2019-11-18

Towards a Green Social Democratic Economy

Background/Context

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[1][2][3][4] Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets.[5][6] In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[7][8]

Social democracy is a political, social and economic philosophy that supports economic and social interventions to promote social justice within the framework of a liberal democratic polity and a capitalist mixed economy. The protocols and norms used to accomplish this involve a commitment to representative and participatory democracy, measures for income redistribution, regulation of the economy in the general interest and social welfare provisions.[1][2][3] In this way, social democracy aims to create the conditions for capitalism to lead to greater democratic, egalitarian and solidaristic outcomes.[4]

The Green New Deal is an ambitious plan for how we can eliminate poverty and create millions of jobs while tackling the biggest threat of our time: climate change. It involves massive public investment in clean energy, transit and climate adaptation work. But the vision is bigger than that: it’s about transforming our entire economy to be safer and more fair, and give everyone a better life. First proposed in the U.S., the Green New Deal is now spreading around the world. In 2015, we joined with dozens of movement leaders to draft the The Leap Manifesto, a 15-point plan for how Canada can decarbonize its economy based on principles of justice. We’re excited about the Green New Deal because it’s even more ambitious than the Manifesto, and it’s being backed by both grassroots movements and politicians.

The Failure of Capitalism

If you are part of the 1%, or perhaps even the top 10%, of wealthy people that call themselves capitalists you are probably wondering what the nonsense of the heading above is. Capitalism is working just fine for you.

But if you are not one of the owners of the means of production, but are the means of production, part of the masses that actually produce the wealth and services that our society depends on you see it completely differently. Indeed even the capitalists themselves are recognizing the market system as it currently works does not serve society and are rethinking the idea that corporations only duty is to shareholders profits and are suggesting corporations also have a responsibility to workers, customers and society. Or at least they want the public to think they have such concerns as a means of placating the masses to prevent the complete abolition of capitalism.

Capitalism unfortunately is based on a lot of assumptions and mythology which simply is not true. Shall we look at some of them.
If everyone acts in their own self interest the interests of the society will be served is one of the basic tents of capitalism. Unfortunately it is just a poorly presented justification for greed.

The market will ensure fair prices and wages and an effective distribution of resources to where they are most needed. Clearly not working.

What's good for General Motors is good for America, or more generically, what is good for the mega corporations is good for the country and the society. Has the laughter died down yet.

Competition will ensure the survival of the best ideas and most efficient implementation of them and the failure of the poorest. UNLESS you are too big to fail, then state socialism will bail the capitalists out with the workers money.

No one is too rich and there is no need for income or wealth redistribution because the earth has infinite energy and resources and infinite capacity for development and the environmental impacts that go along with that and there are no limits to growth. Everybody can become a billionaire if they just make the effort. The poor are just lazy. No comment necessary.

Need I go on.

Fortunately social democracy does not require, nor seek, the elimination of private ownership. It only seeks to build a fair society where everyone can contribute with a fair distribution of wealth.

Inequality

We have all read the statistics on wealth and income inequality. It seems unnecessary to repeat them here. But here are a few citations anyway.

The world’s richest 1 percent, those with more than $1 million, own 45 percent of the world’s wealth. (Global Inequality - Inequality.org)

Last year 26 people owned the same as the 3.8 billion people who make up the poorest half of humanity. (5 shocking facts about extreme global inequality and how to even it up | Oxfam International)

Billionaires in Canada have increased their wealth by $20 billion over the last year, says a new Oxfam report on global inequality. In the same time, the 4.5 per cent of the country's wealth held by the poorest half of Canadians remained static. (Obscene gap between rich and poor, says Oxfam | National Observer)

Since 1990, the richest group of Canadians has increased its share of total national income, while the poorest and middle-income groups has lost share. (Income inequality - Canada and world results)

Income inequality in America is the highest it’s been since Census Bureau started tracking it, data shows (The Washington Post)

I wrote this about excessive wealth in an earlier blog post, THE FIFTH COLUMN: On Inequality, Democracy and Taxing the Rich – A Modest Proposal.

So what is excessive income and wealth. There are many ways to measure that, many statistical, but I propose a simpler definition – the amount of wealth and income where increases have no discernible effect on ones way of life or standard of living, where the increase is simply not noticeable in one's day to day life. Let's be generous to the wealthy in determining such levels. I propose an annual income of $1 million dollars and total assets of $100 million as the level that triggers “excessive income and wealth”. Above that no one notices without reading their financial statements.

