Category Archives: Socioeconomics

Dignified Socio-economies Both Closed and Open

By Trond Øverland

Keywords: Protectionism, free trade, national capitalism, Prout.

Whenever someone mentions "the economy", many of us actually think of "our society and its economy". It is hard for most people to separate "economy" from "society". We often hear about fluctuating interest rates, unemployment figures, retail prices, and stock exchange markets, but all the while we wonder how such developments might impact us and our families, society and peace.

"Socio-economy too is a
collective expression of humanity"

Among all living beings, humans in particular seem to have clear ideas about progress. We aspire to be something much more than just a cog in a wheel; a piece in a financial puzzle and a figure in someone's Excel sheet. We feel deeply that our society isn't just meant to be an economic machine. First things first then: Actually what is a society?

Societies obviously consist of living beings. Still, for a group of people to qualify as a society they require something other than just being many in number. Societies of monkeys, thieves, and of human beings all have their particular features and qualities, a sort of purpose and dynamism that make them come alive in their own way as a society. 

Take the example of passengers on a metro train. When boarding the train, all we may see is a collection of random individuals seemingly unrelated and socially quite inactive. Whereas if the train comes to an unexpected long stop in an awkward place, or an accident takes place inside the carriage, those previously apparently unrelated individuals would suddenly start to interact. Personalities, groups, etc. will come into play and a kind of society will manifest among them. Some passengers will proceed to form parties and opinions: A few will take the lead, others will follow, one or two will want to be daring, others cautious, some will argue, others will be commenting bystanders, some will try to get a more comfortable place, etc.

Still, the orderly passengers we saw when we first boarded the train also formed a society even when all they did was quietly reaching their respective destinations together. After all they were not that passive but had already paid their fares in order to form a society of passengers on their journey.

Historians label societies. For instance, our present society and times are said to be characterized by rapid technological advancement, ruthless economic competition, the emancipation of women, ecological awakening, cynicism, and a great many other things. Past societies and times have been labelled as matriarchal, patriarchal, monarchic, dark ages, enlightenment, industrial, modern, post-modern, etc. Such labels intend to convey something about the ways and customs of those societies. The long string of these labels may lead us to conclude that:

  1. We the members of society love to define collective and individual potentiality, perhaps as a way for us to better know and become ourselves.
  2. Societies frequently move from one such label to another, indicating that we have it in us to change our ways fundamentally (having to do with our evolved basis), and even rudimentally (having to do with our existential roots), in order to realize fresh potentiality. 

Socio-economics, more than just economics

All living beings are born into some society or the other. Like ants in an anthill, for instance. Society is where we humans grow up to fulfil our instincts, interests, and dreams. Society is our playground, school, university, and workplace — our common home and world.

In society we realize ourselves individually and collectively. As collectives societies exhibit particular properties of life in their own collective ways. Collective sentiments of anxiety, safety, sorrow, joy, depression, hopefulness and bliss, indifference, compassion, passivity, participation, possessiveness, generosity, animosity, friendliness, revenge, forgiveness and grace, etc. are among the chief momenta we see reflected in the behaviour, traditions, and laws of societies. 

Naturally, features expressed most clearly by a majority of the members of a society will typify that society. Coming back to our original subject, which is socio-economy, purely economic factors, such as investment, financial returns, and profits, are far from common to most humans but found to be dominant only among a small minority consisting of traders and others intimately connected with economics. On the other hand, the general goals and values of society — survival, security, belonging, togetherness, creativity, cultural growth, civilizational refinement, spirituell emancipation, etc. — are universal and the domain of all. It follows that society is something more than economic affairs, and that economy should be subordinate to society.

Socio-economy of individuals and groups

We have now established that, like any other dimension of human society, socio-economy too is a collective expression of humanity. One feature of socio-economics is its need for both closedness and openness in order to function properly. In human terms we may say we need a certain degree of privacy and stable personal circumstances in order to strengthen our self-reliance, while at the same time we need to develop social skills and ability to engage and participate. It follows that the closedness of a society maintains its rudimentary existence and basic identity, while its openness generates further development and integration beyond its indigenous limitations into a larger world and universal spirit.

“Countries with closed economies are entirely self-sufficient and neither export nor import goods. …
In an open economy, the country willingly trades outside of its borders, including both imports and exports…”2

Closed socio-economy

A society's first priority is the security of its members. From a security point of view, basic necessities should be produced domestically. Not only should crucial commodities be home-grown, they should also be tax-free (according to Prout1 regular domestic taxes should not be levied at the consumption stage in the form of income tax and VAT but at the starting point of production).

This is a main aspect of the closedness of a Proutistic socio-economic system: A strong foundation of basic self-sufficiency. If such self-reliance is not established, efforts should be continued until basic self-reliance is achieved.

"Socio-economic dignity starts
with basic security and rights."

Here the term closedness is not used as in "a closed society" or "closed economy". Psychology has taught us that abused people need to learn to set boundaries for others so that their life of abuse ends. This has to be done without becoming isolationalist, self-centered, or abusive oneself. In the same way, societies, too, need to exercise a certain autonomous control in order to recover their sense of dignity. When one is vulnerable to the control of others, one has been deprived fundamentally of their dignity and becomes a victim. Such abused socio-economies may be termed as vulnerable or victimised socio-economies. A properly developed socio-economy is self-reliant open to dignified interaction. Socio-economic dignity starts with basic security and rights.

Another aspect of Prout's dignified socio-economics is its emphasis on mother tongue and local culture. The propounder of Prout, Shrii Prabhat Rainjan Sarkar, noted: "The psychology of suppression undermines the progress of a country. People will eventually revolt against it and restore unity. The sentiments of people cannot be forcibly suppressed for a long time. Human beings best express themselves through their mother tongue. If people’s mother tongue is suppressed, it is equivalent to strangling them. The suppression of people’s mother tongue is a sin."3 And, "According to the policy of PROUT, besides the mother tongue, students can also learn as many languages as possible. Let people know as many languages as they can. Still, in the practical field—government and non-government work and court work—the mother tongue should be used."43

Open socio-economy

No matter how much we human beings value our security and cherish the soil, stones, grass, plants, trees, mountains and coastlines of the country of our birth, we still dream of a greater world beyond. Human history abounds with tales of exploration of the unknown. And of great migrations. And these days, airports all over the world require constant expansion and upgrading, while on the Internet we may find and study in depth … 

Crude and subtle indications abound of our universal craving for the unknown: The science of ecology tells us that all of us as well as each and everything are interconnected, while the science of spirituality prods us still further on in this respect. As each one of us awaken once again to these old truths it becomes evident that we clearly want to find the link between that which is already known to us and that which is still not.

Our common need for basic security coupled with the innate human longing for further exploration present us with an apparent socio-economic riddle: No security-conscious society can afford to leave its basic necessities to chance or to foreign powers naturlly concerned first and foremost with their own local interests. On the other hand, we cannot and do not wish to remain in isolation.

Prout's solution to this historical conundrum is balanced dynamic development. Another term for it would be movement towards synthesis. Faced with society's basic need to be socio-economically self-reliant, Prout balances the closed dimension with being open to global trading and bartering of semi-essential and non-essential commodities, and promoting free trading and bartering of overproduction (more on this free trade model below). Cultural exchange and cultivation of a general non-dogmatic spiritual outlook and its practice throughout the educational system completes this approach to synthesis.

Socio-economics is not an isolated field of human activity — all kinds of human acitvity are mutually related. Prout therefore invites further interaction and syntheses between various countries and regions for improved security and further progress. For instance in the form of common environmental planning and projects; implementation of universal legal values; human, animal and plants rights; united military strength, etc. For the smooth running of such global dynamics, Prout suggests the establishment of a world government based on a world constitution.5

Earlier in this short essay, society was defined in a general way illustrated by a few examples. Particularly on the socio-economic point, Prout defines societies as people with same economic problems; uniform economic potentialities; ethnic similarities; sentimental legacy including language, historical traditions, literature, common usages and cultural expressions; and similar geographical features such as topography, river systems, rainfall and irrigation water.

"A healthy socio-economy is both closed and open, serving a conglomerate of human beings, animals and plants in a dignified way."

