Co-operatives as most efficient and effective vehicle for economic enterprise hF24

von Co-operatives as most efficient and effective vehicle for economic enterprise » Donnerstag, 2. September 2004

Welcome to another edition of PROUT Gems.

The conservative economists will tell you that there are no alternatives
to capitalism. But they fail to look at co-operatives and blindly
mistake them for communes in the Soviet era. They are wrong.
Co-operatives would have to be the most efficient and effective vehicle
for economic enterprise. Why because of the safeguards of
worker-shareholder control, the desire to benefit consumers and to seek
only a rational profit rather than profits driven by greed ... and many
other reasons. There can only be an efficient market through
co-operative structures. For over 200 years capitalism has not solved
any problems about poverty or the like. 200 hundreds years or more it
has had - it is an insult to humanity. Time for alternatives =
cooperatives, decentralised economy, economic decentralisation. Let us
examine them.

Cooperative Economics: An Interview with Jaroslav Vanek
interviewed by Albert Perkins

Albert Perkins: Professor Vanek, how did you first develop your ideas on

Jaroslav Vanek: I had four major influences. First, I experienced the
evils of communism when I was a refugee in Czechoslovakia from
Stalinism, and later, when I came to the West, I also experienced the
evils of western capitalism. Then, in between, I was fortunate enough to
spend time with my late brother who did extensive work for the I.L.O.
(International Labor Organisation) and wrote the first book about the
workers' councils in Yugoslavia. I learned many of my basic ideas from
him. He was a sociologist and I was an economist, and I was able to
transpose his ideas into my field. Third, was the doctrine of the
Catholic Church. Pope John 23rd went a long way toward suggesting the
desirability of economic democracy. Finally, I was influenced by
Dubceck's model of social democracy. It could have been more successful
than the Yugoslavian experiment, but for the Soviet tanks. I have had
several interests in my life, including the area I call economic
democracy. Economic democracy is a transposition of the idea of
political democracy. It implies that economic life is governed by people
who are involved in that economic life. Capitalism is based on property
rights, and democracy on personal rights. Perhaps the most important
aspect of capitalism, its objective function, is to maximise profit. If
you look at it more carefully, profit is revenue minus labor costs and
other costs. This means then human beings enter the defining objective
function of the system with a negative sign. By contrast, economic
democracy has an objective function where people are on the positive
side of the equation. The idea is to maximise the welfare of the people
participating. This is an enormous difference, and I'm convinced that
the tragic difficulties of our culture -- ecological devastation,
starvation, etc - can be traced to this negative side But capitalism
could be cured slowly if we developed economic democracy. One of the
main reasons why the western world is so schizophrenic is that we have
political democracy and economic autocracy.

AP: What would such a system look like?

JV: The system should be a market system, not ruled from a central
ministry, but by the rules of supply and demand This is the only true
market economy. The capitalist economy is not a true market economy
because in western capitalism, as in Soviet state capitalism, there is a
tendency towards monopoly. Economic democracy tends toward a competitive
market. The system is composed of households, enterprises, government,
and so on. The main distinguishing characteristics are in the area of
production. Productive enterprises are small republics. Everyone who
works is a member and the enterprise is run democratically and directors
are elected democratically and the bourse stockholders have no control.

AP: Do you see all firms run cooperatively?

JV: There are many possibilities. In Mondragon you have cooperatives
developed from the Rochdale principles, characterised by democratic
management. And the Yugoslav firms, although poorly designed, were
democratically run and semi-cooperative. In an article to the Russian
Academy of Sciences concerning Khabarovsk, I argued that during the
transition period they should have democratic, but not necessarily
cooperative enterprises. These could be associations of workers in a
democratic firm who would lease the assets of the factory from the
state. The American ESOP co-op provides a good model. By insisting on
co-ops we narrow things down unnecessarily. The idea of economic
democracy is broader than just co-ops. Visualize two sets of loops. One
set is co-ops and one set workers' participation. Where they intersect
on the co-op side we could have housing, credit, etc. On the other side
we can have participation as simple as suggestion boxes. There are
workers coops where the owners make $2000 a week while the workers make
$200. I wouldn't call that economic democracy.

AP: Why aren't co-ops working in the West?

