Why do we need Economic Democracy?

“Society long ago democratized government, but we have never democratized the economy.”

Marjorie Kelly and Ted Howard (2019: xiii): The Making of a Democratic Economy. Building Prosperity for the Many, Not Just the Few.

Unless the economy is democratized, today’s extractive economy will persist. According to Kelly and Howard (ibid),  globalization and financializaton are the hallmarks of this extractive economy:

“Benefits are said to trickle down, when actually the system extracts wealth up from communities and sets it spinning in [the world of] speculative trading.” (ibid: 22-23, emphasize and text in brackets added)

“Ours is an economy of, by, and for the 1%’.. In today’s ownership design, corporations are short-term in orientation, require endless growth, measure success by profit and share price, externalize costs onto the environment and, too often, are amoral in decision-making.”

(ibid: 5, 23-24 )

Given today’s problems of inequality, climate change and environmental destruction, the above traits points to nothing less than a system failure:

“[The elephant in the room is fiduciary duty (board members duty or loyalty to shareholders)] we haven’t fully confronted the fact that corporations believe they have a fiduciary duty to systematically suppress labor and labor income—and weaken environmental regulation—in order to increase profit for wealthy shareholders.”

(ibid:6)

Accordingly, there is a need for systems change. For Kelly and Howard, democracy needs to move inside the economy: “[It is not enough to put] such values as sustainability or fairness on the outside of the system through regulation and social safety nets. These values need to be in the DNA.” (ibid:8)

Therefore, the ‘value proposition’ of a democratic economy (hence also the ideal value proposition of enterprises) should conform to ‘democratic economy designs’:

• “A democratic economy designs social architectures around what we value, with community and sustainability as the alpha and omega, our inter-relatedness and interdependence at the center.  

• Unlike the [business] monoculture of extractive design, democratic design relies upon a diversity of public, private, cooperative, and employee-owned designs, structured at different scales and in different sectors to create the outcomes we seek.” (ibid:3,83,)

• “Serving the common good is the core of the new system. This plays out through 7 principles of a democratic economy.” (ibid:9, emphasize and bullets added)

To appreciate these principles of ‘an economy for the 99%’, some terms needs unpacking before summarizing the principles themselves:

1. The capital bias of today’s extractive economy

2. Board members duty (‘Fiduciary duties’): A built-in system failure

3. The financialisation of the economy and its democratic deficiency

4. The need for system change: ownership design

5. Principles of the democratic economy vs. the extractive economy

 

The below refers related system failures as shown in the course outline on Cooperative Social Entrepreneurship.

Course on Cooperative Social Entrepreneurship; cutout from Course overview, Part 1

Climate Change	Dysfunctional Climate Strategies & Measurements System. How the Illogical System for Global Trade exaggerate Climate Change
Loss of Nature & Livelihood	Nature & Biodiversity Loss, Mass Wildlife Extinction, Pollution & Enclosure
Inequality	Piketty: Returns to capital remain consistently higher than to labor
Money System Failures	1970-2010: 145 banking crises. How the money system creates its own crises	Systematic redistribution of wealth through Interest & Compound Interest		The system’s built-in tendency to disregard the future & sustainability
Corporate Power & Abuse	Magnified by Corporate Personhood, Deregulation and Privatisation
Democracy Eroded	Wealth concentrated via banks & corporations corrupts the political system		‘Free’-Trade Agreements; When corporations can sue governments