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The Occupy Wall Street movement is often held up as evidence that the Left is hostile to “the free market”—that the Left’s real goal is to protect all of us from the market’s brutal logic. The story goes like this: the Left blames “neoliberalism” for greatly liberating markets from political control, and so producing exploitative forms of globalization that benefit economic elites and corporate interests while placing local communities and the environment at the mercy of supply and demand. The economic crisis, which banks unleashed upon the world in 2008 and appears to be still deepening, was a demonstration of the misery that unregulated markets leave in their wake.

But this picture is a misleading one. Neoliberalism was, in fact, never a philosophy aimed simply at liberating markets. The neoliberal intellectual tradition—which emerged out of Friedrich Hayek’s 1944 classic The Road to Serfdom and gathered momentum at the University of Chicago during the Fifties and Sixties—was certainly dedicated to reducing the power of the state over economic life. But very often this was accomplished by transferring power from the public sector directly to corporate and private actors—without the mediation of any market. In other words, the guiding assumption of neoliberalism is not that markets work perfectly, but that private actors make better decisions than public ones. Ever since the privatizations pioneered by Margaret Thatcher in the early 1980s, “applying neoliberalism” has meant private businesses acquiring public assets with little concern for the competitiveness of the bidding process. Moreover, Chicago School ideas have also been used to justify deregulation of anti-competitive monopolies in both the U.S. and Europe, on the basis that large suppliers could offer efficiencies to consumers that competitive, decentralized marketplaces could not. In other words, neoliberalism’s main goal was not setting free competitive market forces, but rather deepening the profit-motive of the managers of businesses.

Neoliberalism is not the real inheritor of Adam Smith’s classic defense of the free market. The freedom promoted by the neoliberal thinkers of the Chicago School had little to do with Smith’s vision of a fair, transparent and free exchange of goods. It was rather the freedom of the capitalist to control and exploit his property however he saw fit, undisturbed by public authorities. It was the freedom to constantly redefine property rights, extending them further into intangible and public realms, via intellectual property rights, branding, securitization of risks, privatization of research and so on. Neoliberalism offers new freedoms to businesses and investors, not to consumers or small-business owners.

There is a difference between “neoliberal markets” and “free markets”; if the Left wants to offer plausible economic solutions today, it needs to reconnect with its critique of the former, and make its peace with the latter. In the past, many Marxists have argued that a genuinely liberal market economy would be a positive achievement. Trade between equals, when it actually occurs, is not the basis of exploitation, as users of craft fairs, eBay or farmers’ markets can attest. But because businesses, often very large businesses, are treated under capitalism like forms of private property, one class of people (the bourgeoisie) are granted the right to exploit another class (the proletariat). The idea of a “fair wage” hides this peculiar fact from us, making “labor” appear as just another good bought and sold for money when in fact a wage contract actually involves one person agreeing to obey another. “Liberal socialists” in the tradition of John Stuart Mill, Henry George and James Meade, as well as contemporary “civic republicans” such as Phillip Pettit, Richard Dagger and Stuart White, share much of this Marxist analysis: it is not markets that facilitate the exploitation of people and the environment, but hierarchies and property rights. From this perspective, Adam Smith was not only a defender of free markets, but a critic of neoliberalism avant la lettre, where the former presumes a level of equality and the latter a degree of inequality.

The Left’s struggle is not against free-market competition, but against those peculiar hierarchies and property rights that benefit big investors at the expense of workers, consumers, students, small-business owners and the natural environment. Once we see this, an exciting set of fresh political questions emerges. How can an economy be organized, if not around the interests of the shareholder, the proprietor or investor? How can we replace the capitalist model of ownership without simply flipping from a privatizing neoliberalism into a nationalizing socialism or communism?

Neoliberals are attracted to a simplistic image of private ownership: granted a full and unambiguous monopoly over a certain asset, individuals can be trusted to look after it, improve it and prevent it from harming others. This vision meshes neatly with the American myth of the early settlers, as well as the seventeenth-century Lockean philosophy of ownership so inspirational for the American Revolution. Surely, the neoliberal says, the only person who would interfere with the freeholder on his own land must be either a despot or a communist.

