What Are Alternative Economies And How Can They Contribute To The European Economy?

There is widespread belief that present systems of economic organisation are increasingly proving inadequate, and are failing to tackle income inequality and the attendant social injustices arising therefrom. In a scathing rebuke, Jack Gardner (2017) asserted that ``throughout history, there has been a ruling class, once with faces and names such as monarchies and emperors, but in the late 20th and the early 21st century, these accountable `leaders` have begun to successfully hide behind the veil of corporations and plutocratic bureaucracy.``

Sarah Robinson (2012), writing for the Huffington Post, struck an even harder tone, by declaring that ``the old economic model has utterly failed us. It has destroyed our communities, our democracy, our economic security, and the planet we live on. The old industrial-age systems state communism, fascism, free-market capitalism have all let us down hard, and growing numbers of us understand that going back there isn t an option.``

This leads to the question, ``What do we do about it?`` There is no shortage of alternative approaches to the current dispensation, in the world of economic theory and practice. One that has gained considerable attention in recent years is Economic Democracy.

ECONOMIC DEMOCRACY

Economic democracy proposes to shift decision-making authority from corporate managers and shareholders to an expanded group of stakeholders which includes, inter alia, employees, suppliers, customers, neighbours and the wider public.

The practice of Economic Democracy is traceable to 19th-century policy brainstorming that was centered around socialist and anarchist ideologies. The actual application of its principles in the modern era has achieved success, most notably by the Mondragon Corporation, located in Arrasate-Mondragon, Spain. The corporation is mostly dominated by autonomous corporations operating in four sectors finance, industry, knowledge, and retail. The firm`s managing director is chosen by means of an annual convention.

Now the biggest corporation in its region, Mondragon is renowned for the impressive level of income equity among its employees, more equitable gender roles, and high job security. In the words of Nyegosh Dube (2012), ``Spain s large Mondragon cooperative group is proof that industrial firms can function just fine without wealthy owners and shareholders and massively overpaid executives.``

Other examples of micro-level economic democracy exist in Europe. These are worker cooperatives, employee-owned firms, co-determination, and works councils.

Scott Bader, a British chemical company provides a good example of economic democracy in action. The firm is owned by a charitable trust which is owned by the workers and operated by them along democratic principles. (Dube, 2012)

Bosch, the German corporation, is another good example. As a large firm, it practices as stipulated by German law, co-determination. Additionally, it is largely foundation-owned, with its profits channeled primarily to philanthropic causes.

According to Nyegosh Dube (2012), ``companies like these, without external shareholders or private owners (or with only limited roles for them), besides being immune to takeovers, are not connected with a wealthy investor class and corporate oligarchy. They show that firms can prosper without this class, while empowering workers and serving society.``

In addition to being proposed as a stand-alone theory, Economic Democracy has been envisioned and proposed as an element of larger socioeconomic ideologies, and as a vital part of reform agendas. For example, J.W. Smith (2005) notes that as a route to attaining full &economic rights, Economic Democracy subtly engenders full political rights.

Economic Democracy has been criticised by a number of writers, notably Ludwig Von Mises (2006), who argued that the control and ownership of the means of production ought to be in the hands of private companies, and that their sustenance is derived from consumer choice, which is exercised on a daily basis throughout the marketplace. He saw that as democracy in action. In his words, ``the capitalistic social order is an economic democracy in the strictest sense of the word.``

Further analysis of Mises` theory reveals that whilst indeed democratic choice is exercised by the consumer in the marketplace, this choice is limited to voting on the value of a product - by making a purchase. Their choice does not extend to deciding how the profits will be used. Neither does it influence how the firms involved are organised or managed.

THE COLLABORATIVE COMMONS

Another exciting proposition is the resource-based, shared economy, driven by the Collaborative Commons.

This new economy is predicated on older ideologies of public access and public good which manifested in various policy decisions of the last century that tried to mitigate the inherent imbalances and inequities of capitalist structures. The 21st-century extension of those principles, powered by groundbreaking digital technologies, is expected to result in the Collaborative Commons.

We now possess the technology to access a huge amount of potential energy from hydrogen, wind, ocean currents, wave and tidal action, falling water, temperature differentials, geothermal, natural gas, electrostatic, algae, bacteria, biomass, phase transformation, thermionics, and Fresnel lenses.

Thus, the entire workforce is likely to be automated in the next 40 years, as autonomous machines and artificial intelligence perform all drudge tasks in the workplace. The result of this, as explained by David Tormsen (2015), would be that ``the capitalist structures of companies and industries will be washed away as marginal costs of producing things (and therefore profit) begins to approach zero. This will lead to the rise of the Collaborative Commons.``

A notable proponent of this new economy is Jeremy Rifkin (2014), who identified the Internet as providing the basis for an intellectual commons. He stated that Capitalism is giving birth to a progeny. It is called the sharing economy on the Collaborative Commons... The prospects for this new commons are provided by the onrush of technology... The Internet of Things is giving rise to a Third Industrial Revolution.'

He asserted that technological advancement has reached a point where, the cost of producing each additional unit if fixed costs are not counted becomes essentially zero, making the product nearly free. If that were to happen, profit, the lifeblood of capitalism, would dry up.

He sees the Internet of Things, which is expected to vastly increase the connectivity of humans and objects, as providing social commons with the high tech platform that could see it dethrone capitalism, and become the new economic paradigm.

