What might a financial morphic field for Economic Democracy be like?

4) Is there a Mutual Road to Economic Democracy?  

” : we allowed markets to blindly shape our economy, and in doing so, they also helped shape ourselves and our society.  ”   – Joseph Stiglitz

Financial morphic field, what might that be, sounds a bit wonky.  But naming something can help give its definition a hook. A field is a space and a force field is illustrated but the iron filings  on a white sheet of paper over a magnet, a simple experiment we might have done at school. Such a force field is a morphic field where  magnetic forces arrange the filings into a certain pattern or form.  The term field can also be more widely applied by way of analogy; there is a likeness.

The complex of relationships formed by money transactions, banking, capital and commodity markets,hedge funds, company and property law  dominate most aspects of our lives and put us into a financial morphic field. This predisposes us to behave in certain ways necessary to survive in a market capitalist  world. We, even if uncomfortable about it, unwittingly  reenforce  this relationship by repetitions of acts that perpetuate it, as wage workers, tenants, mortgage holders,buying goods of all sorts some meeting needs, others”must have gizmos”, gambling, saving into th stock exchange through our pensions, insurance and so on. Our lives are structured by the economic political settlement we live in which  pervades most of our lives, we are embedded in these complex of relationships, like it or not. We escape from it in small fractions of our lives, among friends or occasionally in refuges where the capitalist ethos does not have absolute writ, like public spaces or open spaces under common trusteeship   or when we interact with enterprises that have a mutual “commons” about them,  like cooperatives. They usually have a democratic and soft collectivism aspect to them though sometimes decayed.    Capitalism in all its forms is a dynamic  system that through privileging private ownership especially  as corporate capital  seeks to squeeze maximum profits  from other ” factors of production” .  These are  labour, which are people, and land, which is limited and has nature as an aspect. Capitalists are driven by the profit system to enclose and maximise benefits for themselves and try to externalize costs by dumping them on the commons;  these including public spaces and services common to all, whenever they can.    Current examples are the bank bailouts with public money and now the  dismemberment of the NHS,  which is liable to lead to hiving off its assets and profitable operations to the capitalist corporations; the public assets are being put into play in the capital markets.

A  consequence is the growing differentials of wealth and power leading to large sections of the population into impoverishment and social exclusion, the economy for them does not work.  The present economic crisis dramatically illustrates this. The banks were  bailed out at immense public expense, hardly anyone was brought to book, modest reforms are required from them and still the top bankers pay themselves huge salaries while the public is being squeezed to pay for them to start-up doing just as they were before.   The capitalist sector is a complex of “direct agency”  doing things directly with the backing of financial markets that underwrite the organization of business. These  are independent of government  so staying empowered what ever party is in and subordinating politics to their interests. As a system driven by financial markets it is not democratic but we are told that this is the only option, but is it?  How might the conditions for different outcomes look like; what might a  financial morphic field for an emergent Economic Democracy look  like?  How can we begin to make steps to an economy more conducive to equitable and sustainable outcomes. What criterion might it need to meet?

A financial morhic field for Economic Democracy will need to be one where enterprises are run on different principles  and will need boundary conditions that define it,  a semi-detached secular economic nonconformist sector which interacts with the world it is in and can survive..  The whole point of creating a different economic culture is to prompt outcomes which are different, more equitable and conducive to social and ecological ends.  This  will need to be  practical and beneficial if  to be viable , supplying products and services people want.  So Economic Democracy needs a means of establishing “direct agency”  for its emergence. In such an environment actions by people as agents are hopefully structured and aligned to realize the  objectives arrived at by democratic means and is also self re-enforcing.  A financial field for economic democracy has to evolve from primary cooperative isolates into forming federative relationships by sharing secondary cooperative enterprises be it, training, research, enterprise incubation, financial and mutual land trusts. These will help build up and retain capital in a social relationships under democratic governance and generate synergies.

There are already vestiges of   economic democracy  in parts of what is vaguely called  the”third sector”.  Those enterprises that are membership organisations based on one person one vote and are at least nominally  democratic, these being in the main the surviving consumer cooperatives, mutual organizations,  often bureaucratic and corporate.  There are other cooperative forms, likes the new wave of community energy cooperatives, credit unions, housing cooperatives, worker cooperatives  and cooperative land trusts. To these can be added mutual co-ownership companies such as John Lewis Partnership, a succesful enterprise with some worker democracy.  However there is a coyness about any ideological difference ; their differences are incidental.  They  tend to be a self-referential  and inward looking   focusing on internal relations of governance. There  seems to be a poor awareness and little interest in their external  relationship with society and how  a sector of  democratic enterprises could become more a  universal solution for a wider spectrum of society.   The Cooperative hub  perhaps is moving in the right direction to address this problem.

