Capitalism, PROUT and Deficiencies of Democracy – IV

(Note: Parts of the discussion in this section is taken from P.R. Sarkar, PROUT In A Nutshell, Parts 1-22 , AMPS, Calcutta, India, 1987-1991.)

The Progressive Utilization Theory

Dr. Susmit Kumar
Under their five-year plans, communist countries gave importance to large industries. In the U.S.S.R, the center was dictating the establishment of factories all over the country, which was so vast that it covered 11 time zones. After the collapse of the central political authority in 1991, the entire Soviet economy collapsed as well because a majority of the regions were not self-sufficient. Industries and individuals resorted to bartering in the years following as they were strapped for cash. One firm, Bor Glassworks, traded glass for autos with a big Russian automaker. Bor in turn used the autos to settle up with its sand suppliers. Another customer, a factory near Moscow once owned by Singer Company, paid for Bor’s glass with sewing machines, which were then given to employees in lieu of wages.56 The Russian economy shrank by 50 percent between 1990 and 1998.

Third World countries like India have also used five-year plans. According to Jawahar Lal Nehru, India’s first prime minister, the large industries these plans created were like modern-day temples. People migrated in droves from rural to urban areas for work, resulting in places like Daravi, the world’s largest slum, near Mumbai (Bombay), and home to more than a million poor people. It is true that modern industry is necessary for economic development, but because it is not labor-intensive, it resulted in large-scale unemployment in India and is now disrupting China after the withdrawal of the state-funded welfare system. The Chinese health care system, especially in rural areas, is now in crisis. In May 2007, China’s health ministry called for police to be stationed in hospitals to protect medical workers from further attacks by angry patients and their relatives after more than 9,000 attacks on medical workers and facilities in 2006. In one well publicized incident, staff at a southern Chinese hospital had to wear safety helmets for protection. Since the introduction of market reforms in China, many patients have found the cost of medical care unaffordable.57

Although the economies of both China and India are booming now, they will face large-scale unemployment once rural workers try to migrate to urban areas in order to escape declining rural economies. The majority of the Chinese and Indian populations are rural and large—in the hundreds of millions—and work will not be available for a large portion of them.

In advanced countries like the U.S. and Japan, people talk about getting the latest gadgets like flat panel televisions, iPods, iPhones, etc. It is true that the quality-of-living standard of developed countries has increased tremendously in the last couple of decades, but poor people around the globe still struggle just to survive. The World Bank uses an income of one dollar per person per day, measured at purchasing power parity, to determine the numbers of extreme poor, and income between one and two dollars per day to indicate moderate poverty. According to a 2004 World Bank study done by economists Shaohua Chen and Martin Ravallion, roughly 1.1 billion people were living in extreme poverty in 2001, down from 1.5 billion in 1981. The overwhelming share of the world’s extreme poor, 93 percent in 2001, live in three regions: East Asia, South Asia, and Sub-Saharan Africa. Since 1981, the numbers of extreme poor have risen in Sub-Saharan Africa, but have fallen in East Asia and South Asia. Almost half of Africa’s population is deemed to live in extreme poverty, and that proportion had risen slightly over the period. The proportion of extreme poor in East Asia has plummeted, from 58 percent in 1981 to 15 percent in 2001; in South Asia progress has also been marked, although slightly less dramatic, from 52 percent to 31 percent. Latin America’s extreme poverty rate is around 10 percent, and relatively stuck; Eastern Europe’s rose from a negligible level in 1981 to around 4 percent in 2001, the result of upheavals from the communist collapse and economic transition to a market economy. East Asia, South Asia, and Sub-Saharan Africa have about 87 percent of the world’s 1.6 billion moderately poor.58

According to philosopher Prabhat Rainjan Sarkar, Nature has been kind enough to provide abundant natural resources to all regions of the world, but she has not given any guidelines on how to distribute these resources among the members of society. This duty has been left to the discretion and intelligence of human beings. In light of how many people suffered under communism and still suffer under capitalism, it would appear that these two systems represent less than the best in discretion and intelligence, and so he developed the Progressive Utilization Theory (Prout).

