Second Principle of Economic Democracy

2) The second requirement for economic democracy is that increasing purchasing capacity must be guaranteed to each and every individual. In economic democracy local people will hold economic power. Consequently, local raw materials will be used to promote the economic prosperity of the local people. That is to say, the raw materials of one socio-economic unit should not be exported to another unit. Instead, industrial centres should be built up wherever raw materials are available. This will create industries based on locally available raw materials and ensure full employment for all local people.

Commentary: Understanding that the minimum requirements for life are the rights of every human being, the question is how to ensure these rights. Certainly not by a party dictatorship, as in communism. Certainly not by socialism, where bureaucrats micromanage people’s economic lives and makes plans without knowing the local area. If the state is to supply cereals, pulses, salt, gram, ghee, butter, etc. to all people then naturally the state has to institute some process of control which people may not like. The other disadvantage of guaranteeing the supply of minimum requirements is that if consumable goods are supplied to everyone, people will become lethargic and individual initiative is retarded. Economic democracy is not guaranteed by government handouts because being a beggar of one’s own government is not freedom. In countries where there used to be a good income provided as welfare payments, often people were seen to do low-level jobs for a short time and then quit and spend the money and then again work when the money ran out. This type of behaviour arises because people are not in control over their economic destiny and hence do not care about their long-term future and do not take responsibility for their region and nation.

For people to take charge of their own economic destiny requires them to have the capacity to earn their money. This is why PROUT believes in the guarantee of purchasing power of every individual and community must be incorporated into all constitutions – be they provincial, national or global. Purchasing power simply means that people earn enough income to buy the basic food, clothes, medicine, education, housing, telephone, etc that are needed in daily life. Furthermore the purchasing power should increase over time so that people are able to buy more items. This is because, as per PROUT the sign of a healthy economy is the increase in the standard of living of the common people. Per capita income is not a proper indication of the increase in the standard of living of the people because while people may have very high incomes they may not be able to purchase the necessities of life. If the per capita income is low and people have great purchasing capacity they are much better off. So, purchasing capacity and not per capita income is the true measure of economic prosperity.

The first thing that must be done to increase the purchasing capacity of the common people is to maximize the production of essential commodities, not the production of luxury goods. This will restore parity between production and consumption and ensure that the minimum requirements are supplied to all.

The problem today is that although there has been inordinately high investment, the purchasing power of labourers has not been sufficient for them to meet the minimum requirements. Hence, while on the one hand labourers received less consumable goods due to less purchasing power, on the other hand entrepreneurs have captured excessive purchasing power and consumable goods causing excessive disparities in wealth. Economic balance has been upset. So, increasing the expenses of a government department at the cost of developmental programmes amounts to committing economic suicide as the workers will have no money to buy the products they produce.

The very psychology of capitalists is to make profit from the rolling of money or global flow of currencies and commodities. When they discover that the investment of money does not bring profit up to their expectations, then they stop rolling money. This keeps money immobile or inert. As a result, consequently there is no investment, no production, and no income and hence no purchasing power.

If the percentage of the population engaged in non-agricultural industries in a country is less than twenty percent, the country is said to be industrially undeveloped. The per capita income of the people cannot be very high. The standard of living also cannot be very high because people’s purchasing capacity remains very limited. Because of the low capacity for purchasing consumer goods, the import index always remains lower than the export index, or in other words the area has to remain a satellite of a developed country. Consequently, the balance of power in the world is jeopardized and war is always possible.

The situation becomes so dangerous that there are few buyers to buy commodities – both in the exploiting nations and the exploited nations. This is the fundamental crisis in capitalism is that the maximization of profit leads to excess production and the reduction of the purchasing power of the common people. This leads eventually to an economic recession or depression. To save society from depression, the approach of PROUT is to increase purchasing power by increasing production, reduce disparities in the value of wealth, and increase the circulation of money; that is, by keeping money rolling.

In the subtle economic sense, the value of wealth is the real wealth. Wealth, if not properly defined, may mean only riches. But the value of wealth is to be measured in terms of its capacity to purchase commodities. That is, the purchasing capacity of wealth is its real value. This real value of wealth has not yet been properly understood in numerical terms by economists.

A sadvipra or spiritual revolutionary is one who liberates people from harmful physical exploitation and also psychic exploitation by fighting with them to seize control of their local economy from bureaucratic and corporate usurpers. In that case the state need not adopt control measures. When people have economic dignity and self-respect they will naturally become active and their potential talents will blossom.

It is not enough to provide the minimum necessities of life – simultaneously, the wealth of the country should also be increased. If sufficient wealth is not generated to meet the growing demands of the people, seeds of discontent will settle in their minds. So the increase in population should also be accompanied by an increase in the generation of national wealth. This increase in national wealth is not achieved by economic centralization which creates poor, marginalized regions and rich regions for this regional economic exploitation leads to eventual breakdown of the national economy.

The central government should not control large-scale industries because this may hamper the interests of local people. Where there is a federal system of government, these industries should be controlled by the immediate government, and where there is unitary government, they should be managed by local bodies.

Industrial decentralization is only possible in a collective economic structure. No profit motive will remain in such a structure. Capitalists start industries only where the following factors are available: (1) capital; (2) labour; (3) favourable [economic] climate; and (4) a ready market for sales. They always try to decrease the cost of production and therefore hence they will never support the principle of decentralization. In the collective economic structure the profit motive has no place – here industry is for consumption. In the collective economic structure, self-supporting economic units are to be strengthened.

