This is the first piece in a series illustrating how Socialist policies would greatly improve the lives of the American people. Along with flushing out Socialist legislation for us to iterate on, one of this series’s objectives is to highlight that the American economic status quo is a choice and not something that is “natural” or “inevitable.”
For the maiden voyage of this series, we’ll be looking at my proposal for The American Workers’ Bank, a federally run bank with the mission of helping workers buy their companies for the purpose of operating them democratically.
Why should The Bank bank exist?
While the term “Socialism” is used as a catch-all for anything involving government spending/social progress/not being racist, the actuality of the Socialist movement rests on two principles:
1. The pursuit of a comfortable life for all through Social Democracy that provides education, healthcare, welfare, and other social goods.
2. Worker control over the means of production (companies).
While 19th century Socialism (both the pre-Marx Utopian form and Marx’s scientific form) considered armed revolution to establish worker control, in my opinion, this is a pipe dream. Instead, modern Socialists look to give workers control over their workplaces through peaceful means, such as labor unions, social wealth funds, and worker buyouts. Buyouts at a societal scale are what The American Workers’ Bank is designed to accomplish.
A worker buyout is exactly as it sounds: a company’s workers buy the business from the owner(s). Currently, worker buyouts are few and far between. As this one-by-one approach is insufficient to establish an entire worker-controlled economy, a national solution is needed to transition economic control to the people who actually do the work while eliminating the class distinction between worker and owner.
This proposed solution is the American Workers’ Bank.
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How Will The Bank Work?
Just like any other government-owned corporation, The American Workers’ Bank (a.k.a. “The Bank”) would be chartered by the U.S. Government for a specific goal: helping American workers purchase their companies. After The Bank is chartered, Congress would appoint and oversee a board of directors to run it. This configuration ensures The Bank is democratically accountable to the American people through elected representatives. An excellent model to base The Bank’s stewardship on is the Alaskan Permanent Fund Corporation, which runs The Alaskan Permanent Fund, the only social wealth fund in the United States. (An American Social Wealth Fund will be covered later in this series, so subscribe if that interests you.)
At The Bank’s onset, it would be wise to first focus on acquiring larger companies before assisting with smaller ones. This strategy would ensure “the most bang for our buck,” as larger companies are on average more cost-efficient when comparing operating costs to their output, thereby maximizing the amount of American GDP under worker control per dollar.
The Bank’s acquisition process would look something like this:
1. Contact — First, unionized workers would need to file with The Bank notifying them of a desire to acquire their company. Next, The Bank would appoint representatives familiar with the particular sector to the case.
2. Planning & Financing — Union and Bank representatives would form a working group to configure a buyout plan. Depending on factors such as the total cost to buy the organization, owners’ willingness to sell, and available funds, the acquisition plan can be either gradual ( a certain percentage of company equity being acquired every year) or immediate (total sale at the point of signing).
This is when the working group will establish financing. This is The Bank’s reason to exist, as unions are unlikely to have adequate financial backing themselves. As The Bank’s mission is to help workers obtain ownership of their companies and has no interest in turning a profit, the ideal scenario will be The Bank providing 0% interest loans to the unions. After these funds are used to buy out the owners, the union (which is on its way to becoming “the company”) will be able to repay the loan with its share of the profits.
If The Bank doesn’t have enough funding to assist every union that files (which is probable given the hostile political climate it is likely to be born into), these loans may need light interest to keep The Bank solvent and on its mission of assisting as many workers as possible. Needless to say, 0% interest is the goal and should be enacted whenever possible.
3. Implementation — Once the timeline is established, the funding is secured, and the owners have agreed to sell (more on owners uninterested in selling later), the workers will start to acquire company shares according to the stated plan.
If the sale is immediate (which is more likely for smaller or less valuable companies where The Bank can afford the entire sale price), the union will now be in control of the company. With their organized infrastructure already in place, the company will run like any other co-op: the workers will democratically elect the board, which will hire CEOs and other executives to direct the company just as any other executive would. The only difference is that the C-Suite is accountable to the board and therefore the workers.
If the sale is gradual (which is more likely for larger or more-valuable companies where The Bank cannot afford the up-front cost), union ownership will gradually acquire control as they buy shares. If the company is public, this would be no different than any other stakeholder buying ownership and voting at company shareholder meetings. If the company is private, the workers can slot into whatever mechanism of control exists. If the company is being purchased from a sole proprietor or a small group of individuals (most likely a family) the union will cast votes just like they were any other business partner. Essentially, The Bank will be the backer of a leveraged ESOP (Employee Stock Ownership Plan). (ESOPs are used when small and medium owners wish to exit their business and gradually transfer their ownership to the ESOP participants, who are typically the employees.)
