Better together

Sara Horowitz's Mutualism book review

Recently, I read Mutualism¹. In her book, Sara Horowitz accuses the government and the private sector in the United States of allowing the deterioration of the worker safety net. The proposed solution is a revival of the cooperative movement and the establishment of a new social safety net, created by workers for the benefit of future workers. Horowitz is a labor lawyer and labor movement activist. She founded the Freelancers Union and served on the Board of the Federal Reserve Bank in New York.

Sara, what is mutualism?

Horowitz begins by describing her childhood in a family deeply influenced by the legacy of her great-grandfather, Israel, a leader of the International Ladies Garment Workers Union (ILGWU). She describes how the union provided a safety net for her grandmother’s generation, encompassing everything from wage negotiations to affordable housing. Then she shares her own experience as a union organizer with the Freelancers Union, discussing the challenges and obstacles she encountered. Throughout the book, the author also refers to more historical activism, such as the civil rights movement.

What do all of these initiatives have in common? According to Horowitz, it’s the mutualist nature of their organization. They prioritized the well-being of the groups they represented and independently developed solutions to the problems they faced. However, she also identifies that for an organization to be mutualist, it has to have a sustainable economic mechanism (a way of covering its expenditures) and a long-term focus. They were nexuses of community self-organization and local problem-solving in the absence of alternatives from the government or private sector.

Horowitz argues that the current American government and businesses fail to provide a safety net for all workers. In the economy transformed by societal and technological progress, the old post-New Deal laws leave many workers, especially independent contractors, out of the safety net they offer. The private sector is no better due to increasingly poor coverage, rising prices of insurance, and worker exploitation. She states that workers can’t count on anybody to create a new safety net for them. Instead, they should develop institutions to provide this safety net for themselves. The basic idea of mutualist organizations, including unions, cooperatives, and other smaller entities, has existed for a long time, but it requires refinement in the face of modern capitalism, which offers what cooperatives cannot: maximum efficiency and profits. Horowitz thinks mutualism succeeds where capitalism fails by providing community, quality, and meaning.

Proudhon, what is mutualism?

Mutualism in political philosophy and economics originated in the utopian communities of the early 19th century, particularly those inspired by Robert Owen and Charles Fourier. The first to create a cohesive description of mutualism was Pierre-Joseph Proudhon, a French philosopher who, around 1843, joined a group of proto-mutalists in Lyon. In his formulation, Proudhon claimed that private property is theft and that any business profit is a result of unfair economic rent that capitalists gain from labor exploitation². He proposed economic mechanisms based on reciprocity with no profits and collective ownership. He advocated for mutual aid, mutual credit, and mutual insurance institutions. In Proudhon’s vision, the very foundations of capitalism are evil and should be replaced with a cooperative system.

Sara Horowitz does not mean Proudhonian mutualism. She adopted the term but discarded all the problematic radical ideas, leaving behind a blend of labor and cooperative movements within capitalism. Arbitrarily changing the meaning of mutualism introduces considerable confusion; throughout the book, the author never fully conveys how much of the original mutualism she truly believes in. Numerous references to Marxian theory do not help. Nonetheless, the system described in the book functions within the framework of current capitalism, and this is how it should be interpreted.

Building a better future

If mutual cooperation on a local scale is the way to improve the lives of workers today and in the future, how do we build these mutualist institutions? Horowitz advocates for a model in which founding or supporting a small, highly local mutual organization enables solving a problem, gathering funding, and addressing another issue, all while scaling up the organization at a continuous pace. A key to the survival of such an organization is administrative and financial independence. With solid leadership and effective financing mechanisms in place, the mutualist organization will endure. Why do we need such robust structures? To enable the organization to continually address local community issues, recycle any profits back into the community, and ultimately enrich it by fostering new, stronger bonds among its members. However, the existence of even the most robust mutualist organizations may be threatened if the government and the private sector do not facilitate the development of the mutualist sector.

First, the government must understand the role that mutualist organizations play and help them thrive, rather than replacing their function with government programs. An interesting example provided by the author pertains to the healthcare sector. Although Obamacare was a championed reform that significantly extended the scope of Medicaid, it also eliminated the mutualist insurance companies, which offered tailored plans for their members at a reasonable price. According to Horowitz, the situation of some mutually insured upper-working-class and lower-middle-class workers worsened following the introduction of the Affordable Care Act. Instead of trying to replace what mutualist organizations do well, the government should create a favorable environment for their development through taxation and regulation.

