Welcome to episode 2 of Prout Consciousness and its discussion on economic democracy. What is the main difference between political and economic democracy? To most people, the right to vote is what is democracy. This universal franchise is the holy cow of political democracy. In addition, the right to express one’s political views and even to join a party and run for office are included in what is generally termed as political rights.
Is political democracy guaranteed democratic? Prout says it is not because forces beyond and above the political system may affect and even determine political processes. Just as today, regardless of all the political freedom in the world most people still remain in economic bondage, and their economic difficulties seem to only increase even when they exercise their political rights faithfully. Here, economic bondage and difficulties include inability to secure the minimum necessities of life such as food, housing, clothing, education, medical care, energy, having to constantly worry about their economic future, struggling with huge consumer debt, living in a world of enormous disparities, instability, environmental crises and so on.
This is why, when someone like Donald Trump ensures voters that they won’t have to vote anymore, it resonates with the often bitter experience of political democracy that many voters actually have. Popular jokes often reflect the public mood. Here is one on politicians.
A man tells his friend: “Two years ago, my brother ran for office.”
Friend asks: “What does he do now?”
The man replies: “Nothing—he got elected!” [laughter]
Why, asks Prout, is there so much talk about human rights and so little focus on common people’s economic rights? What for do we have a state and politics if human beings are reduced to economic slavery and downright poverty?
Yes, liberal capitalism emphasizes free markets, free trade, and private property but such provisions have got little to do with the economic liberation of ordinary people. In fact, powerful commercial interests are the real movers and shakers while political authorities find themselves being reduced to representing the people in their mostly hopeless struggle to keep up with the whims and wishes of those independent movers and shakers. We see this in socio-democracies where the public authority collect taxes from ordinary people’s income and from the general sales of goods and services. For the rest, forces outside of the political system determine how big capital is employed and distributed. Take the case of the USA. In 2023, private net wealth in America stood at over 135 trillion dollars whereas the public sector ran a minus. Since the 1970s, the US federal government budget has run a surplus only four times, most recently in 2001. The curve of its projected debt into the middle of this century looks absolutely steep and like the climbing wall in your nearby gym. Nevertheless, the USA continues to see the greatest concentration of accumulation of wealth in the world by far, with almost one third of the world’s wealth at home.
How is that even possible—a bankrupt public sector and a record-making private sector? Could it be that people just are not interested in economic matters? The answer to that is no. If we look at what people want, economic issues remain a chief concern. Ahead of the 2024 United States presidential elections, strengthening the economy and reducing the influence of money in politics remain at the top of voter’s wish list with nearly three quarters of voters, 73%, seeing it as the priority, according to Pew Research Center.
Economic Democracy
Coming to the rescue of the holy cow of political democracy is Prout’s holy bull Economic Democracy. So who and what is this holy bull, and will economic democracy be more democratic than political democracy?
First of all, the remedy for increasing economic troubles and poverty may not be found in either private or public sector. Rather, a proper response require catering sufficiently to people’s minimum necessities and essential requirements. For this, Prout introduces the cooperative sector. The first step of Prout’s economic democracy is to secure the minimum necessities of all—food, clothing, housing, education, medical care and other—through cooperatives. The cooperative sector, and its position with regards to the public and private sectors, is discussed in the following episode number 3.
You may think that if there ever was a grandiose welfare system, guaranteeing a minimum of well-being for all must be it. If so, you are mistaken. A healthy economic setup requires universal employment and not doling out benefits. Everybody will be required to earn a minimum for securing basic purchasing capacity. In this system, earning basic purchasing capacity is not only a universal right but also a collective necessity, because the easy availability of the minimum requirements of life will increase the all-round welfare and prosperity of society.
Prout’s idea of securing the minimum necessities of all through sufficient purchasing capacity was formulated nearly 90 years ago. To some, this concept may appear similar to present calls for a universal basic income. However, in a proutistic economic democracy people will be required to work, and different work output will be differently remunerated. As a minimum, people will earn the purchasing capacity needed for securing life’s minimum necessities.
Prout suggests that increases in per capita income are not a sufficiently reliable and scientific index to determine the standard and progress of a particular socio-economic unit. Rather, this approach is misleading and deceitful, because it refers to a simple mathematical calculation of total national income divided by total population. This does not give the correct picture of the standard of living of the people of a particular socio-economic unit, as the wealth disparity in society is concealed. Per capita income shows the mean and not the variation of income distribution. If inflation is also considered, the reliability of per capita income is further reduced.
