Some key perspectives and tools are essential to our vision of development.
This High and Low Road strategic framework emerges from the public side of the economy, the social movement of those who have built and participated in labor and community organizations of various kinds. This American social movement has been relegated historically to being satisfied with making demands and achieving objectives focused on the redistribution of wealth. The premise was that the creation and control of wealth and key decisions of management, investment, and production were reserved for the "private sector."
For example, labor has almost exclusively demanded higher wages, more benefits, more jobs, improved working conditions and recognition. Labor was the squeaky wheel and our unions got the grease for their members, and grew in strength. These demands could be achieved, at least in part, because of the expanding economy. The labor-management social contract was based on the assumption that wages and benefits would increase.
A requirement of this concord was that labor keep its nose out of management business. As General Motors once told the United Auto Workers, "Why don't you get down to your size and get down to the type of job you're supposed to be doing as a trade union leader? It's none of your damn business what GM does about prices."20 All wings of the American labor movement generally accepted this idea, confining their squeaks to the issue of "more or less." The right wing was passive and accepted small progressive steps in wages and benefits. The left wing screamed and led strikes for more wages and benefits. Both accepted and, in fact, preferred that management would make decisions on production and marketing. In the meantime, powerful sections of the business community became focused on control of production and maximizing short-term profits rather than on efficiency of production and the development of society.
In the 1970s and 1980s, unlike the 1960s, demands for income redistribution began to lose their power. Workers, community residents, and the general public were saturated with information about job losses, plant closings, globalization, the emergence of seemingly powerful competitors like Japan, new technology, the rumored "end of work," and leaner and meaner production. This provided a fertile environment for a Low Road corporate offensive against labor. The failure of the Air Traffic Controllers union (PATCO) strike and growing anti-union sentiment--not only among corporations but among the public--discouraged assertive action for jobs, wages, and benefits. Everyone became fearful of punishment for being too assertive, of being on the wrong end of the stick if their profiles were too high, or of following leaders whose demands would make the them vulnerable rather than stronger.
The corporate attacks on unionism in the late 1970s and early 1980s resulted in greater silence, rather than a protest movement; in the weakening of popular organizations at the workplace and in the community; and in the growth of narrow self-interest. In contract negotiations, management at company after company would demand give-backs in wages and benefits as well as other concessions, and would get them quickly, for workers feared losing their jobs and losing them permanently. Aggressive managers made demands in order to provoke a strike, confident that strikebreakers drawn from the mass of unemployed workers would now cross a picket line. Communities that had been the site of armed rebellions and protest actions under the economic and social conditions of the 1960s remained silent as poverty rates soared, services were cut, and discrimination expanded in new forms.
In this context, popular support went only to campaigns and organizing efforts that advanced redistribution of wealth combined with a sophisticated view of practical ways to run the company or a segment of the local economy. Many of the pioneering groups in the Federation for Industrial Retention and Renewal formed out of a successful local, mass campaign around a particular plant closing and suggestions of new ways of running the economy. These campaigns compared well to traditional redistributionist campaigns in the same communities.
The new conditions, in short, require that a social movement maintain its demands for a better and fairer distribution of wealth, but also that it go beyond redistribution to lead in the creation of wealth--seeking control and the right and capacity to manage the economy at every level.
Making the shift from a movement rooted in seeking redistribution of wealth to a movement that leads in the creation of wealth is not easy. It requires a profound reorganization guided by research and analysis and tempered through direct participation in all aspects of production, marketing, and management, as well as critical reflection. Such a social movement must take advantage of every opportunity to learn through participation and action to develop the capacity to succeed. It must be informed by a sophisticated and independent analysis that reflects its values in making decisions within the context of the firm and economy. It must consciously train its established and emerging leaders in the requirements and possibilities of this work. It must create models that demonstrate the power and practicality of these new approaches. The social movement must develop its own financial capacity and have the talent and skills required to acquire and operate companies as well as access to capital in all its forms.
Equally, the social movement must hone and use its traditional skills of militant mass action, organizing, and political action, not only to wield "non-market" power effectively, but also to increase the involvement and identity of more and more people and popular organizations. All effective development strategies combine money, technical skill and politics. The required skill is to know how to manage the tensions that result.
Within this conceptual framework, we must recognize that sections of the business community share the fundamental objectives of our High Road. And a broader segment of the business community has at least a material interest in the success of building the economy, no matter what strategic alliance guides development. Business people bring indispensable skills and resources to the process, and must be attracted and recruited to our efforts. In return for their work, they must be rewarded with fair compensation and return on investment, with partnerships that enhance the performance of their companies, and inclusion in all aspects of our community.