The thing about excessive wealth is that it makes minuscule difference to the recipients but could make all the world of difference to the poor and underprivileged and to society as a whole if used for the common good. I will not even attempt to list what all that excessive wealth could do if devoted to the common good of society .

But there is another side to excessive income and wealth – it is highly undemocratic. The rich do not cling to their excessive wealth because it makes a difference to their daily lives. They cling to it because it gives them economic and political power. It is not just a matter of economic inequality, is a matter of political inequality.

Democracy is based on equality, one person one vote. Economic power is political power. Excessive wealth skews political power so that the wealthy have more of it. Excessive wealth is inherently undemocratic.

The argument that the rich are simply smarter or work harder simply does not hold water (to use an expression). The extremely wealthy are in that position because of privilege or in a few exceptional cases just plain dumb luck. But there is no moral justification for such extreme levels of wealth and inequality, particularity when you take into account the amount of economic and political power that provides which negates any sense of democracy we think may exist in our societies.

Climate Change

This inequality is taking place in a time of environmental crisis. No need to go on and on about the scientific consensus here. Just a few citations for the record.




Some people suggest the solution to climate change lies in the hands of a few big corporations. Others think it only involves moving away from fossil fuels. But in reality avoiding future environmental disaster requires a major remaking of our economy from one based on the concept of unlimited consumption, waste and growth to one based on sustainable living and sustainable development (remember that). We need to refocus our society away from the concept of increasing our standard of living, where standard of living is defined by how much stuff (energy and resources) we consume to one based on increasing our quality of life, where quality of life is defined by how satisfied we are with our life experiences, in effect by how “happy” we are.

Tackling Climate Change and Inequality: An Opportunity to Build a New Society

Too big crises at once. How do we prioritize our response. Fortunately we do not. This is indeed an opportunity to use our responses to both these crises to build a better society.

So let us first look at the so-called “elephant in the room”, the idea that actually doing something significant about inequality is an extreme radical idea that involves stealing the wealth of the mega rich.

Let us assume that we are in an economy where the richest people earn up to a million dollars annually, making more than 10-20 times the income of average workers and that the richest people could acquire wealth of up to $100 million dollars, 100 times what the average worker can save up in a lifetime. Then let us assume someone suggests that is not enough incentive for people to work hard and invest and we should change the system so the wealthy can earn unlimited incomes and acquire unlimited wealth gaining them the economic and political power that that brings with it. Those people would be called extreme radicals with crazy ideas. Rationally that kind of uncontrolled excessive inequality is the crazy radical idea that would undermine society, not establishing reasonable limits to inequality.

Tackling inequality will provide the political opportunity and funds to change our society to deal with climate change. We need to change the economic and political power distribution to do this and there will be economic disruptions and major economic change, which will be for the better in the long term.

How Do We Tackle Inequality

Let us look first at how we tackle the problem of excessive wealth (as defined earlier) and inequality.

Preferably we deal with this outside the tax system and only use the tax system to correct egregious behaviours that continue.

We must start with protections for ordinary working people. We need to start with a minimum guaranteed income for everyone, and not a poverty/subsistence level income but a decent middle class income that allows people to have a satisfactory quality of life.


When it comes to excess income we should set a societal standard that the gap between the lowest income and the highest income should not exceed twenty times within the society and ten times within any one organization. That leaves lots of room to reward hard work, education or risk taking.

On excessive wealth we hope corporations and organization revise their profit structure so it does not lead to excessive wealth, by reducing exorbitant executive salaries and increasing wages for the people that make the goods and provide the services that create the profits, spending more on making products and services better quality and reducing prices. The days when maximizing profits was the only corporate goal need to end.

There will, of course, be situations of such excessive wealth where drastic measures will need to be taken. They should include, where appropriate, simply transferring corporate ownership to workers co-operatives where the profits can be shared more evenly. They may also include the society, through government, taking ownership of enterprises and devoting the profits earned to the common good. In some cases corporate operations and practices will need to be realigned to better serve the needs of the society as a whole.

Where excessive income and wealth remains we will need to use the tax system to tax away any income over $1 million annually and any wealth in the form of assets over $100 million.