With a proper closed-open balance such dignified societies will continue to grow both their own independent core as well as their ability to reach out and interact. In the process, adjacent societies will increasingly find that they share socio-economic characteristics and challenges with their neighbours. Naturally, Prout suggests the merger of properly self-reliant, mature, well-matched units into greater and still greater units—until the entire World is established as one smoothly functioning dignified socio-economic unit.

Protectionism and free trade

A healthy socio-economy is both closed and open, serving a conglomerate of human beings, animals and plants in a dignified way. It is firmly secured at its core and outwardly participatory. As such, societies can deal and adjust with constant changes in both domestic and external circumstances.

Coming back to the economy again, Sarkar suggested free trade6 (trade free from export and import duties) in someone's overproduction as a solution to the underproduction of others. Sarkar reasons that such trade will allow overproducing- and underproducing countries to make adjustments between themselves. Overproduction of any industrial or agricultural produce in one country may be consumed by another country where there is underproduction of the same commodity. 

Prout does not however support trading in raw materials. Wherever there is production of raw material, efforts should be on producing refined goods within the country and not just shipping raw materials abroad. 

Sarkar noted that local raw material prices in the export market are subject to manipulation and sudden 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."7

The refining of raw materials at home will strengthen domestic technology and know-how whereas wholesale exports of raw material will only increase trade imbalances (the difference between the value of a country's exports and imports) due to the fact that consumer products generally command higher prices than raw materials. For instance, if a country exports cotton and imports cotton products it will stand to lose in so many ways on the transaction.

Prout's raw material doctrine is of course diametrically opposed to the present trading practices of global capitalism. Prout clearly contradicts the classic capitalist theories on the importance of comparative and absolute advantages in the creation of global wealth, formulated by Adam Smith and David Ricardo. Today, all that is left of Smith and Ricardo's theories is the frantic search of capitalist exploiters for profitable resources (cheap labour, available raw materials, ready markets, etc.) all round the world. Those basic ideas of global capitalism, once heralded as harbingers of universal prosperity, are no longer indicative of any mutual benefit but only of one-way profiteering.

Prout's model of trade can be said to be a synthesis of protectionism and free trade. This synthesis will, like Prout itself, remain dynamic and not cut in stone. Prout's dynamic model of trade, which opens the doors to both protectionism and free trade, will be able to adjust to constant changes in various countries and the world in order to serve consumers first and foremost and then society.

Two socio-economic solutions

It is often said that capitalism is an open system. Open to what, one may ask. At most we can say that capitalism seems to be wide open to exploitation of any available resources. With its dominating tendency towards centralisation of wealth, capitalism seems to be more of a closed system as far as generating opportunities for all individuals and the collective. 

Prout points to a number of significant conflicts and contradictions under capitalism that need to be resolved. Two particularly severe structural dichotomies are:

  • Unbridled private wealth accumulation as opposed to rational distribution  
  • Profit maximization as opposed to maximum utilization

Unbridled private wealth accumulation vs. rational distribution 

Rational distribution instead of unbridled accumulation has to do with ensuring universal access to resources and prevention of fatal standstills and collapses. Apart from the enormity of the suffering that capitalist exploitation has caused to society before the onset of its own serious crises and eventual collapse, there are two particularly critical structural downsides to its exploitative nature that his capitalists themselves in the final phase of capitalism; one physical and the other mental.

Firstly, the colossal accumulation of physical wealth by a few leads to a state of affairs where vast funds are no longer accessible to society. The negative implications of such a situation become particularly apparent in economically uncertain times when the exceedingly profit-hungry and hyper-rich few prefer to hold back on investing instead of risking losing on it.

This holding back of enormous and most critical capital reserves in times of particular need naturally results in large-scale financial and industrial standstills. It is the natural outcome of the speculative, hesitating, and essentially criminal motivations of the mega-rich and most greedy at a time when profitable opportunities no longer abound but their essentially exploitative instincts probably are stronger than ever before.

This is the second downside to liberal capitalism: The psyche of those who keep accumulating beyond their actual needs, and at the cost of the life quality and indeed lives of others, corrupts increasingly and degenerates into sub-animal greed and crudity. In the end such people become unable to perceive—not to speak of act on—the acute needs of severely deprived individuals and societies, even in times of their extreme physical, mental and spiritual crises.

In fact, not even in its worst nightmares does the capitalist instinct dream of kneeling humbly before humanity. Rather, in the same way as the proverbial duty-bound seacaptain prefers to go down with his ship, the capitalist demons in human form would sort of prefer to one day leave the rest of us for good with all their ill-begotten riches in hand even if in this case that would call for the entire world to go down first.

Remove the rich from socio-economic power

In order to liberate society from economic exploitation, Prout suggests to initially:

  1. Remove the rich from socio-economic power.
  2. Limit individual accumulation.
  3. Establish a system of rational distribution where everyone is guaranteed a minimum of purchasing power in exchange for their work, and where the extra output of the industrious and those with above-average talent are further rewarded from what is left after everyone's basic needs and those of the collective are secured.

This is the value of rational distribution: To provide for the minimum needs of all (on the strength of their work) and at the same time reward those deserving and meritorious for their above average output.

Profit maximization vs. maximum utilization

Profit maximization vs. maximum utilization has to do with the utilization of all kinds of resources: individual, collective, physical, economic, political, social, cultural, mental, and spiritual resources. Let us first take a quick look at the main controlling hubs of all such resources today: Stock exchanges.

The main task of companies listed on stock exchanges is to reward share owners for their investment. This basically counterproductive business template has led to a universal rat race where “leaner and meaner” equals good practice. The term "counterproductive" has been used, as it seems so much more productive to allow investments to be harvested by those who work on them directly, and not by someone unrelated

This is the same principle as the one applied in the establishment of basic security touched on earlier when discussing socio-economic closedness. We should attempt to properly appreciate the socio-economic implications of direct ownership by employees, and conversely their potential alienation towards the total value created by the enterprise they work in.

As already mentioned, global capitalism involves opportunistic restructuring and reallocation of operations to wherever cheap raw materials, labour, etc. are readily available. This essentially one-eyed, profit-motivated strategy entails layoffs, poverty, and ruin in formerly prosperous areas being suddenly laid to waste by the sociopatic dictates of stock exchanges and big banks.

By contrast, Prout upholds the principle of maximum utilization. It means continuous accelerated all-round output of individuals and societies, and not of their financial output alone.

As already indicated, human beings and their societies possess numerous physical, mental, political, social, cultural, and spiritual potentialities which can be harnessed and put to good use. A society is a collective mirror of its individual members in many respects of their lives, and at the same time societies take on their own, collective shape and form. To paraphrase what has already been stated: To make economic potential the end all of individuals and society is not only a serious misapprehension – it perverts the natural evolution. The most natural thing for human beings is to bring the potentialities of all living beings towards fulfilment. Capitalism, on the other hand, is a system that allows only for the greed of a few to grow by all leaps and bounds at the cost of the life quality and indeed the life of the rest of us.

Very few human beings are, as already mentioned, economically motivated in their basic life aspirations. The most important thing for most of us is to be well and live our lives in satisfying physical, mental and spiritual development and richness. Only a very few are willing to renounce their mental and spiritual development in order to sacrifice all their life energy for the collection of physical riches at the cost of the welfare of others.

If the prevailing system dictates an exclusively economic approach to life, we should liberate ourselves from it. In order for us to embark on the journey from a profit-motivated setup to one of maximum utilization of all resources—physical, mental, spiritual—we first need to close down the stock exchanges and all other exploitative capitalist institutions, including all big banks except for the central bank. In the place of profit-motivated economics we should cultivate a socio-economy centering on consumer-motivated cooperative enterprises free of profit-motivation.8

Ideological concerns

Prout’s aim is all-round development. It wants people to live physically, mentally and spiritually fulfilled lives. Prout's definition of progress9 is movement towards the highest good, towards supreme emancipation. Practically speaking then, Prout's progressive socio-economics is embedded in trust in a clear idea of what all-round progress really is.

The bonds between individual human beings and societies are intrinsic, deep, and undeniable. Trust is an instinct, a basic inner force that living beings mobilize in order to bond with circumstances. In the same way as individuals need to trust themselves, societies need to trust their worth and innate capabilities. For this the members of a society require a clear image and understanding of their common journey through history and of the objectives and goals that are in front of them. Without such strong, deep-felt self-assurance and self-understanding little can be done.

