7.8 Financing the transition to a green social democracy

7.8.1 Preferred options for financing the transition

In relation to economic policy there are several alternative possibilities for achieving a green social democratic society. Advanced here are those options that have the greatest likelihood of successfully achieving the aims of a green social democracy and doing so in time to avert the worst of the potential consequences of the continuation of neoliberal policy. These are the options that are most likely to actively engage people in the decision-making process. All are in the direction of decentralization of ultimate decision-making power.

Perhaps the most important option in relation to economics is that concerning governance. Advanced above was the option of a bottom-up form of democracy through which the people would have the greatest control over the major policy decisions that might affect their lives. Thereby ruled out was any option that centralizes decision-making power in hierarchically organized levels of decision-making. These latter are too open to corruption, ultimately leading back to capitalism. The role of leadership in a green social democracy would be in the opposite direction to that under capitalism. Rather than primarily serving the self-interest of the leader, leadership in a green social democracy, following its current tendencies, would be limited to advancing ideas and proposals, providing models, and facilitating universal participation in the decision-making process. The substitution of themselves for the people they are to represent by any individual or group, elected or not, would be grounds for recall or dismissal. It was further argued previously that this model extend to all organizations and institutions within society.

The next issue for which a range of options exists is the ownership and management of investment capital. The argument has already been made that the responsibility for determining priorities for investment should rest with the elected assemblies in a green social democracy. Individual businesses could then decide how they might best serve to meet these priorities and be chartered accordingly.

Favored in this argument are worker owned and operated businesses. A strong argument could even be made that every business beyond the size of family owned and operated ones should by law be worker operated and managed, including stewardship responsibilities to the public for the property utilized by the business. That would mean that private owners of businesses would be required by law to turn over the management of their businesses to the workers in those businesses. The owners would retain the right to work in the business they formerly owned, taking on responsibilities appropriate to their experience and abilities on the basis of mutual agreement with their fellow workers. In the public sector, democratically managed units should become the rule.

One further comment in support of worker operated and managed businesses should be made. In practice it would mean, for example, that companies in the fossil fuel business could be required through their charters to reinvest a proportion of their profits in other directions, right up to the ultimate liquidation of their fossil fuel based activity. This opportunity for the workers in these and the other productive sectors of the economy to invest some of the profits earned from the sector in which they currently work in activities through which they could make alternative contributions would likely prove to be an effective way to engage all working people in making the smoothest possible transition to a more sustainable economy, one that better meets the needs of working people and their families.

The proposals below are for the use of taxation and public banks as additional sources of public revenue, including investment capital. These two means could be used interchangeably, but instead the options advanced here are again those that the authors believe would likely have the best results. It is nevertheless recognized, indeed fundamental, that a green social democratic society is one that would be guided by its experience when making choices between various options. Comparative testing of two or more options to find out which has the best results is likely to become characteristic of the development of a green social democratic society. Indeed, the flourishing of science (content and method) is one of the defining characteristics of a green social democracy, along with the exercise of democracy, education and imagination.

7.8.2 Again, about the transition

Before proceeding to taxation and public banking, it might be helpful for a brief recap and comment on how we arrived at this concluding part of our argument for a green social democracy.

In Chapter 3 on the economic policy of a green social democracy we identified in broad strokes the nature of the system (capitalism) that needs to be replaced, the principal changes required for the successful creation of the new, alternative system (green social democracy) and the nature of the transition. In relation to the financial policies appropriate to the transition, we offer the reminder that a lengthy transition period is to be expected, one that would take us from the inherited institutions of the old system, corresponding to the private-profit goals that define that system, to the new cooperative institutions that would replace them, corresponding to the goal of a just, sustainable future. The details of this transition are likely to vary considerably from country to country, although its main features are already discernible on both logical and practical grounds.

Associated with the transition from one economic system to another is a corresponding cultural transition. This cultural change – and therefore also the economic one - may require generations to complete. Another complexity we should recognize, if past history provides any guidance, is that the correspondence between economic and cultural change is not likely to be exact. Perhaps one historical example might suffice, namely the cultural change associated with the transition from feudalism to capitalism in Western Europe. That transition began when feudalism was still the dominant system, notably during the periods of the Reformation and Enlightenment. These cultural changes were prompted and supported by merchants, artisans and some of the feudal aristocracy, particularly those who found themselves in an increasingly precarious position in relation to growing centralization of state economic and political power under a moribund feudalism.

