Voluntary Method of Distributing Economic Power –

I have these ideas for quite some time, articulating it take a wee bit of selection since the only precedence for the exact thing I want to propose exist in my mind. References to what I have in mind already existed for many years, yet I’m not sure whether this idea is ready to be hatch. Now, a recent article in the New York Times makes me feel that maybe this time is right, to start poking around with this. This essay will give a thesis on the cession of legal, political, and economic power in history; why forced cession of power doesn’t work; samples of power cession in history that do work; and that economic power is the only centralized power left, yet no appealing and reliable non-violent method of distributing economic power has been found.

Kings used to have it all, they have all the legal, political, and economic power in their domain. They ceded it to no one, and why should they, it’s damn good to able to do all you pleased, and if humans are subservient to the laws of nature, it’s only natural for the alpha male to hold on to it’s powers. Yet, throughout history, man’s advancement is a story of an alpha male or woman giving part of their power to fellow man, either willingly, by persuasion, or by pure force.

In most events, this cession of power happens by the 1st two methods, since almost by definition, the despot has all the force, so his subject cannot ‘force’ him to give some of his privilege while expecting such rights to be continuously given to them. Witness the French revolution, a by forced submission of power by the people, what happens is the rise of another emperor. Only when this next emperor is in exile, the republic can truly flourish. Yet even when he was in exile, there are people still loyal to him, wanting him to be emperor, distrustful of they and their fellow man’s ability to rule themselves without king (or simply to get a share of power when the man they support do become emperor again). Witness the dynasty after dynasty in China, when one emperor finally brought down by peasant rebellion, another emperor reigns, usually the leader of the rebellion themselves.

Why? Why does a cession of power purely by force don’t work effectively? Several causes:

1. When power is ceded by force, everyone who’s there has a lack of alternative way of using that power but in the manner power has been wield before. If legal, political, and economic power was taken by force, and no ideological construct has been set to contain this new power so it can wield for the best benefit for the people, the only way is the old way. The American Revolution leads to a democracy in America because by then, the ideology of democracy has existed and are somewhat established (check and balances, distribution of executive, judicial, and legislative powers), so there’s a new way of containing and wielding that power. The rebellion in China doesn’t work because those who rebel don’t know any other way of containing and wielding power but by having an emperor again and hope for the best.

2. When power is ceded by force, those who are involved in that power struggle usually has low moral legitimacy to hold power, and this undermines their ability to use power effectively. If I kill and burn to put down a despot king, what would prevent me to kill and burn when I too have become king? In the absence of ideology, education, intelligence, and compassion, my method of dismantling an incumbent power, would also be my method when I hold that power. There are many examples of this even to modern history, one bad regime are taken down by force, only to be replace by an equally cruel regime, despite democracy being an established system in modern times. In such cases where power is ceded by force, for the new power to be an effective force of good, the one holding the power cannot be the one who has taken the by force, or the one holding the power must have strong moral justification and support to do what he has done in the power struggle process.

3. When power is ceded by forced, the wrong mindset that allows a malfunctioning use of power would still pervade those that has been at, near, or aspire to be at, the power sphere and thus these small incumbents could undermined the positive changed that are still in infancy. In all power centers, there are always small incumbents holding some size of power, they are not the king, but through the accumulation of network, family ties, wealth, and access to a country’s resource, they hold power and are interested of not losing this power. A cession of power by force would not be able to bring down these small powers, unless the inherited nation becomes somewhat dysfunctional and have to rebuild from zero. This is what happens with the Indonesian power struggle in 1998, Soeharto resigned, but there are people holding power beyond him, and these people either fled the country, bringing with them both capital and talent and plunging Indonesia to an economic freeze, or tries to undermine the legal, political, and economic development of the country until now. Then what to do with these small powers? They, just like the king, have to willingly give part of their power into an ideological system that can better distribute that power. This doesn’t have to happen all at once and for everyone, but the voluntary cession of power has to happen in the ruling regime, not just the king himself. And as more and more power holders voluntarily give part of their power, the ideology that contains that new power becomes more acceptable and its benefit more announced. An example, at a higher level, is the growth of democracy in Europe at the end of the 2nd millennia, as nations accept democracy and part of power are ceded to the people, more nations joins in ceding their centralized power into a more distributed model of power; those who do it voluntarily, avoids the struggles and can reap the benefit of empowerment sooner.

4. Humans are generally reluctant to change; really, we can feel uncomfortable to what we see, sometimes enough for us to rebel; but a change is always scary, who can say that a change can lead to a better way of life? Who can say that the new system will be good for us? Who can say that those who run the new system will be kind to us? This is the main reason why many regimes can stay in power, the recipe is, maintain the ratio of guns to oppression. The less you oppress them, the less reason for them to go for a riot, the less need for guns; but if you want to really oppress them, then you better have enough guns to give a good whipping so this one will stop and nobody want to think about having another one.