Again we witness the need for closedness and openness playing round each other towards a greater and mnore comprehensive synthesis. Societies need to nurture both their native identity and their universal soul.

“Nacism”

Time and again throughout human history hero worship has provided the members of societies with much needed self-assurance and understanding – and not seldom with only a devilish semblance of it. Many a strong leader, armed with notions of ideological grandiosity, has attempted to hold up images of eagerly anticipated societal greatness. More often than not such imagery has been painted in colours of stark nationalism and even today, in our modern world of greatly expanded global sense and sensibilities, we still get to see the return of crude nationalism in many places.

Right now we witness the rapid growth of national capitalist (Naci) ideology both in superpowers such as China and the US, and in many European countries. Nacism promotes capitalist interests on a pseudo-nationalist platform. The term pseudo-nationalism is used here as Nacism carries the mask of nationalism over its real face of capitalism. Nacism is fundamentally fake and a contradiction in terms as capitalism's greed and level of exploitation will never stop growing by itself. The malignant cancer at the core of Nacism will continue to spread across any geographical boundary. Neither will Nacism serve any one nation (but only exploit its citizens) and neither will it stay within any limit or border. 

Nacism could turn out to be far worse than national socialism (Nazism). As Nazism and other geo-centred “isms” have already proven, nationalism produces to a very high degree excluding and negative sentiments and far much less inclusive and positive ones. The industrial force of Nacism coupled with its nationally mobilising force and the systemic coherence of global capitalism continue to bolster the momentum of this monstrous force in the world today.

Renaissance of a greater sense of belonging

The term nation indicates "unity based on birthplace". As already touched upon, the truth of ecology and spirituality is that we are all born on this planet in this Universe rather than that each one of us were born in a small special place. To those who have awakened to this ecological and spiritual ethos already, the sweet appeal of the “global village” is obvious. Today, claiming that one only lives in a country quite isolated from the rest of the world is a symptom of severe existential myopia with all its unfortunate consequences.

Our crises-stricken world is crying out for comprehensive, unifying, universal thinking that may serve today's emerging world society in all spheres of existence—physical, economic, political, social, cultural, mental, and spiritual.

Conclusion

The global economy appear as "the One ring to bring them all and in the darkness bind them". Indeed, more than any other current factor or element, capitalist economy dictates the lives of most of us, namely the conditions and circumstances we live in. So it is the economy we have to change if we are to liberate ourselves from exploitation and reclaim our existence locally and globally, individually and collectively.

We humans are many-faceted beings with numerous needs, aspirations, and potentialities. Whatever we are and desire to be, we are not just cog and wheels in an economic robot. Our main job is therefore not only to dismantle capitalism but also to construct and evolve a truly human economic system. It would be a dignified system where both socio-economic closedness and openness are recognized and put into practice and synthesized.

Sources

1 The fundamental principles of the Progressive Utilization Theory (Prout) propounded by Shrii Prabhat Rainjan Sarkar in 1959: http://proutglobe.org/2011/05/5-fundamental-principles-of-prout/
2 Source: “What are the differences between closed and open economies?”
-Reference.com
3 "Three Cardinal Socio-economic Principles," P.R. Sarkar. Prout in a Nutshell Part 16. Ananda Marga Publications. http://proutglobe.org/2017/03/three-cardinal-socio-political-principles/
4 "Talks on Education – Excerpt 4," P.R. Sarkar. Prout in a Nutshell Part 18. Ananda Marga Publications.
5 Material on Prout's concept of world government: http://proutglobe.org/prout/socio-economics/social/political/world-government/
6 “Economic Dynamics,” P.R. Sarkar. A Few Problems Solved Part 9. Ananda Marga Publications. http://proutglobe.org/2011/05/economic-dynamics/
7 "Socio-economic Movements," P.R. Sarkar. A Few Problems Solved Part 8. Ananda Marga Publications. http://proutglobe.org/2011/06/socio-economic-movements/ 
8 For more on Prout's cooperative economy, see: http://proutglobe.org/coops
9 The term progress derives from the Latin progradi, indicating «well-directed movement». The Latin term in its turn derives from pragati in Sanskrit, meaning the same thing.

Economic Indicators for Setting the Minimum and Maximum Wages

Economists have long wrestled with the question of how to achieve the most efficient output and distribution, in a way that is also equitable and fair. However, economic efficiency and fairness have generally been regarded as two separate issues. Many have argued that economists should not even consider equity at all.

“PROUT ensures an adequate “living wage” for every worker, and that extra amenities are provided for at a level that is fair and appropriate for society.”

The PROUT principle of atiriktam (the surplus available to society after the minimum necessities have been supplied to all) resolves this dilemma both logically and morally. PROUT asserts that the only justification for granting higher income to a person is to reward him or her for providing a greater benefit to society.

A higher salary may induce an individual to work harder or to improve his or her skills. However, there is a limit to the output any one person can achieve: personal capacity is limited, and there are only 24 hours in a day. Production may increase with material incentive up to a point, but cannot increase indefinitely. Inevitably the production curve levels off. After that peak, additional incentives will not increase the person’s productivity. In fact, further increases in income may actually decrease one’s productivity, as the individual decides he or she can afford more leisure.

This is based on a central principle of economics known as the Law of Diminishing Marginal Returns. Offering a salary raise that is a hundred times higher cannot induce any individual to work a hundred times harder or become a hundred times more efficient. Some individuals–such as corporation CEOs–are today earning salaries that are hundreds of times that of other employees. This reflects competitive bidding for their services rather than any valuation of their real worth.

Extremely high salaries are also paid to some players in professional sports. This is due to “free agency,” the legal right of players to join a different team when their current contract expires. When these rules were established in the United States and then in the European Union, salaries shot up. In the United States, in 2009 the average base salary of a professional National Football League player was about US$990,000,[1] and in 2010 the Major League Baseball player average exceeded US$3 million.[2] The UK Premier League football (soccer) average salary is equivalent to US $940,000.[3] Many sports stars are paid ten million dollars or more per year.

Some economists argue that these astronomical salaries reflect the revenues the stars earn for their teams. Many fans probably prefer that the extra money goes to the players rather than to the owners. Still, it cannot be demonstrated that the quality of play in these sports has improved. In other words, the higher salaries have had no incentive effect. It is unlikely that players would be lured to other careers if their income fell to the level of other professional salaries. From society’s standpoint, the higher salaries have little justification.

PROUT economist Ravi Batra devised the following system for distributing income, based on the principle of atiriktam (surplus wealth). In the following formula, A stands for atiriktam, NNP for net national product, L for labor force, and w for the real wage required for the minimum standard of living.

A = NNP – wL

When the real wage–the adequate minimum salary needed to comfortably purchase the minimum necessities of life–is multiplied by everyone in the labor force, and this is subtracted from the total product of a nation or of an enterprise, the excess is the quantity of surplus atiriktam available for distribution as higher wages or incentives.[4]

Continuing from this formula, Mark Friedman has further developed an economic model which demonstrates the optimal level of compensation to achieve the maximum productivity. From society’s standpoint, any payment beyond that is wasted, and so society should apply those surplus resources to other purposes. The model provides the theoretical framework for statistical studies; it also allows individual enterprises to pinpoint their optimal individual wages.[5]

Thus PROUT ensures an adequate “living wage” for every worker, and that extra amenities are provided for at a level that is fair and appropriate for society. Most importantly, workers are valued and recognized for their unique contributions. Society benefits from the worker’s productivity, which is maintained at a high level.

In the case of socio-economic regions, Proutist economic boards will have to calculate the legal minimum salary for an individual and his or her family based on the cost of the minimum necessities in that area. This would be considerably higher than the current minimum wage in virtually every region of the world. Of course, the cost of living is cheaper in economically less developed regions, so the minimum salary can initially be expected to be set lower in those regions than in more developed countries.

The boards will then have to calculate, using Gross Domestic Product and other indicators, the surplus wealth presently produced by the economy–that is, the difference between the total national or regional income and the amount needed to provide the minimum wage. This information would enable the calculation of a maximum legal wage for the local economy. This ratio–between the minimum and maximum salaries–could be expected to be initially set higher in less developed regions, then gradually reduced as the standard of living and the overall quality of life improved.