The defining operating mechanism of capitalism, the private accumulation of money capital from the surplus value created by employed labor, likely arose first from within feudal England. There a scarcity of agricultural produce led to market competition between former feudal lords, who became employers of desperate former serfs excluded from usufruct rights to the English commons. While the rest of Europe lingered for hundreds of years more under feudalism, England gained a trade advantage from the more efficient production and sale of agricultural and later manufactured goods, ultimately prompting their trading partners to make increasingly abrupt, often centrally mandated changes from feudalism to capitalism, usually with the participation of the reigning feudal monarch and that monarch's state apparatus. Depending on the timing and local conditions, there emerged great variation in the degree of intermingling and relative dominance of emergent capitalism in relation to displaced feudalism, economically and culturally. (For more detail about the political character of these changes in Western and Southern Europe, see: Ellen Meiksins Wood (2012, Verso) Liberty & Property, A Social History of Western Political Thought from Renaissance to Enlightenment).

The economic and cultural transition period from capitalism to a green social democracy can also be expected to vary considerably in length and character, depending on the circumstances and specific conditions in each country. In this work we have identified economic sectors under capitalism, such as the non-market economy, and emergent cultural practices, such as bottom-up forms of democracy within oppositional movements, which are likely to be expanded under a reigning green social democratic government to become defining characteristics of the new socio-economic system.

We have argued for a more conscious, deliberate effort while capitalism still prevails to advance these ends as preparation for the transition, reflected in some of the preceding sections of this concluding chapter. Nevertheless, also taking the past as a guide, in the section of this chapter on establishing through constitutional assembly a bottom-up form of governance, we have forecast this accomplishment as a revolutionary threshold, a change from dominance by one class of the people, the capitalist class, to political dominance by the people themselves. We foresee this change as the critical one, enabling the development of a green social democratic economy as the replacement for capitalism. The new constitutionally mandated form of government and rights of the people would set the table, enabling the new economy and culture to develop through their mutual interaction. Key to the establishment of the new economy are the financial policies implemented and the rate of cultural change permitting their further evolution towards a more cooperative society. Again, the key concept here is that of a transition period, the complexity and character of which would be determined by the interaction between the parts of the system, primarily between a changing economy and a changing culture.

Facilitated by their new form of government, it would be the task of the people in assembly to make the further legislative changes that are needed for green social democracy to be able to grow at the expense of the old system. Without these changes, again using historical experience as a guide, it should be acknowledged that the likely outcome would be a reversal, perhaps even a violent overthrow of the new government and the persecution of its members and supporters by the re-emergent capitalist elite and its supporters.

While prior revolutions against capitalism have failed, for a variety of reasons, there is little, if any room for failure now, particularly for revolutions occurring in the home countries of the major multinational companies, their owners and directors. The current irrational direction of contemporary capitalism is only a foretaste of what would likely be the result of a return to power of a temporarily defeated ruling capitalist class and its court jesters.

It is vital that when the people get an opportunity to move beyond capitalism that this be done successfully, firmly and irreversibly by establishing the new form of democracy. The success of a green social democratic government requires above all the engagement of the people in self-rule and self-development. There will be no room this time for despotic leaders who fancy themselves as top-down agents of the new system. Only the people united can succeed against the economic, political and cultural forces arrayed against them. The role of leadership – real leadership – is, as it has always been, limited to modelling and facilitating the change.

It then becomes crucial that financial policy correspond to the possibilities created by achieved cultural change, without greater or lesser speed than the circumstances permit.

7.8.3 Financial policy in this transition period

There are two essential arms of financial policy in the transition to a green social democracy, both identified and argued for previously, namely, taxation and public banking.