Second, mutualist organizations require a specific type of capital market that provides funding without the expectation of quick and high returns, described by Horowitz as the “patient capital market.” Investment in mutualism would most definitely yield returns, but the effects are socialized and often far into the future. The author acknowledges the potential unattractiveness of such an investment to capitalists, so she proposes government tax credits to incentivize patient lending. The patient capital market would offer scaling opportunities that avoid compromising the mutualist mission under the pressure of traditional “extractive” investors.

…and they all lived happily ever after?

While the book is painfully repetitive, it makes a few valuable points. I appreciated the rational critique of the government's and the private sector's shortcomings. Horowitz accurately highlights that the government is neither the only nor the most efficient tool in the hands of the political left. A decentralized, bottom-up approach offered by mutualism has the potential to outperform government programs in many areas. It provides what the government can never offer: solutions tailored to the needs of local people. Government officials may attempt to gather more accurate information and tailor their provision based on the population they are targeting, but it is not designed for such a purpose. The giant government machinery has a top-down problem-solving pipeline, and the lower you reach, the higher the relative cost. Mutualist organizations are far better suited to address problems locally. The private sector, on the other hand, often fails to consider the local communities in which it operates, and, by its profit-maximizing nature, frequently extracts value without leaving a substantial surplus for the community. It also lacks patience, as capital is rarely invested in long-term projects with high social but low immediate monetary returns. While capitalism outperforms mutualism in generating surplus, the former creates better living conditions for the lower classes.

All that being said, mutualism is not a universal solution to all the problems of our societies. Horowitz employs a hyper-optimistic lens, making significant assumptions and underappreciating other sectors of the economy. Let’s take the example of healthcare insurance, Sara’s project within the Freelance Union. While filling the void left by the government and the private sector with mutual insurance improved the healthcare situation of independent workers, it did so because of the dysfunction of the public healthcare system in the United States. As per economic theory, insurance is most efficient when it covers everyone in the market. And from experience, we know that even American Medicare has lower costs than private insurance³. Thus, mutual health insurance may prove to be a viable short-term strategy, but ultimately, reforming the public healthcare system will yield the best outcome. Similarly, grocery cooperatives do not markup their sales, and any unforeseen profit is reinvested in the cooperative. They can also provide a better quality of products and service due to individual attention and local connections. However, small cooperatives can struggle to access credit for capital investments, and the responsibility for capital or operating losses can be painful to the members. Moreover, the small scale increases transaction costs, such as contracting suppliers, organizing deliveries, and maintaining a payment system. All these problems mean that, although the cooperative does not profit from its sales, the products there might be significantly pricier compared to those found in supermarkets or convenience stores. All in all, the mutualist way is not always the way.

The land of milk and honey

Cooperative groceries, union housing, mutual insurance, and mutual credit. With this alluring imagery of better solutions that are close and strengthen communities, Sara Horowitz advocates for reinventing the mutualist organizations for the 21st century. There are many critical, everyday-life issues that neither the American government nor businesses have improved nor even stopped from worsening in the past few decades. The long list includes affordable housing, quality food, access to healthcare and education, as well as other essential services. Mutualist organizations could step in and fill the gap, addressing specific low-level problems for which they are designed. Through providing services at a lower price and higher quality while fostering communities and making people feel heard, they can create a safety net for those whom the government and private sector have failed.

Nonetheless, without restructuring the laws and the economy, they are only a band-aid and will not heal the wound. To be sustained, the growth of the mutualist sector must be accommodated by both the government and the private sector. However, most importantly, government programs and market rules require a deep reform, addressing existing failures, preventing future problems, and adapting to the changing needs of our society. While Horowitz is correct that mutualist organizations are a valuable complement to the public and private sectors of our economy, the causes of the current social welfare crisis lie in decades of eroding public and private provisions. Mutualism has the potential to improve our lives, but it won’t save us on its own.

1. Horowitz, S. (2021). Mutualism: Building the Next Economy from the Ground Up. Random House.

2. Proudhon, P. (2017). What is property?: An Inquiry Into the Principle of Right and of Government.

3. Wray CM, Khare M, Keyhani S. Access to Care, Cost of Care, and Satisfaction With Care Among Adults With Private and Public Health Insurance in the US. JAMA Netw Open. 2021;4(6):e2110275. doi:10.1001/jamanetworkopen.2021.10275.