Need To Foster Economic Democracy

According to the World Inequality Report 2022, India stands out as a “poor and very unequal country, with an affluent elite”, where the top 10% holds 57% of the total national income, including 22% held by the top 1%, while the bottom 50% holds just 13% in 2021. This highlights that a country that has won political democracy after years of struggle for independence is still far behind in arena of economic democracy.

Economic Democracy

It refers to a system where people share ownership over the resources in their communities and participate equally in deciding how they are used. It is based on principles and values of solidarity, cooperation, democracy, and sustainability and not just on profit and pure self-interest. It means real partnership and shared power, control, and benefit of the resources of everyday use.

• At a time when one per cent of the world’s population owns half its wealth, economic democracy may seem like a remote ideal. But pressure to make it real is mounting in most democratic societies.

Goals of Economic Democracy

The main goal of economic democracy is to align market forces with the core aspiration of democracy – which Mahatma Gandhi aptly expressed through the term Sarvodaya – the well-being of all. The goals inspiring economic democracy are-

• Opportunity for all.
• Eradication of corruption and other means by which some gain unfair advantage over others. So, losses should not be socialized while profits are privatized.
• Transparency and accountability in the functioning of both the government and industry.
• Emphasis on legal structures to recognise and protect property rights, especially of the poor.
• Public-private partnership to ensure financial services, health care, education and energy for all.

Advantages of Economic Democracy

Proliferation of economic democracy yields following advantages:-

• It provides a powerful impulse to political democracy;
• It seeks to wrest power from capitalists and empower common people;
• It means a stop to exploitation and degrading alienated labour and leads to an increase of labour incomes and productivity;
• Results in a greater amount of human capital investments;
• A positive influence on the characters of workers and stronger community feelings;
• The disappearance of classical and Keynesian unemployment and a probable decline in structural unemployment;
• Reduction in class conflict and wage hikes and the resulting slowdown in inflation;
• Improved income distribution as it reduces inequality and increases the shared wealth in communities, not just creating huge amounts of wealth for small numbers of people;
• An end to external firm control and, hence, to the sway of multinational corporations;
• Reduced monopoly building;
• Lesser risks of power abuse and fraud;
• Economic efficiency gains from a lesser need for state intervention.

India’s Perspective

Constitutional Framework

• Indian Constitution was framed with an aim to impart social political and economic democracy to its people. Part IV of the Indian Constitution provides for social and economic democracy. As per Dr. Ambedkar's vision, political democracy can be achieved but social and economic democracy is hard to achieve.
• The Indian Constitution guarantees both political and social democracy through various regulations but the economic democracy is still not visible.

Scenario of Economic Disparity: Role of Economic Liberalisation

• Economic liberalization has created a situation where the prosperous minority has been able to exclude itself from the political process completely, leaving it for the poor.
• The rich have assiduously created for themselves a system that protects their economic rights without them having to participate in the political discourse in any meaningful manner. The poor are free to become politically active and aware, but have no avenues to assert their economic rights.
• Indian democracy faces the twin challenges of retaining the economic elite in the political system and eliminating economic disparities.

These challenges can be addressed by the state collaborating with the corporate sector as done in case of corporate social responsibility (CSR).

Ways to achieve Economic Democracy

The most efficient instrument for promoting economic democracy is Decentralisation— political, administrative and fiscal.

• Political decentralisation promotes trust and cooperation between government agencies and citizens.
• Administrative decentralisation enables authority to be shared so that local governments can design and implement programmes more appropriate to local conditions, than a centrally designed one-size-fits-all system.
• Fiscal decentralisation enables revenue-raising and expenditure powers across different levels of government to create a level-playing field.

Obstacles for Economic Democracy

Powerful vested interests resist against more radical initiatives to democratise the economy. They have resources at hand to protect the status quo.

• Fiscal decentralisation remains lopsided. State governments are responsible for spending more than 50 per cent of total government expenditure, but most of it goes towards interest payments and salaries, leaving less scope for development initiatives.
• The extent of administrative decentralisation varies across different services. The impact of administrative decentralisation on many service delivery outcomes is ambiguous. Weak capacity, local capture and corruption have diluted advantages of better local information and monitoring.

Possibilities and Prospects

• Shift from Scheme based Transfers: India needs to unbundle the decentralisation agenda to promote economic democracy — shift from scheme-based transfers into broad programmes to increase rural livelihoods, and provide resources and expenditure responsibility to attract and hold the interest of the local community.
• Improving Capacity of Local Level: Along with financial resources there is need to improve capacity, accountability, and participation at the local level, so that lagging regions can make full use of these resources.
• Align Decentralization and Urbanization Agenda: Given the fast pace of India’s urbanisation, the decentralisation agenda needs to be better aligned with the urbanisation agenda. Most cities are financially weak and unable to address the challenges they face — availability of clean drinking water, public transport, treatment of waste water and effluents, or affordable housing.
• Ownership Rights and Control: Under a proper economic democracy, the individual should have ownership rights and control over the work they do and how it is used. This ownership should be collective, diverse and democratic.
• Public Participation: Beyond extending economic rights to the individual and at the business level, what is required is greater public participation and engagement at the macro level of the economy as a whole.
• Participatory Budgeting: Participatory budgeting should be implemented. This is where governments devote a proportion of their budget directly to citizens groups who are brought together in a series of deliberative exercises to decide on investment priorities.
• Overcoming Vested Interests: Vested interests should be defeated to enable democratic mechanisms that rebalance economic resources and decision-making toward the pursuit of the common good, while safeguarding the planet for future generations.

All citizens must get socio-economic and political justice. Therefore, many programmes like - Jan-Dhan Yojana, Mudra Yojana, Stand-Up India and Start-Up India, have been initiated based on ‘Sabka Sath, Sabka Vikas, Sabka Vishwas, Sabka Prayas’ and ‘Sabka Samman, Sabka Utthan’. Economic inequality is deeply penetrating Indian society that is already fractured along the lines of caste, religion, region and gender. So, Economic Democracy is the need of the hour to have a pure democratic country in all means as by denying economic democracy, political democracy will be in peril.