Feb 22, 2013

20 Big Ideas for Creating a Democratized Economy

By It's Our Economy / itsoureconomy.us
20 Big Ideas for Creating a Democratized Economy

The economic collapse of 2008 came at the end of three decades of stagnant wages that resulted in record household debt and made it apparent that the economy does not work for most Americans. 

Even during the collapse the rich got richer and the poor got poorer as trillions of dollars were transferred from the Treasury and the Federal Reserve to the economic elite who were most at fault for the financial collapse. At the same time working Americans saw jobs disappearing, hours reduced, salaries shrinking and more under-employment.  They also saw their retirement savings disappear, 5 million foreclosures, record bankruptcies, record poverty and shrinking housing values.  The cost of everything from health care, to food to energy kept rising while incomes fell. And, the social safety net, limited as it was compared to other developed countries, was shredded, a process continuing as austerity budgets take hold across the United States.

This long term decline of the American economy creates an urgent need to rethink its direction.  The foreign policy-based Empire economy that takes resources and cheap labor from poor countries is only working for the wealthy elite who own transnational corporations or profit from war.  At home, crony capitalism has created economic winners not because they are providing the best product or best service in the most efficient way, but because of the corruption of the American political system by concentrated corporate power.

It is time to shift decades of misguided economic and energy policies toward a democratized economy that gives all Americans a stake in the economy and renews prosperity by creating a new sustainable economy.  Resources must be used responsibly and we must define a vision of an environmentally sound and economically just American (and hence global) economy.

Below is a 20 point agenda that not only stabilizes the economy in the short term but puts in place the building blocks for a democratized and sustainable economy. 

The outline below for a democratized economy combines policies that have proven to be effective along with innovative new solutions.  There is no doubt that this agenda will evolve as we get feedback from supporters and colleagues and is offered as a starting point for discussion, not a final blueprint. Indeed, this document evolves from a Prosperity Agenda (www.ProsperityAgenda.US) written in 2009.  Evolution based on people participating is an essential ingredient of political democracy, as it is for economic democracy.

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New, Efficient, Clean Energy Economy

1. The foundation for a new economy is a carbon-free/nuclear-free energy economy; that distributes energy production down to individual homes and businesses and uses energy efficiently.  The U.S. needs to build a new economic engine: the clean energy economy and the “green” economy that goes with it. The federal government should set clear goals to create a carbon-free/nuclear free energy economy by 2030. The collective resources of the U.S. and world community should be used to achieve this goal, e.g. provide tax credits and other support for “green” projects that can be done quickly, such as retrofitting homes and businesses for increased energy efficiency. People who produce more energy than they use in their homes and businesses should be paid the market price for the energy they produce and return to the grid. One successful approach has been the feed-in tariff of Germany, where long-term contracts are offered to renewable energy producers, typically based on the cost of generating energy for each different technology. Communities that adopt wind farms should receive a financial benefit from the energy the community produces, this will provide resources for struggling rural communities. Utilities should be public so the people have a say in how they are run and the profits benefit everyone, not just a few owners.  Taxpayer investments in creating sustainable energy sources should result in taxpayers being treated as owners and sharing in the profit of these enterprises (see discussion in point 11 below). These investments will create millions of green jobs and businesses especially in long-neglected urban areas. The United States needs to stop corporate welfare to fossil fuel (oil, coal and gas), corn-based fuel, and nuclear energy as these are counterproductive to transforming the nation to a sustainable, clean energy economy.  These tens of billions in revenue should be redirected to spurring the clean energy economy and at the same time leveling the playing field between old energy sources and new.  The U.S. should put forward long-term plans to invest in the creation of the new energy economy.  This will add momentum to the already rapidly expanding investment in new energy products.

