Economic Democracy

Lifted from the proutgems yahoogroup at http://groups.yahoo.com/group/prout-gems/message/27

ECONOMIC DEMOCRACY While by no means comprehensive the following offers some useful insights. The sentiment of economic democracy is brought out and current and future researchers can explore these aspects in more detail. Prout proposes a dynamic economy of the people, by the people and for the people. Rejecting profit-making as the goal of the economy, Prout bases its economic policy on consumption; that is, on meeting the actual needs of the people. Political democracy in which all citizens have the right to elect their government representatives has serious shortcomings in a capitalist system because big money influences elections. Economic democracy, on the other hand, empowers people through cooperative management of almost all enterprises. It also decentralizes decision-making and gives citizens the right to choose how their local economy should be run. P. R. Sarkar identified four pre-requisites for economic democracy to be successful and designed the economic structure of Prout to fulfil them. The first is that the minimum requirements of life should be available to everyone, in order to free everyone from the fear of poverty and want. Secondly, the people should have a gradually increasing capacity to purchase goods and services. This is crucial because people need to feel that the quality of their lives is improving. Measuring the purchasing capacity of the people is the correct way to assess their standard of living and the true state of the economy. Their incomes should grow. To achieve this, raw materials, agricultural produce and other assets of a particular region should be processed and refined close to the location of origin. In this way, improvements in technology and manufacturing will benefit the local inhabitants of every region. Such a system will therefore bring about full employment and increase the standard of living of everyone while creating decentralized flows of goods and capital. The third requirement is that local people should have the right to make all economic decisions which directly affect their lives. Finally, all outsiders (those who do not have an affinity with the socio-economic unit) should be prevented from interfering in the business of local economies. This primarily means outside capitalists. There would be no outside control of land or resources, and profits earned in the region must not be sent elsewhere or hoarded, rather they must be re-invested locally in productive enterprises. Economy in Three Levels

Economic democracy based on Prout has a three-tiered economic structure: Small-scale private enterprises: To encourage creativity and personal initiative, individuals, families and small partnerships should be allowed to open privately owned businesses. They can produce non-essential or luxury goods and services. For example, home businesses, family-run restaurants, small retail shops, handicraft producers, artistic groups and private inventors may prefer to manage themselves. All self-employed workers and micro enterprises will be encouraged to legally register without unnecessary bureaucracy or expense. Self-employment in all professions and trades is not a hindrance. If a private enterprise becomes too large, reaching the ceiling on sales volume or a maximum number of employees (for example, ten) it should then halt any further expansion or if it wishes to expand to else transform itself to more democratic, cooperative management. Cooperatives: It is a basic right in an economic democracy for workers to own and manage their enterprises through collective management. Industry, trade, agriculture and banking will be organized through producer and consumer cooperatives. These will produce the minimum necessities and most other products and services, forming the largest part of a Proutist economy. Smaller satellite cooperatives can serve larger cooperatives, for example, by producing the components needed in automobiles that are then shipped off to the car manufacturing plant for final assembly. Japan has set up such as system to some degree. Prout recognizes three requirements for successful cooperatives. The first is honest, trustworthy leaders/managers. The second is strict administration with transparent accounting to build confidence amongst the cooperative members and the public. The third requirement is the sincere acceptance of the cooperative system by the public. This involves popular education to create an integrated network of community cooperatives. Global capitalism, which wipes out local businesses around the world, also creates unwarranted pressure on cooperatives. However, a decentralized economic democracy can ensure that everyone in the community has employment and a voice in decision-making processes. A cooperative market economy will have many benefits: it will keep consumer prices low, control inflation, ensure low prices for raw materials, facilitate an equitable distribution of wealth, foster closer ties among people and build community spirit. This is because it removes the speculative mentality and arbitrate opportunities found in inefficient capitalist systems. Large-Scale Key Industries: These will be managed as public utilities by autonomous bodies set up by the government on the principle of "no-profit-no-loss." They require large capital investment and are large in scale or very complex. Transportation, energy, telecommunications, defence, some aspects of mining and petroleum are examples and are all essential parts of the economy. However, generally the backbone or core resource will be considered a key industry, eg

