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August 10, 2011

I have written a series of posts on Economic Democracy and its applicability to the issues of our time here in Trenz Pruca’s Journal and as a series of Diaries in The Daily Kos blog. The series was inspired by my discovery of a long lost Campaign Handbook of the populist candidate for the 1976 Democratic party nomination for president of the United States, former Oklahoma Senator Fred Harris. Since then additional research has prompted me to revise in part some of those Diaries and re-publish them.

I would like to point the reader to the works of two Brazilian economists who over the past three decades have explored in depth the foundation of Economic Democracy, applying it to the developing world, Celso Furtado and Ladislau Dowbor. They built their insights upon the work of Amartya Sen, Hazel Henderson and others.

They both base their analysis on the criticism and rejection of the edifice of Academic Economics that has held sway in the world for the past few centuries.

Furtado stated:

“Evolution of the power structures in advanced capitalism eludes the theoretical frameworks we inherited from the past”

– C. Furtado – Em busca de novo modelo – Paz e Terra, 2002, p. 9 .

They basically maintain (as do I) that Classical Economics fails as a descriptive analyses of fundamental social forces, and at best merely describes politically determined choices and at worst is nothing more than a secular religion.

In his great work Global Capitalism, Furtado writes:

No society manages to completely escape the influence of its heretics, and nothing has had such importance in history as heresy.

Now then, the object of study of the social sciences is not something perfectly defined, like a natural phenomenon, but instead something evolved, which surges from the life of people in society. The social sciences acknowledge the evidence that human life is, in large measure, a process of conscious creation, which implies postulating the principle of moral responsibility. 

Global Capitalism by Celso Furtado translated by D. Ohmans© copyright 2009. Text imprint Mexico City, Fondo de Cultura Económica, 1999.

He then goes on to state:

The heresies and heterodoxies play an important role in human history. A

universal consensus invariably reveals that a phase of creative scarcity is being traversed. It is clear that in certain societies, the price that is paid for dissenting is very high. Yet the fact that there have been persons willing to offer up their lives in defense of ideas is an index of the important role that these occupy in social formation.

There are many who ask why, as opposed to what the heralds of the liberal doctrine foresaw, the internationalization of productive structures is not bringing along with it a reduction in income disparities. This is because the income distribution, on the national plane as on the international, is a question fundamentally determined by political factors. If the world had evolved in obedience to the canons of a pure capitalism, income would be more concentrated than what occurs today. However, since the 19th century, the contesting social forces were very militant in Europe and interfered with the structures of political power, opening space for important structural reforms,such as the reduction in the workday.

The above demonstrates that the formation of modern societies reflects not only the appearance of new techniques, but also that it has been a process with wide social projection. It was thanks to the pressure of social forces that salaries rose, following improvements in productivity; that systems of social security were established; and that policies of assistance were defined for less developed regions. By modifying the profile of income distribution, these new political forces changed the physiognomy of the society and, paradoxically, engendered within it new forms of dynamism.

If the tendency toward concentration of income had been maintained, the narrowness of the markets would have been manifested. The cyclical crises would have been even more acute. If they were attenuated, it was because capitalism changed due to pressure exerted by the masses. The expression of this phenomenon in political-economic terms is found in Keynesianism, which legitimates the growing recourse to political instruments in economic management, opening the era of social democracy. Even in the United States, where the development of capitalism was less restricted by institutional factors, the State exerted itself to defend some sectors of economic activity or certain regional interests.

It can be shown that capitalism, over the entire length of a century, benefited ever wider social groups, not so much because income inequalities had abated, as that it could satisfy the basic necessities of the majority of the population. Specific historical factors influenced this evolution, giving way to very diverse results. Upon comparing the historical genesis of the United States with that of Brazil, one notices that in the nation to the north it was the model of colonialization, of territorial occupation, that prepared the society for modernization. A social model was defined there based upon the patrimonial division of the land, while in Brazil there persisted, throughout the process of territorial expansion, an extremely concentrated appropriation of the land that was characteristic from the beginning. In summary, the U.S.A. built on a social model that stimulated the diffusion of the fruits of technical progress, which permitted and motivated direct investments in the development of human resources and opened space for individual initiative. It does not take much imagination to notice that this provided a special basis for the flowering of the capitalist spirit, in the sense it was understood by Max Weber.

He then concludes:

Economic growth should be seen as a means for increasing the well-being of the population and of reducing the degree of misery inflicted on a part of it.

As these two objectives are qualitatively different, one should be very cautious in using indices that claim to measure the average well-being of the population. How can values of a type different from those of satisfaction or pain be added or subtracted? Students of development must confront paradoxes of this sort. Perhaps most appropriate would be to present two maps: that of social well- being and that of social penury. In this latter map, hunger and social exclusion could be reflected in an adequate fashion and the negative effects of the globalization process would be explicitly demonstrated. International competitiveness could be measured in terms of job losses and this in terms of the hunger imposed on some segments of the population.

If to the social costs are added the environmental costs, one will arrive at the conclusion that the existing data used to measure or express the behavior of the … economy are totally inadequate. One will also conclude that such data, by obscuring the reality, become instruments of the groups who make up the structures of domination which sustain the strategy of globalization.

Dowbar elaborates on these themes in his paper “Economic Democracy-Strolling through the Theories”

To turn your back on politics is a relief. It’s easier to say that economics overlooks the discourse and focuses on practical achievements: the enterprises built factories, provide jobs, finance roads, while politicians discuss. This way, the economy would be nice and progressive, the politics distasteful or corrupt. Simplifications seldom yield good results, yet they satisfy our instincts. Remember, it was the great political movements, regularly branded subversive in the initial stage, which in their times achieved the abolition of slavery, the end of colonialism, the rights of the employee, the political inclusion of women and today continue to struggle against economic inequality, against the destruction of the environment, for rescuing of the cultural richness of our lives, against the system of financial speculation, for access by all to basic goods such as water, food, education and health. The democratization of the economy may well become an axis for building a more humane life. To extract oil more quickly, to sell out the Amazon more efficiently, will lead us where?

He adds a discussion of the practical approach to economics manifested by Economic Democracy:

Economic democracy therefore begins with the ethics of results. It does us no good to know that corporate directors are well intentioned, that they contribute to schools in poor areas if, as a whole, the result is a worsening of inequalities and environmental destruction.

Democracy is central in the process, since when there are participative forms of decision-making, involving as such different interests, the outcome tends to better balanced. Unrepresented interests do not affect the decision-making, which leads to greater problems, as they will be manifested when the losers have reached the threshold of despair. Economic democracy is therefore to insert into decision-making processes the various interests, particularly those who are likely to be harmed. Here too, it is less a matter of kindness than of institutional intelligence.

And ends with a plea for us, all of us, to reclaim our control over the essential transformational forces of society:

This outlook, that we can be masters of our own economic and social transformation, that one does not wait for development but just does it, is one of the most profound changes occurring in the country. It removes us from an attitude of critical spectators of a government always inadequate, or from pessimistic passivity. It gives back to the citizen the understanding that he can take destiny in his own hands, as long as there is a local social dynamic that facilitates the process, generating synergy among the various efforts.

Finally, I also wish to call your attention to the book by Robert A. Dahl, “A Preface to Economic Democracy”, University of California Press, 1985.

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