4.1.5 Redesigning the corporate landscape for coöperation

The puzzle, then, is how to redesign the corporate landscape in such a way as to retain all the advantages of the coöperative framework—the emphasis on sustainability and prioritizing the welfare of consumers, workers, producers, affiliates, etc.—while ensuring the ability to raise sufficient funds for economic growth. The fact is, a lot of wealth in the United States is invested in capital. The immediate question, then, is how that capital could be turned into funds to support economic growth in a coöperationist framework.

To be more precise, the total value of the equity markets in the United States, as of December 31, 2019, was $37.7 trillion,²⁵⁸ consists of the following:

• The New York Stock Exchange, which lists about 2,400 companies, has a total equity value (market capitalization) of about $21 trillion (in 2019)

• The NASDAQ (originally, the National Association of Securities Dealer Automated Quotation system), which lists about 3,800 companies, has a total equity value of about $11 trillion (in 2019)

• The OTC (over the counter, officially the OTCQX U.S. Market), which trades about 10,000 over-the-counter securities, including foreign companies and multinationals, and other quirky entities.

At the global level, the total value of all stocks around the world stood at about $90 trillion in 2019.²⁵⁹

This capital, invested in the stock markets, consists either of savings (retirement accounts, brokerage accounts, bank accounts that are invested by banks, etc.) or borrowed moneys on margin. Total margin debt (individual and institutional) in the United States stood at around $600 billion in 2019, equal to about 1.6% of the market capitalization of the stock markets, so a small fraction.²⁶⁰ The total market capitalization, then, represents, essentially, disposable savings as investments. The $37.7 trillion in the United States represent mostly moneys that individuals ultimately own—either directly through retirement accounts, brokerage accounts, holdings of mutual funds, or indirectly through savings accounts that are then invested into the market (or loaned out) by banks, or doubly indirectly by corporations (ultimately owned by shareholders) that invest in the markets themselves.

Surprisingly, though, these numbers are not that big. First, on a per capita basis (with a U.S. total population of 329.6 million),²⁶¹ the market capitalization is about $114,381 per person (if only Americans, and not foreigners, held the capital). Second, in the aggregate, they are not that big either. To put them in perspective, it is worth emphasizing that:

• The U.S. national debt stood at about $25 trillion on May 8, 2020²⁶²

• The U.S. GDP stood at about $21 trillion on May 8, 2020²⁶³

Plus, the national debt is skyrocketing. It already exceeded $26 trillion by the end of June 2020, up more than $3 trillion in the first six months of 2020. As a result of the COVID-19 bailouts, the national debt now stands at 98% of the economy, and is projected to outsize the nation’s entire annual economy in 2021—a situation that the country has not experienced since World War II.²⁶⁴ According to the Congressional Budget Office, “Federal debt, as a share of the economy, is now on track to smash America’s World War II-era record by 2023.”²⁶⁵ On a per capita basis, again, that’s about $212,000 in debt per American taxpayer, or $80,000 per citizen.²⁶⁶

This almost wipes out the aggregate U.S. market capitalization.

So, in other words, all the talk about the importance of market capital is empty: it is pretty much borrowed money at the national level. And as an aside, the total value of market capitalization in the United States is likely to collapse after the 2020 elections when President Trump no longer has the same election incentive to keep the markets at artificial highs through massive indebtedness. Given that the markets have not in any way absorbed the economic recession that is and will continue in light of COVID-19 or the massive indebtedness of the United States, the present market bubble is sure to explode before the next inauguration. In any event, market capitalization in this country is now pretty much a figment of our imagination—and of the national debt.

Even so, if the corporate landscape were reconfigured to favor coöperation, a significant portion of the money that is now market capitalization would be reinvested into coöperative and mutual enterprises as membership equity.

So, first, capital investors would use their savings to invest in themselves and their ongoing enterprises. Workers and employees would put portions of their savings into the enterprises to form coöperatives. Producers, consumers, retailers as well would invest in coöperation. Much of the existing capital would be placed in our own ongoing businesses.

Second, capital investors could lend their moneys to coöperative enterprises. In other words, another big portion of the existing capital markets would be reinvested in the debt obligations of coöperatives. This could be incentivized by the government assuring a certain level of return on the debt obligations of coöperatives and by securing those loans, which would make it even more attractive for those with capital to place their savings in coöperative enterprises.

Third, and most importantly, there would be a gradual redistribution and evening of wealth over the longer-term that effectively would displace the kind of hoarding of wealth that produces so much of the market capitalization. In effect, a more equalized distribution of wealth would mean that a portion of the capital would be used instead as consumption: employees and workers would have more money to spend on their homes and vehicles and household goods and other goods and services. The invested capital, in part, would be funneled back into the economy as consumption and circulation.

The redesign and creation of a coöperationist economy will reduce the amount of wealth that is extracted as capital and returned into investment speculation. Any profits that the coöperative enterprise makes (after paying taxes on any profit and reinvesting a certain amount of the profits in the enterprise) will be distributed to the members. The return on members’ equity may be lower than one would expect from extractive capitalism, primarily because salaries may be higher for most workers and more equitable. But as more equitable wealth begins to permeate the economy, it will be transformed into consumption and economic growth.