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Distributions of Wealth and People's Economy

By Dharma Deva

The question of wealth distribution requires a fundamental look at what


forms a holistic economy. Sarkar states that a developed economy should
consist of four parts: people's economy, psycho-economy, commercial
economy and general economy. It is the people's economy that offers
economic liberation and security for all. Its scope, implementation and
invigoration of economic and human rights needs to be brought to the
forefront as conventional economists are unable to come to grips with
the failures in economies around the world.

Guaranteed minimum necessities

People's economy deals with the essential needs of the people in


general and with aspects such as production, distribution and
marketing. In particular, it is directly concerned with the guaranteed
provision of minimum requirements like food, clothes, housing, medical
care, education, transportation, energy supply and supply of
irrigational waters. The objective is continuous improvement and ready
availability of these essentials. In order for minimum requirements to
be assured there must be guaranteed purchasing power. The time has come
to recognise that the right to guaranteed purchasing power is a
universal and fundamental human right and as such requires
constitutional protection, ie there must be constitutional recognition
of the benefits of economic prosperity for all people.

Grossly unjust wealth distributions

Current laws emphasize property rights and give compensation for


expropriation and misappropriation of property whether by governments
or other individuals. However, in doing so there is disregard as to
whether the distribution of such property rights can be or is
justified, particularly in the case of over-accumulation. A highly
skewed distributions of wealth ranging from some individuals amassing
billions in assets while others struggle on a few cents a day
represents an inefficient production, distribution and marketing system
that does not serve the needs of a people's economy. Despite capitalism
being a relatively somewhat better system than communism in terms of
the production of goods and the incentive to innovate, the large scale
wealth inequalities evident in capitalism does, of itself, mean that
there are many pernicious loopholes in such a free market system.

In terms of a comparison with investment theory, it is certainly


arguable that if a particular investor can derive an abnormal return
consistently distinct from what may be considered as being within a
range of an average or normal return in the market, then the investor
is probably privy to certain information that enables them to exploit
arbitrage or speculative opportunities. Indeed the situation may be
worse and involve, for example, favouritism, collusion, cronyism,
bribery or other biased distribution mechanisms. Abnormal opportunities
such as these represent inefficiency and unfairness in the economy if
such loopholes are readily available and allowed to persist. A truly
efficient economy would continuously marginalise and virtually
eliminate the opportunity to make such abnormal gains or profits. This
also includes the ability to amass unprecedented or abnormal levels of
wealth.

Minimizing the gap - a sign of an efficient and rational economy An


efficient economy would, instead, minimize the gap between the minimum
requirements needed generally by all people and the maximum amenities
required by particular persons or groups so that they are capable of
rendering more service and useful outputs for the benefit of society.
For instance, ordinary people may be provided with motorcycles instead
of bicycles. Here, there is some difference between a motorcycle and a
car, but the gap that existed between a car and a bicycle has been
partially reduced. In an economy that is efficient in what it
distributes (ie marginalises and seeks to eliminate the ability to make
abnormal gains in wealth accumulation), or in another sense is a
rational distributor; the economic gap between ordinary people and
meritorious people is constantly reduced as much as possible, but the
gap will never vanish altogether. That is, the difference between the
minimum requirements of all and the maximum or special amenities of the
meritorious is never entirely eliminated. Even though the gap exists,
there must nevertheless be efforts to continuously reduce the gap. An
important reason for that is because if the gap increases
disproportionally there is every likelihood of economic loopholes again
arising to abnormally skew the distribution of wealth to irrational
proportions. This affects the economic welfare of all members of
society and the common people, such that the value of their labour and
participation in the economy is not properly recognised, thereby giving
scope for a large segment of society to become deprived - and
exploitation will again re-emerge in society in the guise of special
amenities. Accordingly, the provision of special or maximum amenities
should not go against the common interest. This is the relationship
between minimum requirements and maximum amenities.

