Many Australians are demoralised by unemployment, alienated by insensitive bureaucracies, exploited by business, depressed by environmental degeneration, powerless to take control of their lives and cynical about the interest or the ability of politicians to make things better.
Stakeholder democracy would resolve these problems by reducing the size and power of bureaucracies in either the public or private sectors. Citizens would obtain power directly to control their lives and neighbourhoods and to look after their environment. Since stakeholder democracy would create a universal minimum income, policies of full employment could be replaced with a policy of fulfilment in employment.
The opportunity for Australia to establish itself in the next 30 years as an ecologically sustainable stakeholder democracy to provide all citizens with personal fulfilment will require fundamental changes in the way that we govern ourselves.
Beside significant changes to the Australian constitution, we need also to make substantial changes in our social institutions. Instead of relying only on market forces and the authority systems found in public and private bureaucracies to govern our lives, we should place far more reliance on family and community relationships or common interest voluntary associations.
As property rights and money significantly govern our lives, their distribution and characteristics require changing if we are to build an equitable and ecologically sustainable society. To preserve the integrity of our bioregions, we need congruent political structures. To maintain bioregional capacity to yield nature's resources and preserve biodiversity, we need matching diversity in our economic institutions, the means of production and choice of consumption.
To achieve choice and diversity, we need to decentralise control of the economy. Decentralisation facilitates economic equity, efficiency and the ability to manage the information complexity of new technology. New technology will in turn facilitate the development of a decentralised political economy. Decentralised communities create the best defence against political exploitation by foreign interests.
The Aboriginal and Torres Strait Islander Commission is an illustration of decentralised stakeholder democracy in the public sector. Seventeen of its twenty commissioners are elected by its clients. In the private sector, Australian research has confirmed overseas studies which show that listed corporations with employee ownership outperform those without stakeholder involvement. For example, businesses totally controlled by workers and customers around the town of Mondragon in Spain have a far lower failure rate and greater profitability than investor-owned firms.
Both the Australian and State governments should immediately introduce stakeholder participation in the public sector. Privatisation provides an opportunity to create benchmarks of world best practice for the private sector. Australia could become a world leader and export the social technology of stakeholder democracy. However, while stakeholder democracy could improve the performance of both public and private sector institutions, it may not improve economic equity.
Economic equity does not exist in Australia, given that less than 10 percent of the voters own more than 90 percent of the means of production. This inequality is exacerbated by substantial foreign ownership. Expanding local ownership would reinforce the benefits of stakeholder democracy by expanding the number of voters who obtained the right to control through ownership. It is only through local ownership that communities can obtain the power to control the nature and degree of exploitation of their environments. Stakeholder ownership becomes a fundamental strategy for building sustainable societies.
Local ownership also maximises the incomes of voters by eliminating the export of economic values. This avoids resource-rich bioregions becoming cash poor and allows each community to obtain the power to decide the trade-off between income and nurturing their environment. Stakeholder ownership minimises dependency, social alienation and exploitation while maximising the quality of life consistent with sustaining the environment.
Most importantly, stakeholder ownership introduces a 'Third Way' for distributing national income. This new 'plumbing' creates a universal income to replace welfare. As all citizens are consumers, they would all become stakeholders and so obtain property rights to dividend income. Dividends are the only way to distribute national income without work or welfare and taxation.
This Third Way allows the scope, size and cost of government to be substantially reduced. It also increases incentives for expanding the breadth and value of private investment to increase dividends. An 'expanded ownership' strategy provides a way to privatise the tax and welfare system.
No commercial investor requires ownership forever to obtain the incentive to invest. Commercial investments are made on the expectation of obtaining a return of and on money invested within the investor's 'time horizon' during the foreseeable future. Any profits after the time horizon become surplus profits as they are not required to provide any investment incentive.
For most productive assets the foreseeable future is less than ten years unless there is some government support as found in infrastructure projects. For most investments, dividends after ten years represent surplus profits. Surplus profits are totally inconsistent with the economic or moral justification for a market economy.
The transfer of business ownership from investors to stakeholders after the investor's time horizon cannot, from the definition of a time horizon, produce any disincentive to invest. Australian law limits the life of patents to 16 years and so the capture of surplus profits after this period. Our government does not create a level playing field for investors by allowing them to capture surplus profits from corporations after 16 years.
It is also against the interest of Australian voters to have their income and spending power reduced through the export of surplus profits to overseas investors. This now costs Australian voters billions of dollars, absorbs foreign exchange earnings and exacerbates our overseas debt.
To minimise these costs, tax incentives are required to attract investors on the basis that ownership reverts to resident stakeholders over time. Companies should be given the choice of obtaining the rights to surplus profits by paying tax at the existing level or having their tax rate reduced, on condition that say five per cent of the ownership were transferred each year without cost to their resident stakeholders. In this way, participating corporations would become 100 per cent resident owned within twenty years to terminate the export of surplus profits and introduce economic democracy.
A win-win result is created for shareholders, corporations, the government, the economy, citizens, management and other stakeholders. Shareholders would obtain higher dividends from the reduction in tax and profit retention. Corporations would continue or expand their operations through dividend reinvestment into their 'offspring' Ownership Transfer Corporations (OTCs). Government revenues would increase as the tax base transferred from corporations to resident individuals with a higher tax rate.
At the same time, the distribution of income to stakeholders would reduce welfare entitlements and so the cost to government. The economy would export less surplus profits and lose less foreign exchange for all citizens. Management and employees would legitimate their control with part-ownership shared with customers and all other stakeholders. The surplus profits captured by stakeholders would help expand the economy with new spending and investment.
Succession of business operations, management and investment would be provided through the creation of offspring companies and the re-capitalisation of Ownership Transfer Corporations after twenty years. To build an ecologically compatible society, the dynamic, time-limited property rights inherent in Ownership Transfer Corporations also need to be incorporated in the structure of money and the way we own realty.
Health, education and welfare services would be provided through the Community Land Bank which would capture and redistribute most economic values created by the community. Community Land Banks, rather than individuals, would pay tax and appoint the next level of government.
Economic and political power would trickle up, rather than down, this cascade system of governance. The control of business, social infrastructure and land would be exercised directly by their stakeholders to introduce locally owned economic democracy.
Dividends from Community Land Banks would underwrite a universal minimum income for all residents. Unemployment would no longer be a concern as financially independent citizens competed to undertake meaningful unpaid activities.
Voluntary associations and communitarian activities would replace many of the alienating and dysfunctional market forces and hierarchies which currently govern and intrude into our lives. Voluntary community activities would both occupy and support those without paid employment. Dividends for all citizens would allow residents to develop their personal potential and achieve fulfilment without the need for paid employment or welfare.
This is the world I would like to create for our children and their descendants.
Shann Turnbull, MAI Services Pty. Ltd, PO Box 266, Woollahra, NSW, Australia 2025 (tel 612 328 7466; fax 612 327 1497; e-mail: <Shann@peg.apc.org>).
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