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Lecture on Distributive Economy (Christian Council for monetary Justice, House of Commons, London, july 12, 1996)
Our group, La Grande Releve, was formed just after the so-called Great Depression at the beginning of the 1930s. The collapse of much of the world economy was a disaster, which meant that vast heaps of goods could not be sold because growing masses of unemployed had no money to buy them.
Jacques Duboin described it as «poverty in abundance» when in 1934 he founded the association that he called «Le Droit au travail et au Progres social», that could be translated as : «the right to work and to share progress», and a monthly newspaper «La Grande Releve des Hommes par la Science», that could be onlyapproximately translated as : «The great displacement of human labour by science».
It was also an implicit protest against social injustice.
As Duboin noted, mankind has always strived to reduce the effort needed for its subsistence : initially the first tools were invented and then continuously perfected. Quite slow at the beginning, the rate of progress has become exponential in the last decades, so that, at leastin the developed countries, man has at his disposal innumerable «slaves» be they mechanical, electric, electronic, robotic or computerised in nature.
We know how to change and even command nature, how to make it produce almost everything we need, as we want it and when we want it. This great displacement of human labour by science and technology, now prevails at all stages of the production processes. It is leading to a fundamental mutation in human attitudes, most certainly the greatest and fastest cultural evolution of all times. (Neolithic was a great mutation, also due to a change in techniques of production, but it lasted centuries and centuries - our mutation has existed for but a few decades.)
So fast is this mutation in human history that people have not yet realized its major consequences. It is still seen as a problem which will correct itself. This means that people believe that, with a few adjustments, things will come back as much they were before.
No, they will not. The problems themselves have changed.
The big problems of the past were those of production, to avoid scarcity, they are now those of distribution of a potentially abundant production. Obsessed with scarcity, economists have given little thought to abundance : now it is essential that they do so. Since our world is now able to produce an enormous wealth, which has never decreased, it has become possible to produce enough for everyone and with less and less human labour.
Why deprive so many people? And since this present wealth is actually due to the efforts of all preceding generations, does not justice consist in accepting that we are all co-heirs and have right to our share of the inheritance left by our ancestors?
This is our conviction. We then searched carefully to find ways in which this right can be guaranteed to any individual born into this rich world, knowing that there is no right without duty and that sharing the wealth implies sharing the responsibilities and there maining tasks.
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The fact we ascertained is the prime cause of so many social disasters, now commonly observed everywhere, such as poverty, unemployment, exclusion, drugs and so on. This cause lies in the fact any economic undertaking is now driven by a financial profit motive which operates like a distorting filter to obscure the whole picture.
In the past, when the labour of all was needed, capitalist management, ruling the division of labour, ensured the sharing of tasks as well as the sharing of production. A quasi-equilibrium could thus be expected between supply and demand.
Nowadays, as the production of goods, and even of services, is largely done by computerized machines, capitalist management ensures only the growth of profits. The quest of money has progressively displaced human welfare, inverted the roles, so that now the economy is no longer serving people, but money now enslaves people! This can be seen at any level, in any kind of activity : Examples will be given later on.
Now, is it possible to correct the evil consequences of our economic system? May we hope, for example, that some decisions could be taken to boost an economic growth and share out its benefits among the underprivileged? Will it be thus possible to lower the unemployment rate and to bring back the excluded into society?
Clearly, the answer is no!!!
Because, and I’ll show it to be the case, capitalist logic prescribes unemployment, it is opposed to a growth which, if it were to reduce unemployment, would also reduce the financial profits of the companies that own and rule the world.
The conclusion is that the large-scale change that humanity is now undergoing, in every field, implies also a drastic change that must be brought to our economic system. The latter can be reoriented towards human development only if money is put back in its right place. We need an economy in which money is no more the end but is the means to manage goods and services and distribute them equitably between all mankind.
We gave to this economic system which is the basis of democracy in economy, the name of distributive economy.
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3. Duel between finances and needs
One month ago public opinion in France was bowled over by the simultaneous publication of two events. The first was the announcement of mass layoffs in a well known company of household appliances in Normandy. For this region, it was a disaster, thousands of homes lost their means of subsistence. The second news was a sharp rise (11.6%) of this company on the stock exchange.
The misfortune of the wage earners was good fortune for the shareholders. Such a thing may be observed everyday. And, inversely, when an increase of job creation (even insecure and poorly paid ) was announced in the States, this event was coupled with a collapse of the Dow Jones : Wall Street gets panicky when employment starts to rise.
Capitalist logic leads to the following fact : the interest of the financial world is opposed to the interest of workers.
This can be explained. The unemployment rate in a country indeed determines, to a large extent, the social power of the people, and thus the wage level. The increase of unemployment evidently frightens the wage earners and so reduces their bargaining power. Conversely, any sign of recovery in employment pushes the wage level up. But this is not a good bargain for the financial market, not only because this is an additional cost that reduces their profits, but also because, with such a «recovery» appears the spectre of inflation that frightens them now more than anything else.
