Building A Democratic Economy with Ted Howard

ValueWalk’s interview with Ted Howard, the Co-founder and President of Washington DC think tank, The Democracy Collaborative. In this interview, Ted discusses his background and his book The Making of a Democratic Economy, tariffs and trade agreements hurt average American workers and farmers than large corporations, why the need for building a democratic economy is so urgent, the myth of free markets, the most tragic aspects of NAFTA, Trump should stop scapegoating, the healthcare system in this country remains an unmitigated disaster, establishing an Office of Community Wealth Building in the White House, and the outline for a new economic system.

democratic economy

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Interview with Ted Howard

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Can you tell us about your background?

For nearly two decades, I’ve directed The Democracy Collaborative, a research and development lab for the democratic economy. We’re an international, action-oriented think tank (or a “think/do tank” if you will) developing the systemic and practical solutions to address the serious economic and ecological problems we face.

What is your book about?

The Making of a Democratic Economy is about a growing movement of people who understand that we need an economy that’s built, by design, to support workers, communities, and the planet—and that the old models we used to understand our economy, in which the pursuit of corporate profit would lift all boats, maybe with a little help from progressive taxation and regulation, are really quite broken.

In the book, we look to the stories of the people figuring out the implications of this reset in economic thinking on the ground—building real economic alternatives grounded in place, designed for inclusion, and structured to broadly root ownership and control in the hands of communities.

We hope this book will dramatically change the way people look at our economic problems—just as Rachel Carson’s Silent Spring changed people’s perceptions of the environment 50 years ago. To judge any system, you have to look at its outcomes. Our economic system is simply not producing broad-based wealth, nor is it fixing our biggest problems. It hasn’t for many decades.

We believe it’s possible to create a new kind of economic system that, by its very nature and function, benefits all the people, from every walk of life. We believe this new system will be rooted in community and will put workers first. And we believe that the people whose stories we highlight in the book are already building this next system.

You say tariffs will not help American workers why?

Certainly we live in a global economy, where many workers are working in industries in which international competition is a real threat to their livelihood. And certainly, many of the “free trade” agreements of the past, including NAFTA, severely undermined workers’ rights and power, local small businesses, and environmental standards, not just in the US, but around the world.

But President Trump’s trade wars are not designed to lead to a more equitable and sustainable version of world trade capable of producing tangible benefits for US workers. In fact, in as much of the focus thus far has been on the question of intellectual property, the trade wars seem designed primarily to benefit large corporations and their shareholders, rather than workers and farmers.

Moreover, the trade wars will do nothing to change the underlying structures and arrangements of our economic system which are the primary culprit for the plight of workers in this country. For instance, focusing on China, when we are talking about the US economy as a whole, is a convenient scapegoat that distracts us from some key drivers of inequality and unemployment.

Did China sink Toys-R-Us? No, that was private equity, practicing a form of financial extraction designed to suck value out of the company and leave the workers with the bill. China isn’t the reason why some Walmart workers have to rely on food stamps and company food drives to feed themselves while its shareholders (more than half of whom are from the Walton family) received $13.5 billion this past year.

What we’ve seen in the US over the past 40 or so years is a transformation in the economy where greater and greater shares of income are flowing to capital, instead of workers. The globalization of the economy is part of that story, but only a part. More important are the internal dynamics and policies which have decimated unions, deregulated finance, and enshrined shareholder value over all other considerations.

There are some cases where tariffs are appropriate, for instance, when you need to protect the strategic development of a fledgling domestic industry or you want to preserve and protect labor and environmental standards. But generally trying to solve all your economic problems with tariffs at the expense of global trading partners is deeply misguided and counterproductive—not only does it avoid addressing the much more important domestic drivers of disinvestment and inequality, but it invites a tit-for-tat race to see who can inflict the most mutual harm.

This trade dispute is about much more than trade it involves Huawei, mistrust and global power tension - how does this play in with the economy?

One of the key and underappreciated facts of our age is that we are living through the sunset of the American empire. We have to remember that American economic prosperity throughout much of the twentieth century was premised on American supremacy abroad (itself due in part to the decimation of global competitors during the Second World War), and a model of continually searching for cheap labor (first in different parts of the United States, then overseas) as well as the unlimited extraction of natural resources (and the externalizing of environmental costs, such as pollution).

That era is ending, not just because of the shifts in the geopolitical balance of power that’s brought China to new prominence, but because we are running up against the ecological limits of resource extraction that powered America’s golden years. That’s why building what we call a democratic economy is so urgent - it’s a way forward for broadly shared prosperity in the US grounded in our own significant national wealth and potential, that doesn’t depend on extracting wealth from elsewhere or continuing to dominate the world economy. It can form the basis for new relationships with the rest of the world based on genuine cooperation and peaceful engagement within planetary limits.

Why is China devaluing its currency? How will it impact American workers? 

The idea of completely free markets or completely free trade is a myth – or perhaps, more accurately, a purposeful and dangerous lie. All governments intervene in the economy and the trading system in various ways. For instance, economists like Dean Baker have pointed out that the trillions of dollars of assets still held by the Fed from its quantitative easing (new money creation process) after the financial crisis have the effect of holding down interest rates in this country (which has various effects on the exchange rate). In part, China is devaluing its currency as part of the escalating trade war started by President Trump.

