Category Archives: Socioeconomics

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
__________________
Dr. Michael Towsey is based at Queensland University of Technology, Brisbane, Australia. He may be reached at michaeltowsey@gmail.com.

FAQ: Socio-economics

What is the prime motivation of proutistic economy?
In order to guarantee the minimum requirements of all and to keep economic life free from stagnancy, the economy should be consumption-motivated and not profit-motivated. Physical wealth is in limited supply. There is enough for everyone’s needs but not for even a single persons’ greed. Since physical wealth is limited, it cannot satisfy the unlimited inner thirst of any living being. The economy, along with the political system, education, science, etc., should therefore see to it that human beings can move on in life together, and reach their ultimate goal of Supreme Emancipation and unity of all.

What are cardinal rights?
It is the cardinal, or fundamental, right of the people to be guaranteed the minimum requirements of food, clothing, housing, education and medical treatment. The proper supply of irrigation water is also a cardinal right, because without water, food, which is the most important of the minimum requirements, cannot be produced. Irrigation water is like the apex of a spinning top – without it the top cannot spin.

What are the specialties of PROUT’s economic system?
The specialties of PROUT’s economic system are:

  • Guaranteed minimum requirements
  • Increasing purchasing capacity
  • Cooperatives
  • Industrial development
  • Decentralization
  • Developmental planning

What are PROUT’s guaranteed minimum requirements?
The guaranteed minimum requirements are food, clothing, shelter, medical treatment and education for every human being. Once the minimum requirements have been guaranteed, the surplus wealth is to be distributed among those people having special qualities and skills such as physicians, engineers and scientists, because these people play an important role in the collective development of society. The level of minimum requirements should be progressively increased so that the standard of living of the common people is always increasing.

How does PROUT guarantee people’s minimum requirements of life?
It would be impossible to guarantee people’s requirements of life without further ado. It was the intention in communism to do so, but the dogma of equality soon proved catastrophic. Instead of just giving people what they need, PROUT will allow them to earn income in a system of fixed minimum income and maximum amenities. A guaranteed purchasing capacity should be enshrined in the constitution as a fundamental or cardinal human right.

How will PROUT give all people the required purchasing capacity?
The guaranteed purchasing capacity should be enshrined in the constitution as a cardinal human right. This will give the citizens of the country legal power if their minimum requirements are not met, hence the necessity of purchasing capacity will be reinforced by constitutional law. In a proutistic setup people will earn their purchasing capacity through work. There will be no unemployment in such a progressive-minded socio-economic setup as the local people will control the economy. When local people control the economy there is no chance of outsiders exploiting the local people. That local non-profiteering economy will develop self-reliance and it will be easy to keep everyone employed in such a consumption-motivated economy. As people’s economy will deal with minimum requirements and people’s subsistence problems, it must take precedence over other parts of the economy.

What does PROUT mean by “people’s economy”?
People’s economy is part of PROUT’s four-fold economic model, the other parts being general economy, commercial economy, and psycho-economy. People’s economy deals with the essential needs of the people in general – the production, distribution, marketing, shipping, storage, pricing, sales, freight charges, pro forma costing, and all related activities of such essential needs. Most importantly, it is directly concerned with the guaranteed provision of minimum requirements such as food, clothing, housing, medical treatment, education, transportation, energy and irrigation water. This part of the economy comprises other essential areas as well, such as the development of both private and cooperative industries, employment for all, and all other areas and issues related to the economic development and welfare of the people.

What is the wage policy of PROUT?
Wages need not be accepted only in the form of money. They may be in the form of essential goods or services. It is good to gradually increase this component of wages while adjusting with the monetary component.

What is the role of amenities in a proutistic economic setup?
The role of amenities in a proutistic economic setup is:

  • To sustain the especially meritorious people in their continuous effort to offer above average service to society.
  • To inspire all to increase their effort for utilizing their individual and collective wealth properly.
  • To fulfil the progressive requirements of all.

Without stimulating economic growth continuously, by recognizing the natural diversity and competitive drive of human beings, economic vitality will decrease. In a proutistic setup the standard of living will go on increasing and this will be the proof or indication of the vitality of the society.

How does purchasing capacity of the people increase in a Proutist economy?
Today the purchasing capacity of millions of people globally is neglected or non-existent, which has caused a worldwide crisis. To increase the purchasing capacity of the people, it is essential to maximize the production of essential commodities – not luxury goods. Maximizing production of essential commodities will ensure that the minimum requirements are supplied to all.

What are the three types of commodities?
The three types of commodities are:

  1. Essential commodities, such as rice, lentils, salt and clothing.
  2. Demi-essential commodities such as articles for personal care and many household items.
  3. Non-essential commodities such as luxury goods.

These category contents will vary from country to country depending on the standard of living. Items in each category will go on being revised over time. What today is a demi-essential item may tomorrow be considered an essential commodity.

Who should produce which commodities?
Essential commodities which require huge capital investment should be managed by the local government. The railway system would be an example. Essential agricultural Items should be produced by worker cooperatives. Demi-essential items should be produced by producers cooperatives. Luxury goods can be left in the hands of the private sector. Hence for a healthy economy, agricultural cooperatives, essential commodity producers cooperatives, and essential commodity consumer cooperatives are essential.

How will essential commodities be distributed in a PROUT economy?
Goods will be distributed entirely through consumer cooperatives, not through the government, businessmen or middlemen. Hence there will be no scope for manipulation by profiteers.