electrical grid, water supply, telecommunications backbone network. Autonomous bodies should also manage specialized industries, such as research and development, hospitals and nursing homes, and oversee major infrastructure projects, such as ports and airports. All types of natural resources, utilities and strategic enterprises collectively belong to the local people. The local government should manage them in an ecological and sustainable way, and provide worker incentives to maximize efficiency, quality, and worker satisfaction. Providing Goods and Services to the People Sarkar gave great importance to a field of economics that he termed the people's economy. This analyses the lives of individuals in relation to the economy as a whole, including their living standard, purchasing capacity, and economic problems. The most important aspect of the people's economy is ensuring the minimum requirements to everyone, which includes the production, distribution, storage, marketing and pricing of consumable goods. In this effort, the federal government will need to classify types of commodities into three basic categories: essential, semi-essential and non-essential. Essential commodities are those needed to maintain an adequate standard of life: clean water, most foods, most clothing, medicines, housing materials, text books and other educational materials, electricity and energy. Semi-essential commodities include some types of food and clothing, books other than textbooks, most electronic goods, various household items, etc. Non-essential commodities include luxury goods. Only cooperatives would produce and sell essential commodities, and as much as possible, they should also manage semi-essential products. Small private enterprises can produce luxury goods and some semi-essential items or services. As the economy of a region develops, the number of different types of commodities in all three categories will increase. When everyone is able to purchase the minimum necessities, gradually more semi-essential commodities such as household appliances and electronic items will be reclassified from semi-essential to be considered essential commodities. An item, which is initially considered as a luxury, may later be classified to be a semi-essential or essential commodity. Services can also be classified in the same way. Essential services provide the basic necessities, such as schools from kindergarten to university, hospitals, water and sanitation utilities, local public transportation, the railway system, the national airlines, energy producers, telecommunications, etc. The local, state and federal government should be responsible for providing these services through autonomous bodies set up for that purpose. However, ancillary services attached to these core or backbone services can certainly be run on a co-operative basis. Gradually the whole economy can move towards co-operatisation. Key industries will be those held for the benefit of the public for the public trust and operated for the common good. Some essential services such as health care practices, medical centres

and health maintenance clinics employing three or more health care practitioners can be run as service cooperatives, owned and managed by the health care practitioners themselves. Other services classified as semi-essential or non-essential can be provided by small private enterprises, however, cooperatives will always be more encouraged and supported. A special mention should be made about housing. A housing board in each region needs to determine what would be the minimum standards of single-family dwellings in terms of size and facilities. Houses appropriate for the climate and culture of the local people need to be provided as a minimum necessity through adequate purchasing capacity. Any person or family without a home or living in substandard housing is entitled to such a dwelling, and the cooperative bank can grant a long-term low-interest loan to the new owner. The monthly payments for such a loan would have to be included in the calculation of the minimum wage. Owner participation in the planning, arranging the loan and, if possible, the construction, is a key factor of successful low-cost community housing programs in the USA (for example). However, the social programme behind this should be to ensure minimum necessities for all. There should be minimum standards for large families and those who wish to live collectively. People would have incentive to work harder to buy a bigger and better house, but a minimum house would be guaranteed to all. The guarantee is through adequate purchasing capacity. Another responsibility of the people's economy is to confirm that everyone has a job. Although this is a utopian dream in a world dominated by competitive global capitalism, economic democracy based on cooperatives can achieve this. Hence the government should promote and assist the development of cooperatives. It can be achieved because the entire social mentality is geared to first meeting the minimum necessities of life. Increasing the Purchasing Capacity of the People For the last nearly two decades the US economy steadily grew almost without interruption. However, if we look at the real wages and purchasing capacity of the population, we see another story. According to The Economic Report of the President, an annual publication of the US government, the weekly earnings of production workers, measured in 1982 prices, fell from $315 in 1972 down to $260 in 1997, a decrease of 17 percent. During the same period, the real wages of top executives soared 175 percent! In reality only a small percentage of people in the US have benefited from the so-called boom. The average American employee is working harder and longer for less. Behind the American boom there has been tremendous exploitation of labour. Prout measures an economy's health and vitality very differently, by assessing the actual purchasing capacity of the people and their standard of living. Economists will determine a Purchasing Capacity Index or PCI, which begins at a minimum level that is sufficient to pay for all essential goods and services. The minimum wage/salary must be

