Bringing the free market down to earth is a moral question
[Originally appearing in The Conversation, this article was co-authored with Mark Chou.]
Five years on, the response of governments around the world to the global financial crisis (GFC) continues to draw criticism. Leaders failed to fulfil the promises they made during the GFC’s darkest days and, post-crisis, there’s been little reform of a system in which inequality has thrived.
It’s clear the administration of democracy by government is – first and last – a moral question, something the shock of the GFC should have brought to global attention.
Jaded people are now asking questions about equality. Why does the culture of dangerous risk-taking for the creation of private profit appear to remain the status quo? What proof do governments have to show us that justice has been served?
Slowly, we’re seeing answers to those questions emerge. See for instance Tom Malleson’s After Occupy: Economic Democracy for the 21st Century, Joseph Stiglitz’s The Price of Inequality and, of course, Thomas Picketty’s now famous Capital in the 21st Century (masterfully translated from French to English, we shouldn’t forget, by Arthur Goldhammer).
These and other works share a common theme: they focus on something called the “democratic economy” or “economic democracy”.
The main concern of the democratic economy is to increase the participation of citizens in all matters related to the economy. This can be done, for example, by instituting participatory budgeting at the local level, a deliberative citizens’ jury at the state level and a citizens’ parliament or participatory taxation at the federal level.
Citizens can deliberate between themselves and reach decisions with the help of non-partisan experts on topics such as redistributive taxation and economic regulation.
But democratic mechanisms of this sort are not the norm – especially in countries such as the USA and the UK whose decision-makers were complicit in triggering the global financial crisis.
The lack of regulation, the weak enforcement of existing regulations and the missing participation of citizens in creating policy and renewing regulations over economic matters is a moral issue. It is wrong, and a distressing mistake, for power-monopolisers such as governments to shirk their obligation to respond to the crisis democratically.
The following points illustrate why.
Democratic innovations are wasted: Ready-to-use democratic innovations, many of which have been tested to see if they work – and do – remain mostly ignored by governments and un-championed by elites. A brief glance at Participedia, which documents methods for citizen participation from around the world, provides evidence of this. It is both disingenuous and wasteful to not implement these types of innovation.
Inequality is damaging to democracy: The divisions between individuals caused by disparities in capital, wealth, financial inheritance and material belongings sets fire to the delicate social fabric on which a democratic society depends. The idea of democracy has always been attached to the idea of a society that has the ability to rebalance itself to promote and maintain its egalitarian character. Blocking – or not fostering – the ability of a people to decide about public and private capital in their societies binds the hands of the citizenry.
Capitalism is needlessly defined as “do-or-die”: As the academic and author Thomas Malleson recently pointed out, using democratic innovations to involve citizens in decision-making about their respective economies has an added bonus: it allows citizens to define their own brand of capitalism. Most are happy to see healthy and fierce competition but only under the kind of spirit found during friendly sporting matches.
This is a clear rejection of the non-compassionate, do-or-die variant of capitalism that has come to define our times. The do-or-die variant became entrenched partly because of the making sacred of creating and accumulating private profit.
The free hand of the market should not be interfered with: Economic democracy does away with the spurious distinction between the free market and the people. Regarding the free hand of the market as an ethereal object is absurd because human beings are the market.
The market is an expression of our choices and actions. We create and move the market because we decide what objects will have value. We decide the rules that will govern objects of value – for instance, how different values can be traded. Under this logic it is only reasonable for a democrat to suppose she or he will have the ability to influence the very thing that she or he helps to create by being active in the economy.
The four points outlined above show that the moral framework which guides the democratic economy is one premised on implementing democratic innovations so that citizens may participate in and have deciding power over their economy.
The democratic economy brings the market down from the heavens and within reach of the people. It justifies why people must participate and have deciding power over the economy. And it provides a system of values which does demarcate what is right and what is wrong.