According to the Progressive Utilization Theory, a country should be divided into socio-economics zones, each of which will have enough natural resources for its population to become economically self-sufficient. In order to realize the goal of self-sufficiency, local people will hold economic power, enabling local raw materials to be used to promote their economic prosperity. The raw materials of one socio-economic unit will not be exported to another unit, as they often are in the free market system, but rather, industrial centers will be built up wherever raw materials are available. Following this policy will create industries based on locally available resources and provide full employment for local inhabitants. Goods essential to local life like basic food items and clothing will not be targeted for export, either to other zones or to other countries, but rather primarily satisfy local demand. Trade, rather than being the centerpiece of economic policy as it is under neoliberal globalization ideology, will focus more on demi-essential items (non-basic food items, antiseptic soap, etc., that are not luxury items) and non-essential, refined wares (luxury items). Guaranteed employment and productivity improvements will increase the purchasing capacity of all residents, ensuring rising standards of living, the goal of any economic philosophy that plans systematically, not haphazardly, for the welfare of all people, not just a few.

Prout promotes economic democracy. Economic democracy will give local people the power to make all important economic decisions, such as producing commodities on the basis of collective necessity and how to distribute agricultural and industrial commodities. Currently, the only economic decisions most people make are what to purchase and where to work.

Prout also promotes economic decentralization. Each sector of the economy must strive for maximum development, and all sectors must strive for maximum decentralization. This policy leads to diversity of production in goods and economic sectors and diversity of production location. Economic decentralization is impossible under capitalism, because capitalist production always aims at maximizing profit. Capitalists prefer centralized production, which leads to regional economic disparity and imbalances in the distribution of the population. In the decentralized economy of Prout, emphasis is on production for general consumption, and the minimum requirements of life will be guaranteed to all. All regions will get ample scope to develop their economic potentiality, so the problems of floating and migrant populations and overcrowding in urban centers will melt away.

Rather than a one-sided emphasis on state ownership of industry, which characterized communism, or on private ownership of industry, the raison d’être of capitalism, Prout’s economic structure has three tiers: government-controlled key industries, cooperatives, and small, privately-owned enterprises. The majority of industries will be cooperatives and will be worker-owned. Very large industries, too large to be managed by cooperatives, will be managed by the local government, and small industries will be privately owned. These days the U.S. is losing jobs overseas because CEOs have to demonstrate quarterly profits to Wall Street. But suppose a high-tech firm of 500 employees in Silicon Valley is owned entirely by its employees, making it a cooperative. Its decisions will not be dictated by Wall Street, since it is not vulnerable to the stock market; nor will it be controlled from Moscow or Beijing like a communist enterprise. Large retail and department stores like Wal-Mart will be replaced by consumer cooperatives owned entirely by local consumers. They may form regional or national groups, but they will be owned by their members only. Consumer cooperatives will buy consumer goods from producer cooperatives that will be owned entirely by producers. Although stores like Wal-Mart claim they provide cheap goods to American consumers by getting them manufactured overseas, they have also sent millions of manufacturing jobs overseas, and make the country vulnerable economically as the U.S. is going into debt by more than $800 billion a year due to its trade deficit.

According to Sarkar, per capita income is an insufficiently reliable and scientific index for determining the economic status and progress of a particular socio-economic unit. Rather, it is misleading and deceptive, because it refers to a simple mathematical calculation of total national income divided by total population. It is unable to convey an accurate picture of the standard of living in a particular socio-economic unit because it conceals the degree of wealth disparity. When using per capita income as the measurement of economic status and progress, great income disparity can result in the same average standard of living as a more equitable disparity.