A fully developed complex of structures favourable to democratic enterprises as such has some way to go if it they are not  to become  trapped into being a tertiary  supplementary sector; sometimes used as a fat cat litter tray, often as none profit schemes  where casualties are dumped.  These projects have their place and fulfill a need which requires  funding  but should not be a mainstay of  cooperative sector .

Conflating cooperatives with charities, as sometimes happens, confuses the public and is detrimental to the viability of  cooperative sector. There is also some fear that cooperatives can be manipulated to be  used transitional form to privatization. Potentially unions are a component of a democratic economy and ideally will develop partnership relationships with cooperatives.  Cooperative and mutual enterprises apart from being operative in the market have the potential to be the means of introducing economic democracy into a reconstructed public sector.

In the community, there have been problems with the establishment of credit unions as they were hampered by very restrictive regulation and  dominated by a  paternalistic culture which , mainly advocated them as a source of savings and credit for the poor . Thankfully this is beginning to change.  As a consequence they have tended to be “sub primed”  and stigmatized.   instead it might have been better for all if credit unions were promoted  as  inclusive cooperative enterprises for all in the community, as they are in Ireland where some 60 % of the population have accounts instead of under 2.5% in mainland UK. Credit unions can now have more extensive bond areas and a slighty wider range of applications with some associational and corporate accounts now  allowed. This may lead to credit unions to becoming more viable and useful.

Democratic enterprises if the are to make significant progress need to be based on a symmetry of benefits principle while being financially coherent , self-sufficient and emergent.  This is an  assumption prompted by caution. Grant dependency as a norm can prevent the development of robustness. Grants have their place especially for injecting or pump priming funds and also as a means of asset transfers into communities .  The general aim  should be for self-sufficiency unless there are good reasons to do otherwise. For a new wave of cooperative enterprises in all their forms to thrive and become more pervasive they need to be robust. This will need  strong mutual association  through sharing secondary cooperative instruments acting as hubs for  regional and or national federal  networks. Mutual funds and land trusts can act as cooperative  commonwealth trusts and asset anchors  These type of relationships may already be evolving and  the Unity Trust Bank already seems to act as a financial hub for various social enterprises. A  federal association  will ideally be overseen  by a  social council  setting basic principles and policy as  done by the Mondragon Coops. Organizational egotism probably holds back cooperatives from developing more fully as a sector. Isolation of cooperatives can lead  to their decay as democratic enterprises.

Benefits from democratic enterprises can be in kind or financial.  When financial, democratic enterprises should distribute surpluses to the different categories of  stake holders.   The surpluses need to be divided among the various stakeholders in an appropriate way giving measured consideration to all interests.  Some surpluses must to be retained for reinvestment.   Dividends when possible can be  distributed to the various  stakeholders, these might be worker members or co-owners, or to customers with consumer type cooperatives, and  last and not least,  to investors. These will  include workers,  members of their community and  supporter investors who prefer to put their savings into equitable and democratic enterprises.  In this way  the benefits are shared to each layer of the network, the individual, the cooperative enterprises as such  and the community in general,  which would include the primary and secondary cooperatives making up the cooperative commonwealth.

A new wave of emergent democratic enterprises will for the forseeable future need to survive in a capitalist dominated market.    If these emerge in a signficant way  they will become a sector  forming a  niche ,  a socialized  sub-market into which the citizen can step into freely to whatever degree they wish.  The relationship will have various aspects, and individual participant can relate in one or more aspects, for example as a worker, a customer or client, a tenant, or investor.  Each category might qualify as a criterion of membership. Ever stakeholder category will need  some benefit. An important factor is the raising of capital both as venture capital and as loan funds. Economic democracy implies that capital does not subordinate other factors of production be it labour, community and land  (environment).  Capitalism benefits from people’s savings  ( if they have any)  being deposited into the financial complex which makes it up, the stock exchange,  bank deposits; this makes up the financial markets that underwrite the capitalist sector. The average citizen might have some savings on deposit and may have private pension or insurance.  Pension funds have large holdings on the stock exchange making many citizens into passive stakeholders in the city.  The pension holders have no control over these funds and have at times been ill-served .  A workers  pension fund as Capital will often  drive down that worker’s wage or  undermine rights at work and can even sometimes  trigger their redundancy.  Might a worker or citizen not ideally want to  invest in system that upholds not only  personal interests but also  uphold the social good.?  In an ideal world that is what would happen but it will need an  economic democracy  sector which has the capacity to absorb investments transform these into succesful  enterprises  that grew and gave some return.

