The Brief, Great, Vanished Social Welfare
The last of a four-part essay that questions the inevitability of the social costs of unfettered capitalism. By travelling back in time to visit the world as it was before the ancient precursors of Goldman Sachs, it becomes clear that options for the inclusion of social welfare in capitalism existed, but were deliberately externalized by the rapacious tenor of the times. We live needlessly with the result.
Part One: Are There No Prisons - Are There No Workhouses
Part Two: The Unsightly Back of the Invisible Hand
Part Three: The Empty Triumph of False Validation
Part Four: The Brief, Great, Vanished Social Welfare
Humanism is a philosophical approach to the world where the well-being of men is the starting point for all endeavour. Dating back to the ancient Greeks, Humanism didn't really begin to effect social policy until it was adopted at the start of the Italian Renaissance. Here, in the cool thin air of the Apennine Dukedom of Urbino, perhaps the greatest Humanist leader of his time, Federico da Montefeltro employed and encouraged Luca Pacioli to write his "Summa" and launch, among other things, the practice of accounting. As humanists, it never occurred to either the horrific damage it would inflict, or the shape of the world that might result. Such however, are the foibles of great things.
Humanism fought a valiant but hopeless struggle against the forces of capital and commerce throughout the west. The system was gamed against any kind of synthesis, although many tried and lost. From the earliest late Medieval champions like Petrarch (who coined the term "the Dark Ages" from his efforts), through Boccaccio, Cicero, Edmund Burke and the Age of Reason, and through to Thomas Paine and the founding of America. An entire movement extinguished and replaced by Goldman Sachs, Blackwater, and Chevron. Humanism, we are told, is no compliment to capitalism, free markets, and rational men. Humanists don't CEO.
Humanism has retained a strong influence in Europe however, and can be seen in the different social values Europeans have that Americans do not. Humanists still populate public service, the arts, and social studies enough to remind folks of their roots. Humanists, not surprisingly, populate the left most sections of the political spectrum. Many remain in what's left of the Catholic Church, and the force of Humanism on local affairs is often directly related to the "level" of their Christianity. In these communities, a wider worldview is more adaptable to economic change, especially so when change becomes essential.
One such area was the Basque region of Spain, which suffered disproportionately from the ravages of two world wars and was the proving grounds for the Nazi war machine. Having survived that, the Basque people then faced relentless oppression from the Franco regime that followed. The Basque region of Spain is a confusion of hills, valleys, mountains, and streams that tumble gracefully towards the sea. The Basque people are fiercely proud and stubborn, scattered amongst the landscape in hundreds of small, ancient communities. The Basques are hard core Catholic.
Jose Maria Arizmendi was one of many Spanish Humanists to fight on the losing Republican cause in the Spanish Civil War. Imprisoned for his poor choice of sides, Arizmendi was left no option on his release but to join the Church. As a rookie Priest, Father Arizmendi packed off to attend to his brand new flock in the Basque town of Mondragon. In ruins and battered by civil war, interminable oppression, and the early spectre of World War II, Arizmendi found there was little he could do for his flock in Mondragon. He took up a post teaching in the apprentice school of the local industrial corporation. He taught young apprentices the skills they needed to operate the company's machines and equipment, but it were his social values of Humanism, cooperation, and respect for labour that seemed to be having the greatest effect. The Franco-Spanish company canned his ass.
Undaunted, Father Arizmendi set up his own vocational school in a building donated by the town, where he infused every technical lecture with a healthy dose of humanism; Labour was the first responsibility of business, social welfare a legitimate and essential cost of any and all production. Arizmendi even developed an accounting treatment that would allow for "modifications" to raw and unchecked corporate greed. As a result, his enlightened graduates couldn't get a job anywhere.
In 1954, a frustrated group of Arizmendi's original students decided to form their own Corporation based on the kind Fathers social values and principles. Called ULGOR, it was financed by the people of Mondragon and produced a crude but efficient gas fired cooking stove. A staff of 24 was gathered, and with Father Arizmendi as advisor, oracle, and figurehead, they were in business. Just one of many young worker cooperatives that were springing up around Spain and Europe at the time, the ULGOR cooperative was different from the start, and in fundamental ways.
Not communism or socialism, ULGOR was not capitalism either. It was raw, unvarnished Corporatism. ULGOR would compete head to head with balance sheets, P&L's, technology, and capital. It would play the corporate game straight up, and do so all the while protecting the interests of every single human in the process, be they internal or external. Capital would be employed for the benefit of all, with enough left over to beat their competitors senseless in the marketplace. In short, they would defy economics by using capitalism against itself. If you can't beat 'em, join 'em.
