R M Cullen MD MSc MFM BA DipStats DipProfEthics

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Midinomics

introduction

Imagine that you could choose the kind of economy into which your children would be born.

Would you choose an economy where your child was guaranteed secure, quality (but not flashy) accommodation, a good education, a job earning sufficient income to support a family with money left over to save, and a goodly amount of leisure time?

Or would you choose an economy where if your child starts off with advantages (such as parents who own their own home and have good career prospects) those advantages will increase throughout life, so that if your child makes good choices and applies her or himself, the end result will be high income and wealth?

Human economies have, with rare exceptions, been of this second type. There are elite groups ("rulers" and the middle class) within which wealth and freedom are concentrated. There is a much larger group of workers (the proleteriat) for whom life is an ongoing struggle.

The trinity of capitalism, the free market, and democracy has led to a huge increase in the average standard of living in industrialised countries, even in the last century, and certainly when the Europe of today (for example) is compared to that of 1,000 years, or even 500 years, ago.

However, free market capitalism has a strong tendency to create a relatively deprived underclass. The reason for this was well understood by Karl Marx 150 years ago. In a free market capitalist economy, goods are produced as cheaply as possibly and are sold as expensively as possible. The difference is profit, which is returned to the owners of capital.

In this system, wages paid to workers are costs of production, purchased by the owners of capital in the same way as raw materials and electricity. Wages are a cost to be minimised. Profit maximisation benefits when workers compete for jobs. A pool of unemployed means the owners of capital can pay lower wages.

It is this feature of capitalism - paying as little as possible for labor, that creates relatively deprived communities.

There have been three responses to this problem. The first, and most successful, has been the union movement. In essence, the union movement forced capitalists to share their profits with the workers whose labor made those profits possible.

The second has been income redistribution through taxation. The reality here has been that the truly wealthy (the aristocrats or barons of society) do not pay their fair share of tax. Tax, as a method of income redistribution, shifts income from the middle class to low paid workers (the proletariat) and the unemployed.

The third, and in the twentieth century the defining feature of communism, has been the overthrow of the ruling capitalist class and its replacement by a self-appointed group "of the people, by the people, for the people". For whatever reasons, communism at nation-state level was not the success Marx, Engels, and Lenin anticipated.

Capitalism, in the middle part of last century was rescued from the threats of unionism and revolution (it had already rendered taxation manageable) by the emergence of a much larger middle class (loosely understood as the bourgeoisie, those who are not aristocrats but have been favored by the system and support it strongly). Marx and Engels did not anticipate the rapid increase in the numbers of this social class. These people were comfortable and not inclined to take risk when conformity promised sure rewards. They were certainly not revolutionaries.

The persistence of a materially poor underclass (the proletariat) was, and remains, important for social stability. So long as there are a significant number of people less well off or otherwise 'inferior', humans will expend energy in preserving their position rather than in seeking to challenge those in whom capital is concentrated (the aristocrats or barons)

There are three central tenets of capitalism - the three Ps - private ownership (property rights), profit maximisation, and production (which normally requires consumption, or markets).

The question posed at the start of this page can be reframed. How does the proletariat, or a community therein, organise itself within a free market capitalist economy, so that their children are guaranteed secure, quality (but not flashy) accommodation, a good education, a job earning sufficient income to support a family with money left over to save, and a goodly amount of leisure time?

The following pages argue that there are five key components

• identity and restricted immigration
• creation of a local economy around which goods flow
• acceptance of a uniform wage
• community rather than individual ownership of capital, especially housing and the means of production
• establishment of a local banking system with local interest rates and currency

I live in New Zealand, a small country which over the large twenty years has conducted (although treaty settlements are not seen this way) an economic experiment in which the distribution problem has been approached by the state transferring significant sums to indigenous (Maori) communities. There is no evidence that Maori belonging to one of these compensated groups are better off than other Maori. Nor does it seem that the economic gaps between Maori and non-Maori are closing. However, this experiment has yielded a lot of valuable data and experience.

In New Zealand, and its big brother Australia, there are multiple examples of immigrant communities that have elevated themselves from proleteriat to bourgeois, and even of individuals who have become economic aristocracy. They also provide useful examples and data.

midinomics
a modern socialist community
paths to a modern socialist community