Re: [tlug] Introduction to (Tech) Worker Cooperatives, 09:00AM on Sunday, July 12th JST

[Benjamin Kowarsch <trijezdci@example.com>]

On Thu, 9 Jul 2020 at 16:34, Joe Larabell <fred62@example.com> wrote:

While I agree that we need a change in our value system, it seems to me that what we do not need is a replacement of one "one size fits all" system to another, but instead we need a "best tool for the job on a case by case basis" system.

 

The problem with that is that humans, by default, seem to be hard-wired to maximize their own position in the social system -- no matter what system that might be. If you offer multiple alternatives, that will almost certainly result in people "gaming the system" to maximize their own outcome. If you were to ask a bunch of people for a top-ten list of the problems with Capitalism, the list would consist almost exclusively of instances where someone (or, more likely a class of someones) has gamed the system to their own personal advantage. The only way to avoid that is probably one-size-fits-all... but that almost certainly devolves into "one-size-fits-none". Anything else is just swapping the devil we know for the devil we don't.

There are always ways to steer things. That should be evident to any engineer.

Germany has a mixed system already due to the fact that the Raiffeisen cooperative model is enshrined into law. There are thousands of cooperatives in Germany operating under that model. Many of them are well known brands and the general public doesn't actually realise they are cooperatives. The EDEKA supermarket chain for example is a cooperative. The majority of taxi companies are cooperatives. The vast network of Volksbanks and Raiffeisen banks is a cooperative federation of cooperative banks. And all of this has come about without any specific incentives.

Now, if you were to transform the general legal system such that cooperatives are incentivised and for-profit outfits above a certain size are penalised, you could then fine tune the entire economy such that a given target percentage of GDP is generated by cooperative businesses. WIth some academic research it should be possible to determine a goldilocks zone of cooperative-to-capitalist ratios and then steer the economy such that it stays within that zone.

For example, for-profit banks could be required to purchase credit insurance on the open insurance market for every account they open for any person with a net wealth under 10 million EUR while cooperative banks are insured by state guarantee for they do not go bust (none has ever gone bust in 150 years of operating in Germany, not during the great depression, nor during or after two world wars).

This would then shift the burden from regulators (where we all have to pay for it) to the banks and their insurers. The insurers would price risk of failure into their premiums and the higher the general risk of any for profit bank the more expensive their insurance premiums for accounts would be. As a result, most private banks would not bother with operating any accounts for non-wealthy persons. If you go to Switzerland, you will find that a very very large number of the local banks they have will not open an account for you unless you have a substantial net worth and they will ask for documentary proof. So this is not anything extraordinary.

As a result, private banks would only be able to gamble with their shareholder's money and with the money of wealthy people who have the means and wherewithal to watch what their banks are doing with their money. The banks could no longer gamble so easily with impunity with all our money by virtue of holding the accounts of large portions of the entire population. Conversely, the vast majority of the population would have their accounts at cooperative banks.

Such a system would be far more effective at preventing crises in the financial system that have the potential to take the entire economy down than the ever increasing regulation we now have under the Basel system.

The approach I sketched out is like a steam engine with safety valves that will simply let pressure out when it becomes too high. By contrast, the Basel system is like a steam engine without safety valves, where the engineers continuously build thicker walls and pipes into the engine in the hope it won't blow up.

Unfortunately though, we don't have enough engineers in high places in government.