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Could Egypt Become the World's Most Advanced Democracy?

In the four months since the ouster of Egyptian dictator Hosni Mubarak, the prospects for the emergence of a flourishing Egyptian democracy have clearly dimmed a bit. But the ultimate cause for concern isn't abuse by the military junta or the specter of ongoing sectarian division and violence. Even if the military allows free and fair elections, and Copts and Muslims learn to work out their differences peaceably, true democracy will fail to emerge in Egypt unless its people turn their attention to one critical factor that is going largely ignored amidst all the transitional hubbub -- the economy.

The problem with the Egyptian economy is a major deficit. Not a trade deficit or a budget deficit, but one most mainstream economists rarely speak of: a democracy deficit.

To be fair, the problem isn't unique to Egypt. Economic democracy deficits are widespread and have a long history of hindering and weakening political democracy around the world. In fact there isn't a single country in the world today whose economy isn't running a democracy deficit, and no economy in modern history has ever been designed to operate without one.

Otherwise known as economic feudalism, an economic democracy deficit looks pretty much like its counterpart in the political sphere. In general terms, it means the concentration of power in the hands of a small and democratically unaccountable elite, which tends to exercise that power at the expense of the common good. It means corporations run like fiefdoms, where employee-driven innovation and profit belongs to the feudal lords -- the shareholders (basically the least productive members of the company community) -- whose appointed boards allocate that profit on their behalf.

An economic democracy deficit means a system where elite profit leaves little room for the rights of other economic stakeholders including employees, impacted communities, other species, future generations, the global poor and so on. So, if you're an employee who lost your job through outsourcing or downsizing, or if you've managed to hold on to your job and want better working conditions and better pay: too bad. If you're a community whose water supply is threatened by natural-gas fracking: tough luck. If you're a polar bear whose survival is threatened by climate change: suck it up. If you're a child who wants to inherit a livable planet: forget about it. And if you're a developing country hoping for enough resources and real wealth to grow your economy: keep dreaming.

In short, where there's an economic democracy deficit, your concerns and desires don't really matter if they cut into the profits of those at the top, which they invariably do.

In his latest book, Capitalism Hits the Fan, economist Richard Wolff points out that by the above standards, no economic system in modern history could be called democratic. Neither soviet-style command socialism, nor globalized Wall-Street-style capitalism makes the grade. Under both systems, Wolff explains, "boards of directors, whether [named by state officials] or [shareholders] still decide how to use the profits...and the profound absence of democracy...remains."

The problem of the democracy deficit is rooted in what might be called "the electoral fallacy" -- the idea that the democratic process is something limited to politics and public elections. But the history of modern efforts to establish and sustain healthy democracies is littered with examples like Iraq, Afghanistan, and Russia where the fall of autocracy and the establishment of public elections (even where they are apparently fair and free) merely results in the transfer of power from the hands of one set of authoritarian elites to another. Changing rulers doesn't change a thing unless you change nature of the institutions that facilitate the abuse of power.

In fact because no country has ever achieved economic democracy, no country has ever achieved full democracy. Even the American Revolution never accomplished the complete defeat of feudal power. It merely exiled it to the economic sphere where it has regained enough power to reduce political democracy to a hollow charade -- a sort of people's rubber stamp for politicians whose ascendancy and parties have already been bought and paid for by Wall Street.

For America, the failure to decisively defeat feudalism means the Revolution has never actually ended. The official war ended long ago, but the expansion of civil rights has required the people to keep up the fight against moneyed establishment power to this very day. It's little wonder that most of today's great social struggles pertain to rights fundamentally tied to the economy: migrant rights, the right to clean air, clean water, food security, education, employment opportunity, living wages, climate security, healthcare, healthy communities, debt independence and on and on.

Power may concede nothing without a demand, but economic power takes all without a fight.