It also, however, means the ordinary public will not and should not be
deprived of maximum amenities - efforts must be there to give them as
much of the maximum amenities as possible and available to society at
the time, but without destroying the incentive of the more meritorious
to produce better outputs and contributions for society in all spheres
of endeavour. A close analysis reveals that such a system of production
is based on consumption for the benefit of all members of society,
rather than profit being the underlying motive in the field of
production.

Naturally, with the marginalisation of profits and the elimination of


the ability to make excess or abnormal profits, eg with the continual
lessening of opportunities to make speculative gains, the economy is
then in a better position to truly serve consumption needs rather than
profiteering objectives.

Rational distribution of rational profits

Profits, must of course be made, but these have to be rational or


normal profits. What should be eliminated in an economy that rationally
distributes resources and makes maximum utilization of resources is the
ability to make abnormal or irrational profits. There is no scope for
speculative gains in a people's economy.
For example, in the market place the market price may be the cost of
production plus a rational profit (Price = C + Y) where a rational
profit is about 15%. To further the increased purchasing capacity of
workers this amount or part of it will be rationally distributed
amongst them and act as an incentive. As they get more incentive,
workers will produce more goods and services. Incentives should
encourage greater work and better quality work, and so they should be
directly linked to production. This approach in a people's economy
increases purchasing capacity and, therefore, the per capita income and
standard of living of workers increases. In such a system there is no
economic exploitation involving the unrestricted plunder of physical
and psychic labour of a particular community (or its natural resources
in the local area). The surplus value created by labour and taking the
form of profits is rationally distributed to labourers and/or
shareholders in a co-operative manner and through co-operative business
enterprises.

The object of production is then based on the consumption motive.


Profits having been marginalised or minimised to normal or rational
profits in an economy that is truly efficient and which rationally
distributes resources, means also that speculative or profiteering
opportunities or motives decline and, as there is little or no scope
for them, the focus of production shifts to satisfying the minimum
necessities and maximum amenities of the ordinary and also the
meritorious people. It is the rational profits (including equitable
remuneration in the form of salary or wages) derived that are used to
guarantee and increase the purchasing capacity of labourers and/or
shareholders (where labour includes all manner of utilization of
physical, psychic or spiritual capability). Only a system that revolves
around the consumption motive can increase the standard of living of
all people. In such a system the value of wealth is measured in terms
of its capacity to purchase commodities. It is the purchasing capacity
of one's wealth that is the real value of that wealth and that
purchasing capacity is, of course, the real wealth. Accordingly, it is
improper to define wealth as meaning only riches - that amounts to
hoarding of wealth.

Hoarding of wealth leads to economic crisis

Given that wealth must be measured in terms of purchasing capacity, if


there is hoarding of wealth then capital becomes concentrated in the
hands of a few individuals (including corporations) or the State and
its purchasing capacity is undermined. This concentration in the value
of wealth (or what could be purchasing capacity and therefore what
could be money rolling through the economy) is a fundamental cause of
economic depressions. The second and related cause is when money in the
possession of a few individuals, corporations or State capitalists
stops rolling. The Asian crisis is symptomatic of this second cause.

When large amounts of money were withdrawn from economies such as


Indonesia and Thailand, that money could no longer roll through those
Asian economies.

Instead the money found its way into USA stock markets for the
acquisition of corporate stocks, creating an unusual and unprecedented
demand for shares traded through US stock exchanges (the prices of
which are not truly reflective of the fundamental businesses or
investments of those corporations). This usage of money essentially
simply pushed up the value of stocks/shares, while remaining entirely
inert or unutilised for real productive purposes. It has now caused
inflation in the value of shares traded on US stock markets, while at
the same time the withdrawal of wealth from Asia has resulted, or
rather added to, the inability of those Asian economies to produce
their minimum necessities and to provide for any special or maximum
amenities, first to the more meritorious and secondly to the common
people. At no time has the people's economy been considered. For all
intents and purposes innovation in Asia has been stifled, the original
wealth that rolled in and was subsequently withdrawn was not used to
increase the real purchasing capacity of the people because it was not
first properly applied in building up the minimum necessities of all
people, but rather focused more on providing special amenities for a
limited segment of society or class of persons. In a nutshell, there
was no rational distribution. The capitalist reasoning in withdrawing
money from Asia was that they thought that if the money was allowed to
roll freely in Asia then their profits will decrease (even though it
would bring relief to the common masses). Consequently, they withdrew
their money without any control on them by the local economy and local
people.