This measure also lacks any inherent relation to the ability to buy, or not buy, desired goods and services. That is, even though people may have high incomes, they may be unable to purchase the necessities of life. If per capita income is low, however, but people have great purchasing capacity and can buy a lot with that money, they are much better off. So purchasing capacity—the measure of the ability to purchase something with a given amount of money—and not per capita income—which is nothing more than average income—is the true measure of economic prosperity.

Purchasing capacity is the more accurate index, since it shows to what extent peoples’ needs are being met by their income. All of Prout’s programs in the socio-economic sphere aim at increasing it. In addition, policies will ensure that the sum total of costs for each person’s minimum requirements falls within his or her purchasing capacity, or “pecuniary periphery,” as it were.

Economic power in democratic countries is concentrated in the hands of a few individuals and groups. In socialist countries, economic power is concentrated in a small group of party leaders. In both cases, handfuls of people manipulate the economic welfare of all of society. When economic power is vested in the hands of the people, the supremacy of these small groups will be terminated.

Research, particularly in the physical sciences and engineering, is the foundation of America’s economy. In the last five to six decades, it has invented the transistor, fiber optics, integrated circuits, wireless communication, liquid crystal displays, lasers, and medical innovations. These new technologies have revolutionized the world, creating new, high-wage jobs. Unfortunately, private funding for this research has fallen drastically in the last two decades, and federal funding is half what it was in 1970 in terms of GDP. AT&T’s Bell Labs, which invented or laid down the groundwork for the transistor, the C language (which is the basis of Java and the Internet), communications satellites, the fax machine, the VCR, and several other devices, no longer exists. The federal government and private firms now fund only research that has immediate financial gain. During the early and mid 1990s, I met senior physicists who had previously worked in basic science research, now doing work in the financial arena because of the unavailability of research funds in basic science. Research is now rather dictated by Wall Street. A country progresses because of its science and technology, not because of hedge funds or financial organizations.

Prout stipulates free education for all students up to the highest level and guaranteed employment for all youth. It gives importance to the maximum utilization of the intellect. Education provides benefits not only economically, but socially also. It is well known that with an increase in education level, the propensity to commit crime decreases.

Fundamental Rights

The roots of our fundamental rights can be traced to the Magna Carta. Under the threat of civil war, King John signed an English charter of civil liberties, called the Magna Carta, in 1215. It required the king to renounce certain rights, respect certain legal procedures, and accept that his will could be bound by law. Clause 39, for example, defined the right of habeas corpus, and states that “no freeman shall be … imprisoned or disseised [dispossessed] … except by the lawful judgment of his peers or by the law of the land.” In the United States, both the national and state constitutions contain ideas and even phrases directly traceable to this document.59

The constitutions of a majority of countries generally consider fundamental rights to include the right to equality, freedom of expression, freedom of religion, cultural and educational rights, etc. According to Sarkar, it is now time to raise the bar. Rights pertaining more to the material level of life should also receive constitutional guarantee: “Every individual must have equal rights to the dot in respect of things such as food, clothes, housing, medical aid and education that are absolutely necessary for existence.”60

Prout, unlike European social democracy or American liberalism, is not a social welfare system. It promotes a policy of 100 percent employment for local people utilizing local resources as the basis of service and industry. A basic right of all people in the Prout view, as mentioned, is to be guaranteed provision of the minimum essentials for their existence. Further, what counts as the minimum will vary and increase with the development of the economy; a cave man could live without telecommunications and education, but nowadays that is much more difficult. This basic right should be arranged through fully guaranteed employment, however, not through dole-outs. Unemployment is today a critical economic problem in most places in the world, and 100 percent employment is the only way to solve it.

Welfare, utilized to support poor and unemployed people in many nations, is poor policy. Even though, in the Prout view, society has the responsibility to ensure everyone his or her minimum necessities, if this is done gratis or unilaterally through gifts of things like food and shelter, individual initiative becomes retarded. People gradually become lethargic, and may even start to demand an income simply because they exist, as happened in northern Europe in the 1990s. To avert this form of deterioration, as well as cultivate a reciprocal spirit of willingness to contribute to others’ well-being and prosperity through work, society has to make such arrangements that people earn the money they require to purchase the minimum necessities through labor they can perform according to their capacity. Prout promotes welfare through work, not welfare for free, except in those relatively few cases where a person is severely disabled.