Actually, it is scarcity that permits profits to be made : only what is scarce can fetch a high price. This is true for goods as well as for money in the capitalist system. On this point, the depression during the 1930s is edifying : unemployment was reduced by World War II, which transformed the jobless into soldiers and killed more than thirty millions of people. Since it was necessary, afterward, to rebuild what had been destroyed, the so-called crisis was temporarily hidden during thirty post-war years, the «30 Glorieuses» (thirty glorious years) in France.
But this brought a terrific inflation, of which financiers were the victims.They learnt the lesson, and now insist on money being scarce and prices being steady sothat their markets might be safe. They will prevent any growth, estimated at a minimumof 4% each year, which might stop unemployment. While the political decision makers may seek growth, financiers will ever be the winners.
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4. The capitalist logic
Another aspect of the capitalist logic is the merging of companies, which reinforces their strength. While the smallest, as «not competitive», disappear, the «strongest» expand at the world level. The multinationals benefited from the new technologies, in telecommunications in particular, to extend their strength. Globalisation is for them the opportunity to escape any control and act only for their own interests : to produce where wages are the lowest, to transport at lowest costs under flags of convenience, to sell where the prices may be the highest, to set their head office in a tax haven to be exempted from taxes that are fixed by democracies, to locate their secretariat and administrative tasks in countries of the Third world, or by work at home.
Only one thought is an absolute priority : capital must bring profit to its owners.
The result is that investors, whose strength is built on these transnationals who work for them, have now more power than elected policy makers who are supposed to decide on the future of nations. Investors settle their own policy, behind closed doors,in secret colloquiums like the one which is held each year in Davos, then they force it on the rest of the world, through the IMF (International Monetary Fund) and the World Bank, and through pressures on governments, such as those that lead to certain provisions of the treaty of Maastricht implying cuts in welfare expenditures.
In such an iron-clad system, which is opposed to any general social growth and where downsizing means profit, what can the political leaders do, even in democratic countries? Most of them try their best but never imagine reforms OUTside the fixed accounting limits, which are described as «external constraints», as if they were inescapable laws of nature.
Within these limits, for decades, within the framework of a redistribution, everything has been tried out. The usual policy is, anyway, to take back, as taxes, the money to pay for welfare, that is to help those who, without jobs, are reduced to destitution.
But however much imagination is deployed to invent new forms for these measures, redistribution is not the solution. First because nobody can be satisfied. Neither those who feel injured because they have to give back what they rightfully earned, nor those jobless who are prevented from using their talent and who feel treated as if they were dependent nonentities.
Moreover, this redistribution is bound to fail : it cannot prevent the inreasingly large-scale displacement of human labour by technology which inexorably reduces the total payroll. While production is rising, total household income is thus getting falling, whatever its distribution. How, in such conditions, could we improve?
How could we fund important researches that are more and more expensive, develop education, training, take care of an ageing population - and reduce violent crime?
We are going in the wrong direction, going backward from human progress. And the consequences of the capitalist rationale are not limited to an increasing unemployment rate that no recovery will check. Neither are they limited to delinquency and all kinds of violence. Neither to abandonment of any ethics by drug dealers. Its damages are also pernicious at the lowest scale of individual morals. Thousands of examples may be given.
In France as well as in the United kingdom and elsewhere, we have had the problem of transfusion of infected blood : rather than lose money in destroying suspect blood, managers or even physicians preferred to take the risk of transmitting a mortal illness. The «mad cow» crisis shows similar behaviour. And we all know that for a long time rich countries have sold to the Third World poor-quality and even dangerous goods which they cannot sell at home.
We who live in France have seen another example of this reasoning : years ago, we learned that asbestos could cause lung cancer. Then, a committee was created to compel public opinion to believe that the risks were not serious, but the ground for such an attitude was to protect the interests of asbestos suppliers. In short, this is the attitude of all lobbies, of which aim is to increase certain financial benefits to the detriment of general interest, even of human health.
And all this will multiply as long as we will go on believing as true the postulate on which the liberal system is based : the general interest is the sum of individual interests, «laissez faire, laissez passer», the market will ever and naturally find the best solution for all. There is now clear proof that this postulate is false.
What matters now is not to anathematise men, financiers, tradesmen, physicians, political leaders or bankers. Rather it is to show that we all are victims of a logic, which we dare not question, even when it has everywhere proved harmful, terribly harmful. We must be aware of it before it will soon be too late. But this is not easy. Because on the one hand, we are so immersed in this logic in almost all aspects of our everyday life that we are quite used to it.
And on the other hand, because all the experiences that have come out of this logic, have proved to be equally harmful at an intellectual as well as a material level. If a third way is to be found, it is clear that this is possible only if it is outside the framework of orthodox financial rationale. But how, at the same time, can we escape this wildlogic and give back the first place to human development?
