Most of us can agree that political democracies, based on equality and individual freedoms, are the best systems of government in the world today. We know that democratic countries are the least likely to go to war with each other; they suffer from the fewest internal conflicts, the lowest counts of terrorism, and the lowest number of human rights violations. It’s also very clear that democratic political systems are the most fertile grounds for economic prosperity; the countries that rank highest on the United Nations Democracy Index also head the Human Development Index. Freedom, equality and prosperity appear to go hand-in-hand. Why then, do we only apply the principles of the democracy to politics, and not the economy?
The global economy is one of the most undemocratic and inequitable systems imaginable. In 2000, the UN estimates that 10% of the world’s richest adults control 85% of the world’s wealth. According to Forbes, the three richest people in the world control as much wealth as the poorest 47 countries combined. Almost 3 billion people live on $2 a day or less, while the average American lives on $119. The Royal Bank of Scotland controls more assets than the entire GDP of Brazil. Wal-Mart is richer than Thailand.
We criticize and scoff at theocratic political regimes and autocratic non-democracies around the world, but we embrace them in economic markets. Worse, we encourage the world’s poorest countries to adopt our political and economic models with the same degree of enthusiasm. For those countries – the world’s poorest – the adoption of democracy in politics has brought greater individual freedoms, but not economic development. Their embrace of “liberal”, free-market economics has been devastating. Only one country that began the 20th century in the Third World closed out 1999 in the “First World” column (South Korea). The UN estimates that in most countries that have undertaken rapid trade liberalization, wages have fallen 20-30%. The world’s economy continues to grow, rich nations become richer, but inequality and indigence remain the same. The world’s developing nations may be progressing (I’d say that’s up for debate), but developed countries are as far ahead of them as ever, if not further.
The disparity between political and economic equality brings to mind the Cold War debate over Human Rights, seemingly forgotten with the implosion of the Soviet Union, between civil and political human rights, and social and economic rights. The USA championed freedom of speech, religion, and self-determination, while the Soviet Union hammered on the right to housing, food, water… It’s hard to swallow our loving embrace of free speech and the right to vote, without acknowledging the right to food. Does is matter to a poor Cambodian that she can vote, if she can’t feed her children? Are we really patting each other on the back and congratulating ourselves for growing our economy if it doesn’t benefit the people who need it most? I’m so glad Americans are richer this year than last; it’s really too bad Africans aren’t.
We know that democratic governments promote economic growth and prosperity, but we’ve yet to realize that undemocratic economies also ruin democracies, and economic inequality makes true democracy impossible. Massive economic prosperity has resulted in billions of “interest” dollars. Just in the United States, the tobacco lobby alone spends an estimated $106,415 every day the legislature is in session to promote their poisonous agenda. In 2000, oil and gas companies gave $34 million dollars to political candidates (78% to Republicans); a sum greater than the combined annual income of 26,336 Haitians. And we wonder why there isn’t a serious, government-led alternative energy initiative? Countries like South Africa and Nigeria, with relatively high per capita GDP’s, have struggled for decades to forge a political system based on equality in an economic system epitomized by inequality.
If political democracy begins with self-determination and free speech, a democratic approach to trade must begin at the roots of human development; with life’s fundamentals and the right to food, water and shelter. Contrary to popular belief, it is not required of us to provide those things to the world’s disenfranchised, only to create a system in which the average world citizen can provide themselves with those absurdly simplistic necessities. Believe it or not, small farmers, hunter-gatherers, and pastoralists have been feeding themselves since the advent of time and the human race; long before genetically-modified corn or the “green revolution”. What has changed since then is homo sapiens’ access to land and water and the means of producing survival. A capitalist (selfish) and undemocratic approach to human nature – the idea we all compete with each other for limited resources – has set us on a path that is decreasing the ability of people to live on this planet.
The idea of economic democracy isn’t so revolutionary; and certainly not mutually exclusive with political freedom. “Public Goods” and infrastructure, like roads and water, are controlled by the government to ensure a certain threshold of access and standard of living to the population, equally. Public schools provide a decent education for everyone; not just those that can afford Phillips Andover or Miss Porters. Cooperatives exist because they represent democratic economic structures. They are formed to provide goods and services for their members in a way that is fair and just; based on the same democratic structures and systems we employ in our government. They have constituents who form a voting body, an “executive branch” and a Board of Directors that plays the role of the Supreme Court.
