Wednesday, 16 May 2012

Friends, Romans, lend me your Euros

No one should forget that the fragility of the Euro is a symptom of the real financial crisis facing us, namely the global crisis of mismanaged lending.

This crisis is, in turn, not a one-off, but part of a repetitive economic disequilibrium that breaks out whenever the plutocratic model of monetary distribution predominates without being effectively held back by regulation.

How does this plutocratic model work? Its ruling assumption is that money is to be lent to the rich on soft terms to help them get richer, but lent to the poor on stringent terms to keep them poor. Indeed the vast majority of corporate banking institutions following this model leave those with the most desperate needs with nowhere to go but resort to unscrupulous loan sharks. In general, any sign of failure to pay back will trigger off harsh interventions – poor individuals would have to lose everything, and poor countries would have to savagely cut their basic provisions for health, education and social security.

The approach towards lending to the rich is just the reverse. Lending often takes the form of investment, so that failure to produce returns would be written off as a loss-making transaction. The richer you are the more you are begged to borrow huge sums to fuel speculations which undermine economic stability. And any inability to pay back would be treated with deference in direct proportion to the quantity in question. Rich executives are rarely thrown into abject destitution by unsympathetic banks, and rich nations such as the US could for decades pile up debts, which in the case of poor nations would have long ago led to stern castigation.

The net result is that the rich are readily lent money to make even more money, while the poor are told to make up for their falling standards of living (despite their increased productivity) by borrowing more regardless. And when the rich have squandered their borrowed sums on failed gambles, and the poor’s real earnings are cut back so much they cannot keep up their debt payment, the alarm bells are raised and the stick comes crashing down on those with the least.

This model of lending led to the 1930s’ Great Depression. When the lessons from that crisis were forgotten, and the necessary regulations were later swept away by the rising tide of Thatcher-Reagan politics, it opened the floodgate to irresponsible lending which has brought us another wave of economic woes.

There is of course an alternative. The cooperative model of lending replaces exploitative divisions by the pooling of resources for the common good. We can all learn from cooperative finance institutions, mutual societies and credit unions. Money borrowed for high risk speculative gains should be subject to tighter terms that would protect against undesirable consequences for vulnerable members. Global financial deals should be taxed to provide ballast for economic stability. Financial support for the poor should be treated as investment, maintained to boost their ability to build up their own wealth, and written-off where necessary when circumstances beyond their control rob them of their ability to pay. The rich should be held to the same intensity of credit control that has been directed at the poor, while all borrowers should be treated with equal respect.

When applied consistently to individuals and countries, economic wellbeing as well as social justice, will be more readily restored than the disastrous prescription of “laissez-faire-for-the-rich, but austerity-for-the-poor.”

Tuesday, 1 May 2012

The Case for Cooperative Problem-Solving

When faced with problems we cannot effectively tackle on our own, one might think it obvious that we should join forces in aid of each other. Yet throughout history, many of those in a powerful position have sought to stop others from coming together to steer collective action for the common good. Opposed to any possible diminution of their own power, they do not want others to gain strength from organising themselves into a cohesive unit. So they denigrate democratic collaboration as cumbersome and unreliable, and insist that important decisions should be divided between those best made by the few at the hierarchical apex on behalf of everyone, and those that ought to be left to people to resolve individually.

In practice this means that where universal compliance (in a country or a corporation) is required to achieve what the powerful elite want, collectively binding decisions tend to be taken by the few; and where the outcomes are inconsequential to them, laissez faire is preferred and individuals are left to their own devices. For example, in politics, plutocratic interests frequently use government institutions under their influence to obtain policy decisions to help the wealthy minority; while maintaining that decisions to support the poor and vulnerable should be left to individual conscience and private charities. Similarly in business, many top executives, concerned with their own status and remuneration, take decisions that the rest of their firm have to accept though few others would have any say about them; yet at the same time they are ready to dismiss matters relating to the wellbeing of lower paid members of their organisation as something extraneous to their core enterprise.

If this false and pernicious dichotomy continues to take hold, then the many problems we urgently need to address (e.g., environmental degradation, economic turbulence, exploitation of the weak, neglect of the poor, neighbourhood to global conflicts, criminal disorder, spread of drug-resistant disease) would worsen in the absence of concerted efforts to find equitable solutions for all, while the collectively binding decisions that are taken are routinely designed to serve the narrow interests of the powerful minority at the expense of everyone else.

Against this background, it is vital for civic educators everywhere to make it their priority to increase citizens’ understanding of cooperative problem-solving – a tried and tested form of democratic collective action which is economically, politically, and above all, morally, more conducive to the common good than the calculated mix of top-down diktats and selective free-for-alls promoted by the plutocratic elite.

Cooperative problem-solving is exemplified in the development and operation of worker cooperatives, and inclusive organisations such as the John Lewis Partnership and the Semco Group; in a variety of democratic community engagement arrangements like Planning for Real and Participatory Budgeting, which empower citizens to make informed decisions on shaping priorities for public action; and in reconciliation processes from community mediation to restorative justice, which enable even those divided by conflicts and resentment to find common grounds to resolve their differences.

There are three key features common to these examples. First, they recognise that the reliability of any claims cannot be determined by any infallible individual but has to be checked with a community of enquirers. Secondly, they embody true reciprocity in according every participant equal respect, and none can expect to receive concessions from others without making contributions considered commensurable by others. Thirdly, decisions are reached by the direct engagement of all concerned or through procedures that are accepted by all. Together they make it possible for people from diverse backgrounds to deliberate openly and reach consensus under procedures they have signed up to so that their combined efforts can secure better outcomes than they could have otherwise attained.

Far from relying on or imposing uniformity, cooperative problem-solving is premised on the need to find ways for people with contrasting views and outlooks to learn to collaborate. Instead of positing a doctrine that all must accept, it facilitates the finding of common ground to build relationship for the future, even amongst those divided by mistrust. And the outcomes may range from the same minimum guarantee for everyone to varied rewards for different levels of contribution, once such differentials are judged by all concerned to be meritorious and fair. The same applies to penalties for violations of the agreed rules.

Rejecting attempts by the powerful to limit the terms of collective action to what would promote their sectional interests, cooperative problem-solving is pragmatic in its insistence that the extent and method of cooperation is to be determined by people learning from their experience of cooperating with each other. It draws its inspiration not from a single exclusive faith or fundamentalist ideology, but from diverse sources such as the cooperative and communitarian tradition from Robert Owen to R H Tawney; philosophers like JS Mill, John Dewey, Paulo Freire and Jurgen Habermas; and many community development advocates, including Jane Addams, Mary Parker Follett, and Saul Alinsky.

The challenge for civic educators is to present cooperative problem-solving as a generic approach which can be adapted for different social and economic problems, and applied more widely and consistently in producing sustainable solutions. For all the praise given to John Lewis and cooperative enterprises, their business model is still denied to the vast majority of workers. For all the positive impact made through participatory democratic practices, citizens still rarely get the opportunity to truly engage with or shape public policies. For all the success achieved by restorative mediation, the prevailing assumption still rules out cooperative resolution of differences as impossibly idealistic.

In making the case for cooperative problem-solving, we should set out its ethical values of reciprocity which are universally respected; how better outcomes for all are secured using the appropriate techniques in the right context; and why conditions of unequal power must be radically reduced to give genuine cooperation a chance to flourish. And the case should be made at every level of human association, from schools and universities, workplace and community organisations, to national and global politics.

Relevant previous posts for reference:
‘Much Ado About Cooperating’
‘Cooperative and Communitarian: a common heritage’
‘Can Democracy be Saved?’