COMMONS CAPITALISM^[1]

Commons Capitalism^[1], a form of market socialism^[2], is a conceptual United States economic system that could replace traditional capitalism^[3], i.e., business entities owned privately by individuals. In a market economy, Commons Capitalism^[1] could outcompete traditional capitalism^[3] in any industry.

Using Commons Capitalism^[1] Entities (CCEs), tens of millions of workers could receive premium wages and Nordic-style benefits such as healthcare, unemployment benefits, sickness benefits, disability support, childcare subsidies, parental leave, child benefits, maternity grants, education, stipends, pensions, and long-term disability benefits. Each CCE would acquire new businesses and bring new workers under its payroll and social benefit umbrella.

Each CCE, also, would spin off a new CCE that would, in turn, pay new workers under its umbrella premium wages and Nordic-style social benefits. Commons Capitalism^[1] would equitably distribute wealth, via worker’s wages, throughout communities, increasing the standard of living for all and raising the poor out of poverty.

The benefits of Commons Capitalism^[1] are, as follows:

The primary benefit is to distribute profits to workers in the form of premium wages and Nordic-style benefits and spinoff replicate entities. The secondary benefit is to equitably distribute wealth, via worker’s wages, throughout the community. The tertiary benefit is to reduce the accumulation of the means of production^[4] in fewer and fewer individuals.

Commons Capitalism^[1] could begin tomorrow. It avoids the necessity of revolution and guarantees what will replace traditional capitalism^[3]. It’s a system that once it gets established in the market system, will continue to multiply and provide better pay and benefits to more and more workers.

COMMONS CAPITALISM ENTITY^[5] (CCE)

[A Commons Capitalism Entity^[5] (CCE) can be used for any public benefit purpose, including helping the poor, providing education or training, aiding children or animals, or providing for general welfare, not just for providing social benefits for workers. and easily operates in a market economy.

Each CCE has a three-fold purpose: one, spread earnings for a public benefit, two, acquire competing businesses or replicate itself by creating another CCE, and three, by reducing the concentration of that wealth in fewer and fewer individuals. The CCE is not a charitable organization, nor is it funded through gifts or charitable contributions. A CCE requires no state action, funding, or ownership. Multiple CCEs could be federated, thereby increasing their political and financial influence.

This paper discusses using a CCE to pay premium wages and social benefits to workers.]

Commons Capitalism^[1] would use Commons Capitalism^[1] Entities (CCEs) to distribute premium wages and social benefits to workers and to compete against traditional capitalist entities. Also, CCEs would create new CCEs. Both the original CCE and new CCEs acquire traditional business entities to bring those workers under the CCE umbrella and pay the new workers premium wages and social benefits.

A CCE consists of a non-for-profit corporation (corporation) that has no shareholders combined with a wholly owned for-profit subsidiary (subsidiary). The corporation may own more than one subsidiary. Each CCE would hold the means of production^[4] (and the earned surplus) as a “commons.”

The net profits earned by the subsidiary would be distributed to five disparate groups of the CCE, namely, the corporation division for its operations, the subsidiary division for it operations, a pension division to pay benefits to retired and disabled employees, a benefits division to pay benefits to current employees, and an acquisition division to acquire traditional capitalist companies or create new CCEs.

Each division would be represented by a working director who would be a member of the board of directors of the corporation. The corporation would be governed by seven directors. The director for the corporation division would be appointed by its president. The second director would be appointed by the president of the subsidiary. The third director would be elected by the active workers of both the corporation and the subsidiary. The fourth director would be elected by the retired and disabled workers of both the corporation and the subsidiary. The fifth director for the acquisition division would be elected by the first three directors. Two remaining directors would be independent directors who would be elected by the first five directors. In the day-to-day management of the corporation and the subsidiary, workers’ representatives would have a veto power over management’s personnel and alienation of property decisions to prevent the creation of personal fiefdoms by management. The veto power would extend vertically through all management levels from the subsidiary through the corporation.

FORMATION AND OPERATION OF A CCE

The formation of the first CCE requires 100% financing the acquisition of the first capital company as its subsidiary entity since it begins without any funds. However, all subsequent acquisitions of capital companies will be self funded by the CCE since it will have paid off the purchase price of the first acquisition, have adequate cashflow, and assets for financing if necessary.

As mentioned previously, a CCE requires two entities, a not-for-profit corporation and a subsidiary entity. The most important requirement in their formation is that neither can have any individuals as shareholders, members or other stakeholders. The primary reason for this is the corporation and its subsidiary cannot distribute net profits or be responsible to any shareholders, members, or other stakeholders.

