Much of the debate in the 2016 primaries is being fuelled by misgivings, even outrage, over how the economy is working. Republicans are furious about excessive government regulation. Bernie Sanders’ campaign combines the revolutionary idealism of the 1960s with the Occupy movement’s heightened sense of economic injustice. Some of the main issues are:
How can we:
- keep financial interests out of politics?
- keep government out of the economy?
- correct excessive income inequality?
- ensure economic security for all?
- prevent another catastrophic recession?
- stop the economic exploitation of nature and human beings?
- procure adequate funding for infrastructure, health care, education, research and the arts?
Our highly productive economy has generated immense wealth and economic power. Like cream that rises to the top of a milk bottle, this wealth – which stems from ingenuity and the work of all who contribute to the economy – rises to the top. Whether it accumulates in large corporations, banks, or capital markets, most of it will be re-invested in ways that exacerbate the problems addressed above. Why? Because the guiding purpose of for-profit corporations, banks, and capital markets is to maximize profits and extract those profits as personal, accumulating wealth. Indeed, most economic activity today is guided by self-interest. Not just profit-seekers, but shoppers also generally seek for the greatest value at the lowest price without considering how, by whom, and under what conditions it was produced. In most of our economic activity, the survival of the fittest is a premise that goes largely unconsidered and uncontested. Capital funds take on a life of their own, not to serve the welfare of the community as a whole, but for the purpose of drawing as much money as possible out of the real economy. This kind of activity can be compared to a cancerous growth sucking the strength out of its host organism, intent only on its own unlimited growth.1
- As Rana Foroohar reported in the April 4th issue of TIME magazine, in her review of the current television series Billions, “Experts … estimate that only about 15% of all capital flows within America’s financial system end up making their way into the real economy. The rest of that money just rotates around the high-finance microcosm, enriching the 1% as they buy and sell existing assets to one another, bidding up their value, while failing to invest in research, products, jobs or innovation. … our market system has become like the snake that devours its own tail.”
The big questions are: Can these problems be solved? Can the competitive, exploitative forces driving our economy be countered, or perhaps transformed?
In the past, the following political solutions have been experimented with:
- Communism: The government manages the wealth of the country and plans the economy in the name of the people in order to prevent excesses, ensure equality and guarantee economic security. Experiments with communism have clearly failed: Governments are incapable of running an efficient economy that meets real human needs. Communism is a political solution to an economic problem, and while it attempts to place the welfare of the community at the center, it fails to recognize the creative role of free enterprise.
- Socialism: A large part of the wealth generated by the economy is claimed in government taxes and redistributed in the form of pensions, health care, education, etc. Democratic socialism is being more or less successfully practiced in Europe. In Europe excessive wealth and poverty are less pronounced than they are in the United States. Taxes are higher. Universal health care and a strong social safety net are prevalent in European countries. Environmental and social legislation in Europe is stronger than in the US. Bernie Sanders and many younger Americans would like to see more of it here. However, democratic socialism still retains vestiges of capitalism and communism: It leaves the egocentric profit motive in place to drive economic decision-making, and it gives the government too much control over areas that should be left to individual freedom such as education and health care.
Is there another way?
American culture is different from European culture. The entrepreneurial spirit in the U.S. is extraordinary. Americans seem to love to work. They have a strong aversion to government regulation. Volunteerism and philanthropy play an important role in American society. There is a growing movement in the American business community that is consciously trying to overcome the excesses of capitalism and create a more human economy: B Corps, cooperatives, Fair Trade, socially and environmentally responsible investing, CSAs, etc. These are the seeds of a new intentional economy that will, if all goes well, revolutionize and transform our capitalist system from the inside out. They are economic solutions to economic problems.
Instead of pitting government against business, we need to transform our economy into one that recognizes that service is its true mission rather than profit, an economy that is inspired by what it can do to improve the world rather than how it can exploit it. The profit motive has to be replaced by a sense that service is primary and profit a secondary confirmation of success – a reflection of productivity and the meeting of real needs, rather than a goal in itself. Already a century ago, Henry Ford understood: “Putting profits ahead of service is like putting the cart before the horse.” Only when all involved in the economy realize that they work for others and not for themselves will the economy achieve its full beneficial potential.
