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Beyond collectivism and individualism
Structural Features of the Prout Economy

There are several distinguishing structural features of Prout's economic system. Brief description of these follows.

1) Socio-economic units. Regional, self-sufficient socio-economic units should be formed on the basis of common cultural, geographic, social and economic factors. These socio-economic units may be affiliated in a federated system, but they should possess sufficient self-determination in their social and economic sectors to create and control developmental policy.

2) Three-tiered economy. The commercial economy should be organized into three types of enterprises: cooperatives, key industries, and small private enterprises.

a) Cooperatives. Cooperative enterprises should form the core of the economy. Except for a few large-scale, key industries and small private enterprises producing nonessentials, all production should be organized under worker owned and controlled enterprises.

Cooperatives increase worker motivation and job satisfaction because they give workers control of their enterprise and a stake in its profits. Where cooperatives have had access to the necessary inputs of production—capital, entrepreneurship, skilled labor, and competant management—they out-perform private enterprises.

Cooperatives are controlled by their worker members on the basis of one member, one vote. All members must purchase a membership share in the cooperative. This initial capital contribution gives each worker member a financial stake in his or her enterprise. Workers must sell their membership share back to the cooperative upon leaving. Through this system, worker’s ownership rights are based on their functional role as workers, and not on the basis of their capital contribution.

b) Key industries. Very complex, capital-intensive industries, such as utilities, or industries producing raw materials or goods which are strategic to the regional economy, should be designated as key industries. Because they play a crucial role in stimulating production and development for the region as a whole, they should come under community control, not worker control. The cooperative system is also inappropriate for key industries as they are generally too large to be efficiently managed by their workers.

Key industries should be controlled either by the local or regional government, or (preferably) by an autonomous board. The board or local government to oversee operations would hire a plant management team. Participatory team management techniques should be used to insure maximum worker involvement. An effective incentive system should be used to further motivate productivity.

Key industries should operate on a no profit, no loss basis. The state should not subsidize their operation, nor should it extract profits.

c) Small private enterprises. Small businesses—those having a maximum of about 5-8 employees—can be privately owned. Private enterprises should not be involved with producing or distributing staple commodities. Salaries of workers and income of owners should be subject to minimum and maximum standards established for the region.

3) Planning. Economic planning should take place at the central, regional, and district levels. But, so far as is practical, planning authority should reside at the local level. The most basic unit of planning for most purposes is the district. District boundaries should not be determined on the basis of political considerations, but on the basis of geographic factors, socio-economic requirements, common economic problems, and common aspirations of the people.

If planning is undertaken primarily on the district level, it will have the following benefits: planners can better understand the major and minor problems of the area; local leaders can solve problems according to their own priorities; planning will be more practical and more readily implemented; local organizations can play an active role in mobilizing human and material resources; unemployment can be more easily prevented; and a balanced economy can be more readily established.

District level planning should be undertaken on the basis of the following guiding principles.

a) Cost of production. Unit costs of production (including environmental costs) should be carefully determined, and the cost of producing a particular commodity should not exceed its market value. Every economic enterprise must be economically viable, and without need of state subsidy.

b) Purchasing capacity. A major objective of planning should be to increase people’s purchasing capacity. For this, there must be: (1) availability of commodities according to local demand, (2) stable prices, (3) periodic increases in wages, and (4) steady increase in collective assets (such as roads, energy generation systems, and communications infrastructure).

c) Productivity. The economy should be organized in such a way that it has the capacity to continuously increase its productivity. There should be maximum production according to the collective need, and full utilization of the productive units. Money should be properly invested, and not hoarded or squandered in unproductive ways.

d) Collective necessity. Planners should determine the current and projected needs of the community and formulate their developmental plan accordingly.

e) Sustainability. No economic development project should be undertaken which decreases the productive capacity of the environment or the vitality of ecosystems.

4) Capitalization. Investment capital should be generated from within the region, or through interregional trade. Capital for large scale development can come from developmental bank loans, worker shareholdings, and government grants. Smaller scale enterprise can be capitalized through worker shareholdings, private investment, and loans from cooperative banks.

5) Trade. To avoid trade deficits and the loss of currency, interregional and international commerce should be conducted on a barter basis where possible. Locally produced basic commodities should be protected from competition with cheaper goods produced in other countries. To protect local employment opportunities, international and interregional trade in raw materials should be avoided; only finished products should be sold outside a region. Regional economies should be largely self-sufficient in the production of basic commodities. Except for commodities protected from foreign competition, there should be free trade.

6) Taxation. The primary sources of government revenue should be value added taxes and excise taxes placed on non-essential goods and services. Payroll taxes can be used to finance social security expenditures. Income taxes are not recommended, as they encourage a black economy where earnings go unreported. Nor should there be taxes on sales of basic commodities, as such taxes have greater impact on the poor and thus increase economic disparity.

7) Trade unions. Workers should have the right to organize independent trade unions. Control of the unions should remain with workers, not with political party interests. Unions should give as much importance to making workers conscious of their responsibilities as they do to protecting their interests. In small and medium sized cooperatives, there will be less need for worker representation by organized trade unions, as these are worker managed enterprises. But in large cooperatives, key industries, public service institutions, and government administration, unionization should be encouraged. In the large cooperatives, unions would serve the interests of workers as workers, rather than their interests as worker-owners.

8) Incentives. The prosperity of society depends on worker productivity, and incentives are essential to motivate workers to develop and use their full productive capacities. While productivity and talent should be rewarded, rewards should not be so large as to create unnecessary disparity in society. Society should set minimum and maximum income levels. The minimum level should insure sufficient income to purchase basic necessities according to the prevailing standard. The maximum level should balance society’s need to maintain high worker motivation with its need to distribute wealth equitably. Over time, the minimum and maximum income levels would rise with rising purchasing power, and the range between the minimum and maximum incomes should be gradually lessened—unless this has the effect of diminishing worker motivation. The award of incentives should be incorporated into all productive activity. The forms of incentives which have most value and appropriateness are given below.

a) Special amenities. Individuals whose skills have special value to society should receive special amenities, preferably amenities which provide increased opportunity to utilize their talents—for example, special research equipment, or greater opportunities for education and travel.

b) Wage differences. Workers should be paid according to their skill level and their labor. This can be done through salary gradations, payment for piece work, or bonuses. Workers in cooperatives will receive dividends according to the profitability of their enterprise.

c) Psychological incentives. Non-material incentives are also very effective. Motivation increases when workers feel compatibility with their job, when their work environment is pleasant and safe, and when their work provides interest and challenge. Perhaps the most important psychological factor for increasing motivation is the ability to influence decision making. Therefore, all enterprises should implement participatory management processes and team work to the greatest extent possible. Team work can reinforced by material incentives based on team performance.

9) Money. Currency should be backed by bullion. If the state is required to guarantee the value of money by issuing bullion upon demand, this will check its tendency to engage in excessive deficit spending and thereby help prevent inflation.

10) Commerce. Distribution of essential commodities should be done through consumer cooperatives, not through traders, middle men, or the state. This reduces the possibility of hoarding, manipulating prices, and bureaucratic inefficiency in marketing essential products.

There should be a free flow of information about consumer products. Decentralization of production and marketing will reduce opportunities for expensive advertising campaigns designed to manipulate consumer demand.

Copyright Prout World 1999