Purchasing capacity is the real index of how people’s economic needs can be met by their income. In this, economic democracy differs from all existing schools of socioeconomics. Take materialist socialism. Prout does not propose an egalitarian system where everyone is deemed equal but a dynamic system where everybody can develop physically, psychically and spiritually. Clearly, nobody is able or willing to take on all kinds of duties and responsibilities at once but all fit people would be able to do something if only the labour market is properly organized. Similarly, the present system of measuring work output in commercial terms only cannot be allowed to continue. There is enough of economic wealth in human society to allow for other types of existential value as well, such as the social and cultural. Both humanity and the environment need relevant multiple bottom lines and not economic dictatorship.
The human significance of this first step towards economic democracy lies in the fact that the proper development of every individual contributes massively to society just as a properly run society contributes significantly to the growth and development of every individual. People who work properly develop both themselves and their society.
Here we may remind ourselves that in socio-democratic welfare states many of those on social welfare programs are in two minds about the benefits of those programs. One one hand they are getting used to being bolstered by the government like that, and on the other they never seem to think that the benefits they receive are sufficient, as the following joke informs us:
A guy walks into the local welfare office, marches straight up to the counter and says, “Hi… You know, I just hate drawing welfare checks. I’d really rather have a job.”
The social worker behind the counter says, “Your timing is excellent. We just got a job opening from a very wealthy old man who is looking for a husband for his beautiful daughter. You’ll be provided a five-room bungalow on the beach and the starting salary is 95,000 dollars a year.”
The guy, wide-eyed, says, “You’re bullshitting me!”
The social worker says, “Yeah, well… You started it” [laughter].
Now, life under Prout looks even brighter when we come to the second step in establishing economic democracy, which is to provide each and every individual with increasing purchasing capacity. Very few are willing to make an effort for nothing. Moreover, research shows that output decreases when incentive reduces and increases with prospects of incentives. The first requirement for increasing purchasing capacity of all is to maximize the production of essential commodities and not the production of luxury goods. This rational industrial policy will harmonize production with consumption and ensure that essential commodities and services are within everyone’s reach. When this is followed in practice, it will be easy to control prices through the cooperative system and the decentralized approach of economic democracy.
Here we should note that both capitalism and socialism each in their own way have sought the sweet spot of supply and demand. To both, that sweet spot is thought of as a maximum of output from a minimum of input. Socialists seem to want people to produce according to capacity while consumingto their heart’s content. To capitalists, profits is the sweetest thing, means an economic end result larger than the starting capital. According to Prout, both visions are illusory. How can anybody hope for a maximum of output with a minimum of input? Experience tells us that everything of value in life requires hard work and maximum input. So instead of speculation and holding back on input, we should go wholeheartedly all in for a maximum of input to secure surplus in output. Progress is achieved only when individual and collective potentialities are brought to respond properly to human needs and longings. Economic democracy aims at bringing parity between those needs and potentialities. The sweet spot of supply and demand is achieved by engaging individuals and society in maximum all-round progress.
When exerting themselves, people prefer to be free of unnecessary and counter-productive burdens. Today, people are heavily burdened by tax. In Prout’s economic democracy essential commodities will be entirely tax free. Only semi-essential commodities and luxuries will be taxed progressively. There will be no income tax but a tax levied on the production of each commodity. With no income tax, black money would be a thing of the past; all money would be white money. As a result, economic solidarity would be on the increase and so would legitimate trade and commerce, investments, employment and FOREX. When discussing taxation in 1979, Shrii Sarkar contented that if income tax was abolished and excise duty on excisable commodities increased by only ten percent, there would be no loss of government revenue at that time.
As a rule, raw materials should not be exported but should be used for developing the economic prosperity of the local people. It is a far better prospect to process and refine produce at home instead of letting such precious resources simply go by way of dumping them abroad at cheap prices. The aim must be to build local and regional competence and technology while strengthening local economies by maximum returns on production. If there are insufficient raw materials in a country to meet the minimum requirements of its people, necessary raw materials may be imported from another country provided it can be carefully verified that the raw materials in the latter are surplus. According to Prout, free trade, without imposition of export and import duties, should be encouraged once self-sufficiency is attained. The low prices of such commodities will benefit consumers, facilitate increased prosperity and encourage economic harmony among countries, and lead to the formation of larger socio-economic zones.
The principle of industrial self-determination serves as a safeguard against unforeseen upsets beyond local control. Consistent efforts should be made towards becoming self-reliant in all areas of food security, housing, clothing, education, medical care and energy. Industrial centres should be built up wherever raw materials are available. This will ensure full employment for all local people be it in form of cooperatives or private enterprise. While private enterprise remain limited under Prout, as per its first fundamental principle, there is vast scope for cooperatives, as discussed in episode 3.
