Extending Democracy to Our Capitalist Economy to Transform Our Society

Most people equate extending democracy to the economy with socialism. I’m not talking about that.

Socialism uses redistribution to achieve its goals. This proposal would not involve redistributing anything.

Other people think capitalism is inherently unjust. I agree with them.

I accept, however, that for the foreseeable future it is here to stay. We can, however, by extending democracy to our capitalist economy, make our nation more just and make life materially better in this nation, especially for those who have been living in poverty.

With this proposal we could absolutely, positively eliminate (involuntary) unemployment and poverty. We could also, while we were about it, eliminate taxes and public debt. To be clear, there would still be no limit on income or property or wealth. Also, sustainability would be increased, without more regulations.

With the change I am talking about making we could still have any of those things — unemployment, poverty, taxes, public debt — that we wanted. If we could eliminate all of them, though, without cost, why wouldn’t we?

How did I come up with such a startling proposal? I got there by looking at democracy in a way that, as far as I know — and at 65, having spent my adult life reading history, philosophy, and economics, including earning an M.A. in that last subject, I know a hell of a lot — no one ever had before I happened to think of it.

Don’t have a stroke. I’m not suggesting that makes me the smartest person who ever lived, or even smarter than any reader of this might be.

I am, however, smart enough. I realized right away that I had stumbled upon what could be a truly great idea. With a whole lot of effort spread over the last thirty-five years, I’ve been able to increase my understanding of that idea and its implications for the economy and for justice. This essay goes back to my roots, relating how I initially got to the idea. [For more on the economics of the proposal, a reader could check out “A Cure for the Ills of Capitalism,” also here on medium.com.]

People equate democracy with ‘equality’. In getting to this idea I did not stop at equality, but thought about how equality makes political democracy a really just societal process. Specifically, I thought about political rights (voting, running for/holding elected office).

Political rights (like all rights) are abstractions. That means they can be shared by an unlimited number of people and are absolutely free of any material cost. Yet, in a democracy political rights are not universally shared.

Since rights are abstractions, the ‘default value’ is that all people have all rights. ‘Distributing’ rights means putting restrictions on them.

In a democracy political rights are legitimately restricted, based on age. Why is age a legitimate restriction? For one thing, there is a reasonable reason for it: age is a proxy for sufficient maturity. More importantly — of decisive importance, actually — age is universally applicable.

We do not (any longer) allow political rights to be restricted based on gender, race, creed, or color of skin. We have learned that those are unjust restrictions. Why are they unjust? They are unjust because they are not universally applicable.

So I arrived at what I call the “democratic distributive principle:” whatever is being distributed must be available to all members of the community but for universal restrictions, universally applied. To be a just restriction it must be universally applicable; to be justly applied it must be applied universally. One can see the embodiment of equality in it.

[At this point the real philosophers among us will see there the ‘reflexivity problem’ rearing its ugly head. For present purposes, it is enough to say that regarding the political process I have accounted for that, with freedom of political speech as a separate “condition of justice” for the political process. (Political speech is the realm of the political process that exists beyond the political system.) This economic proposal would be implemented, if it ever is, via our (democratic) political process. (The institutional structure of every society’s economic system is determined within its political process — which would apply even in the case of a laissez faire economy; a society would have to choose to have that kind of economic system, even if only implicitly choosing it by not opting for any other kind of system.)]

I then considered that money is to the economic system as political rights are to the political system. Political rights are necessary to participate in the political system. People who are denied political rights can act outside the system — with the potential for peril that can imply in authoritarian states — but that is a very different thing. In the same way, money is necessary to participate in our economic system.

At this point the real political economists among us might bring up barter or this or that. Surely all sane people can agree that people cannot participate in our economy as it exists without using money. For one thing, our money is “legal tender:” people must use it to pay taxes; it is the only thing lenders can require for repayment. In short, to act economically without using money is to act outside our economic system.

So, how can the democratic distributive principle be applied to money? That would mean it must be, like rights, available for an unlimited number of people and cost-free. The only way I could come up with to accomplish that would be to have a “democratically distributed income” with the total of that income forming the supply of money for the economy. (Again, the economic details are available elsewhere.)

Now, money is a material thing, whereas rights are abstractions. With money, a democratic distribution isn’t concerned with just restrictions denying it to some but not others. Rather, the issue is just conditions determining eligibility for it.