2. The U.S. automobile industry, recovering from near collapse, is caught in the web of long-term costs for its retired and current employees, especially the uncontrollable cost of health care (discussed in point 10 below) and rapidly changing transit needs.  Further, the auto industry has to move toward the new green economy, instead continuing to build SUV’s rather than hybrids and electric cars. The industry needs to commit to a rapid transition to electric cars that can make use of cleanly generated and solar energy sources and end the production of gas-based automobiles within the next decade. This transition will spur auto industry production and sales and create an economic engine in the industrial Midwest. Further, a review of transit needs should be conducted and part of the auto industry may need to transition to mass transit, i.e. subways, maglev trains, bullet trains, trolleys and light rail. The production of vehicles for mass transit needs to be rebuilt in the United States.  This is a tremendous opportunity for creation of jobs and further re-invigoration the industrial Midwest.  The government needs to commit to mass transit and transition to electric vehicles, build the infrastructure necessary and thereby spur a revolution in transit.

3. Infrastructure in the United States is literally falling apart and not keeping up with the needs for a sustainable carbon-free/nuclear-free energy economy. Long term investment is needed for new infrastructure.  For two decades U.S. infrastructure has been neglected and the American Society of Civil Engineers reports that the failure to invest in infrastructure will undermine and cripple the U.S. economy.  Beyond the existing projects rebuilding infrastructure should be consistent with the new energy economy, i.e. building infrastructure to efficiently move renewable energy across the country, building mass transit so Americans can break their dependency on cars and airlines, putting in place a network of battery exchange stations for electric cars. Infrastructure also needs to keep up with the needs of the post-industrial, information-based economy so that Americans, wherever they are located and whatever their income, have access to the Worldwide Web.

4. The U.S. and world need to dramatically reduce carbon emissions. A critical step is to tax carbon emissions at the source as they enter the economy, i.e. tax coal, oil and gas for their emissions.  A carbon tax would be the least expensive to administer and more effective than cap and trade, such a program will control carbon emissions and spur research and investment to reduce the release of carbon.  The funds from these taxes, which will be trillions of dollars annually, should be shared among the American people in a monthly dividend check.  This will help consumers pay for increased cost of fuel and will reward Americans who reduce their carbon footprint by reducing their use of oil and gas.

5. Develop local economies to reduce use of fossil fuel in transport and allow local businesses and communities to flourish.  The concept of developing a local economy is simply to buy food (or any good or service) produced, grown, or raised as close to your home as possible. With industrialization, food is now grown and processed in fewer and fewer locations, meaning it has to travel further to reach the average consumer’s refrigerator, e.g., a typical carrot has to travel 1,838 miles to reach your dinner table using fossil fuels and packaging to get there. A locally owned business re-circulates money in the community by hiring local graphic artists, accountants, lawyers and others. Similarly, local farms re-circulate money by purchasing feed, seed and other materials from local businesses. Indeed, local businesses create three to four times the positive economic impact on a community than a national chain.  A recent study from Michigan, reveals that a modest change in consumer behavior — a 10% shift in market share to independent businesses from chain stores — would result in 1,600 new jobs, $53 million in wages, and a $137 million economic impact to Grand Rapids, MI.

Creating Jobs, Providing Housing, Health Care and Building Local Economies

6. Individuals as well as state and local governments are in fragile financial positions and thus in need of an economic and social safety net. Individuals are losing jobs and have reduced or stagnant wages, home values are at record low levels, millions are facing bankruptcy and foreclosure.  Americans face insecure retirements and unaffordable access to health care.  We need to stem the damage of the recession by extending unemployment benefits and food stamps. Extension of unemployment insurance will help minimize the negative impact of the recession on unemployed workers.  And, making food stamps available will reduce the most devastating impact of the recession, poverty, which is at record high levels. State and local governments are at risk due to the failing economy, the reduction of property taxes, increases in the cost of health care and the loss of jobs result in decreased income and increased expenditures.  Support to state and local governments is needed. The federal government should direct its support so that it helps to build the new economy, renew infrastructure and fully fund education from pre-school through college.  More than two dozen states have developed plans to respond to climate change and the need for new energy sources.  They should be aided in putting in place these policies by being provided funds directed toward them.

