FROM FOUNDATION EARTH

Capitalism Can’t Be Reformed, Try the Incentive Economy

“Fortunately, capitalism is not an iron law of history: it is an economic and political system which arose out of a decaying feudal structure in the eighteenth century and was advanced by the ‘haves’ over the ‘have nots’.” -Yorick Blumenfeld

Yorick Blumenfeld’s Dollars or Democracy: A Technology-Driven Alternative to Capitalism (2004) contends that capitalism is fundamentally flawed and cannot be overhauled. He provides an alternative he calls the Incentive Economy. His proposed cooperative and ecologically sane society is a positive vision. The book gives many justifications and additional clarifications of how things would work including the transition. Personal liberation is realized in a greater choice of work and leisure time. Nonviolent cooperation, seen as key to human survival, would replace competition. “Cooperation and interdependence are central mechanisms of the evolutionary process.” He knows this is an enormous challenge, but perhaps one for which a new generation could readily adapt. Look how swiftly the once vast Soviet empire collapsed. The American capitalist supremacy could vanish rapidly as well. New systems are unlikely to come about unless people, in time of crisis, see an attractive alternative. We have the ability and duty to change an economic system that is not serving us well. Below is a summary of Yorick’s thinking. A few [bracketed] points were added by me. Blumenfeld truly presents a challenging alternative. Read his book. –Randy Hayes

Yorick Blumenfeld’s Dollars or Democracy: A Technology-Driven Alternative to Capitalism (2004) ISBN: 1-4134-6080-1 soft cover; ISBN: 1-4134-6081-x hardcover; US Library of Congress #2004094335 www.xlibris.com | orders@Xlibris.com.

Why Blumenfeld argues American capitalism is unreformable:
  1. Capitalism erodes and corrupts democracy: Capitalism is fundamentally antidemocratic. Money controls Washington DC, not the other way around. Corporate money tends to buy key political parties. They use their money and purchased power to write and engineer favorable legislation. The pressures of the sugar lobby control our diets. The highest bidder – corporations – buys democracy.
  2. Bottom feeding: Capitalism pits small countries, states, and counties against each other seeking special tax breaks and subsidies in highly wasteful “corporate welfare” programs. Capitalism seeks the lowest level, cheap labor, and cheap regulations.
  3. It drives off accountability: Corporate managers are shielded from accountability to shareholders while shareholders are protected from personal liability of damage done by the corporation. Capitalism cheats control. Multinationals are responsible to no electorate and no governments.
  4. Capitalism’s values are insufficient: Capitalism doesn’t foster many things we value such as controlling child labor, imposing strict health and safety standards, limiting the number of working hours, or guaranteeing a day off per week. The market economy has failed to focus on durability and ecologically sustainable products and services.
  5. It fails to serve the poor: This model underserves over three billion people. Two hundred plus years of capitalism have not brought about global prosperity or environmental balance.
  6. Capitalism has a stability and debt accumulation problem: The supply of money is dependent on people and firms relying on loans and perpetually increasing their debt. Interest requires endless economic growth, which is neither in the national nor in the global interest. Witness the never-ending economic bubble bursts.
  7. Corporations are subsidized and unaccountable: Capitalist companies are often heavily subsidized (including subsidized by nature by failing to internalize pollution externalities) and structurally capable of avoiding accountability. For instance, corporations avoid taxes that support infrastructure fundamental to their expansion. They use shell companies, tax havens, and modern electronic transfers to shuffle capital around and evade responsibility.
  8. Globalized capitalism creates local vulnerability: Globalized export-oriented high-tech capitalism undercuts national and regional self-reliance in key commodities. [Heavy dependence on global supply lines for items such as food and energy creates a fragile and dangerous situation.] Countries may not be able to feed themselves in the near future.
  9. Capitalism undercuts diversity and threatens groups: It favors cultural homogenization as well as the homogenization of goods and services to advance market control. By pushing Western secular consumerism and materialism and crushing all other value systems, some would argue that capitalism inspires terrorism.
  10. Capitalism ignores and destroys nature’s life support systems: Capitalism has denied that the biosphere has carrying capacity limits. By failing to internalize environmental/pollution externalities and purposefully misleading people, corporations drive a process that radically reduces planetary carrying capacity. [Massive erosion of topsoil via industrial agriculture is one example.] Endless expansion of growth [of the material throughput] is destined to cause overshoot and collapse. [Codfish is one example. They are not expected to recover from industrial overfishing.] The invisible hand has failed in important ways. “Moral outrage is too mild an expression for the deep levels of corruption at work here.” Capitalism will amount to global suicide.

