Economic democracy
Encyclopedia
Economic democracy is a socioeconomic
philosophy
that suggests a shift in decision-making power from a small minority of corporate shareholders to a larger majority of public stakeholders
. There is no single definition or approach for economic democracy
, but most theories and real-world examples challenge the demonstrated tendencies of modern property relations to externalize costs, subordinate the general well-being to private profit, and deny the populace majority a democratic voice in economic policy decisions.
Classical liberals argue that the power to dispose of the means of production belongs to entrepreneurs and capitalists, and can only be acquired by means of the consumers' ballot, held daily in the marketplace. "The capitalistic social order", they claim, therefore, "is an economic democracy in the strictest sense of the word." Critics of this claim point out that consumers only vote on the value of the product when they make a purchase; they are not voting on who should own the means of production, on who can keep its profits or on the resulting income redistribution. Proponents of economic democracy generally agree, therefore, that modern capitalism
tends to hinder or prevent society from earning enough income to purchase its output production. Centralized
corporate
monopoly
of common resources
typically forces conditions of artificial scarcity
upon the greater majority, resulting in socio-economic imbalances that restrict workers from access to economic opportunity and diminish consumer purchasing power
.
Economic democracy has been proposed as a component of larger socioeconomic ideologies, as a stand-alone theory, and as a variety of reform agendas. In most cases, economic democracy promotes universal access to "common resources" that are typically privatized
by corporate capitalism
or centralized by state socialism
. Assuming full political rights
cannot be won without full economic rights, economic democracy is a proposed solution for the problems of economic instability and deficiency of effective demand
. As an alternative model, both market and non-market theories of economic democracy have been proposed. As a reform agenda, supporting theories and real-world examples range from decentralization
and economic liberalization
to democratic cooperatives
, fair trade
, and the regionalization
of food production
and currency
.
. "But the total wage bill is always less than the total capital in circulation (otherwise there would be no profit), so the purchase of wage goods that sustain daily life (even with a suburban lifestyle) is never sufficient for the profitable sale of the total output." According to many proponents of economic democracy, the most fundamental economic problem is that modern society does not earn enough income to purchase its output production.
While balanced mixed economies
have existed briefly throughout history, some analysts agree that command economies
tend to dominate, listing contemporary expressions of state capitalism
as an extreme example, not an exception to the rule. As common resources are monopolized by imperial centers of wealth and power, conditions of scarcity are imposed artificially upon the greater majority, resulting in large-scale socio-economic imbalance.
In any economic system
, "wealth" includes all material things produced by labor for the satisfaction of human desires and having exchange value
. Land
and labor are generally considered the two most essential factors in producing wealth. Land includes all natural opportunities and forces. Labor includes all human exertion. Capital
includes the portion of wealth devoted to producing more wealth.
While the income of any individual might include proceeds from any combination of these three sources—land, labor, and capital are generally considered mutually exclusive factors in economic models of the production and distribution of wealth. According to Henry George
, "People seek to satisfy their desires with the least exertion". Human beings interact with nature to produce goods and services (products
) that other human beings need or desire. The law
s and customs
that govern the relationships among these entities constitute the economic structure of a given society.
In his book, After Capitalism, David Schweickart
suggests, "The structure of a capitalist society consists of three basic components:
While supply and demand
are generally accepted as market functions for establishing price
, the present financial price system is not self-liquidating. Corporate firms typically endeavor to 1) minimize the cost of production
and 2) increase sales
, in order to 3) maximize shareholder value
. But when consumers cannot buy all the goods being produced, "investor confidence" tends to decline, triggering declines in both production and employment
. According to many analysts, such economic instability stems from a central contradiction: Wages are both a cost of production and an essential source of effective demand
(needs or desires backed with purchasing power). Moreover, "those who produce the goods and services of society are paid less than their productive contribution".
through economic rent
s, and that concentration of such unearned wealth
is the root cause of poverty
. "Behind the abstraction known as 'the market' lurks a set of institutions designed to maximize the wealth and power of the most privileged group of people in the world -- the creditor-rentier class of the first world and their junior partners in the third". According to some modern analysts, private savings are not only unnecessary for economic growth, but they are often harmful to the overall economy. In an advanced industrial society, business credit is necessary for a healthy economy. A business that wants to expand production needs to command the labor of others, and money is an effective mechanism for exercising this authority. It is often cheaper for a business to borrow capital from a bank than to stockpile cash itself. This was the purpose of the state banking system in the U.S. prior to the Civil War
. For an industrial firm in an age of continued technological innovation, a considerable amount of earnings must be retained in order to invest in future improvements. If private savings are loaned out to entrepreneurs who use them to buy raw materials and hire workers, then aggregate demand is not reduced.
However, when private savings are not reinvested, the whole economy suffers recession, unemployment, and the eventual disappearance of excess savings. By assuming that producers immediately spend the money they receive as the price for goods and services, Say's Law
overlooks the key fact of retained earnings
. Even if the retained earnings are deposited in a bank they will not necessarily result in new spending. For a variety of reasons, most notably the necessity of retained earnings and the inclusion in prices of the costs of borrowing, sufficient income is never returned to the producing economy in order for people to purchase what can be manufactured.
In this view, unemployment is not an aberration of capitalism, indicating any sort of systemic malfunction. Rather, unemployment is a necessary structural feature of capitalism, intended to discipline the workforce. If unemployment is too low, workers make wage demands that either cuts into profits to an extent that jeopardize future investment, or are passed on to consumers, thus generating inflationary instability. David Schweickart suggests, "Capitalism cannot be a full-employment economy, except in the very short term. For unemployment is the "invisible hand
" -- carrying a stick -- that keeps the workforce in line." In this view, Adam Smith's
"invisible hand" does not seem reliable to guide economic forces on a large scale.
Assuming business credit could come from public sources rather than from the accumulations of private savers, some analysts consider interest payments to private savers both undeserved and unnecessary for economic growth. Moreover, the personal decision to save rather than consume decreases aggregate demand, increases the likelihood of unemployment, and exacerbates the tendency toward economic stagnation. Since wealthy people tend to save more than poor people, the propensity of an economy to slump because of excess saving becomes ever more acute as a society becomes more affluent. The research of Richard Wilkinson and Kate Pickett suggests that health and social problems are significantly worse in more unequal wealthy nations. They argue that there are "pernicious effects that inequality has on societies: eroding trust, increasing anxiety and illness, (and) encouraging excessive consumption"
is largely a study of scarcity
management. "Absent scarcity and alternative uses of available resources, there is no economic problem
". In this regard, many theories of Economic Democracy hold that conditions of scarcity are artificially maintained by corporate structures
that confine abundance to an exclusively entitled minority. In this view, socio-economic imbalance stems not from a failure to manage limited resources in a world of scarcity, but from mismanagement of virtually unlimited abundance and prosperity. In his book Labor and Other Capital (1849), American businessman, Edward Kellogg (1790–1858), said that:
While he considers these functions a public wrong, Kellogg also asserts it is the responsibility of the public to find and implement a remedy. Generally considered monopoly power
, this "public wrong" is viewed by many as the most influential factor in artificial scarcity
. In this regard, Henry George
further suggests:
While some consider land to be the primary source of wealth, others propose the labor theory of value
(first introduced by John Locke
, developed by Adam Smith
and later Karl Marx
), arguing that labor is the fundamental source of value. In these terms, "money is first, and foremost, a contract against another person’s labor. Except for wealth produced by nature, value is properly a measure of the time and quality of all productive labor spent producing a product or service. If the difference between the payment received for productive labor and the price paid by the consumer for a product or service is greater than fair value for expediting that trade, either the producer was underpaid, the final consumer was overcharged, or both. When intermediaries underpay producers or overcharge consumers, they are siphoning away the production of the labors of one or the other, or both."
For example, many analysts consider invention
a "more or less costless store of knowledge, captured by monopoly capital and protected in order to make it secret and a 'rare and scarce commodity', for sale at monopoly prices. So far as invention is concerned, a price is put on them not because they are scarce but in order to make them scarce to those who want to use them." Patent
monopolies capitalize stock values far above tangible labor value. The difference between labor-value and monopoly-value is transferred to consumers in the form of higher prices, and collected as "profit" by intermediaries who have contributed nothing to earn it.
Under such conditions, analysts generally agree that society does not currently earn enough to buy what the economy produces. The difference between earnings and prices is typically appropriated by industrial and banking centers of capital through monopoly control of finance and other market resources. Such exclusive entitlement tends to artificially impose conditions of economic scarcity upon the majority of the population. While the accelerating advance of technology
, developed and maintained by labor, tends to generate a virtually unlimited abundance, this process also drives wages down as workers are replaced by machines, ironically minimizing the purchasing power of workers in the market. In June 2006, investment bank, Goldman Sachs, reported: "The most important contribution to the higher profit margins over the past five years has been a decline in Labor's share of national income."
. Artificially restricted access of labor to common resources is generally considered monopoly or enclosure of the commons
. Due to the economic imbalance inherently imposed, such monopoly structures tend to be centrally dictated by imperial law, and must be maintained by military force, unequal trade agreements, or both.
In 1911, American journalist Ambrose Bierce
defined "land" as:
In The Servile State (1912), Hilaire Belloc
referred to the Enclosures Movement
when he said, "England was already captured by a wealthy oligarchy
before the series of great industrial
discoveries began". If you sought the accumulated wealth preliminary to launching new industry
, "you had to turn to the class which had already monopolized the bulk of the means of production in England. The rich men alone could furnish you with those supplies".
When Adam Smith wrote The Wealth of Nations in 1776, the dominant form of business
was partnership
, in which regional groups of co-workers ran co-owned businesses. From this perspective, many considered the corporate model – stock sold to strangers—inherently prone to fraud. While numerous scandals historically support this dim view of corporate policy, small partnerships could not possibly compete with the aggregate capital generated by corporate economies of scale
. According to Peter Barnes
, author of Capitalism 3.0, the greatest advantage of corporation
s over any other business model is their ability to raise capital from strangers. In this regard, corporations are aided by laws that limit stockholders’ liability to the amounts they have invested.
In A Preface To Economic Democracy, Robert A. Dahl
suggests that agrarian
economy and society in the early United States "underwent a revolutionary
transformation into a new system of commercial
and industrial
capitalism that automatically generated vast inequalities
of wealth, income
, status
, and power
." Dahl claims that such inequalities result from the "liberty
to accumulate unlimited economic resources
and to organize economic activity into hierarchically
governed enterprises."
By the mid-nineteenth century, however, corporations could live forever, engage in any legal activity, and merge with or acquire other corporations. In 1886, the U.S. Supreme Court
legally recognized corporations as “person
s”, entitled under the Fourteenth Amendment
to the same protections as living citizens
. Unlike average citizens, corporations also have large flows of money at their disposal. With this money they hire lobbyists
, donate copiously to politician
s, and sway public opinion
.
But, despite Supreme Court ruling, the modern corporation is not a real person. Rather, the publicly traded stock corporation is what Barnes terms an "automaton
", explicitly designed to maximize return to an elite minority
of stock owners. A corporation never sleeps or slows down. It externalizes as many costs as possible, and never reaches an upper limit of profitability, because no such limit has yet been established. As a result, corporations keep getting larger and more powerful. In 1955, sales of the Fortune 500
accounted for one-third of U.S. gross domestic product. By 2004 they commanded two-thirds. In other words, these few hundred corporations enveloped not only the commons but also millions of smaller firms organized as partnerships or proprietorships
.
Overall, corporations have established a homogeneous global playing field around which they can freely move raw materials, labor, capital, finished products, tax-paying obligations, and profits. Thus, corporate franchise has become a perpetual grant of sovereignty
, including immortality
, self-government
, and limited liability
. By the end of the twentieth century, corporate power—both economic and political – stretched worldwide. International agreements, promoted by the United States, not only lowered tariff
s but extended corporate property rights
and reduced the ability of sovereign nations to regulate corporations differently. David Schweickart submits that such "hypermobility of capital" generates economic and political insecurity around the globe. "If the search for lower wages comes to dominate the movement of capital, the result will be not only a lowering of worldwide wage disparities, but also a lowering of total global income."
At the domestic level, inequities maintained by corporate imperialism tend to result in the large-scale debt, unemployment, and poverty characteristics of economic recession
and depression
. According to Jack Rasmus, author of The War At Home and The Trillion Dollar Income Shift, income inequality in contemporary America is an increasing relative share of income for corporations and the wealthiest 1-percent of households while shares of that income stagnate and decline for 80-percent of the United States workforce. After rising steadily for three decades after World War II
, the standard of living for most American workers has sharply declined between the mid-1970s to the present. Rasmus likens the widening income gap in contemporary American society to the decade leading up to the Great Depression
, estimating "well over $1-trillion in income is transferred annually from the roughly 90-million working class families in America to corporations and the wealthiest non-working class households. While a hundred new billionaires were created since 2001, real weekly earnings for 100 million workers are less in 2007 than in 1980 when Ronald Reagan
took office".
According to Rasmus and other analysts, this "quarter century pay freeze", imposed by rapidly increasing control of wealth by the very rich, has resulted in innumerable negative externalities:
On a global scale, wealthy developed nations tend to impede or prohibit the economic and technological advancement of weaker developing countries through the military force, martial law, and inequitable practices of trade that typically characterize colonialism
. Rhetorically termed by some as a "tragedy of the commons
", "survival of the fittest", or "might makes right", proponents of Economic Democracy generally attribute such economic crises to the imbalances imposed by corporate imperialism. In his book, Economic Democracy: The Political Struggle for the 21st Century, J.W. Smith
examines the economic basis for the history of imperial civilization. Just as cities in the Middle Ages
monopolized the means of production
by conquering and controlling the sources of raw materials
and countryside markets, Smith claims that contemporary centers of capital now control our present world through private monopoly of public resources sometimes known as "the commons". Through inequalities of trade, developing countries are overcharged for import of manufactured goods and underpaid for raw material exports, as wealth is siphoned from the periphery of empire and hoarded at the imperial-centers-of-capital:
Like other financial empires in history, Smith claims the contemporary model forms alliances necessary to develop and control wealth, as peripheral nations remain impoverished providers of cheap resources for the imperial-centers-of-capital. Belloc estimated that, during the British Enclosures, "perhaps half of the whole population was proletarian
", while roughly the other "half" owned and controlled the means of production. Now, under modern Capitalism, J.W. Smith claims fewer than 500 people possess more wealth than half of the earth’s population, as the wealth of 1/2 of 1-percent of the United States population roughly equal that of the lower 90-percent.
According to many analysts, the United States has maintained some measure of stability by economically dominating of the rest of the world as a means of filling the gap between production and consumption. Beginning with massive loans to European combatants during World War I, and continuing through the lend-lease program of World War II, U.S. domination of trade reached its peak through economic recovery measures following those wars. Though forming the basis for U.S. prosperity during the 1950s and 1960s, U.S trade domination was exhausted by the mid-1970s, when the United States implemented a policy known as dollar hegemony
, intended to stabilize the economy.
With a consistently negative trade balance over the decades since, some suggest the United States has compensated for the gap between purchasing power and prices with a wide variety of debt in all sectors of the economy. In this process, many analysts claim that dollar hegemony has flooded the world with U.S. currency, loans, or debt instruments to support U.S. fiscal and trade deficits, pay for extraordinary levels of U.S. resource utilization, induce foreign governments to purchase U.S. armaments, ensure the allegiance of foreign governing elites, and maintain foreign economies in subservience through World Trade Organization and International Monetary Fund trade and lending policies.
maintains:
But many analysts argue that both full employment and guaranteed basic income are impossible under the restrictions of the current economic system for two primary reasons: First, unemployment is an essential feature of capitalism, not an indication of systemic failure. Second, while capitalism thrives under polyarchy
, it is not compatible with genuine democracy. Suggesting that these "democratic deficits" significantly impact the management of both workplace and new investment, some proponents of Economic Democracy favor the creation and implementation of a new economic model over reform of the existing one.
According to most analysts, a serious critique of any problem cannot be content to merely note the negative features of the existing model
. We must specify precisely not only the defining characteristics of the existing model, but also the structural features of an alternative. Such a specification is necessarily complicated, since a modern economy is a complicated affair. "But if we want to do more than simply denounce the evils of capitalism, we must confront the claim that 'there is no alternative' -- by proposing one."
Hungarian historian Karl Polanyi
suggests that the drive of market economies should be subordinate to larger societal needs. He states that human-beings, the source of labor, do not reproduce for the sole purpose of providing the market with workers. In The Great Transformation Polanyi says that, while modern states and market economies tend to grow under capitalism, both are mutually interdependent for functional development. In order for market economies to be truly prosperous, he claims social constructs must play an essential role. With the term "fictitious commodities", Polanyi claimed that land
, labor, and money
are all commodified under capitalism, though the inherent purpose of these items was never intended "for sale". He says natural resources
are "God-given", money is a bookkeeping entry validated by law
, and labor is a human prerogative, not a personal obligation to market economies.