Markets, market pressure, and the marketplace are part of all economies and societies at every stage of development. Market forces are objective features of our current system, past systems, and future systems. How they operate varies with each society's priorities and capacities. Market influence has both positive and negative impacts. How the balance is managed depends on the values, priorities, and capacities of the society and its leaders. This is the source of values in the market.
One of the paralyzing aspects of today's discussion on systems and development is the notion offered by some sections of both the left and the right that use of markets require an embrace -capitalism, and that to use the strengths of the market is to embrace "free market ideology." Whatever system one embraces has to do with the values and priorities of that system, not whether or not it uses markets.
Our strategy for development accepts and masters the positive aspects of the market as a foundation for exposing the limits of the market. Market forces are driven by the laws of supply and demand and, if used effectively, can contribute to greater efficiency, lower cost, and high quality. Market forces can also lead to inefficiency, high costs, low quality, and human degradation and suffering.
We accept the requirement of businesses and agencies to be efficient, productive, and profitable as a reflection of good management within the restraints of available financial resources, technology, and labor talent and capacity. We recognize entrepreneurial actions and skill as leadership within the economic realm and we cultivate and encourage entrepreneurial talent that accepts our broader values. The critical questions are these: What values and priorities are driving decisions within the limits of the market? How do we use the surplus value generated in the market? How creative and effectively do we use non-market capacities to accommodate the market's limits?
In addition to "market forces," the "Market Place" puts the discussion in a particular social context and within pressures and standards of the time. The character of the market place changes continually, depending upon who's bringing what to the market and under what terms. The marketplace of a Native American village is similar to and distinct from Wall Street. Both are arenas of exchange, supply, demand, and the negotiation of terms. Their social, political, and cultural contexts are dramatically different.
Our new strategic framework combines use of traditional market forces with skillful use of resources typically not seen as part of the market: taxation, regulation, and powers such as eminent domain. It includes social action like organized purchases or boycotts of products; negotiated contracts and strikes. This spectrum of tools allows us to achieve the economic and social objectives of sustainable development.
For many in community development or at one margin or another of the business community, all conflict or use of force is avoided or feared. Within the business community, force and conflict are continually in use. Often the most successful are the most adept at managing it--that's why there are so many corporate lawyers. Businesses come and go and are pushed and shoved--sometimes over the brink. Competition can be ruthless.
This kind of conflict usually leads to a negotiated peace. Our problem with this is not the conflict itself, but the values and priorities that guide it. We see people, assets and resources indispensable to the development of our society often wasted in the corporate internal wars.
Our new social movement should not leave its conflict management skills at the door when it enters the market. It should simply get better at using them. Our values should use conflict and force, yes, in order to discourage or block the Low Road.
Our physical position in production and in the community gives us a strategic advantage in blocking development that we do not want and in promoting development that is ours. The non-traditional tools that our social movement can wield give us an enormous advantage in competing with the regulars. We can not only save jobs, companies, communities, and generate funds and all the other by-products of conventional development; we can also train and prepare labor and community for their new leadership role in the economy.
Our strategic vision requires that when market activity supports the High Road and is consistent with our values, we "follow the market," maybe tinkering or adjusting the activity as necessary. When market activity is leaning toward the Low Road, we either challenge those who are guiding it and move to "lead the market" ourselves, or we lead in the pursuit of non-market solutions bringing in the power of government or the organizational power of society. Our effectiveness in the market will, in the long run, be measured by the percentage of production that is geared toward human need and the decline of poverty and inequality.
Many examples in the field of employee ownership illustrate effective use of the market and traditional market skills and demonstrate the "competitive advantage" that labor has in certain market settings. Recognition and skillful use of those advantages permits labor to block a Low Road strategy and implement a High Road strategy guided by our own management values .
Scully Jones
In Chicago in 1983, Bendix Corporation (owned by Allied) was planning to sell one of its production facilities--Scully Jones, a machine tool-holder manufacturing company-- as one step in a corporate consolidation plan. Fifty production workers represented by the United Electrical Workers Union (UE) and ten salaried workers were at risk of losing their jobs. When the plans were announced, a company engineer named Cy Wax, among others, knew that the firm had value and could have a future under the right management strategy.
Workers and managers at the facility, posed and debated and answered the question, "Why don't we buy it?" The recollection still brings tears to Cy's eyes. With very little experience, with a dangerous lack of information, with a dash of audacity, and with two cups of determination, the production and local management employees developed a plan, borrowed money, created an employee owner structure rooted in democratic principles as well as shareholder return, and bought the company.