JV: If you go to a bank and ask for a loan to start a co-op, they will
throw you out. Co-ops in the West are a bit like sea water fish in a
freshwater pond. The capitalist world in the last 200 years has evolved
its own institutions, instruments, political frameworks, etc. There is
no guarantee that another species could function if it had to depend on
the same institutions. In capitalism, the power is embedded in the
shares of common stock, a voting share. This has no meaning in economic
democracy. Economic democracy needs its own institutions for one simple
reason. Workers are not rich. Let's face it, most working people in the
world today are either poor or unemployed. They do not have the
necessary capital to finance democratic enterprises. Hence, we need some
instruments and institutions which make this possible. Why? Because we
know that once democratic firms are organized, or even if they have all
the elements of democratic principles, they work far better than
capitalist enterprises.

AP: Tell us why'?

JV: There are many reasons. First of all, if you know that your employer
is maximizing profits and you are a negative aspect of production for
him, it creates a terrible situation. In the UK recently, the miners
said "Don't fire the miners. Fire Prime Minister Major." This is the
conflict. Major is like a director of a state enterprise. But if the
director is elected by the workers to represent their will, as in
Mondragon, there is a greater likelihood of mutual respect. One of the
greatest advantages of economic democracy in well organized co-ops is
mutual supervision. Normally, in capitalism, the foreman must be paid
three times more than the average worker, because he is really a slave
driver who doesn't produce anything. In fact the workers will produce as
little as possible in this situation. We have found from studies that
the opposing forces of alienation and cooperation can be exceedingly
strong. In French construction coops, capital productivity is double the
norm. The democratic firm can produce two buildings while the capitalist
firm produces only one. The reason for this increased productivity is
that in a democratic firm the workers supervise each other while in
capitalist firms they cover each other's theft or poor work. In GM you
will be called a pig if you expose a theft by a fellow worker. Then
there is the savings of materials. Capitalist firms invest in a lot of
unnecessary machinery. They replicate the inclination of the average
Americans buying things they don't need. The democratic firm can adjust
to the optimum level of intensity. Productivity is not measured only in
dollars and output but also in happiness and job security. Job security
is more important than whether you earn three or four or five hundred
dollars a week. In fact, one of the main theoretical and practical
characteristics of the cooperative system is job security. In capitalist
firms workers are constantly being laid off and fired. Unfortunately,
the people that would benefit most from economic democracy have
infinitely less power than the people who rule, the captains of
capitalism who create laws, customs, bartering systems, and especially
schools. By and large, the economic departments of America's
universities are institutions for brain washing. They pour a certain
culture into students' heads which teaches them that the capitalist
system is the best thing in the world. Our politicians have called
Russia the evil empire, which might have been true at one time, but
since it has disappeared, our capitalist system has become the most evil
in the world.

AP: What sort of support systems do we need to get cooperative
enterprises off the ground? Perhaps you could use Khabarovsk as an

JV: First of all, we must take into consideration the history of Russia.
The problem is the Harvard school -- and Western leaders have often
echoed this -- wants to take a textbook example of capitalism and
transpose it onto Russian soil. Russia has had a functioning state
socialist system for over 75 years. To suddenly import an alien system
is exceedingly difficult. Certain support structures are necessary if a
new system is to be accepted. We know the evils of the police state, one
party system, absence of democratic expression, etc, but all was not bad
with socialism. Income distribution was, if anything, overly just:
medical doctors could earn half that of miners; and workers enjoyed
reasonable job security. Both are necessary conditions for the Russian
mentality of fairness of distribution and job security. However,
economic democracy provides for a more equitable income distribution,
and far greater income security. A major historical coincidence that
will help, whether we like it or not, is that, in Russia, bureaucratic
ministries organized most of the industrial sector. A ministry for
shoes, another for mining and so on. The capitalist model abolishes this
structure and substitutes a stock market. So, this bureaucratic
structure is still in place by incorporating it into the incoming
system. What needs to happen is a transition that can be smoothed.
Thus, before we discuss the implementation of economic democracy in
Russia, we must first consider the historical evolution of the Russian
people over the past 75 years. When we do this we see the enormous
difficulties that a proposed capitalist system must face. For example,
several important ingredients in a successful capitalist system are risk
taking, entrepreneurship and a moneyed class. None of these three are
present in Russia. On the positive side, the historical conditions that
led Russia to accept a system that offered equitable income distribution
and job security will make them much more open to the implementation of
economic democracy.

AP: Will there be less people working in the ministries?

