Saturday, February 6, 2010

Economic Democarcy

Economic Democarcy(Information Supplied by Varied Sources)
Economic democracy is a social and economic philosophy that suggests an expansion of decision-making power from a small minority of corporate shareholders to a larger majority of public stakeholders. Example can be found in Co-ops and ESOPs and even Municipal BusinessesCentralized 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. Also diminishes workers rights and attacks the impoverished.Economic democracy promotes universal access to common resources that are typically privatized by corporate capitalism . Assuming full political rights cannot be won without full economic, social, or political rights, economic democracy suggests alternative models and reform agendas for solving 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 include democratic cooperatives, fair trade, social credit, and the regionalization of food production.

Worker self-management

According to Schweickart’s model, each productive enterprise is controlled by those who work there. Workers are responsible for the operation of the facility, including organization, operations, production, and the nature, price, and distribution of products. Workers control the means of production and management.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 employees.Workers control the workplace, they do not “own” the means of production in Schweickart’s model. 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. Societal “ownership” of the enterprise manifests itself in two ways.All firms must pay a tax on their capital assets, 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 depreciation 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. Movable capital will be used 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.

Inclusive democracy

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: democratic planning, which involves a feedback process between workplace assemblies, demotic assemblies and the confederal assembly, and an artificial market using personal vouchers,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 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 .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 : capitalist an ’socialist’ growth economy. It is also different from the various types of collectivism , 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.Co federal 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.
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 utility 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.

National dividend

In this view, many proponents advocate Basic Income Guarantee (“B.I.G.”) Or Universal Income (UI), previously proposed in the United States by economists, politicians and reformers, including Thomas Paine, 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. 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:“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.”* What maybe problematic about this is the fact that Democrats and Republicans may distort political facts about poverty and place people into another management scheme taking away freed, liberty, and affordability.Likewise, 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. Divided 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 Notes, 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:“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 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, . Contrasting “redistribution” of income (or property) with “pre-distribution”, (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.Since times have changed, there should be a consideration of a Living Wage and a Universal Income comparable with a Living Wage.Monopoly power versus public utilityMain article: J. W. SmithRather 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 title 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 cultures. 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 rents 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 markets, 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 all eviated by simply printing it. The Universal Income should be favored over all, But it must equal the to living wage. Other wise it will be just another poverty management program'

Democratic Economics is the mission of Democratic Socialists simply for the reason that these would present democratically controlled institutions, employment. Some would dispell these as Capitalism and the Government should own everything. This is not true Democratic Socialism.


  1. It’s really helpful for me which I have ever seen.Its presented well and nicely written which easy to understand.Thank you very much for the information.Keep blogging.

  2. Thank you Tino for informing your readers about ID, but we must remind you that, as ID' s Economic Democracy model is a specific model (like the Schweickart model on self-management you refer to), Inclusive Democracy is a project developed by Takis Fotopoulos in Towards and Inclusive Democracy and we expect you to cite the source of the ID project.


    For the Editorial Committee of The International Journal of Inclusive Democracy

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