In Captialism, Richard Wolff also warns against putting faith in mere welfare state solutions like America had under the New Deal or many European states still enjoy today. The reason is simple: if undemocratic forces remain at the helm of the economy, they will retain the means and the incentive to roll back any regulations and social programs that stand in the way their profits. This is exactly what we've seen happen with many regulations and New Deal protections in the US and is exactly what has been unfolding across Europe in recent years. Regulation can't work without transformation.

The bottom line: to promote the health of political democracy and give people real control over the levers of basic social health and welfare we need to take the democratic revolutionary process to the economic sphere. We need to end the economic democracy deficit. If we don't, no election will ensure the prevention of future economic crises, the reigning in of Wall Street, or real progress on crises like climate change, and Mubarak's fall won't usher in a new democratic society for Egypt. The forces of economic feudalism will maintain their sway, and we'll get more of the same.

In Egypt's case, of course, preventing more of the same means much more than strengthening democracy; it means defending democracy's very legitimacy. Without economic democracy to prevent corruption and deliver on the revolution's promise of broad prosperity, democracy itself could become discredited as a vehicle for social change, opening a window for violent Islamic fundamentalism.

Fortunately, there are plenty of great economic-democracy blue prints out there for the Egyptians and economic revolutionaries around the world to turn to.

Central to any such model is the concept of employee ownership. While state and privately appointed boards of directors control company profits and policies like unaccountable feudal lords, employee-elected boards of directors would serve democratically, in the interest of the most sizable and productive segment of the company community -- the employees. According to Richard Wolff, such a transformation would not only serve employee interests, but benefit their companies and the economy as a whole by eliminating much of the destructive moves corporations have made to maximize elite profits. Wolff refers to the example of employee wages, which corporations have effectively stifled in the US since the 1970s, thus necessitating the consumer debt glut which culminated with the recent financial crisis.

Of course, as David Korten has written in his brilliant treatise Agenda for a New Economy, it's not enough to shift ownership to employees in general; the most democratic owners are local owners -- that is, employees based in the communities that will be most affected by a company's actions. It's not hard to see why. For instance, you'd be a lot less likely to pollute a local water supply if it's your water supply, or rip off your own neighbors in an investment scam. It's at the community level that the invisible hand can actually do its job. Korten's Agenda also outlines a series of seven key "points of intervention" needed to shift the axis of economic power from the kings of Wall Street to the communities of Main Street. For a full description of the interventions, check out Korten's book or the New Economy Working Group website, but here's the basic outline:
  • Replace GDP with "living wealth indicators" to measure how the economy is actually benefiting communities
  • Reorient the financial system to invest in thriving main street economies rather than expanding phantom, Wall-Street wealth
  • Achieve a more just distribution of wealth
  • Promote businesses designed to make better communities instead of just money
  • Grow democracy and real markets by ending corporate personhood and replacing corporate monopolies with real main-street markets
  • Create local-living economies that act as bounded subsystems of the global ecosystem (check out the Center for the Advancement of the Steady State Economy's work for an enlightening look at what this would involve)
  • Change the global rules and institutions to promote the preceding goals

If you're thinking these are the kinds of changes only a revolution could produce, you're right. Until business-as-usual on Wall Street provides us with the ultimate game-changing crisis, activists across the world will have little choice but to keep up their herculean struggle, building the foundations of transformation bit by difficult bit.

The world is bound to face such a transformational crisis in short order, without a doubt. But in Egypt a transformational moment has already has presented itself. As the latest country to undergo a democratic revolution, Egypt has an historic opportunity to not only become the world's newest political democracy but also its most modern and most complete democracy by expanding its revolution into the economic sphere. In so doing it could help inspire similar movements and provide the global community with a model it will need over the coming decades to overhaul the global economy and save civilization from the crises of Wall-Street style-capitalism.

With all that's stacked against them, the chances the Egyptians could pull it off are admittedly slim. But they have nothing to lose and the world's first true democracy to gain.