Why India needs to have 'economic democracy'

At a time when one per cent of the world’s population owns half its wealth, economic democracy may seem like a remote ideal, rues Rajni Bakshi.

As the new government is formed, there will be a burst of competing prescriptions about the best way forward to intensify reform with a primary focus on gross domestic product growth that is somehow ‘inclusive’.

Instead, what is needed is a reflection, and introspection, on the first principles of economic democracy as outlined above.

An explosion of material aspirations is posing new challenges to Indian democracy.

Beneath all the outrage about crony capitalism, inept governance and absent jobs is an unrest that arises from a fundamental mismatch between the economic and political sphere.  

. . .

We may be equal inside the polling booth -- with one-person one-vote and every vote carrying equal weight.

But out in the market place there is no such thing as equality.

So what is it that would enable democratic societies to foster a market system that is both dynamic and compatible with democracy’s promise of empowerment-of-all?

Over the last five years I have posed this question to a range of people -- from passionate votaries of free markets, to social activists working in the non-profit sector.

The resulting conversations threw up one point on which everyone agreed -- the need to foster economic democracy.

. . .

Political democracy is elusive enough, now what is economic democracy?

As an ideal, economic democracy is not easy to define, but its core principle is to prevent any such concentration of wealth that inhibits economic freedoms of society as a whole.

For that is simultaneously anti-democratic and anti-market.

At a time when one per cent of the world’s population owns half its wealth, economic democracy may seem like a remote ideal.

But pressure to make it real is mounting in most democratic societies.

The main goal of economic democracy is to align market forces with the core aspiration of democracy -- which Mahatma Gandhi aptly expressed through the term Sarvodaya -- literally, the well-being of all.

. . .

While this Gandhian allusion might seem too lofty, it is actually what an enlightened market economy theoretically promises to deliver.

Therefore, globally there is a broad understanding today, at different levels of society and business, on the following rudimentary principles of economic democracy.

• Opportunity for all.
• Eradication of corruption and other means by which some gain unfair advantage over others. So losses should not be socialised while profits are privatised.
• Transparency and accountability in the functioning of both the government and industry.
• Emphasis on legal structures to recognise and protect property rights, especially of the poor.
• Public-private partnership to ensure financial services, health care, education and energy for all.

. . .

This list of essentials needs reiteration because all of the above are not universally accepted -- either in India or abroad.

Proponents of economic democracy, who are closer to the mainstream, argue that a truly efficient market will be fair and thus give everyone a better deal.

They favour market forces determining the survival of the fittest.  

The more radical proponents of economic democracy believe that fairness in market transactions is not enough.

They challenge the supremacy of capital over value-generation that is measured in terms of social and environmental sustainability.

For example, at present, many businesses treat the social and environmental impact of their operations as unavoidable side-effects that can be off-set by schemes in the name of corporate social responsibility.

. . .

However, those with economic democracy in mind would design a business to create win-win options for all stakeholders.

In this context economic democracy is equated with business models based on co-creation and cooperation, like producer-owned companies of farmers and artisans where wealth is widely shared by workers, and even the public at large.

The more mainstream version of economic democracy is amenable to the privatisation of natural resources, as long as the market is not distorted by either corrupt governments or private cartels.

The more expansive version of economic democracy calls for natural resources to be protected as a commons, to be used judiciously with minimal environmental damage and some profit-sharing with local inhabitants.

. . .

As also knowledge sharing.

The prevailing market system treates Intellectual Property Rights as the key to innovation and economic growth.

Advocates of economic democracy, however, champion a knowledge commons and oppose patent regimes that lead to more and more knowledge being locked up in business models, which concentrate money power and undermine open innovation.

As the new government is formed, there will be a burst of competing prescriptions about the best way forward to intensify reform with a primary focus on GDP growth that is somehow ‘inclusive’.

Instead, what is needed is a reflection, and introspection, on the first principles of economic democracy as outlined above.

Arriving at a consensus on how those principles translate into action will be a Herculean task.

. . .

Even where there is agreement on 'opportunity for all', the scramble for opportunities on the ground creates bitter conflict.

Perhaps the most vital component of economic democracy would be to foster a wider societal engagement about addressing and resolving such conflict -- rather than leaving it to the State to play arbiter.

The inspiration for this is deeply embedded in the formation of modern India.

Sixty four years ago, even as B R Ambedkar celebrated free India’s commitment to one person, one vote, he emphasised the need to challenge social and economic structures that would ‘continue to deny the principle of one man, one value.’

Defining and constantly refining an economic democracy framework is essentially a challenge for all of us to address in our capacity as citizens and moral beings not just as consumers or producers in the market place.

Rajni Bakshi is Gandhi Peace Fellow at Gateway House. She is also the author of the award winning book Bazaars, Conversations and Freedom: for a market culture beyond greed and fear