The psychology of the capitalists is to make profit from the rolling of


money, and as in Asia when they discover that the investment of money
does not bring profit up to their expectations, then they stop rolling
the money in that particular economy. It brings economies to it knees.
The money is instead kept immobile or inert or channeled into
unproductive purposes by, for example, the acquisition of US related
stocks. While this may give a pretence of riches it is really a type of
concentration of wealth away from where it could be better productively
applied in the medium to long term so as to give greater opportunities
for the all-round welfare of a greater number of people. Such pretence
of riches also does nothing to increase the purchasing capacity of that
wealth. In PROUTist terms the wealth is said to have lost its value
because it is not assisting in increasing the purchasing capacity of
most people.

Keep money rolling

Also, in PROUTist terms the value of money depends on the extent of its
circulation. The more frequently money changes hands, the greater its
economic value. The greater the value of money, the greater the
prosperity in individual and collective life, and the greater the
opportunities for all-round welfare. The people's economy then
flourishes. While money may well change hands through the US stock
markets, that does not amount to true circulation of money in the
productive parts of the economy which are concerned with the provision
of minimum necessities for all and special or maximum amenities to
first, the meritorious and secondly, to the common people. This
contradiction in capitalism and its false claim to being an efficient
allocator of wealth and distributor of resources arises due to the
self-centered profit motivated psychology and the control and
accumulation of wealth for the benefit of a few rather than for the
welfare of all.
However, had the consumption motive been the motivating force for
production there would have been a continual circulation of money
through the productive parts of the economy centered around the needs
of the people.

There would easily be a proper and equitable allocation of wealth,


money would circulate readily and the standard of living of all would
be capable of increasing.

The consumption motive

The advantage of the consumption motive is that it is essentially


concerned with establishing adequate purchasing capacity and then
increasing it. Furthermore, this can only be beneficial to sustaining
business enterprises. For example, while first class passengers already
get special facilities and ordinary passengers do not, if the
purchasing capacity of ordinary passengers is increased in greater
proportion to that of first class passengers, then the ability of
ordinary passengers to consume more (and to obtain at least some of the
extra facilities available to first class
passengers) has increased. That would result in an increase in
production for the extra provision of some of the facilities previously
available only to first class passengers and which are now made
available to a greater population base of ordinary passengers through
increased purchasing capacity. The production being for the consumption
by ordinary passengers.

Therefore, that consumption motive has resulted in an increased


standard of living for ordinary passengers. In a less advanced economy,
it would of course be the minimum requirements of the common people
that would be immediately increased through extra purchasing capacity.
This again would result in increased production for consumption
resulting in increased standards of living. It is worthwhile mentioning
that what constitutes both the minimum requirements and the maximum
amenities/facilities is ever increasing.

Citizen power

To ensure that there is citizen power in enforcement of a guarantee of


minimum necessities to all persons, PROUT supports a constitutional
right for citizens of a country to sue a government if their minimum
requirements are not met. This is a check to ensure that proper
policies are developed by governments to warrant that there must be
rational distribution of resources and a system of minimum necessities
for all and increasing maximum amenities as required. While the
government should not be an economic controller per se through
centralized economic power, it does have an obligation to ensure that
there is no inequity in society and so can be taken to be the last
avenue of recourse when there is a concern about any person's minimum
necessities being denied. It can always pass the necessary laws or take
administrative action to ensure that the required equity is achieved
across the board for all people.