Under the traditional model, capital is invested and labour is rented. Rented labour is thus a cost to business. In the Mondragon canon, one invests the labour and rents the capital. This moves the interests of labour onto the balance sheet in the form of equity. When a Mondragon coop is established, the company recruits members and not workers. Each is required to invest a substantial amount in the company, currently about 7,500 Euros (which they can borrow from the Firm). This money is placed in an individual capital account for each member. In return, members are given the opportunity to work, and thus improve their capital. You must invest to be a member, and you must work to maintain that membership. Unlike traditional capital stock, members may not sell or transfer their stock and it remains personal to them. If they leave the coop, they must cash out and take their capital with them.
This has several benefits. First, seed capital is raised from the employee/owners and not outside sources, retaining complete control. Second, since "shares" are personal and not transportable they are worth nothing to anybody else. This keeps ownership inside the company and amongst the Members. To buy up Mondragon, Lloyd Blankfein and all his friends would have to work in shipping, on the factory floor, or sweeping the company parking lots. Guaranteed protection of that substantial equity ownership also provides a powerful human motivator. Mondragon has virtually no "supervisory" management levels or expense.
Members are paid a salary as well, which forms a part of the operating costs of the firm. However, there are few salary bands, and the workers themselves - who vote on the firms payroll costs - put those that do exist in place. In addition, each salary band is anchored to the concept of the "lowest theoretical wage". Members are paid a multiple of the lowest theoretical wage in the company, from 1-1 at the bottom, through 4.5 - 1 for the CEO. Put another way, the highest pay band in the company cannot exceed four and one half times that of the lowest paid member. The members vote on that as well. Mondragon member/workers earn substantially more than those outside in the standard capitalist community, except for the higher pay bands who earn substantially less (American corporate ratios can range upwards of 400 -1 by comparison).
In fact, the members vote on everything, as the company's board is comprised completely of member workers elected from each of the firms operating departments. They have personal equity at stake, and so their opinion counts. The member/workers rent professional management on short definable contracts for the executive positions, all of whom answer to the board and must perform to have their contracts renewed.
There is also a second, more powerful board called the social committee which holds power over all non operating issues of the company, and is charged with maintaining the humanist principles of Father Arizmendi. The operating board passes no decision unless it first passes scrutiny from the social committee. It is here that worker safety, pensions, benefits, and all matters relating to the human needs of members are met and guaranteed. The social committee is comprised of yet more member workers. Management never gets a vote and simply do as the workers instruct them.
In the Mondragon co-op system, revenue from the company is used first pay the costs of operation as it is with other corporate structures. The net proceeds after that are then apportioned amongst the local community (at a flat rate of 10%, similar to the Islamic Zakat), a reserve against future needs, and then the equity shareholders - the members. Corporate contributions to the member/workers are placed into the individual capital accounts of each, where they must stay untouched until a member leaves the company, at which time the entire account is paid out and closed off. In this way, the share of the coop corporation's members continues to grow with the success of the enterprise. Except for the mandated return to the community of the "Zakat", virtually all the profits return to the members, and none leaves to enrich those who have done nothing to contribute to the firm.
On retirement, member/workers receive a fair return on the investment of their life's work when their capital account is paid out (with a lifetime of accumulated and compounding profits included). This method accounts completely for the fair value of each human's contribution to the whole. Members shoulder the risk alone, and share in the rewards alone. Risk is mitigated to the wider community through the corporate mandate of its "Zakat" policy, in addition to the limits of operation set forth in the humanist philosophies instilled in 1941 by Father Arizmendi. This philosophy is codified and sealed into the corporate charter, and the Social Committees ensure that every operating decision made by the Board of Directors meets or exceeds the code. In this way, the Mondragon Cooperatives have managed to merge the social welfare of pre-European economies with the hunter killer charter of the capitalist corporation.
In the meantime, while it is spending its resources and energy managing its moral and ethical responsibilities to human beings, Mondragon has grown to an international organization of 100,000 member/workers, 250 individual firms, and 17 BILLION Euros in annual revenue in 2009. Mondragon is Spain's largest manufacturer of household appliances, built from a humanist idea, 24 capitalist explorers, and a flimsy Bunsen burner stove. Mondragon has built its own banking and finance arm, as well as colleges, universities, and schools that promote and prepare member/owners for the Mondragon system. They are now building health care centres as well as hospitals and laboratories, all serving the needs of its members and local communities, and all from the proceeds of their laser sharp victories against traditional corporate rapists.