Guaranteeing the availability of the basic necessities of life has another advantage and purpose. If sufficient purchasing capacity is ensured in a way that avoids the monopolization of people’s time and energy, they will be able to use their surplus time and energy—which in some countries is nil owing to the resources required just to procure life’s necessities—in subtler pursuits. People will be progressively freed from the struggle to conquer need and scarcity, and both individuals and society will benefit as they use their surplus resources in art, the accumulation of knowledge, leisure (possibly alleviating stress and health problems), sports, spiritual development, etc.

The minimum requirements of every person are generally the same (food, living quarters, clothing, etc.), but diversity is also the nature of creation. Special amenities should therefore be provided as incentives so that diversity in skill and intelligence is fully utilized and talent is encouraged to contribute its best for human development. What counts as an amenity or incentive will vary according to the society and times. But at the same time there should be constant effort to reduce the gap between the amount of special incentives a society offers and the minimum requirements a society ascertains to be the bare necessities at any given time. The guaranteed supply of minimum requirements must be liberalized, in other words, by gradually increasing the amenities given to the many so that they approach the level of amenities given only to the few. If economic adjustment is pursued along these lines, it will assist in the physical, mental, and spiritual evolution of humanity, and allow humanity to develop a cosmic sentiment for world fraternity in place of narrower sentiments like the marked modern tendency to emphasize personal acquisition.

The cosmic sentiment finds its clearest description in P.R. Sarkar’s philosophy of “Neohumanism.” Neohumanism is an evolution of ordinary humanism, which is centered on human beings in their generic sense, that he based on humanity’s most expansive sentiment, one that sympathetically embraces everything in the universe. It is an application of his spiritual philosophy, a form of monism in which matter occupies a derivative position. According to Sarkar:

All molecules, atoms, electrons, protons, positrons and neutrons are the veritable expressions of pure consciousness. Those who remember this reality, who keep this realization ever alive in their hearts, are said to have attained perfection in life.… When the underlying spirit of humanism is extended to everything, animate and inanimate, in this universe—I have designated this as Neohumanism. This Neohumanism will elevate humanism to universalism, the cult of love for all created beings of this universe.61

It is a sentiment or philosophy like Neohumanism that will help people progress beyond selfishness into a socio-economic system that incorporates social or shared benefit as one of its defining factors.

Surplus goods and services, after distributing the minimum requirements, are to be given according to the social value of the individual’s production. Note that the measure of value is social rather than economic. Here, the “social value” of a person means how valuable he or she is to society, whereas “economic value” indicates how valuable a person is to the economy. Those with social value benefit society non-economically, and those with economic value benefit society in terms of their direct economic contributions. For example, Mother Teresa, Nobel Prize winners, teachers, spiritually elevated people, and the like may have more social value than the CEO of a firm, whereas a CEO has more economic value. This principle provides a rational, social basis for material incentives and expands their scope so that they are less focussed on market services and commodities. It is, of course, better for society if moral incentives and the desire for social service motivate people in their productive work. However, the practical reality is that productivity is, to a large extent, proportional to material rewards. “Serve according to your capacity and earn according to your necessity,” the Marxist slogan, sounds good to the ears, but will reap no harvest in the hard soil of the world. The need, rather, is for a framework that controls incentives and contains them within bounds that best serve the collective interest, which transcends pure market considerations. Incentives should also be provided in the form of goods and services that can be applied to social purposes, rather in the form of wealth that is likely to be hoarded.

To be more concrete, today common people in poorer countries need bicycles, for example, while meritorious people need motorcars, but there should be efforts to provide common people with motorcars also. After everybody has been provided with a motorcar, it may be necessary to provide meritorious people with airplanes so that their incentive to work is maintained. After providing each meritorious person with an airplane, efforts should be made to provide ordinary people with airplanes also. This principle is applicable in poor as well as developed nations.

