To fully and adequately address the world’s problems requires replacing the system that causes those problems. Herman Royce outlines a different economic and political system designed to avoid the present’s failings.
CONSIDER a hypothetical economy that does not involve profit or interest (the greatest sources of instability in market economies). For the sake of explanation, the economy is not expected to either grow or contract over the next year: production won’t change, and everyone keeps their jobs and consumes as normal. The year’s production costs for such a stable economy are known in advance: without interest or profit, total producer costs equal total wage costs (either paid directly to producers’ employees, or indirectly to those of other producers providing materials or parts). Hence, without profit or interest, the total prices of the goods produced over the year can be set to equal the total production costs.
Of course, expectations are not always met. So, near the end of the year, it makes sense to examine what actually happened, what work was really required, and especially the time needed to do it. If less work was needed by some producers than anticipated and paid for over the year, then average working hours for the entire economy can be reduced accordingly for the next year, with the necessary work shared. But if the total costs of work reduce, so too can the total prices of the goods produced by that work ― by the same proportion.
This approach – Cost And Price Equalisation (CAPE) – has the main effect of absorbing changes which now give rise to the boom-bust business cycle into altered working hours and prices. If lower sales and/or efficiency improvements and/or anything else decrease the need for work by x percent, the same work is shared over a working week also reduced by x percent. Income and total costs then also fall by x percent, because of which CAPE requires an x percent reduction of all prices. Similarly, more shared work, whether because of reduced productivity, natural disaster, or any other reason, causes the working week, income and prices to all rise by the same proportion.
So, though people can get less (or more) income, none lose (or gain) purchasing power because all prices drop (or rise) by the same proportion as income.
Importantly, although CAPE balances total costs with total prices, the price of any individual product need not equal its cost. Given a choice, people might well prefer some goods to be free ― a reasonable minimum quota of staple food and basic clothing, housing, education, health care, perhaps more. Also, some work definitely needs doing but does not directly result in finished consumable goods ― such as environmental regeneration and repair, construction of community facilities and infrastructure, international development and aid, and the less dysfunctional work of governments such as welfare for the disabled, retired, injured, and anyone genuinely unable to work.
With CAPE, any product can be made free, and any worthwhile work that does not produce consumable goods can be afforded – including development of land for use, and building homes and fixed capital such as factories – simply by increasing the prices of all non-free consumables by the appropriate proportion. As the figure below demonstrates, these costs, in effect, are ‘absorbed’ into the prices of all non-free consumables. (Yes, Virginia, there really is such a thing as a free lunch.)
CAPE’s balance between total costs and total prices ensures that all goods can be afforded by definition. But if you don’t pay anything for your most fundamental needs, like housing and basic food and clothing, you have less to spend on, and a much greater disposable income ― especially if you don’t pay taxes (directly at least, since their equivalent is absorbed into the prices of all non-free consumables). So, even if prices of non-free goods were to exceed those now current, so too would your capacity to afford them. But prices will almost certainly decrease compared to now, because CAPE allows the working week to be substantially reduced, meaning much lower total costs than now, necessarily balanced by proportionately lower prices…
If prices and income move up or down in unison via CAPE, then economic growth or contraction or a steady-state can be handled by sharing the work around. This not only avoids needing to constantly invent work (as market economies must do), it allows work to be reduced ― indeed minimised.
We could work a lot less than we do now if we abandoned all the unproductive work currently performed, automated everything we could of what remained, and shared the rest ― especially if we also built to last instead of to obsolesce, and if we produced and consumed less slavishly and more responsibly. In fact, if we accept Buckminster Fuller’s estimate that seventy percent of jobs in developed countries do not produce “any wealth or life support” [Buckminster Fuller, Critical Path (St. Martin's Press, New York, 1981), p.226], that leaves thirty per cent to share among all wishing to be employed, meaning roughly a one-and-a-half-day working week.
But, if taking into consideration negative multiplier effects and the latent ability to work closer to our capacities, then a one-day working week is more than plausible. (The shock of adjustment for people in jobs identified as unnecessary can be minimised if their wages continue to be paid while they are retrained for other useful employment.)
Of course, not everyone need work the same hours. Those whose work cannot easily be performed in a single day per week can work longer hours but (hopefully) over compensably shorter working lifetimes. An economy might have so few doctors, for example, that each needs to work (say) five days a week, until more are trained to ease their burden and allow them to return to standard hours ― but then their extra contributions would be compensated by subsequent reduced hours and/or earlier retirements.
A shorter working week unleashes spare time not just for leisure, however, but also to meet the extra responsibilities required by decentralising and democratising political and economic decision-making…
Determining and Doing
With CAPE, no longer does the question ‘what can we afford?’ take priority, but rather ‘what do we need?’, and ‘what do we want that we’re prepared to work for?’
To make decisions on what work – public and private – is really needed and wanted, how it is shared and paid for fairly, which goods are free or discounted, and much else, requires more than a mere ‘market’ and/or what now masquerades as democracy. It can be better attained via a bottom-up decentralised participatory form of Internet-based direct democracy underpinned by small self-governing electorates arranged into progressively larger associations whose decisions require the majority agreement of constituent groups (this will be detailed in a later article). Call it plurocracy.
Although specialist co-ordination and advice at times will be needed – especially regarding the latest innovations and availability of resources – plurocracy provides a market surrogate by enabling needs and desires, for goods and services and provision of labour to be tabulated and accrued from the bottom up, thus assisting producers and workers to plan and employ resources accordingly.