In order that the quest of profit can no longer flout democratically established laws, that the wealth of a country be produced and fairly shared, finance must be subjected to political power in democratic countries. Now the tool of the financial power is money. Therefore, since this tool is where a transformation is necessary, we have to understand its failures and make the correction.
5. The inherent defect
By what mechanism has this evidently useful tool, invented about two centuries ago, now become the instrument of injustice? The answer is clear as soon as we think. I’ll explain with the help of one image and two or three numbers.
The image is that of a snowball. Make a very small snowball and just leave it go on a downhill slope. It will become bigger and bigger, gathering on the snow that covers its road. Because there are forces, in the physical constitution of snow, that allow ice molecules to bind, leave the snowball pass, and it will naturally become larger, it may well be transformed in an avalanche. Similarly for capitalist money : in the way it is conceived, it naturally accumulates. Money makes money! It is well known that banks open credits only if they are confident of repayment at interest. This right to draw money begins as soon as credit is created.
Now, the numbers; here is a more precise idea of this accumulation of money in the financialrealms. In the year 1992, the total amount of global exports was, on average, 10 billions US dollars each day. At the same time, the transactions on financial markets soared to average 900 billions of dollars. This gives an estimate of the volume of speculative trading : ninety times the volume of physical trading. In only ONE day, the financial transactions are much higher than the total reserves of the central banks of the world, which are but 693 billions of dollars. A third and more recent number : the transactions of the G-7 increased from 35% of the GDP (gross domestic product) in 1985 to 140% ten years later.
6. The distributive logic
The task is thus to abolish this pattern of accumulation, inherent in the conception of capitalist money. If man can do nothing to change the laws of nature, he must, on the contrary, be able to change the rules of his own game.
This is the aim of our proposition of a distributive economy, or economy of the needs, in which money cannot accumulate. Distributive money is strictly consumerist in nature : it is only a purchasing power, it is used just once to hand out goods and services from the producers to the consumers, it does not circulate, it cannot be invested to bear interest and is no longer anonymous.
This is the only way in which any investment can be decided taking into account other requirements than financial return on capital. The management of goods and services will be established for the benefit of the whole community, while having regard to ecological imperatives, only if instead of being submitted only to the blind forces of the market, it is established at the end of debates, in which all human, social, ecological, moral, ethical aspects, can be taken into consideration.
Actually, the aim of our propositions is to invent democracy in economy.
We have been thinking a lot over this problem, particularly because it opens prospects that are bright. We think that any person, who is born in today’s world, is entitled to the right of living in the best way that is possible, with the only limit that it does not prevent the other people and their descendants from having the same rights. It’s why in distributive economy, every one, from his birth to his death, is attributed an income.
However, we think also that any right must go together with a duty, here,the economic duty to keep things working.
Thus, a Social Income is associated with a Social Service to share the goods, as well as the tasks, between all.
This implies the creation, at various levels (local, regional, national, european, etc.), of say, Social and Economical Councils (SEC), democratically constituted and acting according to the principle of subsidiarity. Economic democracy is at last attained by granting to these Councils the power of creating money. This power is taken away from the credit banks that now use it in an arbitrary way. The money created, in the modern computerised fashion, is also used to finance the needed investments for organisations and companies, who are of course accountable for them.
In a word, in the distributive economy, all that is humanly and physically possible will be made financially possible.
Thus, the SECs will have charge of the management of both aspects of the distributive economy. To manage the social income, they have to estimate the amounts of purchasing power to be distributed periodically (each month, for example). In a broad sense, this problem consists in evaluating the production of output in a given time. The factors to take into account are consumer demand, limiting conditions, public service requirements and planned investments. The sum total of all social income, for a given period of time, is the difference between the value of estimated production output and that of the approved investments.
The second charge of the SEC is evidently linked to this. Sharing the tasks involves that the social service is effected by each and everyone throughout his active life, taking into account his aptitudes, and subject to community needs.
What we now call holding a job has to be redefined. «Work» ceases to be man’s prime occupation, over and above all other activities and defining his «social level». Other activities, once regarded as non-profitable, even impossible to measure in financial terms, but at least as useful or even essential, will then be recognized.
We think that the sharing must be made in the least compulsory way. To this purpose, and in order to stimulate individual initiative, innovation and creativity whilst taking into account the increasing complexity of the economic structures, we suggest the creation of a civic contract for each individual. These civic contracts will be periodically submitted to the SEC, openly discussed and even improved, the Councils having the means to decide, and to create and use the adapted funds.
On this basis, it is easy to imagine how society can function. Moreover, the way it functions must be open-ended, able to match new needs, to use new means of production (without tears). Briefly, it must be adapted to drive human evolution instead of impeding it.
But let the people themselves settle the things.
To conclude, here is a concise summary of the distributive economy philosophy. It is in fact the slogan of the SNCF, the French Railway System :
Progress has value only if shared by all.