Radically Democratic Business and Finance by@deranian

Radically Democratic Business and Finance

Understanding that the crises we are facing stem from largely built-in features of the socioeconomic structure we live in, we can begin to consider solutions. As implied, these will require some sort of larger scale coordination, and at least an acknowledgement that inequality is a problem, and that there are common resources (like air and water) that should be managed for the common good, as opposed to for profit. Any reasonable solution to these problems should seek to maintain the benefits of the current system (individual freedom and innovation) while addressing the systemic problems it creates. A classic solution to these issues is the progressive income tax, but newer solutions might include platform cooperativism, democratic corporate structures (one person, one vote instead of one share, one vote), and democratically-managed investment funds and financial institutions.
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Deranian

Coder and writer.



"We live at a time when the dominant culture, including the media, elected officials, and corporate advertisers, herald individualism. The stories we hear in school focus on the heroes and heroines of history, rarely on the collective power of organized groups. Although it is true that good stories rely on strong characters, promoting individuals helps those in power to play down the stories of how mass movements, collective struggle, and community-based campaigns have moved resources, shifted power, and improved the lives of many people."

Joan Minieri and Paul Getsos, "Tools for Radical Democracy"


"Are you satisfied with the life you're living?" Bob Marley, "Exodus"


The dominant ideology in the West, particularly in the United States, is the notion that optimal results come when individuals and institutions act independently, coordinated only, or primarily through the market. In other words, people can generally do whatever they want as long as they have enough money and their behavior is within the constraints of the law.


This obviously has tremendous benefits, especially significant individual freedom (at least to those with means) and innovation, but has two major drawbacks. The first is widening inequality. This is a fundamental feature of the system, based on network effects and the power law. To put it simply, in a typical market context, the more one has, the more they are able to obtain, whether it's cash, credit, market share, education, influence, etc. It is also called the Matthew effect, and it is a positive feedback loop.


According to the National Bureau of Economic Research, the wealthiest 5% of Americans own two-thirds of the wealth. And in 2014, The Guardian reported that "the share of wealth owned by the top 0.1% is almost the same as the bottom 90%". It has undoubtedly gotten worse since then, because, again, left unchecked, this is an inherent feature of the status quo.


Moreover, the ones who benefit the most from this ideology (who also tend to be the most powerful) are also the most likely to promote it as the best possible option, even when it is not for the majority of people. They will celebrate the Horatio Alger types: those individuals who have ascended from significant poverty to stratospheric success, as "proof" that "anyone can do it", even though those individuals, who are few and far between, also tend to be extraordinarily talented and/or lucky.


Ordinary people who are unable to transcend their circumstances and "make it" may, by contrast, develop extreme self-loathing or resentment. Even worse, they will be blamed for succumbing to their own circumstances. So, while some lucky few may be able to soar to the top through sheer talent and grit, I would argue that a healthier system would have fewer extremes in the first place, so that more people have the opportunity to live a stable, abundant life in a safe, thriving community, as opposed to a mass delusional and obsessive grasping for celebrity or billionaire status. In any case, the adoration of strangers is likely overrated, compared to community and intimacy.


The second is externalities. As I wrote in a previous article, when individuals and organizations (including companies) act primarily in their own interest, they will tend to engage in behavior that is beneficial to them, but harmful to others. A simple example is litter: if I don't feel like properly disposing of, say, my candy wrapper, I may just drop it on the floor. I have then externalized the problem of what to do with my trash. Either someone else will pick it up, or it will find its way into some natural ecosystem and pollute it. Either way, it's "not my problem" (or so I think). Companies do the same sort of thing, at a much larger scale, either deliberately or through negligence.


This leads, unfortunately, to a tragedy of the commons. When everyone is "doing their own thing", using resources for their own individual needs, without any sort of coordination, they will inevitably tend to deplete limited, shared resources - the "commons".


The concept was first explored in 1833 by economist William Forster Lloyd, who studied the effects of cattle grazing in public grasslands in Great Britain and Ireland (Wikipedia). A dramatic example occurred in London in 1952, when residents, faced with unusually cold weather, burned coal to keep warm. The result was a massive smog that rendered the city pitch black, with a toxic atmosphere, for days. Thousands of people died in what came to be called the "Great Smog of London", and many others likely developed long-term health problems. In this case, the disaster consisted of many people each acting on their own to address their individual concerns (the cold) at the expense of the common good (a clean, breathable atmosphere).


The parallels to climate change (an overly weak term for impending ecological disaster) are, perhaps, too obvious to even mention, other than to say that, like inequality, it is an emergent feature of a system where everyone is encouraged to act independently without any coordination. That may be a great model for, say, producing creative work. It is not a great model for managing critical resources like food, water, and air. We are, at this moment, in danger of going from one extreme to the other, from freewheeling independence to centralized (and possibly, very dangerously, politicized) rationing.