In reality, modern capitalism no longer offers such simplicity or purity. A number of now familiar economic institutions prevent benefits and costs from being unambiguously “owned” or “privatized.” “Bankruptcy protection” and “central banking” have become normal parts of a capitalist economy; both exist precisely to protect risk-takers from the full costs attached to their decisions. Perhaps more dramatically, the institution of “limited liability companies” allows managers to take risks with shareholders’ money, without either shareholders or managers being liable for all of the potential costs attached to these risks. Shareholders might lose the money they invest in a firm, should it fall in value or go bankrupt, but they bear no further responsibility; they don’t, for example, have to settle its outstanding debts or pay for its impact on society or the environment. This enables firms to take risks and innovate in ways widely celebrated. But it famously leaves unresolved the question of who is to cover the costs of a firm’s mistakes when things go wrong.

Limited liability enabled investment bankers to speculate wildly on derivatives in the run-up to 2007, knowing that neither they personally, nor their shareholders, would ever have to pay the full cost, should their bets turn bad. Bankers must have known that the taxpayer was ultimately underwriting their risks, so vast were the potential costs if their bets failed. But the blame shouldn’t fall on these individuals alone. The most recent financial crisis, and the resulting recession, could not have occurred with the regulations that existed just a few decades ago. Until the 1990s, most investment banks were organized as “partnerships” (without limited liability), leaving partners fully liable for the risks their firms were taking. Less risky behavior was the result.

Libertarians now propose abolishing all these risk-mitigating institutions in the hope that private entrepreneurs might then be able to calculate the costs and benefits of their actions more honestly. And their idealized vision—of private entrepreneurs or family businesses employing productive assets in their own private economic interests—just about held through the British industrial revolution of the eighteenth and nineteenth centuries. But for the past hundred years or so, the dominant productive unit of capitalism has been a quasi-public institution—one might even call it a “cooperative” of a sort—namely the corporation. A corporation is an association wherein a large number of shareholders combine their capital, and managers are granted the right to invest it productively on their behalf.

The corporation is a legal construct, an abstraction in which an array of assets, processes, reputations and relationships become the “property” of a set of external shareholders. As American manufacturing has subsided since the 1950s, the assets of corporations have become increasingly intangible—like human capital, culture, reputation, brand and intellectual property. Yet these abstractions are still treated as private assets that can be sold, like cars or houses.

The idea that a corporation’s intangible assets can be “owned” just like a car or a house is difficult to swallow, especially since employees cannot legally be “owned.” In contrast to the neoliberal model of ownership as personal possession, ownership today is a bundle of rights and responsibilities, costs and benefits—rarely all held by a single party. The corporation’s dualistic quality, as both intangible idea, brand or association, and private asset belonging exclusively to shareholders, needs to be reckoned with. This institution has clear social consequences, yet it is currently protected from democratic processes.

The early era of the U.S. business corporation had the merit of involving the public in wealth creation, via the purchase of shares; this was at least quasi-democratic, employing a particular form of market, namely the stock market, to facilitate wider ownership. however, the growth of investment by private equity instead of public stocks has led to firms being taken over for a limited period of time (typically two or three years), exploited for maximum profit and return on investment, then sold again. Where companies listed on the stock market have certain obligations of transparency, private equity ownership grants the new management the freedom to act ruthlessly in the owner’s short-term interests, while disclosing nothing to the public or employees.

The politics of ownership extends well beyond the business world. Universities, heritage sites, sports clubs and national parks could all become dependent on the surpluses of rentier capitalists or sovereign wealth funds in the near future. Patterns of intergenerational inheritance have become a major concern in nations such as Britain, where homes are scarcely affordable on income alone. Oligarchical investors, especially those benefiting from rising energy prices, have growing power to purchase cultural assets in heavily indebted nations. Again, to say that these assets could become “owned” by private investors does not mean that they become entirely privatized, in the manner of an eighteenth-century farmer with the fence around “his” land. The university will still produce benefits for society, the heritage site or national park should still be preserved for future generations, and the sports club may still attract fans. But different forms of ownership imply different forms of power and rights for the owners.

