Wealth Supremacy and the employee ownership movement
Reviewing Marjorie Kelly's new book
As part of our mission to promote education around employee ownership to the broader public, we’ve established a “books corner” where VEOC staff can share thoughts on books we’re reading, new and old, that are related to our mission of sharing wealth, saving jobs, and sustaining communities.
For many years, Marjorie Kelly has touted the benefits of building up structures of economic democracy from within the economy as it exists today. Throughout her career and as Distinguished Senior Fellow of The Democracy Collaborative, she has championed values-driven economic tools such as Community Development Financial Institutions (CDFIs) and Community Wealth Building (CWB). Her 2012 book, Owning Our Future, articulated the promise of generative forms of institutional ownership, including employee ownership. And in 2017, she spoke on the topic of “why employee ownership is the next embodiment of the American Dream” as the keynote speaker of the 15th Annual Vermont Employee Ownership Conference.
With her latest book, Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises, Kelly has taken a step back from promoting any particular business models or economic solutions. Instead, the book deliberately goes straight into the center of our economic system in order to give name to what is found there. Far from a tour of practical solutions, Kelly’s latest book is a journey into the realm of our shared ideas about economics and the myths that support and perpetuate those ideas.
In her search, Kelly has found that much of the foundational underpinnings of our economy and society are in fact quite solid. Her book does not at all seek to discard the concepts of private ownership or profit themselves. Kelly does find, however, that many of our shared concepts around the generation of wealth have been skewed beyond recognition and, in some cases, have lost entirely the context in which they were originally adopted. As a consequence, Kelly argues, economic principles that were set in place long ago are much at odds with the “myths” (in the sense of a widely-held yet false belief) that have emerged in the centuries since.
One such example the book details is the myth which surrounds the idea and practice of fiduciary duty. As originally intended, a fiduciary’s explicit duty of care and duty of loyalty were meant to protect people from the mismanagement of their assets so that managers of funds can be held accountable if they invest someone else’s money in some kind of highly questionable venture. And fiduciary duty does serve this purpose still today, but as Kelly explains, the way it is interpreted now all but ensures that fiduciaries will consider the maximization of returns on capital to the exclusion of all other considerations, even if those highly lucrative investments and decisions could substantially impact investors in other, potentially damaging, ways.
As Kelly describes it, this myth surrounding fiduciary duty and other harmful myths reinforce and obscure the pervasive influence of wealth supremacy and its powerful companion, capital bias. Together, the seven myths that Kelly identifies as surrounding and supporting wealth supremacy function to create the illusion that our existing economic paradigm, in which wealth and ownership continue to concentrate at accelerating rates, is the result of natural, immutable processes.
Wealth supremacy — the cultural and political processes and attitudes by which persons of wealth accumulate and maintain prestige, privileges, and power that others lack.
Capital bias — the bias toward the maximum increase of capital—maximum benefit to wealth holders—that operates inside the processes and institutions through which capital deploys functional power.
-definitions from Wealth Supremacy, p. 13
Wealth supremacy and employee ownership
Still a strong supporter of employee ownership and economic democracy more generally, Kelly nonetheless now qualifies her support for such models with the caveat that no single business or lending model is sufficient so long as it exists within the current paradigm of unquestioned and unrestrained wealth supremacy and capital bias. In a recent conversation with Nathan Schneider titled, Where I Went Wrong: Marjorie Kelly on Why Advancing Ethical Business Isn’t Enough, Kelly lamented that despite so many of her own efforts and those of others to promote better ways of doing business, the work of values-driven businesses hasn’t paid off like she had expected. Since those years of optimism, Kelly said she has seen that as a whole “the system really subsumes our efforts into itself.”
Supporting this position with regards to employee ownership, Kelly noted the relatively recent emergence of private equity firms on the employee ownership conversions scene. Attracted by the higher profitability and productivity boosts often seen in employee-owned firms, she explained, this form1 of private equity views employee ownership as a way to create impressive returns on investment by buying firms, giving employees an equity stake, and selling the company after share values have risen considerably. While employees in these companies will get a payday along with investors, Kelly added that their futures can be less certain after these companies are bought and sold than they otherwise would have been.
“Employee ownership is being, in a way, taken over by private equity,” Kelly said. “The mistake that I made [previously] was that I failed to emphasize that employee ownership is part of system change. You know, it’s not just about putting a little bit of wealth in workers’ hands while you leave the extractive system in place. … So for private equity to be saying, ‘We’re now doing employee ownership,’ that’s like Exxon Mobile putting solar panels on top of its factories. It’s not getting to the heart of the matter.”
Even so, Kelly doubled down on her firm support for worker ownership both in her book and in her conversation with Schneider, noting during the latter that “worker-owned companies are superior … on many, many measures” compared with investor-owned companies and that employee-ownership still stands out to her as “one of the models that feels most ready for scale.” Given the rate of economic decline for the majority of workers, however, Kelly now views scale as an essential component for the employee ownership movement to serve as an antidote to wealth concentration.
For those, like us at VEOC, who are committed to helping scale employee ownership, the book suggests neither a reversal nor a new path, but rather a shift in emphasis. Because her book locates the source of our economic woes within the very idea of wealth supremacy itself, it therefore posits our economic salvation in its undoing, accomplished by simultaneously exposing its hiding places throughout our existing economic system and clearly articulating the features of the next system that will take its place.
Kelly told Schneider:
Of course, we still need to support worker cooperatives; we need worker ownership and we need CDFIs. That’s the next system. … We need to take ourselves seriously as the next system and not just think of ourselves [as] building a few worker-owned firms.
The book is a plea to be bolder, to not be satisfied with damage control measures in an economic system that is rapidly eroding communities. It is a call to not only know and name the enemy, but to break free of organizational silos in a unified attack against the cultural and political forces that uphold and perpetuate wealth supremacy (noting, of course, that this is an attack on a cultural and political system, not against individuals).
What’s next: The Democratic Economy
In the book’s 15th chapter, “The Democratic Economy,” Kelly outlines the models and concepts, broad-based worker ownership included, that she believes will constitute the next system. And, as Schneider pointed out in their discussion, this next system is not part of a “broad ideology” but rather represents a mix of solutions of both practical and potent ways of fracturing the existing system of wealth supremacy. For Kelly, the new system, which she chooses to describe as the democratic economy, is a paradigm shift that begins by recognizing the idea at the center of our current economic paradigm: that we must always maximize capital gains no matter what. Under the next system, Kelly said, the purpose at the center of the economy will instead be life.
1 Other private equity firms are taking a different approach to employee ownership conversions. Apis & Heritage is one example. The firm is using private equity to convert businesses where a minimum of 1/3 of the workforce are Black, Indigenous or People of Color (BIPOC) into employee ownership for the long-term.