For example, Norway has one of the highest standards of living (fourth in the world, according to the IMF, with US$52,238 GDP per capita) due in large part to its petroleum reserves and hydroelectric capacity. The United Nations ranked Norway first in the world in its 2010 Human Development Index listing. The country also has one of the lowest wage gaps in the world. The lowest salary for a Norwegian government employee in 2010 was US$36,000 annually (207,900 kroner, wage level 1), and the highest was US$192,000 (1,106,400 kroner, level 98), 5.3 times more.[6] By comparison, U.S. government federal employees have a 10 to 1 gap, starting at US$17,803 (General Schedule grade 1), and the highest is US$179,700 (Senior Executive Service).

PROUT economist and historian Edvard Mogstad, together with the think tank Bevegelsen for Sosialisme, assert that the egalitarianism of Scandinavia is the secret of its economic success and low unemployment. They propose a policy which ensures that nobody should earn less than half of the average income (which in 2010 was US$70,000), and the maximum wage should not be more than four times the median income. That gives a ratio of 8 to 1, which they feel is the widest acceptable for Europe. They also propose that constant effort should be made to lessen that gap.[7]

The requirement of a livelihood-level minimum wage would eliminate some under-paid, low-productivity jobs. For example, live-in domestic assistants in undeveloped countries are paid so little that most middle-class households have at least one, while in developed countries only the wealthy choose to pay the decent wages required for that service. A Proutist economy would no longer permit the exploitation of underpaid manual workers.

People with physical or mental disabilities, or who for any other reason are unable to do high-productivity work, would have their income subsidized or be employed in a public works project or some type of service cooperative. With the exception of social security for the elderly, a system of full employment would replace most of government’s welfare functions.

Keynesian economists will appreciate that raising the minimum wage would stimulate aggregate demand, thereby increasing output and creating more jobs. Several studies have shown that raising the minimum wage in a capitalist economy helps poor people, while causing a decrease in unemployment. The challenge for a Proutist society will be to continually improve people’s skills and competence through different types of education. It will also be necessary to encourage productivity through capital investment by making low-interest business loans available for cooperatives and the self-employed.

Notes

1  NFL Player Salaries http://www.buzzle.com/articles/nfl-player-salaries.html
2  Associated Press, “MLB’s average salary eclipses $3M”, December 13, 2010, http://sports.espn.go.com/mlb/news/story?id=5915468
3  U.S. Library of Congress, “The Business of Soccer”, Business & Economics Research Advisor, Issue 3/4, Summer 2005
4  Ravi Batra, Progressive Utilization Theory: Prout – An Economic Solution to Poverty in the Third World (Manila: Ananda Marga Publications, 1989) pp. 58-60.
5  Friedman, Mark, “Living Wage and Optimal Inequality in a Sarkarian Framework”, Review of Social Economy, Vol. LXVI, No. 1, March 2008,
6  http://www.bevegelsen.no
7  Ibid.

Excerpted from After Capitalism: Economic Democracy in Action by Dada Maheshvarananda (Puerto Rico: Innerworld Publications, 2012): www.aftercapitalism.org

The Right to Live!

 By Dada Maheshvarananda

These days, a person who possesses wealth is respected and revered whereas a person without money is a person honored by none… Bereft of everything, people toil ‘round the clock to earn a mere pittance… The railway stations and market places are full of half-clad beggars and lepers desperately stretching out their begging bowls… The poor live in shantytowns, barely protected from the elements… Village people die for want of medicine… The pavements have become the home for so many people.
— P.R. Sarkar[1]

Planet Earth has enough resources for everyone–if we share. As explained in the previous chapter, according to the principle of Cosmic Inheritance, it is unacceptable to hoard wealth or resources. The goal of PROUT is to utilize and distribute our shared inheritance in a rational way for the benefit of everyone.

Material incentives for those who work harder, are more skilled, and who contribute more to society are integral to a Proutist economy, but the incentives must be reasonable. The goal is gradually to raise the standard of living and quality of life of everyone, while reducing damage to the natural world and other creatures.

The Minimum Necessities of Life

The first requirement of PROUT is to guarantee the minimum necessities to everyone: “The minimum necessities of all should be guaranteed in any particular age.”[2] Guaranteeing the right to live has to be the first priority of every country. The Brazilian spiritualist Frei Betto called attention to this need when he said, “The degree of justice in a society can be evaluated by the way food is distributed among all citizens.”[3]

PROUT recognizes five fundamental necessities of life: food (including pure drinking water), clothing, housing (including adequate sanitation and energy), medical care, and education. Supplemental requirements are local transportation and water for irrigation. According to the principle of Neohumanism, this birthright transcends citizenship — meaning that every human being, whether native or visitor to a country, must be guaranteed these necessities.

Providing the basic necessities should be the primary function and duty of any economy. Human beings require these in order to realize their individual potentialities, to develop culturally, to achieve inner fulfillment. Without necessities, the “pursuit of happiness” remains beyond the reach of the world’s poor.

Most government provide a safety net to help guarantee that the poor and most vulnerable do not fall below a minimally accepted level of poverty and destitution. Unfortunately most government safety nets provide a very low bar that prevent only the worst suffering. Increasing numbers of citizens face great hardship without access to housing, health care, and food.

As many as 3.5 million people in the United States experience homelessness each year.[4] More than 60 million Americans have no health care insurance and many more have only limited coverage, causing millions to fall into poverty when their family is hit by a medical emergency.[5] And 46 million Americans are receiving food stamps.[6]

The right to meaningful employment with fair wages is also a fundamental human right. The minimum requirements should not be handed out by a government agency, as in the current welfare systems of liberal democratic countries. Rather, people should pay for them with the income they earn from honest work. It is the responsibility of all levels of government to pursue policies which achieve and maintain full employment, with jobs that utilize each worker’s skills and capabilities.

A just minimum wage, often called a “living wage,” must be set high enough so that people can purchase the necessities. Increasing employment will reduce the numbers requiring the safety net. Welfare systems create disincentives for their recipients to work. In the United States, for example, those who receive welfare must immediately report any dollar they earn, which is usually deducted from their next welfare check. They are not allowed to borrow money to start a small business without immediately sacrificing their monthly assistance.

In this way, welfare recipients sometimes become emotionally dependent, prisoners of both poverty and the welfare system which seeks to alleviate it. Thus a whole class of people who should be employed remains jobless or becomes part of the underground informal economy. PROUT, on the other hand, by guaranteeing a livable minimum wage, would limit welfare as a special contingency for those who are physically or mentally unable to work.

The determination of what are the minimum necessities should be done in a progressive way; there must be continual adjustment of these basic requirements depending upon the available resources and scientific standard of the locality. As with all the principles of PROUT, the standard for minimum necessities will change with time and place.

For example, staple foods are different in different cultures, yet they must meet adequate nutritional standards. Clothing varies according to climate and culture. Minimum housing standards appropriate to the climate and culture must also be determined. The availability of better housing will also be an incentive–such incentives will be built into the system, unlike in the Soviet Union, for example, where “dacha” vacation homes for the Party elite were kept secret. Everyone, however, will be guaranteed a roof over their head, regardless of their social standing.

In a Proutist framework, the people’s purchasing capacity will be taken as the measure of economic advancement. In order to facilitate a continually increasing purchasing capacity, a number of factors are required. These include the guaranteed availability of basic goods and services, stable prices, appropriate wage increases, and increasing collective wealth and productivity.

Imagine a world in which no one need worry about getting enough money to buy food, clothes, housing, education and medical care for his or her family!