Dr. Martin Luther King Jr. claims "Communism
forgets that life is individual. Capitalism
forgets that life is social, and the Kingdom of Brotherhood is found neither in the thesis of Communism nor the antithesis of Capitalism but in a higher synthesis. It is found in a higher synthesis that combines the truths of both". Trade unionist and social activist, Allan Engler, argues further that economic democracy is the working-class alternative to capitalism. In his book, "Economic Democracy", Engler states:
Assuming that "democracy is not just a political value, but one with profound economic implications", David Schweickart
suggests "the problem is not to choose between plan
and market
, but to integrate these institutions into a democratic framework". According to Schweickart, economic democracy, like capitalism, can be defined in terms of three basic features:
In real-world practice, Schweickart concedes economic democracy will be more complicated and less "pure" than his abstract model. However, to grasp the nature of the system and to understand its essential dynamic, it is important to have a clear picture of the basic structure. Capitalism is characterized by private ownership of productive resources, the market, and wage labor. The Soviet economic model abolished private ownership of productive resources (by collectivizing all farms and factories) and the market (by instituting central planning), but retained wage labor.
Proposed models for economic democracy generally begin with abolishing wage labor. Schweickart's model goes further to abolish private ownership of productive resources. Other proposals recommend abolishing the market, as well.
, David P. Ellerman
, states:
Ellerman maintains that the contract to buy and sell labor services is inherently invalid because labor, in the sense of responsible human action, is de facto
non-transferable. The rights to the positive and negative fruits of one’s labor are thus inalienable rights. In questions of governance
(as opposed to production
), the emphasis is on decision-making (as opposed to responsibility
). But the basic facts are the same. Decision-making capacity is de facto inalienable. A person cannot in fact alienate his or her decision-making capacity just as he or she cannot alienate de facto responsibility. 'Deciding to do as one is told' is only another way of deciding what to do.
Thus, Ellerman concludes, it is not private property that needs to be abolished, but the employment contract
. In other words, "a firm can be socialized and yet remain 'private' in the sense of not being government-owned."
In the proposals of both Ellerman and Schweickart, each productive enterprise is controlled by those who work there. Workers are responsible for the operation of the facility, including organization, discipline, production techniques, and the nature, price, and distribution of products. Decisions concerning proceeds distribution are made democratically. Problems of authority delegation are solved by democratic representation. Management is not appointed by the State nor elected by the community at large, nor selected by a board of directors elected by stockholders. Whatever internal structures are put in place, ultimate authority rests with the enterprise's workers, one-person, one-vote.
In David Schweickart’s model, however, workers control the workplace, but they do not "own" the means of production. Productive resources are regarded as the collective property of the society. Workers have the right to run the enterprise, to use its capital assets as they see fit, and to distribute among themselves the whole of the net profit from production. In Schweickart's model, societal "ownership" of the enterprise manifests itself in two ways:
If a firm is unable to generate even the nationally specified minimum per-capita income, then it must declare bankruptcy
. Movable capital will be sold off to pay creditors. The workers must seek employment elsewhere. In such economic difficulty, workers are free to reorganize the facility, or to leave and seek work elsewhere. They are not free to sell off their capital stocks and use the proceeds as income. A firm can sell off capital stocks and use the proceeds to buy additional capital goods. Or, if the firm wishes to contract its capital base so as to reduce its tax and depreciation obligations, it can sell off some of its assets, but in this case proceeds from the sale go into the national investment fund, not to the workers, since these assets belong to society as a whole.
on the capital assets of all productive enterprises replaces all other business taxes. This "capital assets tax" is collected by the central government, then invested back into the economy, assisting those firms needing funds for purposes of productive investment. These funds are dispersed throughout society, first to regions and communities on a per capita
basis, then to public banks in accordance with past performance, then to those firms with profitable project
proposals. Profitable projects that promise increased employment are favored over those that do not. At each level, national, regional and local, legislatures decide what portion of the investment fund coming to them is to be set aside for public capital expenditures, then send down the remainder to the next lower level. Associated with most banks are entrepreneurial divisions, which promote firm expansion and new firm creation. For large (regional or national) enterprises that need access to additional capital, it would be appropriate for the network of local investment banks to be supplemented by regional and national investment banks. These too would be public institutions that receive their funds from the national investment fund.
Economic Democracy does not depend on private savings or private investment
for its economic development
. In Schweickart's model, banks are public, not private, institutions that make grants
, not loan
s, to business enterprises. According to Schweickart, these grants do not represent "free money", since an investment grant counts as an addition to the capital assets of the enterprise, upon which the capital-asset tax must be paid. Thus the capital assets tax functions as an interest rate. A bank grant is essentially a loan requiring interest
payments but no repayment of principal
.
While an economy of worker-self-managed enterprises might tend toward lower unemployment than under capitalism, Schweickart says it does not guarantee full employment
. Social control of investment, under this model of Economic Democracy, serves to mitigate this defect. If the market sector of the economy does not provide sufficient employment, the public sector will provide all but the most severely disabled with the opportunity to engage in productive labor. The original formulation of the U.S. Humphrey-Hawkins Act of 1978
suggests that full employment can be assured in a market economy only if the government functions as the employer-of-last-resort. In Economic Democracy, the government assumes this role, something a capitalist government cannot do. Thus, social control of investment also serves to block patterns of cyclical, recessionary unemployment typical of capitalism.
, at least insofar as the allocation of consumer and capital goods is concerned. Firms buy raw materials and machine
ry from other firms and sell their products to other enterprises or consumers. "Prices are largely unregulated
except by supply and demand, although in some cases price controls or price supports might be in order -- as they are deemed in order in most real-world forms of capitalism."
Without a price mechanism sensitive to supply and demand, it is extremely difficult for a producer or planner to know what and how much to produce, and which production and marketing
methods are the most efficient. It is also extremely difficult in the absence of a market to design a set of incentives that will motivate producers to be both efficient and innovative
. Market competition
resolves these problems, to a significant if incomplete degree, in a non-authoritarian
, non-bureaucratic
fashion.
In Schweikart's view, centralized planning is inherently flawed, and schemes for decentralized non-market planning are unworkable. As theory predicts and the historical record confirms, central planning is both inefficient and conducive to an authoritarian concentration of power. This is one of the great lessons to be drawn from the Soviet experience
.
Since enterprises in Economic Democracy buy and sell on the market, they strive to make a profit. However, the "profit" in a worker-run firm is not the same as capitalist profit. It is calculated differently. In a market economy firms, whether capitalist or worker-self-managed, strive to maximize the difference between total sales and total costs. But for a capitalist firm, labor is counted as a cost. For a worker-run enterprise it is not. In Economic Democracy labor is not another "factor of production" technically on par with land and capital. Labor is the residual claimant. Workers get all that remains, once non-labor costs, including depreciation set asides and the capital assets tax, have been paid.
Because of the way workplaces and the investment mechanism are structured, Schweickart's model aims to facilitate fair trade
, not free trade
, between nations. Under Economic Democracy, there would be virtually no cross-border capital flows. Enterprises themselves will not relocate abroad, since they are democratically controlled by their own workers. Finance capital
will also stay mostly at home, since funds for investment are publicly generated and are mandated by law to be reinvested domestically. "Capital doesn't flow into the country, either, since there are no stock
s nor corporate bonds
nor businesses to buy. The capital assets of the country are collectively owned -- and hence not for sale."
According to Michael Howard, "in preserving commodity exchange, a market socialism
has greater continuity with the society it displaces than does nonmarket socialism, and thus it is more likely to emerge from capitalism as a result of tendencies generated within it." But Howard also suggests, "one argument against the market in socialist society has been that it blocks progress toward full communism or even leads back to capitalism". Thus, nonmarket versions of economic democracy have also been proposed.
, in Towards An Inclusive Democracy as a stateless, moneyless and marketless economy that precludes private accumulation of wealth and the institutionalization of privileges for some sections of society, without relying on a mythical post-scarcity state of abundance, or sacrificing freedom of choice.
The proposed system aims to meet the basic needs of all citizens (macro-economic decisions), and secure freedom of choice (micro-economic decisions). Therefore, the system consists of two basic elements: (1) democratic planning, which involves a feedback process between workplace assemblies, demotic assemblies and the confederal assembly, and (2) an artificial market using personal vouchers
, which ensures freedom of choice
but avoids the adverse effects of real markets. Although some have called this system “a form of money based on the labour theory of value”, it is not a money model since vouchers cannot be used as a general medium of exchange and store of wealth.
Another distinguishing feature of inclusive democracy is its distinction between basic and non-basic needs. Remuneration is according to need for basic needs, and according to effort for non-basic needs. Inclusive democracy is based on the principle that meeting basic needs is a fundamental human right which is guaranteed to all who are in a physical condition to offer a minimal amount of work. By contrast, participatory economics
guarantees that basic needs are satisfied only to the extent they are characterized public goods or are covered by compassion and by a guaranteed basic income for the unemployed and those who cannot work. Although many advocates of participatory economics and Participism
have contested this.
Within the inclusive democracy project, economic democracy is the authority of demos (community) in the economic sphere — which requires equal distribution of economic power. Therefore, all 'macro' economic decisions, namely, decisions concerning the running of the economy as a whole (overall level of production, consumption and investment, amounts of work and leisure implied, technologies to be used, etc.) are made by the citizen body collectively and without representation. However, "micro" economic decisions at the workplace or the household levels are made by the individual production or consumption unit through a proposed system of vouchers.
As with the case of direct democracy, economic democracy today is only feasible at the level of the confederated demoi. It involves the ownership and control of the means of production by the demos. This is radically different from the two main forms of concentration of economic power : capitalist and 'socialist' growth economy. It is also different from the various types of collectivist capitalism, such as workers' control and milder versions suggested by post-Keynesian social democrats. The demos, therefore, becomes the authentic unit of economic life.
For economic democracy to be feasible, proponents of inclusive democracy suggest three preconditions must be satisfied: Demotic self-reliance, demotic ownership of the means of production, and confederal allocation of resources.
and productive output. While reform agendas
tend to critique the existing system and recommend corrective measures, they do not necessarily suggest alternative models to replace the fundamental structures of capitalism; private ownership of productive resources, the market, and wage labor.
rather than debt to financial centers. Once reinvested in human productive potential, the surplus
of societal output could actually increase Gross Domestic Product rather than throttling it, resulting in a more efficient economy, overall. Social Credit
is an economic reform movement that originates from theories developed by Scottish engineer Major C. H. Douglas. His aim to make societal improvement the goal of monetary systems is reflected in the term "Social Credit", and published in his book, entitled Economic Democracy. In this view, the term "economic democracy" does not mean worker control of industry. While technological advancement tends to increase unemployment along with productivity, Douglas suggests that our perspective will determine whether this problem is a "catastrophe" or a "magnificent achievement":
A national dividend and a compensated price mechanism are the two most essential components of the Social Credit program proposed by C.H. Douglas to stabilize purchasing power for a democracy of consumers on a national and global scale. While these measure have never been implemented in their purest form, they have provided a foundation for Social Credit policital parties in many countries and for reform agendas that retain the title, "economic democracy".
, veteran Project Manager for the U.S. Treasury Department, Richard C. Cook
proposes two general measures, which together he terms, "economic democracy":
While some analysts suggest an economic crisis might be necessary to drive a movement toward large-scale economic democracy., Richard C. Cook argues that "most economic reform programs address symptoms, not causes":
Cook's critique of finance capitalism avoids any proposal of collectivist
solutions as a diagnosis of underlying financial issues. Rather, he affirms the value of "democratic capitalism," combined with a shift to more public control of credit, and suggests a new approach to achieving worldwide prosperity, starting with economic recovery in the United States. Cook's argument stems from prior success in the United States with credit as a public utility, including colonial paper currencies which allowed an emerging American society to monetize the value of its own goods and services, the Greenbacks issued by President Lincoln during the American civil war, and the Reconstruction Finance Corporation (RFC) which moved to recapitalize failing non-Federal Reserve state banks in rural areas and small towns during the Great Depression. While Herbert Hoover's efforts are not remembered as the most popular in U.S. history, Cook credits RFC programs with providing low interest loans to the railroad industry, farmers, exporters, state and local governments, and wartime industries over a period of at least 20-years.
, Milton Friedman
, Dr. Martin Luther King Jr., and John Kenneth Galbraith
. Friedman originally proposed a negative income tax
to support this system, but then opposed the bill because its revised implementation would have merely supplemented existing tax-structures rather than replacing them. Cook further suggests that racism might have been at the root of BIG's demise in the late 1960s, as "many beneficiaries of the program would have been African-American". But in 2006, the basic income guarantee was again proposed on the national level by State Representative Bob Filner
(D-CA) as H.R. 5257, supported by author Matthew Rothschild. According to the U.S. Basic Income Guarantee Network:
Moreover, Richard C. Cook suggests existing surplus in United States Gross Domestic Product
(GDP) could support such a system, as GDP of $12.98-trillion minus $9.21-trillion in purchasing power ("wages") equals a difference of $3.77-trillion. Distributed equally amongst United States citizens, Cook estimates a "National Dividend" of approximately $12,600 could be provided annually to every U.S. citizen. A primary function of monetary reform is to "provide sufficient individual income" -- not merely "create jobs" -- for American workers displaced by technological advancement, outsourcing, and other economic influences beyond their control. Funding of the National Dividend would be drawn from a national credit account, which would include all factors that generate production costs and create new capital assets. The national credit account could also be used for price subsidies to discourage manufacturers from cutting costs by shipping jobs overseas.
Rather than Federal Reserve Note
s, circulated only through debt payable to a bank with interest, the National Dividend would be "real money", based on the productive capacity of the economy expressed as GDP. Cook says, "it's important to realize that Social Credit
is not a socialist
system. Rather it is 'democratic capitalism,' in contrast to the 'finance capitalism' that has become so damaging". Rooted in the ideals of Social Credit, proposed by C.H. Douglas in the 1920s, Cook explains:
In his book, Capitalism 3.0, Peter Barnes likens a "National Dividend" to the game of Monopoly
, where all players start with a fair distribution of financial opportunity to succeed, and try to privatize as much as they can as they move around "the commons". Distinguishing the board game of Monopoly from contemporary real-world business, Barnes claims that "the top 5 percent of the population owns more property
than the remaining 95 percent", providing the smaller minority with an unfair advantage of approximately "$5-trillion" annually, at the beginning of the game. Contrasting "redistribution" of income (or property) with "predistribution", Barnes argues for "propertizing" (without corporately privatizing) "the commons" to spread ownership universally, without taking wealth from some and giving it to others. His suggested mechanism to this end is the establishment of a "Commons Sector", ensuring payment from the Corporate Sector for "the commons" they utilize, and equitably distributing the proceeds for the benefit of contemporary and future generations of society.
One real-world example of such reform is in the U.S. State of Alaska, where each citizen receives an annual share of the state's oil revenues called, "Alaska Permanent Fund Dividend". Barnes suggests this model could extend to other states and nations because "we jointly own many valuable assets". As corporate pollution of common assets increase, the permits for such pollution would become more scarce, driving prices for those permits up. "Less pollution would equal more revenue", and over time, "trillions of dollars could flow into an American Permanent Fund".
However, none of these proposals aspire to the mandates recommended by Dr. Martin Luther King Jr.:
Moreover, proponents of Economic Democracy generally deem any such reform unlikely under the dominance of contemporary command economies. While Thomas Paine originally recommended a National Dividend to compensate for the brutality of British Enclosures, no such large-scale disbursement has materialized in over 200-years since.
to natural resources and technologies should be converted to inclusive conditional titles –- the condition being that society should collect rental values on all natural resources. Smith suggests the basic principles of monopolization under feudalism were never abandoned, and residues of exclusive feudal property rights restrict the potential efficiency of capitalism in Western culture
s. Estimating roughly 60-percent of American capital is little more than capitalized values of unearned wealth, Smith suggests elimination of these monopoly values would double economic efficiency, maintain quality of life
, and reduce working hours
by half. Wasteful monetary flows can be stopped only by eliminating all methods of monopolization typical in Western economies.
J.W. Smith divides "primary (feudal) monopoly" into four general categories; banking, land, technology, and communications
. He lists three general categories of "secondary (modern) monopoly"; insurance
, law, health care
. Smith further claims that converting these exclusive entitlements to inclusive human rights
would minimize battles for market share
, thereby eliminating most offices and staff needed to maintain monopoly structures, and stop the wars generated to protect them. Dissolving roughly half the economic activity of a monopoly system would reduce the costs of common resources by roughly half, and significantly minimize the most influential factors of poverty.