The formation of the for-profit subsidiary is straightforward; it will be a wholly owned subsidiary of the corporation and can be formed as a limited liability company^[6] under the laws of all fifty states.

However, the corporation must be formed, minimally, as a not-for-profit so that it has no shareholders or members. Not-for-profit corporations can be formed in any of forty-four states without shareholders or members.

The corporation, also, may need a dynamic management system with tremendous directorship flexibility. The reasons are two-fold. Each of the disparate groups has competing financial interests and, therefore, management conflicts, and the corporation must be prepared to weather the internal and external vagaries of business. Fortunately, twenty-one of those forty-four states allow not-for-profit corporations to have such dynamic and flexible directorships.

The CCE and its component entities, the corporation and the subsidiary (formed as a limited liability company^[6]), can do business in all fifty states by having the entities register as foreign entities in any state where they want to conduct business.

FINANCING THE FIRST CCE

The first CCE could receive financing to purchase its first target company by using a combination of asset-based lending, syndicated loans, guaranties, and/or seller financing. No state funding or shareholder investment would be required. After the first CCE had satisfied repayment of the debt of acquiring its first target company, which would take 3-5 years, the CCE would be fully funded to start paying prevailing wages and social benefits to workers.

It, also, would be sufficiently funded to start acquiring new businesses or funding a new CCE. Most likely, it would acquire a second company before starting a new CCE. This would allow the CCE corporation to benefit from combined corporate operations for serving the two subsidiaries while increasing its liquidity for starting a new CCE.

The inaugural purchase of a target company from a Seller could be financed by the CCE obtaining 70% of the purchase price through syndicated loans secured by the assets of the target company. The remaining 30% of the purchase price could be financed through the Seller taking back a promissory note and security agreement giving the Seller a second priority security interest in the company assets and providing a stand down agreement to the syndicated lenders.

The Seller would not be required to gift or donate to the CCE because the target company would be purchased as an arm’s length transaction. This is the most straightforward example of how a CCE could be financed. The most possible scenario is that the Seller would be a benefactor of the CCE to the extent of giving owner financing to the CCE for the purchase. However, the Seller-Benefactor would not be out any costs on the acquisition by the CCE.

Finding such a benefactor certainly is possible; keep in mind that Barre Seid gifted the Tripp Lite corporation, worth $1.6B, to a trust for the benefit of the Federalist Society. Surely, a benefactor would come forward to help start a CCE and create a paradigm shift that could spread wealth within communities nation-wide, raise the standard of living within each community, raise people out of poverty, and reduce the concentration of wealth in individuals.

ETHICS AND THE CCE PUBLIC BENEFIT CORPORATION

A CCE would be formed to operate as a public benefit corporation, organized for a public purpose and operated in a responsible and sustainable manner.  The public purpose would include creating higher paying jobs with better social benefits for workers as a class. A CCE benefits from having no shareholders demanding the highest net profits and from modern state legislation allowing for dynamic corporate formation and management structure.

Each CCE not-for-profit corporation could adopt various strategies to make a net profit while maintaining a conscionable approach to management without the pressure of maximizing net profits. Here are some ways to achieve this:

Ethical Business Practices

Prioritizing ethical standards in all operations. This includes fair labor practices, sourcing materials responsibly, and ensuring the rights and well-being of past and present workers.

Sustainable Operations

Implementing sustainable practices that minimize environmental impact, such as reducing waste, recycling, and using renewable energy sources.

Community Engagement

Engaging with the local community through philanthropy and working with other CCEs to assist worker placement through those CCEs.

Transparent Reporting

Maintaining comprehensive monitoring and transparency in financial reporting and business operations and building trust with each division within the CCE and all workers.

Innovation

Investing in research and development to innovate products and services that can open new markets and revenue streams, contrary to the criticism by capitalists against “socialist” programs.

Long-term Planning

Focusing on long-term goals and sustainable growth rather than short-term profits, which can lead to lasting success and profitability.

Diverse Revenue Streams

Acquiring multiple CCE subsidiaries to diversify revenue streams to reduce reliance on any single source of income, which can provide financial stability.

CCEs DISTINQUISHED FROM WORKERS’ COOPERATIVES

A CCE is not a workers’ cooperative. A workers’ cooperative is an entity that is owned and controlled by its members, operates for their financial benefit, and is often based on the workers’ labor contribution to the cooperative. A CCE is an entity that is not owned by anyone and is controlled by a board of directors that operates the CCE for the benefit of certain disparate groups.

The workers of a cooperative have representation on, and vote, for the board of directors, adhering to the principle of one worker, one vote. In a CCE, workers vote for two members of a five-director board of directors, namely, the director representing the division governing the payment of social benefits and the director representing the division governing the payment of retirement and disability benefits.

