Public Banks breed democracy

Economic democracy is not simply a series of piecemeal reforms; it is also a vision of a fundamentally different kind of society. Imagine a society with full and robust economic democracy based on the following four pillars: the majority of workplaces are worker cooperatives; workers and consumers interact in a highly regulated and redistributive market; finance is provided by public banks; and public investment occurs partially at high level for major projects, but significantly through lower levels via participatory investment. How would the nuts and bolts of such a system function? People would apply for jobs in the normal way. Co-ops would try to make money in the market, just as firms do today. The co-ops would be free to pay their workers equal wages or not (though previous experience with co-ops indicates that wage differentials will not usually exceed 3:1). Co-ops looking to expand would apply for loans from their local public bank. Businesses that are innovative and successful at responding to the demand of the population would grow and prosper. So successful firms would make more money than their competitors, thus providing incentives to work hard. High levels of taxation would prevent the rich from becoming super-rich, and would also pay for excellent public services, perhaps a Guaranteed Basic Income. Firms that are producing things that no one wants would go out of business; their workers would need to find new jobs (but note that unlike today, this would not at all be a tragedy since the public services or basic income provide very strong social support). Moreover, community members would be able to direct the economic development of their neighbourhoods through their participatory budgeting system as well as the public banks. Such a system would retains price signals for efficient allocation, a certain degree of material incentives for hard work, but no devastating consequences for business failure. There would still be business competition, which is useful for keeping firms accountable to what the population wants, but in this competition, no one wins majestically and no one loses tragically (no one ever becomes rich enough to acquire power over others or poor enough to go hungry, or lose their healthcare). The democratic market here resembles more a friendly sports race than a life-or-death battle. A true economic democracy would possess all the efficiencies of the market system without the profound injustices and disenfranchisement. There would be far more freedom - workers have enhanced say in their workplaces, citizens would have enhanced say about the economic development of their communities. There would be far more equality - due to the compressed pay scales of the co-ops and the higher taxes. Democracy too would have finally breached the barriers of the political system within which it has previously been confined, and would thereby come to animate all the main institutions of society. Such a society would be neither capitalist nor communist. It would be a radically democratic society. Clearly it would not be a perfect society, but just as clearly, it would be a profound advance from where we are now.