It may help clarify the fatal flaws of capitalism to ask what an alternative system might look like. Although there are many possible post-capitalist systems, one that can be explained quickly and which could be implemented immediately is called Economic Democracy. Here’s how it works:

• Economic Democracy is a market-based system. That is, most goods and services are produced by independent companies to be sold for profit in a competitive market.

• Every company is owned and run solely by its workers.

• Funds for investments (for starting new companies or expanding existing companies) are generated by a flat tax on the dollar value of each company’s capital. The proceeds of this tax go into a National Investment Fund. The money in the Fund is returned to the economy on a per capita basis through public investment banks in each region, state, and city—that is, each area receives new investment funds for local and regional enterprises proportional to the number of people living there.

• Decisions about which companies to invest in are made by bank workers according to two criteria: profitability and job-creation. The bank workers who play the role of investor are paid according to how successful they are at choosing the most profitable and job-creating companies to receive new funds.

• Companies are required to preserve the value of the capital entrusted to them. This means that each company must set aside money in a depreciation fund to repair or replace existing capital. This money may be spent on whatever capital replacements or improvements the company chooses, but it may not be used to increase workers’ incomes.

• If a company finds itself in financial difficulty, workers are free to reorganize the company or quit, but they are not free to sell off the capital and use the proceeds as income. A company can sell off capital and use the proceeds to buy other capital. Or, if the company wishes to shrink its total capital assets in order to reduce its tax and depreciation costs, it can sell off some of its capital without replacing it. However when a company sells its capital without replacing it, proceeds from the sale go into the National Investment Fund, not to the company, because the capital belongs to society as a whole.

• The minimum wage is set at a living wage. If a company is unable to pay its workers the minimum wage, it must declare bankruptcy.

• In order to ensure full employment, the government acts as employer of last resort, offering a minimum-wage job to anybody who wants one. Examples of such jobs might include caring for parks and other public spaces, nonhazardous environmental cleanup, and low-tech improvement of energy efficiency.

• Citizens are universally provided with excellent social services, including health care, education, child care, transportation, disability benefits, and retirement benefits.

That’s it. In such a system, there is no way to earn money except by working, and everyone has access to a good job. And, most importantly, there’s no way to use one’s personal wealth to acquire more wealth, and so no way for a wealthy elite to form and rule again.

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Note: This economic system was first described by David Schweickart, in his books Against Capitalism and After Capitalism. It is based on a quite successful economic model that was put in practice in the Socialist Federal Republic of Yugoslavia as well as on Mondragon, an 80,000-member worker-owned and -run cooperative, and on the planned markets–based growth successes of postwar Japan and post-Mao China among other countries.

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Would everyone be paid the same wage in Economic Democracy?
Probably not. Currently, in most larger companies that are owned and run solely by the workers of that company, people are paid differently depending on the job they do. In Economic Democracy, the workers of each business decide that for themselves democratically.


Is Economic Democracy the only viable post-capitalist economic system?

Not at all. There are a great many others. Towards a New Socialism, which can be downloaded for free, provides another excellent model for a post-capitalist system (one that is nonetheless quite different from Economic Democracy) that could also be implemented immediately.


Is Economic Democracy a form of socialism?

It depends on what someone considers to be socialism. People’s ideas about socialism vary wildly.

That said, most people who call themselves socialists today would probably agree either that Economic Democracy is a form of socialism or at least that it is quite similar to socialism and perhaps a very large step on the way toward it.

Socialists today generally agree that a socialist economy is one that produces a truly democratic society that is no longer divided into a working class and an owning class. That division into two classes is the essence of capitalism. Under socialism, the laws would ensure that everyone has equal access to—and an equal voice in the overall use of—society’s collective capital. Economic Democracy is a system that is in some ways quite similar to capitalism in that it still has market competition to produce consumer goods. Nevertheless, it is radically different from capitalism in other ways. It doesn’t allow billionaires because it doesn’t allow people to turn their wealth into more wealth. In Economic Democracy, the only way you might be able to get notably (albeit not corruptingly) wealthy would be by doing very important work at a very successful enterprise.

So, because Economic Democracy would mean there was no more separate working class and owning class, socialists would probably agree that it’s fair to say that Economic Democracy is a form of socialism. Specifically, it is an example of market socialism.


Why do you give Economic Democracy as your first example of a post-capitalist system over any other model?

Because I think it is a very good model and would be glad to see some form of it implemented—and more importantly because I think a lot of people would be surprised to learn about market socialism. In many people’s understanding of capitalism, markets are the essential component—not the ability to own stock—so encountering a form of socialism that features market competition may get many people to rethink their understanding of socialism generally.


Does Economic Democracy have an unplanned economy?

Not at all. In fact, one crucial aspect of Economic Democracy is that it truly empowers everyone to participate in the democratic planning and running of society. This would enable us to conceive of and, more importantly, actually implement the enormous economic rearrangements necessary to move to a completely sustainable global economy that is in balance with nature.


Doesn’t Economic Democracy put a lot of power in the hands of the workers at the public investment banks?

That is a definitely something that would have to be thought about carefully for any country that wanted to implement Economic Democracy. But it doesn’t seem like an unsolvable problem for at least two reasons:

First, in Economic Democracy, the area or region that a public investment bank serves has as much democratic control over the investment process as seems necessary. Any society that wanted to implement Economic Democracy would be aware of this potential problem and would take elaborate anti-corruption measures.

Second, in Economic Democracy, financial workers don’t have any special power or protection. They are not wealthier than other workers—let alone the rest of society combined, as they are in capitalism. They are therefore not empowered to avoid or thwart the law as they are in capitalism.

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