Development without economic concentration

Economic concentration is not an inevitable natural product but the result of our societies certain way of functioning and it can be transformed. This requires acting in several fronts and levels. In other texts we have analyzed the accelerated process of wealth and decision concentration that prevails in the world identifying its multiple dimensions, the factors sustaining it, the terrible effects it generates, among others, environmental destruction, neglecting majorities, widespread poverty, severe inequality, social violence, conspicuous consumerism, manipulation of democracy, existential alienation, systemic instability. [[Article [Is the world burning?->]; Opinion Sur’s Collection books Global crisis: [adjustment or transformation->], [Los hilos del desorden: primeras trayectorias geopolíticas del Siglo XXI->] and [Adjusting the course: getting out of the crisis towards a sustainable development->].]]

Economic concentration is not an inevitable natural outcome but the result of our societies certain way of functioning. This means, it is a dynamic that some sectors manage to impose upon the rest based on their economic power which, at the same time, projects itself over other areas that support them such as the media, judiciary, armed forces, culture, values transmitted to us mixing up ethical prescriptions and interests. All together, this process gives rise to democratic traps [[Article [Democratic traps: solving them by deepening democracy->].]] that need to be removed since they derail energies from a transformational action towards the maintenance of the status quo.

This way of functioning that prevails in many of our countries can and needs to be transformed. Moving forward towards a development without economic concentration requires acting in several fronts and levels.

Political action and public policies

On one hand, it is crucial to act in the political front since the capacity to transform the way of functioning depends greatly on the economic policy decisions, on how political forces and social movements operate to influence or manage the State apparatus and the multiple instruments available to it: among others, the orientation of public expenditure to assist different social groups, some more than others, with social services (education, health, social security, housing), security, justice, as well as socio-productive infrastructure (energy, science and technology, communications, transport, irrigation); the tax system that can be more or less progressive or regressive; the monetary policy which includes preserving monetary stability, exchange rates, credit allocation and better or worse regulation of the financial system; the foreign and domestic trade policies; the promotion of investment.

The focus of this wide set of policies should be placed on transforming the way value is generated, redistributed and extracted, which is ultimately at the core of the concentrative dynamic [[A more detailed analysis in [Differentiating generation, redistribution and extraction of value->].]]. It is about preventing concentration from reproducing for which it will be necessary to dismantle the prevailing mechanisms of value extraction, plus fully mobilizing the productive capacity of all population stratums in a way that those who are willing to generate value can do so under appropriate conditions, and at the same time apply income redistribution mechanisms according to social needs and economic priorities.

There are several ways of extracting value, among others the following:

(i) The unbridled financial speculation that financial entities and hedge funds exercise which is sustained by manipulating regulators and conditioning public policies in their favor, apart from exercising an irresponsible management of risk and privileged information.

(ii) Extortive conditions transnational corporations impose upon weak nations and/or corrupt governments regarding the exploitation of natural resources (mining, forests, fishing, aquifers);

(iii) Extraction of value through the imposition of abusive prices due to having a dominant position in imperfect markets (monopolies, oligopolies).

(iv) Extraction of value by avoiding paying taxes which promotes capital flight and restricts the State’s capacity to provide social and productive infrastructure [[See articles on tax havens (ill-named tax heavens) published in former issues of Opinion Sur]] .

(v) Extraction of value through drugs, arms and people trafficking;

(vi) Extraction of value that local speculators obtain by appropriating assets in a stress situation or through illegal means;

(vii) Extraction of value by capitalizing in one’s own benefit the returns of a public investment without paying improvement contribution;

(viii) Extraction of value taking advantage of discriminatory regulation favoritism;

Each form of value extraction presents singular characteristics according to the institutional, economic and political reality in which it is performed. Thus the actions to eliminate the different value extraction mechanisms will have to take into consideration how each of them operates specifically as to dismantle the factors sustaining it. In an upcoming article possible courses of action will be analyzed.

Taking action regarding values, culture and ideologies

Transforming a country’s way of functioning is essentially a political fact where the action of the national government, complemented with provincial and municipal governments, constitutes a decisive factor. However, a State alone cannot transform the socioeconomic functioning without involving and mobilizing those who are part of the social ensemble. While public policies create conditions and set a course, the march becomes unsustainable if they are not accepted by large majorities. Therefore the importance of working at the level of individual consciousness, of each one’s will and determination, to include those majorities in a sustained transformational effort they understand and contribute to materialize.

This process of understanding what is happening, not just on the surface but the entire network of interests that are not out in the open, requires unveiling the intentions of those who have the capacity to shape public opinion against our own true interests. Since understanding is influenced by the values we practice and the ideologies we adopt, it is necessary to take a closer look at the values guiding our conduct differentiating ethical orientations (that can be confirmed or adjusted) from the interests that sustain privileges and get to us encrypted in some of those values.

Thus, for example, there are values such as greed and selfishness that if not fought against with great firmness end up guiding the behavior of too many actors with severe social effects, just as if disregarding others would prevail and individual interest was all that mattered. The passive acceptance of ill-gotten privileges, undermining common wellbeing, justice and equity, constitute ideological features that serve as support for economic concentration.

Direct support to the base of the social structure

In current times, only a minority segment of the population has the appropriate means to generate value (knowledge, management, technology, financial resources, contacts, and access to those who demand); the rest is underemployed or does not participate in the productive process. This situation does nothing but widely reproduce the concentration process since those who accumulate most today have the best means and through them obtain the greatest results. The consequent flip side is the enormous social inequality existing in almost every country and affecting most of the population and of which the most serious expression is poverty and destitution.

This situation can be transformed with coordinated action from the public and private sector with support of civil society oriented to democratizing access to productive means and appropriate management that enable generating value. The challenge lies in allocating means and redistributing incomes focusing on creating or strengthening the capacity to generate value in the medium and low sectors; not only on redistributing to maintain poor levels of livelihood that do not represent a sustainable solution.

The profit of some at the expense of others using prerogatives, influences, tax evasion, unilateral determination of prices and sales conditions, deliberate destruction of the competition, corruption of politicians and regulators, is inadmissible. At the same time, it is necessary to consider that global competitiveness demands the presence of large scale actors with management capacity and financial means to access market thresholds where good commercial opportunities reside. In contemporary reality it is the economic systems and not individual companies those who compete, and in order to effectively do so every actor involved, not only those leading value chains, have to equitably participate in the results of collective efforts: this includes small and medium suppliers, distributors, the public sector providing social and productive infrastructure, the educational system, scientific and technological community, local governments, among several others.

To achieve this, redistributive mechanisms and fair and compensatory prices are required throughout the entire value chain, which is not simple to guarantee given the enormous scale difference, and consequently leverage to negotiate, between leading companies and the rest. A short-term vision leads to trying to maximize immediate benefits without properly considering that a value chain’s sustainability is based on the strength and improvement of each of its members. There is an enormous space to work as to change that perspective, whether based on a clear action from those leading productive networks, whether it is with the firm regulatory and promotional intervention of the public sector.

In this context the biggest challenges cornering small production must be appropriately faced. An exceedingly promising tool is using available organizational engineering to integrate currently scattered small producers into medium scale economic organizations, such as franchise systems, export consortia, trading companies, second and third degree cooperatives and locomotive agro industries. In order to materialize this type of initiatives it is possible for the public sector (national, provincial or local) and corporate sectors to work together accompanied by development organizations and the scientific and technological community. An effective vehicle to orchestrate this critical aspect of inclusive development is the developers of inclusive ventures that Opinion Sur has been promoting.

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