If co-ops are the democracies of the economy, privately-owned companies are autocracies and dictatorships that exist solely to benefit the owners. Corporations on the other hand, are oligopolies that exist solely to create wealth for a few owners. The “owners” are not involved in the process or implementation of production, and are generally unaware and unaccountable for the casualties along the way, the backbone of the Limited Liability Corporation. It’s like American voters electing the congress and president of Zimbabwe, and basing their votes on what’s best for America.
If you believe in the justice and equality of democracy, you have to believe cooperatives are less likely to exploit one another, less likely to steal, cheat and destroy the environment. Examples like the Associated Press, Organic Valley and Equal Exchange are shining examples of successful cooperative businesses that promote equality, transparency, justice and social responsibility. Trade between democratically-organized cooperatives was the foundation of the organic and fair trade movements. By bringing wholesome food to people in a way that values people and the environment, they exemplify the transformative potential of democracy in economics; to empower, develop and invest in all people, fairly and equally.
Small Farmers. Big Change. 
It seems to me like now is the perfect time for some sort of democratic economic system to be introduced on a wider scale, in light of all of the hardship the current US financial regime is going through thanks to the sub-prime mortgage mess. It does seem unlikely that any kind of drastic sweeping change would happen quickly, but if organizations such as Equal Exchange continue to provide such a great example of how successful such a model can be, I would not be surprised to see our entire system retooled overtime to use a more democratic based system.
Great post Nick, really. I would like to also point out that humans, by nature, are social animals. We form ourselves into groups, communities, countries, because it makes survival as a species easier. We are only as technologically advanced as we are today because human knowledge is cumulative- new information and advances are available because of what past civilizations have learned and developed. When you keep this in mind economic democracy seems natural, like common sense. The difficulty lies in getting people to think critically about their world. Apathy is the real enemy, not the super wealthy capitalists. I guess it’s just so much easier to turn on the television.
Keith;
Thanks for your comment. I may post something to this affect, so keep checking in, but I agree with you wholeheartedly. I understand the sub-prime banking crisis required a timely response, but it discourages me to see that Wall Street and the US government reacted by further consolidating the banking industry. It seems to me that the enormity of Merrill Lynch, Fannie Mae, Freddie Mac, Bear Stearns… was, if not entirely responsible for their demise, certainly a factor that exacerbated their reckless lending; banks with trillions of dollars in assets and millions of “share-holders” become less and less accountable to their individual customers (average Americans who need bank accounts and hope to retire one day), and perceive themselves to be more and more invincible. And it’s absolutely the reason the entire country is feeling the aftermath; including those of us who had nothing invested in Merrill Lynch or Lehman Brothers.
Bigger is not better, and the further removed corporations become from their clients, the less democratic and quite frankly, human, they become. I believe corporate consolidation is diluting the quality of the global economy across the board; most obviously in our food system, but also manufacturing, technology, and banking.
Now does seem like the time for sweeping democratic reforms to our economy, but I fear we cannot rely on Wall Street or Capitol Hill. We can only hope that a few thinking Americans see through the hubris and move their money into a credit union or community-oriented bank that values people and their customers over the market-price of their stocks and their Christmas bonuses.
In cooperation,
Nick
Interestingly enough I just finished reading my home state’s senator Bernie Sanders comment on the current financial mess: “This country can no longer afford companies that are ‘too big to fail” — the full paragraph response to the crisis can be found here: http://sanders.senate.gov/
but I agree entirely Nick. While we may (this is arguable depending on how you define value and progress) gain efficiency and seemingly overall value from growing economies of scale and consolidation, we often lose some of the more intangible aspects of a social economy like knowing our clients and operating a transparent business. With food it is even scarier because unlike some of the other material possessions we encounter in our daily lives, food makes up who we are, how we feel, and how we relate to the earth we live on. As a result of corporate consolidation most people today have no idea where their food comes from and many people would have a hard time surviving with out frozen microwavable dinners.
But to end on a positive note – non-traditional Economics, at least in academia, has recognized, at least in some small way, the importance of cooperative business and preventing consolidation (such as what’s happening today) resulting in anti-competitive behavior. One good example is economist E.F. Schumacher’s famous book Small is Beautiful. It’s been a long time since I read it so I will just end this post with a nod to coop’s from Wikipedia: “For a large organization to work, according to Schumacher, it must behave like a related group of small organizations.”