The European Left spent much of the Twentieth Century arguing for state ownership, rather than private ownership, and achieved widespread nationalizations following World War II. But a number of Left-wing thinkers have grown as suspicious of state ownership as they are of capitalist ownership. Interestingly, this includes both radical Marxist thinkers, such as Erik Olin Wright, and moderate centrist policymakers, who have recognized the limits of both socialist nationalization and neoliberal privatization. even the British Conservative Party is trying to think beyond the simple dichotomy of “state vs. market” in considering what models of private organization and ownership might serve public interests better than the shareholder-owned corporation. The task of today’s Left is not, then, to abolish property rights—as is often supposed—but to invent or expand alternative property forms that recognize the ambiguity of ownership, especially in relation to intangible assets and organizations. The clear dichotomy of “public vs. private” should be abandoned, and the gray area between the two explored.

A form of ownership that has long held great promise for the Left is mutual or co-operative ownership. At its simplest, a mutual is an organization which lacks external shareholders and is run in the interests of a set of designated users, typically its employees or customers. Members do not contribute capital, in the way that shareholders do, which means that mutuals typically depend on bank loans as a source of finance. Meanwhile, the membership expresses its interests by internal democratic governance processes, rather than through threatening to withdraw its capital as in shareholder-owned companies. in the U.K., one of the largest chains of department stores and grocery stores, the John Lewis Partnership, is established as a mutual, with its shares held in an “employee benefit trust” that acts on behalf of its employees. Worker co-operatives date back to the mid-nineteenth century, and grant employees ownership and democratic control over the organization to which they contribute their time, ideas and effort. Given the importance of psychological commitment, customer service and innovation in the post-industrial workplace, this model of ownership promises to be far more suitable to contemporary Western capitalism than to the manufacturing industries for which it was first invented.

There is a wide variety of models and precedents for employee-ownership, some of which I explore in my book Reinventing the Firm. Mondragon in Spain and Publix in the U.S. (which has 140,000 employees) are two of the largest examples of employee-owned entities in the world. Some of the models involve employees contributing their own savings to take ownership of a firm, as in the case of American employee Share Ownership Plans, first introduced by the Republican Party in the early 1970s. Others stick more closely to the mutual principle that shares of the organization are not to be bought and sold at all.

Credit unions are another example, whereby those who contribute to the organization (namely the savers) are nominated as its members, to whom management is then accountable. These organizations could never become engaged in the types of speculative, high-risk practices that investment banks did, seeing as they are constitutionally required to take deposits and make loans in the way that is best for their members, rather than to maximize the return on shareholder capital. Consumer co-operatives take the same principle and apply it to retail. in all these cases, profits are distributed as dividends to the members (or, in financial mutuals, as higher interest rates for savers), rather than being funneled out to external shareholders. Without external shareholders demanding maximum quarterly dividends, the managers of these organizations are free to focus on the long-term interests of both their organizations and the members who contribute to them.

In many different ways, these organizations outperform their shareholder-owned rivals. Surveys show that customers experience higher levels of customer service from mutually-owned enterprises, where profit-maximization is not the overarching goal.

Ironically, many employee-owned firms are even more profitable than their shareholder-owned rivals, despite this not being their managerial objective. It turns out that managers can draw more enthusiasm, innovation and commitment from employees when the employees are also the owners. Research suggests that employees are happier and more engaged when they have a sense that their organization has some purpose which they identify with. HR departments around the world demonstrate a vague understanding of this fact through their focus on business “values,” the “psychological contract” and “leadership.” Sadly, they never go so far as to question the basic organizational structure of their companies.