Neo-liberal policy has made taxation a primary means of achieving the current level of wealth and income inequality. Even before the emergence of green social democratic governments, the fight to reverse neoliberal policy needs to be waged. This includes the fight for taxation policy that favors a more egalitarian distribution of income and wealth with an increasing share of tax revenue spent on the common good, including:

  • Eliminating the blight of poverty in the midst of plenty;
  • Transitioning from fossil fuels to safe, renewable forms of energy;
  • Developing an efficient, affordable system of public transportation;
  • Investing in a sustainable natural environment;
  • Providing excellent, free public education at every level;
  • Improving the health and well-being of all;
  • Establishing a more just, democratic, inclusive society; and
  • Advancing the other aims of the emerging green social democratic movements.

Current struggles against neoliberal policy and for greater equality in after tax disposable income and more public investment in restoring and expanding the social wealth of the people help mobilize the support that will be needed for the implementation of these policies by emergent green social democratic governments. In the more economically developed countries income redistribution policies can aim at effectively ending poverty and creating a more just and sustainable society. In less developed countries they can provide for the most rapid reduction and elimination of poverty.

The fight to end poverty while capitalism prevails can likewise pave the way to a green social democracy when addressed in the appropriate manner. Although practical possibilities for ending poverty under capitalism are limited by the opposition of the ruling capitalist elite, cultural change can begin with the argument for an annual guaranteed basic income as a social dividend, equally merited by each person on the basis of the contributions of past generations to current levels of labor productivity. Even if used as an argument for the substitution of a single universal program for the paltry panoply of welfare programs now provided under capitalism, the argument for such universality could raise expectations for the levels of universal income and wealth support that only a green social democracy could securely provide. The key arguments, however, must include universality and human dignity. These requirements mean that the social dividend be provided to everyone equally, without bureaucratic intervention.

Other policies that might be successfully fought for while capitalism prevails or more likely when green social democratic governments come to power include the following:

  • Elimination of all grants, subsidies and tax advantages enjoyed by large privately owned, for-profit corporations, starting with all of those engaged in the high-carbon economy;
  • Provision of tax advantages and grants to non-profit businesses and organizations dedicated to achieving a just, sustainable economy;
  • Phasing out intellectual property rights, including patents and copyrights, replacing these instead with guaranteed public sector employment to inventors and creators, including income at the level their contributions merit and supportive resources for their continuing creativity; and more generally
  • Making all the intellectual products of human imagination and creativity the shared property of humankind – matching the law to the social nature of all human intellectual production.

7.8.4 The social goals of financial policy in a green social democracy

1. Creation of a social dividend, ending poverty

The first goal to be achieved through the financial policy of a green social democratic government would be an end to poverty. As a relative term, poverty might be understood in some of the more developed countries (those without extreme levels of inequality) as income and wealth that is, say, less than half of the mean income and wealth shared in the economy. As an absolute term, poverty might be understood everywhere in terms of a lack of access to goods and services thought to constitute a minimum for a dignified existence and further development within the given country. Although fought for under capitalism by those whom we have identified as green social democrats, the goal of ending poverty by either definition is unrealizable in the present system. It would undermine the very foundation of the system, the availability of labor willing to work at the lowest rates and under whatever conditions prevail under capitalism.

Given the role that money now plays in the market economy, the first act of a green social democratic government in the sphere of finance should be the creation of a social dividend in the form of a minimum guaranteed income to every person, sufficient, in the more developed countries, to cover all the essential goods and services that a person or family must ordinarily obtain by purchase. Able to obtain the basic necessities of life, every person would then be free to take full advantage of the other opportunities that nature and human effort create, including opportunities for personal development and engagement in voluntary activity that benefits others (the non-market economy). The initial supporting legislation should proclaim this annual guaranteed basic income (social dividend) as a human right, the amount of which should begin to reflect the contributions of previous generations to the current productivity of all who work.

2. Gradual elimination of the need for money

Another goal of the financial policies of a green social democracy would be to reduce and ultimately eliminate the role of money in human affairs. As we have already acknowledged, this end cannot be achieved overnight. It must, after all, include a cultural change from a capitalist culture in which the dominant "religion" for hundreds of years has been that created by commerce, the worship of money and its possession. A fundamental measure of the success of any green social democratic government will be its progress towards a non-market economy, first towards making it the dominant sector of the economy and from there gradually eliminating altogether the need for a market economy (defined by the use of money for the exchange of goods and services).

