• “We need to think deeply about what economic development is and who it is for; and, engage the larger society in that conversation.”

    Dr. David T. Barnard
    President and Vice-Chancellor
    University of Manitoba

  • “Rising income inequality undercuts the trust that is essential for the market system to work.”

    Art DeFehr
    President and CEO, Palliser Furniture.

  • “Investing in people in the new economy is now not just morally sound, but economically rational”

    Alan Freeman
    Cultural Economist

  • “Organizations and societies in which the top few appropriate most of the value are like inverted pyramids – inherently unstable”

    Dr. Hari Bapuji
    Associate Professor, University of Manitoba

  • “The present crisis has overturned many accepted truths: that poverty matters but inequality doesn't is one of the more important.”

    Radhika Desai
    Professor, Department of Political Studies, University of Manitoba

  • “The income gap between rich and poor, between skilled and unskilled workers, has been rising in both developed and less developed countries for a number of years. The trend is disturbing and we must find a way to turn this trend around.”

    Michael Benarroch
    Dean, I.H. Asper School of Business, University of Manitoba

Friday, April 27, 2012

Capitalist Inequalities and the Need for Economic Democracy

By Costas Panayotakis

One of the basic claims of mainstream economic theory is that capitalist markets lead to an efficient use of scarce resources. This updated version of Adam Smith‘s invisible hand thesis does not square with the reality all around us. Instead of using scarce resources in accordance with human welfare and the ecological integrity of the planet, capitalism has plunged us into serious economic, social and ecological crises that inflict massive suffering on billions of people around the globe.

These failures of our economic system are directly related to the class inequalities at its basis. The fact that capitalist elites receive and control the economic surplus produced has far-reaching implications. To begin with, it accounts for the great economic inequalities that have been growing in recent decades. In a world where the wealth of the world‘s top capitalists is many times larger than what it would take to eliminate hunger and extreme poverty in the world, it is clear that capitalism cannot and will not allocate scarce resources to those who need them the most.

This injustice is, however, not the only negative effect of capitalist inequalities. In addition to leading to vastly different life chances, the control of the surplus by capitalist elites has pernicious effects on our political system, our culture and the planet we live on. This is because capitalist consumption and investment are not the only ways that the surplus is currently used. Part of the surplus is ‘invested’ in the political system, securing political outcomes that increase economic inequality, while also debasing the claim of our political system to be democratic and breeding cynicism. This also means, however, that any progressive gains within capitalism are always precarious since, as the move from the post-war golden age of capitalism to the neoliberal model, any attempts to institute a capitalism with a human face are likely to be reversed the moment the balance of power shifts in favor of capital.

Another part of the capitalist surplus has historically fueled commercialism and the construction of a consumerist culture that fails to satisfy. This culture distracts people from what, all psychological studies suggest, makes people happy, namely the quality of their human relationships. By devoting inordinate amounts of resources to the project of defining the good life in terms of the possession of coveted commodities, the consumerist culture capital creates encourages people to work long hours and get into debt, thus also exposing people to the risk of growing stress and impoverished human relationships.

In addition to exacting human and social costs, consumerism is also one of the reasons for capitalism’s ecological unsustainability. Another way capitalist inequalities encourage environmental degradation is by making it possible for the economically strong to externalize the environmental cost of their economic activities on the poorest and most vulnerable segments of the world’s population.

All in all, capitalist inequalities are at the heart of some of the major challenges facing humanity in the new millennium. In addition, as social epidemiologists and scholars, such as Richard Wilkinson, have shown, inequality is a major contributing factor to a variety of social problems from health and violence to racism, sexism and the declining quality of social life. Given all this, the recent rise of movements around the world that are willing to take on capitalist inequalities is an important and welcome development. But their ability to address the problems capitalism creates will depend on their ability to advance the project of economic democracy by ensuring that all people have an equal say over the operation of the economic system and the priorities it serves.

For managers the project of economic democracy would imply an opportunity to use their important skills for the good of humanity and the planet rather than to simply serve the pursuit of profit and capital accumulation. In fact, the challenges facing us today require the democratization and generalization of managers’ skills. If the solution to these challenges calls for economic democracy and the active participation of all people in the economic decisions that shape their fate, this solution will not be forthcoming until all people gain the knowledge, skills, and self-confidence required to fully participate in the conversation of how economic and economically-relevant institutions, such as workplaces, the state, family, etc, should be organized and run.