Capitalism was based on the exploitation at the county level, then at the regional level and then at the national level. What PROUT advocates is the reversal of this trend or economic decentralization. This mandates the creation of a grassroots economic revival based on the local talent and local people charting their own economic destiny in consultation with ecologists, economists and other experts. What this means practically is that local resources will not be stolen by other regions or nations. The local resources will be used to create local industries. This will stop the brain drain as well as urban flight which not only destroys agricultural production but also results in moral and cultural debasement. This will also foster the development of local, regional and global civilization. Moral values, folk culture and spiritual or mysticism thrive in a decentralized society where they emerge naturally out of the process of ecological, economic, psychological harmony with the local environment and with the inner realm of spiritual bliss. Furthermore indigenous peoples (adivasis) who are what is called the Fourth World in a decentralized economy will be able to attain economic and cultural freedom from exploitation by the majority ethnic population. In reality indigenous peoples used to know countless rare plants that have thus far not been used as crops because of the monoculture of capitalist agriculture.

It is not enough to simply create a few industries. Shrii Prabhat Ranjan Sarkar called for an industrial revolution based on local resources including rare, lesser known ones such as for example types of bamboo which are as hard as steel. The goal of this industrial revolution is to create economic independence as far as possible at the block (district subdivision) level, at the district level and then at the regional (samaja) level. The aim behind this industrial revolution is to create regional cultural and economic freedom and sovereignty (svaraja). For this industrial revolution we must not depend upon raw materials from foreign countries. Remember that no country should depend on imported raw materials for development. Indigenous raw materials, that is, materials available within the country itself, must be used for this purpose. Those who love society – those who love the people of their country and are keen to bring about their socio-economic elevation – must think in terms of an industrial revolution based on the raw materials available in their own socio-economic unit.

The economy of the area and the social life of the people should be balanced. The development of big industries alone should be avoided, because in such industries the local people have no place.

Maximum industries should be developed in the local area according to the availability of raw materials or local consumption. This principle will develop the economic potential of a socioeconomic unit by placing economic power into the hands of the local people and divesting outsiders of their control over the economy. In an economy most industries will be run as agricultural, producer or consumer cooperatives creating a new kind of cooperative spirit or cooperative dynamo. Such an approach will place economic power into the hands of those who work physically or intellectually for proper production, stripping capitalists of their exploitative economic power. Thus maximum industrial development will be assured.

Several corollaries arise from this principle. First, industries should utilize locally available local raw materials and should not import raw materials from outside the socioeconomic unit. Raw materials are the basic ingredients or resources necessary to make finished products. The tyre industry, for example, requires rubber plantations as rubber sap is the basic raw material for this industry. If the topography of the local area favours the ample growth of rubber trees, then industries may be created around this raw material. Or, if alternative synthetic materials are available, a synthetic tyre industry may be developed.

There are several reasons why industries should utilize locally available raw materials. First, not all areas have the same socio-economic potential. Different areas will naturally be conducive to producing different kinds of raw materials, as in the case of plant-based raw materials. Industries based on locally available raw materials can produce commodities cheaply, be located near ready supplies of raw materials, and ensure their self-reliance. These advantages are not apparent where there is a dependence on outside raw materials.

Secondly, raw material producers, especially producer cooperatives, will prosper as there will be ready markets for their products.

Thirdly, industries will feel secure when they know that sufficient raw materials are available to supply their needs, and they will be able to plan their future production efficiently.

Fourthly, many large capitalists deliberately influence the economic and political policies of a local area by preventing the growth of local industries based on the local raw materials. They further exploit the local people by selling manufactured goods in the local markets which are made from locally produced raw materials. Australia, for example, imports many manufactured goods from Japan which are produced from Australian raw materials. Encouraging the growth of local industries based on local raw materials will terminate the dominance individual and collective capitalists exercise over the local markets, ending the drainage of capital vital for the local area’s economic growth.

Another corollary is that local raw materials should not be exported – only manufactured goods should be exported. Local raw material prices in the export market are subject to manipulation and erratic fluctuations as they are currently traded through speculative commodity markets which are controlled by vested interests. To root out dishonesty from the field of trade, free trade should be established throughout the world as far as possible.

Manufactured goods, on the other hand, are generally subject to less price manipulation and command better prices than raw materials. By manufacturing locally finished products, a socioeconomic unit can conserve its reserve bullion and improve the purchasing capacity of the local people.

A third corollary is that if no potential exists to produce the manufactured goods required by industry in the local area, only then should the importation of such goods be allowed. Importation of manufactured goods means that local capital is being transferred to another socio-economic unit which has produced the product. The drainage of capital is always detrimental to the economic growth of a socio-economic unit; therefore unnecessary importation should always be discouraged. Barter agreements should be arranged between trading units so that no net loss occurs to either of the trading partners. Barter agreements in foreign trade are especially beneficial for those socio-economic units which have very few commodities to sell but a large number of commodities to buy, and their saleable commodities, though few in number, are large in quantity.

Thus, where there is a plentiful supply of local raw materials, industries can be developed for local demand according to local consumption, and if applicable the surplus may be exported. The availability of raw materials will ensure the long term viability of local industries.

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