In Smith's view, most taxes should be eliminated, and productive enterprise should be privately owned and managed. Inventors should be paid well and all technology placed in the public domain. Crucial services currently monopolized through licensing
should be legislated as human rights.
Smith envisions a balanced economy under a socially owned banking commons within an inclusive society with full and equal rights
for all. Federated regions collect resource rent
s on land and technology to a social fund
to operate governments and care for social needs. Socially owned banks provide finance capital by creating debt-free money for social infrastructure
and industry. Rental values return to society through expenditure on public infrastructures. Local labor is trained and employed to build and maintain water systems, sewers, roads, communication systems, railroads, ports, airports, post offices, and education systems. Purchasing power circulates regionally, as labor spends wages in consumption and governments spend resource rent and banking profits to maintain essential services.
According to Smith, all monetary systems, including money market
s, should function within fractional-reserve banking
. Financial capital should be the total savings of all citizens, balanced by primary-created money to fill any shortfall, or its destruction through increased reserve requirements to eliminate any surplus. Adjustments of required reserves should facilitate the balance between building with socially created money or savings. Any shortage of savings within a socially owned banking system should be alleviated by simply printing it.
is a limited liability entity, organized either for-profit or not-for-profit, that differs from a corporation in that its producing members, rather than non-producing shareholders, comprise decision-making authority. Classified as either consumer cooperatives or worker cooperative
s, the cooperative business model is fundamental to the interests of economic democracy.
According to the International Cooperative Alliance's Statement on the Cooperative Identity, "cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organized in a democratic manner."
Cooperatives play an essential role in all models of Economic Democracy, providing for the needs of workers, consumers, and communities. As an alternative to globalized economy
, domination by large corporations, and neoliberal economic policies, Economic Democracy emphasizes large-scale economic withdrawal from corporate imperialism
to more regionally organized producer and consumer cooperatives, thus restoring socio-economic stability on a broader scale.
, "a worker cooperative
is a business entity that is owned and controlled by the people who work in it". Workers own the business together, usually investing with a buy-in amount of money when they begin working. At the end of each year, worker-owners are paid a portion of the money the business makes after expenses. In cases where the company is also owned by employees, there are no outside or consumer owners. Only employees own shares of the business, which represent fractions of the market value of the cooperative. Only one membership share may be issued to each member, and one membership share provides its owner with one vote in company decision-making. While membership is not a requirement of employment, only employees can become members.
Worker cooperatives generally employ an industrial model called Workplace democracy
, which rejects the "master-servant relationship" implicit in the traditional employment contract. This term is often used synonymously with industrial democracy
. Companies like Semco
, DaVita
, Google
, Freys Hotels and Linden Lab
s maximize employee participation and engagement in this regard, as the New Unionism
movement views workplace democracy as a necessary link between production and economic democracy.
Some analysts suggest self-governing enterprises should not be confused with other systems they might vaguely or closely resemble. According to Robert A. Dahl:
Decisions in a worker cooperative are made democratically by the people who do the work, rather than by one person or group of people that holds all the power. This process usually adheres to the principle of "one worker, one vote". Worker-control can take many forms depending on the size and type of the business. Some ways to make decisions democratically include: an elected board of directors, elected managers, management job roles, no management at all, decisions made by consensus, decisions made by majority vote, or any combination of the above. Each worker-owned business creates the structure best suited to its needs. Equal participation in decision-making becomes the responsibility and privilege of each member, providing a democratic alternative to the centralization of power typical in corporate hierarchies.
Many businesses, controlled by workers and/or sharing profits among them, are not formally considered worker cooperatives. In general, these are called democratic workplaces. Across the United States, democratic workplaces occupy many different sectors and industries, with greatest concentrations in the Northeast, the West Coast and the Upper Midwest. While a few worker cooperatives in the United States are notable larger enterprises, most are small businesses. There are an estimated 300 democratic workplaces in the United States, employing over 3,500 people and generating over $400 million in annual revenues. Growing steadily over the past 20 years, the number of worker cooperatives includes both well-established businesses and new ones, with the fields of technology and health care showing most of the recent increase.
In many ways, the operations of worker cooperatives are quite similar to conventional businesses. They develop products or services, and offer them for sale to the public, with the goal of generating enough income to support the business and its owners. They incorporate with the state, get business licenses, pay state and federal taxes, have payroll and benefits, and so on.
But there are also some fundamental differences between worker cooperatives and traditional businesses. In conventional businesses, net income is called profit, which tends to be distributed primarily amongst non-producing shareholders. In worker cooperatives, this income is called surplus, which is distributed amongst worker-owners based on hours worked, seniority, or other criteria. In a worker cooperative, workers own their jobs, and therefore have a direct stake in the local environment and the power to conduct business in ways that benefit the community rather than destroying it. Some worker cooperatives maintain what is known as a “multiple bottom line”, evaluating success not merely in terms of net income, but also by factors like their sustainability as a business, their contribution to the community, and the happiness and longevity of their workers.
According to Tim Calvert, a founding member of the worker-owned Portland, Oregon cooperative, City Bikes, "the marks of a worker co-op are an emphasis on cooperative working for collective success, a democratic structure for decision making with each member having an equal vote, a collective determination of how net income or net losses are allocated, an equal contribution to and benefit from the co-op's cash and an equal sharing of the risks and benefits of working at and owning a business". But since there is no inadequate legislation regarding worker cooperatives in the United States, most worker cooperatives tend to utilize consumer cooperative law for their purposes. While Calvert believes a genuine worker cooperative should be specially incorporated as owned solely and equally by employees, he also observes that CityBikes is one of the few that strictly adheres to the principles of a properly incorporated worker-owned cooperative. Instead, many worker-cooperatives choose to incorporate as Limited Liability Corporations, because 1) there is less paperwork involved, and 2) protection from personal lawsuit is a paramount concern.
is a cooperative
business owned by its customers for their mutual benefit. Oriented toward service rather than pecuniary profit, consumers of goods and services are often also the individuals who have provided capital to launch or purchase such free enterprise
. Consumers' cooperatives differ from other forms of business in their directive to provide quality goods and services to consumer/owners at the lowest cost rather than to sell goods and services at the highest price above cost that the consumer is willing to pay. In practice consumers' cooperatives price goods and services at competitive market rates. The difference is that where a for-profit enterprise will treat the difference between cost (including labor, etc.) and selling price as financial gain, the consumer owned enterprise returns this sum to the consumer/owner as an over-payment.
Large consumers' co-ops run much like any other business, requiring workers, managers, clerks, products, and customers to keep the business running. In smaller cooperatives, consumer/owners are often workers as well. Consumers' cooperatives can differ greatly in start up and also in how the co-op is run, but to be true to the consumers' cooperative form of business the enterprise should follow the Rochdale Principles
. Consumers' cooperatives may, in turn, form Co-operative Federations. These may take the form of co-operative wholesale societies
, through which Consumers' Co-operatives collectively purchase goods at wholesale prices and, in some cases, own factories. Alternatively, they may be members of Co-operative unions.
Consumer cooperatives are very different from privately owned "discount clubs," which charge annual fees in exchange for a discount on purchases. The "club" is not owned or governed by the "members" and the profits of the business go to the investors, not to members. In a cooperative, the members own the business and the profits belong to the community of members.
Most food co-ops are consumer cooperatives, which means that all our retail co-ops are owned by the people who shop at the stores. Members exercise their ownership by patronizing the store and voting in elections. The members elect a board of directors to hire, guide and evaluate the general manager who runs day to day operations. Food cooperatives were originally established to provide fresh, organic produce
as a viable alternative to packaged imports. But this process can present a struggle, as communities tend to import the same crops that local farmers cultivate. The ideas of local and slow food
production can help local farmers prosper, in addition to providing consumers with fresher products. But the growing ubiquity of organic food products in corporate stores testifies to broadening consumer awareness, and to the dynamics of global marketing.
Associated with national and international cooperative communities, Portland Oregon cooperatives manage to survive market competition with corporate franchise. As Lee Lancaster, financial manager for Food Front, states, "cooperatives are potentially one democratic economic model that could help guide business decisions toward meeting human needs while honoring the needs of society and nature". He admits, however, it is difficult to maintain collaboration among cooperatives while also avoiding integration that typically results in centralized authority.
Tim Calvert believes that dollars are the most important vote to make, and others tend to agree. Citing members of People’s Co-op and Alberta Cooperative Grocery, Romona DeNies of The Portland Alliance states, "Co-ops are the antidote to the centralization of power. People forget they have power as consumers to make choices. We can’t be completely disentangled from the corporate world, but we can try to provide a local model of living further from it. No one is getting rich off your money at a co-op. But that’s the economic value of shopping here. In return, you support a viable alternative to the vicious cycle of bottom lines and end profits".
As World Trade Organization
representatives negotiate issues of competition, agricultural subsidies, and economic protectionism among developed nations, the pending fate of the American farmer depends upon the ability of third-world farmers to "compete" with subsidized agricultural giants like Monsanto Company. Lee Lancaster says, “Underneath our unique aspects, we have the same structure and principles. Welfare of our respective neighborhoods is of vital concern to us. Food co-ops were started to provide local, organic produce. Now with those things more mainstream, the demand is going up, and our share of that market is declining. We have to reevaluate."
Further, Lancaster claims the traditional independence and decentralization of U.S. cooperatives have restricted their impact on the food industry through economies of scale
, lamenting they should have been better organized: "What if we could work with other co-ops to nurture and establish other cooperatives?" he asks, "In essence, this is an extension of neighborhood organizing. We’re all driven by competition from national chains, but in looking at national issues and realizing there’s a lot to address, what’s needed is a bigger movement, not a big corporation."
, author of New Money for Healthy Communities, "The pinnacle of power in today's world is the power to issue money. If that power can be democratized and focused in a direction which gives social and ecological concerns top priority, then there may yet be hope for saving the world". In this regard, many proponents of Economic Democracy recommend the regionalization of currencies. Some experts suggest that, "under the Bretton Woods system
, the Federal Reserve acted as the world's central bank. This gave America enormous leverage over economic policies of its principal trading partners". Other analysts add that developing nations are susceptible to exploitation mainly because they have no independent monetary system, using the U.S. dollar instead. This feeds the fractional reserve banking system, operated by the U.S., Canada, Europe, and Japan (imperial-centers-of-capital). Developing nations pay heavily for this service through market interest rates and because banking profits and property ownership emigrate to financial centers elsewhere.
According to J.W. Smith, "Currency is only the representation of wealth produced by combining land (resources), labor, and industrial capital". He claims that no country is free when another country has such leverage over its entire economy. But by combining their resources, Smith says developing nations have all three of these foundations of wealth:
Smith further explains that developed countries need resources from the developing world as much as developing countries need finance capital and technology from the developed world. Aside from superior military power of the imperial centers, the undeveloped world actually has superior bargaining leverage. With their own trading currencies, developing countries can barter their resources to the developed world in trade for the latest industrial technologies. Barter avoids "hard money monopolization" and the unequal trades between weak and strong nations that result. Smith suggests that barter was how Germany resolved many financial difficulties "put in place to strangle her", and that "World Wars I and II settled that trade dispute". He claims that their intentions of exclusive entitlement are clearly exposed when the imperial centers must resort to military force to prevent such barters and maintain monopoly control of others' resources.
----
Socioeconomics
Socioeconomics or socio-economics or social economics is an umbrella term with different usages. 'Social economics' may refer broadly to the "use of economics in the study of society." More narrowly, contemporary practice considers behavioral interactions of individuals and groups through social...
philosophy
Philosophy
Philosophy is the study of general and fundamental problems, such as those connected with existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing such problems by its critical, generally systematic approach and its reliance on rational...
that suggests a shift in decision-making power from a small minority of corporate shareholders to a larger majority of public stakeholders
Stakeholder theory
The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. It was originally detailed by R...
. There is no single definition or approach for economic democracy
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...
, but most theories and real-world examples challenge the demonstrated tendencies of modern property relations to externalize costs, subordinate the general well-being to private profit, and deny the populace majority a democratic voice in economic policy decisions.
Classical liberals argue that the power to dispose of the means of production belongs to entrepreneurs and capitalists, and can only be acquired by means of the consumers' ballot, held daily in the marketplace. "The capitalistic social order", they claim, therefore, "is an economic democracy in the strictest sense of the word." Critics of this claim point out that consumers only vote on the value of the product when they make a purchase; they are not voting on who should own the means of production, on who can keep its profits or on the resulting income redistribution. Proponents of economic democracy generally agree, therefore, that modern capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
tends to hinder or prevent society from earning enough income to purchase its output production. Centralized
Centralization
Centralisation, or centralization , is the process by which the activities of an organisation, particularly those regarding planning and decision-making, become concentrated within a particular location and/or group....
corporate
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
of common resources
Common-pool resource
In economics, a common-pool resource , also called a common property resource, is a type of good consisting of a natural or human-made resource system , whose size or characteristics makes it costly, but not impossible, to exclude potential beneficiaries from obtaining benefits from its use...
typically forces conditions of artificial scarcity
Artificial scarcity
Artificial scarcity describes the scarcity of items even though the technology and production capacity exists to create an abundance. The term is aptly applied to non-rival resources, i.e. those that do not diminish due to one person's use, although there are other resources which could be...
upon the greater majority, resulting in socio-economic imbalances that restrict workers from access to economic opportunity and diminish consumer purchasing power
Purchasing power
Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing...
.
Economic democracy has been proposed as a component of larger socioeconomic ideologies, as a stand-alone theory, and as a variety of reform agendas. In most cases, economic democracy promotes universal access to "common resources" that are typically privatized
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
by corporate capitalism
Corporate capitalism
Corporate capitalism is a term used in social science and economics to describe a capitalist marketplace characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit....
or centralized by state socialism
State socialism
State socialism is an economic system with limited socialist characteristics, such as public ownership of major industries, remedial measures to benefit the working class, and a gradual process of developing socialism through government policy...
. Assuming full political rights
Civil rights
Civil and political rights are a class of rights that protect individuals' freedom from unwarranted infringement by governments and private organizations, and ensure one's ability to participate in the civil and political life of the state without discrimination or repression.Civil rights include...
cannot be won without full economic rights, economic democracy is a proposed solution for the problems of economic instability and deficiency of effective demand
Effective demand
In economics, effective demand in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not constrained in any other market...
. As an alternative model, both market and non-market theories of economic democracy have been proposed. As a reform agenda, supporting theories and real-world examples range from decentralization
Decentralization
__FORCETOC__Decentralization or decentralisation is the process of dispersing decision-making governance closer to the people and/or citizens. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy,...
and economic liberalization
Economic liberalism
Economic liberalism is the ideological belief in giving all people economic freedom, and as such granting people with more basis to control their own lives and make their own mistakes. It is an economic philosophy that supports and promotes individual liberty and choice in economic matters and...
to democratic cooperatives
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
, fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
, and the regionalization
Regionalism (politics)
Regionalism is a term used in international relations. Regionalism also constitutes one of the three constituents of the international commercial system...
of food production
Local food
Local food or the local food movement is a "collaborative effort to build more locally based, self-reliant food economies - one in which sustainable food production, processing, distribution, and consumption is integrated to enhance the economic, environmental and social health of a particular...
and currency
Local currency
In economics, a local currency, in its common usage, is a currency not backed by a national government , and intended to trade only in a small area. As a tool of fiscal localism, local moneys can raise awareness of the state of the local economy, especially among those who may be unfamiliar or...
.
Deficiency of effective demand
"Workers spending their wages is one source of effective demand", claims geographer, David HarveyDavid Harvey (geographer)
David Harvey is the Distinguished Professor of Anthropology at the Graduate Center of the City University of New York . A leading social theorist of international standing, he received his PhD in Geography from University of Cambridge in 1961. Widely influential, he is among the top 20 most cited...
. "But the total wage bill is always less than the total capital in circulation (otherwise there would be no profit), so the purchase of wage goods that sustain daily life (even with a suburban lifestyle) is never sufficient for the profitable sale of the total output." According to many proponents of economic democracy, the most fundamental economic problem is that modern society does not earn enough income to purchase its output production.
While balanced mixed economies
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
have existed briefly throughout history, some analysts agree that command economies
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
tend to dominate, listing contemporary expressions of state capitalism
State capitalism
The term State capitalism has various meanings, but is usually described as commercial economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or...
as an extreme example, not an exception to the rule. As common resources are monopolized by imperial centers of wealth and power, conditions of scarcity are imposed artificially upon the greater majority, resulting in large-scale socio-economic imbalance.