A traditional method used by working classes in the nineteenth century was to accumulate funds through small increments, this method might be useful in a modern form. A start could  be made by the introduction a micro-pension , which at first should be a secondary one, into which people  contribute into during their working lives. Workers in cooperatives might  subscribe to such a pension  and build up a savings as a  personal stake holding and  as an act of mutual support. Others in the community who want to see economic democracy through direct agency might also want to support these projects by subscribing to a  micro pension scheme , adding to the pool of socialized capital.    These funds can supplement those currently raised by  share issues  for cooperative schemes through use of ( Industrial and Provident societies ) IPSs . The efforts of the already existing social investment societies like Cooperative and Community Finance (ICOF) could be boosted.   These funds would be locked in and be invested into various types of cooperatives which in the end would be expected to pay back the funds and a share of any surplus as a dividend.

Starting in a modest way will allow any emergent sector to work out teething problems and build up capacity over time.   If succesful democratic enterprises  would eventually be able to absorb more investments. Investments could be made as straight loans or through  secondary investment societies  having holdings in various other cooperative  enterprises;  using  withdrawable mutual shares (IPSs)   Such mutuals and can hold and manage investments in several cooperatives and spread risks.  Mutual fund type enterprises are relatively simple so prone to be understandable and  transparent. There might be some people with spare savings who would find  it  attractive to park a fraction of their pensions or savings into democratic enterprises.  There are  several  organizations that if brought into a stronger network relationship  might be made up a foundation for the above suggestions.  At present many cooperative funds find it difficult to invest in viable projects.   There seems to be a shortage of viable  enterprises.  Ways and means of developing new quality democratic enterprises need  working on. Some of this might be done by the cooperative networks themselves, especially if they are associated with  investment sources. This situation opens opportunities and might attract people with desire to develop democratic enterprises.

Some might thing the micro pension idea incredible. If set at about 1% of income , a sum that no one would want to lose , which can be avoided with a bit of competence unless  unlucky but if partly lost not a total disaster. This has the potential to raise sufficient funds if there are enough contributors. Union dues are approximately on the same scale and a look at the trade union certification officers website illustrates what sums can be raised if there are a critical mass of subscribers. Charities raise £13 billion a year  and people never get their money back,  often with little transparency of how funds are spent.  Micro pensions for economic democracy could become quite a reasonable propositions if there are good viable   democratic enterprises. A micro pension would be locked in and only redeemed under  certain conditions, usually on retirement.  Ideally there will be some return. Funds can be invested in a several  democratic enterprises which could range from manufacture, community, communication,  energy, services, entertainment and culture. To this can be added anchor  investments such as capital assets,  buildings and land.  Should  favorable political circumstances arise the state or other bodies could make grants or asset transfers into the democratic economy.  The more that is done before by direct agency, the more know how and capacity there will be to utilize these  But there is a danger that investments alone can become a solution looking for a problem.

Mutual finance is just a means to an end, such as creating jobs owned by workers,  providing housing, workshops,  community services owned by communities and   other benefits.   Funds are only useful in so far that there are people who want or can apply them in a useful way. Do people want democratic enterprises? People often do not understand cooperatives or mutual organisations.  There might be some nostalgic feeling among some older people  remembering their mother’s coop membership number.  Most people understand  coops as rather distant corporate enterprises that run  convenience supermarket and funeral services, not always well. Though the Cooperative Bank and the new Energy Cooperative seem to be dynamic. ( Sadly the Bank is in trouble added note) Some efforts have been made to mitigate  poor awareness especially  during 2012 UN year of the coop. But it is probably  fair to say that there is more work to do in raising awareness of what cooperatives are, their democratic nature and the general benefits they bring to individuals and their communities , which are often subtle and long-term.  Democratic enterprises should be open and not mask problems  if these are to be solved.  There is now a considerable knowledge of  best practice in regard to cooperatives and mutuals but there is some work to be done in increasing public awareness of seeing cooperative forms as a way into work through job ownership and also as platforms for other enterprises.

