Economic Democracy, Food and Justice

By Saliem Fakir · 5 Jun 2008

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Picture credit: gypsysoulcorby
Picture credit: gypsysoulcorby

Democracy is an imperfect system. Its characteristics can vary – from being  a creation of  populist traditions to democracies run by elites.

In the common imagination when we think of democracy we think of people’s power. Power is delegated as a trust to holders of political office and from whom we expect that they would manage our affairs wisely and judiciously.  They would protect us from vulnerability.

Depending on what is within their power or outside of their power to change, they can either do us good or harm.

Often, the most harm that comes from political democracy is its inability to rectify the injustices of the economy. It becomes the unwitting and even willing servant of the market.

There is all expectation that the economy will be the self-correcting and organic distributive mechanism for economic well-being and then social justice will be deemed to have been achieved. Where there is fair work there is also a fair sharing of the rewards.

What happens in the economy is not always so transparent as millions of individuals and firms transact with each other. And so the costs and benefits of economic transaction are not always discernable unless parties harmed bring matters to the public eye.

Democracy and accountability within an economy is not exercised through the vote like in normal politics but its method is slightly different:  there is a complex chess game between government rules and oversight institutions, consumer vigilance, competition between firms and the activism of organized labour, shareholders and civil society – all pitted against each other to control the excesses of each. Economic power of some is determined by the relative power and will of each.

Now and then, and some would say often, those with money tend to have the upper hand.

History would have it that we have two centers of power so to speak: the discrepancy in power between the political and economic spheres is a legacy that has proven hard to break in South Africa – these are the two real centers of power.

When economic power inordinately favours a minority, it has a greater sway over political power – it is here where political democracy begins to fail the populace.

Economic power is always restless. When it has the upper hand it always seeks to determine the direction of political power – it exercises its vote in political democracy through the back-door.

If, wealth is a good thing then we ought also to ask to what purpose is it being used? Where it is used deliberately or unwittingly to undo the economic freedom of others and their quality of life then as Amartya Sen in his book Development as Freedom has argued, growth and development are not the same thing.

Underdevelopment can manifest despite surplus of food. The great majority of poor and vulnerable human beings suffer malnourishment, lack of access to proper health, housing, water and sanitation as result of income poverty.

In an economy entirely dependent on markets for the distribution of goods, the lack of income means the inability to have access to essential goods and services.  And, even when there are social grants to the poor, the disabled and elderly, the value of this income is dependent on their purchasing power. Excessive rent seeking in the market is the hidden inflation that erodes the purchasing power of the poor and their ability to live decent and dignified lives.

Sen treats both political and economic freedom as the basic building blocks to judge the quality of democracy. The one works in tandem with the other.

Political democracy fails the economic well being of others when there is marked signs of "capability deprivation" where the ability to survive, the freedom to pursue economic opportunities and earn fair wages are degraded.

As Sen says: "Greater freedom enhances the ability of people to help themselves and also influence the world, and these matters are central to the process of development". This is not just the responsibility of the state but also the markets.

Debates about the market arouse passions - sometimes in favour and other times against them. Markets have a role but not one in which we have blind subservience to them.

Well functioning markets should have a greater social good but when markets are a means to multiply the economic power of established interests, they can only favour some groups above others.  Markets should not be spoken about loosely, but only in relation to their fairness, prudence and deployment of capital without waste.

In an economy where there is a great degree of freedom for economic actors to ply their trade, there is also a  handing over of trust and expectation of responsible and ethical behavior. But trust and ethical behaviour cannot be taken for granted.

Not too long ago, we had a taste of exactly this point with bread price hikes. Tiger Brands was fingered by the Competition Commission for price fixing.

Tiger Brands (Albany Bakeries) was not alone - Pioneer (Sasko & Bokomo), Premier Milling (Blue Ribbon), and Foodcorp (Sunbake & Woolworths) have all been implicated in colluding until one of them blew the whistle.

Tiger Brands was fined the paltry sum of R99 m and with great consternation from the public, merely passed on the expense by later hiking the price of bread by 40 cents; and simultaneously paying out handsome dividends and bonuses to its senior executives, adding insult to injury.

More recently Tiger Brands has been at it again: it has also been fingered in another price-fixing scandal involving medicines. Its subsidiary Adcock-Ingram was caught colluding with other pharmaceutical companies in fixing tender prices for government contracts.

These incidences seem to be  the tip of the ice-berg. Consumers of all shades and income capacity are being assaulted by rent seeking behaviour amongst corporations. The efficient market also has the habit of unruliness.

This behaviour seems to be becoming the norm. Hence the flurry by the Competition Commission to take a wider look. Other cases are being investigated – there doesn't seem to be a shortage of whistle-blowers.

Dairy companies, banks, steel makers, cell-phone companies and many more, are or have been being investigated.

The erosion of the capital base of the poor has dire consequences: less savings, more debt, less investment in health and education. This coupled with transport, fuel and other price increases, as well as a squeeze on wages means more hardship and despondency.

The long term does not bode well for all of us.

On the one end there is excessive capital accumulation by those who have the penchant to squeeze every cent for a rand invested and on the other, a deepening of impoverishment: all of this is a recipe for the break down in social solidarity and in turn will have major consequences for our young democracy.

Political democracy in the end is not a guarantee that there will be economic justice nor freedom for the lesser off. Often well-meaning State support for the poor on the one-hand is always undone by its other center of power; the economy on the steroid of greed.

The less vociferous the State is in the market the more it undoes it own claim to political legitimacy. Politics and economics go hand in hand and as Rupert Murdoch, the media mogul once noted, all business in the end is politics, so why not the other way round and assure us all that politics is not just a lame duck in front of king-size economic wolves hiding in sheep’s skin.

Fakir is an independent writer based in Cape Town.

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