Also, as people's economy deals with minimum requirements and people's


subsistence problems, it must take precedence over other parts of the
economy. For example, if people have no food and are starving, it may
be necessary to establish short-term uneconomic industries to supply
food.

In normal conditions such industries would violate the logic of general


economic principles and the rules of supply and demand. But, in order
to get an efficient and rational system of supply and demand working,
the means for that must first be put in place. To this end people's
economy is also concerned with the development of small-scale
industries, both private and cooperative. Private industries must,
however, be limited in size and scope to prevent monopoly production
and exploitation, and be required to function as cooperatives once they
grow too large.

Cooperatives and social welfare

Cooperative industries are the best means of organising people in an


independent manner so that they take collective responsibility for
their livelihood. They are also the main means of ensuring rational
distribution of profits to workers and/or shareholders in the local
economy. It is the co-operative system that is capable of ensuring the
social welfare of citizens in the local economy.

This is in contrast to the notion of the welfare state supported by


capitalist and mixed economies. Does not the welfare state represent
loopholes in the capitalist system, in that because the existing system
of production, distribution and marketing cannot provide adequate
purchasing capacity to all citizens at all times, the welfare state
must step in to solve the inefficiencies of the capitalist system. This
is done primarily through transfer payments to welfare recipients. Is
it not a contradiction in terms of efficiency? The only 'efficiency'
that exists in capitalism today is the scope it gives to hoarding of
wealth for a few. The triggering of economic crises around the world
reveals that capitalism is totally inefficient in all other respects.
So much so that governments in countries such as Japan and areas such
as Hong Kong have forced themselves into intervening in their stock
markets with the expectation that they will be propped up through such
intervention.

While, of course, special facilities in the form of welfare need to be


made available in special cases such as birth deformities or being born
intellectually handicapped or similar situations in which a person has
no means of earning an income, in other cases such as unemployment
benefits the provision of relief through the welfare state merely
indicates the inadequacies of the capitalist system and its obsession
with profit making.

Unemployment being a figment of an irrational structuring of the


economy and its inefficiency in being able to distribute resources and
wealth rationally so as to ensure that no one is denied adequate
purchasing capacity.

Deficiency in Keynesian thinking

It is worth mentioning here Keynes' theory on the model of Circular


Flow of Expenditure and Income. In brief, flow of expenditure on goods
and services comes from consumers, investors and governments, which
goes to firms, which produce outputs. The income from firms then flows
to consumers (labour), after some is paid to the government as taxes
and part of the income may then be replaced or income may be given to
persons by transfer payments (eg social security payments to
individuals).

There are some fundamental discrepancies in this model from a PROUTist


perspective. Firstly, income taxes on wages and salary essentially
reduce a person's purchasing capacity. PROUT does not accept income
taxes on individual labour. However, in order to support wealth
ceilings and as a transitional measure income taxes may be used as a
proxy for wealth taxes and therefore in support of a wealth ceiling so
as to limit and help prevent the excess accumulation of wealth.

Traditionally in the Keynesian model the bulk of taxation is derived


from income taxes. Although this has changed over the decades towards
indirect taxes such as sales taxes and consumption taxes, these by no
means solve wealth disparities if no wealth ceiling or limits on the
accumulation of wealth are in place. Instead, PROUT support taxes at
the point of production, which means that taxes must be imposed before
income reaches individual workers as a result of that production. It is
arguable that such a system imposes on firms an obligation to ensure
that they prove themselves to be efficient (and not wasteful), because
as part of their productive activity, they must contribute also to the
collective welfare (eg for education facilities) through making
allowance for taxes when they produce.

This is so even if the effect of those production taxes do flow through


to prices to the end consumer (who in any case will have adequate
purchasing capacity). The effect of production taxes is also likely to
be minimal to any single consumer, eg a resource extraction tax
relative to the scale of production is likely to have minimal effect on
any single consumer. Further, the Keynesian model assumes the existence
of a welfare state and expenditure through transfers in the form of
welfare payments. PROUT, in general, does not support welfare state
mentality. Rather, PROUT supports full employment, and by this is meant
all forms of social contribution involving physical, psychic or
spiritual capabilities.