While the neoliberal model of the corporation treats it as a private asset to be exploited solely in the interests of shareholders, mutuals and co-operatives recognize that there are multiple, potentially conflicting interests in an organization. There is neither a single unambiguous purpose nor a single rights-holder at work, which is one reason why “liberal socialists” have long argued that labor should hire capital, rather than capital hiring labor—or at least that the two should have equal voice over the management of a firm. Just as labor would get its “wage,” capital would also get a “wage” in the form of an agreed interest payment, and any remaining surpluses would then be shared between the two. This vision assumes that a business can be profit-making without being profit-maximizing. Contrast this with the “shareholder value” ideology (itself only dominant since the 1980s) which commits managers to ensure that growing quarterly shareholder earnings are their sole focus and gauge of success. A cooperative enterprise exists to serve several interests at once, including staff, customers and the local community, because it lacks a single numerical score of how well it is performing. A shareholder-owned corporation, by contrast, is governed with a constant eye on one single indicator, namely its share price, to the detriment of many of its own constituents.

Concerns about economic inequality now engulf the Western world, as the international success of the 99 percent movement has demonstrated. But rarely does anyone remember where so much of this inequality has come from. Under the pretense of putting returns to external shareholders at the center of their vision, managers have succeeded in paying themselves ever-higher salaries by making share packages an increasing proportion of their total remuneration. The ratio of boardroom to shop-floor pay has grown starkly since the 1970s—a direct result of executives coming to view themselves as the delegates of the wider investment community, rather than the most senior members of a particular organization’s workforce. Increasingly, the entire edifice of the corporation appears to exist to serve a small coterie of elite interests, rather than those who contribute their time, energy and custom to it.

Cooperatives and mutuals generate far less internal inequality, for a number of reasons. firstly, managers cannot pay themselves shares, because the company issues no shares. They therefore cannot present themselves as the delegates of the financial community, and won’t act purely to maximize dividends and share price. Secondly, research comparing Japanese, German and American companies suggests that wage inequality is lower in corporate cultures where executives are promoted from within the firm. The U.S. market for CEOs has worked wonderfully well, at least to increase the share of profits that end up in CEO pockets. Managers who have worked with a company for a long time, or even worked their way up from the bottom, have far less proclivity to inflate their own earnings, since they tend to identify with colleagues and the long-term interests of the organization. This is equally true of cooperatives and mutuals.

The new political economy of property has been gathering momentum for some years, but the economic crisis generates heightened urgency, and makes once-radical ideas appear more politically plausible. Senior politicians in Europe have come to recognize that raising taxation on income may be counter-productive, as it penalizes people for working and makes little dent in the public debt. however, taxing high-value assets, such as large landholdings and homes worth over two million dollars, could be a major source of revenue, and would only affect a small minority of the very wealthy. Liberal socialists have long argued that inheritance tax is a crucial part of a free society, while the restoration of anti-trust (especially in the financial sector) could help return neoliberalism to its original liberal principles. These policies are all born from an awareness that there is a pernicious political logic to capital and to centralized wealth. There is no reason why trade and transparent, non-exploitative forms of exchange should not form a central part of a Left-wing political and economic agenda.

In a sense this all comes down to establishing a legitimate notion of protectionism. Economic liberals and neoliberals successfully made the term “protectionism” a taboo, associating it with trade sanctions and tariffs of the sort that potentially create long-term global economic depressions. But some things are worth protecting. And besides, there are already plenty of institutions protecting shareholders and managers (such as limited liability). Many entrepreneurs want to protect their firms from the greed of equity investors, so they shift them into employee ownership, often through leveraged employee buy-outs. Enlightened models of copyright and the digital commons protect the right of authors to be recognized and remunerated for their work, but without seeking to obstruct the public flow of knowledge. Today heavily indebted nations across the developed world are at the mercy of a new class of international rentier capitalists (including various sovereign powers); they need to find ways of protecting their public spaces and institutions from becoming excessively privatized and exploited. now that neoliberalism has lost its last vestige of principled liberalism, revealing itself as a mere strategy for safeguarding capital, the task of the Left is to protect individuals against that strategy. And in this battle, markets are not the enemy.

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