How to Build a Just Economy in The Alternative by Nick Romeo

In “The Alternative: How to Build a Just Economy,” Nick Romeo presents a compelling vision for reshaping our economic landscape. This groundbreaking book illuminates the path towards a more equitable and sustainable future, offering powerful insights and practical strategies for creating a society that benefits all. Discover how we can transform our economy and build a world where prosperity is shared by everyone.

Dive into this transformative exploration of economic justice and uncover the key principles that can guide us towards a brighter future. Keep reading to gain a deeper understanding of how we can create a more inclusive and compassionate economy.

Genres

Economics, Social Justice, Public Policy, Political Science, Sociology, Business Ethics, Sustainability, Inequality, Economic Development, Social Change

“The Alternative: How to Build a Just Economy” by Nick Romeo presents a thought-provoking analysis of the current economic system and its inherent inequalities. The book delves into the root causes of economic injustice and explores innovative solutions for building a more equitable society. Romeo argues that the prevailing economic paradigm, which prioritizes growth and profits above all else, has led to widespread inequality, environmental degradation, and social unrest.

The author proposes a new economic model that prioritizes human well-being, sustainability, and social justice. He advocates for a shift towards a more democratic and participatory economy, where workers have greater control over their labor and communities have a say in economic decision-making. Romeo also emphasizes the importance of redistributing wealth and power, ensuring access to essential goods and services, and investing in public infrastructure and social programs.

Throughout the book, Romeo draws on a range of disciplines, including economics, sociology, and political science, to support his arguments. He provides compelling examples of successful alternative economic models, such as worker cooperatives and community land trusts, and offers practical strategies for implementing these models on a larger scale.

Review

“The Alternative: How to Build a Just Economy” is a timely and essential book that challenges us to rethink our economic priorities and imagine a more equitable future. Nick Romeo’s writing is engaging and accessible, making complex economic concepts easy to understand for a general audience.

The book’s greatest strength lies in its comprehensive analysis of the current economic system and its failures. Romeo does an excellent job of exposing the ways in which the pursuit of profit and growth has led to widespread inequality, environmental destruction, and social unrest. He also provides a convincing case for why a new economic model is necessary and urgently needed.

However, some readers may find the book’s proposed solutions to be overly idealistic or lacking in practical details. While Romeo offers compelling examples of alternative economic models, he does not always provide a clear roadmap for how these models can be implemented on a larger scale.

Despite this limitation, “The Alternative” is an important and thought-provoking book that deserves to be widely read and discussed. It offers a much-needed critique of the current economic system and provides a hopeful vision for a more just and sustainable future. Anyone interested in economics, social justice, or the future of our planet will find much to ponder and appreciate in this book.

Recommendation

Why is the US economy so cutthroat? Is its harsh nature just an inevitable feature of capitalism? In this intriguing text, American journalist Nick Romeo travels to Austria, Spain, and Portugal, seeking alternatives to America’s dog-eat-dog economic ethos. In Austria, he finds a program that guarantees a job to anyone who wants one. In Spain’s Basque Country, he tours a thriving cooperative conglomerate. And in Portugal, he attends budget hearings in which citizens propose public projects based on their priorities. Through his travels, he draws a road map to a kinder, gentler form of capitalism.

Take-Aways

• Mathematics has come to dominate the field of economics.
• Consumers are willing to pay more when companies offer workers a living wage.
• Guaranteed employment is a fraught concept but merits serious debate.
• As gig work grows more common, it will require a more humane model.
• Cooperative ownership can bolster democracy within work and society.
• Trust-based ownership is a way to encourage results over profits.
• Participatory budgeting bolsters civic engagement.

Summary

Mathematics has come to dominate the field of economics.