We have discussed why force cession of power could not work, then is there any precedence to voluntary cession of power? Why would rulers voluntarily give their power?

They why is, at the moment, beyond the scope of this essay, and a really voluntary cession of power is few and far between, but there are many well known examples of a somewhat voluntary cession of power, one that does not involve the incumbent being slain by the over thrower.

Curiously, an example of a distributed power system already exists in ancient time. Although prompted by bloodshed, the cession of power was made willingly. Sparta in 7th century BC divided power to 2 kings and several types of assemblies. Sparta had the first written constitution, equality becomes an important concept in its society and they have a public educational system. It’s not all roses since the result is still an oligarchy controlling a communal society that stresses the community benefit over individual freedom, yet this still represents a departure from the common despot rule of the day.

Magna Carta Libertatum cedes some legal and economic power from the king to the parliament. Once can argue that Magna Carta is not a willing cession of power, since it is chartered to prevent a potential rebellion over the king’s reign, but this very reason makes Magna Carta a departure over the pure force method of power cession, where the king’s palace is simply stormed and his head brought to a guillotine or to a gun squad.

During the Magna Carta’s inception in England, powers are somewhat distributed from the King to his feudal vassals, power has not been ceded to the people, and unlikely to be so in the near time after Magna Carta. But Magna Carta represents a step, among many ensuing steps that allows the increase distribution of power and the benefit of empowerment to society.

The Swedish society had a democracy like system from prehistoric times, an annual general assembly was held, lead by a lawspeaker; The king’s action is also limited to what is deemed good by his people. This is also an example of a non-coercive distribution of power.

The renaissance humanism movement in 14th century marks the revival of ideas that serve as the foundation of distribution of legal and political power.

The United States Constitution then marks one of the most well defined legalize distribution of power. Although sovereignty over the domain of the United States was taken by force from the British Monarch, the successor of this power choose to willingly distribute this power to others instead of claiming a new monarch or an elite ruling oligarch. The resulting empowerment brings one of the most advance country in the modern world.

United Kingdom’s Reform Act of 1832 represented an increasing distribution of political power in United Kingdom by granting seats to industrialized cities and increasing the number of individuals that can vote. The reform act was established by calls to reform and public pressure, rather than revolution or violent power transfer.

In most cases, power is already somewhat distributed (due to the need of managing an wide swath of region effectively). This then prompt then cession of power from one central holder to other members of the power sphere. To increase moral legitimacy of the ruler, the rights to power are often extended to non-ruling members of society as well; although this rule often exist only in theory, the provision of such rules allow the ever increasing distribution of power to all members of society, culminating in individual voting rights for political power and through representatives, distribution of legal power through appointed judges.

In some cases, like the United States Constitution, intelligence and compassion won over survival instincts and power are distributed without the need for persuasion or pressure.

Political and legal power has been largely distributed in the modern world, there are some despotic rulers, but as a general rule, democracy or at least parliamentary has taken hold.

Although in practice quasi oligarchs rule nations, education and access to markets has allow social mobility to happen at increasing pace, limiting the ability of these quasi oligarch to maintain dynasties of ruling families since new oligarch rises and uncompetitive old ones are removed. In medieval times, your best hope of becoming a lord is to born to one, being rich won’t give a seat in the circle of power since the person with the sword can rob you. But in modern times, provided you have enough wealth, you can join the quasi oligarchs.

But now we see wealth, innocuous wealth, being both the means of centralizing power and a centralized power in modern times.

Since legal and political power has been legally distributed, an individual cannot force his way to obtain legal and political power, what he can do is, use wealth to influence legal and political power holders to do his bidding. Wealth becomes the means of centralizing what supposed to be a distributed power.

The one ring to rule them all.

And this ring is still largely centralized.

In my essay on “Flow of Money, Multiplication Effect, Concentration of Wealth, and Reclycing of Weatlh to Society” https://sendy82.wordpress.com/2010/06/09/flow-of-money-multiplication-effect-concentration-of-wealth-and-reclycing-of-weatlh-to-society/

I argue that human desires, markets, and money would inevitably lead to the concentration of wealth. That the fulfillment of human desires would lead to the transfer of wealth from most humans to the select group of humans who happens to control the machines, energy, labor, capital, and resources that allows the fulfillment of desires to occur.

Alas, no self sustaining non-coercive method of distributing wealth as power has occurred, communism failed at distributing economic power, and the reason that China can maintain it’s political construct of communism is exactly because it has distribute economic power from the state to individuals.

And although history has shown that voluntary distribution of power is the best way to distribute power, no wide scale distribution of wealth has took place, that’s until Bill Gates and Warren Buffet comes in.