set at this amount. Of course, the actual cost of the minimum necessities will vary according to the number of people in the household. High quality education and medical care will be provided to all through collective schemes in which all contribute and can benefit. The PCI and corresponding minimum wage should be set high enough to include the food, clothing, local transportation and monthly housing and utilities bills for a family of four. The PCI will continually calculate the actual cost of all goods and services available, thus determining the real wages of the people. In a capitalist economy, the rate of inflation often fluctuates significantly over short periods of time. However, in an economy based on cooperative enterprise, inflation is likely to stay extremely low for long periods of time. Distortion, through inflation, is a figment of capitalist economies based on profit motives alone. If everyone is guaranteed the basic requirements of life, the cost of capital items will remain low, capital will be continually reinvested in productive enterprises, and the wealth generated by cooperatives will be spread equitably throughout society. A Proutist economy will guarantee the people an increasing purchasing capacity. This means that all workers will have to have their incomes progressively increased at a rate that is higher than any rate of inflation. Thus the minimum wage will have to gradually rise, giving the people the opportunity to purchase an increasing range of all types of goods and services. Another way that wages and salaries can be increased is by increasing their corresponding benefits or by improving their conditions. For example, a minimum wage in most countries would probably be set for 35-40 hours in a week with higher rates paid for overtime work. By introducing improved technology and making cooperatives more efficient, it will eventually be possible to gradually reduce the number of working hours in a week. While maintaining the same level of productivity, all workers can be paid the same amount for 33-38 hours of work each week. This gradual reduction in working time will give everyone more time for cultural pursuits, further education, sports and other hobbies, as well as intellectual and spiritual endeavours. Cooperatives would be encouraged to offer their members "flexitime," allowing them to adjust their working hours and schedules to meet family and other commitments, within certain limits. It should be illegal for children below the age of fourteen to work in the workforce. Young people between the ages of fourteen and sixteen should be limited to working too many hours work a week and paid hourly according to the just minimum wage, unless they are students and the work is part of their apprenticeship training. Economic Decentralization and Socio-Economic Regions Prout proposes the formation of self-sufficient economic regions, based on common economic and social problems, common geographic potentialities, common cultural legacy and language. Current political

countries may contain one or several socio-economic regions. Most important, the people should develop a spirit of cooperation to make their region self-reliant. For planning purposes, each socio-economic unit is further divided into districts and "blocks," based upon economic, geographic and population considerations. Each block should have a population of between one to two hundred thousand people. The goal of a decentralized economy is to make each block self-sufficient. This is no grey, centralized planning, but a vibrant community process. One of the major defects of capitalism is the appropriation of raw materials and capital from local areas and the concentration of resources in a few hands. Resources taken from under-developed regions are extracted at low cost and used to benefit the owners who live elsewhere. Centralized economies also lead to high industrial and urban concentration. A decentralized economy does the opposite by attracting city dwellers towards new jobs, a higher standard of living and a better quality of life in small towns and rural areas. It also prevents the creation of a migrant population of farm workers who travel each season from region to region harvesting crops eking out an existence. Local control of resources and capital is maximized, as is the opportunity for every locality to develop its socio-economic potential. Each area is then free to develop its own plans to achieve economic self-sufficiency and development while protecting the natural environment. What is a local area is relative and for small population area can be geographically very wide. Racism, discrimination and hate crimes have historically plagued movements for local autonomy. Unemployed or underpaid local people often resent foreign workers as well as landowners and capitalists from other countries or regions or with other religious or cultural backgrounds. The major underlying cause for such intolerance, which sometimes leads to violence, has always been economic exploitation. Political leaders seize on the mood of general frustration, bitterness and resentment and fan the flames to gain popularity and power. Prout overcomes this by insisting that anyone may settle in any region, so long as that person merges his or her economic interests in that region. Profits may not be exported out of the region. When the minimum necessities of everyone are guaranteed through full employment, and when a ceiling on salaries and wealth is established, anger and intolerance of outsiders will naturally decrease. Schools, popular education and the media also need to cooperate and encourage the spirit of universalism. Barter Trade In principle, Prout supports free trade. However, free trade among countries should be developed when all the countries concerned enjoy economic parity; otherwise the poorer and weaker countries can be exploited economically by the richer and more powerful ones. Guidelines are needed to ensure that trade is beneficial to all parties

