Tuesday, May 31, 2016

Economic cohesion

How going back to basics can achieve it.

One of the things that still works quite well in South Africa is the pursuit of individual enterprise.

That should not be too surprising. It is a feature of the indomitable spirit of human beings in achieving independence and securing basic comforts, and above all, it offers an opportunity for creating meaning in our lives. That pursuit dates back thousands of years giving practical expression to the two most powerful and basic driving forces in humanity – meaning and means.

Those primary forces have found expression in the cell of all economic activity, first from pure subsistence in making things of value for personal use, and then creating them for others, which ultimately led to commerce and industry as we know it today. No matter how sophisticated or complicated the commercial process has become, those ancient principles still apply. In the end, all economic activity revolves around a very simple principle – that of a person, or group of people creating something of value for others. In short – people serving people.

It is this principle that has served humanity well for hundreds of years and underpins a system that has been described as the greatest in the history of social co-operation. It also has within it the most powerful force of forging, at least at an economic level, cohesion between people of all persuasions. So the lofty “indaba’s” that South Africa repeatedly has between government, business, and labour to address unemployment and low economic growth, should not be focussed on what they can do to encourage it, but rather to stop doing that which discourages it.

The bond that exists in the value-adding, or wealth creating cell, is as natural, as cohesive and as strong as the bond between molecules that make up substances.
We can superimpose that template on any business activity, large and small. A street vendor, for example, actively sells her wares, and in that action is an employee (labour). She would have used her own money to buy stock, and therefore is the sole shareholder (capital). And she would use state or community resources, such as streets, pavements and whatever level of education she may have received. Apart from the state, which for the most part should be an existential given, the bond between labour and capital in this case is absolute, and virtually indistinguishable.

One could also present those “molecules” of the value-adding cell as active contributors, or active stakeholders. Again, the state by and large is, or ideally should be, an active contributor, albeit more indirectly than the other two. It is only when the cell becomes bigger and the individual molecules multiply to become groupings of self-conscious and self-gain interests, that tensions start to manifest. In turn it loses sight of the bond that holds them together – creating something useful for others.

Still, despite all the tensions, disruptions, jockeying for self-gain, customer neglect and occasional complete collapses of those cells, for the most part by far, they are still held together by that simple principle of people serving people. That principle remains the core upon which the entire economic construct rests. Without it, that construct would simply disintegrate.

The real danger for its survival does not come from within itself, but the creation of institutional abstracts such as “labour”, “capital” and “state”, and placing them in formidable opposing formations, presumptuously representing the contributors within the cell. The tensions that may exist in the cell itself give succour and largesse to a number of power mongers and are multiplied hundredfold in grandstand posturing: in parliament, in government, in the Nedlac’s and particularly in organised labour both amongst each other and against others. The favourite fall-guy and common enemy is “capital” – because of its formidable centralised power, its often exploitive behaviour, and an assumption of its supremacy and majesty in the cell.

Armed with, or perhaps warped by their pet economic theories or ideologies gleaned from text books, classrooms, or even the streets, their views, dictates and regulations are then re-imposed on the cell, multiplying tensions there many-fold. What is forgotten is that the value-adding cell is an ancient concept, predating the written word, theories and ideologies. It has survived wars, oppression, suppression, restrictions, constraints and any form of government or economic system.

All democratic systems need checks and balances. So too does the cell need rules of the game to ensure fair play and prevent exploitation and dangerous dominance, either by one of the stakeholders over the other, or of the cell towards its market. But what it needs most of all is a nurturing of a healthy and appreciative relationship between those stakeholders and the promotion of a shared purpose and common fate. That has to largely come from within the cell itself. All it needs is to redefine some of the conventional assumptions about how best that cell should operate.

There are few things more powerful in breaking down barriers between people than trade and transaction. We can easily forge a far greater degree of economic cohesion by re-examining how to nurture the already strong and natural bond between parties in the economic cell we call companies, businesses or indeed any enterprise. That will take us a giant leap forward in our greatest challenge of all: establishing social cohesion.

Then there is the overall economic environment that has caused a fraying of those bonds. They include the burgeoning of parasitic entities such as financial and speculative markets, the incursion by governments into private initiative, concentration of corporate capital, a contaminated exchange system and a warping of price discovery. In nearly every respect, the ideal of commercial democracy has been invaded. Economic democracy should not be confused with the populist concept of “economic freedom” which focuses on possession of wealth and assets. The former is about freedom of choice and access to opportunities for self-help and development.

But still, our magnificent cell will survive. Increasingly and ironically, this ancient expression of wealth creation is finding an unlikely friend in modern technology. The changing building blocks of the modern company, reflected in so-called “disruptors”, and “insurgents” are far closer to the pure and ancient value-adding model. The role of often largely parasitic intermediaries, including banking, is being challenged. Block chain technology is gaining trust and confidence, and crowd funding is chipping away at the very vestige of capital formation, stock exchanges and bond markets. Peer-to-peer transactions are ensuring greater purity in price discovery.

Put together, technology’s greatest achievement may yet be to restore economic democracy and with it a completely fresh, yet ancient understanding of the true dynamic of wealth creation. 

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