The top economic minds of the 18th, 19th and early 20th centuries — such as Adam Smith, Karl Marx, and John Maynard Keynes — saw their discipline as intrinsically linked to others, including history, politics, ethics, and psychology. In recent decades, however, economics has become synonymous with the study of just one field: high-level mathematics. In the early 2000s, a survey of graduate students in economics revealed that an overwhelming majority saw “excellence in mathematics” as a vital element of their training but viewed “a thorough knowledge of the economy” as unimportant. As a handful of top economists now admit, economics’ isolation from other disciplines and its divorce from the practical realities of working people played a big part in the policies that led to the 2008 financial crisis. Just a few years before the crash, University of Chicago economist Robert Lucas opined that the study of wealth inequality had no place in modern economics, labeling focus on the issue “poisonous.”

“The confusion of economics with natural science has been very politically useful: It lets economists claim scientific certainty while advancing inherently political and moral arguments.”

The shift away from a “big picture” view of economics coincided with another change in perspective in the latter half of the 20th century: the idea of market forces as “natural and inevitable.” Economist Milton Friedman’s landmark 1970 essay, “The Social Responsibility of Business Is to Increase its Profits” summed up the new mindset. But Friedman had made perhaps a more influential — and damaging — claim in 1953 when he wrote that economics was pure science, just like the disciplines that endeavored to define the laws of the physical universe. Economists applied that level of certainty to their field — and the prevailing dogma quickly came to embrace a hard-nosed, profit-first ethos.

“The strongest evidence that alternative arrangements are viable is to show that they already exist.”

This warped new approach to economics paved the road to today’s eye-watering inequality: If the laws of economics are immutable — so the thinking goes — then only a fool would protest the concentration of wealth in the hands of a tiny minority of a market economy’s population. This doctrinaire approach to economics has hurt the discipline in the long run — not to mention society. However, across the United States and Europe, economic pioneers are bucking neoliberal economic logic and pursuing alternative ways of doing business. These case studies underscore that the economic status quo is far from inevitable, and they point toward potential solutions to some of the world’s most pressing economic problems.

Consumers are willing to pay more when companies offer workers a living wage.

As of 2023, Well-Paid Maids, a cleaning service in Washington, DC, charged $219 to clean a one-bedroom apartment — twice the rate of more affordable cleaning services. The above-average fees directly benefit its workers, such as Lexi Grant, a Washington resident who previously worked as a Chipotle store manager for $14 an hour. Well-Paid Maids boosted her pay to $22 an hour and gave her benefits like paid time off and health insurance. That pay bump, paired with $150 in weekly tips, elevated Grant from poverty. She could pay for a safe, clean apartment and afford occasional extravagances such as dining out. For comparison, the median wage for cleaners in the city is just $15 an hour, and many workers lack benefits.

“Consumers in many markets will pay more for products and services that eliminate a good deal of suffering.”

Former consultant Aaron Seyedian launched Well-Paid Maids because he believed that a cleaning business could thrive even while paying workers well. He disagreed with the position of the National Federation of Independent Business and other interest groups, which respond to calls to raise the minimum wage by claiming that doing so will harm businesses. Seyedian says his company’s profits offer a strong counterargument: Despite their higher prices, Well-Paid Maids gets plenty of clients, earning $1.5 million in revenue in 2022. The company recently began operating in New York City — cleaners there make at least $27 an hour.

While paying workers more does affect a business’s bottom line, it also has advantages: Workers are more loyal and more productive, which allows companies to avoid costs associated with chronic employee turnover. Moreover, by paying a “living wage” — a much-debated term — Seyedian aligns with a premise once widely accepted in economics: wages are, in part, moral judgments. To argue otherwise is to ignore the history of labor laws in America and elsewhere, including restrictions on child labor, product safety standards, and the advent of overtime pay. Without such moral interventions in purportedly morally neutral markets, “human society would have been annihilated, ”as economic historian Karl Polanyi noted.

Guaranteed employment is a fraught concept but merits serious debate.

It is the official policy of many governments to eliminate joblessness. However, the way the United States measures unemployment gives an inaccurate picture of labor markets. For instance, the official statistics do not count as unemployed those who are underemployed, have not looked for work in the past month, or have voluntarily quit unsatisfactory jobs. This reality has spurred some to advocate for guaranteed incomes. But even if people do not need to work, evidence indicates that most crave meaningful employment and become depressed when it’s lacking.