I must agree with Keith. Countries around the world have given the free market a try, and when it spins out of control, governments comes in to take control of the economies, and when that spins out of control, the world, again, dogmatically turns back to the Free Market to solve all of its problems.
It’s time, that we the people, try something different; a third alternative to state control and market control. That alternative is a cooperative economy that is controlled by the people. These boom & bust cycles cause real suffering to working and middle class people, all while increasing the gap between the haves and the have-nots.
But these cycles of distress can be lessened if we democratically control the places where we buy our groceries; the financial institution that we place our money; the industries where we work and much, much more!
It is time for the people to offer an alternative to the state and the market, to show the world there is another way to make “progress” while offering equality and environmental sustainability. This is the third way, the Cooperative way. And it is a system that Equal Exchange is currently working under and actively working to promote, along with it’s Consumer Cooperative partners, it’s Producer Cooperative partners, it’s Financial Cooperative Partners and it’s Worker Owned Cooperative partners. And it is through this Cooperative economy that we can help rebuild the world’s economies, starting from the ground up, and controlled by all of us!
This may sound idealistic, but at times like these, we need idealism, we need a light to guide us forward. We need to know that the solution can rest with us, and if we start creating institutions that are controlled by the people, that we can start building our own solutions, rather than waiting the rich and the bureaucratic to attempt to do it for us. The Cooperative way is this light, and if we work together, we can use this light to guide us through yet another economic crisis created by free markets and irresponsible governments. If you are doubtful that we can do it, you only need to look at the Farmer Cooperatives that Equal Exchange works with, or the Consumer Co-ops that they sell to, or even Equal Exchange itself, which is organized as a Worker Co-op, to know that not only is this possible, but it is growing with every passing day!
That was a great post Nick. I believe in the concerted efforts of local citizens that have success with an alternative model of exchange (barter, the “Ithica” hours) This makes a difference on a small scale.
In other communities it would take a willingness from citizens of the community despite general apathy and overall lack of resources to gain momentum resulting from marginalization, segragation etc.
Despite this, there is succesful economic models on various levels(worker co-ops, barter, particapatory economics) by affluent people in this country that, in times like these, will become appealing to more and more people. This falls in line with CSA and farmers markets.
I think this post makes a lot of great points, and it certainly would be great if the world had many many more cooperatives. Just for the sake of discussion, however, I would like to point out that it may be a little hasty to equate corporations, especially public ones, with dictatorships. Shareholders, in theory, have a vote and therefore a say in how the company is run. Shareholders may number into the thousands, making them look more democratic than the dictatorship term might suggest. Furthermore, where to those billions of dollars that the corporations have come from? They come from consumers who, effectively, “vote” with their dollars. The rise of organic food in markets across the country are examples of what happens when consumers “vote” with their dollars.
Therefore, we need to make sure that we keep making sure that consumers are educated as much as possible, that they have many alternatives (small is much better for us), and that we keep bringing attention to global poverty so that everyone who votes in every form can make good decisions. Nick’s post is a great example of that, and I look forward to more!
Raymond, those are great points; and very valid. It is definitely a stretch to say that corporations are the dictatorships of the economy. I do think they have a lot in common though; for starters, I think the majority of corporations, even public ones, are dominated by a few holding companies or families; Berkshire Hathaway, the Waltons and Rockefellers; much like… House of Saud or the Somozas in Nicaragua; and one vote for every dollar isn’t democratic; “demos” means people, not money. In a corporation, people with money vote on how to become richer; and how to benefit themselves, not the business per se, its customers or its employees. Likewise corporate pay structures are unimaginably unfair, undemocratic and autocratic.
I absolutely agree consumers, individuals, voters and investors all share in the blame; for voting the way they do, for investing the way they do, consuming, spending, complaining, and most important, to quote JFK, enjoying the comfort of opinion without the discomfort of thought. To refer to Phyllis’ post, and this sense that “bigger is better”, Americans seem to feel that “bigger is smarter”; that we no longer need to question leaders or employers. That is certainly the downfall of democracy.
It does also make me think of the economic melt-down, not that it’s an easy target right now or anything, but those banks were lending our money; all the Americans who have bank accounts and retirement plans, and everyone who pays taxes. We are responsible for allowing the people we trust with our money to lose it and go out of business. As a whole, we have lost our connection, ownership and accountability to/of the system we’ve created, and tacitly “vote” for every day but not challenging it.
Thanks for calling me out, Raymond. I’ll look forward to hearing more from you.
Nick