Notes

1 P.R. Sarkar, “Social Values and Human Cardinal Principles”, PROUT in a Nutshell Part 7 (Calcutta: Ananda Marga Publications, 1987).
2  P.R. Sarkar, “The Principles of PROUT”, Proutist Economics (Calcutta: Ananda Marga Publications, 1992), p. 4.
3  From a letter to the author.
4  National Law Center on Homelessness and Poverty, “Homelessness in the United States and the Human Right To Housing” January 14, 2004. www.nlchp.org/content/pubs/HomelessnessintheUSandRightstoHousing.pdf
5  During some part of the year 2010, 60.5 million Americans (19.8 percent) were without health insurance. Robin A. Cohen and Michael E. Martinez, “Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–March 2011” Division of Health Interview Statistics, National Center for Health Statistics. http://
www.cdc.gov/nchs/data/nhis/earlyrelease/insur201109.pdf
6  “Supplemental Nutrition Assistance Program (SNAP): We put healthy food on the table for more than 46 million people each month.” United States Department of Agriculture Food and Nutrition Service. http://www.fns.usda.gov/snap/

Excerpted from After Capitalism: Economic Democracy in Action by Dada Maheshvarananda (Puerto Rico: Innerworld Publications, 2012): www.aftercapitalism.org

Increasing the Purchasing Capacity of the People

Excerpted from After Capitalism: Economic Democracy in Action by Dada Maheshvarananda (Puerto Rico: Innerworld Publications, 2012): www.aftercapitalism.org

Despite nearly three decades of US economic growth, real wages and purchasing capacity of the population have been falling. The US mini- mum wage, when adjusted for inflation and calculated in 2009 dollars, has fallen from a peak of US$10 per hour in 1969 to less than US$7 in 2010.8 The average American employee works harder and longer for less. Constant economic growth has been won by exploiting workers.

PROUT measures economic health and vitality quite differently: by assessing the actual purchasing capacity of the people and their standard of living. PROUT economists will determine a minimum salary sufficient to provide essential goods and services, such as food, clothing, local transportation, health care fund contributions and monthly housing and utilities bills for a family of four.

“While maintaining the same level of productivity, workers can be paid the same amount for less hours of work each week.”

The government must finance high-quality education at all levels. One way to finance quality medical care for everyone is by a health fund to which all employed workers contribute monthly and which is overseen by the government.

To control inflation, the real wages of people will be regularly reviewed according to the actual cost of all goods and services available. While in capitalist economies the rate of inflation often fluctuates significantly, a cooperative-based economy can keep inflation low for long periods. By guaranteeing the basic requirements of life, capital costs will remain low, allowing capital to be continually reinvested in productive enter- prises, and the wealth generated by cooperatives will be spread equitably throughout society.

Another way to stabilize short-term prices is by stockpiling key and essential commodities. When demand exceeds the supply of a particular commodity, tending to push the price up, the government can reduce its stockpile. Similarly, when there is an excess of goods, the government can increase its stockpile. In the long term, economic planners must anticipate demand levels and restructure production accordingly.

A Proutist economy will guarantee people an increasing purchasing capacity. This means that all workers will have to have their incomes progressively increased at a rate that is higher than the rate of inflation. Thus the minimum wage will have to gradually rise, giving people the opportunity to purchase an increasing range of all types of goods and services.

Another way that wages and salaries could be increased is by increasing their corresponding benefits or by improving conditions. For example, a minimum wage in most countries would probably be set for 40 hours per week, with higher rates paid for overtime work. By introducing improved technology and making cooperatives more efficient, it will eventually be possible to gradually reduce the number of working hours in a week. While maintaining the same level of productivity, all workers can be paid the same amount for, say, 38 or less hours of work each week. This gradual reduction in working time will give everyone more time for cultural pursuits, further education, sports and other hobbies.

Cooperatives would be encouraged to offer their members “flexitime,” allowing them to adjust their working hours and schedules to meet family and other commitments, within certain limits.

It will be illegal for children below the age of fourteen to work in the workforce. Young people between the ages of fourteen and sixteen should be limited to working twenty hours a week, and should be paid hourly according to the just minimum wage, unless they are students and the work is part of their apprenticeship training.

Widening Wage Gap Is Conscious Government Policy; Batra

Professor Ravi Batra of South Methodist University, Dallas spoke to PROUT Globe’s Trond Øverland about the widening wage gap, US economic policy is world policy, and the smiling CEOs of today who one day will be crying.
Dr Ravi Batra at his office in Dallas, Texas, April 2012
Dr Ravi Batra at his desk in Dallas, Texas, April 2012

(Dallas Texas, April 24, 2012)

Can you say something about the widening gap between rising production and falling wages, the so-called wage gap. Is it conscious government policy?

RB: It is conscious government policy. That’s the sad part of it is that it reflects political corruption. Anything that reduces labor demand will reduce the real wage and reduce people’s salaries. Anything that reduces labor demand for the economy as a whole will lead to a fall in wages.

So what are those policies? First of all, you have the policy of the falling minimum wage – in real terms, in purchasing power terms. You see, there is a dubious economic theory popular among the proponents of monopoly capitalism for hundreds of years.

“Not to allow wages to rise is an American policy. So that has spread all over the world. The policies and economy of the US have a tremendous influence on the world.”

That theory says that unemployment occurs when the minimum wage goes up! It is a totally wrong notion that was never supported by facts and history. Nevertheless, those who support the system, who are in charge of economic policy and of the media, keep repeating again and again that unemployment results from a rising minimum wage.

Well, let’s look at the example of the United States economy:

  • In 1969, the minimum wage in real terms, in purchasing power terms, was 10 dollars per hour. At that time, the unemployment rate was 3.5 percent.
  • Today the minimum wage is only 7 dollars per hour while the unemployment rate in true terms is 15-16 percent.

CEO propaganda

So to say that a higher minimum wage is the cause of higher unemployment is incorrect. It is just the propaganda of big business CEOs. Still, this theory is really popular among many economists. In fact, almost all economic textbooks teach it.

Prices have been rising fast while the minimum wage has not. That’s why the purchasing power of the minimum wage has decreased so much. This is one reason why wages have been falling. This is government policy. It is not the policy of the Obama administration but it was the policy of both the Reagan and Bush administrations. Under Clinton the minimum wage went up somewhat but never caught up with prices. Therefore the real minimum wage has been falling sharply and that is one reason why wages have been stagnant.

Outsourcing

The other reason is outsourcing. When countries are allowed to outsource their work, for which they have to pay high wages at home, then real wages will fall.

Free trade

The third reason is free trade; free trade with low wages nations. If a high wages nation has free trade with other similar countries (where the wages are high) it is bad for both parties. However, if a high wages nation has free trade with low wages nations it kills the economy of the high wages nation.

These three causes of the falling minimum wage — rising prices, outsourcing, and free trade — have destroyed the manufacturing base in the US, in Europe and in Australia. This is why these countries have seen falling wages while the productivity continues to rise.

Debt

They postpone the problem of the widening wage gap by creating a lot of debt in the economy. However, once the consumers had spent their good collateral consumer debt could not rise anymore, and that characterized the initial stage of the present world economic crisis.

Major economic reforms 2016-2020

If we do not get a majority of good politicians from the current (November 2012) elections, which is somewhat doubtful, then by the 2016 elections the economy of the world will be so bad that there will be massive changes.

That’s why the year 2016 is important in my mind. It may take another year, 2017, and definitely by the end of this decade. We will see major economic reforms and the rise of PROUT.

The importance of a proper system of taxation

Do you see that taxation has influenced the direction of the minimum wage in any way?

RB: Well, since 1980 (the year Reagan became President) taxes have been rising on the poor and middle classes and falling on the rich. The tax burden has been shifted onto the poor and the middle classes, and that is one reason why growth has been low.

Economic growth has been very low since 1980. Earlier the US economy had been growing at an average of 4 percent per year. Between 1980 and 2000 it went down to 3 percent per year, and since it has fallen sharply because of the ongoing slump.

“In the end the CEOs will cry but right now they are very happy because they are getting richer than never before.”

High taxes on the rich and low taxes on the poor kept consumer demand high. Rising consumer demand means increasing growth. Once they switched to this regressive taxation, by increasing taxes for the poor and the middle classes and lowering them on the rich, consumer demands could not rise as fast as it had done in the past. So growth fell.

A proper system of taxation is very important for the prosperity of an economy. The tax system used to be that the US had very high tariffs on imported goods, which kept domestic industries prosperous. That was a chief reason as to why the US emerged as the world’s leading economy with the largest manufacturing base – high tariffs. The tax system should support consumer demand and production at home.

Pollution

When you have high production at home it also minimizes the problems of pollution. You don’t have to import goods from far away countries and ship them and use so much oil.

Happy now, crying later

Recently I spoke to the CEO of a sea food company in Australia who moaned about declining consumer demand. I asked him if he would support policies that would increase the general purchasing capacity of the public. His immediate response: “No, no, no! It is not the way to go.” Why do you think big business is suicidal like that?