In any economic system
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, "wealth" includes all material things produced by labor for the satisfaction of human desires and having exchange value
Exchange value
In political economy and especially Marxian economics, exchange value refers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market...
. Land
Land (economics)
In economics, land comprises all naturally occurring resources whose supply is inherently fixed. Examples are any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum. Natural resources are fundamental to...
and labor are generally considered the two most essential factors in producing wealth. Land includes all natural opportunities and forces. Labor includes all human exertion. Capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
includes the portion of wealth devoted to producing more wealth.
While the income of any individual might include proceeds from any combination of these three sources—land, labor, and capital are generally considered mutually exclusive factors in economic models of the production and distribution of wealth. According to Henry George
Henry George
Henry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "single tax" on land...
, "People seek to satisfy their desires with the least exertion". Human beings interact with nature to produce goods and services (products
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
) that other human beings need or desire. The law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
s and customs
Custom (law)
Custom in law is the established pattern of behavior that can be objectively verified within a particular social setting. A claim can be carried out in defense of "what has always been done and accepted by law." Customary law exists where:...
that govern the relationships among these entities constitute the economic structure of a given society.
In his book, After Capitalism, David Schweickart
David Schweickart
David Schweickart is an American mathematician and philosopher. He holds a BS in Mathematics from University of Dayton, a PhD in Mathematics from University of Virginia, and a PhD in Philosophy from Ohio State University. He currently is Professor of Philosophy at Loyola University Chicago.He has...
suggests, "The structure of a capitalist society consists of three basic components:
- The bulk of the means of productionMeans of productionMeans of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
are privately owned, either directly or by corporations that are themselves owned by private individuals.
- Products are exchanged in a "market"; that is to say, goods and services are bought and sold at prices determined for the most part by competition and not by some governmental pricing authority. Individual enterprises compete with one another in providing goods and services to consumers, each enterprise trying to make a profit. This competition is the primary determinant of prices.
- Most of the people who work for pay in this society work for other people, who own the means of production. Most working people are "wage labourWage labourWage labour is the socioeconomic relationship between a worker and an employer, where the worker sells their labour under a formal or informal employment contract. These transactions usually occur in a labour market where wages are market determined...
ers."
While supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
are generally accepted as market functions for establishing price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
, the present financial price system is not self-liquidating. Corporate firms typically endeavor to 1) minimize the cost of production
Cost-of-production theory of value
In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it...
and 2) increase sales
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
, in order to 3) maximize shareholder value
Shareholder value
Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders...
. But when consumers cannot buy all the goods being produced, "investor confidence" tends to decline, triggering declines in both production and employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
. According to many analysts, such economic instability stems from a central contradiction: Wages are both a cost of production and an essential source of effective demand
Effective demand
In economics, effective demand in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not constrained in any other market...
(needs or desires backed with purchasing power). Moreover, "those who produce the goods and services of society are paid less than their productive contribution".
Savings, investment, and unemployment
In his 1879 book Progress and Poverty, Henry George argued that a majority of wealth created in a "free market" economy is appropriated by land owners and monopolistsMonopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
through economic rent
Economic rent
Economic rent is typically defined by economists as payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply. A recipient of economic rent is a rentier....
s, and that concentration of such unearned wealth
Unearned income
Unearned income is a term in economics that has different meanings and implications depending on the theoretical frame. To classical economists, with their emphasis on dynamic competition, income not subject to competition are “rents” or unearned income, such as incomes attributable to...
is the root cause of poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...
. "Behind the abstraction known as 'the market' lurks a set of institutions designed to maximize the wealth and power of the most privileged group of people in the world -- the creditor-rentier class of the first world and their junior partners in the third". According to some modern analysts, private savings are not only unnecessary for economic growth, but they are often harmful to the overall economy. In an advanced industrial society, business credit is necessary for a healthy economy. A business that wants to expand production needs to command the labor of others, and money is an effective mechanism for exercising this authority. It is often cheaper for a business to borrow capital from a bank than to stockpile cash itself. This was the purpose of the state banking system in the U.S. prior to the Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
. For an industrial firm in an age of continued technological innovation, a considerable amount of earnings must be retained in order to invest in future improvements. If private savings are loaned out to entrepreneurs who use them to buy raw materials and hire workers, then aggregate demand is not reduced.
However, when private savings are not reinvested, the whole economy suffers recession, unemployment, and the eventual disappearance of excess savings. By assuming that producers immediately spend the money they receive as the price for goods and services, Say's Law
Say's law
Say's law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say , who stated that "products are paid for with products" and "a glut can take place only when there are too many means of production applied to one kind...
overlooks the key fact of retained earnings
Retained earnings
In accounting, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation takes a loss, then that loss is retained and called variously retained losses, accumulated losses or...
. Even if the retained earnings are deposited in a bank they will not necessarily result in new spending. For a variety of reasons, most notably the necessity of retained earnings and the inclusion in prices of the costs of borrowing, sufficient income is never returned to the producing economy in order for people to purchase what can be manufactured.
In this view, unemployment is not an aberration of capitalism, indicating any sort of systemic malfunction. Rather, unemployment is a necessary structural feature of capitalism, intended to discipline the workforce. If unemployment is too low, workers make wage demands that either cuts into profits to an extent that jeopardize future investment, or are passed on to consumers, thus generating inflationary instability. David Schweickart suggests, "Capitalism cannot be a full-employment economy, except in the very short term. For unemployment is the "invisible hand
Invisible hand
In economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith...
" -- carrying a stick -- that keeps the workforce in line." In this view, Adam Smith's
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
"invisible hand" does not seem reliable to guide economic forces on a large scale.
Assuming business credit could come from public sources rather than from the accumulations of private savers, some analysts consider interest payments to private savers both undeserved and unnecessary for economic growth. Moreover, the personal decision to save rather than consume decreases aggregate demand, increases the likelihood of unemployment, and exacerbates the tendency toward economic stagnation. Since wealthy people tend to save more than poor people, the propensity of an economy to slump because of excess saving becomes ever more acute as a society becomes more affluent. The research of Richard Wilkinson and Kate Pickett suggests that health and social problems are significantly worse in more unequal wealthy nations. They argue that there are "pernicious effects that inequality has on societies: eroding trust, increasing anxiety and illness, (and) encouraging excessive consumption"
Monopoly power versus purchasing power
The discipline of economicsEconomics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
is largely a study of scarcity
Scarcity
Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...
management. "Absent scarcity and alternative uses of available resources, there is no economic problem
Economic problem
The economic problem, sometimes called the basic, central or fundamental economic problem, is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs...
". In this regard, many theories of Economic Democracy hold that conditions of scarcity are artificially maintained by corporate structures
Corporate finance
Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks...
that confine abundance to an exclusively entitled minority. In this view, socio-economic imbalance stems not from a failure to manage limited resources in a world of scarcity, but from mismanagement of virtually unlimited abundance and prosperity. In his book Labor and Other Capital (1849), American businessman, Edward Kellogg (1790–1858), said that:
- "Money power is not only the most governing and influential, but it is also the most unjust and deceitful of all earthly powers. It entails upon millions excessive toil, poverty and want, while it keeps them ignorant of the cause of their sufferings; for, with their tacit consent, it silently transfers a large share of their earnings into the hands of others, who have never lifted a finger to perform any productive labor."
While he considers these functions a public wrong, Kellogg also asserts it is the responsibility of the public to find and implement a remedy. Generally considered monopoly power
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
, this "public wrong" is viewed by many as the most influential factor in artificial scarcity
Artificial scarcity
Artificial scarcity describes the scarcity of items even though the technology and production capacity exists to create an abundance. The term is aptly applied to non-rival resources, i.e. those that do not diminish due to one person's use, although there are other resources which could be...
. In this regard, Henry George
Henry George
Henry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "single tax" on land...
further suggests:
- "There is in reality no conflict between labor and capital; the true conflict is between labor and monopoly... Abolish the monopoly that forbids men to employ themselves and capital could not possibly oppress labor... [R]emove the cause of that injustice which deprives the laborer of the capital his toil creates and the sharp distinction between capitalist and laborer would, in fact, cease to exist".
While some consider land to be the primary source of wealth, others propose the labor theory of value
Labor theory of value
The labor theories of value are heterodox economic theories of value which argue that the value of a commodity is related to the labor needed to produce or obtain that commodity. The concept is most often associated with Marxian economics...
(first introduced by John Locke
John Locke
John Locke FRS , widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered one of the first of the British empiricists, following the tradition of Francis Bacon, he is equally important to social...
, developed by Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
and later Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
), arguing that labor is the fundamental source of value. In these terms, "money is first, and foremost, a contract against another person’s labor. Except for wealth produced by nature, value is properly a measure of the time and quality of all productive labor spent producing a product or service. If the difference between the payment received for productive labor and the price paid by the consumer for a product or service is greater than fair value for expediting that trade, either the producer was underpaid, the final consumer was overcharged, or both. When intermediaries underpay producers or overcharge consumers, they are siphoning away the production of the labors of one or the other, or both."
For example, many analysts consider invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
a "more or less costless store of knowledge, captured by monopoly capital and protected in order to make it secret and a 'rare and scarce commodity', for sale at monopoly prices. So far as invention is concerned, a price is put on them not because they are scarce but in order to make them scarce to those who want to use them." Patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
monopolies capitalize stock values far above tangible labor value. The difference between labor-value and monopoly-value is transferred to consumers in the form of higher prices, and collected as "profit" by intermediaries who have contributed nothing to earn it.
Under such conditions, analysts generally agree that society does not currently earn enough to buy what the economy produces. The difference between earnings and prices is typically appropriated by industrial and banking centers of capital through monopoly control of finance and other market resources. Such exclusive entitlement tends to artificially impose conditions of economic scarcity upon the majority of the population. While the accelerating advance of technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
, developed and maintained by labor, tends to generate a virtually unlimited abundance, this process also drives wages down as workers are replaced by machines, ironically minimizing the purchasing power of workers in the market. In June 2006, investment bank, Goldman Sachs, reported: "The most important contribution to the higher profit margins over the past five years has been a decline in Labor's share of national income."
Enclosure of the commons
The term "land" typically denotes the "universe of natural opportunities" or "public utilities", generally known as the commonsCommon land
Common land is land owned collectively or by one person, but over which other people have certain traditional rights, such as to allow their livestock to graze upon it, to collect firewood, or to cut turf for fuel...
. Artificially restricted access of labor to common resources is generally considered monopoly or enclosure of the commons
Enclosure
Enclosure or inclosure is the process which ends traditional rights such as mowing meadows for hay, or grazing livestock on common land. Once enclosed, these uses of the land become restricted to the owner, and it ceases to be common land. In England and Wales the term is also used for the...
. Due to the economic imbalance inherently imposed, such monopoly structures tend to be centrally dictated by imperial law, and must be maintained by military force, unequal trade agreements, or both.
In 1911, American journalist Ambrose Bierce
Ambrose Bierce
Ambrose Gwinnett Bierce was an American editorialist, journalist, short story writer, fabulist and satirist...
defined "land" as:
- "A part of the earth's surface, considered as property. The theory that land is property subject to private ownership and control is the foundation of modern society.... Carried to its logical conclusion, it means that some have the right to prevent others from living; for the right to own implies the right exclusively to occupy; and in fact laws of trespass are enacted wherever property in land is recognized. It follows that if the whole area of terra firma is owned by A, B and C, there will be no place for D, E, F and G to be born, or, born as trespassers, to exist".
In The Servile State (1912), Hilaire Belloc
Hilaire Belloc
Joseph Hilaire Pierre René Belloc was an Anglo-French writer and historian who became a naturalised British subject in 1902. He was one of the most prolific writers in England during the early twentieth century. He was known as a writer, orator, poet, satirist, man of letters and political activist...
referred to the Enclosures Movement
Enclosure
Enclosure or inclosure is the process which ends traditional rights such as mowing meadows for hay, or grazing livestock on common land. Once enclosed, these uses of the land become restricted to the owner, and it ceases to be common land. In England and Wales the term is also used for the...
when he said, "England was already captured by a wealthy oligarchy
Oligarchy
Oligarchy is a form of power structure in which power effectively rests with an elite class distinguished by royalty, wealth, family ties, commercial, and/or military legitimacy...
before the series of great industrial
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
discoveries began". If you sought the accumulated wealth preliminary to launching new industry
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
, "you had to turn to the class which had already monopolized the bulk of the means of production in England. The rich men alone could furnish you with those supplies".
When Adam Smith wrote The Wealth of Nations in 1776, the dominant form of business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
was partnership
Partnership
A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace...
, in which regional groups of co-workers ran co-owned businesses. From this perspective, many considered the corporate model – stock sold to strangers—inherently prone to fraud. While numerous scandals historically support this dim view of corporate policy, small partnerships could not possibly compete with the aggregate capital generated by corporate economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
. According to Peter Barnes
Peter Barnes (entrepreneur)
Peter Barnes is an American entrepreneur, environmentalist, and journalist.-Early life:Barnes grew up in New York City. He earned a B.A. in history from Harvard University and an M.A. in government from Georgetown.-Journalist:...
, author of Capitalism 3.0, the greatest advantage of corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s over any other business model is their ability to raise capital from strangers. In this regard, corporations are aided by laws that limit stockholders’ liability to the amounts they have invested.
In A Preface To Economic Democracy, Robert A. Dahl
Robert A. Dahl
Robert Alan Dahl , is the Sterling Professor emeritus of political science at Yale University, where he earned his Ph.D. in political science in 1940. He is past president of the American Political Science Association...
suggests that agrarian
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
economy and society in the early United States "underwent a revolutionary
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
transformation into a new system of commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
and industrial
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
capitalism that automatically generated vast inequalities
Economic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...
of wealth, income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...
, status
Social status
In sociology or anthropology, social status is the honor or prestige attached to one's position in society . It may also refer to a rank or position that one holds in a group, for example son or daughter, playmate, pupil, etc....
, and power
Economic power
There is no agreed-upon definition of power in economics. At least five definitions of power have been used:*Purchasing power, i.e., the ability of any amount of money to buy goods and services. Those with more assets, or, more correctly, net worth, have more power of this sort...
." Dahl claims that such inequalities result from the "liberty
Liberty
Liberty is a moral and political principle, or Right, that identifies the condition in which human beings are able to govern themselves, to behave according to their own free will, and take responsibility for their actions...
to accumulate unlimited economic resources
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
and to organize economic activity into hierarchically
Hierarchy
A hierarchy is an arrangement of items in which the items are represented as being "above," "below," or "at the same level as" one another...
governed enterprises."
The rise of corporations
The concept of the corporation reaches back to Roman times. However, according to author Greg MacLeod, "the modern business corporation evolved radically from its ancient roots into a form with little relation to the purpose as understood by historians of law." John Davis, a legal historian, notes that the precursor of the business corporation was the first monastery established in the sixth century, the purpose of which was to serve society. Most business corporations before 1900 developed in Britain, where they were established by royal charter, with the expectation of a contribution to society. Incorporation was a privilege granted in return for service to the crown or the nation. MacLeod goes on to say:- "A corporation is considered by the law to exist as a legal person. In the Middle Ages it was called a “persona ficta”. This is a very useful way of looking at a business corporation, because it suggests correctly that the corporate person has a certain personality. It has duties and responsibilities vested unto it by the legitimate government or society that fostered it. The corporate person receives great benefits from society – and, in return, it must exercise great responsibilities. One of the most basic responsibilities is job creation, a fundamental need in any society."
By the mid-nineteenth century, however, corporations could live forever, engage in any legal activity, and merge with or acquire other corporations. In 1886, the U.S. Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
legally recognized corporations as “person
Person
A person is a human being, or an entity that has certain capacities or attributes strongly associated with being human , for example in a particular moral or legal context...
s”, entitled under the Fourteenth Amendment
Fourteenth Amendment to the United States Constitution
The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868, as one of the Reconstruction Amendments.Its Citizenship Clause provides a broad definition of citizenship that overruled the Dred Scott v...
to the same protections as living citizens
Citizenship
Citizenship is the state of being a citizen of a particular social, political, national, or human resource community. Citizenship status, under social contract theory, carries with it both rights and responsibilities...
. Unlike average citizens, corporations also have large flows of money at their disposal. With this money they hire lobbyists
Lobbying
Lobbying is the act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies. Lobbying is done by various people or groups, from private-sector individuals or corporations, fellow legislators or government officials, or...
, donate copiously to politician
Politician
A politician, political leader, or political figure is an individual who is involved in influencing public policy and decision making...
s, and sway public opinion
Public opinion
Public opinion is the aggregate of individual attitudes or beliefs held by the adult population. Public opinion can also be defined as the complex collection of opinions of many different people and the sum of all their views....
.
