Wealth of Cooperation

Introduction

The world changed a lot since the moral philosopher Adam Smith wrote his work "An Enquiry into the Nature and Causes of the Wealth of Nations" in 1776. In his world, there were no fossil fuels, no limited liability companies and the first democratic nation was just to be founded. What is a nation? A nation is not a racial or tribal, but historically constituted community of people. It is a social concept with no uncontroversial definition (wikipedia.org 21.11.2015). The formation of democratic nations as well as nationalism, imperialism and the zenith of colonialism followed the enlightenment. A nation is a form of cooperation of people on a certain territory. Therefore the wealth of "nations" is also a subject of this enquiry into the nature and causes of the wealth of cooperation. However also the wealth of rich individuals often results from cooperation: Any business organization is a form of cooperation. The profit shareholders and managers fetch result out of cooperation between many employees and investors. The question is how these cooperative units are structured, and where the borders of cooperation are drawn. Lay-off someone means eject him out of the cooperative unit. Corporations discharge people to remain competitive. Can nations discharge excessive citizens too? In the 19th century, Great Britain sent its offenders to Australia; and paupers where motivated or even subsidized by European nations to emigrate over the ocean. It would be scandalous but comprehensible if poor nations would follow this practice today. 

 

Adam Smith is known for his arguments on free markets and competition. Competition takes place at the border of cooperative units - be it corporations or nations. Corporations benefit when extending cooperation - they gain market power by mergers and acquisitions. Smiths arguments were used to open the state monopoly of the British East India Company. However the trusts formed and the limited liability companies evolving in the 19th century contradict his arguments for a free markets basing on moral sentiments. Which units shall cooperate under which conditions, and where should the power of competition play? Smith assumes early in his book that the human nature "tending to get in touch and trade" probably as a "necessary consequence of his capability to think and speak". We cannot expect Smith to know much about evolution, since Darwin published his theory 1859 only, after his death. Today I'd dare to claim that humans speak and think as a consequence of their tendency to get in touch with each other, as a consequence of cooperation. 

 

Therefore, this book starts with a chapter on the evolution of human culture and the role of cooperation. The role of currencies was deliberately ignored in classic economics. Silver was a kind of world currency until the 19th century, and as long as more then 90% of the population lived in agricultural self-sufficiency, money didn't rule the daily life as it does today. We have to consider the nature of currencies in chapter 2. Chapter 3 is about the evolution of corporations, questioning limited liability. British companies violently opened Asian markets for global trade. The division of labor and sense of (free) trade is discussed in chapter 4. While Adam Smith was a descriptive theorizer hesitating to give recommendations, John Maynard Keynes practically influenced politics in how to handle money and enable growth. He is known for assigning the state the important role of balancing and enabling growth by state interventions. However he also has foreseen "the long run problem of full employment" - published in 1980 only - after the oil shock, when a reduced consumption didn't allow full employment anymore. There will be a time, when all necessary investments are done and further investments to stimulate growth would be wasteful. Then, it will be necessary "to encourage wise consumption and discourage savings, and to absorb some of the unwanted surplus by increased leisure, more holidays and shorten hours." We will have to discuss the forces and limits of growth in chapter 5. Thomas Piketty claims that inequality is reduced if economic growth is higher than capital returns; but we experience more inequality if growth falls bellow the rate of profits. He questions the Kuznets curve; nonetheless I would say that there can be a relation between inequality and average income. But the development of a nation isn't a one way street - high inequality within a currency area results in a lower average income. Piketty analyzed income inequality within certain countries, however I'd like to consider the effect of national inequality via international currency mechanisms on  global inequality in chapter 6. Before ending part A and heading to action in part B, politics are the subject of chapter 7. Innovative initiatives are discussed in the direct democracy of Switzerland: The introduction of an unconditional basic income and a money reform, disabling commercial banks to create money from debts. However, as Piketty highlights the problem, income inequality is a key to influence politics. Swiss billionaires wisely and successfully invested some millions in a campaign against an inheritance tax, threatening with economic downturn and unemployment, to save multiple millions of tax. A broad education and health system, provision and safe jobs are a prerequisite to overcome poverty, as can be concluded from Abhijit Banerjees book "poor economics". They became a matter of course in welfare states like Switzerland. By arguing against taxes and reducing the ability of the state to improve or maintain social welfare, powerful business players follow their self-interests. Adam Smith warned of political influence of businessmen - their interests are not the same and often against the public interest. Limited liability companies are not individuals with moral sentiments, as Smith assumed, so they should not take Smiths theory as a justification when following their self-interest and influencing politics. 

 

Part A should unlock "enlightenment"; awareness is a necessary prerequisite to overcome ignorance. Many people might be aware about global warming and injustice, however ignorance is convenient. Ignorance, greed - excessive attraction - and hate - excessive rejection - are said to be the cause of all suffering on earth, according to Buddhism. If we understand, how everything is connected with each other and see cause and effect, it's easier to overcome greed and hate. Being aware that awareness is not a sufficient to improve the situation, part B is a kind of narrative of individual action. What would you do, if you live in a agrarian economy with a daily income below 2 USD? Option 1 is to emigrate - but finally you will end as a refugee in southern Italy surviving in a shabby tent, working black on a tomato farm, which successfully exports, threatening the business of tomato farmers in your home country. That's the somewhat the story of chapter 8. Option 2 is to follow the example of the White Tiger as written by Aravind Adiga; chapter 9 is an analogy to this desperate reckless success of self-interested action. In chapter 10 the evolvement of a business plan for a currency cooperative is thought through, with the appeal to elaborate innovative cooperative organizations. The idea of the currency cooperative is to satisfy the basic demands of its members by using their workforce. Income inequality and unemployment is avoided in times of low work demand by honoring diligent members with more leisure. There's an internal currency covered by the assets of the cooperative; external trade is practiced if beneficial to the community. Anyone is free to join or leave the cooperative, it'll grow or disappear depending on the competitiveness of the status of living the members enjoy. Having a safe alternative, there's no need to save insolvent banks and maintain growth-addicted industries just to save jobs, no need to overexploit nature to maintain one-sided growth.

 

Whether the concept of currency cooperatives is the key to more equality on earth remains to be seen. Anyway part C thinks about the consequences if the world would become more equal. Earing more than others is said to be a factor for happiness. So some might feel less happy if there's no infinite pool of cheap labor anymore. One might question why part B is about action options in poor countries; what shall wealthy Europeans and Americans do? When oil companies threatened the nature and culture in South American Rain Forests, some wise Achuar Indians told to those who came to support them: If you came to help us, you came in wane. You need to change the dream of the modern world - shifting your culture of overconsumption to one that honors and sustains life. That's the idea of the Pachamama initiative, and I hope part A is a contribution to overcome encrusted believes and dreams which might turn into nightmares. What would you do, if you were a major shareholder of an international garment company with more than 200'000 USD capital income per year? Knowing that the base of your business might get crumbled, trying to prevent a development as described in part C might be reasonable. You invest in politics to keep your wealth. If moral sentiments arouse after reading part A, you might fund orphans homes and schools in developing nations or even invest in politics against self-interested action. However you will lose you fortune faster than others defending their interests. On the long run, the self-interested actors might keep their influence better than the benefactor. Given that he has desperate people to exploit. I decided for a third way, writing this book and motivating anyone to excogitate, initiate and support initiatives as described in chapter 10 / part B; solving the debate between state and market resp. capitalism versus communism with a private cooperative initiative! 

 

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