The past two decades have also been an era of marked intellectual cowardice and timidity in respect to attacking the economic fundamentalists.

The essential elements of his alternative economy/society are below. Points 1, 2, 9, & 10 are key to his new economic system.
  1. No making money off lending money. Hence, there are no banks, stock exchanges, or mutual funds.
  2. No cash in society. There is a credit system and people use smart cards for all transactions. There are several reasons for this, including reduction of black markets, mafia, etc. The computer era makes management of this system possible where it wasn’t before.
  3. Labor is the real source of income. There is a right to useful, rewarding, regular work.
  4. The credit value would likely be some average value for an hour of labor. Think one credit per hour. Think $5 per hour like a minimum wage. Credits are used for what money is not used for legally.
  5. Basic survival: Imagine forty credits given every adult (stay-at-home-mother or whoever) every week for basic food/shelter/survival.
  6. There is a system of social incentives centered on cooperation and community. Shifts to renewable energy and massive recycling would be incentivized.
  7. Yorick sees a nonviolent transfer out of capitalism. Personal financial accounts up to five figures would be turned into credits.
  8. Most private homes and farms would not be affected. People would be able to keep most of their tangible assets such as jewelry, paintings, planes, and yachts. The question would be where to obtain the means to maintain items such as planes and yachts? Without income from shares, bonds, interest, or rent, the upkeep would quickly prove prohibitive.
  9. The speculative era of property markets would be over. There is a whole chapter on property saying in part that we have to reconsider the question of property in the context of a more cooperative and mutual society.
  10. Businesses are not nationalized or privatized. There are many smaller worker-owned cooperatives like the Spanish system of Mondragon. There are about 50,000 cooperatives in the U.S. today in which about 120 million Americans participate. Trade and barter is allowed by cooperatives. Giant corporations are rapidly phased out.
  11. There is a factor ten credit reward (think salaries) for real work responsibility differences and to provide sufficient incentives to people. This provides greater social and economic equality. Absolute equality is not sought.
  12. Workers share in profits or losses. Workers would be held responsible for their cooperatives’ ethical behavior (such as effect on local environment), which is a powerful incentive. Workers (as owners) have a democratice voice in the enterprise’s policies.
  13. The price of goods and services depends on their actual and marginal costs, not on scarcity value or large profits earned.
  14. We would need to exercise material restraint. If the Chinese ate as much fish as the Japanese, it would consume the entire global catch [which is already beyond sustainability].
  15. There are local and regional “Credit Service Centers” where individuals or cooperatives could be advanced credits. Cooperatives return government advanced credits from profits earned.
  16. Initial credit values would mimic current prices for a while to minimize chaos.
  17. Controlled reduction or growth of economic enterprises to protect natural systems.
  18. Funding governments: National government funding would follow something like this: Imagine 100 million people getting or earning on average 4000 credits per year. If the government budget were 25% of that, it would be deducted automatically [people don't have to file/pay taxes]. Local or regional governments would follow some formula. OECD countries typically run about 50%.
  19. Additional government revenue could come from duties and taxes on trade or levies on profits from cooperatives.
  20. To promote stability of key services: Certain services such as water and electricity would be brought back to local/regional government or the state.
  21. Health care would be universal and costs covered by the state.
  22. TV, free from the bonds of commercial advertising, would be returned to a public service function run for the benefit of the viewers and with a strong educational function. Entertainment programs would continue, but hopefully a cut or two above gutter exploitation programs that are too numerous.
  23. Advertising would not be prohibited, but it would not be encouraged with tax breaks or deductions. We would see an advertising shift from materialism [having stuff] to promoting frugality and being.
  24. Overall demand would be regulated by the economic administrators directing the cooperatives [based on local, regional, and global carrying capacity issues].
  25. Population numbers matter. Every month, despite strong government efforts, China births over a million new mouths to feed. The growing population requires new jobs.
A large role for government and central planning would be needed. Chinese “communist” party leadership has taken on “crony capitalism” with its rush to “modernization” isn’t the model to look toward. “In the Incentive Economy it will no longer be legitimate to continue granting privileges to those who live off the wealth that the labor of others creates.” This approach seeks to provide satisfying work, fair earnings, stable prosperity, and a healthy web of life — planet wide.

Ultimately, the struggle for human survival will most likely be determined not by the fittest but by those most capable of cooperation.