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OPINION: Economic Democracy

By: Art Warmouth

Oct. 4, 2013

We are currently living a moment of historical transformation as profound as the revolutionary period of the 18th century.  The social construction of economic democracy is as urgent now as the construction of political democracy was then.  Complementary currencies and local investing are essential tools for this transformation.

We need to redesign our cultural, economic, and political institutions to privilege the quality of life and human relationships over material consumption.  We have the science to be able to manage natural resources on a sustainable basis, but we need a new vision of economic development based on investing in social capital that can guide the creation of appropriate economic and political institutions.  Among other things, this means relocalizing all aspects of the economy – there are many – that cannot be efficiently and sustainably managed by the globalizing economy of manufacturing and trade.

Many of us in the Bay Area are involved in networks that are redesigning the monetary and banking system, and we need to enlist political leadership that can take the innovations we are working with to the scale needed to address the core problems.  That means enlisting local governments to do more.  But it also means encouraging state leaders to create appropriate policy contexts.  And it also means creating new hybrid political institutions such as Peter Barnes’ suggestion of “commons trusts,” as well as planning organizations that can develop and integrate government and nonprofit services in the economic commons. 

The “commons” – an idea that was being promoted by Jonathan Rowe before his untimely death – is central.  It identifies an economic domain – really two economic domains, the natural and social commons – that are ignored by free market economic ideology and even largely ignored by free market theory.  The  bromide that “The private sector creates wealth and the public sector consumes it” is just flat out wrong. 

Thus I see three primary target audiences for a revolutionary curriculum:

  • State and local governments
  • The investment community [We need an army of investment managers who can invest in real wealth creation (mostly social capital, that is, socially useful organizations).]
  • Higher education (education for citizenship)

In my view, an understanding of economic rights is a key concept for the 21st century.  It can anchor economic democracy in much the same way as political rights anchored the 18th century revolutions establishing political democracy.  The core economic rights are the safety net of food, shelter, and health care.  Education and public safety are also basic economic rights.  In the implementation of economic rights, public policy is only one element in the redesign of the economic systems needed to support these rights.  Politics and government have a limited but guiding role.  The social institutions that provide food, shelter, health care, education, and public safety are mostly local, or at least regional in scope.[1]  Therefore, the systems redesign that is necessary to provide access to all of these resources must be based on local needs and resources.  National and state programs[2] can help and provide economic support.  But the details must ultimately be worked out locally, and the sectors that serve these basic rights must be actively involved in the redesign process.

Some of the priorities that have been developed by the complementary currency and local investment movements that need to be central to the curriculum:

  • The need for alternatives to debt-based legal tender.  Mutual credit clearing is probably the most robust model of local currency.  Time Banking has a proven track record in the low tech service economy.  Businesses and organizations need to learn how to use multiple accounting systems.  Local governments need to become trusted issuers of local currencies (thus gaining the benefits of seigniorage).
  • The need to enlist retirement savings in order to realize the requisite scale of investment in system redesign.  This will require new investment instruments that invest in real wealth and in preparing the world for a growing retired population.  It will require a new breed of investment mangers who are able to deal with complex needs and goals for creating the society of the future.  It will require recognizing the imperatives described by Peter Ducker in 1976 in The Unseen Revolution (reprinted in 1996 as The Pension Fund Revolution).
  • The need to tax environmental externalities rather than productive economic activity.  This is Lester Brown’s agenda, and until externalities are largely eliminated, it might be sufficient to fund the social commons.  It harkens back to Henry George’s idea of the single tax on land value.  A critical problem is that the preponderance of unmet needs reside in the commons.  In the long run, it will take a combination of progressive taxation of the market economy, cooperative and pension funded ownership, and philanthropy to assure a proper balance in the allocation of resources to the market and the commons.

The bottom line may be that local currency and local investment need to go forward in a coordinated fashion, and investors need to realize that investing in real wealth is the necessary alternative to boom and bust paper entrepreneurialism.  Preserving and growing real capital (social more than material) are more important than looking for higher returns.  The average rate of return is going to reflect growth in the real wealth of the economy (and the average return is always going to be average).   Figuring this out could unleash the new generation of entrepreneurs and investment managers that is necessary for saving the planet.

And perhaps we have learned enough from Mahatma Gandhi and Martin Luther King to make this a nonviolent revolution.

--Art Warmoth, Ph.D.


[1] There are significant global markets in food production and medical technology and pharmaceuticals.  In the former case distribution is local and there is a largely unrealized potential for sustainable local production.  In the case of medical technology, its use is in the hands of local professionals who actually deliver medical services. 

[2] Current major government safety net programs include food stamps (now called SNAP), HUD housing vouchers, and Medicaid, along with intergenerational transfer payments including Social Security and Medicare where current generations of workers pay forward for their own retirement security by supporting the current generation of retirees.


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