The new economy will be characterized by solidarity and cooperation rather than exploitation and ruthless competition. Business decisions will be made by all the stakeholders, not for the benefit of the few, power-holding stockholders. Producers, distributors and consumers will come together in transparent associations, learn about each other’s needs, and come to decisions out of mutual, empathetic understanding. Consumers will hear from producers about the production process. Consumers will inform producers about their needs. Manipulative advertising will be eliminated and wasteful overproduction avoided. The economy will no longer be an inhuman machine subject to wild gyrations driven by greed and fear, but a caring, intelligent network of human interrelationships driven by the will to meet real needs and the goal of long-term collective security and welfare. International trade will also be arranged by representatives of all the stakeholders involved.
We need to find ways of investing our tremendous capital resources in ways that truly benefit the wellbeing of humanity and the earth. Capital represents an untapped capacity that can be used to renew the real economy for the benefit of all. Placing it in the hands of individuals who act as stewards charged with reinvesting it wisely for the greater good opens the doors for new innovations and initiatives, improving infrastructure, as well as financing research and education. Many individuals and organizations are already allocating large sums of money with the wellbeing of the whole community in mind. This is the antidote to vulture capitalism.
Another major change that needs to happen is the decoupling of wages and salaries from work. Henry Ford’s fundamental insight pertains not only to corporate executives but to all who work in the economy: The motivation for work should be love for, and pride in, doing a good job and satisfying one’s fellow human beings, not procuring a pay check. Instead of tapping into deeper sources of creativity, which are activated when one performs work for its own sake, working for money falsifies one’s relationship to one’s work, reducing it to a means to an end, a sophisticated form of slave labor that is rewarded by a paycheck, free time and benefits. In reality, work, by its very nature, is performed to meet the needs of others. There should simply be no other reason for doing it. Wages and salaries should follow work rather than act as an incentive. It is an overlooked fact that a large portion of human work and service occurs outside of the monetized economy. Mothers and fathers, sisters and brothers, friends in the community, we constantly fill our time caring and serving each other, but most of this work is not monetized. How often do we hear people tell us that they can’t do what they really want to do because they “need to make money.” The need to earn one’s living will continue to be a dominant motivating force as long as the only way to secure one’s livelihood is to acquire an income by performing a job. A guaranteed basic income would be a step toward alleviating this situation. It would also be a means of supporting children, retirees and those outside of the workforce due to illness or disability, and it would help to solve the problem of unemployment due to automation and innovation.
In a fully transformed economy, money, not work, would become a means to an end, providing individuals as well as corporate initiatives with what they require so that they can accomplish the tasks they perform for other individuals and for society as a whole. We need to put the real economy back in the forefront of our consciousness, and relegate money to its proper role as a tool that serves us rather than allowing it to become an all-consuming end in itself.
How would this transformation of our economy deal with the excesses of capitalism and solve the problems addressed at the beginning of this article?
- Because an associative economy would emancipate itself from governmental control and regulate itself for the common good, the government would no longer have to step in to regulate predatory economic practices. For this reason, and because government subsidies would no longer be necessary, corporate lobbying would be reduced to a minimum, and the government would be able to devote itself to its intended purpose of protecting human rights.
- Income inequality would be greatly reduced through the separation of income from work. Income would reflect people’s needs.
- Capital and land would no longer be a privately owned source of personal income but would be invested and allocated in ways that benefit the whole community.
- Booms and busts such as we saw in 2007-8 in the housing market would not be possible. In an associative economy in which all stakeholders are represented, speculation for personal gain would no longer be tolerated.
- Economic exploitation of nature and human beings will cease when the economy is re-directed toward stewardship and service.
- The new economy will realize that it owes its productivity to good government, a good infrastructure, a healthy and well-educated community and the innovations and creativity that arise from scientific research and the arts. The vast sums that are presently tied up in capital markets and wasted on advertising, overproduction and planned obsolescence will flow into areas that sustain the economy.
Our founding fathers created a strong framework for our democratic government. It is now up to us, the people, to create an economy that is in keeping with human dignity, that serves our real needs efficiently, and protects the earth. Progressive forces in our economy are already moving in this direction. An associative economy is the natural next step as the generous American spirit overcomes its adolescent excesses and ceases to serve interests that run counter to the wellbeing of all. However, the battle between elected governments and the business community will continue until this transformation of the economy has taken place. Until then, Republicans will continue to fight against government regulation and Democrats will continue to call on the government to fight against the excesses of the economy.