In a PROUT system, will there be taxes on essential goods?
Essential goods will be entirely tax free. There will be no income tax either. Instead taxes should be levied at the starting point of production.

How to make up for the abolition of income tax?
If income tax is abolished and excise duty on excisable commodities is increased by only 10%, there will be no loss of government revenue. Moreover, when there is no income tax, nobody will try to accumulate black money. All money will be white money and as a result there will be economic solidarity, an increase in trade and commerce, more investment, more employment and an improvement in the position of foreign revenue. The abolition of income tax will prove a boon.

What do capitalists do with essential commodities?
They hoard them and create artificial scarcity so as to extract maximum profit for themselves.

What happens in all undeveloped socio-economic areas?
Surplus labor arises. When this surplus labor moves to the cities looking for work, then that undeveloped socio-economic area is likely to remain undeveloped forever. According to PROUT, wherever there is surplus labor, steps must be taken to provide employment in that very town/village. If local labor leaves, it will result in natural resources being controlled by outside labor, which will destroy the local economy because local people will lose control over their natural resources. For this reason, employment must be given first to local people, so that they do not leave their area.

What will be the hallmark of PROUT’s economy?
“Increase the purchasing capacity of the common people above all.” If this maxim is followed in practice, it will be easy to control the price of goods through the cooperative system and through economic decentralization.

What other key factor must be followed in a Proutist economy?
Paper money (monetary notes) must be backed up by gold. No paper money should be issued by a government unless that government can back up the paper money with gold coins.

What are the hallmarks of both capitalism and communism?
Both systems want the maximum output with the minimum investment. For this very reason it is critical to maintain economic balance in each country – balance in both agriculture and industry. Otherwise, socio-economic equilibrium will be destroyed. When there is over-industrialization (as we see everywhere today), it affects the personal, social and national health of the people. It precipitates gradual individual and collective degeneration. Further, if the industrial system depends on outside laborers, this will lead to rapid mental deterioration in the society. Also, people will face permanent scarcity of food.

Why have cities and states lost economic balance after having achieved prosperity?
First, if a city developed along a river system and the river changed course, the economy would be adversely affected. Second, if industries moved away from rural villages, the balance of the economy would be destroyed. Third, when there is a defective educational system and social system, the economic balance is lost.

What will be the result of establishment of a decentralized economy?
Economic exploitation will be eradicated; the gap between rich and poor will be minimized, and individual and collective welfare will be greatly enhanced. This will lead to greater opportunities for the intellectual and spiritual progress of all people in the society.

What is another benefit of keeping only local goods in a locality?
The outflow of capital from that area will be checked, and will be utilized to increase production and enhance the prosperity of the local people. With increasing demand for local goods, large-scale, medium-scale and small-scale industries will all flourish.

How will banks be managed under PROUT?
The banking system will be managed by cooperatives. The central or federal bank will be controlled by the immediate or local government.

What is PROUT’s theory of exploitation?
Karl Marx held that the creation of surplus value is the source of economic exploitation; when capitalists convert surplus value into money value they amass profit. However, no country, communist or otherwise, could do away with the creation of surplus value as it is an indispensable part of national prosperity. Marx’s weakness here is that he tried to interpret exploitation only in an economic perspective.

PROUT’s analysis of exploitation says:

  • Economic exploitation involves the unrestricted plunder of the physical and psychic labour of communities together with the natural resources in their local areas.
  • By undermining local culture and corrupting the mental and spiritual spheres by introducing foreign culture with an economic motivation, exploitation includes psychic and spiritual exploitation as well. Marxism could not perceive of such pervasive exploitation as its world view is materialist.

If surplus value is essential to economic growth, how to guard against its misuse?
It is not possible, as Marx proposed, to exterminate exploitation by doing away with surplus value. It is correct that capitalists cheat the public in all possible ways and continue to accumulate profits by tucking surplus value in their off-the-limits coffers, but a productive economy without the creation of surplus value is a sorry utopia. In practical life, economies do not work without surplus value. The entire weapon’s industry of the Soviet block was based on the production of surplus value. PROUT’s policy to root out exploitation is two-fold: applying external pressure and stimulating internal urge. The internal urge of confirmed exploiters is very weak, therefore external pressure will have to be applied on them. The first fundamental principle of PROUT establishes that accumulation of physical wealth must be regulated. This is only possible by turning the economy upside down and creating a bottom-up economic structure where the grass roots are in control over their economic destiny. PROUT calls it economic democracy. On the other hand, the remaining four principles stimulates both positive external and positive internal urge. PROUT is embedded in spiritual inspiration. It is the only scientific socio-economic theory that looks towards the entire potential and requirement of human beings. The integrated application of PROUT and neohumanism will end exploitation.

What happens when people merge their individual socio-economic interests with the collective socio-economic interest?
The outflow of economic wealth from a region will cease and exploitation will be completely rooted out. The right of full employment for all local people will be guaranteed, and employment of local people will take precedence over non-local people.

What is PROUT’s view on the so-called population crisis?
It is a crime to disallow or dissuade anyone from bringing children into this world. Such crimes are only perpetrated in an exploitative setup. PROUT’s view on the so-called population crisis is that it isn’t a crisis of population at all but a crisis of leadership, a systemic crisis. The system that makes many poor and a few rich does not want that people should multiply as the number of poor and therefore revolutionary will grow in dangerous ways. However, by introducing policies based on maximum utilization and rational distribution of all natural resources a proutistic society will be able to feed all and educate any number of people so that humanity will continue to grow in a natural way.