2.1 Expanding the commons, shared freely by all

Supplementing and, in the longer term, potentially replacing the need for a social dividend in the form of money, will be the activity of green social democratic governments in continually expanding the commons, shared freely by all, in part by investment in restoring the health of degraded ecosystems, thereafter made accessible for free to all who contribute voluntarily to the stewardship of the commons, in part by transferring more of what is now private into the commons, and in part by human created additions to the commons (such as, housing, educational facilities and resources, parks and recreational facilities, and free access to services and resources that are currently part of the money economy).

2.2 Achieving increasing wealth and income equality, in part through progressive taxation policies

 

So long as the money economy remains a significant part of the total economy, the members of a social democratic society, through their elected assemblies, will be obliged to use taxation policies to appropriate for public use a share of the money value of everything created and sold in the money economy. This can take any of its present forms under capitalism, namely taxes on personal income, taxes on wealth (property taxes and estate taxes), and sales taxes. The main difference between the taxation policies within a capitalist society (particularly one governed by neoliberal policy makers) and a green social democratic society is who gets taxed and how much.

Taxes on income and wealth. Favored for a green social democracy is a steeply progressive income tax beyond the level of the guaranteed social dividend and steeply progressive property and estate taxes beyond the average level of adult personal wealth.

Sales taxes on luxuries. Sales taxes, in our view, should only be collected on luxuries, defined as environmentally wasteful expenditures, and should be as high as they need to be to discourage and eventually eliminate environmentally wasteful goods and services purchased for private use. This category should include the purchases of personal use property beyond the capacity of the purchaser to maintain through their own labor in an environmentally healthy state.

Taxing businesses

. Public services to businesses operating in the market economy should be paid for by these businesses as part of their operating expenses, but be free to businesses operating in the non-market economy, thus encouraging the development of the latter. Otherwise, taxation policy in relation to business activity would be an instrument of public policy goals, including support for the transition from environmentally more harmful practices to environmentally sustainable practices by taxing the former and publicly subsidizing the latter while both practices continue to exist.

Other income policy

. Other income policy would include:

  • Establishing a generous minimum wage that assures every working person a total income that fairly represents their contribution to the market economy; and
  • Establishing a maximum allowable income corresponding to the maximum contribution to the public good that can reasonably be attributed to the individual, taking into account the society's cumulative contribution in the form of education and infrastructure.

7.8.5 Replacing private-for-profit financial services by public non-profit banks

Probably no other policy would be more critical to the achievement of green social democratic aims than the establishment of public non-profit banks. These would be the basis for creating equal opportunities for all to participate in the entrepreneurial development of a green social democratic economy. Consideration could be given to taking over the physical resources and personnel of failing banks and those deemed too-big-to-fail. Those excluded from the public domain would most likely fail on their own account in short order.

In principle, public banks could be given the option of making profits for the public, but we argue instead that there should be no desire or intent to risk the creation of another monster once the threat from the current one has been successfully dealt with. Rather, interest rates on bank investments should be limited to those needed to cover the bank's costs in providing the services.

In any case, publicly owned non-profit banks are essential if society is to move away from dominance by large for-profit financial institutions. Their initial capitalization should include the management of all government finances, including becoming the sole creditor of government. Thenceforward, all debts of the people would be to themselves.

The non-profit character of public banks would facilitate the transition from dominance by a wasteful, destructive capitalist economy to one propelled by the aim of achieving a higher quality of life in a just society and a healthy natural environment. Limits on the salaries and benefits of bank executives would be a necessary part of the public regulation of public banks. In no case should a salary earned by working in the public financial industry (or in any other part of the public sector of the economy) exceed the ceiling established for taxation purposes.

During the transition period in which private banks continue to exist, regulation of private banks would need to be tightened, including strict controls on allowable salaries and benefits to their senior executives and increasing levels of taxation on their profits, transforming them, in essence, into public utilities, if competition from public banks doesn't eliminate them first.

Private financial institutions facing bankruptcy should be allowed to fail, with legislatively required priority distribution of their assets to those of their creditors and customers with the smallest alternative sources of income and wealth. Bank executives found guilty of breaking laws should be prohibited from further work in the financial industry. Criminal penalties should be applied to executives who have ignored or circumvented regulations and otherwise broken the law, with the severest penalties reserved for those whose criminal behavior has benefited themselves while harming others.