At the moment, there are roughly 3 solutions offered to the distribution of economic power, they are the corporation, cooperatives, and charity.

Charity doesn’t work sustainably because when you continuously give charity to grown man, that charity doesn’t induce empowerment. Charity is very relevant to ameliorate a dire or emergency situation, but once you try to go beyond sustenance, continuous charity won’t really help. Charities are also prone to misuse (either by the organizer or the recipient), and it’s very difficult to develop a legalized economic system based on charity since when that happens, “charity” becomes taxes.

For the record, I do not reject charity, I am active participant in charity program for children in remote regions of Indonesia, I just don’t think charity is a self sustaining method of distributing economic power.

Capitalist Corporation doesn’t work as a means to distribute economic power because the basic premise behind it is self fueling greed. The short definition of Capitalist Corporation is: a vehicle of accumulating capital for the sake of accumulating capital. It’s unfair to expect Capitalist Corporation to be the means of distributing economic power. It’s like creating a predator drone then expects it to tend for the children.

The notion that corporation democratizes capital is bull at best, as if the selling of shares to the general public can allow capital to be free. It’s only logical that when you divide ownership of an attractive company to shares, then a large part of this share would be owned by those who already have capital and thus the growth of this capital would benefit those with the initially larger share. Corporation allows participation, but not democratization. If it weren’t for insurance company and pension funds, control over large corporations would exclusively belong to oligarchs, with as few as single digit ownership over a company’s share.

Cooperatives doesn’t work as a distributor of economic power because they tend to expect equal contribution (both labor and capital) from its members, denying the benefit of specialization that can bring an edge to its economic activity. And when professional help is sought, cooperatives tend not to pay competitive compensation over corporations, putting them at a disadvantage in the market place. Thus although cooperatives has the right intention, it doesn’t have the tooth and claw to be an economic force.

Unfortunately, from 3 solutions, corporation remains the best way of ensuring efficient and effective use of earth and human resources to fulfill human desires, not by having good intention, but by leveraging the combined and conflicting self interest of its participants.

But is there really no way of restructuring the cooperatives and the corporation to be the means of distributing economic power? To bring about the next venue of society empowerment? Surely if the 2 riches man on earth are willing to donate their wealth, then the good intentions to distribute economic power is there. Perhaps it’s just the ideological construct that is still lacking, an undefined system waiting to be written.

What I envision is a corporation where the owner voluntarily gives a sizable part of his profit back to his employee.

That’s all this about, a corporation where the intention of the owner is to actually give a sizable part of his profit back to his employee. A certain formula to distribute the profit back need to be developed, but the general premise is that.

It’s not entirely charity, since the recipients do work for you and the result of their work has correlation to the profit pool; it’s not wage since the existence and size is not known by both the giver and the recipient (can one assure that his company will, 100%, make a profit this year); it’s not reliant on volunteer talent since the laws of corporation regarding talent management still holds; it’s not cooperatives since the participants is asymmetrical in the type and size of their initial contribution; it’s not exactly capitalist, since the accumulation of capital exist for the sake of distributing the accumulated capital; it’s not non-profit since the company seek to maximize pre tax profit first, then distribute it rather than to accept inefficiencies along the income statement.

And to stay true to the principle of leadership, I though I will be the 1st to do this, and if nobody else do it, then at least I contribute to my employees.

That is, until I read about Knights Apparel (http://www.knightsapparel.com/index.html). Although Knight Apparel method’s is a bit different then what I have in mind, they choose to accept paying higher wage than the market, their willingness to absorb a lower profit make their implementation resonates with the goal I have.

Some quotes on their willingness to absorb the increase wage: “Mr. Bozich says the factory’s cost will be $4.80 a T-shirt, 80 cents or 20 percent more than if it paid minimum wage. Knights will absorb a lower-than-usual profit margin, he said, without asking retailers to pay more at wholesale.”

Some could doubt the micro and macro benefit of this method, of distributing profit back to labor.

Well, in the micro level, distributing profit back to labor allows them access to better living conditions for them and their family, improving worker’s morale and put the company at an edge to competitors when you seek talent. Again, the formula of distributing profit back would be key.

At the macro level, the profit sharing allows more money in the hands of consumers, driving the potential demand of the economy, driving growth when supply can keep up.

I’m waiting for the day when I open my own business and can be among those who put these ideas to reality.

—————————————————————————————-

References:

http://www.nytimes.com/2010/07/18/business/global/18shirt.html?_r=1&ref=business

http://en.wikipedia.org/wiki/Magna_Carta

http://en.wikipedia.org/wiki/History_of_democracy

http://en.wikipedia.org/wiki/Reform_Act_1832

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