On the evidence, Rifkin`s thesis is persuasive. Today, nearly half of all humanity are sending audio, video, and texting each other, at virtually zero marginal cost. Millions of consumers have become what Rifkin describes as `Prosumers`, following the rise of the internet. They are producing and sharing personal videos, news blogs, entertainment, and knowledge across lateral networks at almost zero marginal cost, essentially for free, evading the capitalist market, and bypassing it all together in many instances.

According to Jeremy Rifkin (2014) , We can go up on this Internet of Things now and we can take that big data flowing through the system from the devices all the way to these three Internets and any of us with our own apps and our own mobile technology will be able to use the big data and combine it with analytics to create our own algorithms just like the big guys at Google... And it won`t be rocket science because those apps will be programmed for us. &So we can create our own apps with our mobile technology, using that big data to dramatically increase our productivity, reduce our marginal cost in the production of physical things like energy and 3-D printed products. &That`s already begun.

A criticism of Rifkin`s work is that it fails to adequately address the issue of fixed costs. Network providers and other facilitators will continue to extract rents and payments from users, to be in profit. And they could extract even more than marginal cost. Rifkind`s answer to this has been the recent emergence of the Collaborative Commons, for which he used an example from the Tennessee Valley Authority`s rural electrification project, which was largely underwritten by the US federal government, who "threw its support to a distributed, collaborative, laterally scaled economic institution the cooperative... (Frischmann, B. 2014)

Thus, this ``third approach``, in Rifkin`s view, dealt with supply side issues while enabling infrastructure commons. It remains to be seen how the theory could apply seamlessly across a variety of industrial settings and circumstances.

CONCLUSION

The paper discussed two examples of alternative economies that have the potential to disrupt the European economy. Europe is especially ripe for this type of disruption, being among the most heavily penetrated regions on earth for the ongoing digital revolution, and explosion in technological possibilities, from artificial intelligence to 3-D printing. Backed by solid infrastructure, democratic institutions, and a progressive worldview, Europe could pioneer in evolving from capitalism to more sustainable and equitable socio-economic systems.

It is one thing, however, to devise new ways of doing things, and quite another galvanising the actors - governments and the private sector - to attain those objectives. But certain developments in economic theory point to the possibility of change, due to what Thomas Piketty (2014) refers to as the ``changing perception of inequality``. His core argument is that ``the return on capital is structurally greater than economic growth, leading to ever increasing inequality``.

This was a simple, persuasive argument that has severely dented the conventional view of accumulation which frowned on the redistribution of wealth on the grounds that it created disincentives to invest and `excel`. Piketty`s argument that the inequality was not meritocratic, but structural, and designed to favour the wealthy few, was easily backed by the simple mathematical calculation in his thesis. Thus, as Meyer Henning (2014) states, ``Most people are now open to the suggestion that inequality is not the fair outcome of different levels of performance but, moreover, the result of a distributive system that is fundamentally flawed and designed to favour a few people at the top.``

The extent to which this new realisation translates to a positive change in Europe remains a moot point.

BIBLIOGRAPHY

1) Gardner, J. (2017). The Failure of Capitalism. Swamp, [online] Available at: https://theswamp.media/the-failure-of-capitalism (Accessed 22 August 2020)

2) Robinson, S. (2012). Capitalism Has Failed: 5 Bold Ways to Build a New World. Huffington Post, [online] Available at: http://www.huffingtonpost.com/sara-robinson/capitalism-has-failed-5-b_b_1546120.html (Accessed 22 August 2020)

3) Tormsen, D. (2015). 10 Potential Alternatives To The Conventional Capitalist System. Listverse, [online] Available at: http://listverse.com/2015/06/28/10-potential-alternatives-to-the-conventional-capitalist-system/ (Accessed 22 August 2020)

4) Dube, N. (2012). From Neo-Liberalism To Economic Democracy - An Alternative Road For Europe, [online] Available at: https://www.socialeurope.eu/from-neo-liberalism-to-economic-democracy-an-alternative-road-for-europe (Accessed 22 August 2020)

5) Smith, J. W. &(2005). &Economic Democracy: The Political Struggle for the 21st century. Radford, VA: Institute for Economic Democracy Press, p.3

6) Mises, Ludwig, V. (2006). [1931] The Nature and Role of the Market: The Role and Rule of Consumers. &The Causes of the Economic Crisis: and other Essays Before and After the Great Depression &(pdf). Auburn, Ala: Ludwig von Mises Institute.

7) Brooke, M. (2016). The Collaborative Commons, The Sharing Economy, And The Future of Capitalism. The Project, A Socialist Journal, 17 June 2016 (online) http://www.socialistproject.org/issues/july-2016/collaborative-commons-sharing-economy-future-capitalism (Accessed 22 August 2020)

8) Rifkin, J. (2014). The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons and the Eclipse of Capitalism. St. Martin`s Press, &p.13

9) Frischmann, B. (2014). Who Will Pay For The Zero Marginal Cost Society? Huffington Post. [online] http://www.huffingtonpost.com/brett-frischmann/fixed-costs-zero-marginal-cost-society_b_5124945.html (Accessed 22 August 2020)

10) Henning, M. (2014). Inequality And Work In The Second Machine Age, The Worker Institute, 2014. [online] https://www.socialeurope.eu/wp-content/uploads/2014/12/RE4-Meyer.pdf (Accessed 22 August 2020)

This resource was uploaded by: Ross