Democratizing Economic Power for a People-first Economy

George Matafonov CEO & Founder, Trruster

"In the Industrial Age economic prosperity is shared primarily through creating financial profit by exploiting finite resources. In the Information Age economic prosperity will be shared primarily through the creation of social capital, which is an infinite resource."

Events like the election of Donald Trump, Brexit, rising social tension, growing nationalism and the seeming revival of old-time socialism are leaving even the experts and pundits at a loss for an explanation. These events can be much better understood and explained in the context of societal evolution - as part of the great human journey from living in caves afraid of everything to boldly walking on the moon and even reaching for the stars. Within this broader context the seemingly inexplicable becomes explicable and the pathway forward becomes much clearer.

Within the context of societal evolution we see great transitions in societal organisation driven by technology. The hunter/gatherer society giving way to the Agrarian society with the development of farming methods. Similarly, the Agrarian society giving way to the Industrial society with the development of steam power and factory production, which brings us to the present time as the Industrial Age transitions to the age of information.

And therein lies the problem. The transition from the Industrial Age to the Information Age has not finalized and, worse still, has stalled. We think we are living in the Information Age but the reality is we are still stuck in the Industrial Age, albeit with better communication technology.

The transition to the Information Age has stalled for a number of key reasons including resistance to change from the existing social, political and economic paradigm, a lack of a clear vision of what an Information Age society looks like and, most importantly, an economic model with two glaring deficiencies in relation to the operation of economic power within society, which are preventing the transition.

Economic power can be defined simply as the collective power of people working together for the common good. Left to our own devices we would struggle to build a mud hut, but working together we can build skyscrapers and even reach for the stars, literally. This is the power of cooperative effort, which finds expression in a flow of financial capital around the world.

The first deficiency of modern economic theory lies in how it defines the common good solely in terms of financial profit based on the breathtakingly flawed and limited view of humans as always acting rationally in the pursuit of their self-interest. The result is that economic power flows almost exclusively only to areas of greatest profit or greatest personal gratification and blind to the consequences.

This deficiency explains why capital will flow to a factory despite it poisoning the surrounding environment; or to an enterprise that utilizes child labor; or why the move to renewable energy will not happen until it can deliver bigger profits than fossil fuels, even at the expense of a collapsing environment.

This narrow definition of social good is a major stumbling block in the transition to the Information Age because it requires everyone to contribute to creating profit in some way, in order to share in the proceeds. For the majority of people this means having a paid job which requires constant and, even exponential, economic growth in order to provide the required jobs. Anyone who believes in exponential economic growth on a finite planet, according to Kenneth Boulding, "must either be a madman or an economist".

In many ways the current economic model resembles a classic Ponzi scheme which is now unraveling as the flow of job creation is increasingly stymied through job automation.

The Industrial Age solution is to double up and attempt to create more jobs through economic growth, often at any cost. The Information Age solution is to expand the definition of the common good to include social capital in all its forms leading to a more inclusive and sustainable economic model.

In the Industrial Age economic prosperity is shared primarily through creating financial profit by exploiting finite resources. In the Information Age economic prosperity will be shared primarily through the creation of social capital, which is an infinite resource.

The second deficiency in modern economic theory borders on being sinister in the implications and relates to the question: who actually controls the flow of economic power?

Economic theory will tell you it is market forces, but the reality is quite different because of the many fingers in the pie including nation states, multinational corporations, politicians with agendas, bankers, financiers, powerful lobby groups and predatory wealth managers, to name just a few.

The exploitation of economic power by nation states, powerful groups and individuals seeking financial gain and by well-meaning politicians results in the regular cycle of booms and busts.

The battle for control of economic power is behind every major historical conflict including the two world wars and is one of the key reasons for the lack of any real action on climate change.

The European Union was established specifically to deal with this problem by removing control of economic power from the nation states and vesting it in an overarching body of bureaucrats.

While the vision and purpose of the EU is laudable, it is failing for the same reason the Soviet Union failed – it is bogged down in a lumbering, unrepresentative bureaucracy which shifts its head office every month from Brussels to Strasbourg at an estimated cost of £300 million per month.

With the EU failing and the increasing election of political leaders stoking nationalism we are on the path to repeat history with nation states battling to seize control of economic power.

The result is not just a climate of fear and uncertainty, it is directly impacting on people’s lives and not just in the global battle zones but everywhere, including advanced economies where traditional jobs are disappearing and those previously living comfortable lives are struggling to pay for the basics and facing the future with dread rather than optimism.

We are a society not just in transition but in search of direction and this makes us vulnerable to the siren calls of the populists who promise to take away the pain, the fear and the uncertainty in exchange for ever increasing amounts of power.

And, if history is any guide, this is the pathway not just to the destruction of freedom, but also to war and a descent into another period of collective madness out of which humanity may never re-emerge.

But fortunately we now have the technology to prevent such an event occurring by moving to a new economic model that expands the definition of the common good to include social capital in all its forms and democratizes economic power in three steps by:

  1. Tapping directly into the global capital flows through a universal reputation management service based on subscription.
  2. Using market forces to encourage the business community to subscribe.
  3. Distributing the proceeds to areas of greatest need and social value based on community feedback through the same service.

While this will not completely remove the power of the corporations, politicians, bankers, financiers or the lobby groups in controlling capital flows (nor should it), it will democratize enough economic power to stabilize the global economy, improve equity and fairness and give rise to a new economic model that will finally smooth the way for the transition to the Information Age.

One of the most important medium to longer-term outcomes will be the re-invigoration, promotion and expansion of democracy as an antidote to the growing global turmoil.

As the global capital flow is democratized it will be freely available to anyone with an Internet connection anywhere in the world. From the streets of Athens where the Greeks are struggling under the yoke of austerity to Johannesburg where the South African dream is failing because of corruption. From the streets of Moscow as the Russians edge slowly to full democracy to the wasteland and forgotten former centers of industry in the mighty USA.

As more people join, it will force politicians everywhere to become open to community feedback. The business community will follow and this will accelerate the flow of democratized capital, globally.

With strong democracies leading the way, the pressure will mount on the leaders of the weaker or fledgling democracies and on the dictators and the populists to do the same.

The increasing pressure will extend to the priests, imams, mullahs, rabbis, lamas and the popes to also be finally accountable and responsible to the people they purport to serve in the name of their god.

And open accountability of our leaders will finally solve the fundamental human problem of the ages: how to deal with the corrupting influence of concentrated power as perfectly summed up in the truism - “power tends to corrupt and absolute power corrupts absolutely”.

The restoration, expansion and strengthening of democracy underpinned by a more inclusive economic model provides the only viable solution to ending the misery and suffering of the millions of people currently displaced and seeking refuge globally. It will also smooth the way to the future envisaged by John Maynard Keynes almost one hundred years ago in his essay entitled: The Economic Possibilities for our Grandchildren - a time when humanity would finally solve the “economic problem” – the basic struggle for survival.

If there is a simple take away message it is this: The Information Age is ultimately about a powershift from the elites - politicians, corporations, econocrats, bureaucrats, mediacrats and technocrats - to the people.

And it all starts with democratizing economic power fueled by the grand narrative for the post-industrial society called Progressive Conservatism.

And here is the best news. We don't have to lobby politicians, convince economists, demonstrate, protest or occupy anything. Economic power is now in our collective hands and we can direct it to where it is needed most, not where it can deliver the greatest financial profit.

Keynes was indeed prescient in his prediction because we are those grandchildren he was writing about and all we have to do is to look up from the social, political and economic mire of the Industrial Age to realize a future our ancestors could only dream about.

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