7. Another tool for developing local economies, particularly around housing and land use, is the community land trust.  This is a nonprofit corporation which acquires and manages land on behalf of the residents of a community. The non-profit board is generally made up of three parts (1) public representatives (government, community organizations, service providers), (2) people who lease the land and (3) people from the community who do not lease land.  This divided board is used to ensure a variety of views are heard and no one view dominates.  The prototype for the modern-day community land trust was formed in 1969 near Albany, Georgia by leaders of the southern civil rights movement seeking a new way to achieve secure access to land for African American farmers.  The Institute for Community Economics in 2004 reported nearly 120 community land trusts of varied sizes in 30 states, the District of Columbia and in five Canadian provinces. Usually, the land trust holds the land, but sells residential or commercial buildings which are on the land.  Because the land is not sold, land cost is not included in the price and therefore purchases of the buildings are more affordable. In addition resale prices are controlled thereby keeping property affordable. In rural areas they have been used to preserve family farms.  Modern land trusts are used to control development, prevent speculation, provide affordable housing, reduce absentee ownership and minimize foreclosures.

8. To address housing we must stop the mortgage crisis by requiring mortgage holders to reconfigure mortgages to allow homeowners to stay in their homes and not lose them to foreclosure.  This should have been required as part of the bailout of the big banks. This would ensure the mortgage holders get their money back through repayment of the loans and ensure that home values stop falling. We should include a requirement in reconfigured loans that homes be made more energy efficient and additional funds provided to achieve it. This is a much less expensive alternative than buying ‘toxic’ assets and builds the economy from the bottom up rather than the top down. The addition of the green mortgage will create jobs, reduce energy waste and save home owners money.

9. Face up to the health care crisis which is approaching 20% of U.S. GDP.  The United States has the most cost-inefficient health care system in the world. Other nations have succeeded in delivering quality health care at half the price paid in the U.S. To avert national bankruptcy the United States must put in place a publicly funded national health insurance plan as the basis for quality, universal access to health care.  This would end dependence on the private health insurance industry which makes up one-third the health care cost with the bureaucracy it creates and its overhead.  A national health plan will also help the auto, airline, steel and other big businesses and will also make it easier for small and medium size businesses to start and expand. The Obama health reform will leave tens of millions without insurance, fails to control the rising cost of health care and entrenches the insurance industry further in their dominance of U.S. health care. Failure to control the cost of health care ensures long term increase in government deficits, the failure and stifling of small business and continued bankruptcy of Americans. Economic security demands a national health insurance plan.  The United States needs to improve Medicare and provide it to all Americans.  This will save money, provide health care to all, control costs and begin to improve health care in the United States which is faltering and producing worse outcomes.

End the Wars and Reduce the Military Budget

10. End the Iraq, Afghanistan, Pakistan and Libyan wars and reduce military spending.  The United States needs to end a foreign policy based on empire and militarism.  A major purpose of these wars is to preserve a wasteful energy consuming economy without facing the necessity of conservation and developing renewable energy resources. America’s military spending doubled in the same period that the U.S. economy shrunk from 32% to 23% of global output. Weapons and war make up 55% of federal discretionary spending. Spending hundreds of billions on war and hundreds of billions more annually on military spending is one reason why the U.S. economy is faltering. The long-term cost of a military-dominated foreign policy has been a massive disinvestment in the civilian economy.  There is tremendous waste in the military budget, e.g., the total cost of F-35 Fighter Program will equal the combined outlays for fighting the Korean and Vietnam Wars. The Pentagon now spends about $21 million every hour to develop and procure new weapons systems.  The Chairman of the Banking Committee, Rep. Barney Frank, is calling for a 25% cut in military spending; we believe much larger cuts are needed.  A senior Pentagon advisory group has warned President-elect Obama that the military budget is unsustainable.

Re-making Finance, Shared Prosperity

11. Transform corporate welfare into taxpayer investment. Even before the current bailout, the U.S. government provided hundreds of billions of dollars annually to big business interests in loans, tax breaks, under-valued access to federal lands and a host of other mechanisms.  Corporations that want tax payer support need to be required to treat that as an investment in their company and treat taxpayers as investors, i.e. provide taxpayers with an equity stake in the corporation, share the profit of the corporation and participation in setting its direction. This taxpayer investment could be modeled after the multi-decade success of the Alaska model known as the Alaskan Permanent Fund which was put in place in 1980 to share oil wealth from public lands and gives every Alaskan from birth to death an annual dividend check.