It was mentioned that in general people want output for their input. The policy of full local employment will ensure that the standard of minimum requirements continue to increase, while the meritorious would see an increase in special amenities as well. For example, doctors, engineers, scientists and other capable people engaged in various activities require extra amenities so that they can perform greater service to society. In the same way, any great capacity and extraordinary productivity should be recognised economically. In this way, the locally controlled dynamics of Prout’s economic democracy increases the standard of minimum requirements continuously while maintaining incentives for special competence and above average output. This particular system of wealth distribution is discussed in detail in episode 12 on Prout’s second fundamental principle.
The economic gap between common and meritorious people should be gradually reduced as much as possible but this gap should never vanish altogether so that required dynamism for further progress is maintained. If the gap increases, the common people will be deprived and exploitation will re-emerge in society in the guise of amenities. Prout’s economic democracy leaves no such loophole because on the one hand the standard of the minimum requirements will increase, and on the other hand the provision of amenities will be assessed from the viewpoint of collective welfare. In this way, an increasing proper minimum standard of living of all citizens can be realised while also ensuring further progress.
The third point of Prout’s economic democracy is that the power to make all economic decisions must be placed in the hands of the local people. Economic liberation is a universal right, everybody’s birthright. In order to realise this right, economic power must be with the local people. In such democracy, the local people will have the power to make all economic decisions, to produce commodities on the basis of collective necessity, and to distribute all agricultural and industrial commodities.
It follows that for economic democracy to take proper roots, outsiders must be strictly prevented from interfering in the local economy. The outflow of local capital must be stopped by strictly preventing outsiders or a floating population from participating in any type of economic activity in the local area. “Outsiders” are defined as people who have not yet merged their socioeconomic interests with those of the local people. Conversely, anybody is welcomed into the locality who are willing to settle there and spend their income and wealth in the area. Clearly, this concept of local people has nothing to do with physical complexion, race, caste, creed, language or birth place. The fundamental issue is whether or not each person or family has identified their individual socio-economic interests with the collective interests of the concerned socio-economic unit. Those who have not done so should be branded as outsiders.
Not following this localist principle will develop a floating population, causing the outflow of economic wealth from the local area. The psychological defect of so-called parallel societies is that they fail to accept a new locality as their own home and consequently cannot forget the land they left behind. This is the reason why the speed of their socio-economic integration and progress is slower than that of the local people. In Europe, the USA and in other countries that have seen heavy immigration this problem is often referred to as “failing integration”. Economic democracy would set even this defect right.
Economic democracy essentially seeks to increase the standard of living of ordinary people. In this, it is essentially consumption-motivated and not profit-motivated. A question raised by some is how any economic enterprise would continue to operate without making sufficient profits to reinvest in production and operations? Prout’s answer to that is rational profits. Take the status of agriculture in the world today. In industrially developed countries agriculture tends towards mono-cropping and being an object of economic speculation. Throughout much of the industrially underdeveloped and thickly populated world many are engaged in agriculture with next to zero salary and faced with unending prospects of sustained poverty. Thus there is a great need for revolution in the world of agriculture, and that revolution must include both modernisation and education. Prices of agricultural commodities should be fixed on a rational basis by taking into account the actual cost of commodities; the cost of labour, raw materials, transportation and storage; depreciation; sinking funds, etc. In addition, the price should include a rational profit of not more than fifteen percent of the cost of production. In the decentralized setup of economic democracy, agriculture will have the same status as industry.
Like in every other area of industry today, powerful owners of large agricultural ventures give preference to items which yield maximum return, and everywhere there is keen competition for presenting the most profitable goods to consumers. In general, capitalism’s lopsided profit-motivation has led owners all over the world to prioritise access to cheap raw materials and cheap labor over local development. The result is severely imbalanced arbitrary supply and demand chains with extensive production of semi-essential commodities and luxury goods to the exclusion of essential goods and services at fair prices.
Prout does away with middle-men between producers and consumers, and with owners who do nothing but take profits. In a decentralized economic setup the owners are those who are actually involved in the enterprise, be it at the administrative, executive or any manual level. Yes, investors should be allowed but in a cooperative economic democracy every person gets one vote and not any number of votes because of their investment. Financial or other investors, such as of land or machinery, get to vote on par with all other bona-fide members and that is how local people get to control their economic destiny.
Earlier it was mentioned that industrial self-determination would serve as a safeguard against upsets beyond local control. In economically decentralized democracies, commodities produced locally would be sold in the local market itself. As a result, there will be no uncertainty in the local economy or the economic life of the local population. Their minimum necessities would be guaranteed by local self-reliance. In addition, money would be circulated within the local market so there would be no outflow of local capital. The possibility of recessions and depressions elsewhere hitting local economies would be largely eliminated, even in the event of severe economic instability in the wider world. Even, the phenomena of price inflation and product inflation would be largely reduced and finally eradicated in a world where local people and not foreign speculators control the economy.
