Skip to content

A New Economic Model for Scotland

Robin Hahnel and Gar Alperovitz are two of the major figures in the New Economic movement in the US. We are very lucky to have them writing on the Common Weal and Scotland’s economic future – from today’s Sunday Herald

It is increasingly evident that the old economic ‘models’ are inadequate for the twenty-first century. State socialism is firmly in the dustbin of history, may it rest in peace. Triumphant neoliberal capitalism has generated an escalating succession of financial crises, the greatest recession in five generations, and is well on its way to destroying the middle classes in Europe and North America as the top one percent continue to capture virtually all of our productivity gains. Social democratic political parties are increasingly clueless about how to respond, refusing to take on the financial oligarchy, and administering pointless fiscal austerity when in office. In short, social democratic politicians and the traditional labor movement have failed abysmally to protect the interests of their traditional supporters.

You would never know it from the mainstream media which only covers conventional economic policies incapable of lifting us out of our present malaise, but a ‘new economic model’ is already growing in many places around the globe. If Scots abandon failed models and build a ‘new Common Weal’ they will not only benefit themselves but offer a beacon of hope to citizens of larger economies mired in stagnation. But what is this new economy, or common weal?

In broadest terms the ‘new economy’ is the economics of equitable cooperation rather than the failed economics of competition and greed.

  • It is an economy where destructive fights between employers and employees are replaced by cooperation among producers. This can be cooperation among members of worker owned cooperatives. Or it can be agreements on how to share productivity increases equitably, and how to incorporate worker input into decision making procedures.
  • It is an economy where firms no longer abandon communities to move operations where wages, working conditions, and environmental regulations are all worse. Instead, communities are represented on boards to ensure that firms do not exploit or abandon their hosts.
  • It is an economy in which new wealth generated by extensive growth and productivity increases is distributed to those who have less wealth to begin with, rather than to those who already have more than they know what to do with. The new wealth created by extensive growth can be more equitably distributed by using community land trusts to capture increases in land values for the citizenry rather than leave land speculators and developers to appropriate this new wealth. Many municipalities in Germany already practice these policies, and a few enterprising city governments in the United States facing severe budget crises are studying the possibilities.

The new wealth created by productivity increases can be distributed more equitably by earmarking new shares of stock in growing enterprises for employees. The famous Meidner Plan ‘wage earner fund’ would have made employees the owners of most of their enterprises by now in Sweden had this policy not been abandoned by the social democratic party in the late 1970s.

  • It is an economy that values public goods and services, and therefore prioritizes spending on education, healthcare, and parks and recreation rather than conspicuous consumption, which generates ever smaller increases in happiness. It is an economy that recognizes that high levels of progressive taxation are the means of achieving the right balance between public and private consumption, and rejects the myth that high, progressive taxes destroy productivity because there is no empirical evidence supporting this right wing claim whatsoever.
  • It is an economy that maintains its public infrastructure, which is the bedrock of future productivity, rather than prioritize short-run profits and let public infrastructure decay at the expense of future generations.
  • And most importantly, it is an economy that takes our role as steward of the natural environment seriously. It is an economy for people who understand that hundreds of years of engaging in the economics of competition and greed have abused the natural environment to such an extent that much of our economic energies need to be devoted to a rapid transition from unsustainable ‘fossil-fuel-estan’ into sustainable ‘renew-conserve-estan.’

As the new economy develops people will continue to search for more and better ways to facilitate equitable cooperation. Participatory budgeting is already well underway in Venezuela, Ecuador, Brazil, and Kerala India. Community management of common pool resources as an alternative to privatization and government management has gained traction due to the pioneering work of Nobel laureate Elnor Ostrom. Recognition that most of our productivity is a collective inheritance bequeathed us by all who went before, rather than an individual attribute meriting highly differential rewards is slowly penetrating popular consciousness.

And finally, new ways to go about democratic planning that avoid endless meetings without clear criteria for settling disagreements are being developed in both theory and practice. In particular, a procedure whereby worker and consumer councils can propose and revise their own activities, distributing user rights over our collective natural, physical, and human capital efficiently and equitably, that is part of a model known as ‘participatory economics’ has gained increasing attention as an alternative to both authoritarian planning and markets.

But the important thing is to realize that stale debates over conservative versus liberal versions of how to tweak the economics of competition and greed will get us nowhere, and concentrate instead on how to build an economics of equitable cooperation. Our economic Common Weal will start first with local initiatives, and only later be followed by regional, national, and eventually international procedures for facilitating equitable cooperation. But it is not a pipe dream — because it is happening already. And make no mistake about it, as conventional economics generates ever worse results for the overwhelming majority while it also destroys the natural environment beyond repair, the ‘new economy’ will increasingly become a necessity.

Robin Hahnel

Professor Emeritus American University, Washington DC

Visiting Professor Portland State University, Portland Oregon

Author of Economic Justice and Democracy: From Competition to Cooperation (Routledge, 2005), and Of the People, By the People: The Case for a Participatory Economy (AK Press, 2012).

Gar Alperovitz

Lionel R. Bauman Professor of Political Economy at the University of Maryland and a former Fellow of King’s College, Cambridge; a founding Fellow of Harvard’s Institute of Politics; a Fellow at the Institute for Policy Studies; and a Guest Scholar at the Brookings Institution.

Alperovitz also served as a Legislative Director in the U.S. House of Representatives and the U.S. Senate, and as a Special Assistant in the Department of State. He is a member of the board of directors for the New Economics Institute.