Bernie Sanders announced this week that his campaign is working on a new policy proposal that might, in his words, “move to an economy where workers feel that they’re not just a cog in the machine — one where they have power over their jobs and can make decisions.” According to Jeff Stein in the Washington Post, the policy will have large firms issue a portion of their stocks to an employee-owned fund. This fund would issue dividends to the workers and might also give them a say in the firm’s governance through their positions as shareholders.
This is a bold and exciting plan, one that fits together with a host of policy ideas we can broadly term “investment fund socialism.” Bernie’s ideas have already been compared to the Meidner Plan in Sweden and Matt Bruenig’s proposal for an “American solidarity fund.” But with respect to its technical design, what he has alluded to is quite different from these plans — and is much more similar to the inclusive ownership fund plan currently being debated and developed in the United Kingdom.
Yet by challenging capital’s basic control over the investment function and instead aiming to socialize it, something that would be crucial for a transformative program of democratic socialism, they each confront a similar set of political obstacles. To be successful, the question of the political viability of these plans needs just as clear-eyed an assessment as our consideration of their economic feasibility and desirability.
Let’s contrast the design features of these plans. The Swedish wage earner funds were proposed in 1975 by two in-house economists at the Swedish Trade Union Confederation, Rudolf Meidner and Gösta Rehn. The early 1970s corporate profit boom led to a distribution of profits that exacerbated Swedish inequality and threatened to undermine labor’s solidaristic approach to bargaining wages. At the time, the wage solidarity policy adopted and implemented by the labor movement had income equality as one of its principle aims. But wage moderation also helped to produce large stores of excess profits for Swedish firms.
In this context, the Meidner Plan emerged to weaken the concentration of profits and capital and generate greater workplace democracy. It proposed the establishment of wage-earner funds by a gradual transfer of ownership of Swedish companies into sector-based funds controlled by unions. With hefty tax penalties for companies that refused, Swedish firms would issue new company stock into the wage-earner funds, with the long-term goal of socializing Swedish capital entirely.
In his 1978 book, Employee Investment Funds, Meidner suggested that with an average profit margin of 15 percent a year, the funds would have a majority ownership of Swedish firms within twenty-five years. Eventually, shareholder rights would effectively give workers collective control over the major firms in the domestic economy.
Matt Bruenig’s “American solidarity fund” offers an alternative approach to investment fund socialism from the Meidner Plans. Bruenig’s plan is a sovereign wealth fund run on the basis of government mandates.
Many countries already have such funds. China’s five sovereign wealth funds have total assets in excess of $2.2 trillion. Oil funds in Middle Eastern countries like Kuwait, Saudi Arabia, and the United Arab Emirates hold nearly half of the share of total global sovereign wealth assets. But Norway’s oil fund, with over $1 trillion in assets and control of, on average, 1.3 percent of the shares of every publicly listed company globally, is by far the largest.
Bruenig’s sovereign wealth fund would be not be financed only from profits, but rather by a combination of voluntary contributions by high-asset donors, transfers of existing assets held by the state, levies (taxes and fees), borrowing from the Treasury at low rates, and the strategic purchase of assets associated with the fund by the Federal Reserve. He proposes that it be established as a state-owned corporation through the Treasury Department. But the more fundamental aim is to both distribute ownership and (potentially) voting rights for the fund itself to every citizen and a non-transferable share that would entitle owners (read: everyone) to a “universal basic dividend” from the returns on the fund’s portfolio. Here control occurs at the level of the fund, but not at the level of existing companies.
What Sanders suggests is technically quite different, more in line with proposals for an inclusive ownership fund that have been proposed by John McDonnell in the British Labour Party and developed by new left think tanks like Common Wealth and Democracy Collaborative. In McDonnell’s plan, private companies employing more than 250 people would allocate new shares of the firm to a worker fund. The aim of this plan and Bernie’s is to both allocate a greater share of the profits to workers (though excess profits above a fairly low level in the Labour plan would be directed into a public fund to counter possibility of worsening inequality within the working class) and greater say of workers in the management of the firm where they work.
These plans operate at distinct scales: inclusive ownership funds at the level of the firm, the Meidner Plan at the sectoral level, and a sovereign wealth fund at the level of the state. Yet all three aim to establish some form of popular control over the investment function and the allocation of finance. That they would threaten to democratize private control over investment makes them politically very similar.
The details aren’t yet fully clear, but how might Bernie’s plan play out? The history of Sweden’s wage-earner funds holds some lessons for us. By 1991, they had become Sweden’s eighth-largest shareholder group, with 2.6 percent of total Swedish stock value. And they performed well financially relative to other investors.
But their most ambitious features were largely stripped by the time the plan itself was implemented in 1984 (almost ten years after it was first proposed). Labor’s original plan faced a hard backlash, not only from sectors of Swedish business but also from key members of the Swedish Social Democratic Party. Neither capital nor the main party of social democracy was willing to allow investment to be subject to more democratic forms of allocation.
As a result, the aims of transferring ownership to workers were drastically rolled back. What resulted offered very little in terms of both democratization of firms and worker say over investment practices.
This underscores a fundamental dimension of the debate about worker control and economic democracy that often gets sidelined in favor of a focus on the technical specifics of the plans and their economic feasibility: their political feasibility. The crucial historical lesson of the Meidner Plan — not just for the Sanders’ campaign but also supporters of Bruenig’s sovereign wealth fund and Labour’s inclusive ownership fund — wasn’t that the wage-earner funds failed economically because of their design. Rather, they first failed politically because the reforms didn’t also simultaneously weaken the political power of business in politics.
This is the historical lesson for contemporary debates on wage-earner funds: any reform that aims to undermine the economic power of capital in the long term must undermine its political power in the short term.
Business has always mobilized to defang efforts to democratize the economy. As Sanders has made clear on the campaign trail about issues like Medicare for All, winning the presidency or writing a bill won’t be enough. The corporate enemies of publicly provided, free health care — or any other policy that aims to weaken business’s power — will move heaven and earth to destroy such policies. The only way to overcome that pushback is through a mass, grassroots movement to defend them and policies that weakens businesses’ political power.
As Sanders and others on the Left develop new “investment fund socialism” proposals, the strategy for ensuring their political viability should be as seriously worked out as their actual design.