In Austria, the Job Guarantee program offers a practical example of how a guaranteed job initiative could operate. The Austrian program, offered in a quiet village outside Vienna, gives anyone who has been jobless for a year or more the option of taking a subsidized private-sector job or of working with a nonprofit to create a job that meets a local need. Participants working with the nonprofit receive salaries ranging from €1,110 [$1,181] to €2,400 [$2,577] a month. The program’s costs are similar to those of the unemployment system: A year of public benefits costs the Austrian government about €30,000 — just about the price per participant for the Job Guarantee program. The program operates from an old mansion. Some participants work onsite at tasks such as carpentry, sewing, or gardening; others work offsite, helping maintain local parks and schools, and running programs for children and older adults.

“The concept of employment as a fundamental right is neither new nor radical.”

Many of the participants are over 50 and disabled. Monika, 56, worked as a health aide until she injured her back. Adnan drove trucks and taxis, but after two heart attacks, he worried about having another cardiac event while behind the wheel. Gilbert worked as an elevator installer before he hurt his back and knee while skiing. The fact that participants can refuse to do jobs they don’t like points to a potential obstacle to the widespread embrace of job guarantee programs. But those in favor of the initiative point out that job guarantees put positive pressure on employers to increase pay and improve working conditions for the jobs that people don’t want. Research also suggests that the costs of a nationwide Job Guarantee in America would be easily offset by the taxes the government could gather from those who would otherwise remain unemployed. The promise of a good job for all who want one would likely boost people’s physical and mental health.

As gig work grows more common, it will require a more humane model.

Gig work has taken the US economy by storm. The US Bureau of Labor Statistics estimates that, in 2017, more than one-third of Americans worked in the gig economy. The trend only accelerated during the pandemic. By 2027, more than half of Americans could be fending for themselves in freelance jobs with little in the way of benefits, worker protections, or job security. The University of California, Berkeley examined rideshare drivers’ pay. It concluded that, after deducting for unpaid downtime between rides, unpaid payroll taxes, and paltry reimbursement of expenses, drivers made less than $6 a week. Moreover, companies can terminate these gig workers for the smallest of transgressions.

“The ultimate challenge for reforming the gig economy is identifying a strategy that can retain its positive aspects while eliminating the negative ones.”

The city of Long Beach, California, has been trying to find a better way to run gig work. The Long Beach workforce agency launched a gig-work platform that gained national attention in 2018. Then, during the COVID-19 pandemic in 2020, nurses, firefighters, and other front-line workers needed to go to work — but child care facilities were mostly closed. So Long Beach’s program connected workers with child care provided by gig workers. The initiative served as a pilot program for more types of gig platforms. Long Beach’s platform, GoodFlexi, has expanded to include both public-sector and private-sector jobs. Because the program is subsidized, the fees it charges are modest. Cities such as Portland, Oregon; Oakland, California; and Louisville, Kentucky are now exploring building their own gig-work platforms.

Cooperative ownership can bolster democracy within work and society.

The conventional economic wisdom holds that employee ownership is counterproductive. In 2019, economist Larry Summers publicly criticized co-ops as slow-growing and self-serving. But the success of Mondragon Corp., located in Spain’s Basque Country, tells a different story. Mondragon consists of 95 co-ops across various sectors, including supermarkets, manufacturing, education, consulting, and food services. The co-op collective generated more than €11 billion in revenue in 2021. Its more than 80,000 member-owners share these profits and allocate funds and workers within the collective to prevent job losses during challenging economic periods. The collective holds more than 500 patents and contracts with such firms as General Electric and Blue Origin — Jeff Bezos’s space tourism business.

“If we support democracy in the political sphere, perhaps there’s no justification for abandoning it in the economic one.”