JV: Yes. Perhaps by as much as 50 percent. However, we must not totally
eliminate the possibility of capitalism in Russia. Some of the younger
and more able bureaucrats may wish to set up private enterprises. It's
not my preference, but it may be theirs - but limit it to small
enterprises. Anyone who reads this interview would benefit greatly by
watching the video the BBC made on the Mondragon co-ops in Spain. You
can see the practical implementation of much of what I am saying.
Economic democracy is based on a competitive system, with a large number
of autonomous firms which, by themselves, cannot fulfill all the
functions of a large company. General Motors, for example, is so big it
can do its own R&D, banking, credit, accounting, transportation,
marketing, etc. Democratic companies, which are smaller and more
personal, need support systems to help in these areas. These would be
second level co-ops. They would follow in the same spirit of the larger
firms, maximizing welfare and income for all its members.

AP: How would the poor be able to capitalise their co-ops?

JV: There are existing enterprises already in place. These can be leased
to the workers at a reasonable price. It could be in the form of a fixed
lease contract that would give an incentive to the workers to earn extra
income. The lease money would have to be efficiently allocated to those
who need it for start up costs. The best use of finance is to develop
second level co-ops. If we have mining in an area, we should also have
local production facilities. Rather than ship copper to Moscow for
smelting, they could build a smelter and factories for the production of
copper commodities for sale in their local market as well as for export.

AP: What are their prospects for success?

JV: The Russians are being bombarded by big money on one side, and on
the other, by some Vanekian notions of economic democracy. The odds are
a million to one. It should be said, however, that in the early days of
perestroika, there were some very successful co-ops. Too successful.
They were killed by the bureaucrats because they caused unrest as other
enterprises failed. But education and information are important, as well
as pilot projects so these ideas can be tested in context. Perhaps
Khabarovsk will be one of these test cases.

AP: What are the possibilities of developing successful co-ops in

JV. It will not be easy. However, the present economic crisis may worsen
and eventually create a shock that may help the large scale development
of economic democracy in the US. The itinerary, of course, would be
entirely different from that in Russia because our history is so
different. Americans are familiar with political democracy but it will
be difficult for them to move away from the Wall Street power that
bought the last two presidents. Labor unions, though not very strong
today, are still important tools. They could help both in the collective
bargaining process, and as part of the support structure for the new
economic democracy. Some developments that fit into economic democracy
are already at work in the US. The so-called ESOP, worker controlled
businesses, is a step in the right direction. Another is profit sharing.
They are opening new vistas. Galbraith points out that many people hold
shares but don't exercise power. If the present crisis deepens, we may
complete these experiments of worker ownership and profit sharing and
use them to create support organisations. In my life to date, I have
engaged in a series of transformations, or what I call praxis
progressions, going from critical reflection to action: from Stalin's
serfdom to the freedom of the Western white upper class; from capitalism
to economic democracy and self-management; from neo-classical economics
to a critical, history-based and human-oriented study going beyond the
confines of economics; from comfortable agnosticism to a deep,
all-pervasive faith; from believing in Western-style economic
development to assisting a sustainable human betterment of the world's
poor through cooperation, solar energy and human technology; from the
AEA to association with the poor of Calcutta, Lima, Nairobi or Manila,
who indirectly are victims of the former. The inflated standard of
living enjoyed by the rich of the world can never, for many reasons,
become the way of life of the 80 percent who are poor. The sane levels
at which all humanity can survive indefinitely is somewhere near the
order of ten times less than today's rich, and ten times more than today
's poorest. For the latter, whose only wealth is solar energy, there is
the promise of a significant improvement over the long haul. This I
would call the economics of hope. By contrast, the potentially
cataclysmic road of our present, self-centered mainstream economics and
"atom defense" of our ill-gotten riches is what I call the economics of
damnation. The road ahead appears bright for the poor (if the rich do
not destroy it), and assisting and learning from it appears to me to be
the only redemption for the rich.

from Prout Journal
This article was published in New Renaissance magazine Vol. 5, No. 1

Jaroslav Vanek is Professor of Economics at Cornell University, where he
directs the program on "Participation and Labor Managed Systems" . Vanek
is a leading authority on, and advocate of, cooperative economics. He is
currently working on strategies for the transition to worker-managed
economies in post-communist countries. Vanek also founded and heads
STEVEN, a company which designs appropriate technology for use in the
Developing World .