Here, it may be asked how local, ordinary people suddenly would become most competent and able to develop industry and economy for the benefit of all? You may know the old joke on political democracy: “The best argument against democracy is a five minute conversation with the average voter” [laughter]. So, how would common people suddenly come to know how to utilize individual and collective physical, psychic and spiritual potentialities to a maximum and continue to adjust those methods according to ever-changing circumstances? Experts have attempted to come up with answers to such challenges, including “hiring professionals” and “letting specialists do it for them”. The reality is that our world and its people are changing fast. Modern technology offers information, education and current affairs in realtime to everyone. What was once difficult to comprehend has become easily understandable and commonplace. In fact, the potential for understanding matters of everyday importance is more or less the same in all people. Moreover, modern communication platforms are a great boon for individual study as well as for collective effort. They have made it easy for anyone to reach a conclusion, individually as well as collectively, as to the path ahead and how to proceed. In fact, modern low-cost communication technology appears to favour the welfare of common people more than it would secure any privileged position of vested interests.
Here is another controversial issue. As economic democracy aims to develop local industries and create employment for the local population, commodities which are not produced within the local area should be removed from the local market as far as possible. Local initiatives for replacing foreign made goods should be encouraged and supported, in particular when it comes to essential and semi-essential goods. The local population should be properly educated in ideas of solidarity economy and learn to utilize commodities produced in their own area to ensure the prosperity of the local economy. Initially, local commodities may be inferior, more costly or less readily available than outside commodities. Yet in spite of this, locally produced commodities should still be used by the local people. Here it is emphasised that wherever local commodities do not meet the needs and aspirations of the people, immediate steps must be taken to increase the quality, reduce the price and increase the supply of local goods, otherwise illegal imports will be encouraged.
Local means local. If this principle is deviated from it would mean something other than local. If neglected, local industry will gradually close down, local markets will go out of the hands of the local people and unemployment will increase. Once locally produced goods are accepted in principle, not only will local industries survive, but with their further development the local economy will thrive. The outflow of capital from the local area will be checked, and because it will remain in the local area, it will be utilized to increase production and enhance the prosperity of the local people. With the increasing demand for local commodities, large-scale, medium-scale and small-scale industries will all flourish.
Another important characteristic of decentralized economic democracies is that money will always remain in circulation, hence the economy will move with accelerating speed. What is the value of wealth after all? Well, first, the value of money itself depends on the extent of its circulation. The more frequently money changes hands, the greater its economic value. The greater the value of money, the greater the prosperity in individual and collective life, and the greater the opportunities for all-round welfare. Here we approach a greater vision of what wealth may be: physical, psychic, social, cultural and spiritual progress for all. In this we catch glimpses of the differences between local solidarity economies and economies manipulated by foreign exploiters.
Democracy is of course a huge term that means much more than only economy. But then, what is the actual value of such big tickets if people remain destitute and unable to walk straight in life? When properly appreciated, there is a close relationship between the economic prosperity of people and their psychic and cultural development. Improvements in individual and collective life will lead to the all-round welfare of people, including psychic and spiritual growth.
If local people do not develop a sense of self-confidence in their economic activities, then they become mentally weak, and this inherent weakness becomes an impediment to their economic well-being. Such unhealthy self-depreciation in face of foreign aggression has always been a root cause of all sorts of exploitation, including socio-economic, linguistic, cultural and even religious exploitation. Any community subjected to psychic manipulation becomes an easy target of economic, political and psycho-economic exploitation by vested interests. Thus, in economic democracy local language is to be used in all local dealings and transactions. That is, the local language should be used in the administration, the education system, the economy, and in cultural activities. All official and non-official bodies and offices of a particular socio-economic area should use the local language as the chief medium of communication.
When developing his ideas of economic decentralization, Shrii Sarkar commented that economic democracy is essential not only for the economic liberation of human beings, but for the universal well-being of all – including plants and animals. Economic democracy will greatly facilitate environmental emancipation. The universality of economic democracy will devise ways and means for effecting the smooth progress of all by recognizing the unique value of humans, non-humans and nature alike.
The overall well-being of society is the ultimate goal of economic democracy. This is a comprehensive ideal and should be established in each and every socio-economic unit. It will bring about economic prosperity as well as ensure greater opportunities for the psycho-spiritual elevation of all members of society. In the final analysis, this is what economic democracy is for, paving the way for righteous living.
That is all for this episode. Much of what can and should be said about economic democracy is left to the following episodes. For now, thank you and goodbye!