How CEOs behave like closet socialists
Progressives and socialists in the United States are working towards major economic changes such as Medicare for All and the Green New Deal. It is urgent that we empower national government to take over such critical functions in society as health insurance and the transition to a green economy. But we often encounter pushback: Many Americans worry about the risks of giving control over so much of our lives to a central authority. Our opponents cite the failure of the USSR.
We need to convince people that centralized economic planning can be democratic and effective. One way is to point to a working model of what that looks like, one they are already familiar with. In my recent book, The 99% Economy, I argue that we can find just such a model in a strange place—in many of our biggest capitalist businesses.
A working model, right under our noses
Many corporate CEOs behave like closet socialists. In public, they defend the superiority of markets over planning. But inside their own corporations, where they could leave their various business units to compete with each other, they rely instead on comprehensive strategic planning. Such planning aims to ensure that the various business units that make up the corporation coordinate their production, investment, and other plans to achieve the best outcomes for the corporation as a whole. Yes, some corporations try to emulate the market in their internal operations, but that approach is relatively rare. In most firms, the activity of business units is coordinated by a strategic plan—just like a government-run health insurance program, a national health service, or a national energy system.
In this internal planning process, corporations confront in miniature the same challenges that bedeviled centralized economic planning in the old USSR. But our corporations have developed effective techniques to deal with those challenges—techniques that could be deployed on a wider scale and to similar advantage in socialist planning.
Consider Kaiser Permanente
Consider how Kaiser Permanente orchestrates its strategy process. KP is the largest private-sector health care provider and one of the largest private health care insurance companies in the U.S., with more than 12 million health plan members, 696 hospitals and medical offices, and more than 217,000 employees.
Many things about the way KP operates anger us progressives—it’s a basically capitalistic enterprise that often puts its own profits over the needs of its workers and patients. But there’s a lot to admire about its planning.
Instead of letting its 22,000 doctors compete with each other as little independent businesses and haggle with insurance companies over prices and services, and instead of putting its hospitals in competition with each other for patients and doctors, KP draws them all into a strategic planning process aimed at maximizing the performance of the system as a whole.
As in many other big enterprises, KP’s strategic goals are informed by both top-down leadership and bottom-up input about opportunities and challenges. Through this vertical and horizontal dialogue, the organization determines goals and mobilizes towards achieving them.
One key feature of KP’s planning is the role of its unions. In 1996, KP formalized a partnership relationship with a coalition of most of its unions, representing the vast majority of its employees. While this labor-management partnership was originally conceived as a labor-relations strategy designed to minimize the risk of strikes, it soon evolved into the organization’s operating strategy. Management came to see that front-line employees could contribute to organizational performance if given a chance.
The leaders of the union coalition worked with KP’s top national leaders to develop a shared set of strategic goals. And the labor-management partnership put into place structures for joint planning and decision-making at every level—national, regional, medical center, and department—to advance those goals. On the front lines, 3500 Unit-Based Teams with management and union co-leads were mobilized to contribute to them.
The result is a health care delivery system that offers impressive levels of efficiency and clinical quality, levels that would be unattainable if KP were organized internally as a market-based, competitive system. One of the many advantages of planning over competition is that—unlike much of the rest of the U.S. health care system—KP units have a strong incentive to invest in preventive care and community health.
In this way, Kaiser Permanente shows how socialists would solve our health care crisis: nationalize the entire industry and implement an expanded version of this type of strategic management process in the new National Health Service. Having nationalized ownership and having thus turned the entire health care delivery system into a public agency, we could overcome the limits imposed by capitalism on KP’s planning. Employees’ voices could be guaranteed, rather than being a conditional privilege accorded by an enlightened management. Financing would be determined by democratic deliberation, rather than subject to the veto power of investors. Patients and community voices would be brought into the governance of the agency on an equal footing.
Beyond health care
Now pivot from health care to, say, the automobile industry, whose products and processes have proven so toxic to the environment. We can nationalize the auto companies and their suppliers. We can integrate them into a national transportation industry planning council to rebalance public and private transportation options. Our democratically elected representatives would develop economic, social, and environmental goals for the industry—just like GM or Ford executives develop strategic goals for their companies today, but on a bigger scale, and with much deeper and wider participation. Workers in the transportation industry as well as the wider community would work in regional and sector councils to formulate their input on these goals and develop plans to achieve them.
Their plans would be funded by the national investment bank in accordance with criteria developed democratically at the national and local levels. We would rationalize the internal structure of this industry, greatly reducing costs by eliminating unnecessary variation in components, designs, and processes. We would task the national investment bank to invest in creating new job opportunities in regions hit by the resulting downsizing.
Some worry that such gargantuan public enterprises would be unaccountable. But socialism would replace the very unreliable accountability provided by the market (remember Enron anyone? Or the banking collapse of 2008?) with a more robust, democratic form of accountability through regulators, courts, legislative oversight, and public advocacy.
Our Aristotle problem
As progressives and socialists, we have to find some way to help people form a mental image of the better world we want to create. But it’s hard for many Americans to imagine that centralized economic planning could be democratic and effective.
We shouldn’t underestimate this challenge. Consider this: Ancient Greek philosopher Aristotle—one of the greatest minds of his era or indeed any other—was convinced that if the right to vote were extended to women and slaves, Greece’s glorious political democracy would degenerate into rule by the rabble. Yet most of us today are committed to political democracy with universal suffrage, even if we accept that its implementation is never perfect.
To deal with the many challenges we face today, the democratic principle must be extended from the political realm to the economic. But we have grown up in a capitalist world. It is as difficult for us to imagine the expansion of democratic decision-making to the economic realm as it was for Aristotle to imagine the expansion of democratic rights to women and slaves.
Perhaps pointing to the central planning that already operates in our big corporations can help people overcome this hurdle.
Paul S. Adler is currently Harold Quinton Chair of Business Policy and Professor of Management and Organization, Sociology, and Environmental Studies at the University of Southern California. He began his education in Australia, moved to France, and was employed as a research economist for the French government. He came to the USA in 1981, and before arriving at USC in 1991, was affiliated with Barnard College, Harvard Business School, and Stanford's School of Engineering.