But, despite Supreme Court ruling, the modern corporation is not a real person. Rather, the publicly traded stock corporation is what Barnes terms an "automaton
Automaton
An automaton is a self-operating machine. The word is sometimes used to describe a robot, more specifically an autonomous robot. An alternative spelling, now obsolete, is automation.-Etymology:...
", explicitly designed to maximize return to an elite minority
Elite
Elite refers to an exceptional or privileged group that wields considerable power within its sphere of influence...
of stock owners. A corporation never sleeps or slows down. It externalizes as many costs as possible, and never reaches an upper limit of profitability, because no such limit has yet been established. As a result, corporations keep getting larger and more powerful. In 1955, sales of the Fortune 500
Fortune 500
The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks the top 500 U.S. closely held and public corporations as ranked by their gross revenue after adjustments made by Fortune to exclude the impact of excise taxes companies collect. The list includes publicly and...
accounted for one-third of U.S. gross domestic product. By 2004 they commanded two-thirds. In other words, these few hundred corporations enveloped not only the commons but also millions of smaller firms organized as partnerships or proprietorships
Sole proprietorship
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits and has unlimited responsibility for...
.
Overall, corporations have established a homogeneous global playing field around which they can freely move raw materials, labor, capital, finished products, tax-paying obligations, and profits. Thus, corporate franchise has become a perpetual grant of sovereignty
Sovereignty
Sovereignty is the quality of having supreme, independent authority over a geographic area, such as a territory. It can be found in a power to rule and make law that rests on a political fact for which no purely legal explanation can be provided...
, including immortality
Immortality
Immortality is the ability to live forever. It is unknown whether human physical immortality is an achievable condition. Biological forms have inherent limitations which may or may not be able to be overcome through medical interventions or engineering...
, self-government
Self-governance
Self-governance is an abstract concept that refers to several scales of organization.It may refer to personal conduct or family units but more commonly refers to larger scale activities, i.e., professions, industry bodies, religions and political units , up to and including autonomous regions and...
, and limited liability
Limited liability
Limited liability is a concept where by a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. If a company with limited liability is sued, then the plaintiffs are suing the company, not its...
. By the end of the twentieth century, corporate power—both economic and political – stretched worldwide. International agreements, promoted by the United States, not only lowered tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s but extended corporate property rights
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
and reduced the ability of sovereign nations to regulate corporations differently. David Schweickart submits that such "hypermobility of capital" generates economic and political insecurity around the globe. "If the search for lower wages comes to dominate the movement of capital, the result will be not only a lowering of worldwide wage disparities, but also a lowering of total global income."
At the domestic level, inequities maintained by corporate imperialism tend to result in the large-scale debt, unemployment, and poverty characteristics of economic recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
and depression
Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....
. According to Jack Rasmus, author of The War At Home and The Trillion Dollar Income Shift, income inequality in contemporary America is an increasing relative share of income for corporations and the wealthiest 1-percent of households while shares of that income stagnate and decline for 80-percent of the United States workforce. After rising steadily for three decades after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, the standard of living for most American workers has sharply declined between the mid-1970s to the present. Rasmus likens the widening income gap in contemporary American society to the decade leading up to the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
, estimating "well over $1-trillion in income is transferred annually from the roughly 90-million working class families in America to corporations and the wealthiest non-working class households. While a hundred new billionaires were created since 2001, real weekly earnings for 100 million workers are less in 2007 than in 1980 when Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
took office".
According to Rasmus and other analysts, this "quarter century pay freeze", imposed by rapidly increasing control of wealth by the very rich, has resulted in innumerable negative externalities:
- "For the first time since the U.S. government began to collect the data in 1947, wages and salaries no longer constitute more than half of total national income. In contrast, corporate profits are at their highest levels since World War II, having risen double digits every quarter in the last three and a half years alone and 21.3% in the most recent year, 2005, according to Dow-Jones 'Market Watch'. Corporate profit margins are higher than they have been in more than half a century, according to Merrill Lynch economist, David Rosenberg. After tax profits are now equal to 8.5% of the U.S. Gross Domestic Product -- that's more than a trillion dollars -- and the highest since the end of World War II in 1945."
Imperialism
Generally considered the forceful extension of a nation's authority by territorial gain or by the establishment of economic and/or political dominance over other nations, some view imperialism as an advanced stage of capitalism. The merging of banks and industrial cartels give rise to finance capital, which is then exported (rather than goods) in pursuit of greater profits than the home market can offer. Political and financial power is divided amongst international monopolist firms and European states, colonizing large parts of the world in support of their businesses. According to analyst, Michael Parenti, imperialism is "the process whereby the dominant politico-economic interests of one nation expropriate for their own enrichment the land, labor, raw materials, and markets of another people." Parenti says imperialism is older than capitalism. But, given its expansionist nature, capitalism has little inclination to stay home. While he concedes imperialism is not typically recognized as a legitimate concept with regard to the United States, Parenti goes on to argue:- "Emperors and conquistadors were interested mostly in plunder and tribute, gold and glory. Capitalist imperialism differs from these earlier forms in the way it systematically accumulates capital through the organized exploitation of labor and the penetration of overseas markets. Capitalist imperialism invests in other countries, transforming and dominating their economies, cultures, and political life, integrating their financial and productive structures into an international system of capital accumulation."
On a global scale, wealthy developed nations tend to impede or prohibit the economic and technological advancement of weaker developing countries through the military force, martial law, and inequitable practices of trade that typically characterize colonialism
Colonialism
Colonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...
. Rhetorically termed by some as a "tragedy of the commons
Tragedy of the commons
The tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource, even when it is clear that it is not in anyone's long-term interest for this...
", "survival of the fittest", or "might makes right", proponents of Economic Democracy generally attribute such economic crises to the imbalances imposed by corporate imperialism. In his book, Economic Democracy: The Political Struggle for the 21st Century, J.W. Smith
J. W. Smith
J. W. Smith is an independent economist with a PhD in Political Economics from Union Institute and University, Cleveland, Ohio. Smith has written six books on the elimination of poverty and war, and Smith also founded and presides over the Institute for Economic Democracy to promote theories and...
examines the economic basis for the history of imperial civilization. Just as cities in the Middle Ages
Middle Ages
The Middle Ages is a periodization of European history from the 5th century to the 15th century. The Middle Ages follows the fall of the Western Roman Empire in 476 and precedes the Early Modern Era. It is the middle period of a three-period division of Western history: Classic, Medieval and Modern...
monopolized the means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
by conquering and controlling the sources of raw materials
Material
Material is anything made of matter, constituted of one or more substances. Wood, cement, hydrogen, air and water are all examples of materials. Sometimes the term "material" is used more narrowly to refer to substances or components with certain physical properties that are used as inputs to...
and countryside markets, Smith claims that contemporary centers of capital now control our present world through private monopoly of public resources sometimes known as "the commons". Through inequalities of trade, developing countries are overcharged for import of manufactured goods and underpaid for raw material exports, as wealth is siphoned from the periphery of empire and hoarded at the imperial-centers-of-capital:
- "Over eight-hundred years ago the powerful of the city-states of Europe learned to control the resources and markets of the countryside by raiding and destroying others’ primitive industrial capital, thus openly monopolizing that capital and establishing and maintaining extreme inequality of pay. This low pay siphoned the wealth of the countryside to the imperial-centers-of-capital. The powerful had learned to plunder-by-trade and have been refining those skills ever since".
Like other financial empires in history, Smith claims the contemporary model forms alliances necessary to develop and control wealth, as peripheral nations remain impoverished providers of cheap resources for the imperial-centers-of-capital. Belloc estimated that, during the British Enclosures, "perhaps half of the whole population was proletarian
Proletariat
The proletariat is a term used to identify a lower social class, usually the working class; a member of such a class is proletarian...
", while roughly the other "half" owned and controlled the means of production. Now, under modern Capitalism, J.W. Smith claims fewer than 500 people possess more wealth than half of the earth’s population, as the wealth of 1/2 of 1-percent of the United States population roughly equal that of the lower 90-percent.
According to many analysts, the United States has maintained some measure of stability by economically dominating of the rest of the world as a means of filling the gap between production and consumption. Beginning with massive loans to European combatants during World War I, and continuing through the lend-lease program of World War II, U.S. domination of trade reached its peak through economic recovery measures following those wars. Though forming the basis for U.S. prosperity during the 1950s and 1960s, U.S trade domination was exhausted by the mid-1970s, when the United States implemented a policy known as dollar hegemony
Dollar hegemony
Dollar hegemony is the hypothesized monetary hegemony of the US dollar in the global economy. Henry C.K. Liu popularized the term in the article "Dollar Hegemony has to go" in Asia Times, April 11, 2002...
, intended to stabilize the economy.
With a consistently negative trade balance over the decades since, some suggest the United States has compensated for the gap between purchasing power and prices with a wide variety of debt in all sectors of the economy. In this process, many analysts claim that dollar hegemony has flooded the world with U.S. currency, loans, or debt instruments to support U.S. fiscal and trade deficits, pay for extraordinary levels of U.S. resource utilization, induce foreign governments to purchase U.S. armaments, ensure the allegiance of foreign governing elites, and maintain foreign economies in subservience through World Trade Organization and International Monetary Fund trade and lending policies.
Alternative models
With regard to closing the gap between production and purchasing power, Dr. Martin Luther King Jr.Martin Luther King, Jr.
Martin Luther King, Jr. was an American clergyman, activist, and prominent leader in the African-American Civil Rights Movement. He is best known for being an iconic figure in the advancement of civil rights in the United States and around the world, using nonviolent methods following the...
maintains:
- "The problem indicates that our emphasis must be two-fold. We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available."
But many analysts argue that both full employment and guaranteed basic income are impossible under the restrictions of the current economic system for two primary reasons: First, unemployment is an essential feature of capitalism, not an indication of systemic failure. Second, while capitalism thrives under polyarchy
Polyarchy
In modern political science, the term polyarchy was introduced by Robert A. Dahl, now emeritus professor at Yale University, to describe a form of government in which power is vested in three or more persons. This form of government was first implemented in the United States and was gradually...
, it is not compatible with genuine democracy. Suggesting that these "democratic deficits" significantly impact the management of both workplace and new investment, some proponents of Economic Democracy favor the creation and implementation of a new economic model over reform of the existing one.
According to most analysts, a serious critique of any problem cannot be content to merely note the negative features of the existing model
Scientific modelling
Scientific modelling is the process of generating abstract, conceptual, graphical and/or mathematical models. Science offers a growing collection of methods, techniques and theory about all kinds of specialized scientific modelling...
. We must specify precisely not only the defining characteristics of the existing model, but also the structural features of an alternative. Such a specification is necessarily complicated, since a modern economy is a complicated affair. "But if we want to do more than simply denounce the evils of capitalism, we must confront the claim that 'there is no alternative' -- by proposing one."
Hungarian historian Karl Polanyi
Karl Polanyi
Karl Paul Polanyi was a Hungarian philosopher, political economist and economic anthropologist known for his opposition to traditional economic thought and his book The Great Transformation...
suggests that the drive of market economies should be subordinate to larger societal needs. He states that human-beings, the source of labor, do not reproduce for the sole purpose of providing the market with workers. In The Great Transformation Polanyi says that, while modern states and market economies tend to grow under capitalism, both are mutually interdependent for functional development. In order for market economies to be truly prosperous, he claims social constructs must play an essential role. With the term "fictitious commodities", Polanyi claimed that land
Land (economics)
In economics, land comprises all naturally occurring resources whose supply is inherently fixed. Examples are any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum. Natural resources are fundamental to...
, labor, and money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
are all commodified under capitalism, though the inherent purpose of these items was never intended "for sale". He says natural resources
Natural Resources
Natural Resources is a soul album released by Motown girl group Martha Reeves and the Vandellas in 1970 on the Gordy label. The album is significant for the Vietnam War ballad "I Should Be Proud" and the slow jam, "Love Guess Who"...
are "God-given", money is a bookkeeping entry validated by law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, and labor is a human prerogative, not a personal obligation to market economies.
Dr. Martin Luther King Jr. claims "Communism
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
forgets that life is individual. Capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
forgets that life is social, and the Kingdom of Brotherhood is found neither in the thesis of Communism nor the antithesis of Capitalism but in a higher synthesis. It is found in a higher synthesis that combines the truths of both". Trade unionist and social activist, Allan Engler, argues further that economic democracy is the working-class alternative to capitalism. In his book, "Economic Democracy", Engler states:
- "When economic democracy -- a world of human equality, democracy and cooperation -- is the alternative, capitalism will no longer be seen as a lesser evil. When the working class, not a revolutionary party, is the agency of social transformation, change will be based on workplace organization, community mobilizations and democratic political action. The goal will be to transform capitalism into economic democracy through gains and reforms that improve living conditions while methodically replacing wealth-holders' entitlement with human entitlement, capitalist ownership with community ownership and master-servant relations with workplace democracy."
Assuming that "democracy is not just a political value, but one with profound economic implications", David Schweickart
David Schweickart
David Schweickart is an American mathematician and philosopher. He holds a BS in Mathematics from University of Dayton, a PhD in Mathematics from University of Virginia, and a PhD in Philosophy from Ohio State University. He currently is Professor of Philosophy at Loyola University Chicago.He has...
suggests "the problem is not to choose between plan
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
and market
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
, but to integrate these institutions into a democratic framework". According to Schweickart, economic democracy, like capitalism, can be defined in terms of three basic features:
- Worker Self-Management: Each productive enterprise is controlled democratically by its workers.
- Social Control of Investment: Funds for new investment are generated by a capital assets tax and are returned to the economy through a network of public investment banks."
- The Market: These enterprises interact with one another and with consumers in an environment largely free of governmental price controls. Raw materials, instruments of production and consumer goods are all bought and sold at prices largely determined by the forces of supply and demand.
In real-world practice, Schweickart concedes economic democracy will be more complicated and less "pure" than his abstract model. However, to grasp the nature of the system and to understand its essential dynamic, it is important to have a clear picture of the basic structure. Capitalism is characterized by private ownership of productive resources, the market, and wage labor. The Soviet economic model abolished private ownership of productive resources (by collectivizing all farms and factories) and the market (by instituting central planning), but retained wage labor.
Proposed models for economic democracy generally begin with abolishing wage labor. Schweickart's model goes further to abolish private ownership of productive resources. Other proposals recommend abolishing the market, as well.
Worker self-management
In his book, "The Democratic Firm", veteran Economic Advisor for the World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, David P. Ellerman
David Ellerman
David P. Ellerman is a philosopher and author who works in the fields of economics and political economy, social theory and philosophy, and in mathematics...
, states:
- "In the world today, the main form of enterpriseEnterpriseEnterprise may refer to:-Economics and business:* A business* A company* Entrepreneurship, the practice of starting new organizations, particularly new businesses* Enterprise Architecture...
is based on rentingRentingRenting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...
human beings (privatelyPrivatePrivate may refer to:* Private , a military rank* Private , a U.S. step rocket* Private , a Denmark-based band* Private , a 2004 Italian film* Private , a young-adult book series launched in 2006...
or publicly). Our task is to construct the alternative. In the alternative type of firm, employmentEmploymentEmployment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
by the firmFirmA firm is a business.Firm or The Firm may also refer to:-Organizations:* Hooligan firm, a group of unruly football fans* The Firm, Inc., a talent management company* Fair Immigration Reform Movement...
is replaced with membership in the firm. Economic democracy requires the abolitionAbolitionAbolish means to put an end to something or to stop something.Abolition may refer to:*Abolitionism *Abolition of death penalty *Abolition of monarchy*Prison abolition movement...
of the employment relation, not the abolition of private propertyPrivate propertyPrivate property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...
. Democracy can be married with private property in the workplaceWorkplaceThe workplace is a place where someone works.*Toxic workplace*Workplace aggression: A specific type of aggression that occurs in the workplace....
; the result of the union is the democratic worker-owned firmFirmA firm is a business.Firm or The Firm may also refer to:-Organizations:* Hooligan firm, a group of unruly football fans* The Firm, Inc., a talent management company* Fair Immigration Reform Movement...
."
Ellerman maintains that the contract to buy and sell labor services is inherently invalid because labor, in the sense of responsible human action, is de facto
De facto
De facto is a Latin expression that means "concerning fact." In law, it often means "in practice but not necessarily ordained by law" or "in practice or actuality, but not officially established." It is commonly used in contrast to de jure when referring to matters of law, governance, or...
non-transferable. The rights to the positive and negative fruits of one’s labor are thus inalienable rights. In questions of governance
Governance
Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...
(as opposed to production
Production (economics)
In economics, production is the act of creating 'use' value or 'utility' that can satisfy a want or need. The act may or may not include factors of production other than labor...