Workers become voting members of the co-op, and each vote counts equally, regardless of an individual’s rank or role. Executives can make no more than six times as much as the lowest paid workers. The workers decide this pay cap, like everything else at Mondragon. Each of the 95 cooperatives is free to adjust pay ratios as it sees fit, including adjusting the executive pay cap at above or below 6:1. The egalitarian spirit at Mondragon reflects the Basque community: The region has low income inequality and high levels of civic engagement. Some executives and workers say they could earn more elsewhere, but they find value in the collective ethos of Mondragon.

Trust-based ownership is a way to encourage results over profits.

Matt Kreutz, founder of the bakery Firebrand in Oakland, California, offers a model for mixing social conscience with profitability. When Kreutz was 12, his alcoholic father left the family. The family struggled to make ends meet and went heavily into debt. When he was 16, his mother, who worked as a nurse, was convicted of stealing money from her employer, a crime she later repeated. Those experiences colored Kreutz’s approach to business. At Firebrand, he made a point of hiring workers usually considered unemployable — people with prison records, refugees, and those who had experienced homelessness. At the same time, Firebrand was growing quickly enough that he needed outside financing to fund new investments. Private equity investors were taken with the bakery’s success — but they also made clear that the founder’s social initiatives were a low priority.

“Business owners have particularly important ethical opportunities for good conduct.”

Kreutz had worked for years to build his business, and he wasn’t prepared to abandon his mission because that’s what investors preferred. Instead, he opted for a structure that required him to contribute 51% of his shares in Firebrand to an entity known as a perpetual purpose trust. The ownership structure codifies the company’s mission, including requirements for sharing profits and hiring employees with red flags on their resumes. Four social impact investors contributed $2.5 million to bankroll Firebrand’s growth. In exchange, the investors receive 90% of the company’s profits until they’ve doubled their money. After that point, employees keep 90% of the profits. The model isn’t just for bakers of artisanal breads and almond croissants — perpetual purpose trusts can also be used to develop affordable housing.

Participatory budgeting is a way to bolster civic engagement.

The concept of participatory budgeting (PB) plays on the idea that local taxpayers are a source of public funding and that therefore they should have a voice in public budgeting. While some 4,000 cities across Europe have embraced PB, the coastal city of Cascais, in Portugal, has pursued it with particular enthusiasm. Since 2011, the city has invested €51 million in a variety of projects, ranging from public Wi-Fi in parks to renovations of abandoned properties.

“When executed well, PB can address central political ailments of our age, strengthening civil society, increasing transparency in government, and improving the quality of public works and services.”

For PB to succeed, it must be more than political window dressing. The concept debuted in Porto Alegre, Brazil, in 1989. At first, PB led to soaring investment in public facilities — and skyrocketing public participation in budget meetings. While just 1,000 citizens participated in Porto Alegre’s budget meetings in 1990, the number had jumped to 40,000 by 1999. Unfortunately, waning political support affected funding, forcing the city to stop pursuing PB projects in 2017. Even today, most cities with PB let citizens direct less than 2% of spending.

“A majority of PB projects tackle nonglamorous infrastructure needs: improvements to schools, roads, old buildings, green spaces, and athletic facilities are among the most frequent winners.”

In Cascais, though, where 15% of the budget is allocated to PB, real money is at stake, and front-line government employees and everyday citizens make their pitches. At one meeting that the author attended, a firefighter asked for money to replace the brigade’s 15-year-old ambulance. A Coast Guard official requested funds to upgrade a 20-year-old rescue boat. Proposals go through a rigorous analysis. A Cascais mother won sympathy for her story about her obese son facing bullying at a school gymnasium, and citizens approved her request for a special gym for overweight children. However, the PB staff decided the concept was not feasible. Even when a project does not move forward, officials note that it can bring an important public issue to light that the city may be able to address through other avenues.

About the Author

Nick Romeo covers economic policy for The New Yorker and teaches at the Graduate School of Journalism at the University of California, Berkeley. He has written for The New York Times, The Washington Post, and National Geographic.