Despite the objections and absence of assistance from UE's national leadership, which was ideologically opposed to worker ownership, the transition happened. The company has sustained and expanded the jobs at the company despite very difficult market conditions. Democratic life permeates the structure, where the CEO--Cy Wax--faces election every year. Union members still pay their dues to the UE and maintain union life. And the rest of us in the city have a good example of labor and management on the High Road together--saving jobs and a corporation despite the plans of Bendix to disinvest. In the Chicago market place, something different happened because new entrepreneurs with a different vision and different values intervened.
Morse Cutting Tool
In the early 1980s, another UE local guided by a different strategic perspective demonstrated the power of traditional organizing tools when creatively applied in a business or market setting.21 This did not involve an employee buyout.
UE Local 277 represented the workers at Morse Cutting Tool, an anchor company in the coastal town of New Bedford, MA that made twist drills to be held by the tool holders made at Scully Jones. In 1968, Morse Cutting Tool was purchased by Gulf + Western (G+W). In 1981, a dramatic shift in management policy signaled impending demands for wage and benefit concessions and threats that the firm might shut down. Local UE staff member Ron Carver22 knew that to wait to respond during the typical contract cycle would almost guarantee the local's defeat in negotiations and could lead to devastating job loss for the community. Ron turned to the Industrial Cooperative Association (ICA) in Somerville, MA, a then-new consulting firm inspired by the Mondragon model to help workers build cooperatives.
ICA did a study of G+W's management of Morse Cutting Tool that documented its business strategy of "milking the cash cow"--draining the company of cash for use in other acquisitions. They showed in detail how this viable, profitable company that employed hundreds of workers was being destroyed by G+W's narrow corporate approach. G+W was reinvesting about 2% of gross sales into capital improvements in an industry that required at least 8% annual reinvestment. It was buying a car and never changing the oil.
The consequence was obvious. The union documented what the impact of the closing would be on the small town. It went door-to-door and organized a broad coalition of local organizations. Armed with community support and a detailed analysis of G+W's wrecking methods, the union went to Mayor Brian Lawler and persuaded him to use the state's power of eminent domain to prevent G+W from closing Morse Cutting Tool.
The mayor told the company, "Either invest in Morse Cutting Tool, or sell it to someone who will, or I will take it away from you with my powers of eminent domain." The press howled that this stand would wreck the business climate of New Bedford as well as the company. But it didn't. G+W reversed its plans and sold the company to a local investor who developed an effective partnership with the union.
The market place in New Bedford produced some new entrepreneurs who changed its terms. Labor with community support refused to let one company destroy their local economic assets and intervened with ordinary politics forcing the sale of the company to another corporation that would continue to develop the local asset.
Sharpsville Quality Products
In the 1990, members of Steelworker Local at Sharpsville Quality Products in the Pittsburgh area narrowly supported their local president in a controversial decision to agree to a company "participation in management" proposal. Union members used the program to learn more about the company and the industry. When faced with a three-day notice of management's plan to shut the plant down, the workers occupied the company for 42 days with a sit-down strike.
From their position of power and through gaining community support, they negotiated a purchase of the company with the assistance of Locker Associates, a consulting and investment firm that has a long history of defining labor's power in the market context,23 and the Steel Valley Authority, a regional industrial retention initiative.24 The buyout was supported by local churches and community organizations who created the A New Beginning Fund and loaned the workers $250,000. The company remains open under employee ownership. The market place in Pittsburgh adjusted to the dramatic entry of these new union/worker entrepreneurs with strong community support.
Our strategy is premised on growing participation, consultation, and democratic control of the economy as something that makes economic and social sense. Our economics requires the organization of mass movements and the creation of effective mass organizations such as unions, community-based organizations, and political structures. Through these movements people gain essential knowledge of and consciousness about their ties to one another and their collective strength. It is in fact the one feature which gives our approach to development its competitive advantage. We can marshal the knowledge, enthusiasm, militancy, and creativity of a profoundly broader network of people in recognizing, developing, and protecting our economy.
Of course, expanding democracy and worker participation during of the non-stop battle to maintain a positive cash flow or in difficult negotiations, is like expanding democracy during wartime. It is often difficult and complex, particularly when the combination of roles that we suggest is relatively new. We recognize that resolving of the inevitable conflicts is where the real training, education, and capacity-building takes place. These are of course essential for the kind of paradigm shift we suggest. So we encourage organized participation at all levels of the economy and society, recognizing that this is a precondition for human development.
