DEMOCRATIC
CAPITALISM
THE
WAY TO A WORLD OF PLENTY OF PEACE
A
READER'S GUIDE
Chapter
10 can be read as a summary of Book I. It includes 10 hypotheses that if
validated lead to the ideal of a world of peace and plenty, the means
to attain the ideal, and the process to confirm the
ideal and specify the means.
Chapter 1, Citizen's Choice
In
the late twentieth century the
The
various political processes have never found the rational organization for human
affairs. Power adoring and untrained
leaders have persistently led to folly and violence.
The right citizen choice for the twenty-first century will require a
higher quality truth searching process by the other parts of the culture to
properly educate citizens and train leaders in support of the superior economic
system, democratic capitalism.
Chapter 2, The Development of a
Democratic Capitalist
Because
the propositions in this book are an integration of my experience and study, it
is appropriate to describe how I discovered democratic capitalism and the
extraordinary potential of people when they become involved, cooperate, produce,
innovate, and share. In my
experiences over many years, and many countries, I discovered and tested the
principles that I later confirmed through studying the wisdom of many.
Included
is a description of Care and Share, a profit-sharing and ownership plan that I designed
and implemented as CEO of ADT, Inc. I
believe that such programs are the solution to the maldistribution of wealth
that has persistently corrupted capitalism.
At
the end of my business career, I was puzzled as to why these principles were not
applied to all aspects of human organization.
After studying this question for years, I became even more puzzled that
the simple principles of democratic capitalism have yet to become the template
for a comfortable and peaceful society.
Chapter 3, Historical Background
In
1776 Adam Smith defined a new industrial system that could eliminate material
scarcity, but he warned of the threat from speculators.
Smith's vision of economic freedom was complemented by the political
freedoms in the new American republic. Robert
Owen provided early experimental verification that investment in human capital
produces superior results, and Karl Marx and John Stuart Mill enlarged the
definition of democratic capitalism by examining worker ownership as a way to
distribute wealth broadly.
Mill's manifesto contains the radical proposal that industrial performance and the worker's quality of life are synergistic:
It
is scarcely possible to rate too highly this material benefit, which yet is
nothing compared to the moral revolution in society that would accompany it; a
new sense of security and independence in the laboring class; and the conversion
of each human being's daily occupation into a school of the social sympathies
and the practical intelligence.
Mill's
manifesto and Marx's Communist Manifesto appeared at the same time, 1848, yet the record
does not show that the intellectual community synthesized these two powerful
statements. I also draw on the
Marquis de Condorcet's 1794 summary of the work of the Enlightenment; the
examination of the American democratic experiment by another Frenchman, Alexis
de Tocqueville; and the march toward freedom described by the German Idealists
Kant, Hegel, and Marx. Kant also proposed the imperative of law, not violence,
in the relations among nations in order for economic and political freedoms to
be functional.
Marx’s
axiom that social progress depends on movement to a superior economic system is
contrasted to the flawed cultural tradition in which reformers are conditioned
by a contempt for commerce and a love of state.
Chapter 4, How Democratic Capitalism
Works
Although democratic capitalism is not taught in Business Schools as a coherent commercial philosophy and practice, most of the companies designated by Fortune as the "100 Best" practice its principles. These companies have found democratic capitalism, as I myself did, through trial and error. The common features include a fundamental morality broadly understood, customer loyalty, high levels of productivity, job security, meritocracy, minimum structure, action orientation, and a compensation system that is both fair and perceived to be fair. The practices of democratic capitalism flow from a commitment to integrity in a coherent and integral pattern.
Only
in the democratic capitalist environment will the cognitive power of involved,
contributing, sharing people be fully released.
Consequently, in the Information Age, democratic capitalism has become a
competitive necessity.
For democratic capitalism to reach full potential it needs a finance
capitalism that is subordinate, not an ultra-capitalism that is dominant.
Chapter 5, Worker Ownership: The
Democratization of Capitalism
In
the coupling of democracy and capitalism, wealth distribution determines whether
the coupling is one of tension or of synergy.
Broad wealth distribution motivates wage earners to produce and innovate
to their full potential. Broad
wealth distribution recycles surplus back into the economy to maximize growth,
adds spendable income to make free trade work, and provides a sense of unified
purpose. Concentrated wealth inverts each of these requirements for economic
growth and social cohesion.