), the emphasis is on decision-making (as opposed to responsibility
Responsibility
Responsibility may refer to:* Collective responsibility** Cabinet collective responsibility, a constitutional Convention in Governments using the Westminster System* Corporate responsibility** Corporate social responsibility...
). But the basic facts are the same. Decision-making capacity is de facto inalienable. A person cannot in fact alienate his or her decision-making capacity just as he or she cannot alienate de facto responsibility. 'Deciding to do as one is told' is only another way of deciding what to do.
Thus, Ellerman concludes, it is not private property that needs to be abolished, but the employment contract
Employment contract
A contract of employment is a category of contract used in labour law to attribute right and responsibilities between parties to a bargain.On the one end stands an "employee" who is "employed" by an "employer". It has arisen out of the old master-servant law, used before the 20th century...
. In other words, "a firm can be socialized and yet remain 'private' in the sense of not being government-owned."
In the proposals of both Ellerman and Schweickart, each productive enterprise is controlled by those who work there. Workers are responsible for the operation of the facility, including organization, discipline, production techniques, and the nature, price, and distribution of products. Decisions concerning proceeds distribution are made democratically. Problems of authority delegation are solved by democratic representation. Management is not appointed by the State nor elected by the community at large, nor selected by a board of directors elected by stockholders. Whatever internal structures are put in place, ultimate authority rests with the enterprise's workers, one-person, one-vote.
In David Schweickart’s model, however, workers control the workplace, but they do not "own" the means of production. Productive resources are regarded as the collective property of the society. Workers have the right to run the enterprise, to use its capital assets as they see fit, and to distribute among themselves the whole of the net profit from production. In Schweickart's model, societal "ownership" of the enterprise manifests itself in two ways:
- All firms must pay a tax on their capital assetCapital assetThe term capital asset has three unrelated technical definitions, and is also used in a variety of non-technical ways.*In financial economics, it refers to any asset used to make money, as opposed to assets used for personal enjoyment or consumption...
s, which goes into society's investment fund. In effect, workers rent their capital assets from society.
- Firms are required to preserve the value of the capital stock entrusted to them. This means that a depreciationDepreciationDepreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....
fund must be maintained. Money must be set aside to repair or replace existing capital stock. This money may be spent on whatever capital replacements or improvements the firm deems fit, but it may not be used to supplement workers' incomes.
If a firm is unable to generate even the nationally specified minimum per-capita income, then it must declare bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
. Movable capital will be sold off to pay creditors. The workers must seek employment elsewhere. In such economic difficulty, workers are free to reorganize the facility, or to leave and seek work elsewhere. They are not free to sell off their capital stocks and use the proceeds as income. A firm can sell off capital stocks and use the proceeds to buy additional capital goods. Or, if the firm wishes to contract its capital base so as to reduce its tax and depreciation obligations, it can sell off some of its assets, but in this case proceeds from the sale go into the national investment fund, not to the workers, since these assets belong to society as a whole.
Social control of investment
Under Schweickart’s model of Economic Democracy, a flat-rate taxFlat tax
A flat tax is a tax system with a constant marginal tax rate. Typically the term flat tax is applied in the context of an individual or corporate income that will be taxed at one marginal rate...
on the capital assets of all productive enterprises replaces all other business taxes. This "capital assets tax" is collected by the central government, then invested back into the economy, assisting those firms needing funds for purposes of productive investment. These funds are dispersed throughout society, first to regions and communities on a per capita
Per capita
Per capita is a Latin prepositional phrase: per and capita . The phrase thus means "by heads" or "for each head", i.e. per individual or per person...
basis, then to public banks in accordance with past performance, then to those firms with profitable project
Project
A project in business and science is typically defined as a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim. Projects can be further defined as temporary rather than permanent social systems that are constituted by teams...
proposals. Profitable projects that promise increased employment are favored over those that do not. At each level, national, regional and local, legislatures decide what portion of the investment fund coming to them is to be set aside for public capital expenditures, then send down the remainder to the next lower level. Associated with most banks are entrepreneurial divisions, which promote firm expansion and new firm creation. For large (regional or national) enterprises that need access to additional capital, it would be appropriate for the network of local investment banks to be supplemented by regional and national investment banks. These too would be public institutions that receive their funds from the national investment fund.
Economic Democracy does not depend on private savings or private investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
for its economic development
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...
. In Schweickart's model, banks are public, not private, institutions that make grants
Grant (money)
Grants are funds disbursed by one party , often a Government Department, Corporation, Foundation or Trust, to a recipient, often a nonprofit entity, educational institution, business or an individual. In order to receive a grant, some form of "Grant Writing" often referred to as either a proposal...
, not loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s, to business enterprises. According to Schweickart, these grants do not represent "free money", since an investment grant counts as an addition to the capital assets of the enterprise, upon which the capital-asset tax must be paid. Thus the capital assets tax functions as an interest rate. A bank grant is essentially a loan requiring interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
payments but no repayment of principal
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
.
While an economy of worker-self-managed enterprises might tend toward lower unemployment than under capitalism, Schweickart says it does not guarantee full employment
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
. Social control of investment, under this model of Economic Democracy, serves to mitigate this defect. If the market sector of the economy does not provide sufficient employment, the public sector will provide all but the most severely disabled with the opportunity to engage in productive labor. The original formulation of the U.S. Humphrey-Hawkins Act of 1978
Humphrey-Hawkins Full Employment Act
The Full Employment and Balanced Growth Act , is an act of legislation by the United States government.-Impetus and strategy:...
suggests that full employment can be assured in a market economy only if the government functions as the employer-of-last-resort. In Economic Democracy, the government assumes this role, something a capitalist government cannot do. Thus, social control of investment also serves to block patterns of cyclical, recessionary unemployment typical of capitalism.
The market
According to David Schweickart, Economic Democracy is a market economyMarket economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
, at least insofar as the allocation of consumer and capital goods is concerned. Firms buy raw materials and machine
Machine
A machine manages power to accomplish a task, examples include, a mechanical system, a computing system, an electronic system, and a molecular machine. In common usage, the meaning is that of a device having parts that perform or assist in performing any type of work...
ry from other firms and sell their products to other enterprises or consumers. "Prices are largely unregulated
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
except by supply and demand, although in some cases price controls or price supports might be in order -- as they are deemed in order in most real-world forms of capitalism."
Without a price mechanism sensitive to supply and demand, it is extremely difficult for a producer or planner to know what and how much to produce, and which production and marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
methods are the most efficient. It is also extremely difficult in the absence of a market to design a set of incentives that will motivate producers to be both efficient and innovative
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
. Market competition
Competition (economics)
Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services...
resolves these problems, to a significant if incomplete degree, in a non-authoritarian
Authoritarianism
Authoritarianism is a form of social organization characterized by submission to authority. It is usually opposed to individualism and democracy...
, non-bureaucratic
Bureaucracy
A bureaucracy is an organization of non-elected officials of a governmental or organization who implement the rules, laws, and functions of their institution, and are occasionally characterized by officialism and red tape.-Weberian bureaucracy:...
fashion.
In Schweikart's view, centralized planning is inherently flawed, and schemes for decentralized non-market planning are unworkable. As theory predicts and the historical record confirms, central planning is both inefficient and conducive to an authoritarian concentration of power. This is one of the great lessons to be drawn from the Soviet experience
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
.
Since enterprises in Economic Democracy buy and sell on the market, they strive to make a profit. However, the "profit" in a worker-run firm is not the same as capitalist profit. It is calculated differently. In a market economy firms, whether capitalist or worker-self-managed, strive to maximize the difference between total sales and total costs. But for a capitalist firm, labor is counted as a cost. For a worker-run enterprise it is not. In Economic Democracy labor is not another "factor of production" technically on par with land and capital. Labor is the residual claimant. Workers get all that remains, once non-labor costs, including depreciation set asides and the capital assets tax, have been paid.
Because of the way workplaces and the investment mechanism are structured, Schweickart's model aims to facilitate fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
, not free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
, between nations. Under Economic Democracy, there would be virtually no cross-border capital flows. Enterprises themselves will not relocate abroad, since they are democratically controlled by their own workers. Finance capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
will also stay mostly at home, since funds for investment are publicly generated and are mandated by law to be reinvested domestically. "Capital doesn't flow into the country, either, since there are no stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
s nor corporate bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
nor businesses to buy. The capital assets of the country are collectively owned -- and hence not for sale."
According to Michael Howard, "in preserving commodity exchange, a market socialism
Market socialism
Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
has greater continuity with the society it displaces than does nonmarket socialism, and thus it is more likely to emerge from capitalism as a result of tendencies generated within it." But Howard also suggests, "one argument against the market in socialist society has been that it blocks progress toward full communism or even leads back to capitalism". Thus, nonmarket versions of economic democracy have also been proposed.
Inclusive democracy
Economic democracy is described as an integral component of an inclusive democracyInclusive Democracy
Inclusive Democracy is a political theory and political project that aims for direct democracy, economic democracy in a stateless, moneyless and marketless economy, self-management and ecological democracy...
, in Towards An Inclusive Democracy as a stateless, moneyless and marketless economy that precludes private accumulation of wealth and the institutionalization of privileges for some sections of society, without relying on a mythical post-scarcity state of abundance, or sacrificing freedom of choice.
The proposed system aims to meet the basic needs of all citizens (macro-economic decisions), and secure freedom of choice (micro-economic decisions). Therefore, the system consists of two basic elements: (1) democratic planning, which involves a feedback process between workplace assemblies, demotic assemblies and the confederal assembly, and (2) an artificial market using personal vouchers
Labour voucher
Labour vouchers are a device proposed to govern demand for goods in some models of socialism, much as money does under capitalism.-Outline:...
, which ensures freedom of choice
Choice
Choice consists of the mental process of judging the merits of multiple options and selecting one of them. While a choice can be made between imagined options , often a choice is made between real options, and followed by the corresponding action...
but avoids the adverse effects of real markets. Although some have called this system “a form of money based on the labour theory of value”, it is not a money model since vouchers cannot be used as a general medium of exchange and store of wealth.
Another distinguishing feature of inclusive democracy is its distinction between basic and non-basic needs. Remuneration is according to need for basic needs, and according to effort for non-basic needs. Inclusive democracy is based on the principle that meeting basic needs is a fundamental human right which is guaranteed to all who are in a physical condition to offer a minimal amount of work. By contrast, participatory economics
Participatory economics
Participatory economics, often abbreviated parecon, is an economic system proposed primarily by activist and political theorist Michael Albert and radical economist Robin Hahnel, among others. It uses participatory decision making as an economic mechanism to guide the production, consumption and...
guarantees that basic needs are satisfied only to the extent they are characterized public goods or are covered by compassion and by a guaranteed basic income for the unemployed and those who cannot work. Although many advocates of participatory economics and Participism
Participism
Participism is a libertarian socialist political philosophy consisting of two independently created economic and political systems: participatory economics or "parecon" and participatory politics or "parpolity"...
have contested this.
Within the inclusive democracy project, economic democracy is the authority of demos (community) in the economic sphere — which requires equal distribution of economic power. Therefore, all 'macro' economic decisions, namely, decisions concerning the running of the economy as a whole (overall level of production, consumption and investment, amounts of work and leisure implied, technologies to be used, etc.) are made by the citizen body collectively and without representation. However, "micro" economic decisions at the workplace or the household levels are made by the individual production or consumption unit through a proposed system of vouchers.
As with the case of direct democracy, economic democracy today is only feasible at the level of the confederated demoi. It involves the ownership and control of the means of production by the demos. This is radically different from the two main forms of concentration of economic power : capitalist and 'socialist' growth economy. It is also different from the various types of collectivist capitalism, such as workers' control and milder versions suggested by post-Keynesian social democrats. The demos, therefore, becomes the authentic unit of economic life.
For economic democracy to be feasible, proponents of inclusive democracy suggest three preconditions must be satisfied: Demotic self-reliance, demotic ownership of the means of production, and confederal allocation of resources.
- Demotic self-reliance is meant in terms of radical decentralization and self-reliance, rather than of self-sufficiency.
- Demotic ownership of productive resources is a kind of ownership which leads to the politicization of the economy, the real synthesis of economy and polity. This is so because economic decision making is carried out by the entire community, through the demotic assemblies, where people make the fundamental macro-economic decisions which affect the whole community, as citizens, rather than as vocationally oriented groups (e.g. workers, as e.g. in participatory economics ). At the same time, workers, apart from participating in the demotic decisions about the overall planning targets, would also participate (in the above broad sense of vocationally oriented groups) in their respective workplace assemblies, in a process of modifying/implementing the Democratic Plan and in running their own workplace.
- Confederal allocation of resources is required because, although self-reliance allows many decisions to be made at the community level, much remains to be decided at the regional/national/supra-national level. However, it is delegates (rather than representatives) with specific mandates from the demotic assemblies who are involved in a confederal demotic planning process which, in combination with the proposed system of vouchers, effects the allocation of resources in a confederal inclusive democracy.
Reform agendas
Assuming the most basic requirement for societal prosperity is a healthy, educated, and enterprising population, Economic Democracy seeks to close the growing gap between purchasing powerPurchasing power
Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing...
and productive output. While reform agendas
Reform movement
A reform movement is a kind of social movement that aims to make gradual change, or change in certain aspects of society, rather than rapid or fundamental changes...
tend to critique the existing system and recommend corrective measures, they do not necessarily suggest alternative models to replace the fundamental structures of capitalism; private ownership of productive resources, the market, and wage labor.
Social Credit
Rather than an economic shortfall, many analysts consider the gap between production and purchasing power a social dividend. In this view, credit is a public utilityPublic utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
rather than debt to financial centers. Once reinvested in human productive potential, the surplus
Economic surplus
In mainstream economics, economic surplus refers to two related quantities. Consumer surplus or consumers' surplus is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay...
of societal output could actually increase Gross Domestic Product rather than throttling it, resulting in a more efficient economy, overall. Social Credit
Social Credit
Social Credit is an economic philosophy developed by C. H. Douglas , a British engineer, who wrote a book by that name in 1924. Social Credit is described by Douglas as "the policy of a philosophy"; he called his philosophy "practical Christianity"...
is an economic reform movement that originates from theories developed by Scottish engineer Major C. H. Douglas. His aim to make societal improvement the goal of monetary systems is reflected in the term "Social Credit", and published in his book, entitled Economic Democracy. In this view, the term "economic democracy" does not mean worker control of industry. While technological advancement tends to increase unemployment along with productivity, Douglas suggests that our perspective will determine whether this problem is a "catastrophe" or a "magnificent achievement":
- "The so-called unemployment problem is really a problem of leisure. The problem really is a problem, first of the distribution of purchasing power to those who are not required, and will decreasingly be required, in the industrial system, and secondly, of ensuring that the total purchasing distributed shall always be enough to pay for the goods and services for sale."
A national dividend and a compensated price mechanism are the two most essential components of the Social Credit program proposed by C.H. Douglas to stabilize purchasing power for a democracy of consumers on a national and global scale. While these measure have never been implemented in their purest form, they have provided a foundation for Social Credit policital parties in many countries and for reform agendas that retain the title, "economic democracy".
Credit as a public utility
Utilizing the ideas of Major C.H. Douglas and a monetary reform program based on direct government spending set forth by groups like the American Monetary InstituteAmerican Monetary Institute
The American Monetary Institute is a non-profit charitable trust organized in 1996 for the "independent study of monetary history, theory and reform."...
, veteran Project Manager for the U.S. Treasury Department, Richard C. Cook
Richard C. Cook
Richard C. Cook is a former U.S. federal government analyst, who was instrumental in exposing White House cover-ups regarding the Space Shuttle Challenger disaster of 1986. As a witness to the incident and a participant in the subsequent investigations, Cook provided key documents to The New York...
proposes two general measures, which together he terms, "economic democracy":
- Credit as a public utility: "We should spend sufficient credit into existence to supply the basic operating expenses of government at all levels without recourse to either taxes or borrowing. At least ninety percent of all taxes could be eliminated. The only taxes that should be retained would be those in the form of user fees for infrastructure operations and maintenance and those levied only for dire emergencies. Capital expenses for infrastructure construction at the federal, state, and local levels should be financed through a self-capitalized national infrastructure bank lending at zero-interest. Operating on a national scale, such a bank could begin to rebuild our job base starting at the state and local levels. A public program of direct government expenditures as described herein would be as effective, as timely, far less inflationary, and much cheaper than creating new public debt by borrowing credit created 'out of thin air' by the banking system."