Not everything can be anticipated, of course, so each producer and consumer can nominate a percentage of their total expected expenditures, for possible discretionary ‘impulsive’ purchases. Motivation to keep the percentages small follows from understanding that they cause production and the average working week to increase. Similarly, instead of insurance, prices can be set to ‘absorb’ estimates of likely costs, based on recent trends, of all repairs anticipated to be needed for natural disasters and misfortune.
Plurocracy has another liberating effect: it enables free land, homes, factories and other fixed capital to be stewarded rather than owned or rented. People living in the smallest plurocratic electorate with borders fully enclosing unused land have responsibility for looking after the land until they agree on how, if at all, to use or develop it. Home stewards have all the usual rights bestowed by ownership, except they cannot sell (or buy) their houses: those who look after or improve their homes simply move house ― the more responsible their stewardship, the greater their options (assisted by nomination of preferences to create online waiting lists). Fixed capital is stewarded mostly by the people operating it – all the workers of a factory, for example – but also, and ultimately, by those most directly affected by the capital’s operations: those living in the smallest plurocratic electorate with borders fully enclosing the capital.
Similarly, plurocracy facilitates the sharing of work. Personal choice, needs, skills, dispositions, and experience – as well as practicalities such as location and transport availability – should continue to play the dominant roles in determining who gets what work. However, people are always going to see some work as odious or undesirable, and it seems unreasonable to expect those jobs to be performed by an unlucky few. Rather, all should take on an equal small share of work that none or too few want to do. Once established which jobs lack workers, people can choose which of the unwanted work they prefer. But probably still some work will lack sufficient volunteers, and have to be assigned ― perhaps most fairly by periodic randomisation, subject to the constraints of spreading the load evenly, and not forcing people to work impractically far from home or to do labour for which they clearly have no suitability (for example, abattoir work for vegetarians). Even then, volunteers’ online recording can indicate they prefer to swap or give up any assigned work to others less repelled by it. Certainly, hard and fast draconian solutions need not be imposed, but all willing participants need to be prepared to compromise to some small extent ― a small cost to pay for a one-day working week and numerous other advantages provided by CAPE and plurocracy…
To handle all of the above, interest-free finance, at the start of each year, credits each producer account with enough funds to cover expenditures expected for that year following plurocratic determination of needs, desires and work commitments. It also credits consumer accounts each week with wages and/or welfare earned.
A purchase debits the purchaser’s account by the price, but credits the producer’s account with the cost. Over the year, some producers undoubtedly spend more or less than they expect, or sell fewer goods, or suffer shortfalls ― so by year’s end, their accounts differ from at the start, data which should help inform future allocation of work and resources. At year’s end, though, producer accounts are reset to zero, then re-credited for the next year’s expected expenditures (revised plurocratically, based partly on this year’s performance).
‘Project’ accounts – for work that does not produce consumable goods, such as housing construction or factory building – function like producer accounts, except they involve no purchases of produced goods.
Consumer accounts are not adjusted but remain cumulative: then, hard workers and frugal spenders keep accounts mostly in credit, while big spenders and lazy burdens are more often in the red. To increase motivation to work and spend responsibly, consumer account balances are always publicly available for anyone to inspect, thus evoking pride or shame.
So, in such an economy, what would stop a person from simply refusing to work at all, while still spending like a millionaire? After all, even if those who deliberately and consistently choose not to contribute receive no welfare payments, their accounts could still be ‘overdrawn’ to a theoretically unlimited extent.
I suggest few people would abuse a system based on plurocratic decision-making, and built around the sharing of both the work and the fruits of that work, especially with community approval likely to play an even more significant role than it does now. Those who did fail to pull their weight would likely have personality problems of a scale that would make them difficult for any system to handle. However, probably few could persist for long without ending up shunned by their communities, which might well change their minds. Most people, though, would instead feel liberated ― not just by stable economic conditions, and the abolition of any need to compete, but perhaps most by the absence of compulsion. Especially with only a one day working week, they’d be motivated to make a responsible choice because they could do so without coercion. So, probably, most people would keep their accounts in approximate balance from one year to the next.
Nevertheless, while no one need be forced to work, they can still be encouraged in different ways to do the responsible thing. The most obvious encouragement stems from publicly available account balances, but also from the knowledge that if enough people take the lazy option, too few are left to do the necessary work, and then everyone suffers. Co-operation can be further, and more inventively, encouraged if anyone refusing work for more than a year (or with an account in the red beyond a plurocratically agreed amount) is disallowed moving house except to a place of lesser quality than their existing residence (the longer they refuse to work, or the larger their ‘overdraft’, the less the quality of housing they can choose). Having everyone’s final account balance displayed on their gravestone or memorial plaque also seems likely to motivate most people to avoid an unflattering epitaph. As a last resort perhaps, anyone refusing to work for a long enough period might have their plurocratic voting privileges revoked until they start putting in a reasonable effort.
Doubtless, some will see the preceding ideas as utopian or idealistic. Of course, difficulties of implementation have to be assessed, but rejecting alternatives out of hand – by simplistic labeling – without fully considering them or why the inbuilt flaws of the status quo make them so desperately needed, misses the point entirely. Keeping this in mind, it seems far more utopian and idealistic (if not living in denial) to proceed on the basis that we just need to tweak things a bit here and there to solve our problems, while ignoring the inherent contradictions and destabilising, unsustainable, problem-causing dynamics of current arrangements.
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