The Bankruptcy of Classical Economics
Adapted and annotated from a paper by Walter Haines.

Is the accumulation of physical wealth the most important pursuit of

Economists today tend to believe that their subject is the most rigorous
of the social sciences. After much time and study they have developed
complex equations, which they can manipulate extensively in modern
computers, turning out solutions to complicated questions in precise
detail. Why then are their predictions so frequently wrong? Why is it
possible to say, not wholly with tongue in cheek, that we probably
wouldn't be any worse off if we let economists predict the weather and
meteorologists predict the economy? The answer, in one sentence is that
their theoretical models don't have much to do with reality. There is a
complete lack of fundamental principles to aim for the good and
happiness of all.

Amazingly, capitalist economists assume some superstitious nonsense
about an invisible hand, that it is Adam Smith's invisible hand of
competition that drives the market. But nowhere do we find Smith's
concept of competition working. Nor do monopoly theory, oligopoly
theory, and a dozen other specialised market theories help much. It is
incredible that today capitalist economics is based on some ridiculous
dogma about an invisible hand. It is like some outdated religion in
which a magical hand is waving around on the planet dishing out guidance
- and then for whom: well certainly not for everybody that is for sure.

In another direction, if the invisible hand, or even the visible hand or
government, is supposed to keep business honest, why do we hear almost
every day of another instance of fraud, price gouging, and illegal
collusion not only by the small fry, but by our largest and presumably
most respectable corporations. This all represents a disgusting
inefficiency in capitalist economics.

Why, in the richest country in the world, are consumers so disaffected,
so unsatisfied, so restless? Why cannot we find pure air, pure water,
clean soil, or relief from the omnipresent oppression of nuclear wastes?
Why do we not have even a suitable place to dispose of all the household
wastes that our affluent civilization produces? What has happened to the
market that is supposed to take care of these economic details?

On the world-wide level what does economics tell us about global
warming, the ozone level, vanishing species, destruction of natural
resources, the disappearing fish catch, bio-diversity? Cost/benefit
should say something about such issues. We arc working feverishly on
these problems, but the figures that are churned out by various
researchers vary from one to another by orders of magnitude, at least
partly because we cannot agree on how to measure benefits often not even
costs. Where are the answers?

As economics has struggled mightily to become more scientific, it has
become even more useless. Economists fail to come to grips with real
issues. Why this parlous state of affairs? It is because specialists
become blind - they become analysts rather than synthesists. For
several centuries at least the amount of knowledge that the human race
possesses has increased by leaps and bounds, and scholars have tried to
adjust to this explosion by limiting their individual concentration to
smaller and smaller pieces of the whole in the process known as
reductionism. But the ultimate result is the reductio ad absurdum. As
one wag has put it: A jack of all trades is a person who learns less and
less about more and more until finally he knows nothing about
everything, while a specialist is a person who learns more and more
about less and less until finally he know everything about nothing. Our
specialization has given us lots of pieces but no overall pattern into
which to fit the pieces together.

What is the economic view of the world and its peoples? They say human
beings are selfish and aggressive. Nature is pure mechanism and has no
function except to be exploited. Material progress is all that matters.
Quantity of things is more important than quality of life. Efficiency is
the prime virtue. Atomistic individuals are the base of civilization,
and social community is an aberration. All persons are rational, and
rationality is defined in terms of single-minded pursuit of wealth.
Anything that can't be quantified is irrelevant.

Economists are, of course, human beings, and no human being thinking as
an individual, could possibly believe all these things. The catalogue of
economists who in their saner moments, have written about the idiocy of
one or more of these untenable tenets of economics is long and wide, but
when they retreat into their "scientific" persona, the old pattern is
repeated and strengthened.

John Maynard Keynes, in one celebrated but isolated article, condemned
the current orientation of economics in strong language indeed in his
prediction of a future golden age:

"When the accumulation of wealth is no longer of high social importance,
there will be great changes in the code of morals. We shall be able to
rid ourselves of many of the pseudo-moral principles which have
hag-ridden us for two hundred years, by which we have exalted some of
the most distasteful of human qualities into the highest virtues ...
love of money as a possession will be recognized for what it is, a
somewhat disgusting morbidity, one of those semi-criminal,
semi-pathological propensities which one hands over with a shudder to
the specialists in mental disease."