It would be possible to have a democratically distributed income that would be based solely on age. Everyone that age or older would be eligible for the income, no matter what.

That would not solve the problem of poverty. Poverty is having an income that is insufficient relative to prices. If everyone got the democratically distributed income prices would adjust upward accordingly (absent some kind of controls), and relative to prices everyone would be in the same position one was in before the democratic income was established. Again, we could continue to have poverty if we wanted it, but if we could eliminate it without cost or redistribution, why not do that?

On that subject, the amount of this income is something to be determined. In relating this idea I always base the amount of it on the current median income. I would make the democratic income $15/hr.; $600/wk.; $2,600/mo. (or $2,400/mo. plus an additional annual payment of $2,400 to bring it up to the equivalent of $600/wk. for 52 weeks). That would be slightly above the current median income in the U.S.

We could have a democratic income that eliminated (involuntary) poverty and unemployment if we had three categories of people eligible for it. The first two are straightforward; the third requires a bit of explaining.

The first two categories of people who would be eligible for the democratic income would be retirees and people of the minimum working age or older who were too incapacitated to work any job. In short, this income would replace Social Security (eliminating that whole problem).

The third category of people being paid the democratic income would be people employed in minimum-pay positions. In other words, the democratic income would be the minimum income for employed people. It could be paid as an hourly wage or a salary. It could be paid for part-time work. As the incomes of people employed in minimum-pay positions would be the democratic income, it would not come from their employers. (All people making more than the minimum would continue to be paid in full by their employers, as at present.)

In a free labor market, employers would presumably have to pay for benefits (in-kind, not monetary) to compete for minimum-pay employees. That neatly reverses the ‘possession arrow’ in that labor market.

In a free market it makes all the difference whether one controls that for which others are competing or one is among those competing for it. Up till now in capitalism people have been competing for jobs controlled by employers; in this paradigm employers would be competing for minimum-pay employees. The minimum pay would be the same everywhere, but benefits would represent conditions in local labor markets.

In order to make this income universally available it would be necessary to guarantee a job for everyone who was willing and able to work. People could choose not to work, but the only money available for them would be private charity. People could be employed but poor, such as a proverbial ‘starving artist’ who labored at one’s art for (so far) meager monetary returns. Everyone who wanted a ‘regular’ job, however, would have to be guaranteed to have a job. That could be achieved by using government as an employer of last resort.

In a market-based economy to be guaranteed a job that job must be cost-free. That means these jobs offered by government could not require any additional investment or receive benefits. Without benefits, they would not increase competition for minimum-pay jobs in the regular labor market.

Finally, it would be as easy as not to pay the democratic income to one parent or legal guardian in a home with at least one dependent child living there. The income would be the same no matter how many children were present.

People who are wondering how people will get paid an income in an economy so technologically advanced that the need for human beings in production will be greatly limited might take special note of that option. Raising children is, after all, the second-most important job there is in civilization. (Producing food is the most important.)

With this system we could fund government (at all levels) without taxes or public debt. It would be funded (local, state, and federal) as part of the operation of the monetary system. Again, we could keep incurring public debt and paying taxes if we wanted, but we could eliminate both of them.

This proposal could be implemented by our central bank, the Federal Reserve System (often called ‘the Fed’). It has a legal mandate to “minimize” unemployment commensurate with “acceptable” inflation. With this system in place there would be none of either. (With built-in controls, this system would not have inflation as a general increase in prices.) [See “A Call for a (Further) Central Bank Revolution” here on medium.com.]

Another option would be for Congress to establish a new Monetary Agency. It would have no discretionary authority, but would merely administer the democratic income (with the help of individual banks). It would be separate from and independent of both government and the banking system. [That is the model in “A Cure for the Ills of Capitalism.”] Given that the Social Security Administration already makes monthly payments to retirees and disabled people, it could be extracted from government to become the Monetary Agency.

So, if we implemented this proposed democratically distributed income (using either process) our society could be thoroughly transformed. It would still be the economy we have now, but with a different way for supplying the economy with money. To that end, this proposal can be considered in strictly economic terms, with no reference to justice at all. Still, whether justice was ever mentioned or not, with this monetary system in place our capitalist economy would be as just, as a societal process, as political democracy is.