In both capitalism and communism there is economic centralization. Capitalism centralizes economic control in large corporations while communism centralizes control in party-controlled planning bodies and large state industries.
Centralized economies are not adequately responsive to the needs of local communities or protective of local ecosystems. They leave people feeling disempowered to affect their economic destiny. They drain off a large portion of the capital generated by local economies. They do not make sufficient long-term investments in community development. And, because planning is undertaken by those who are far away and unfamiliar with local resources and needs, there is inefficient use of materials and skilled labor.
Principles of Economic Decentralization
PROUT proposes a decentralized economy, guided by five principles of economic decentralization.
Recources
The resources of a region should be controlled and utilized by the local people. Where practical, local people should process raw materials locally, using these processed materials to produce finished goods rather than exporting their unprocessed resources. They should also have control over these resources, unless the resources are of strategic global importance.
There are significant advantages to a policy of local control and local use of resources. First of all, if a local economy is mostly based on industries that make use of local raw materials, and which are controlled by local interests, then the people of that community can plan their economy in a way that better assures their economic security. This contrasts with economies where industries are dependent upon the import of raw materials. If there is resource dependency and the availability of a needed resource becomes scarce, or that commodity’s price on the global market increases sharply, then the concerned industries will be greatly disrupted. Of course, there will be those strategic materials, such as oil, which may not be produced locally and which may need to be imported. So no economy will be fully independent of outside resources. But all economies will enjoy security if steps are taken to minimize the need for imports and to make use of locally available resources.
The second reason for a policy of local control and use of resources is that excessive import of raw materials leads to drainage of capital – capital that could have far greater benefit were it to be circulated within the local economy, rather than being used for the payment of imported commodities.
Third, economies which are heavily dependent on the export of their raw materials as a source of income also face vulnerability. Should there be a glut of a commodity on the world market and the price of that commodity then drops or should demand for the commodity drop due to product substitution or changing market conditions, then there will be a sharp drop in income flowing into that economy.
Fourth, economies which export their raw materials, rather than using them in local production or first processing them for export, will suffer from a loss in the capital generating potential that could have been obtained. It should be recognized that an increase in capital creation occurs at each stage in the extraction, processing, manufacturing, and marketing required to bring finished goods to consumers. For example, if the Russian Far East ships raw logs to lumber mills in Japan or the United States, there will only be the economic activity involved with timber harvesting and transport. But if the logs are first milled into dimensional lumber, and this lumber is then manufactured into laminated joists and prefabricated roof trusses which get used in the construction of local buildings, then the local economy will be far more enriched.
Production base
Production should be based on consumer need, not profit. The main motive for the production of goods and services should be to meet the needs of the general population, not to maximize profits. An economy that is based on consumer needs will be more geared toward supplying basic commodities than toward supplying profit-generating luxury goods, and more oriented toward meeting the needs of local markets than the needs of export markets. In a consumer needs-based economy, not only will local people have their material needs better met, but there will be more circulation of money in the local economy, stimulating increased production, more jobs, and greater purchasing capacity. So an economy built up around production for local consumption will have greater vitality and greater responsiveness to human needs than one based on production for profit.
In the context of the PROUT economy, production for consumption does not mean that people would be goaded to consume or that there would be social value placed on conspicuous material consumption. It simply means that the profit-motive is replaced by the motive to see that the goods and services are adequately available, are affordable, are of good quality, and are designed for local tastes and requirements so that human material needs can be properly met.
Cooperatives
Production and distribution should be organized primarily through cooperatives. Cooperatives, by their nature, equitably distribute wealth and decentralize economic power. At the same time, a decentralized economy is essential for the viability of cooperatives. That is, where raw materials are allocated for local use, there will be a constant supply of these materials available to the industrial cooperatives. Also, these materials will not only be available in more constant supply, but also for a more constant price than if there is dependency on external sources. Furthermore, because cooperative enterprises tend to serve local needs, there is also less uncertainty about product demand. Thus, the economic stability created by cooperative enterprises will give local people a much greater sense of economic security, and popular support will readily develop for the cooperative system.
Can PROUT’s economic system be called a cooperative economy? It is not precisely a cooperative economy, but it employs many cooperative principles. The premise upon which PROUT is built is not the ideal of cooperative venture but the ideals of economic independence, local control, and diversified economy. It is based on control by the local people, not cooperative ownership. The ideal of PROUT is to give maximum utilization of resources through an incentive system, along with some safeguard against economic exploitation. Now it so happens that cooperative ownership is one of the best methods of ensuring these objectives, so it is employed within the PROUTist system. But it is only used in so far as it meets the above-mentioned goals. It is not used for its own values, but as a means to achieve local control, economic independence, and security against exploitation.
When a cooperative system is employed to facilitate these PROUT objectives, there are certain characteristics which should be present. The first characteristic is that the cooperative be composed of those people who are directly affected by the cooperative. Second, no cooperative should exist independent of regulation and basic guidelines provided by the state or the district. There must be a certain code of ethics among the various cooperatives so that no part becomes overly independent from the whole or loses sight of the collective welfare. Third, each and every member of the cooperative must have a say in the operation. It cannot be operated by a few elite individuals at the expense of others; it is operated collectively in a democratic fashion. No one is privileged above another in a healthy cooperative. Though some may have a higher status or a greater earning capacity, still they hold no greater privilege in the decision making. It is a collective process, and the most humble and the most prestigious have equal footing in the vote on policies and decisions affecting the cooperative as a whole.