That quotation brings out the most important and damaging point of all.
Which is that among the most basic premises of economics are a fair
number of value judgments that economists present as if they were facts.
Economists present themselves as unbiased - as pure scientists
completely shorn of prejudgments, ruled only by reality, not opinion.
They assume that the highest goals of human existence are fundamentally
economic, that GDP is the most significant measure of human progress and
human happiness. Is that a fact? Or is it merely a fancy? How has it
been proven? No economist has attempted to prove it. It is part of the
folklore of the human race, and like much folklore it is not devoid of
original significance.

When human beings are on the teetering edge of death from starvation, it
can readily be seen that food is one of the driving forces of existence.
The economic activities associated with farming (or gathering) were
paramount in the life of earlier communities. But even at that level the
life of the community included a great amount of non-economic activity:
the togetherness of the family, the rituals and festivities, the social
order. Never was food the sole driving force. And as those most primal
physical needs for food, clothing, and shelter were met, the "higher
needs", to use Maslow's phrase, became more prominent: health,
education, and security; friendship, affection and belonging; esteem and
self-respect; self-actualization.

The sad actuality is that, without proof or even examination, economists
have hammered at their primal myth so long and so effectively that
almost everyone accepts it as Gospel Truth. We have all been
brainwashed, and our behavior has been subverted into chasing false
gods. Even economists are tricked by their own propaganda. Wealth equals
happiness; we must get more of it.

How economists have succeeded in perpetrating this fraud on the world's
people is hard to understand. It is particularly strange because it is
such nonsense. The function of economics is to satisfy people's wants.
That seems legitimate. What is it then that people want? Is it important
to you that your country have a higher GDP per capita than Japan?

Economists say that wants are "given", and then go on to assume that
those wants are predominantly for economic goods. Psychologists, who are
supposed to be the specialists in understanding wants, say no such
thing. One would hardly expect that Freud would be concerned with
economics; he certainly wasn't. Henry Murray, an expert whose inventory
of human wants turns up in many psychology text books lists 20 different
categories of wants from achievement to understanding, not one of which
is economic. Achievement sounds as if it might be economic, but Murray
illustrates it by such activities as climbing mountains and the will to

One might also think that if one wanted to discover what people want one
could ask them. Interestingly enough, economists who mention this
possibility usually dismiss it as unscientific. People don't know what
they want; only economists do. But when individuals are asked, they
agree with the psychologists (or vice versa). Public opinion polls again
and again put non-economic desires at the top of people's list of
desires. One startling Harris Poll taken in 1978 found that 76 percent
of the respondents preferred "learning to get our pleasures out of
nonmaterial experience" as important compared with 17 percent who voted
for "satisfying our needs for more goods and service." (Current Opinion,

Similar results have been found by poll-takers over the decades. The
statement, "Americans would be better off if they lived more simply"
elicited agreement from a surprising 83 percent of those queried in an
ABC News-Harris Survey (1980). A 1987 poll asked, "what does the term
rich life remind you of?" The highest answers were: health, 30%; happy
family life, 20%; spiritual contentment, 19%; financial wealth, 9%.
Examples can be extended ad nauseam. There are many things that people
desire more than wealth.

Who is right: the economists or the people? It should be said in partial
defence of economists that in spite of the fact that poll respondents
voice their strong support of non-economic goals, the actions of those
same people often belie their words. Yet this fact may itself be
evidence of the effectiveness of the economists in urging people to act
in a materialistic way whether they want to or not. The self-seeking
that Adam Smith attributes to individuals may well become a
self-fulfilling prophecy. The individual feels that "this is the way I
am supposed to act in order not to be a misfit". What actions show may
therefore be conformity rather than inner desire.

One significant approach to a solution is a change in the way we think.
Adam Smith was a thinker who had some significant message for his own
day. But that day is two hundred years out of date. Now his gospel is
deadly poison for our own time. We must acknowledge that we have sold
ourselves a bill of goods in emphasizing the importance of economics,
asserting its purely scientific basis, and touting its medicine as a
cure for our ills. We need to recognize that happiness is more
satisfying than pleasure, relationships are more important than goods,
the environment takes precedence over gadgets, nature is our precious
habitat, holism is the science of the future, altruism can be more
gratifying than plunder, cooperation brings more rewards than
competition and peace (both inner and outer). This is the state
devoutly to be wished.