12. Democratize access to financing by re-making the Federal Reserve and re-forming the nation’s money system. The Federal Reserve’s Board of Governors leadership is the exact opposite of democracy; it is control of the money system by the wealthy few, plutocracy. The result has been decades of Fed leadership aimed at funneling finance capital into big business monopolies, leaving small and mid-sized businesses capital starved and creating a decidedly unleveled playing field that disadvantages all sectors of the economy except for big business transnational corporations. It is time to end the private banker’s corporation known as the Federal Reserve, and create a new democratic structure involving sound money and free market lending in place of the failed monopoly system of our existing bankers. A replacement for the existing Federal Reserve System would retain the Fed’s regional decentralization, but include representation from all the major sectors of the economy and civil society, small and mid-sized business, local and regional governments, non-profits and organized labor. In addition, a number of at-large representatives would be democratically elected directly by the people of each region. Further, the Fed should be part of the government, under the Department of Treasury, and should be audited annually with the results made available to the public.  Along with re-making the Fed, the banking cartel, known as the “too big to fail” banks needs to be broken up, separating investment and savings banks (Glass Steagall) and regulating derivative trading.

13. Democratize corporate power by increasing shareholder rights, expanding the rights of shareholders to choose directors of corporations and submit resolutions to set the direction and priorities of the corporation they invest in and of which they are part owners. End corporate personhood, so that corporations do not have the rights of human beings.  And, national corporations need to be chartered nationally to allow them to be properly regulated and include public interest provisions in those charters.  Anti-trust laws need to be enforced to reverse decades of mergers that have led to near monopolies in every major industry. Consumer owned businesses, e.g. energy co-ops, housing co-ops, food co-ops and credit unions, should be encouraged to give people greater control of the corporations they deal with.

Financing the Government: Taxes and Deficits

14. Reconsider the tax structure to make it more equitable.  For the last two decades there has been aggressive class warfare in the United States – the wealthy against everyone else.  Slogans like “trickle down” and “free market” have been used to carry out the largest transfer of wealth from the poor and working class to the wealthiest in world history.  The result has been an upward spiral of wealth and income to the top 5%, especially the top 1% of wealthiest Americans. Now the top 1% of Americans has wealth equal to the bottom 95%.  Some of the proposals above will share the wealth of the new economy more equitably and decentralize profit; in addition the tax structure should be changed to be much more progressive, as it used to be.  For example, the Social Security tax is a non-progressive tax; indeed in 2011 it is capped at $106,800 (indexed).  The cap should be removed and the tax should be made progressive.  Similarly, while Americans pay taxes on the purchase of food, clothing, property, fuel and other essentials, no tax is paid when people buy stocks, bonds and derivatives. A micro tax of .1 (1/10th of 1%) on these purchases would raise three times as much as the income tax.  Tax reductions on the wealthiest since 1980 can be corrected by a surtax on those earning over $5 million annually.  Currently, most U.S. corporations pay no taxes (despite receiving hundreds of billions in corporate welfare), removing the loopholes on corporate taxes would ensure corporations pay their fair share. The capital gains tax should be lifted and capital gains treated like any other income. Finally, the income tax should be made much more progressive with increased taxes at various levels above $1 million, $5 million, $10 million, $100 million, $500 million and $1 billion.

15. We must be mindful of the deficit and debt at all levels of government but also recognize there times when government must spend to rebuild the economy.  The U.S. debt surpassed $14 trillion in January 2011. The burden of debt placed on the next generation is unjust and threatens the U.S. economy as well as the value of the dollar. The U.S. must pay its bills as we go along and not unfairly place this burden on future generations. Many of the items in this Agenda for a Democratized Economy are designed to reduce debt and deficit, e.g., controlling the cost of health care, reducing military spending, changing the tax structure. Not all debt is bad, indeed deficit spending to build the economy can pay dividends for the future and in 2012 is still needed to get the economy out of collapse. President Reagan allowed the deficit to rise when he responded to a similar recession. The essential condition for fiscal stability is that the ratio of debt to GDP does not rise over time. That ratio has been rising since 2001.  Right now it is essential that U.S. spending be directed to building the new economy and creating new jobs as the only way to reduce debt and deficit is growing the economy, while at the same time facing up to bloated military spending and the failure to capture fair taxes from the economic elite and major corporations.