Eastern Airlines
In 1983, the Chairman of the Board at Eastern Airlines, Frank Borman, saw an opportunity in the climate that surrounded labor negotiations. In preliminary talks with Charlie Bryan, President of District 100 of the International Association of Machinists and Aerospace Workers (IAM), Borman asked for major wage and benefit concessions.25 Rather than view this as an issue of redistribution and whether or not his members were worth more or less in the marketplace, Bryan responded to the demand as if it were a request by Borman for a loan or investment in the company. The Machinists sought the assistance of Randy Barber, a pioneer in the development of capital strategies for labor.
As any banker or investor would, Bryan then entertained Borman's proposal on the condition that the union have access to the full financial records of the company for an independent analysis of how the company should be operated in the "competitive" climate.
Following a thorough review, the union granted Eastern some concessions in exchange for positions on the Board of Directors, stock ownership, unlimited access to all company financial information, a right to review the company business plan, and new labor-initiated and controlled productivity plans.
Through a highly participatory process, union leadership united the rank and file around its plan and prevailed. The union's approved plan "saved the company $53 million on an annualized basis. Many of these savings recur year after year, meaning that from January 1984 to January 1986 the union provided a total of $137 million in cost savings through...contracting in...repair versus replace...manufacture versus purchase...rebid supplier contracts...and labor force reductions through attrition and cuts in planned new hiring."26
Despite the promise of these innovations, Frank Borman competed to become "Low Road CEO of the decade." As Charlie Bryan said, the "idea we had of developing complete trust between labor and management with a culture of co-determination ended with total betrayal by corporate power brokers in the night of February 23, 1986." That night the Board of Directors, over the objections of employee representatives, sold Eastern Airlines to Texas Air Corporation, run by Frank Lorenzo, the airline industry's lead union-buster.27
In the same way that labor began to master the use of Employee Stock Ownership Plans (ESOPs), emerging labor leaders developed sophisticated ways to implement "Participation in Management" systems that both improved the performance of the company through ideas generated by the workforce and protected the jobs and rights of the workers who had the ideas. Experimentation and its results in this arena are indispensable, not only in building strong companies but in promoting democratic participation in all aspects of organizational life.28
The traditional development paradigm often rewarded organizers and even their most militant actions. Management had grease to give and a willingness to give it. Most battles for a bigger share of the pie were short-lived, particularly after World War II. Of course, factors of race and gender brought into play much deeper contradictions in society and added complexity, length, and often defeat to campaigns. And even simple campaigns for redistribution of wealth were often very difficult, dangerous, complex and protracted, and sometimes resulted in bitter loss. But generally speaking, most campaigns could generate results in a relatively short period of time.
Campaign duration was proportional to the breadth of the base, militancy or the threat of militancy, effective public relations, and creativity of the organizers. In this context, community organizing traditions such as that of Saul Alinsky flowered and gained influence. In labor, huge unions were built in explosive fashion within the context of a relatively narrow program and range of activities. In the 1960s, a leaflet or two plus a picket line or a sit-in could attract thousands.
In the last 15-20 years, the rules for organizing have changed. What worked within the old social contract can no longer work predictably in today's environment. In reaction to the passivity and bureaucracy of union leadership in the 1960s and 1970s, emerging leaders developed the "organizing model" of union leadership to oppose the "service model." But even this shift to a more activist approach doesn't always prove to be enough.
We promote the Development Model of Organizing29 that builds individuals, organizations, and communities in seeking a profound transformation of society. This model focuses on building a qualitative foundation for quantitative growth. Traditional organizing that focuses on redistributionist demands and mobilizes people on the lowest common denominator of their concerns barely or rarely goes above that in raising their consciousness about the character of society or in giving them strategic vision. The activist or militant organizers are more aggressive and strident, but they have essentially the same reductionist approach as those who mobilize people to embrace one aspect or another of the status quo. The Saul Alinsky organizing tradition offers a full array of these styles that vary in form but not in substance. At this early stage in our new movement, emphasis must be placed on selecting leaders carefully, providing patient training and education on the full features of a new strategic vision, and developing the skills needed to build strong and vibrant participatory organizations at all levels.
From our experience, consulting firms, unions, community coalitions, national coalitions, or business organizations that embrace this new strategy of development always require an organizational transformation of some kind. In the last 10 years, we have seen the collapse of a number of organizations that thrived in earlier periods, and a number of dynamic organizational leaders have crashed and burned. Like organizing strategies, organizational structure and culture must be based on what works in the context of different programmatic objectives.
Community groups and unions were organized around the assumption that campaigns would typically be relatively straightforward and short. Now they can last for years and require sophistication in moving from one complex stage to the next complex stage. Oppositional skills were an essential element of success in the 1960s and were frequently enough to win the contract or victory. Today, the same organization with the same opponent needs to advance an alternative and achievable business strategy as the context for its demands to maintain or improve wages and benefits.