- A national dividend: "The endemic gap between prices and purchasing power in an advanced economic system in reality is the “leisure dividend” that we never received from our amazing producing economy. That gap should now be filled by a non-taxable national dividend of two types. One would be a cash stipend paid to all citizens which would also serve the purpose of eliminating poverty by providing everyone with a basic income guarantee. The remainder of the national dividend would consist of an overall pricing subsidy, whereby a designated proportion of all purchases, including home building expenses, would be rebated to consumers. The average national dividend per person would probably exceed $12,000 per year under today’s economic conditions. It would be a calculated value charged against a government ledger but would be off-budget, with no need to finance it with taxation or borrowing."
While some analysts suggest an economic crisis might be necessary to drive a movement toward large-scale economic democracy., Richard C. Cook argues that "most economic reform programs address symptoms, not causes":
- "Monetary reformMonetary reformMonetary reform describes any movement or theory that proposes a different system of supplying money and financing the economy from the current system.Monetary reformers may advocate any of the following, among other proposals:...
embraces the enormous productivity of modern industrial methods with approval and hope. But it identifies factors in the nature of industrial production at the level of the corporation as creating a chronic state of instability". "The top priority of the reform program would be to use public credit to rebuild the producing economy which has been wrecked by the phony ideology of 'market' economics and the inept and self-serving manipulation of the money supply by the Federal Reserve and the banks."
Cook's critique of finance capitalism avoids any proposal of collectivist
Collectivism
Collectivism is any philosophic, political, economic, mystical or social outlook that emphasizes the interdependence of every human in some collective group and the priority of group goals over individual goals. Collectivists usually focus on community, society, or nation...
solutions as a diagnosis of underlying financial issues. Rather, he affirms the value of "democratic capitalism," combined with a shift to more public control of credit, and suggests a new approach to achieving worldwide prosperity, starting with economic recovery in the United States. Cook's argument stems from prior success in the United States with credit as a public utility, including colonial paper currencies which allowed an emerging American society to monetize the value of its own goods and services, the Greenbacks issued by President Lincoln during the American civil war, and the Reconstruction Finance Corporation (RFC) which moved to recapitalize failing non-Federal Reserve state banks in rural areas and small towns during the Great Depression. While Herbert Hoover's efforts are not remembered as the most popular in U.S. history, Cook credits RFC programs with providing low interest loans to the railroad industry, farmers, exporters, state and local governments, and wartime industries over a period of at least 20-years.
National dividend
Richard C. Cook's proposed national dividend, sometimes known as a Basic Income Guarantee or "BIG", has previously been advocated in the United States by economists, politicians and reformers, including Thomas PaineThomas Paine
Thomas "Tom" Paine was an English author, pamphleteer, radical, inventor, intellectual, revolutionary, and one of the Founding Fathers of the United States...
, Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
, Dr. Martin Luther King Jr., and John Kenneth Galbraith
John Kenneth Galbraith
John Kenneth "Ken" Galbraith , OC was a Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism...
. Friedman originally proposed a negative income tax
Negative income tax
In economics, a negative income tax is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government. Such a system has been discussed by economists but never fully implemented...
to support this system, but then opposed the bill because its revised implementation would have merely supplemented existing tax-structures rather than replacing them. Cook further suggests that racism might have been at the root of BIG's demise in the late 1960s, as "many beneficiaries of the program would have been African-American". But in 2006, the basic income guarantee was again proposed on the national level by State Representative Bob Filner
Bob Filner
Robert Earl Filner is the U.S. Representative for , and previously the 50th, serving since 1993, and Chairman of the House Committee on Veterans' Affairs since 2007. He is a member of the Democratic Party...
(D-CA) as H.R. 5257, supported by author Matthew Rothschild. According to the U.S. Basic Income Guarantee Network:
- "The basic income guarantee (BIG) is a government insured guarantee that no citizen's income will fall below some minimal level for any reason. All citizens would receive a BIG without means test or work requirement. BIG is an efficient and effective solution to poverty that preserves individual autonomy and work incentives while simplifying government social policy. Some researchers estimate that a small BIG, sufficient to cut the poverty rate in half could be financed without an increase in taxes by redirecting funds from spending programs and tax deductions aimed at maintaining incomes."
Moreover, Richard C. Cook suggests existing surplus in United States Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP) could support such a system, as GDP of $12.98-trillion minus $9.21-trillion in purchasing power ("wages") equals a difference of $3.77-trillion. Distributed equally amongst United States citizens, Cook estimates a "National Dividend" of approximately $12,600 could be provided annually to every U.S. citizen. A primary function of monetary reform is to "provide sufficient individual income" -- not merely "create jobs" -- for American workers displaced by technological advancement, outsourcing, and other economic influences beyond their control. Funding of the National Dividend would be drawn from a national credit account, which would include all factors that generate production costs and create new capital assets. The national credit account could also be used for price subsidies to discourage manufacturers from cutting costs by shipping jobs overseas.
Rather than Federal Reserve Note
Federal Reserve Note
A Federal Reserve Note is a type of banknote used in the United States of America. Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing on paper made by Crane & Co. of Dalton, Massachusetts. They are the only type of U.S...
s, circulated only through debt payable to a bank with interest, the National Dividend would be "real money", based on the productive capacity of the economy expressed as GDP. Cook says, "it's important to realize that Social Credit
Social Credit
Social Credit is an economic philosophy developed by C. H. Douglas , a British engineer, who wrote a book by that name in 1924. Social Credit is described by Douglas as "the policy of a philosophy"; he called his philosophy "practical Christianity"...
is not a socialist
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
system. Rather it is 'democratic capitalism,' in contrast to the 'finance capitalism' that has become so damaging". Rooted in the ideals of Social Credit, proposed by C.H. Douglas in the 1920s, Cook explains:
- "The difference between a National Dividend and a basic income guarantee is that the dividend is tied to production and consumption data and may vary from year to year. During years that the dividend falls below a designated threshold, the balance of a basic income guarantee could be provided from tax revenues. But in a highly automated economy such as that of the U.S., the National Dividend would normally be sufficient".
In his book, Capitalism 3.0, Peter Barnes likens a "National Dividend" to the game of Monopoly
Monopoly (game)
Marvin Gardens, the leading yellow property on the board shown, is actually a misspelling of the original location name, Marven Gardens. The misspelling was said to be introduced by Charles Todd and passed on when his home-made Monopoly board was copied by Charles Darrow and thence to Parker...
, where all players start with a fair distribution of financial opportunity to succeed, and try to privatize as much as they can as they move around "the commons". Distinguishing the board game of Monopoly from contemporary real-world business, Barnes claims that "the top 5 percent of the population owns more property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
than the remaining 95 percent", providing the smaller minority with an unfair advantage of approximately "$5-trillion" annually, at the beginning of the game. Contrasting "redistribution" of income (or property) with "predistribution", Barnes argues for "propertizing" (without corporately privatizing) "the commons" to spread ownership universally, without taking wealth from some and giving it to others. His suggested mechanism to this end is the establishment of a "Commons Sector", ensuring payment from the Corporate Sector for "the commons" they utilize, and equitably distributing the proceeds for the benefit of contemporary and future generations of society.
One real-world example of such reform is in the U.S. State of Alaska, where each citizen receives an annual share of the state's oil revenues called, "Alaska Permanent Fund Dividend". Barnes suggests this model could extend to other states and nations because "we jointly own many valuable assets". As corporate pollution of common assets increase, the permits for such pollution would become more scarce, driving prices for those permits up. "Less pollution would equal more revenue", and over time, "trillions of dollars could flow into an American Permanent Fund".
However, none of these proposals aspire to the mandates recommended by Dr. Martin Luther King Jr.:
- Two conditions are indispensable if we are to ensure that the guaranteed income operates as a consistently progressive measure. First, it must be pegged to the median income of society, not the lowest levels of income. To guarantee an income at the floor would simply perpetuate welfare standards and freeze into the society poverty conditions. Second, the guaranteed income must be dynamic; it must automatically increase as the total social income grows. Were it permitted to remain static under growth conditions, the recipients would suffer a relative decline. If periodic reviews disclose that the whole national income has risen, then the guaranteed income would have to be adjusted upward by the same percentage. Without these safeguards a creeping retrogression would occur, nullifying the gains of security and stability.
Moreover, proponents of Economic Democracy generally deem any such reform unlikely under the dominance of contemporary command economies. While Thomas Paine originally recommended a National Dividend to compensate for the brutality of British Enclosures, no such large-scale disbursement has materialized in over 200-years since.
Monopoly power versus public utility
Rather than superficially compensating for legalized inequities, many analysts recommend the "enclosures" themselves—property rights laws—should be either abolished or redefined with particular respect for "the commons". According to J.W. Smith, exclusive titleEntitlement
An entitlement is a guarantee of access to benefits based on established rights or by legislation. A "right" is itself an entitlement associated with a moral or social principle, such that an "entitlement" is a provision made in accordance with legal framework of a society...
to natural resources and technologies should be converted to inclusive conditional titles –- the condition being that society should collect rental values on all natural resources. Smith suggests the basic principles of monopolization under feudalism were never abandoned, and residues of exclusive feudal property rights restrict the potential efficiency of capitalism in Western culture
Western culture
Western culture, sometimes equated with Western civilization or European civilization, refers to cultures of European origin and is used very broadly to refer to a heritage of social norms, ethical values, traditional customs, religious beliefs, political systems, and specific artifacts and...
s. Estimating roughly 60-percent of American capital is little more than capitalized values of unearned wealth, Smith suggests elimination of these monopoly values would double economic efficiency, maintain quality of life
Quality of life
The term quality of life is used to evaluate the general well-being of individuals and societies. The term is used in a wide range of contexts, including the fields of international development, healthcare, and politics. Quality of life should not be confused with the concept of standard of...
, and reduce working hours
Working time
Working time is the period of time that an individual spends at paid occupational labor. Unpaid labors such as personal housework are not considered part of the working week...
by half. Wasteful monetary flows can be stopped only by eliminating all methods of monopolization typical in Western economies.
J.W. Smith divides "primary (feudal) monopoly" into four general categories; banking, land, technology, and communications
Telecommunication
Telecommunication is the transmission of information over significant distances to communicate. In earlier times, telecommunications involved the use of visual signals, such as beacons, smoke signals, semaphore telegraphs, signal flags, and optical heliographs, or audio messages via coded...
. He lists three general categories of "secondary (modern) monopoly"; insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
, law, health care
Health care
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, chiropractic, dentistry, nursing, pharmacy, allied health, and other care providers...
. Smith further claims that converting these exclusive entitlements to inclusive human rights
Human rights
Human rights are "commonly understood as inalienable fundamental rights to which a person is inherently entitled simply because she or he is a human being." Human rights are thus conceived as universal and egalitarian . These rights may exist as natural rights or as legal rights, in both national...
would minimize battles for market share
Market share
Market share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...
, thereby eliminating most offices and staff needed to maintain monopoly structures, and stop the wars generated to protect them. Dissolving roughly half the economic activity of a monopoly system would reduce the costs of common resources by roughly half, and significantly minimize the most influential factors of poverty.
In Smith's view, most taxes should be eliminated, and productive enterprise should be privately owned and managed. Inventors should be paid well and all technology placed in the public domain. Crucial services currently monopolized through licensing
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
should be legislated as human rights.
Smith envisions a balanced economy under a socially owned banking commons within an inclusive society with full and equal rights
Social equality
Social equality is a social state of affairs in which all people within a specific society or isolated group have the same status in a certain respect. At the very least, social equality includes equal rights under the law, such as security, voting rights, freedom of speech and assembly, and the...
for all. Federated regions collect resource rent
Resource rent
In economics, rent is a surplus value after all costs and normal returns have been accounted for, i.e. the difference between the price at which an output from a resource can be sold and its respective extraction and production costs, including normal return...
s on land and technology to a social fund
Social fund
A social fund is an institution, typically in a developing country, that provides financing for small-scale public investments targeted at meeting the needs of poor and vulnerable communities...
to operate governments and care for social needs. Socially owned banks provide finance capital by creating debt-free money for social infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
and industry. Rental values return to society through expenditure on public infrastructures. Local labor is trained and employed to build and maintain water systems, sewers, roads, communication systems, railroads, ports, airports, post offices, and education systems. Purchasing power circulates regionally, as labor spends wages in consumption and governments spend resource rent and banking profits to maintain essential services.
According to Smith, all monetary systems, including money market
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
s, should function within fractional-reserve banking
Fractional-reserve banking
Fractional-reserve banking is a form of banking where banks maintain reserves that are only a fraction of the customer's deposits. Funds deposited into a bank are mostly lent out, and a bank keeps only a fraction of the quantity of deposits as reserves...
. Financial capital should be the total savings of all citizens, balanced by primary-created money to fill any shortfall, or its destruction through increased reserve requirements to eliminate any surplus. Adjustments of required reserves should facilitate the balance between building with socially created money or savings. Any shortage of savings within a socially owned banking system should be alleviated by simply printing it.
Democratic cooperatives
Sometimes referred to as a "Co-Op business" or "Co-Op", a cooperativeCooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
is a limited liability entity, organized either for-profit or not-for-profit, that differs from a corporation in that its producing members, rather than non-producing shareholders, comprise decision-making authority. Classified as either consumer cooperatives or worker cooperative
Worker cooperative
A worker cooperative is a cooperative owned and democratically managed by its worker-owners. This control may be exercised in a number of ways. A cooperative enterprise may mean a firm where every worker-owner participates in decision making in a democratic fashion, or it may refer to one in which...
s, the cooperative business model is fundamental to the interests of economic democracy.
According to the International Cooperative Alliance's Statement on the Cooperative Identity, "cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organized in a democratic manner."
Cooperatives play an essential role in all models of Economic Democracy, providing for the needs of workers, consumers, and communities. As an alternative to globalized economy
World economy
The world economy, or global economy, generally refers to the economy, which is based on economies of all of the world's countries, national economies. Also global economy can be seen as the economy of global society and national economies – as economies of local societies, making the global one....
, domination by large corporations, and neoliberal economic policies, Economic Democracy emphasizes large-scale economic withdrawal from corporate imperialism
Imperialism
Imperialism, as defined by Dictionary of Human Geography, is "the creation and/or maintenance of an unequal economic, cultural, and territorial relationships, usually between states and often in the form of an empire, based on domination and subordination." The imperialism of the last 500 years,...
to more regionally organized producer and consumer cooperatives, thus restoring socio-economic stability on a broader scale.
Worker cooperatives
According to the United States Federation of Worker CooperativesUnited States Federation of Worker Cooperatives
The United States Federation of Worker Cooperatives is a federation of worker cooperatives in the United States. USFWC was founded at the U.S. Conference of Democratic Workplaces in Minneapolis, Minnesota in May 2004.....
, "a worker cooperative
Worker cooperative
A worker cooperative is a cooperative owned and democratically managed by its worker-owners. This control may be exercised in a number of ways. A cooperative enterprise may mean a firm where every worker-owner participates in decision making in a democratic fashion, or it may refer to one in which...
is a business entity that is owned and controlled by the people who work in it". Workers own the business together, usually investing with a buy-in amount of money when they begin working. At the end of each year, worker-owners are paid a portion of the money the business makes after expenses. In cases where the company is also owned by employees, there are no outside or consumer owners. Only employees own shares of the business, which represent fractions of the market value of the cooperative. Only one membership share may be issued to each member, and one membership share provides its owner with one vote in company decision-making. While membership is not a requirement of employment, only employees can become members.
Worker cooperatives generally employ an industrial model called Workplace democracy
Workplace democracy
Workplace democracy is the application of democracy in all its forms to the workplace....
, which rejects the "master-servant relationship" implicit in the traditional employment contract. This term is often used synonymously with industrial democracy
Industrial democracy
Industrial democracy is an arrangement which involves workers making decisions, sharing responsibility and authority in the workplace. While in participative management organizational designs workers are listened to and take part in the decision-making process, in organizations employing industrial...
. Companies like Semco
Ricardo Semler
Ricardo Semler is the CEO and majority owner of Semco SA, a Brazilian company best known for its radical form of industrial democracy and corporate re-engineering. Under his ownership, revenue has grown from US$4 million in 1982 to US$212 million in 2003 and his innovative business management...
, DaVita
DaVita
DaVita, Inc. is one of the largest kidney care companies in the United States, with corporate headquarters in Denver, Colorado. Their offerings include in-center hemodialysis, peritoneal dialysis, home hemodialysis, vascular access management, chronic kidney disease education, and renal diet...
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
, Freys Hotels and Linden Lab
Linden Lab
Linden Research, Inc., d/b/a Linden Lab, is a privately held American Internet company that is best known as the creator of Second Life....
s maximize employee participation and engagement in this regard, as the New Unionism
New Unionism
New Unionism is a term which has been used twice in the history of the labour movement, both times involving moves to broaden the trade union agenda.-1880s:First was the development within the British trade union movement in the late 1880s...
movement views workplace democracy as a necessary link between production and economic democracy.
