Social Innovation, Worker Ownership And Global Prosperity

Longtime PWF contributer Alan Greig of The Mercury Centre has sent us the following socially innovative observations on worker ownership and global prosperity.

Shared ownership helps to diversify rather than concentrate wealth, and it roots the value it generates in communities, maintains Jeff Hollender of Jeffrey Hollender Partners, an American business strategy consulting firm. He says:

“Protesters around the world are questioning inequality issues around wealth and employment. Is shared ownership the answer?

Inequality has become an embarrassing social reality for more and more global citizens – a reality that we seem very far away from solving.

One particular statistic underlines the sorry state of affairs in which we find ourselves: 1% of Americans own 40-50% of national wealth. And it is a trend perpetuated in other first world countries. The rest – the 99% – are making their voices heard with protests in the streets of New York, the Middle East and elsewhere.

But how does such gross inequity come to be? And what can be done to alleviate it? The causes are key to our development of solutions. One such cause of our current crisis is that we have seen businesses grab a greedy handful of wealth, while even the smallest piece of the pie (crumbs really) has slipped out of the hands of the middle and lower classes.

In the US, while our tax system and regulatory guidelines bear a large portion of the blame, business has played a powerful hand in almost everything that’s wrong with this picture. Big business writes most of the rules and also maintains its hold on wealth concentration by ensuring that workers are not owners.

The antidote? Co-operatively owned business, Employee share ownership plans (Esops) and other forms of worker ownership that are often classified under the idea of economic democracy.

Economic democracy describes a socio-economic arrangement in which business enterprises are democratically managed and worker-owned. While the form and structure of economic democracy varies, these businesses are organised to primarily benefit a group of stakeholders, rather than outside investors.

Such economic institutions exist in all sectors of our economy from banking, finance and insurance to education, manufacturing, retail and agriculture. Indeed, economic democracy exists within capitalist economies and does not reject the role of markets, but rather limits the primacy of the profit-maximisation motive that currently drives the way in which most businesses engage with the market.

Shared ownership helps diversify rather than concentrate wealth – which is what we desperately need to do to revitalise our economy. It roots the value it generates in communities, keeping assets and resources from being transferred from local communities and low-wage employees to multinational corporations and their owners.

Co-operatively owned businesses can range from small-scale local companies to multimillion dollar global businesses. Throughout the world, co-operatives today already employ more than 100 million people and have more than 800 million members. In the US, nearly 14 million employees participate in 9,650 employee stock ownership programs at public and private firms with combined assets of over $925bn (£592bn). In the US, co-operative businesses serve over 120 million members, or four in 10 Americans. The top 100 co-ops generate more than $150bn in revenues, and there are more than 72,000 co-operative establishments in the US providing more than 2m jobs.

In Europe, Italy’s Legacoop and Spain’s Mondragon multi-sector co-operatives have been able to both reach significant scale and demonstrate long-term sustainability. Legacoop, founded in 1886 in Milan, now has more than 15,000 member co-operatives and employs more than one million people. Mondragon, founded in 1956, now holds €33.3m (£27.4m) in assets and employs more than 85,000 people internationally.

A world of co-operation and shared ownership is not only possible but critical to address the chronic unemployment, the dangerous concentration of wealth and the environmental destruction our world currently faces.”

Diversifying rather than concentrating wealth makes sense.

Jeff Hollender tweets here.