Democratize the economy

It is possible to democratize the economy provided that we can advance over what sustains the concentrating process. Deep-rooted changes are needed even though some specific measures can be adopted to open spaces for a fairer productive inclusion; among others, establish negotiating spaces to enhance the distribution of results within value chains and reinforce entities to provide financial and technical assistance to popular-base ventures (those that already exist and new ones that use modalities of shared ownership).

Democratizing the economy implies introducing transformations to the economic system to reverse the current process of concentration of wealth and economic policy decisions. Today, large corporations, international and local, hegemonize the functioning of the economic system subordinating other actors to their interests and convenience. With that, the development potential of the national production is sterilized or limited with serious effects over the internal market, welfare of the population, and decisional sovereignty. By concentrating income in large corporations, the capitalization of small and medium-size enterprises is seriously compromised and, with that, their investment capacity to access a path with greater generation of value and jobs.  At the same time, lower or worse paid jobs affect consumption (effective demand is reduced) and the satisfaction of popular needs.

In those circumstances, indebtedness of enterprises and people increases as short-term substitute solution to compensate for the limitation of genuine income, which might appear only if the concentration process were reverted. Until this happens, higher indebtedness constitutes a lucrative business for financial groups but not for those who slide down to a dangerous over indebtedness. It is worth to explicit that one of the egregious mechanisms for appropriation of value is precisely the financial subjection that overindebted actors suffer.

Several authors, including Opinion Sur, have analyzed the perverse dynamic of the concentrating processes, their effects, and implications. Instead, in these lines we concentrate our attention on specific measures that can be used to advance in democratizing the economy by transforming some of the concentrating process supports. Among others: (i) modify the distribution of results within value chains, (ii) secure an extended productive inclusion of the economically active population by strengthening existent popular-base ventures and establishing new types of popular-base productive units (different modalities of shared ownership enterprises). We mentioned that these measures represent advances towards the democratization of the economy as, to be fully effective, they need to unfold in the context of a macroeconomic transformation geared towards securing general wellbeing (not favoring privileges of minorities), the steady care of the environment, and the sustainability of the productive matrix.

Modify the distribution of results within value chains

In general, value chains are structured and function in ways to mainly serve the interests of their leading enterprises. Indeed, there are other fairer and more potent options. However, those better ways of structuring and functioning of value chains do not emerge spontaneously but induced, favored, and regulated by a State based in new correlations of social and political forces able to resist the power to impose that leading enterprises exercise. This does not imply compromising the viability of value chains, but rather strengthening them by aligning the diverse interests at stake with equity.

Proposed changes should ensure that all those who participate in a value chain are favored by its development (fair compensation for their efforts); that produced goods and services do not infringe upon the sustainable development of the economic system and health of its population; that the activities of the entire value chain care for the environment and labor rights.

Negotiation spaces for prices and commercial conditions should be established within each value chain so that results do not end up concentrated in powerful enterprises but rather get fairly distributed among all economic units that contribute their value to the productive process, small and medium size providers of supplies and services, and the State that facilitates good part of the necessary social and productive infrastructure. Leading enterprises must relinquish part of their extraordinary rate of return to enable the growth of the rest, and with that coming closer to an organic development of the entire productive chain. Some leading enterprises might understand and adopt this new paradigm; others may resist it. The first ones will endure with transformation and be part of the new eras that people of the world demand; the latter will have to face more and more antagonistic perspectives.

Productive inclusion reinforcing existent popular ventures and establishing new popular-base productive units with diverse structures of shared ownership.

Despite having been installed in large part of the collective imaginary, it is false that technological and managerial excellence cannot be offered to those who have always been neglected. No doubt that each transition entails difficulties but we should not ignore that there are resources and organizational and financial modalities that allow for the incorporation of large segments of underemployed or openly unemployed populations as producers. Of course, to redirect and effectively channelize those resources it is needed to count on a double backing: a firm political support and a comprehensive system for the promotion and accompaniment of the popular-based economy, including specific developers and trusts.

Today, popular sectors fighting to be fairly included in the economic system must do so on their own and in a context of tremendous financial, technological, and managerial hardship. They do not have formal or informal supports (as enterprises coming from upper-middle sectors), bearing from the beginning with the critical restriction of their small scale.

With exceptions, how can a small entrepreneurial group with paltry resources insert itself in promissory market niches, buy good supplies and provide itself with needed services, work with a simple but not rudimentary and onerous technology, defend its production prices if it does not have the capacity to negotiate better conditions within value chains in which its own activities are marginal and subordinated to much larger players? How can a small venture address labor obligations, permits, duties, taxes and other obligations established to larger-scale activities with higher returns? How can they prevent their vulnerability from placing them as an easy prey for blackmail and bribes by inspectors and judiciary officials?

Their situation would be very different if they could upscale using modern organizational modalities that allow for the integration of those who are currently barely surviving in simple subsisting activities into middle-size ventures. And, as these ventures do not spontaneously emerge in adverse markets, how many new options could open up if there were specialized developers that would accompany the complete arduous process of promoting them with the complement of trusts that could contribute start-up and working capital. With these supports existent popular-base ventures would strengthen and other new of very diverse organizational modality could be created; inclusive ventures such as first and second degree cooperatives; consortiums for small producers to buy supplies, provide themselves with technology, and market their products; enterprises recovered by their workers; communitarian trading companies; locomotive agro-industries of associative ownership that channel the production of small producers of family-base agriculture; people-based franchises sometimes associated with an strategic partner; community supermarkets; community transport and logistics facilities; among many others.

The support system for popular-base ventures would allow access to factors that are critical for any corporative development, such as organizational, technological, and managerial excellence; insertion in promissory value chains, contacts, and commercial opportunities, short and medium-term credit, establishment of strategic alliances, being informed about tendencies, opportunities, and risks in their sector and in the macroeconomic context. With these they will be in better chance of successfully operating the process of generation and retention of value so that they can capitalize and sustain over time.

The significance and functionality of these economic actors would not be complete if we do not point out a critical change in motivation: their performance is not just guided by the goal of maximizing profits at any social and environmental cost but rather by the purpose of providing themselves with a fair income in activities that will also contribute to the sustainability of the economy and the general wellbeing. Actors from the popular economy need to promote other rather different values from those that tend to prevail in contemporary markets. They know it is not greed, selfishness, voracity, mistreatment of others, the mere profit, what would generate better societies and that it is worth joining a cultural battle to prioritize values of responsibility towards Mother Earth and solidarity with the others. The effort of assisting those who suffer poverty situation would lose sense if it would only serve to generate more savage actors that would join the savagery that already exists in contemporary markets.

 

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