Success requires effective approaches to finance and management. Gaining community support requires reframing the fight from a labor-management battle or a company/community battle so as to define it as a coalition of workers and their broader community against a narrow corporate approach and in support of a more effective business strategy. Staff and organizers need different qualities, different training, and a different mindset from the old days, if they are to succeed. The conversion is often difficult. Organizational change must be anticipated and addressed with candor and skill. The same applies to consulting and research companies that work in this field. Technical talent must be matched with political judgment and skill.
As one such company, CLCR itself almost collapsed under the pressures tied to understanding and applying our own new strategic approach. We too required and sought outside management assistance, and this led to a complete restructuring in our approach to our own finances, management, and quality control.
I believe that we are at the beginning of a relatively long transition period of 30 or 40 years that will result in the kind of economy and society envisioned in this paper. The transition will be complicated and difficult and requires careful, patient, and honest analysis as leaders seek to understand and transform events. As philosophers teach us, all development springs from the struggle among contradictory aspects of a thing. Negative and positive qualities are in constant transformation. We need to understand dialectics recognizing that in many cases, our work will be characterized by weakness--say 80% weak and 20% strong. We need to be skilled in recognizing that 20% and building on it to address the weaknesses in a protracted process that will lead to work that is 80% strong and 20% weak, or better.
It's frequently very difficult to weigh the positive and negative qualities of organizations, strategies, leaders, or opponents and to correctly understand how they are changing and what the most effective policy of the moment may be. At an early stage, not much convincing data is ever available. This demands a commitment to critical thinking and digging beneath the surface. It requires the willingness to identify strengths and weaknesses candidly in our work, knowing that "truth is beauty" even if it's painful and means more work. Active and spirited debate among contending views has to be nurtured. Writing analytical descriptions of current events and in-depth evaluations of theory has to be a requirement of leaders and organizers. To succeed at this requires the skills of using differences between people and organizations as a springboard for building organizations and relationships rather than for tearing them apart.
One of the classic features of old thinking is seen in those who resist, refuse, and discourage this critical process. We see it in community and development organizations that avoid the complex and controversial, fearful that their reputation will suffer if they acknowledge or confront a weakness. We see and welcome dynamic experimentation by the new AFL-CIO, but we worry at the apparent lack of critical reflection. In organizer circles, a deeply entrenched anti-intellectualism seizes on the easy weaknesses of hollow theoreticians as excuses for avoiding their own analytical responsibilities.
There are strong anti-leadership traditions that view dissenting opinion argument as inherently negative or arrogant. This undermines the absolute responsibility of leaders to lead--which by definition requires espousing a minority view initially, and then sending it into competition with opposing or differing views.
We must recognize the positive and negative aspects of competition. As we do in the market, we master the positive ideas to expose and counter the negative ones. Competition is an essential quality of economic and democratic life and can be used in ways that enhance and strengthen democracy and productive capacity either within or among firms and communities. The same tension applies to the positive and negative aspects of cooperation. Cooperation in one setting is absolutely appropriate and constructive. In another setting, such as when someone has a diametrically opposed view, cooperation becomes corrosive.
We now must leave behind the luxury of believing that all needs can be met. We need to acknowledge and accept the limits imposed by uneven development of resources, knowledge, and capacity. No perfect distribution system exists, nor does complete capacity. Hard and difficult decisions of allocation must be made and they can't satisfy all concerns. The ability to make these decisions fairly at the firm and community level qualifies and trains us to make similar decisions in a national or international framework, and that is a prerequisite for overcoming the limits imposed on us.
Every aspect of our economy and society is now influenced by global pressures. Our development strategy must be consistent with and contribute to a vision of international sustainable development. We have a continuing obligation to speak to the immediate needs of our communities, but their satisfaction cannot be based on an exploitative relationship with any other segment of the wider international community, like the exploitative relationships that made our expanding economy possible through the early and mid-20th Century. In fact, our development strategy must be the opposite--aggressively linking our capacities to those in other countries, seeking to transfer wealth and technology to promote economic stability and development internationally.
Rather than simply opposing international agreements on trade and investment, a stance that can mask protectionist and nativist priorities, we should work to develop international agreements on trade and investment that reflect our values and commitment to mutual development. It is true that 80% of our production goes to domestic markets, but that is no reason to avoid examining and developing the international links in our strategy. As we define the specific features of our development model in its global and international context, we are forced to address the specific challenges of competition, uneven development and stability that are present in these relationships.