Education has always been an important aspect of the cooperative movement as such in all its permutations, worker, multi-stakeholder or consumer.  Connections with some universities would be ideal and can cover, research into administration of democratic enterprises, appropriate product or service development. This can include information on how to set up cooperatives or conversations of business to democratic enterprises. The Cooperative Hub (see links) has quite a lot of information and there are some useful basic booklets published by Radical Roots. The internet and you tube have great potential to be a primary source of information. A series of educational you tube videos would be ideal and a start in that direction may be under way.

The hope and aim would be that wealth, as capital assets or funds be built up, benefitting workers and communities enterprises  leading to more equitable distributed income and benefits. A culture of wage solidarity limiting differentials would also be ideal.  Democracy on one person one vote should be applied more fully in all aspects of governance, political, financial and economical. Workers in democratic enterprises need clear mandates ,  job descriptions for all functions. Administrators or managers where appropriate need the  means to do their work but conversely the membership be they worker or other should  be engaged  with their enterprises and  be empowered to vet governance in the appropriate  venues. A range of cooperative forms might  include  co-ownership enterprises. The sector might have a range of administrative forms from flat collectives to formally managed enterprises but which still are answerable to members.   Areas with high density of cooperatives seem to show  resilience in weathering the present economic crisis. These suggestions are to a large degree hypothetical but point  to possibilities.  The Modragon Cooperative Corporation is an example of what can be done under the right conditions and attitudes.

The developments implied in this thought piece privileges an economic approach through direct agency as opposed to the political approach  through displaced agency.  Supplications to institutional power the state, which largely belongs and is dominated by vested interests, will tend to result in minimal reforms. These hunches are  inspired by what the British common people, mainly what the working class did in the nineteenth century , create their own democratic self-help organizations, mutuals, cooperative and trade unions. The politics that eventually led to the creation of the welfare state was underwritten by a culture of empowering direct agency, unfortunately this has atrophied . They were able to make some temporary advances because there was a sufficient density of popular self empowering organizations in society beyond the state which gave them a grounding that enabled them to push through significant reforms.  This needs reconstructing in a modern form.  The aim of realizing economic democracy might  be a vitalizing objective, but it is the doing that counts, for this to happen there will need the learning.

One hopes these suggestions are useful  and merit consideration.  This will be so only if relevant to solving problems that arise because of the current political economic settlement that privileges private ownership of property and assets  but which subordinates and exploits the majority of people as labour and  also land,  which includes  environment and nature.  A  major problem since the relatively benign  post second war period  broke down in the mid 1970s has been the reemergence  of vast differentials of wealth . This is clearly explained by people like Gar Alperovitz in the USA but also applies in the UK, is that democracy is being undermined by a small sector of the population owning and or controlling most of the assets.

Wealth differentials are  reflected in the power relationships within society which now is  unhealthy skewed in favour of the wealthy to the detriment of the majority of citizens and workers.  Wealth as capital dominates, leading to enclosure of assets,  finance or land, to the near exclusive privilege of a plutocratic coterie and a diminishing concentric circles of supplementary beneficiaries. Capital seeks profits through exploitation, squeezing other factors of production, this a consequence of over privileging of private ownership of property and wealth as extra personal ownership ; holding more than a single person can  reasonably use.  The symmetry of benefits principle which underlies the suggestions in this thought piece is an attempt to think through a way of giving each factor of production its due and bringing capital into a  democratic mutual relationships more conducive to social and ecological ends.  This if doable to a significant degree, might lead to outcomes less rapacious to people, beast, plant and earth. This can only come about if people chose to begin doing it different.  People even if involuntary will tend to do capitalism because most relationships are institutionally set up in that way, but in areas  in of the economy based on democracy and some participation they can choose to do it different as, UK Beyond Capitalism! .

This will be as good as people do it, and if the fruits are beneficial people will automatically be attracted. These are times of stress, new solutions need thinking through and then acted on. Opposition to what is happening has a role to play but it is as  important to develop counter positional solutions. New solutions are always a latent potential  and even within the limited democracy we have there are possibilities to diversify into more inclusive economic solutions.  Some recent initiatives  in cooperative investments and credit unions may be harbingers of new developments that point to laying a  mutual path to economic democracy, the support of the trade and industrial  unions might be a great help in shaping these developments. New generation of  people with ideas, ability and energy will hopefully come forward to pioneer a new wave of democratic enterprises. We all are free to help these developments through directing our  campaigning, purchases,savings and donations and in so doing helping our fellow citizens especially the youth, who need  new frontiers of opportunities.

Morphic field as a term  can now be discarded on the principle of  Occam’s razor!

NB: See Cooperative Hub and Cooperative UK on Blogroll at the left side of the screen

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