If the maximum amenities of meritorious people become excessively high, however, then the minimum requirements should immediately be increased. For example, if a person with special qualities has a motorbike and an ordinary person has a bicycle, there is a balanced adjustment. But if the person with special qualities has a car, then we should immediately try to make motorbikes part of the minimum requirements. There is a proverb that refers to plain living and high thinking, but what is plain living? Plain living 80 years ago was not the same as it is today, so plain living changes from age to age. The standard of value also varies from age to age. Thus, both the minimum requirements and the maximum amenities will vary from age to age, and both will be ever-increasing. If this were not so, economic progress would falter.

The Prout approach, in sum, is to provide the minimum requirements of the age to all, the maximum amenities of the age to those with special qualities according to the degree of their merit, or social value, and the maximum amenities possible to ordinary people as well. As per their monetary value, the minimum and maximum requirements of the age are to be fixed, refixed, fixed again, and so on. The Prout amenity system is thus a process both for providing incentives for extra effort and skill and for raising the level of minimum necessities. Because it is a permanent part, or fundamental principle, of Prout, any society organized in this way will steadily raise its level of material prosperity in perpetuity, and humanity will thereby develop as well.

India has seen some progress on this front. Since 1972, villagers in the state of Maharashtra, on India’s west coast where Mumbai is located, can demand work from the state government if they are unable to earn their livelihood under the state government’s Employment Guaranteed Scheme. The central government implemented this program under the National Rural Employment Guarantee Act (NREGA) in 2005. Under NREGA, every household in India’s rural areas shall have a right to at least 100 days of guaranteed employment every year for at least one adult member.

Even though the advancement of science and technology has made enough resources available so that everyone can get the minimum requirements necessary for life, material wealth is still in limited supply, or finite, at any given point in time. Prout therefore advocates a maximum limit to wealth, too, not only minimum levels. According to Sarkar, “No individual should be allowed to accumulate physical wealth without the clear permission or approval of the collective body.” The term “the collective body” here means society. Setting maximum limits will allow more rational and effective application of policies that increase both minimum requirements and amenities, both of which would tend to stagnate if wealth were concentrated in a few hands.

This would include capping salaries and other forms of compensation at a reasonable maximum level. According to renowned economist John Kenneth Galbraith, “The most forthright and effective way of enhancing equality within the firm would be to specify the maximum range between average and maximum compensation.”62 Currently, however, the gap between the wages of average workers and the salary and compensation package of a typical CEO in America is increasing yearly. Japanese and Taiwanese CEOs make about 11 and 14 times more than their average employee, respectively, whereas German, French, and Polish CEOs make about 20, 23, and 25 times more, respectively.63 But the average American CEO earns 262 times more than the average worker—more in one workday (there are 260 in a year) than an average worker earns in 52 weeks. In 1965, American CEOs in major companies earned 24 times what the average worker earned; this ratio grew to 35 in 1978 and to 71 in 1989. The ratio surged in the 1990s, and hit 300 at the end of the recovery in 2000. A fall in the stock market then temporarily reduced CEO stock-related pay, causing it to moderate to 143 times that of the average worker in 2002. Since then, however, it has exploded, and by 2005, the average CEO was earning $10,982,000 a year, 262 times the average employee, who received $41, 861.64

Ceaseless efforts should be made to increase both the minimum and maximum amenities provided as well as to reduce the gap between the two, but the size of this gap will never shrink to zero. If the minimum vehicle provided is a 6-10-year-old used car, for example, the vehicle provided as a maximum amenity may be a luxury car, worth, say, $100,000. With the advancement of science and technology, if the minimum vehicle provided is a brand new car, the maximum amenity might be a private airplane.

Part 5: Differences Among PROUT, Capitalism and Communism

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