Workers Rights

16. Democratize the workplace by encouraging employee-owned businesses.  It is time to replace wage-slaves with employee owners.  Employee-owned businesses perform better not only in providing wages and benefits to employees, but larger profits and less bankruptcy.  Several studies show the greater the level of employee participation the greater the level of productivity. Democratization of the workplace – giving employees more power as employee-owners is the future – a future that is better for employees and corporations. Restore union rights, repeal Taft-Hartley, protect the collective bargaining rights of private and public workers.

17. Reduce the work week with no reduction in pay. Before the economic collapse, 7% of the U.S. GDP was based on consumer buying.  Since the early 1970s wages have been flat in the U.S. and the consumer economy has continued because of two-income families, increasing personal debt and cheap goods from abroad.  This is unsustainable.  In a time when millions are losing jobs, millions more are underemployed and tens of millions more are working overtime and two jobs just to make ends meet, we can’t afford to be putting people out of work. A reduction in the work week with no reduction in pay would spread the work around, keep people working and equally important, allow ‘the overworked American’ some additional, much needed leisure time. After 2000, the United States overcame Japan as the country with the most overworked employees. That’s not an accomplishment to be proud of, but rather, a problem to be solved. A root cause of the downturn in the U.S. economy is insufficient buying power – the economy has doubled in size, productivity has dramatically increased but workers have had no increase in buying power.  One remedy for this is the 32 hour work week and increase in overtime pay to double-time.

18. Establish a national guaranteed income for all Americans based on the model proposed by Richard Nixon in 1969. Governments are already paying a heavy cost for poverty and homelessness, much of that would disappear with an income guarantee. Indeed, currently nearly as much is spent on poverty bureaucracy as on poverty, by simply sending a check that bureaucracy is no longer needed. The guaranteed income is paid by government to its citizens on an individual basis, sufficient to meet basic needs.  Poverty has been rising in the United States since 1999.  The national poverty rate has climbed to record highs in recent years. More than 46 million people (14.3%) were in poverty in 2009, up from 39.8 million (13.2%) in 2008, according to data from the U.S. census; roughly 40% of Americans fall below the poverty line at some point within a 10-year time span. The United States has one of the highest poverty rates in the developed world. Moreover, the standard of living for those in the bottom 10% was lower in the U.S. than other developed nations except the United Kingdom, which has the lowest standard of living for impoverished children in the developed world.  Economist Milton Friedman proposed a variation of guaranteed income known as the “negative income tax.” In this model, income subsidies would be given through the tax system to persons or families with employment or other income below the poverty line. Guaranteed income is meant to cover basic needs, not life’s luxuries.

International Trade and Finance

19. World Bank and IMF dominance (which means ending U.S. and European dominance) of the world financial markets.  These entities need competition and regional banks in Latin America, Asia, Africa and other regions should encouraged as should stabilization funds to assure currency stabilization.  These organizations need to be democratized, made more transparent and include appropriate representation and decision-making by developing nations. The power of corporations to undermine democratically enacted laws through the World Bank should be discarded. The IMF, which answers to the U.S. Treasury Department, plays political favorites based on U.S. foreign policy interests. IMF loans have come with requirements of privatization and cuts of basic services in many countries. The U.S. Treasury Department should prohibit onerous conditions from being attached to any IMF lending that takes place.  Further, these institutions have directed resources to expansion of the fossil fuel industry, rather than the new energy economy.  The IMF/World Bank should cancel 100% of the debt of developing countries, and switch to a system of grants for poor countries, rather than loans. If they fail to do so developing countries should take matters into their own hands and default on their debts in order to meet the urgent needs of their populations.

20. Remake international trade from corporate trade to people’s trade.  The current rhetoric calls trade agreements “Free Trade” but in reality they are trade agreements that favor corporations over the interests of labor, the environment and consumers.  Trade agreements need to be redesigned so they serve the interests of people and the planet rather than the interests of corporations.  Further, institutions like the World Trade Organization need to become more transparent and more democratic.  They can no longer be giving power to corporations to overturn democratically enacted laws by making corporations more powerful than governments.

What To Do


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