Capital Commerce

I missed Michael Moore's Capitalism: A Love Story when it was in theatres (and I wasn't alone, apparently, as it did not do nearly as well at the box office as many of his previous films). But I was intrigued by the interviews Moore gave for the film, such as this one with Wolf Blitzer in which Moore declares that we should replace capitalism with "democracy." "You and I should have a say in how this economy is run," he told Blitzer.

Blitzer misses some golden opportunities to ask Moore what he really means by this proposal. How can voters run an economy? Will the ballot box determine what new goods should go on sale? Will there be a referendum whenever we need to figure out the price of a loaf of bread?

As it turns out, there is a way democracy can coherently make economic decisions. But it's not what Moore wants. Many firms—profit-seeking, capitalist ones—around the country and world are implementing "workplace democracy," in which workers are given voting power over certain aspects of how the business is run.

My friend Greg Ferenstein, a researcher on this subject at UC Irvine, recently had a great op-ed in the Christian Science Monitor that explains where Moore gets democracy wrong, and how workplace democracy can actually help capitalists make money.

One example of the change: Harvard Business Review contributor Ricardo Semler saved his manufacturing plant from bankruptcy by replacing middle management with autonomous, employee-run teams.

Teams at his plant, Semco, set their own salaries, schedule their own hours, and are offered finance classes so they can understand Semco's transparent record books. Mr. Semler found that devolving power to employees made them happier — and happier workers were more productive.

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Yesterday's Washington Post had a very one-sided article on how it has been difficult for one region of North Carolina to cope with global economic competition. The local residents quoted in the story—many of whom have lost their jobs as local manufacturers move to China and elsewhere—are quite skeptical of the claim that local economies can adapt in the face of globalization:

"The people in the think tanks keep saying we are going to become—what's the term?—an 'information and services' economy," said Allan Mackie, manager of the North Carolina Employment Security Commission office. "That doesn't seem to be working out too good."

I wish author Peter Whoriskey had spent time investigating the other side of the coin—the entrepreneurs who are trying to create those new information and services jobs. That's the harder side of the story to report because it is never obvious where the new drivers of job growth will be, and it can be a slow process to discover them.

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Irwin Stelzer asks how private-sector employers are responding to the healthcare debate in Washington:

Small-business men I met with this week tell me they are in a state of paralysis as they watch the debate over the health care "reform" bill wending its way through Congress. Lurking in its 1,502 pages (the Senate version) are provisions that will markedly raise their costs, and their personal taxes. So even as business gets better, they won't take on more staff because they can't figure out what it will cost them to do so.

What are these cost-raising provisions? In my analysis of the Baucus bill, I mentioned the tax penalties that would apply to businesses that do not provide healthcare for employees who would be subsidized under the plan. But those penalties only applied to firms with 50 or more employees—only 4 percent of all employer businesses. The bill Congress is currently debating, however, is more expansive.

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The White House has responded to an analysis of the Cash for Clunkers program by Edmunds.com that claims the program created only a trivial amount of new car sales, and many of the cars purchased under the program would have been sold anyway. Here's a point by Macon Phillips, the White House director of new media:

This analysis ignores not only the price impacts that a program like Cash for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program.

[emphasis mine]

That point goes two ways though. If we include cars that weren't directly eligible for the Cash for Clunkers program in our analysis, that means we need to look at the used car market. Of course, as I've pointed out before, subsidizing new car purchases is a good way to push up prices in the used market. A whole class of consumer for which used vehicles is all they can afford were pretty much given an "anti-stimulus."

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