concerned and to the economy as a whole. In an economic democracy, resources are considered the common resources of the region's population. Refinement and manufacturing should therefore take place as close to the source of raw materials as possible. Once a local economy is able to meet the basic needs of its people, finished goods or half-finished goods can be imported if they are not available and cannot easily be produced, so long as they do not undermine the market for local goods. The best form of trade is barter trade, because this avoids the need to pay in foreign currency. Barter trade can be multilateral. It is wrong to suggest that barter is a bilateral process. Both parties and countries/regions benefit, exchanging excess goods for what they do not have. There is precedence for this: Singapore and Indonesia recently signed a trade agreement which fixed that 60 percent would take place in barter trade. Clearing houses for multilateral barter trade also exist. With the increase of trade, a greater variety of goods becomes available to the people. This will develop prosperity and economic parity amongst socio-economic regions. Gradually neighbouring socio-economic regions will merge, and a global free trade zone can be created that is based on fairness and economic democracy. A Progressive System of Taxation In most capitalist countries the burden of taxes falls disproportionately on the lower and middle-income families. In the US, the top 1% earners are paying only one third as much in income taxes today as they did in 1960, while the middle classes are paying almost double. Sales taxes are even more regressive, causing the poor and middle classes to pay a much higher percentage of their income than a rich person who buys the same items. In principle, sales tax and income tax should be abolished. It makes no sense to tax people's income when their income is supposed to guarantee them increasing purchasing capacity. However, at present income tax should not be abolished for everyone, as that would only deprive the government of revenue and benefit those in high income tax brackets who already have sufficient wealth. In such cases income taxes may be used as a proxy for wealth taxes. As a first step, all those earning the minimum wage should be exempted from paying income tax. Then the no-tax threshold on income should be gradually raised, and the tax brackets immediately above that level reduced. In this way, step by step, it will be possible to gradually abolish income tax, and to introduce a wages and salary system which has a just minimum wage and a rational maximum salary as well as a reasonable ratio between the two, say 1:10 or 1:20, but not anything that is way to disproportionate. The higher income tax brackets will have to be tied to a rational ceiling on wealth. A ceiling on net assets could initially be set at no more than 1,000 to 2,000 times the annualised rate of the just minimum wage. All those whose net assets exceed this ceiling will have to be

taxed to reduce their net assets so that they comply with the set limit. Thus income tax will gradually be transformed into a mechanism which caps individual wealth at a predetermined upper limit. Along with the abolition of sales and income tax, a new progressive tax system should be introduced on production. In other words, taxes on goods should be levied at the point of production rather than at the point of purchase by the consumer, and taxes on services should be levied on the service provider for the services they provide. A tax system based on a production tax would provide the broadest possible tax base. It can take the form of a resource tax. All goods produced in the country would be taxed at the point at which they enter the economy, and the producer would pay the tax. All imported goods would be taxed at the point of importation and the importer would pay the tax. Similarly, taxes on services would be levied at the point at which they are provided to the consumer, and the service provider would pay the tax. Thus, the government would have the opportunity to collect the greatest amount of revenue in such a system. The amount of tax can be quite low and reflects how goods and services also have externality costs which the producer has to take into account and which the consumer also needs to consider. Moreover, a tax system based on a production tax would be the fairest possible tax system for the consumer. The provision of minimum necessities would suffer none or the least taxes - as minimum necessities are rights available to all. Producers of essential, semi-essential and non-essential commodities would be taxed at varying rates, as would providers of essential, semi-essential and non-essential services. Essential goods and services would be taxed at the lowest or nil tax rate, semi-essential goods and services would be taxed at a higher tax rate, and non-essential goods and services (ie luxuries) would be taxed at the highest tax rate. Each consumer would have the opportunity to choose which product or service they preferred, knowing that they would be paying more for luxury items. Commodities which are harmful for people's health, such as cigarettes and alcohol, should be taxed at rates which are significantly higher than the rates for non-essential goods and services. The externality costs (ie the harmful effects on society) should be fully reflected. Further, neither the producers nor sellers of these items will be allowed to advertise or to earn profits from their sales. These items can be considered as addictions and profits should not be made from addictive goods. Anything above the actual costs and the externality costs are revenues that should go to finance the health care system. A very progressive tax reform movement is being led by Proutist Alanna Hartzok, director of Earth Rights Institute, along with many others in Pennsylvania, USA. Called the Land Value Tax Shift, it puts a brake on land speculation that drives prices up, while encouraging small owners and community renovation by not taxing that land. She writes: This tax may better be thought as a pay-for-use (access) fees. In this system, the holding of a land title simply indicates the right to exclusive use (but not abuse) of particular land and resource areas. Those on poorer sites pay lower fees while those with access to better

located lands, or richer soils, pay much higher fees to the community as a whole. Land maintains affordability when taxed because profiteering and speculation are eliminated. People are not penalized for improving their properties. Labour has greater purchasing capacity when it is untaxed.