A further cautionary note may be needed here before concluding. For a society in which being part of government, as an elected official or a civil servant, is no longer a route to personal power, but an opportunity to offer guidance and support, arms-length relationships between government and the performance of public services, especially financial services, are needed. The government's role in relation to banking, whether public or private, should be regulatory, not micro-management. This, too, corresponds to a cultural change, both in public expectations and in the behavior of officials.

The removal of subsidies to private-for-profit businesses, especially in the high carbon economy and other extractive industries, providing them instead to the new economy, and the establishment of public non-profit banking will create a more even playing field between private-for-profit businesses, private non-profit businesses and publicly owned businesses. The protests from private business that this is a competition they cannot win would be the best arguments that could be made for these policies. If for-profit businesses cannot win on an even playing field, they should not exist.

This will not be the old socialism, with command and control governments substituting for the people. A level playing field with a government constitutionally limited to regulation and leadership should have its intended result: a just, sustainable society. Otherwise, it would remain the people's natural right to make whatever further legislative and constitutional changes that may be necessary to that end.

Welcome!

This website was launched September 1, 2010 in support of a green social democratic alternative to neoliberal capitalist policy and practice. The primary result is a work by Charles and Karen McFadden of seven chapters, grouped under the title, Towards a Green Social Democratic Alternative to Capitalism available here in pdf and html formats.

Below under the heading What’s New can be found the most recent materials posted on this website, including opinion pieces, book reviews, articles and selections from the 2017 edition of the main work.  For the interest of new and returning visitors, new materials will be included quarterly.

What's New

NEW & REVISED

Authors' Preface

1.6 The epochal nature of the period we are entering

6.0 The socialism we need against the "socialism" of the 20th century

6.8 Additional concerns about 20th century variants of "socialism"

6.9 The people united!

7.1 Policy alternatives and political movements to advance them

OPINION

Charles and Karen McFadden, Is revolutionary transformation on the agenda

Charles and Karen McFaddenHumanity on the Brink

Charles and Karen McFaddenMovements of Resistance to Movements for System Change

Charles McFaddenTranslating Green Principles into Education Policy and Practice

Charles and Karen McFadden, The Role of Revolutionaries in the Labor Movement

REVIEWS

Charles McFadden, The People United for a More Just Sustainable Future

Karen and Charles McFaddenCan emergent early 21st century neo-fascism be defeated without coming to grips with late 20th century restructuring of capitalism into a global system

Karen and Charles McFaddenA Dominant Capitalism or a Sustainable Environment? Why we can't have both.

US CORNER

William I. RobinsonThe Crisis of Global Capitalism and Trump's March to War

William I. RobinsonTrumpism, 21st Century Fascism, and the Dictatorship of the Transnational Capitalist Class

CANADA CORNER

George HewisonWINNIPEG 1919 & THE COLD WAR

George HewisonArt Manuel - "Unsettling Canada

George HewisonThe NDP and LEAP

RECOMMENDED

Albert Einstein, David Swanson, Jill Stein, Chris Hedges, William I. Robinson, and others Selected articles for Winter 2018

FEATURED WORK

ECONOMICS

1.7 The dynamics of capitalism as a system and the limits of single issue reforms

2.11 The economy in transition towards a new deal for labor and the community

3.1 The challenge of a moribund economic system

3.7 Public banking: A cornerstone of a green social democracy

4.7 Economics and culture

6.5 Using the non-market economy as an opportunity to begin moving beyond capitalism

HISTORY

1.6 The epochal nature of the period we are entering

2.0 Theoretical Perspective: Defining Green Social Democracy

2.5. Socialism and green social democracy in historical materialist theory

4.3 Culture in historical perspective

5.1 Contrasting a green social democratic world with the currently prevailing, but challenged neo-liberal one

6.2 Socialism and capitalism as coexisting social systems

LABOR

2.11 The economy in transition towards a new deal for labor and the community

5.7 Defeating neo-liberal capitalism: The role of social movements

7.3 Justice: Creating a just society, based on the right of all to a dignified, secure existence

Creative Commons License

Creative Commons License: Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) applies to all work posted on this website except that which appears with authors whose last name is other than McFadden, in which case standard copyright should be assumed to apply.