Walter Haines is Emeritus Professor of Economies at New York University.
His original paper was presented before the Society for Human Economy,
at Drew University. The complete and unannotated version of the paper
appeared in Human Economy (The Human Economy Center, P.O. Box 28, West
Swanzey, New Hampshire, USA).

This article was published in New Renaissance magazine Vol.5, No.3


Global Authoritarian Regimes
by Ignacio Ramonet

A look at the political and social influence of large corporations.

So-called "Totalitarian Regimes" were those regimes consisting of only
one political party, which allowed no organized opposition, which
subordinated the rights of the individual to the cause of the State, and
in which political power sovereignly guided all the activities of the
dominated society.

After these political systems, is following, at this end of the century,
another kind of totalitarianism, that of global authoritarian regimes.
Resting on the dogmas of globalisation and with it as the only
consideration, they do not allow any other political-economic system,
subordinating the social rights of the citizen to the cause of
competition and abandoning to the financial markets the complete control
of all the activities of the dominated society.

In our direction-less societies no one is ignorant of the strength of
this new totalitarianism. According to a recent opinion poll in France,
64% of the people questioned believe that "it is the financial markets
which have the most power today". After the agricultural economy which
prevailed during thousands of years, after the industrial economy which
marked the 19th and 20th centuries, we have entered into the era of the
global financial economy.

Globalization has killed the national market, which was one of the
nation state's foundations of power. In annulling it, globalization has
rendered largely obsolete national capitalism and diminished the role of
public agencies. States no longer have the capacity to confront the
market. The volume of central bank reserves is ridiculously weak against
the attack of speculators. States no longer dispose of the means to
brake the formidable flow of capital nor to oppose the actions of
financial markets which are against their interests and the interests of
their citizens. The governed bend to the general requirements of the
economic politics which define world organizations like the IMF, World
Bank, or the OEDC. In Europe the celebrated criteria of convergence
established by the Maastricht treaty (budget deficit, public debt
reduction, and contained inflation) exercise a true dictatorship on
state politics rendering fragile the base of democracy and aggravating
social suffering.

If our so-called leaders affirm that their belief is in political
autonomy, ie "our hands and feet are not tied in a world which is
imposed on us", then if certain politicians declare like this their will
of resistance looks like a bluff because they immediately add in the
disguise of a constant: "the international situation is characterised by
the free movement of capital and products, which is called
globalization." And they demand, with insistence, "to make an effort to
adapt" to this situation. Now, under such circumstances, what is
adaptation? It is simply admitting the supremacy of the markets and
impotence of the politicians. Such is the logic of these global
authoritarian regimes. During the last two decades the those in politic
control have favoured policies such as monetarism, deregulation,
commercial free exchange, the free flow of capital and massive
privatisations. Thus capital decisions (in the manner of investment,
employment, health, education, culture, environmental protection) have
moved from the public sphere to the private sphere. It is why, at the
present time, that of the first 200 economies of the world, more than
half are not countries but enterprises.

The phenomenon of multi-nationalising of the economy has developed in a
spectacular manner. In the 1970s the number of multinational
corporations was only a few hundred. Now they exceed more than 40,000.
If one considers the global turnover of the 200 principal enterprises on
the planet, this amount represents more than a quarter of the world
economy and for all that, these 200 firms employ only 18.8 million
salaried persons; less than 0.75% of planetary manpower. The turnover of
General Motors is greater than the GNP of Denmark, that of Ford is
larger than the GNP of South Africa, that of Toyota is more than the GNP
of Norway. Here, we are in the domain of the real economy, that which
produces and exchanges concrete goods and services. These figures do not
include certain financial economies, such as principal American and
Japanese pension funds, which dominate the financial market. Their
volume is perhaps 50 times greater than the real economy. These funds
along with the income of the large corporations, makes governmental
influence on economic policy almost negligible.

More and more countries, which have massively sold their public
enterprises to the private sector and de-regulated their markets, have
become the property of big multinational groups. These dominate entire
sectors in the economy; they use local governments to exercise pressure
at the heart of international forums and obtain the most favourable
political decisions in their search for global domination.