RB: (Smiling) Because this is the way they put money into their own pockets and create unemployment for their own people. I mean, why should a CEO be unhappy with the current system? Their fortunes are multiplying while a lot of people are being laid off. They are getting rich like never before.

But one day they will come to understand that this is self-defeating for themselves. The problem can’t continue like this with large-scale unemployment in the long run. For years now millions of Americans have been living on unemployment benefits, and millions and millions of Europeans have been doing the same thing.

Large sections of the population cannot live on unemployment benefits forever. In the end they will snatch political and economic power from the big business CEOs. Their economic power is now giving them political power and ordinary people will take this power away from them through a revolution and by electing honest politicians.

So in the end the CEOs will cry but right now they are very happy because they are getting richer than never before.

US policies and the world

Reganism changed everything, didn’t it?

RB: Yes, this started in 1980 when Reagan became President and it changed America and the whole world. That is when the wage gap began to widen. Those policies of 30 years ago are mainly responsible for the sorry state the whole world is in right now.

You are based here in Dallas, Texas. To what extent do you see that the rest of the world is following America’s economic policies?

RB: They follow it to a very large degree. America is still the center of the world in terms of culture and economic power. You see all these countries in Asia who try to export as much as they can to the United States. They don’t want to build a large consumer base at home because for that they would have to increase wages.

Not to allow wages to rise is an American policy. So that has spread all over the world. The policies and economy of the US have a tremendous influence on the world. So from this perspective things will have to change here (in the US) first. Changes here will lead to changes everywhere.

Copyright PROUT Globe 2012 www.proutglobe.org

100% Employment for Local People

P.R. Sarkar
(31. December 1984) – There should be 100% employment for the local people. The basic right of all people is to be guaranteed the minimum essentials for their existence, including at least proper food, clothing, housing, education and medical care. This basic right should be arranged through cent per cent guaranteed employment, not through welfare or dole-outs. Unemployment is a critical economic problem in the world today and 100% employment of the local people is the only way to solve this problem.

Local people are defined as those who have merged individual socio-economic interests with the socio-economic interests of the socio-economic unit they live in. The primary consideration is whether or not people have merged their individual interests with their socio-economic unit, regardless of their colour, creed, race, mother tongue, birthplace, etc. Those who earn their livelihood in a particular socio-economic unit but spend their earnings in another socio-economic unit should be considered as outsiders or non-local people, as this practice is not in accordance with the interests of the socioeconomic unit in which they are employed. It results in the drainage of the capital necessary for the continued growth of that unit and undermines its economic development.

Capitalists, in either their singular or collective forms, are the most pernicious economic exploiters today. All over the world they are continually exploiting local economies and draining their wealth. In nearly all cases the profits they accrue are spent outside the local area and remitted to outside stockholders and parent companies. An essential measure to control this economic exploitation is that the speculative markets in all countries of the world should be closed down immediately.

To create 100% employment among local people, PROUT supports both a short term and a long term economic plan. In the short term plan, labour intensive industries based on the collective minimum requirements of life should be started immediately or made more productive where they already exist. These industries should be based on the consumption motive. They should also provide a rational profit in order to guarantee adequate purchasing capacity to those employed in them and to ensure their continued existence and growth. In North Bihar, for example, where there is virtually no industry, all kinds of agrico and agro-industries can be developed to alleviate the unemployment problem there.

In the long term plan, capital intensive industries should also be developed to increase the productive capacity of the socioeconomic unit. PROUT advocates a three-tiered economic structure, that is, small scale privately owned businesses, medium scale cooperatives and large scale key industries managed by the immediate government. Such an economic structure should be based on the principles of self-reliance, maximum utilization, rational distribution, decentralization, rationalization and progressive increases in the standard of living of all people. Through the never ending creation of new industries, new products and new production techniques incorporating the latest scientific discoveries, the vitality of the economy can be increased. As part of the long term economic plan, working hours may also be progressively reduced to maintain full employment.

To solve the unemployment problem in both the short and long term there must be an accurate understanding of the surplus and deficit manual and intellectual labour trends. In India, for example, there is surplus manual labour in North Bihar, which is based upon an agricultural economy, and surplus intellectual labour in Calcutta. In both places there is high unemployment. In most of the countries of the world where there is high unemployment, there is surplus manual labour. So manual labour intensive industries are required to create employment. In some instances where deficit labour exists for an expanding industry, retraining programs may equip workers with the necessary skills for employment.

Another way to help solve unemployment, especially in rural communities, is the utilization of plants for economic selfreliance. All socio-economic units have the potential to increase their plant and crop varieties by properly matching these with the soil, topography and climatic conditions etc. in their units. Reforestation can reclaim arid and semi-arid regions, and some unique plants like the fern (Puranica), which has the capacity to attract clouds, can help radically transform the rainfall and weather patterns of a region. Agro- and agrico-industries based upon the productive potential of different plants can also help solve rural unemployment by creating a range of new goods and services. There are many dimensions to this revolutionary plant rationalization program, which is also a practical expression of the ideals of Neohumanism.

From PROUT in a Nutshell Part 13.
Copyright Ananda Marga Publications 2012. All rights reserved.

Full Employment and Reduction of Working Hours

In 1958, while addressing a wide range of social and economic issues prior to the formulation of PROUT, P.R. Sarkar commented that work hours should be shared and that it is impossible to effect such sharing under capitalism due to its domineering profit-motivation:

“The use of advanced scientific technology means rapid mechanization. Conservative people vociferously criticize this mechanization. Actually, such mechanization within a capitalistic structure inevitably brings more misery, in the form of unemployment, to the common people. That is why conservative people oppose it.

"Those who want to promote public welfare without antagonizing capitalism will have to oppose mechanization. This is because when the productive capacity of machinery is doubled, the required human labour is decreased by half, so the capitalists retrench large numbers of workers from their factories. A few optimists may say, “Under circumstantial pressure other ways will be found to employ these surplus labourers in different jobs, and the very effort to find these alternatives will accelerate scientific advancement, so the ultimate result of mechanization under capitalism is, in fact, good.” This view, though not useless, has no practical value, because it is not possible to arrange new jobs for retrenched workers as quickly as they become surplus labourers due to rapid mechanization. Surplus labourers are ruined, bit by bit, due to poverty and hunger. A few among them try to keep body and soul together by resorting to petty theft, armed robbery, profligacy and other sorts of antisocial activities, but this situation is certainly not desirable.

"In a collective economic system [Sarkar propounded PROUT a year later in 1959] there is no scope for such an unhealthy situation; in this system mechanization will lead to less labour and more prosperity. With the double increase in the productivity of machines, the working hours of labourers will be reduced by half. Of course, the reduction in working hours will have to be determined keeping in view the demand for commodities and the availability of labour.

"In a collective economic system the benevolent use of science will bring about human welfare. It is possible that as a result of mechanization no one will be required to work for more than five minutes a week. Not always being preoccupied with the problems of acquiring food, clothing, etc., people’s psychic and spiritual potentialities will no longer be wasted. They will be able to devote ample time to such activities as sports, literary pursuits and spiritual practices.”

While following up on the formulation of the five fundamental principles in 1959, Sarkar added:

"It is incorrect to say that rationalization is the root cause of the unemployment problem. Such propaganda is carried out by leaders having little knowledge of socio-economic philosophy. The question of unemployment arises only in the capitalistic framework where industry is for profit. In the collective economic structure, where industry stands for consumption and not for profit, the question of unemployment does not arise. Here the number of labourers will not be lessened; rather the working hours will be reduced and the remaining hours will be used in mental and spiritual pursuits. The reduction in the working hours depends not only on yield, but on the demand for commodities and the availability of labour."

In 1979, Sarkar reiterated:

"PROUT supports maximum modernization in industry and agriculture by introducing the most appropriate scientific technology, yet modernization and rationalization should not lead to increased unemployment. In PROUT's collective economic system, full employment will be maintained by progressively reducing working hours as the introduction of appropriate scientific technology increases production. This is not possible in capitalism."

Sources

Problems of the Day (1958)
"Discourses of PROUT – 3" (1959), PROUT in a Nutshell Part 5
"Some Specialities of Prout's Economic System" (1979), PROUT in a Nutshell Part 13

May the Euro and the EU Be Rebuilt on the Sound Foundation of Prout

[2011] – The euro crisis exhibits the fatal state the EU and capitalism is in at the moment. When the euro falls, we expect the entire union to go with it. What people and countries need is rational mergers, not profit-motivated ones.