At levels below those that are extremely excessive we need to reform the income tax system reversing decades of tax reductions for high income earners and making it more progressive. We start with eliminating income tax on the minimum guaranteed annual income. Tax rates above that should increase progressively with new higher tax brackets at the upper end.

Corporate tax rates need to be brought back to historical levels before the massive cuts began.

What Type of Economy Do We Need

As we respond to the climate change crisis we must realize that the answer is not simply avoiding a catastrophe at this time by reducing our fossil fuel use and carbon footprint but avoiding future environmental disasters with an economy based, not on consumerism with it's inherent excessive consumption and waste, but on sustainability.

The 4 R's:

One guideline to this is the traditional 4 Rs .

1. Refuse: To refuse waste is often seen as a "radical" choice. As a consumer, the impact of refusing waste is a clear statement to the producer. This choice is a powerful one in that you refuse to take on the responsibility of waste and only wish to receive the wanted or needed product.2. Reduce: As you gain a better understanding of what waste is and the impacts it has on our natural, economic and social environments, reducing becomes a choice of consciousness. Reducing waste allows you to participate at any level.3. Reuse: Using conventional waste to divert it from the waste stream offers a broad spectrum of savings. From plastic containers to shipping containers, the reuse of a product introduces a second life cycle.4. Recycle: Though recycling is the last "R" in this though process, it has become the most commonly used element. Recycling is absolutely important in eliminating waste and will always be part of the ongoing process. Separating out recyclables from other waste is a responsibility that often lies with the end consumer. The problems that arise with recycling are usually the lack of knowledge and accessibility.

I would like to emphasize here that these are listed in priority order with the most important principle being saying no to environmentally unsustainable products and practices.

And “Reduce” has to be meaningful as we move from an economy based on consuming to one based on living.

For example, at a time when families are smaller why are houses bigger. A family of two adults and two children does not need a three or four thousand square foot house. A family with two parents and two teenagers does not need four automobiles. What happened to the family car. Appliances should be built to last twenty or more years. Even computers, tablets, smartphones, etc,. are at a state of maturity now that they do not need to be replaced every two years. When it comes to smaller items it is often the excessive packaging that is the biggest environmental problem. Why do we allow that when it harms the planet and adds unnecessary costs to both the producer and consumer. We simply cannot continue such a wasteful and unsustainable lifestyle. Clothing can be worn until it is actually worn out. These are just simple examples of how we can change our habits with little real impact on our quality of life.

Localism

I would add an additional, and perhaps most important, principle here – localism. A search of the Internet will find many different definitions of localism and environmental localism and political localism. Most of them relate to a certain degree to what I see as localism in this context.

One of the biggest users of energy and resources and contributors to climate change is transportation, and in particular the transportation of goods over long distances.

People make a great deal of noise over personal air travel. However there is a lot of good that comes with people visiting other countries, experiencing other cultures and getting to know other people. There is a also a lot of good to come from international conferences where people get together to try to solve the world's problems that can only be done face to face.

Certainly a lot of business travel, where people are simply travelling to airports and then to meeting rooms and only meeting like-minded people and only discussing internal corporate matters could probably be replaced with electronic communications.

But the big transportation waste of energy and resources (and carbon footprint) has to be the needless global transportation of goods that could easily be produced locally by local workers. There was a time when every town had a sawmill, a textile mill and a factory or two producing consumer goods and providing good paying union jobs.

Now most of our consumer goods are made in the same massive factories in China and most of our clothing comes from the third world. Capitalism is supposed to promote efficiency but when you add the amount of resources and labour to the cost of transportation to market, importing most of our goods from offshore is not efficient. The only measure by which this is profitable is the extremely low value we attach to workers in developing countries and on flags of convenience shipping lines. When you look at what wages used to paid for goods consumed in North America compared to wages are now paid for most goods consumed in North America it is pennies, or less, on the dollar.

But the environmental costs, particularly in terms of carbon footprint, are excessively greater than producing goods close to where they will be used.

Much the same can be said about food. There is a lot of energy and resources expended because we think we should be able to get anything we want from anywhere anytime. That was not even the case 50 years ago when many products were just considered seasonal. We don't need to just eat what we grow in our own backyards but we can adopt a more balanced approach to importing food. And we can certainly encourage more local growing of Canadian produced foods to reduce transportation costs and the related environmental impacts.

We need more than individual tokenism here but an economy built on these principles.

