Yesterday, my colleagues at the University of Maryland’s Democracy Collaborative unveiled a new website called Community Wealth.org. It contains a mass of practical information about alternatives to the standard business corporation, including “community development corporations (CDCs), community development financial institutions (CDFIs), employee stock ownership plans (ESOPs), community land trusts (CLTs), cooperatives, and social enterprise.” Gar Alperovitz, Jessica Gordon Nembhard, and other Maryland colleagues have shown that these wealth-generating organizations are rapidly growing and are often highly efficient and sustainable. Alperovitz also has a new book on the subject, which has been excerpted in Philosophy & Public Policy Quarterly (a journal produced by my shop).
These are my two favorite arguments for expanding alternatives to standard corporations:
1) The traditional approach to equity–taxing and spending after the fact–has encountered strong popular opposition in all Western democracies. Besides, it makes the recipients of government aid dependent on the state. Wealth-generation is a preferable strategy for both political and substantive reasons.
2) Alternative economic institutions like CDCs and co-ops are more rooted in communities, less able to move their investments. One of the biggest weaknesses of democracy today is the mobility of capital. As Alperovitz notes in the excerpt, a corporation can influence political decisions in multiple ways, including the “implicit or explicit threat of withdrawing its plants, equipment, and jobs from specific locations.” Besides, “in the absence of an alternative, the economy as a whole depends on the viability and success of its most important economic actor–a reality that commonly forces citizen and politican alike to respond to corporate demands.”
If there is no alternative to the standard corporation, then democracies really must do what firms want. Trying to restrict capital flows simply violates the laws of the market and will impose steep costs. In the market we have, it is not corrupt when democracies favor corporations; it’s just realistic. However, Alperovitz and his colleagues are showing that there is an alternative to the corporation. It’s possible to increase the wealth of people in poor communities by creating economically efficient organizations that are tied to places.