The chief reason for the colossal debts of many EU member states and the imminent breakdown of the common currency is that the union did not first require a minimum of sound socio-economic development in local areas. From the beginning, the European common market was based on the four freedoms of free flow of capital, goods, services and labor.

According to PROUT, a socio-economic merger between two or more mutually foreign areas should not take place until a number of basic features are properly developed and fulfilled by all parties. These include same economic problems, uniform economic potentialities, ethnic similarities, the sentimental legacy of the people, and similar geographical features. In Europe, as on most continents, there is vast scope for utilizing the inherent dynamics of these features, leading to proper mergers of countries and regions once the welfare of all has been developed to a significant extent locally.

It may be that the concept of a common European market was conceived of and realized in a war-weary atmosphere that cried out for peace in Europe and indeed the world. True, there is little use in arguing against war. However, it is also true that the EU in its present form was never a remedy for lasting peace. What we have on our hands now is menacing economic, military and other forms of instability both on the European continent and throughout the world.

To begin with, UK government officials now express fear that when one member state leave the euro, investors in both that country and other vulnerable Eurozone nations would transfer their funds to safe havens abroad. Borders are expected to be closed (barring money smuggling) and the British Foreign Office is preparing to evacuate thousands of British expatriates and holidaymakers from stricken countries, The Telegraph (UK) reports.

Dozens of top banks in wealthy European countries are hugely exposed to Greece, Ireland, Italy, Portugal and Spain through loans to companies, households, and financial institutions. The tsunami following the breakup of the euro will have an unprecedented impact on the entire world economy and could trigger a global depression, according to economists at HSBC.

Under EU rules, capital controls can only be used in an emergency to impose “quantitative restrictions” on inflows, which would require agreement of the majority of EU members. Controls can only be put in place for six months, at which point an application would have to be made to renew them.

Such strict regulations, and there are thousands of them, will be another hugely detracting factor in the scenario that is expected to unfold following the fall of the euro. Countries are expected to demand long periods for planning and implementing domestic control mechanisms, such as protectionism, which so far has been out of the question as far as EU has been concerned.

The situation is indeed explosive and the EU as we have come to know it may very well be a thing of the past soon. PROUT stands for united and well-integrated continents and indeed a one world political unit instead of a platform of financial exploitation and opportunism.

May the Euro and the EU be rebuilt on the sound foundation of PROUT.

Copyright PROUT Globe 2011

The Wealth Cap and Other Practical Proposals for Reducing Inequality

Ac. Krsnasevananda Avt.
Inequality is the issue of the day – the real cause behind the prolonged recession and a major contributing factor in social, environmental and ethical issues affecting societies all over the world. It is finally dawning upon the public (and even upon some economists) that if you keep increasing production capacity (by making people work longer for less) and reducing consumption capacity (by stagnating wages and increasing unemployment) you will eventually end up with lots of goods and no one to buy them – in other words, a recession or depression.

Public consciousness and anger about inequality is being clearly and increasingly expressed around the world. Coming out of genuine suffering it is one of the primary motivating factors behind the Arab Spring revolts, massive protests against corporate tax-dodging in the U.K., “indignation” protests in Greece, Spain, Portugal and Israel and now the “Occupy Wall Street” protests against corporate greed spreading accross the United States.

Although public anger at inequality is high there have been few, if any, new ideas about how to solve the problem. This post explains a number of mechanisms for controlling inequality put forward in the Progressive Utilization Theory (PROUT) of P.R. Sarkar.

The rich get richer and the poor get poorer

Inequality is essentially an unhealthy gap between rich and poor. In present day economies the normal means for minimizing this gap include welfare benefits, minimum wage, bargaining powers of workers and unions, progressive taxation, property taxes, capital gains taxes, company taxes, etc. Over the last 30 years we have seen all of these methods undergo steady changes which have been harmful for the poor and middle class and beneficial for the wealthy.

As Warren Buffet put it, the class war has been going on for the last 20 years and his class won. In order to safeguard the interests of the vast majority of the population, obviously stronger methods (and the political will to implement them) are needed.

Here are a few methods suggested by PROUT:

  1. Constitutionally guaranteed increasing purchasing capacity. In other words the right to a minimum wage which is constantly increasing in its actual value. The purpose is to ensure that the government has a clear and legally binding social contract to make the basic requirements of life affordable to everyone. This will remedy the “poor get poorer” side of the gap.
  2. A collectively agreed upon ceiling on the amount of wealth which individuals are allowed to accumulate (a wealth cap). This ceiling should be set after a careful study of two aspects of the inequality gap:
    1) How much of a gap is necessary to provide sufficient incentive for individuals to work harder (this could be reduced over time as people become more altruistic and observe the benefits of greater cooperation). Too small a gap would result in lack of incentive leading to economic stagnation and the alienation of talented individuals.
    2) At what point does the amount of inequality begin to have a negative impact on the welfare of the general public. At present the top 10% of people in the United States own 75% of the nation’s wealth. Obviously that leaves very little for everyone else. After careful consideration of these factors a ceiling on wealth can be set which strikes a harmonious balance between individual incentive and collective welfare. This will remedy the “rich get richer” side of the gap. It will also safeguard the political process from being purchased by the rich.
  3. Decentralization and democratization of economic power through restricting private ownership to small family-sized businesses. Businesses over a certain size should be owned and managed by workers collectively. Large scale key industries should be in the hands of elected local governments. If this model is followed neither private individuals nor state governments will be able to control vast amounts of economic power.
  4. The above three methods are the primary tools which PROUT employs for maintaining a level of inequality beneficial for all. Additional PROUT policies such as abolition of the stock market, regional self-sufficiency in essential commodities, local level economic planning and restriction of access by external economic interests would also have a positive impact on inequality. Details of these and other PROUT policies are found elsewhere on this web site.

Applying these methods could bring many benefits in the following areas:

Economic Benefits

Through proper control of the wealth gap productive capacity and consumptive capacity will rise in tandem, i.e. “a tide which lifts all boats”. Everyone prospers. This is the essential factor in maintaining a healthy economy.

As the economy grows everyone’s purchasing capacity increases thus stimulating more demand, more production and more growth. If the above methods were applied (especially no. 1 and 2), the economic crisis would be ended overnight.

Notice that there is no need for welfare in this system. With jobs and a livable wage guaranteed no welfare will be required (other than for those who are unable to work for health or age reasons).

On the one hand, elimination of excessive wealth will help get rid of the financial instability caused by speculation. It will ensure that all wealth is used for productive purposes and no wealth sits idle in bank vaults benefitting no one. On the other hand, elimination of poverty and unemployment will ensure that the poor and uneducated will not be a drain on the economy, rather the productive capacities of all people will be put to maximum use.

Social Benefits

A more equal society is a more united society. In both the social and work environment people will feel a closer family or team feeling. This will have enormous benefits socially as well as economically.

In their ground-breaking book The Spirit Level – Why Greater Equality Makes Societies Stronger, Richard Wilkinson and Kate Pickett present thought-provoking statistics showing that more equal societies, are happier, healthier, have longer life expectancy and fewer social problems (and also do well economically).

Less inequality will also help recapture democracy. No longer will wealthy individuals be able to purchase political decisions that favor a small minority of people, rather the government will stand a much better chance of protecting the actual needs of its people. In the workplace the cooperative mode of production will enhance worker participation and ensure that the needs of labor as well as capital are reflected in decision making.

Environmental Benefits

People with little or no economic power are at a great disadvantage when it comes to protecting their environment. Conversely, with more equal economic power, the common people will have an equal voice in decisions affecting the local environment.

PROUT policies such as local control over the economy, decentralization and regional self-reliance will ensure that overcrowded cities and abandoned rural areas will become a thing of the past.

Spiritual Benefits

Unequal societies sooner or later are exploitative and oppressive in nature. Overworked and underpaid, burdened by fear and anxiety, the common people have little opportunity to develop their subtler human potential.

