Co-ops Offer ‘Alternative Model of Capitalism,’ Economist Reich Says at International Summit of Co-ops


During a keynote address at the 2016 International Summit of Cooperatives, economist Robert Reich told an audience of some 3,000 cooperators in Quebec City, Quebec, that the co-op business model—if properly harnessed—could shift the world’s economic future toward an “alternative model of capitalism” that values both growth and equity. Co-operative News published this piece by reporter Anca Voinea: 

Economist Robert Reich thinks that many Western countries are witnessing a crisis of capitalism, which can be overcome if co-ops spread their business model and become more visible.

Speaking at the 2016 International Summit of Cooperatives in Quebec City during a lunch sponsored by Agropur Co-operative, he looked at what the future might bring for the U.S., as well as the world.

Reich, who served as Secretary of Labor under Bill Clinton’s administration, now serves as chancellor’s professor of public policy at the Goldman School of Public Policy at the University of California, Berkeley.

Reich thinks the crisis affecting capitalism can be shown by looking at wages in the U.S., pointing out that a typical American family is earning less than it did in the year 2000, and has 14 percent less wealth than in 1984.

Similarly, in Canada and many European countries, people face a stagnation of income combined with greater economic insecurity. “People accuse me of being a class warrior; I am a class ‘worryer’. I worry about stagnant or declining income, the wealth of the top and the poor going nowhere,” he said.

Three economic trends concern him, Reich told the audience. The first is an overall economic stagnation with the middle class not earning enough to keep spending and grow the economy. “There is less and less purchasing power, which means you get economic stagnation and very slow economic growth,” he said.

A second trend is the shrinking of opportunities for the poor to ascent to the middle class. Third, in light of these changes, populist politicians in the U.S. and across Europe are using people’s anxiety and fear to build division and win votes. “This is not new,” he said. “Demagogues thrive on downward mobility.”

Reich criticized Republican nominee Donald Trump for using globalization to antagonize U.S. workers and companies against foreign employees and firms. Trump’s approach is a zero-sum game, he argued, in which one side benefits only to the extent to which the other loses.

“Everything is made everywhere: we are in a completely interdependent economy; everybody is working together,” Reich said, questioning Trump’s statements regarding the U.S. having to compete with countries with low wages.

“It is not a matter of fearing a race to the bottom, but competition regarding innovation and value added,” he said, pointing towards his replacement hip—designed in France and produced in Germany.

Low wages are not the result of technological developments, he said, but of the failure to adapt to their fast pace or invest in training people to get jobs that pay as well as the ones they are losing.

“The pace of technological displacement is much faster than our ability to do something about it,” he said.

After delivering this gloomy overview, Reich suggested a solution, calling for policies and mechanisms to enable people to cope with these changes. He said these remedies could include wage subsidies or action to address monopolies like the U.S. banking sector. When the crisis occurred in 2008, the five largest banks together held 22 percent of the market’s assets. Today, they hold 44 percent.

“They were too big to fail,” he said, “and are even more so now.”

Co-ops, Reich said, offered another way to tackle the growing crisis.

“If you follow my logic—whether stagnant wages or concentrated wealth or people getting nowhere—we have a big problem, a problem that co-ops, given their meaning and structure, are ideally suited to contributing to answering.”

He called on cooperatives to countervail the power of large corporations and big banks monopolizing the market. “Co-ops offer an alternative model of capitalism,” Reich added, encouraging cooperators to join efforts and speak with a louder voice.

“Only you can help people understand that,” he said. “Spread the model; it is a matter of public understanding and visibility.
“I urge you to have not only the courage of your conviction, but pride in what you are already accomplishing. Our future, in many respects, is in your hands.”

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