Worker-owners of a cooperative often manage the day-to-day operations through various management structures. Day-to-day management of the CCE is performed by business professionals, although managers may be hired from within the CCE. In a CCE, workers have a veto power over the personnel matters and the alienation of property.

The membership of workers’ cooperatives is often limited because a person must make a financial contribution to the cooperative to become a member/owner. Consequently, a lot of the workers for a workers’ cooperative are merely employees and not owners/members. All workers of a CCE are employees and are not required to make any financial commitments to the CCE.

CCEs and workers’ cooperatives have two different purposes. A workers’ cooperative directive is to distribute the net profits to the members/owners of the cooperative as a return on their investment. Consequently, workers’ cooperatives reach, at most, tens of thousands of members/owners. The CCE directive is to distribute wages and benefits to its workers. As a result, CCEs could reach tens of millions of workers.

Egalitarianism, Equality, and Democracy

Commons Capitalism^[1] advocates fair and equitable distribution of net profits to workers.

It does not embrace egalitarianism, equality, or democracy since those positions can be counter-productive to the mission of each CCE to participate competitively in a market economy and to distribute competitive wages and social benefits to workers. However, workers elect two of the five working directors of the CCE corporation. Additionally, workers have veto power over management supervision of personnel and alienation of property.

The veto prevents management from building fiefdoms within the CCE structure.

Holding of The Means of Production^[4]

In Commons Capitalism^[1], the means of production^[4] are not held publicly, nor privately for the benefit of individuals. The means of production^[4] are held privately by the CCE corporation to be distributed to workers as wages and social benefits, but not distributed for the benefit of the public welfare.

Commons Capitalism^[1] may cause some results that are convergent with the goals of socialism^[2], i.e., spreading wealth within a community and reducing the concentration of wealth in individuals, raising the standard of living within each community, and raising people out of poverty.

ACCEPTING A CAPITALISM^[3] PARADIGM SHIFT

Commons Capitalism^[1] is a theory that employs the use of Commons Capital Entities to conceivably reverse the problems created by capitalism^[3], i.e., ownership of the means of production^[4] by individuals, through raising the standard of living for millions of workers and their families and by reducing the ownership of property by individuals.

Commons Capitalism^[1] is a readily implementable concept, that complies with all state and federal laws and is an economically sound and sustainable economic system. However, Commons Capitalism^[1] suffers the same fate as all paradigm shifts, the inhibition of people to accept and implement a new concept.

Capitalism^[3] has been deeply ingrained in our thinking for the last four hundred years. For traditional capitalists, traditional capitalism^[3] justifies their mindless approach to making a profit. For some socialists, capitalism^[3] gives them a cause cèlébre to trash and vehemently discard to demonstrate their personal self-worth. For both, the concept of capitalism^[3] prevents them from accepting Commons Capitalism^[1] as a challenge to the status quo.

Consequently, capitalists claim that Commons Capitalism^[1] embraces Communism, Marxism, and socialism^[2] while socialists assert it will destroy the environment and cause societal collapse simply because it’s capitalism^[3]. Neither capitalists, nor socialists, will embrace Commons Capitalism^[1] for fear of being ostracized by their respective tribes of believers.

Professionals on either side will discount it because nobody has previously advanced the concept of Commons Capitalism^[1]; so, it must not be a viable concept. However, the concept of Commons Capitalism^[1] has been possible only within the last forty years because of the changes in states’ legislation and empirical research in recent economics.

Commons Capitalism^[1] appears to represent uncharted territory; however, solace can be found in studying traditional communal capitalism^[3] which operates similarly to Commons Capitalism^[1] to accomplish the same objectives, e.g., raising the standard of living in communities through payment of higher wages and social benefits to workers, raising people out of poverty, and reducing the concentration of the means of production^[4] in private ownership.

Transitioning from traditional capitalism^[3] to Commons Capitalism^[1] may disrupt established power structures and lead to resistance from wealthy capitalists and socialist idealogues. Accepting Commons Capitalism^[1] also involves intellectual effort and emotional adjustment which some capitalists, socialists, economists, lawyers, and business managers may find uncomfortable.

The largest impediment to the adoption and implementation of Commons Capitalism^[1] is the lack of public education about, and awareness of, Commons Capitalism^[1].

A Commons Capitalism Entity^[5] (CCE) can be used for any public benefit purpose, including helping the poor, providing education or training, aiding children or animals, or providing for general welfare, not just for providing social benefits for workers. CCEs are economically viable and financially feasible now. A CCE was neither viable, nor feasible, forty years ago. A CCEs creation is supported by both United States’ federal and state law and easily operates in a market economy.