So, if the plan calls for the union to gain 1% of a sole proprietor’s company every year, it would take 51 years for the union to have total direction of the business. Obviously, the faster workers can become the owners the better, but it’s important to be realistic and acknowledge it’s going to take time to transition the American economy from economic dictatorship to economic democracy.
What If Owners Don’t Want to Sell?
In its infancy, it would behoove The American Workers’ Bank (and the Americans it serves) for its preliminary cases to be scenarios where owners were interested in selling. This would build public momentum and prove politically that The Bank can achieve its goal.
However, it’s inevitable there will be instances where The Bank determines the acquisition of a company to be within its immediate priorities, but ownership is uninterested in relinquishing control.
The first option is the standard market practice of increasing the offer, but as every extra dollar spent on one company is another not spent on acquiring a different one, it’s counterproductive to waste unnecessary funds padding the pockets of greedy owners looking to milk the government for every cent.
Fortunately, the Socialist movement has an array of policy options designed to transfer wealth and industrial control from the Capitalist class to the people. And just like The Cheesecake Factory menu, the Socialist Policy Menu has no bad options.
Here are a few ways to shift to worker control if purchasing isn’t an option:
Collecting Shares as Taxes — Instead of collecting corporate taxes in cash, the government could collect them in the form of stock shares. These shares could then be diverted to The Bank and onto the union, or placed in an American Social Wealth Fund (see below).
Buyouts, not Bailouts — American Capitalists are committed to the free market in the same way us Catholics are committed to Catholicism. We praise the doctrine and demand others live by it while we ignore it and do what we want. On numerous occasions, Capitalist corporations that require others to live and die by “free” markets have lobbied for and gladly accepted government bailouts. Most infamously, this happened with car manufacturers and banks following the 2008 Great Recession but was also more recent in the form of COVID relief PPP loans. Instead of just handing failing companies public money, the U.S. government should act as an investor: exchange public funds for equity in the company.
For example, following the 2008 financial crash, the U.S. Treasury Department gave $50 billion dollars to General Motors as part of the TARP program in exchange for company equity.
At one point the U.S. government-owned 61% of General Motors. The stock was sold between 2010 and 2014 for an estimated loss of $11.2 billion. For all intents and purposes, the government’s intention was never to act on the equity, but rather to keep the Capitalist* General Motors solvent.
Imagine if instead of merely selling the equity, the U.S. government had transitioned it to GM’s workers through a hypothetical Worker’s Bank. In such a case, General Motors workers would not only dictate the company’s direction but would reap the full profits of their labor.
And, for those who feel the need to say: “Well, how do we know the workers would be any good at running the company? What if they bankrupt it?” I guarantee they’d have done a better job than the schmucks who ran it into the ground in the first place.
American Social Wealth Fund — A Social Wealth Fund is a government-run equity fund that invests in a country’s assets is owned by the citizenry. An American Social Wealth Fund requires far more nuance than this paragraph (and is something we’ll cover as part of this serious, so *cough*subscribe*cough*cough), but the TLDR is that such a fund can be used to purchase equity in American companies. This can be done either through the methods mentioned above or by straight-up purchases during IPOs. Either way, it’s a way to bring companies under democratic control, whether it be of the workers or the general public. To put it in pugilistic terms, I see an American Social Wealth Fund as the right cross following the jab of The American Workers’ Bank.
The American Worker’s Bank is not likely to exist in the near future. Only a handful of Congressional Representatives and Senators would support it today, and President Joe Biden (who had a heavy hand in passing TARP) would mistake it for a napkin if it were put on his desk for signature.
But just like Social Security, Medicare, the Five Day Work Week, and any other social reforms and programs that changed the country for the better, anything worth having is going to have to be fought for.
That is the aim of this series: to propose, discuss, and refine Socialist programs that can slowly but surely enter the public discourse with the hopes of one day creating an America where our descendants look back with disgust for this time when workers had no control over the very workplaces they themselves made function.
What do you think about my proposal for The American Workers’ Bank? Let me know in the comments below and don’t forget to subscribe for future episodes of The Socialist Policy Series.
A few fun things to check out.
Check out The Sample, a daily email that curates newsletters just for you. It’d really help me grow if you sign up using my referral link here.
It looks like a Starbucks store in Buffalo, NY is going to unionize! Yay! If you’re in the area, shoot me a message and I’ll pay for your next coffee.
Yellowstone is a great show, and something I’m really looking forward to writing about. The inherent contradiction of a man trying to protect the land he inherited/stole provides a remarkable centerpiece for storytelling.