Community Infrastructure Building and A Green New Deal

Capitalism and the so-called free market may do a good job of maximizing short term profits but it needs tempering to serve longer term corporate needs and is a complete failure at serving social needs, often diverting funds to frivolous but profitable expenditures.

Regulations (including labour, environmental, and health and safety standards) can restrain some of the worst aspects of capitalism but only taxation can provide the funds necessary to fulfill our society's needs. This is why, as pointed out earlier in this post, we need a strong progressive tax system especially at the highest levels of income and for corporations.

As well as funding a social safety net in the form of a guaranteed annual income and universal health care and public education, not to mention police and fires services, defence and foreign policy, and on and on, taxation funds necessary public infrastructure.


This is where the proposed Green New Deal comes in. By building sustainable public infrastructure the public sector can set an example for the private sector on how to do development that is not harmful to the environment.

The most obvious example is transportation which has a huge carbon footprint. Locally improved public transit and cycling infrastructure can reduce the use of individual motor vehicles considerably, even eliminating it's need for short trips. Development of electric transport vehicles, particularly rail, can make a huge reduction in the economic and environmental cost of delivering goods, especially when coupled with production facilities (factories) closer to the final consumers.

The improvement of water, sewage and waste disposal facilities has an obvious environmental benefit.

As well, moving to a more people focused society, as discussed in the next section of this post, will see the need for more educational, arts and community facilities.

And we must not neglect to include publicly funded housing projects to address the chronic need for affordable housing. Public housing projects will provide an opportunity to develop and implement more sustainable building techniques and build housing that has much lower ongoing environmental impacts.


We now know the best way to provide affordable housing is through co-operative or mixed income housing that does not ghettoize low income earners, Hopefully a guaranteed income at a decent middle class income level will make this less of an issue.

All of this will, of course, provide an employment benefit, increasing the traditional Gross Domestic Product (GDP) standard of living measurement and more importantly increasing the quality of life of the population.

What Type of Society Do We Want

This is the big question. Do we want a society based on people not stuff, living not consuming. But first this.

The Robots Are Taking Over and Taking Our Jobs

Since the first stages of industrialization to the assembly line and beyond to modern robotics there have been two scenarios for this trend. One dystopian. One utopian.

The current capitalist economy tends to be leading us to the dystopian model. As automation leads workers to be more productive, producing more per hour of labour, wages per hour are going down. Workers are earning less for producing more. This is because, unlike early predictions, increased productivity has not led to reduced working hours but to increased unemployment. At some point very few people will be producing a large number goods for a very small number of people and the whole system will collapse.

A New Society For A New Economy

“Whoever has the most stuff when he dies wins” is a reflection of our current capitalist society based on competition where the goal is to prove yourself better than other people by acquiring more stuff, which may include fame and status.

There is a another, more utopian model. The expression "from each according to his ability, to each according to his needs” reflects a society where everyone contributes according to their ability and has their basic needs met, a social democratic society.

Such a society will produce our basic needs in the most efficient way possible, taking advantage of automation and robotics to free people from the drudgery of producing excessive stuff. We will produce less stuff because our lives will not be based on the status conferred by owning things.

People will still work, but hours of drudgery will be limited and everyone will be guaranteed a decent middle class income. Education will be at the forefront of society with most people serving as both teachers and students. Education, the arts and culture (including writing, music, theatre, movie, TV and video production, etc.) and recreation will provide meaningful employment. There is a huge opportunity for localism here with hopefully a better balance of funding and earnings for local productions compared to international corporate financed productions and so-called superstars earnings.

Connections with the natural world will be emphasized with resource extraction of the wilderness being replaced by sustainable recreation and forms of eco-education and eco-tourism. Sustainable energy sources will replace those based on resource extraction.

A society based on living a more meaningful life will reduce alienation (Side Note: Karl Marx’s Conception of Alienation) and build a sense of community and reduce crime and conflict. While the first stages of new society will allow for some inequality, people realizing they do not want to measure themselves by how much more they own than everyone else will lead to the gradual end of inequality. The lack of desire for the consumption of excessive stuff will put less stress on the planet's resources and environment and avoid future environmental disasters.

And finally Karl Marx and Jesus Christ will rest easily in their graves.


Postscript:

For those asking what about our democratic institutions. That is a completely different blog post. See: THE FIFTH COLUMN: On Democracy

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