In an effort to dampen discontent the populace is drugged with media emphasizing violence and sex. Divide and rule policies are employed to cause the disenfranchised to war amongst each other thus distracting their attention from their real oppressors

In a society where the people are economically secure and prosperous, where the benefits of technology can be spread amongst all in the form of reduced working hours, such people will have sufficient comfort and security to develop their subtle potentialities. The prevailing atmosphere of co-ordinated cooperation will be conducive for emotional and spiritual growth.

To conclude, despite abundance of material wealth and sophisticated technology, we have been unable to create a society which offers security and happiness to our citizens. The people have run out of patience and we are on the border of global rebellion.

Our old methods have failed and something new is required which expresses a higher level of care and respect for each other and for the environment. The PROUT policies outlined above, aimed at the good and happiness of all, represent a comprehensive solution to this problem.

Copyright The author 2011

Trade for Regional Self-Reliance

Dr. Michael Towsey

“It is patent that in our days not alone is wealth accumulated, but immense power and despotic economic domination is concentrated in the hands of a few …. This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying so to speak, the lifeblood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will.” – Pope Pius XI Encyclical “Quadragesimo Anno.”

The powerful language used by Pope Pius XI conveys something of the magnitude of the crime that is modern international finance. A lot of confusion surrounds money and its management primarily because such confusion suits the international banking and business community. Greed always thrives best in an atmosphere of confusion.

For much of its history, banking practice has confused even the economists and bankers! It was not until the mid 19th century that economists became aware that bank lending resulted in the creation of money1 and most bankers did not admit the fact until well into the 20th century. Giving evidence to the New Zealand Royal Commission on Finance in 1955, the Chairman of the Associated Banks of New Zealand said: “They [the banks] have been doing it for a long time [i.e. creating money], but they didn’t quite realise it and they did not admit it. Very few did. . . . The system has not changed very much; it is the system that stands today, not very much different from what it was 40, 50 years ago, but there has been a development of thought.” [2]

The gradual public realisation that the privately owned banking system creates a community’s money supply at little cost to itself and reaps handsome rewards in the process, resulted in the birth of numerous monetary reform movements. Given the vigour with which the banking system has defended its privileged position, it has not been easy to distinguish the sensible reform proposals from the crackpot. Similarly, the present international trading system is inherently inequitable and requires thorough reform if underdeveloped countries are to escape their plight. We will consider a variety of proposals to reform trade management, which are compatible with self-reliant regional development.

Principle of Intra and Inter Community Trade: Multilateral trading within communities, bilateral trading between communities

There are two kinds of economic exchange between individuals, corporate bodies, or nations — barter, and the money transaction. In barter, there is direct exchange of physical goods or services. There is no need for money since both parties agree that the goods being exchanged are of the same value. It does not matter if the goods are not exchanged at the same time. The essence of the barter agreement is that goods received will at some agreed time be exchanged for other goods of the same value. By comparison, in the money transaction, goods received are exchanged for money. The cash recipient is then free to do whatever. The two traders may never see each other again. There is no agreement to have a later reciprocal transaction.

Both forms of trading have advantages and disadvantages. Barter can go ahead without money and there is no chance of being caught with money one can’t use. One the other hand, barter is cumbersome in a fast-moving and complex economy. Money transactions are convenient and flexible, but in large, complex economies, it is quite possible for one community to end up with an excess of physical wealth and another to end up with an excess of money. These imbalances can destabilise and stagnate the communities concerned.

The barter system at the international level is referred to as bilateral trading, whereas money transactions give scope for what is called multilateral trading. Multilateral trading means trading between three or more countries using money as the medium of exchange. The difference between the two systems has proved to be most important. The weaknesses of multilateral trading were (and still are) exploited by the First World to bleed wealth from the Third World.

Just after World War II, the capitalist bloc countries signed two trading pacts, the Bretton Woods Agreement and the General Agreement on Tariffs and Trade (GATT). According to the Bretton Woods Agreement, the U.S. dollar would be used as the standard currency for all trading between capitalist countries. And according to the GATT agreement, multilateral trading was to be the dominant system of trade.

The combined effect of these two agreements was to force poorer and weaker counties to accumulate U.S. dollars so they could have a reserve of money to enable them to engage in international trade. The only way to do this was to export more goods to the U.S. than were imported. By this arrangement, the U.S. was able to accumulate much physical wealth for as long as the exporting countries were prepared to hold onto U.S. dollars. This would not have occurred with bilateral trading.

Today, the whole system is threatened with collapse because the U.S. flooded the international markets with a huge excess of dollars primarily to finance the Vietnam War, oil imports, and Reagan’s Star Wars program. The excess of U.S. dollars means they are no longer so valuable to hold onto. The only thing which keeps the system going is the fear of those holding dollars that they will be worth nothing if the system collapses! So today we find the central banks of western Europe and Japan buying U.S. dollars for no other reason than to keep their price up.

Despite this abuse at the international level, multilateral trading has an essential role to play both within nations and between nations. The problem to be solved is: what mix of bilateral and multilateral trading should be used so that the advantages of each can be maximised and their disadvantages minimised?

Experience suggests the following. Multilateral trading (via money transactions) should be used within a community because of its convenience. Potential instabilities can be corrected due to the cultural and political coherence of the community. (Here the term community means any socio-economic community whether at the level of a locality, district, state, or federal trading bloc.) On the other hand, barter or bilateral trading should be used between communities because this system prevents one community gaining at the expense of another. Multilateral trading requires much cohesiveness between the numerous trading entities if it is to be of mutual benefit to all concerned. As a corollary, the further two communities are apart, whether in distance, culture, or politics, the more bilateral trading is the preferred system. This principle can be used to formulate trade agreements for South-South cooperation and more generally in the reform of international trade.

Bilateral trade is especially beneficial for underdeveloped countries because it helps to isolate them from the economic cycles (of inflation and depression) which originate in exploitatively developed countries (with excessive wealth concentration). Global inflation and depression spread through multilateral trading networks rather like a contagious disease. Bangladesh exports raw jute, animal hides, and some manufactured goods. It imports foodstuffs and almost everything else. In the event of a global depression, multilateral trading grinds to a halt and Bangladesh would suffer greatly. By arranging bilateral trading agreements, Bangladesh could lessen the impact of a global depression. [3]

There should be minimal trade of raw materials and only where absolutely necessary. Local industries should be established to utilise local resources. This benefits local industry, increases economic security, and prevents drainage of capital. Manufactured goods are less subject to price manipulation and command better prices than raw materials. “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.” [4]

Principle: Free trade offers the best possibility for regional development

Here it must be noted that free trade is defined as the absence of government-imposed import and export duties and the absence of private speculators controlling international markets. It does not mean unregulated trade. The difference is extremely important. Free trade offers many economic advantages for underdeveloped nations principally because it enables them to dispose of local surplus profitably. Import and export duties, tariffs, and trade restrictions reduce the mutual benefits to be gained by trade. Despite their rhetoric, wealthy western nations practice free trade only when it suits their purpose. “Neither the capitalist or the communist countries like the free trade system because it is detrimental to their respective self-interests. But there are free trade zones in the world which are very bright examples of the success of this sort of system.” [5]

However, in formulating a trade policy, each economic unit should make a distinction between raw materials and manufactured commodities and between essential commodities and luxuries. The export of unprocessed raw materials is an indicator of economic ill health. Rather, such commodities should be converted into manufactured goods at the place of origin of the raw materials. Manufactured commodities invariably command better prices than raw materials. In the case of perishable agricultural commodities, excess production depresses world prices, which benefits only the First World. But canned and processed foods allow possibility of higher prices. Research into product diversification is another means to dispose of a surplus. [6]

Similarly, the import of essential requirements is a sign of economic ill-health. While the free trade of semi-essential and non-essential commodities is to be encouraged, the trade of essential commodities should be regulated on a global basis to ensure that every citizen in the world has the minimum essentials of life.

References

J.Pen, Modern Economics, Pelican, UK, 1980.
The Institute of Economic Deomcracy, “The Money Trick”, Kingstown, NSW, Australia
P.R. Sarkar, Prout in a Nutshell, Vol. XIII, Ananda Marga Publications, Calcutta, 1987, p,.54
ibid. p.38
ibid. p.56
ibid. p.57
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Dr. Michael Towsey is based at Queensland University of Technology, Brisbane, Australia. He may be reached at michaeltowsey@gmail.com.