Some analysts suggest self-governing enterprises should not be confused with other systems they might vaguely or closely resemble. According to Robert A. Dahl:
- "Self-governing enterprises only remotely resemble schemes of employee consultation by management; schemes of limited employee participation that leave all critical decisions with a management elected by stockholders; or Employee Stock Ownership Plans (ESOPs) that are created only or primarily to provide corporations with low-interest loans, lower corporate income taxes, greater cash flow, employee pension plans, or a market for their stock, without, however, any significant changes in control."
Decisions in a worker cooperative are made democratically by the people who do the work, rather than by one person or group of people that holds all the power. This process usually adheres to the principle of "one worker, one vote". Worker-control can take many forms depending on the size and type of the business. Some ways to make decisions democratically include: an elected board of directors, elected managers, management job roles, no management at all, decisions made by consensus, decisions made by majority vote, or any combination of the above. Each worker-owned business creates the structure best suited to its needs. Equal participation in decision-making becomes the responsibility and privilege of each member, providing a democratic alternative to the centralization of power typical in corporate hierarchies.
Many businesses, controlled by workers and/or sharing profits among them, are not formally considered worker cooperatives. In general, these are called democratic workplaces. Across the United States, democratic workplaces occupy many different sectors and industries, with greatest concentrations in the Northeast, the West Coast and the Upper Midwest. While a few worker cooperatives in the United States are notable larger enterprises, most are small businesses. There are an estimated 300 democratic workplaces in the United States, employing over 3,500 people and generating over $400 million in annual revenues. Growing steadily over the past 20 years, the number of worker cooperatives includes both well-established businesses and new ones, with the fields of technology and health care showing most of the recent increase.
In many ways, the operations of worker cooperatives are quite similar to conventional businesses. They develop products or services, and offer them for sale to the public, with the goal of generating enough income to support the business and its owners. They incorporate with the state, get business licenses, pay state and federal taxes, have payroll and benefits, and so on.
But there are also some fundamental differences between worker cooperatives and traditional businesses. In conventional businesses, net income is called profit, which tends to be distributed primarily amongst non-producing shareholders. In worker cooperatives, this income is called surplus, which is distributed amongst worker-owners based on hours worked, seniority, or other criteria. In a worker cooperative, workers own their jobs, and therefore have a direct stake in the local environment and the power to conduct business in ways that benefit the community rather than destroying it. Some worker cooperatives maintain what is known as a “multiple bottom line”, evaluating success not merely in terms of net income, but also by factors like their sustainability as a business, their contribution to the community, and the happiness and longevity of their workers.
According to Tim Calvert, a founding member of the worker-owned Portland, Oregon cooperative, City Bikes, "the marks of a worker co-op are an emphasis on cooperative working for collective success, a democratic structure for decision making with each member having an equal vote, a collective determination of how net income or net losses are allocated, an equal contribution to and benefit from the co-op's cash and an equal sharing of the risks and benefits of working at and owning a business". But since there is no inadequate legislation regarding worker cooperatives in the United States, most worker cooperatives tend to utilize consumer cooperative law for their purposes. While Calvert believes a genuine worker cooperative should be specially incorporated as owned solely and equally by employees, he also observes that CityBikes is one of the few that strictly adheres to the principles of a properly incorporated worker-owned cooperative. Instead, many worker-cooperatives choose to incorporate as Limited Liability Corporations, because 1) there is less paperwork involved, and 2) protection from personal lawsuit is a paramount concern.
Consumer cooperatives
A consumers' cooperativeConsumers' cooperative
Consumer cooperatives are enterprises owned by consumers and managed democratically which aim at fulfilling the needs and aspirations of their members. They operate within the market system, independently of the state, as a form of mutual aid, oriented toward service rather than pecuniary profit...
is a cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
business owned by its customers for their mutual benefit. Oriented toward service rather than pecuniary profit, consumers of goods and services are often also the individuals who have provided capital to launch or purchase such free enterprise
Free enterprise
-Transport:* Free Enterprise I, a ferry in service with European Ferries between 1962 and 1980.* Free Enterprise II, a ferry in service with European Ferries between 1965 and 1982....
. Consumers' cooperatives differ from other forms of business in their directive to provide quality goods and services to consumer/owners at the lowest cost rather than to sell goods and services at the highest price above cost that the consumer is willing to pay. In practice consumers' cooperatives price goods and services at competitive market rates. The difference is that where a for-profit enterprise will treat the difference between cost (including labor, etc.) and selling price as financial gain, the consumer owned enterprise returns this sum to the consumer/owner as an over-payment.
Large consumers' co-ops run much like any other business, requiring workers, managers, clerks, products, and customers to keep the business running. In smaller cooperatives, consumer/owners are often workers as well. Consumers' cooperatives can differ greatly in start up and also in how the co-op is run, but to be true to the consumers' cooperative form of business the enterprise should follow the Rochdale Principles
Rochdale Principles
The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The...
. Consumers' cooperatives may, in turn, form Co-operative Federations. These may take the form of co-operative wholesale societies
Co-operative wholesale society
A Co-operative Wholesale Society, or CWS, is a form of Co-operative Federation , in this case, the members are usually Consumers' Co-operatives...
, through which Consumers' Co-operatives collectively purchase goods at wholesale prices and, in some cases, own factories. Alternatively, they may be members of Co-operative unions.
Consumer cooperatives are very different from privately owned "discount clubs," which charge annual fees in exchange for a discount on purchases. The "club" is not owned or governed by the "members" and the profits of the business go to the investors, not to members. In a cooperative, the members own the business and the profits belong to the community of members.
Food cooperatives
Most food co-ops are consumer cooperatives, which means that all our retail co-ops are owned by the people who shop at the stores. Members exercise their ownership by patronizing the store and voting in elections. The members elect a board of directors to hire, guide and evaluate the general manager who runs day to day operations. Food cooperatives were originally established to provide fresh, organic produce
Organic food
Organic foods are foods that are produced using methods that do not involve modern synthetic inputs such as synthetic pesticides and chemical fertilizers, do not contain genetically modified organisms, and are not processed using irradiation, industrial solvents, or chemical food additives.For the...
as a viable alternative to packaged imports. But this process can present a struggle, as communities tend to import the same crops that local farmers cultivate. The ideas of local and slow food
Slow Food
Slow Food is an international movement founded by Carlo Petrini in 1986. Promoted as an alternative to fast food, it strives to preserve traditional and regional cuisine and encourages farming of plants, seeds and livestock characteristic of the local ecosystem. It was the first established part of...
production can help local farmers prosper, in addition to providing consumers with fresher products. But the growing ubiquity of organic food products in corporate stores testifies to broadening consumer awareness, and to the dynamics of global marketing.
Associated with national and international cooperative communities, Portland Oregon cooperatives manage to survive market competition with corporate franchise. As Lee Lancaster, financial manager for Food Front, states, "cooperatives are potentially one democratic economic model that could help guide business decisions toward meeting human needs while honoring the needs of society and nature". He admits, however, it is difficult to maintain collaboration among cooperatives while also avoiding integration that typically results in centralized authority.
Tim Calvert believes that dollars are the most important vote to make, and others tend to agree. Citing members of People’s Co-op and Alberta Cooperative Grocery, Romona DeNies of The Portland Alliance states, "Co-ops are the antidote to the centralization of power. People forget they have power as consumers to make choices. We can’t be completely disentangled from the corporate world, but we can try to provide a local model of living further from it. No one is getting rich off your money at a co-op. But that’s the economic value of shopping here. In return, you support a viable alternative to the vicious cycle of bottom lines and end profits".
As World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
representatives negotiate issues of competition, agricultural subsidies, and economic protectionism among developed nations, the pending fate of the American farmer depends upon the ability of third-world farmers to "compete" with subsidized agricultural giants like Monsanto Company. Lee Lancaster says, “Underneath our unique aspects, we have the same structure and principles. Welfare of our respective neighborhoods is of vital concern to us. Food co-ops were started to provide local, organic produce. Now with those things more mainstream, the demand is going up, and our share of that market is declining. We have to reevaluate."
Further, Lancaster claims the traditional independence and decentralization of U.S. cooperatives have restricted their impact on the food industry through economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
, lamenting they should have been better organized: "What if we could work with other co-ops to nurture and establish other cooperatives?" he asks, "In essence, this is an extension of neighborhood organizing. We’re all driven by competition from national chains, but in looking at national issues and realizing there’s a lot to address, what’s needed is a bigger movement, not a big corporation."
Regional trading currencies
According to Thomas H. Greco, Jr.Thomas H. Greco, Jr.
Thomas Henry Greco, Jr. is a community economist, who blogs, writes, and speaks on the subject of free market alternative currency and monetary systems.-Life and work:...
, author of New Money for Healthy Communities, "The pinnacle of power in today's world is the power to issue money. If that power can be democratized and focused in a direction which gives social and ecological concerns top priority, then there may yet be hope for saving the world". In this regard, many proponents of Economic Democracy recommend the regionalization of currencies. Some experts suggest that, "under the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...
, the Federal Reserve acted as the world's central bank. This gave America enormous leverage over economic policies of its principal trading partners". Other analysts add that developing nations are susceptible to exploitation mainly because they have no independent monetary system, using the U.S. dollar instead. This feeds the fractional reserve banking system, operated by the U.S., Canada, Europe, and Japan (imperial-centers-of-capital). Developing nations pay heavily for this service through market interest rates and because banking profits and property ownership emigrate to financial centers elsewhere.
According to J.W. Smith, "Currency is only the representation of wealth produced by combining land (resources), labor, and industrial capital". He claims that no country is free when another country has such leverage over its entire economy. But by combining their resources, Smith says developing nations have all three of these foundations of wealth:
- By peripheral nations using the currency of an imperial center as its trading currency, the imperial center can actually print money to own industry within those periphery countries. By forming regional trading blocs and printing their own trading currency, the developing world has all four requirements for production, resources, labor, industrial capital, and finance capital. The wealth produced provides the value to back the created and circulating money.
Smith further explains that developed countries need resources from the developing world as much as developing countries need finance capital and technology from the developed world. Aside from superior military power of the imperial centers, the undeveloped world actually has superior bargaining leverage. With their own trading currencies, developing countries can barter their resources to the developed world in trade for the latest industrial technologies. Barter avoids "hard money monopolization" and the unequal trades between weak and strong nations that result. Smith suggests that barter was how Germany resolved many financial difficulties "put in place to strangle her", and that "World Wars I and II settled that trade dispute". He claims that their intentions of exclusive entitlement are clearly exposed when the imperial centers must resort to military force to prevent such barters and maintain monopoly control of others' resources.
See also
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Social Credit Social Credit is an economic philosophy developed by C. H. Douglas , a British engineer, who wrote a book by that name in 1924. Social Credit is described by Douglas as "the policy of a philosophy"; he called his philosophy "practical Christianity"... Social economy Social economy refers to a third sector in economies between the private sector and business or, the public sector and government. It includes organisations such as cooperatives, non-governmental organisations and charities.... Industrial democracy Industrial democracy is an arrangement which involves workers making decisions, sharing responsibility and authority in the workplace. While in participative management organizational designs workers are listened to and take part in the decision-making process, in organizations employing industrial... Participatory economics Participatory economics, often abbreviated parecon, is an economic system proposed primarily by activist and political theorist Michael Albert and radical economist Robin Hahnel, among others. It uses participatory decision making as an economic mechanism to guide the production, consumption and... Workers' control Workers' control is a term meaning participation in the management of factories and other commercial enterprises by the people who work there. It has been variously advocated by anarchists, socialists, Communists, Social Democrats and Christian Democrats, and has been combined with various... Workers' self-management Worker self-management is a form of workplace decision-making in which the workers themselves agree on choices instead of an owner or traditional supervisor telling workers what to do, how to do it and where to do it... Workplace democracy Workplace democracy is the application of democracy in all its forms to the workplace.... |
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External links
- The Institute for Economic Democracy (IED)
- Economic Democracy online
- Articles by Richard C. Cook on Economic Democracy
- New Unionism Network
- U.S. Basic Income Guarantee Network
- Network of Bay Area Worker Cooperatives (NoBAWC)
- The United States Federation of Worker Cooperatives
- Assistance in establishing workplace cooperatives
- International Cooperative Alliance
- Slow Food: Manifesto on the Future of Food
- Slow Food Movement Defends Culinary Diversity, by Mario Osava July 6, 2001
- Progressive Utilization Theory
- After Capitalism, by Seymour Melman
- Effortless Economy, an economic environment without labor
- History of Work Cooperation in America
- Mondragon Corporacion Cooperativa, Spain
- The U.S. Solidarity Economy Network (SEN)
- The Take, a film directed by Avi Lewis
- The Corporation, a documentary film by Mark Achbar, Jennifer Abbott and Joel Bakan
- Economic Democracy for the Americas (ECODEMA)
- Forum for Stable Currencies - House of Lords
- Inclusive Democracy - economic democracy as an integral part of the ID project
- Common Good Bank a grassroots project for principles of economic democracy
Further reading
- A Preface to Economic Democracy (1985), Robert A. DahlRobert A. DahlRobert Alan Dahl , is the Sterling Professor emeritus of political science at Yale University, where he earned his Ph.D. in political science in 1940. He is past president of the American Political Science Association...
: University of California Press ISBN 0520053451 - Economic Democracy, C. H. DouglasC. H. DouglasMajor C. H. Douglas MIMechE, MIEE, , was a British engineer and pioneer of the Social Credit economic reform movement.-Education and engineering career:...
(1920) new edition: December 1974; Bloomfield Books; ISBN 0904656063 - Economic Democracy: A Grand Strategy for World Peace and Prosperity, J.W. Smith, Institute for Economic Democracy, July 2006, ISBN 1933567023
- Economic Democracy: The Working-Class Alternative to Capitalism, Allan Engler, 2010, ISBN 9781552663462
- Guild Socialism Restated (1920) and Self-Government in Industry (1917), G. D. H. ColeG. D. H. ColeGeorge Douglas Howard Cole was an English political theorist, economist, writer and historian. As a libertarian socialist he was a long-time member of the Fabian Society and an advocate for the cooperative movement...
- After Capitalism, David SchweickartDavid SchweickartDavid Schweickart is an American mathematician and philosopher. He holds a BS in Mathematics from University of Dayton, a PhD in Mathematics from University of Virginia, and a PhD in Philosophy from Ohio State University. He currently is Professor of Philosophy at Loyola University Chicago.He has...
, Rowman & Littlefield Publishers, Inc., Oct 2002, ISBN 0742513009 - "The myths about the economic crisis, the reformist left and economic democracy" by Takis FotopoulosTakis FotopoulosTakis Fotopoulos , born , is a political philosopher and economist who founded the inclusive democracy movement. He is noted for his synthesis of the classical democracy with the libertarian socialism and the radical currents in the new social movements...
, The International Journal of Inclusive DemocracyInclusive DemocracyInclusive Democracy is a political theory and political project that aims for direct democracy, economic democracy in a stateless, moneyless and marketless economy, self-management and ecological democracy...
, vol 4, no 4, October 2008. - Participation and Democratic Theory (1970), Carole PatemanCarole PatemanCarole Pateman is a British feminist and political theorist. She earned a DPhil at the University of Oxford. Since 1990, Professor Pateman has taught in the Department of Political Science at the University of California at Los Angeles . In 2007, she was named a Fellow of the British Academy...
: Cambridge University Press, ISBN 052129004X - The War At Home: The Corporate Offensive from Ronald Reagan to George W. Bush, Jack Rasmus, Kyklos Productions, LLC, 2006, ISBN 0977106209
- The Great Transformation, Karl Polanyi
- "Towards an Inclusive Democracy", Takis FotopoulosTakis FotopoulosTakis Fotopoulos , born , is a political philosopher and economist who founded the inclusive democracy movement. He is noted for his synthesis of the classical democracy with the libertarian socialism and the radical currents in the new social movements...
, London/New York 1997 Googlebooks - Das KapitalDas KapitalDas Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
, Karl MarxKarl MarxKarl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
, Voltmedia GmbH, Oct 2004, ISBN 3937229345 - Towards the Post-University: Centers of Higher Learning and Creative Spaces as Economic Development and Social Change Agents, by Jonathan Feldman, Economic and Industrial Democracy, Volume 22, Number 1, 2001.
- We Hold These Truths: The Hope of Monetary Reform, Richard C. CookRichard C. CookRichard C. Cook is a former U.S. federal government analyst, who was instrumental in exposing White House cover-ups regarding the Space Shuttle Challenger disaster of 1986. As a witness to the incident and a participant in the subsequent investigations, Cook provided key documents to The New York...
: (2008–2009): Tendril Press, LLC: ISBN 978-0-9802190-1-2