Understanding that the crises we are facing stem from largely built-in features of the socioeconomic structure we live in, we can begin to consider solutions. As implied, these will require some sort of large-scale coordination, and at least an acknowledgment that inequality is a problem, and that there are common resources (like air and water) that should be managed for the common good, as opposed to for profit.


Any reasonable solution to these problems should seek to maintain the benefits of the current system (individual freedom and innovation) while addressing the systemic problems it creates. One such solution is the progressive income tax: poor people pay less, and rich people pay more. This approach has been absolutely demonized in the United States, but if we look at it not from the perspective of penalizing wealth, but as a corrective to the built-in power law dynamics that tend to widen wealth inequality over time, the rich will still be rich, and the poor will still be poor, but the gulf between them would at least remain manageable, and people of fewer means will have far more room to breathe, and even thrive. Most importantly, it may help stabilize what is now an unstable political system. And of course, regulations would ideally be designed to rein in the most toxic and abusive behaviors that destroy the commons, without inhibiting innovation.


But government intervention tends to create a cat-and-mouse dynamic where companies and individuals try to get away with whatever they can within the system. And the wealthiest companies and individuals have spent vast sums to influence both the government, to pass laws that favor them (another serious problem), and the public, who might otherwise demand significant positive change. So, critical legislation simply does not get passed, and the problems continue to worsen. Not surprisingly, it has also eroded public faith in the government, now to a critical point.


As Douglas Rushkoff points out, "we are running a 21st-century digital economy on a 13th Century printing-press era operating system." The whole venture capital model almost demands surveillance capitalism, since a company like Facebook, for example, under vast pressure from its shareholders, has to grow, and grow, and grow. And when it has no logical place to go, it has to grow some more and begins to mutate into this all-encompassing thing that has disproportionate control over everyone's lives (I highly recommend "Barbarians at the Gate" as an entertaining look at what happens when an otherwise stable company is forced to keep growing).


The underlying financial and ownership model has to change, and platform cooperativism, a term coined by Trebor Scholz, would be a great place to start. Think Uber owned by the drivers (instead of private equity), and you have Eva, Modo, or RideFair. Airbnb becomes FairBnB, Zoom becomes meet.coop and Spotify becomes Resonate.


As Resonate points out on their website, they are "transforming an industry that's currently based on exclusivity and inequity into one based on openness, transparency, and collaboration", and perhaps more importantly, "[v]alue is not just measured in the public success or monetary worth. Art has a value to society and humanity that cannot be quantified and commodified."


That may be it, in a nutshell: exploring other types of value beyond revenue, or market share, or whether the stock price has gone up or not. Freedom, creativity, agency, sustainability, stability, community: human values that most of us would want to connect with.


Another approach might be to change corporate governance from "one share, one vote" (a.k.a. "one dollar, one vote") to "one person, one vote". That means that whether you own one or one million shares in a company, you would get one vote whenever a decision is put to the shareholders. Cooperative or democratically-managed companies would have a radically different approach to doing business. Volkswagen might not have engaged in emissions fraud, Apple might not have deliberately slowed down old phones, Wells Fargo might not have created millions of fake accounts, John Deere might not have locked farmers out of repairing their tractors, Boeing might not have sent defective airplanes into the air, and Facebook might not have... I'm not sure where to even start, there, because as democracies, their owners, meaning all their stakeholders (i.e. us), not just their largest shareholders, would never have allowed it. Would farmers lock themselves out of their own tractors? Externalities always affect someone else. When the owners are "We, the People", there is no "someone else" - it's just us. This isn't a question of "bad apples": the problem is clearly systemic.


What about a cooperative, democratic financial institution, one that would allow anyone to vote, directly or indirectly, on how to invest, say, $100 million? Or $100 billion? There are some legal obstacles to this model, but the difference between this and our current system of isolated retail investors, or even crowdfunding, is that the financial cooperative would, as a shareholder, even under the non-democratic status quo, have much more say in decisions made by the corporations whose stock it owned, helping to democratize the private sector that way. How might a democratically-managed fund influence how, say, Exxon, McDonald’s, CoreCivic (private prison) or Lockheed Martin (war) did business?


Ultimately, this is about a choice and a new ideal. As George Monbiot puts it in The Guardian,


It’s democracy v plutocracy – this is the endgame for our planet." The new ideal is more participation, more inclusive decision-making, healthier decisions, and a more integrated system that takes into account the good of the whole: the good of society, the good of humanity, and the good of the deteriorating planetary life-support systems that we all depend on.


Presented here are some ideas that could help us collectively pivot into a saner direction. I don't know if they will be enough. But humanity and the planet need some creative thinking right now.



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