Many people think that in a cooperative everyone is equal, that all have the same status. But a PROUTist cooperative will allow for personal gain in accordance with the independent initiative and hard-earned labors of the members. If a person stands out for their hard work, their brilliance, their skillfulness, they would be recognized and rewarded for their efforts and abilities. Each member of the cooperative may be equal in voting privilege, but in personal status and wealth they may vary a great deal – but not to the point of bleeding the wealth of others. Likewise, if a member has little initiative, they may find that their status and wealth will decline. But basic necessities will be met for all by policies of the state and as directed by the local government. So, this system in no way resembles communism, nor does it suffer the pitfalls of capitalism. The objective is not cooperative economic development, it is local control and diversified economic growth. The cooperative is the methodology for achieving these objectives.
Local people
Only local people should work in and control local economic enterprises. Local people are best qualified to guide the development of local enterprises in a manner that will best promote their own economic well-being. Outside interests should not interfere with local economies, as currently occurs when a large corporation comes into a community and establish a production plant or distribution center, bringing with it a management team from outside the community and making major corporate decisions from far away.
Also, the use of workers from outside the region should be avoided, especially if there is not already the full employment of the local work force. The local economy should provide employment for local people. When there comes to be a large number of workers brought in from elsewhere, the effect of these workers can be to put downward pressure on wages. Furthermore, the imported workers may send much of their income back to their families, thus draining capital from the community.
Not only should the local economy provide employment for local workers, but the economy should be developed in such a manner that the skills and potentialities of local people are fully developed and fully utilized. It is particularly important that employment opportunities exist for highly educated and highly skilled people so that they are not forced to search elsewhere for work in their field. When there is a “brain drain” because of economic underdevelopment, then a society will lose those skilled professionals who are particularly capable of making valuable contributions to their community.
Essential commodities
Essential commodities should be produced by local enterprises. As much as may be reasonable and feasible, the basic requirements of life should get produced locally. This might mean the local production of staple food products, commonly used building materials, basic medicines, common clothing items, and everyday household goods. In this way, people are not dependent on outside economies for their essential goods but produce them within the regional economy for a stable market.
Now if a basic good is not locally produced and efforts are made to initiate its production, then that local industry may need special support. This support might include restricting the import of competing products. Local industries should be given this kind of protection even though the goods they produce may be of inferior quality or more costly. If this support is not given, the development of local industry may become stifled, leading to decreased employment opportunities and increased dependency of the local economy on imports. If, however, goods can be locally produced, the economy will be stimulated, capital will remain in the local area where it can enhance the prosperity of local people, and economic self-determination will be strengthened.
Providing protection to locally produced goods does not mean that consumers should indefinitely accept products that are of inferior quality or that are higher priced. Committed efforts should be made to improve the quality of protected goods and to make them more affordable so that protections can be removed.
Free trade advocates contend that import restrictions should not be employed and that consumers should be able to buy the best and cheapest products available in the global marketplace. It is certainly true that as a general rule it is better to avoid trade barriers so as to allow for the free flow of goods. But the PROUT economy gives greater importance to full employment and to creating a stable, vigorous, and self-determined economy than it gives to the principle of free trade. To accomplish these ends it is necessary to encourage healthy local economic development, particularly in the production of essential commodities.
Economic Self-Sufficiency in a Global Society
Economic self-sufficiency will be qualified, for no one is an island, and in an integrated human society all must work cooperatively together. There are economic needs that will be shared by many different districts, so they will have to work cooperatively together. The main point is that the local area is in charge of itself; the local people are not the slaves of some outside interests that have no association with the local people’s needs and makes them powerless. The people of the local area hold the power. If they want to engage in a cooperative economic venture with other districts, good and well. If they don’t, then they have the power to do that also.
So power is with the people of the local area, though there will be political regulations with which they will have to abide in order to function cooperatively within the whole. For example, let us say a particular region has many diamond mines, and so they are producing a precious and rare substance needed throughout the world. Everyone must come to them for their diamonds. They do not have the right of local economic autonomy to then set the highest price and exploit everyone because they are locally in charge of a commodity that is needed throughout the world. They cannot set exorbitant prices and milk everyone for their personal prosperity. There will be some regulations on this – particularly on items produced only in certain areas of the world but needed by all.
These regulated processes will be required to establish global cohesion, but as much as possible there must be local autonomy. When it comes to items utilized in the region that can be produced locally, this will be entirely in the purview of the region or the district itself. Then they are in charge of their own business, because no one is affected but them – unless they should require some assistance because they are poor and cannot meet the minimum necessities for their people. If that is the case, there will have to be planning made, and assistance given, for a period of time until they can make their district sustainable.
Ronald Logan, Revised 2020
Read more: www.proutinstitute.org