Spain was slammed by the economic inferno of 2008 of course, and remains one of Europe's most fragile economies. Mondragon, being the third largest company in Spain, has become "too big to fail". Which is not a concern to anyone;
"Here's how it played out when one of the Mondragón cooperatives fell on hard times. The worker/owners and the managers met to review their options. After three days of meetings, the worker/owners agreed that 20 percent of the workforce would leave their jobs for a year, during which they would continue to receive 80 percent of their pay and, if they wished, free training for other work. This group would be chosen by lottery, and if the company was still in trouble a year later, the first group would return to work and a second would take a year off.
The result? The solution worked and the company thrives to this day."
Which brings us of course, to this....
The Deepwater Horizon ocean oil drilling platform could well be described as the summit of the mountain of gifts our corporate capitalism has conferred upon us. A gift to us, from gods of our own making. On a bright clear evening in April of 2010, the gods of others threw our gift up and onto the decks, engineering, technology and hubris of the goliath, and then on into the sea with all its innocent life. The spectacle of the listing deathstar, slathered in billowing smoke and collapsing wreckage, soon morphed into the horror that a hole had been punched through a mile of ocean and thousands of feet of rock, perfectly and brilliantly and triumphantly tapping the earth's deepest riches, riches which were now spewing unchecked into the Gulf of Mexico.
For each one of us, this latest crime of the century gave a guilt-ridden pause. Gut check time for corporate capitalism and all the goodies it provides. A creepy feeling that spread across our conscience at one hundred thousand barrels a day. After four hundred years of corporatism and a present generation who know and understand the world in no other way, our brief, great, vanished social welfare was gushing out before us.
British Petroleum, the stateless international corporate behemoth, had somehow come to "own" the riches of the earth it had charted, logged, and registered across Gods sea floor of the Gulf of Mexico. With most of the appropriate papers filed with some of the appropriate governing bodies, BP received the right to sell us back our stuff. Following generally accepted accounting principles, the appropriated sections of the planet were monetized 
and added to the balance sheets of BP as unimpeachable assets. The cost of extracting the treasure became an expense to BP, and as an expense, BP had a fiduciary duty to its shareholders to minimize this in any way possible. In fact, so strong is that animal drive to lower costs, so welded to capitalism and business, that even laws and regulations were calculated and balanced against the risk of penalties, fines, and lawsuits. Safety itself is a cost. Life is a cost measured in insurance premiums and legal suits.
At the very moment a fireball of methane was hurtling up a thirty thousand foot pipe towards infamy, BP was doing exactly what it was supposed to be doing - keeping costs low and balancing the risk of catastrophe against the financial spoils of victory. It could do no other, and it cares not regardless. For corporate capitalism, just another day at the office.
And so there it was before us. An entire planet fuelled by oil, black gold that provides Toyotas, Wal Mart, and Big Macs. To survive another single day, the planets economy depends on an uninterrupted flow that is as cheaply gotten as we incessantly demand. We give the earth to giant resource extracting corporations free, in exchange for their vicious ability to extract it as cheaply as possible. Every barrel of goo that leaves the sea floor of the Gulf of Mexico has been methodically scrubbed of any expense beyond the hard payments made to other corporations - each of whom does the same thing in turn.
No consideration is made for the risk such a business poses to the wider community. Not one hundred miles from the wetlands of Louisiana, absolutely no human alive today thought it necessary or even feasible to compensate the humans behind those wetlands for the risk that offshore drilling automatically confers upon them. To play that game, innocent humans will have to monetize the risk on their own, and then take their chances in court to recover them. Meanwhile, the social risks to human welfare continue to be borne by all, while the profits that result from the absence of those costs flow directly to corporations. BP continues to pump oil that still has no provision for the social costs they shed as a matter of course.
BP hedges its risk every day and is compensated mightily for it. Everyone else...not so much. The reason for this is simple - since the inception of western capitalism, calculating those social costs, monetizing them, and balancing them against revenue in the double entry bookkeeping system would result in a price for the goods that we as a society would not accept. By social custom, our modern society will take a low price over virtually anything, even if that means we all must swim in oil soaked oceans forever more. We like it that way.
We like it that way because it is the only way we know.