In general, as I previously mentioned, this trade war is unlikely to benefit US workers for a number of reasons. One reason is that China is actively prepared to intervene in its economy to counteract the effects of the conflict on its people and prolong the cycle of retaliation. While I do not endorse government interventions into the economy simply to win a trade war, an important lesson US workers should take from this episode is that the myth of free markets is constraining our imagination (and power) in the US; and we need to begin to think creatively about how government economic policy can lay the foundations for an economy that ensures broad-based prosperity for all Americans, not just corporate shareholders and the wealthy elite.

The past 25 years of NAFTA have been a boon for companies offshoring profits but a disaster for the American worker - what alternatives do we have to tariffs?

Well, for one thing, I think one of the most tragic aspects of NAFTA is that it went to great lengths to create a more integrated economy between Canada, the US, and Mexico by making it easier for capital to cross borders, without doing the same for people. Free trade without free movement will always lead to the dominance of capital over labor. Instead, we wound up in the situation we are in today, where our Southern border becomes this horribly cruel and violent instrument for managing population flow and disciplining workers on both sides.

That aside, I do think we need to look very strategically—and much more creatively—at how we try to use government policy at all levels to create and support good jobs where they are most needed. An example in my book is the Evergreen Cooperatives in Cleveland—this is a project that is creating good, living wage jobs in some of the most disinvested neighborhoods in Cleveland, all through companies owned democratically by their workers. These neighborhoods are places with high levels of unemployment—tariffs aren’t going to help the places deep in the Rust Belt where industrial production has left long ago.

So Evergreen focuses on meeting local demand, especially the needs of local “anchor institutions”—hospitals and universities, that are unable or highly unlikely to leave the city, and which are increasingly the backbone of its economy. The cooperatives Evergreen has created supply these anchors, and in doing so have created hundreds of jobs, intentionally hiring residents of the neighborhoods most in need of them. We can think about replicating this at a local level all across the country, and we can think of scaling it up.

Let’s say we had a federal government that was rational enough to recognize the onrushing climate crisis and the massive threat it poses to the economy—that’s also an opportunity for a massive industrial program—to rebuild our grid, our transportation infrastructure—that could create millions of jobs. Doing so in ways that keep the wealth created circulating in local communities might mean breaking with free trade orthodoxy, but we should do so because we have an intentional plan for inclusive economic development, not because we think we can win a trade war.

What should Trump do differently to help workers?

The scapegoating—of foreign countries, of immigrants, of perceived political enemies, of the media—needs to stop. That doesn’t help anyone except Trump himself, and it is doing a lot of harm, as we saw in El Paso, for instance, where Trump’s rhetoric emboldened a domestic terrorist attack. I’m really worried about this especially because, while our recovery from the last financial crisis has been anemic and highly unequally distributed, the economy is still, at least by some Wall St. friendly measures, doing “well.” But everything points to a downturn sooner rather than later. Right now, Trump is priming people to whiplash towards scapegoats when this crisis hits, rather than looking toward real solutions that would make the economy more democratic, resilient, and equitable (like those we advance in our book.)

Regrettably, the tangible things that an administration could do to help workers – promote and incentivize employee ownership, advocate for raising the minimum raise, make large investments in infrastructure and renewable energy in order to create good quality jobs, and so much more – Trump is simply hostile to. Not to be too glib about it, but the greater contribution Trump could make to American workers is to resign immediately.

We hear how the ACA helped a lot of people but it seems the opposite as the healthcare system is still a total disaster for many middle-class (and even upper in many cases)  Americans - what policies would help middle class Americans afford health bills? 

The ACA has undoubtedly helped millions of people who were previously uninsured get health insurance. This has allowed people to see a doctor for the first time in years, get seen for treatable conditions that would have otherwise led to serious health issues (and countless deaths), and avoid relying solely on emergency rooms for healthcare. That being said, the healthcare system in this country remains an unmitigated disaster. It is a disgrace that millions of people are still uninsured, that hundreds of thousands of people go bankrupt from medical bills, and tens of millions of people cannot afford decent medical care

. Moreover, our healthcare system is by far one of the most expensive in the world, yet delivers far worse outcomes than many other countries. Ultimately, I believe that we need some sort of single payer or national health service model, like those that exist in most countries around the world.

In the meantime, we should acknowledge that stripping a public option for health insurance out of the ACA was a historic mistake that needs correcting. We should also focus on the role that existing healthcare institutions, such as hospitals, can play in building strong, equitable, and prosperous local economies by intervening in the social determinants of health. As I discuss in the book, these large “anchor institutions” can play an important role in building community wealth, and thus offsetting some of rising costs of healthcare.

If you were President and could pass one EO what would it be

On day one I would establish within the White House an Office of Community Wealth Building, tasked with developing Federal policies and strategies so that government agencies could take steps to democratize our economy and place our countries capital and assets in the hands of America’s workers, rather than in the control of a handful of wealthy investors.

Final thoughts?

It has been said that “It is easier to imagine the end of the world, than to imagine the end of capitalism.” It was probably the same for people in Pharaoh’s Egypt and in Europe in the Middle Ages. When you’re inside a system, it seems as if things will always stay the way they are. But human history is the story of systems coming and going and then being replaced by new values and principles. The greatest impediment to fundamental change we face is our own lack of imagination and vision that something new is possible.

The hyper casino capitalism we live in was constructed by mere mortals and is designed to produce certain outcomes, including the ever-greater concentration of wealth and power. Our book, The Making of a Democratic Economy, provides the outline for a new system by extending the principles of democracy into the economy. It’s time to get to work!



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver