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The New Case for Corporatism: "Inclusive Capitalism" Works Better

David Callahan

Sixty years ago, the key sectors of Americans society -- business, labor, and government -- often worked well together to grow the U.S. economy. CEOs understood that giving workers a fair of the wealth they created was good business, since it motivated labor to do its absolute best. Elected officials of both parties understood that government's role was to fan growth by building the public structures that undergird prosperity -- like state university systems and the Interstate Highway System.

For several decades, up until the 1970s, this powersharing arrangement -- "corporatism" -- worked. America's economy boomed and everyone got rich together. A new middle class had plenty of spending money, thanks to getting its fair share of the pie, and that led to the rise of a new mass consumerism that powered growth. 

Then the model broke down amid globalization and a shift rightward by business, which began cutting labor out of its fair share of the pie. The rest of the story -- about soaring inequality, a hollowing out of the middle class, and slowing growth -- is well known.

But the idea of corporatism is hardly forgotten. It's still practiced in the successful economies of northern Europe, and in some parts of the U.S. economy. Now, a growing number of voices are advocating closer collaboration between business, labor, and government -- as well as nonprofit groups -- to grow the U.S. economy. 

In a recent op-ed, former SEIU chief Andy Stern and former Nathan Milikowsky call for expanding an "inclusive capitalism" that brings together labor and business to spur growth. 

Today, many companies, from small but growing innovators to unionized manufacturers such as U.S. Steel and Boeing to information-technology giants such as Intel and Microsoft practice inclusive capitalism.

At its best, this can align the interests and provide benefits to workers and employers. Not only do workers  feel respected and motivated to speak up to suggest positive changes but they can also earn higher wages and enjoy greater job security and wealth creation. Companies can benefit from increased worker productivity, profitability and the likelihood of the firm’s long-term survival.

The authors cite the example of C/G Electrodes, an electrodes company, where "profit-sharing and employee stock ownership were embedded in the company culture. Workers developed the procedural changes that reduced bottlenecks and increased output by more than 50 percent with a minimal investment. Employees in other parts of the production process improved their ability to keep up with this higher volume."

Today's new corporatism, of course, doesn't just include labor, business, and government, it also includes colleges and job training organizations. A major challenge facing business is finding workers with the right skills, and these partners can help overcome that problem. In city after city, community colleges are working closely with business to ensure that their degree programs match up with what local business want. 

The Center for American Progress has a new report out on inclusive capitalism that details its benefits. But a key finding of the report is that government needs to more -- much more -- to foster strategies that produce shared prosperity.