Our world is a tangled web of infinite complexity. So many threads, so many strings, so many wires that disappear into the vortex of modernity. No human alive can possibly understand it, though so many say that they do. They do not. Our achievements, our triumphs, our funky western civilization is the sum total of centuries of wiring and strings and threads layered one atop the other. We call this ball of confusion progress. And everybody wants progress.
The truth of the matter is that we don't know what we want. Intuitively, as humans, we understand the importance of sustainability. Pollution offends us all. We abhor crime, corruption, injustice, and unfairness. But at the same time, we desire all these things only in the context of our current worldview, an individual perception of reality we develop from the experience of our own lives. We demand clean oceans and accountability but only to the limits of what we perceive to be the natural order of civilization and progress. We grudgingly accept the price society pays for oil, gold, diamonds, and drugs because we cannot understand our world without unfettered free markets and capitalism. It is the only world we know.
This world and how we understand it did not arrive suddenly on a sunny Tuesday morning. It arrived in increments. Bits and pieces. Here and there. It is arriving still, and always will. In this way, we are lulled into a complacency that allows the most astounding changes to occur in plain sight, and to occur so innocuously as to appear to us, "normal". At this moment, the accumulated bits and pieces of capitalism, free markets, and rigid accounting are pitted against the last vestiges of the defence of social welfare, and it is happening so subtly that we can hardly fail to miss it. We will think it normal.
BP is solely responsible in both law and morality for the catastrophe that is the Deep Water Horizon. For perhaps the first time, the epic scale of the "negative externalities" measured in massive social and 
environmental disruption will dwarf the might and glory of the world's fourth largest industrial conglomerate. This conglomerate, six centuries in the making, will fight to the death against the only power on earth capable of bringing it to accountability - and its knees. Barack Obama, President of the United States of America, backed by the elected members of congress and the American judicial system, and representing the simple human beings who have for too long been beaten senseless by the short end of the stick, will be forced to break the power of BP, or by failing, forever cement the corporation as the true power on the planet. Who will be master and who will be supplicant. You simply will not find greater pathos on TV these days.
There are places in our modern world that are ghosts from the distant past, relics of ages and people long gone. Some are corners, small eddies in the tired, meandering course of progress. They are quaint in their resistance to change and adaptation and decorate our contemporary lives. There are also vestiges of the past hidden in plain view, so essential and ubiquitous they form important struts and bearing walls for everything we know. Some of these sit beneath our modern edifice of complexity and technology. Some sit on top.
Capitalism is one such ghost, strut and bearing wall hidden in plain view. Assembled over hundreds of centuries from the crudest of means, constructed piecemeal, and cobbled together incrementally and beyond notice. Resting on our most basic social tools of numeracy and accounting capitalism is more than a religion, culture, or discipline, capitalism is us, completely. And yet, it - we - are killing us and we know it.
We are paralysed in the face of it. Frozen as time rolls inexorably forward, in increments, piece by oil soaked piece.
Aetius Romulous Historian, Economist, Accountant, Writer, and blood sucking CEO. Born at the wrong end of the Baby Boom Generation - too late to enjoy the ride, too early to have missed it, and stuck in the middle with the mess. Aetius writes and blogs from his frozen perch atop the earth in Canada, spending the useful capital of a life not finished making sandwiches and fomenting revolution. It's a living. aetiusromulous (at) rogers.com The Shaena Project - Essays on the question of our world Shaena was our oldest daughter, who once told me "I ain't much on thinkin'". Shaena was murdered on Valentine's Day, 2010. Shaena sweetheart, thinking is important. The Empty Triumph of False Validation The Unsightly Back of the Invisible Hand Are There No Prisons - Are There No Workhouses The Coming Fury of an Angry America Banks: Corporate Bundles of Dismal Joy - and Mislaid Rage Economic Democracy Demands One World Balance There Is No Recession in Heaven Stock Markets are Not Democratic Editorial Perspective The Angry and Forgotten of Conservative America We Held These Truths to be Self-Evident Göbekli Tepe: A Subtle Admonition from the Gods The Coming Fury of an Angry America Meltdown: or How I learned To Stop Worrying and Embrace the Debt Defending the Waterboarding Torture America Will Never Have Universal Health Care The Guantanamo Debt Cannot Be Repaid 789 Billion Cubic Dollars of Panic Leave Timothy F. Geithner Alone Stress Test: US Banking, Obama, and the IMF Collision Ice Cold Rivers of Change Flood the Streets of Washington
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