Globe
A Democratic Economy
We have defined Democracy as Freedom - to do, go, think, speak and work as individuals , without restrictive state controls. However, an important corollary is that this freedom must not cause harm in any way. In other words, we must not be allowed to abuse our freedom and restrict the freedom of others by seeking greater economic benefit for ourselves than is fair or just. Until, as individuals, we can control our self centred desires and think of the common good, we need a control that is exercised by the state. This must be, of course, democratic control.
The idea of balance is important in nature. When the balance shifts too far in one direction the natural equilibrium falters and often disaster happens. So it is with the interaction between people, whether between large groups of people or within the family unit. Democracy is the result of balance in government. When the balance of power shifts, usually the people suffer.
The balance that is part of a democratic system of government needs to be established in our economic life. The three factors in the economy that should be in balance are: the procurement of material resources, the application of the skills of workers, and the raising of the capital needed to bring the first two factors together to create wealth.
That balance has generally been weighted in favour of capital. In recent years this weighting has increased at the expense of the labour force, and the exploitation of material resources is putting the environment at risk.
Redressing the balance needs a major shift in attitude towards the production of goods. We have been exploiting our natural resources for many years. When manufacturers needed space they built where it best suited them, not the environment or the people. One of our earliest forms of exploitation was the use of rivers to carry away factory waste products, often very toxic, without consideration of the the other values of the river, or the people living downstream. Pollution of the air with noxious fumes is another example of inconsiderate behaviour. When trees are torn from the earth by indiscriminate clear cutting, the effects are devastating to the earth's surface and even world climate. When we hunt or drive, by our economic activity, animals to extinction, we rob the planet of its unique life forms and diminish the quality of life of ourselves and our children.
A system that allows for severe unemployment for one part of our society while another part gains in wealth is a recipe for disaster. Revolutions occur when the 'have-nots' attempt to replace the 'haves', and the exploitation continues with new victims. reactionary movements try to restore the status quo. In neither situation is there much attempt to create a balance.
Economic Balance
Democracy is a matter of balancing the several interests within a society. A politically democratic society must have a democratic Economic System.
This balance must be one of feeling. The two sentient parts of the economic life force are Labour and Capital. Each cannot function without the other. Each must feel that the distribution of wealth is fair. The system must regulate itself without confrontation or greed. We clearly need a mechanism to allow this to come about. The two sentient parts must feel the need to look after the non sentient part of the economy, the resources of the earth. Without this shared empathy the environment is open to exploitation and abuse, and everyone suffers.
The proportionment of the three factors in the economy must be in balance. If we can see that the purpose of economic activity is the creation of an economic weal, or prosperity, for the whole country and even the world, then we should consider the three factors as being the cost of creating wealth.
Earth Resources. These are the property, in trust, of all the people of the country they are contained in. If an economic activity uses any resource it must pay a proper fee for that resource. This fee should take into account not only the actual resource, but also the cost of returning the earth to an acceptable condition after extraction or use. Included also should be the cost of waste treatment or disposal. The earth should not be sacrificed on the altar of Mammon.
This would form one trisector of the economic pie. Its size would vary in proportion to the other two. Clearly, many economic activities differ in the amount of natural resources used.
Labour Skills. Whether physical or mental, human effort should make up a third of the wealth of the wealth produced by an economic activity. The history of labour strife has been the struggle for recognition of the value of labour. Sometimes it has been overvalued most often it is undervalued. There should be no reason for labour to fight to prove its value; there should be no reason for labour being able to gain a position where it is overvalued.
One third of the wealth created by an enterprise should be considered as the cost of the labour needed to create that wealth.
Capital Investment. The third factor is the cost of money required to set up an enterprise. Because it is so closely connected to the profit creating potential of the enterprise, the benefits paid to those who have sold their money to the enterprise are usually out of proportion to the benefits paid to the other two sectors.
In a democratic economy the wealth created by capital should be closer to an equal third.
Instead of a business being considered a three-part enterprise whose purpose is to create benefits for all three parts, it is often considered valuable only in as much as it creates monetary wealth for the capital sector. If it fails in this function, it is considered non-viable and ceases to exist. The wealth created in the satisfying lives of the people who work in the enterprise, and the families who support these workers, is deemed to be of lesser significance. Of least importance is the effect of the abandonment of an enterprise on the environment. The gaunt remnants of factory buildings, blighted landscapes, polluted land and water, are proof enough of what happens when a business fails and responsibility vanishes.
The idea of 'making one's fortune' should be considered a crime against the nation because it can only be done at the expense of other parts of the wealth making whole. the idea is the same as the situation in medieval times when a robber baron was able to kill and destroy his neighbour's army and build up his own land possessions. If he managed to survive other barons' attempts at take-overs, usually by being more astute and keeping in the good graces of a king who was no doubt himself of dubious parentage and authority, he became a 'noble man' and an 'aristocrat'. What misnomers! What is noble about a robber thug? Is such an aristocrat, as the name implies, the 'best' person to rule? The rich and powerful of today may not be called aristocrats but they are often little different from their medieval counterparts.
The money engendered by the product created by the three sectors of an economic activity has been earned by all three sectors, each indispensable in its way, and should be divided equitably among them. This is not just 'profit', the added value created by human activity. Some of that added value is cash that can flow through a community, but much of it is the product itself, a good that is useful to people. There is also job satisfaction, care of the neighbourhood/environment, and provision for a future that will be affected by that activity.
When the American economist Henry George wrote in his Progress and Poverty (1879) that "produce minus rent equals wages plus interest", he was stating that the value of the product of an economic activity less the material cost of creating that product would give you the monetary value of Labour and Capital costs together. Labour and Capital are thus put in competition for the available money. Until labour unions formed themselves, Capital had unopposed ascendancy - and government was under its control. The result was the rampant power building business empires of the 19th Century, and a correspondingly dismal life for the working poor. When Labour began to redress the balance with the Russian Revolution, its determination to keep capital in a subservient place by government control led to the economic stagnation of much of Europe.
An unbalanced economic system is undemocratic, whether under Capitalist or Communist rules, and has been shown to be ineffective in producing long term social contentment.
A Democratic Economic Balance
(In preparation)