that he would vote for "the moderate Republican who is running unopposed for the Democratic nomination." It's certainly a clever line. And while most conservatives these days would be bemused at the thought that anyone could think President Obama a moderate Republican, given his interventionist domestic policy and disregard for the Constitution and so on, it occurred to me today that the characterization has some merit.

To understand how, we must remember that the Republican Party has not always been a party of small government. In previous years, people that would be derided as squishes or "RINOs" (Republicans in Name Only) were the conventional elite of the party. This was the faction of Nelson Rockefeller and the like.

In fact, the more I thought about it, the more President Obama reminds me of one moderate (really, progressive) Republican in particular, from times past: President Richard Nixon.

Now, I'm not talking about President Obama's apparent liking for enemies' lists, or his campaign's documented use of cheating and dirty tricks to defeat Hillary Clinton during the 2008 primaries (to say nothing of what his allies might do elsewhere), or any of the other sordid comparisons you might be tempted to make. I'm strictly talking about the policy programs of Presidents Obama and Nixon. Consider:

Both presidents came into office while America was embroiled in foreign wars started by presidents of the other party, having campaigned on a promise to end those wars. Both presidents discovered that to do so, they needed to ramp up the intensity of the conflict. (Though Obama seems content to cash out of Iraq and focus on Afghanistan; admittedly, he has two unwanted wars to handle.)

Both presidents favored deficit spending to stimulate the economy, coupled with interventionist policies designed to favor some domestic groups at the expense of others. For Obama, I mean the health care bill primarily, along with the nationalization of student loans and the repeated interventions into the home mortgage market, among others. Nixon, of course, imposed price and wage controls across much of the economy and severed the link between gold and the dollar, to escape the accumulating consequences of his own and President Johnson's massive deficits.

Both Nixon and Obama put in place major environmental policies; remember that Nixon instituted the Clean Air Act, which Obama's EPA has used to dramatic effect. Both, too, were committed to expanding the social-welfare state: Nixon pushed for and won passage of the Supplementary Security Income (SSI), an expansion of welfare, along with automatic Cost-Of-Living Adjustments to Social Security.

In many ways, the Republican Party then was just as Progressive as the Democrats were; Theodore Roosevelt was, after all, a Progressive Republican and one of the leaders of Progressivism of the time. It is only more recently that the Progressive platform of massive societal restructuring through the heavy hand of government, to create a New Man who would be a compliant member of mass society rather than an uncooperative individual, has been cast out of the Republican Party—by the rise of small-government conservatism on the one hand, and newly active religious blocs on the other.

So yes; in many ways President Obama would fit into the mold of a Progressive Republican from days of yore. The difference is that today is not a Progressive moment; and Obama is running against the tide of history in trying to make policy as if it were. We should see a clear demonstration of that in a few months.

How Partisan Opportunism is Eroding Civilian Control Over National Security

Recently, the Obama administration apparently cooperated with reporters working on a story about the Stuxnet virus inflicted on Iran, essentially confirming that the United States is now launching cyberattacks against other countries. The blowback from this has been immense, with even senior Senate Democrats attacking the leak as reckless and harmful to the interests of the United States. (Hat tip: Instapundit.)

This follows after an earlier episode in which the Obama team claimed credit for stopping the latest underwear-bomber plot in Yemen, antagonizing British intelligence and blowing the cover of at least one agent who had managed to infiltrate al-Qaida. In general, the Obama team seems to have utterly ignored the maxim about loose lips sinking ships.

The partisan implication of this have been well hashed over by other blogs. What I want to focus on is how such behavior by the civilian leadership will tend to encourage the military and intelligence services to simply stop telling the White House what they are doing.

At the beginning of President Obama's term I had lunch with someone who would know, who told me that the military was being very careful with what information they were giving the White House, until they could verify that he could be trusted. The reasoning is simple: if a politician is going to reveal all of your secrets for personal gain, then your duty to the civilian leadership may well be outweighed by your larger duty to the personnel you command, the objectives of your mission, and the greater interests of the United States as a whole. (Something like, "We had to deceive the village in order to save it.")

So now that President Obama is getting desperate, in the face of an electoral defeat that seems more and more likely as time goes on, the national security establishment is going to be mighty tempted to cut the White House out of the loop altogether for anything important. In the short term I can't blame them; the danger is that for the long term, this kind of behavior could well lead to the defense establishment forming its own independent policy, free of civilian oversight. (More so than they already do, of course.)

This is why public-spirited politicians generally don't shoot their mouth off about national-security secrets. President Obama is doing real damage to the authority of the Presidency, and our elected government in general.

Being Paid to Borrow

On Friday, the 10-year Treasury yield ended up below 1.5%; shorter durations are even more ludicrous. At a time when inflation is something like 2% (and that's assuming you trust the official numbers, which I don't), what this means is that the Federal Government is essentially borrowing money for free, at worst—at best lenders are effectively paying real money to the Treasury for the privilege of letting it spend their assets.

I suppose that if ever there was a good time to run trillion-dollar deficits forever, this might be it. Of course, that all depends on whether the Treasury can roll all of its debt over into longer maturities before rates shoot back up…

Why are rates so low? John Mueller argues that interest rates are being driven down because of the Dollar's status as a reserve currency; something like $4 trillion is being held by other nations not to pay for our exports, but to stabilize their own currencies. This creates a serious problem, driving inflation and causing interest rates to decouple from fiscal and monetary policy. In short, politicians no longer suffer automatic consequences from borrowing loads of money.

Worse, if we were to stop borrowing so heavily, all it would do is to drive interest rates even lower as foreign buyers bid up the diminishing stock of Treasury bonds remaining. Eventually, the temptation of free money would grow intolerable to any responsible politician, and we'd start overspending again.

What can be done about this? Mueller suggests going back to gold as an international reserve. Short of that, I'm not sure how we solve the problem. Assuming that it is a problem to be solved.