There is also no reason to exclude the bringing up of children, care of


the elderly, etc. All these can be done through co-operative assistance
and enterprises, and through rational distribution of profits to
workers and/or shareholders (be it via wages, salary, bonus payments,
dividends or contributions to superannuation funds, annuities, pensions
or insurance co-ops for members), this will largely take care of the
need for government transfers for contingencies such as are now covered
by social security payments. Furthermore, money applied for these
purposes would not fall directly into government hands thereby avoiding
the concentration of economic power via centralised government
management or control.

Concentration of economic power in government hands has recently been


demonstrated by the governments of Hong Kong and Japan investing large
sums of money, either directly or indirectly through controlled
entities, in the stock markets of those countries so as to artificially
prop up those market indices. Such money would have been better
utilised toward programs that increased real production in the country
and so as to increase the minimum necessities and special amenities of
the people as appropriate. This also demonstrates how far removed the
ordinary person has become in having a local say in their local
economy.

Welfare economics requires people's economic power

Nobel prize winner, Amartya Sen has emphasized that what creates
welfare is not goods as such, but the activity for which they are
acquired. Sarkar goes further and asserts that excess accumulation of
wealth reduces those activities and therefore the ability to enhance
purchasing capacity across the economy. According to Sen, income is
significant because of the opportunities it creates. But the actual
opportunities - or capabilities, as Sen calls them - also depend on a
number of other factors, such as health; these factors should also be
considered when measuring welfare. Again, Sarkar goes further and
provides a blueprint and economic model and intuitive principles that
directly tackle the issue - even defying conservative economic
thinking. In relation to health, Sarkar states that medical care and
therefore health is a minimum or basic necessity which must be
available to all people through adequate purchasing power. Without the
guarantee of minimum necessities the capability of income or rather the
value of wealth is not realised.

Sen has pointed out that all well-founded ethical principles presuppose
equality among individuals in some respect. Sarkar, in this regard has
formulated what in Neo-humanistic terms is called the Principle of
Social Equality and contrasts that to the Principle of Selfish
Pleasure. The former is beneficial individually and collectively, while
the latter is not of real benefit to the collective interest and indeed
leads to degradation of individual consciousness.

Sen recognises that the ability to exploit or claim equal opportunity


varies across individuals, and concludes that the distribution problem
can never be fully solved; equality in some dimensions necessarily
implies inequality in others. This raises the tricky issue of, in which
dimensions equality is to be advocated and in which dimensions
inequality is to be accepted. Sarkar, with profound foresight, gives a
solution to this issue by advocating that the guarantee of minimum
necessities to all represents the baseline for economic equality and
the Principle of Social Equality must not deny anyone access to social
opportunities. In addition, Sarkar solves the inequality question
through the principle of making available special amenities to
meritorious persons making contributions to society, while also
reducing the gap between minimum necessities and maximum or special
amenities, but never closing the gap completely. In this way society is
capable of pursuing a continual betterment and increase of available
minimum necessities and additional or special amenities which in one
way or another benefits all people. Sarkar's position being that it is
people's economy that is the real welfare economics.

People's economy - the way forward

The conclusion that must be reached is that for there to be real


economic welfare there must be proper economic organisation in society.
Just as there is political organisation in society through
representative structures, there must also be economic organisation
having as its motive the economic well-being of all people and indeed
all living things as well as the inanimate environment. Today economic
power is owned by a handful of capitalists in the liberal economies or
party leaders in State socialist countries. Sarkar's message is that
this supremacy must be terminated. Only then will there be economic
liberation and economic democracy will be established so that the
economic welfare of all people can be enhanced step by step.

The basis of people's economy as propounded by Sarkar, without


attachment to conservative economic thinking, and fully in accord with
the human heart and intuition is the stepping stone and means to that
economic welfare.