Forms
of worker ownership such as ESOPs, and profit sharing stock purchase plans have
grown in the
Chapter 6, The Economic Logic of
Democratic Capitalism
The
positive effect on both supply and demand by democratic capitalism is described
along with productivity increases that support broader wealth distribution in a
non-inflationary way.
Macro
and micro economic policies of the
The
priority for large dividends to maximize long-term shareholder value is stressed
in order to balance income, appreciation and security.
Chapter 7, The Rise of
Ultra-Capitalism
Included
is a historical review of the conflict in commerce between those providing goods
and services and those making money on money. During the last quarter of the
twentieth century the traditional flaw of concentrated wealth was multiplied
many times as excessive volatility was caused by floating the dollar in 1971,
excessive liquidity was caused by ERISA requiring full pension funding, and easy
credit for speculation was caused by combining deregulation with the suspension
of market disciplines.
Ultra-capitalism
is a threat to economic common purpose and world peace.
Many nations had their economic momentum reversed by ultra-capitalism but
the most egregious example presented is
Although
the wage earner is now the major source of new investment capital wealth is
concentrated in record amounts.
Chapter 8, Conflicts in Capitalism: An
American Tragedy
This
play depicts how the building and selling of products and services has been
dominated by the short-term and greedy demands of ultra-capitalism.
Chapter
9, Enron: The Poster Boy for Ultra-Capitalism
The
bankruptcy of Enron in 2001 is analyzed as a case study of the corrupting
elements of ultra-capitalism that threaten the world’s economy.
The emphasis is, however, not just on greedy and immoral executives, but
rather on the structural imperfections in government that allow Enrons to
happen. The government that is
supposed to control currency and credit for the general welfare, instead,
provides easy credit for speculation. This chapter points out how this
traditional impediment has escalated in the last quarter century into a dominant
force because the lobbying power of Wall Street is not neutralized by the
democratic power of reformers. The
reformers have a different agenda and lack understanding of the necessary macro
reform of fiscal, monetary, and regulatory policies.
Specific
reforms are proposed that would prevent Enrons from happening including large
dividends, changes in measurement
and accountability, auditing, rating agencies, executive compensation, and Board
governance.
Chapter 10, The Way
to a World of Peace and Plenty
This
concluding chapter presents hypotheses in a logical structure, that is, the
first hypothesis must be validated before the second one can be relevant and so
on with the succeeding hypotheses.
Hypothesis
#1 is Marx’s axiom that social progress depends on movement to a superior
economic system. Reformers have persistently failed to accept this
hypothesis and as a consequence have failed to place the culture and
political structure in support of
the superior economic system.
Hypothesis
#2 is a definition of the superior economic system. Hypothesis #3 presents
economic freedom as a potentially universal system because it has demonstrated
its capacity to improve lives in both democratic and authoritarian governments.
Hypothesis
#4 describes how the domination by ultra-capitalism results in a world economy
functioning at a fraction of potential. Hypothesis # 5 explains how government
privileges have prevented the synergistic combination of democracy and
capitalism from the beginning Hypothesis
#6 explains that this domination by ultra-capitalism is a result of an
intellectual and political gridlock in the United States between those who
support ultra-capitalism and those who do not use their democratic power to
reform fiscal, monetary, and regulatory policies but rather waste it on micro
intrusions in free markets..
Hypothesis
#7 traces this gridlock to a failure in the truth-seeking process in which the
intellectual community never accepted the challenge of the eighteenth century
Enlightenment to apply scientific truth-seeking methods to the organization of
human affairs. The process presented by Aristotle and Francis Bacon would unify
scholarly disciplines, bridge the managers and thinkers, and find common ground
for the secular and religious.
Hypothesis
# 8 and 9 identifies the agents of change: the universities and the
institutional investors. The former with the responsibility to educate citizens
and train leaders, the latter with the democratic power and fiduciary obligation
to replace ultra-capitalism with democratic capitalism.
Hypotheses
1-5 about democratic capitalism and ultra-capitalism are
examined in Book I. Hypotheses 6-10 are examined more fully in Book II
that can be read, pending publication, on the