These phenomena of economic globalization and of concentration of
capital, in the South as in the North, break social cohesion. They
aggravate, everywhere, economic inequalities which increase in relation
to the augmentation of the markets' supremacy. Thus the obligation of
revolt, the right of protest, become the citizens' imperatives for
refusing these unacceptable global authoritarian regimes. Is it not time
to demand the installation, on a planetary scale, of a new social

Ignacio Ramonet is Editorial Director and President of Le Monde
This article was published in New Renaissance magazine Vol.7 No.2.
Translation Gary Levinson.


Some Features of Prout's Economic System - A Brief Look
by P.R. Sarkar

The Progressive Utilization Theory (PROUT) is the basis for an economic
system which is an alternative to both capitalism and communism. PROUT
was conceived by P.R. Sarkar in 1959 who in the article below outlines
some of the basic features of a decentralised, cooperative economic
system built upon the principles of PROUT.

Guaranteed Minimum Requirements and Purchasing Power:

PROUT stands to guarantee the minimum requirements of life, that is,
food, clothing, accommodation, medical treatment and education, to each
and every person. After the minimum requirements have been guaranteed,
the surplus wealth is to be distributed amongst people with special
qualities and skills, such as physicians, engineers, scientists, etc,
because these people play a crucial role in the collective development
of society. The quantum of these minimum requirements should be
progressively increased so that the standard of living of ordinary
people is ever increasing also. The concept of equal distribution is a
utopian idea, a clever slogan to deceive simple, unwary people. PROUT
rejects this concept and advocates the rational distribution of economic
wealth. Such a system will provide incentives to increase production. To
effectively implement such an approach, PROUT advocates progressively
increasing the purchasing power of each individual. In fact, the
increase in the purchasing power of each individual is the controlling
factor in a Proutistic economy. Because the purchasing capacity of the
people has been ignored in many undeveloped, developing and developed
countries of the world, economic systems are breaking down and heading
towards a crisis. To increase the purchasing power, the production of
essential commodities - not the production of luxury goods - for
consumption by the ordinary people must first be maximized. This will
restore parity between production and consumption and will ensure that
the economic needs of the people are met.

The Co-operative System:

According to PROUT the co-operative system is the best system as far as
the production and distribution of commodities are concerned.
Co-operatives, run by moralists, are the only safeguard against
capitalistic and other types of exploitation. Agents or intermediaries
will have no scope to interfere in the economy in the co-operative
system. The main reason for the failure of the co-operative system in
different countries of the world is rampant immorality which has been
perpetrated by capitalist exploiters so that they can maintain their
economic exploitation.

A co-operative usually develops out of the collective labour and
intellect of a community who live within the same economic structure,
who have the same common needs and who have a ready market for the goods
produced on a co-operative basis. If these three factors are not
present, a co-operative cannot be developed. Properly managed, the
co-operative system will be free from the defects of only individual
ownership, and through scientific methods it will be possible to
increase the quantum of production. The success of co-operative
enterprises depends on three factors - morality, strong administration
and the whole-hearted acceptance of the co-operative system by the
people. Co-operative enterprises become successful in proportion to the
degree that co-ordination between these three factors is achieved. To
encourage people to form co-operatives successful co-operative models
should be established and people should be educated about the benefits
of the co-operative system. The latest technology should be used in the
co-operative system, both in production and distribution. Appropriate
modernization will lead to increased production.

In the co-operative system, managers should be elected from amongst
those who have shares in the co-operative. The members of a co-operative
can get dividends from the co-operative in two ways: according to the
amount of capital input they have put into to the co-op; and/or
according to the amount of their productive, manual or intellectual
labour. To pay this dividend, the total production should be divided on
a 50-50 basis - that is, 50% of the fruits of produce should be spent on
wages and 50% as a return on capital input. Developmental plans should
be adopted to bring about equal development in all regions instead of
just a particular region, and local wealth and other resources and
potentialities should be utilized in this developmental plan. Thus,
local people should get first preference in participating in the
development of cooperative enterprises.

Industrial Development:

PROUT has divided the industrial system of production into three
categories: key industries managed by the immediate or regional
government; co-operatively managed medium scale industries; and small
scale privately owned industries. This system will not create any
confusion or duplication between the government and private enterprise.
An important aim of PROUT is to reduce the excessive pressure on
agriculture presently occurring in many undeveloped and developing
countries of the world. Not more than 40% of the people should be
employed in agriculture under any circumstances. In villages and small
towns a large number of agro- and agrico-industries should be
established. In addition, agriculture should be given the same status as
industry so that agricultural workers can realise the real value of
their labour. PROUT's wages policy advocates that wages need not only be
received in the form of money. Wages may also be received in the form of
essential goods and services. PROUT also supports maximum modernization
in industry and agriculture. This can be achieved by introducing the
most appropriate and scientific technology. Yet modernization and
rationalization should not lead to increased unemployment. While there
should always be an effort to maintain 100% employment, this is not
possible in the capitalist systems. However, in PROUT's collective
economic system full employment will be maintained by progressively
reducing working hours as the introduction of appropriate technology
increases production.

Decentralisation and socio-economic units:

In order to implement the economic ideas outlined above, PROUT advocates
a new and unique approach to decentralisation. It recommends the
formation of socio-economic groups or units throughout the world. These
socio-economic groups should be formed on the basis of factors like
common economic problems, uniform economic resources and potentialities,
ethnic similarities, common geographical features, and the sentimental
legacy of the people, which arises out of common socio-cultural ties,
like language, cultural traits, etc. Each socio-economic group should be
free to chalk out its own economic plan and the methods of its
implementation. Within each socio-economic group/unit there should also
be decentralised planning which PROUT calls block-level planning.

A block is the lowest level planning authority in PROUT's socio-economic
system. In PROUT's system one political unit, like a state or a
province, is likely to contain a number of socio-economic regions.
These units should be guaranteed the full freedom to achieve economic
self-sufficiency through the implementation of their own economic
planning and policies. If these socio-economic groups start a full scale
program to achieve all-round socio-cultural and economic emancipation,
there will be a widespread socio-economic awakening in that part of the
world. All people, regardless of whether they are rich or poor, old or
young, educated or illiterate, inspired by a common anti-exploitation
sentiment, will start a powerful movement for socio-economic liberation.

If those living within one socio-economic unit merge their individual
socio-economic interests into the collective socio-economic interests,
the outflow of economic wealth from any region will be stopped and
exploitation will be completely rooted out. In PROUT's system the right
of employment for the local people will be fully guaranteed, and the
employment of local people will take precedence over non-local people.
Where there are no opportunities for proper economic development,
surplus labour develops. In fact, in all undeveloped economic regions
surplus labour occurs, and when this surplus labour migrates to other
regions, the surplus labour area remains undeveloped forever. Wherever
there are surplus labour areas, provision should be made to employ the
local labour immediately. While providing employment to local people,
the local sentiment should also be taken into consideration. Maximum
agro- and agrico-industries should be established on the basis of the
socio-economic potential of the region. Also, various other types of
industries should be established on the basis of the collective needs of
the region.

This approach will create enormous opportunities for new employment.
Through such an employment policy, increasing the standard of living of
the local people will be possible. The modernization of industry and
agriculture can be readily introduced in a decentralised socio-economic
system and the goods that are produced can be easily marketed. If a
socio-economic unit develops its economic potential, per capita income
disparities in different regions will be reduced and the economic
position of undeveloped regions will be raised to that of developed
regions. Economic prosperity can be enjoyed by each and every person.
When every region becomes economically self-sufficient, the whole
country will rapidly achieve economic self-sufficiency.

Another unique feature of PROUT's decentralised economic system is its
guiding principles of planning. According to PROUT, effective economic
planning should be based on four fundamental factors: productivity, cost
of production, purchasing power and collective necessities. Other
related factors are natural resources, geographical features, climate,
river systems, transportation, industrial potentialities, cultural
heritage and social conditions.

Trade and Commerce:

PROUT also has its own unique features in commerce, taxation and
banking. The distribution of essential commodities should be done
entirely through consumer co-operatives, not through the government,
businessmen or different levels of "middle men", thus leaving no scope
for manipulation by profiteers. Essential commodities should be entirely
tax free except for some special circumstances. Income tax should be
abolished, and instead taxes should be levied at the starting point of
production. Wealth ceiling should be imposed. The banking system should
also be managed by co-operatives, and the central or federal government
bank should be controlled by the immediate government or the local
government. In the productive economy of PROUT, which aims above all
else to increase the purchasing power of the people, it will be easy to
control price levels through the co-operative system and
decentralisation at all levels.

1981, Calcutta.
P.R. Sarkar (1921-1990) founded Renaissance Universal in 1958.
This article is an excerpt from his book PROUT in a Nutshell.
This article was published in New Renaissance, Volume 9, No. 1, issue



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