Empowerer

The Shareholder Citizen - Separating Economics and Politics

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by Zeljko Zidaric and Alma Ortega
Mexico City

Making everyone a shareholder in their nation
  • Giving everyone a piece of the pie
  • When everyone is a capitalist, who will oppose free markets?


Note: This idea is under development and this article is very rough.
Please come back periodically to see how the concept develops.
If you have any ideas you want to contribute, or know of similar concepts please let us know.

In order to create a more free, fair and prosperous socio-economic structure we propose the development of a new type of national structure based on the concept of the Shareholder-Citizen. Each citizen becomes a direct shareholder in the national economy. Under this model, each citizen has a political vote and a vote in the economy as a shareholder. This model would further empower people in the direction setting of society and for them to receive tangible benefits of the economy.


Problem - Perception that the free market benefits only big capital

Many people hate capitalism because they are not capitalists.

The Free Market / Capitalism system has a growing problem based on the perception of disenfranchisement of the masses. Many people believe that they are only tools of production and mouths for consumption. Many people believe that they are powerless and irrelevant as political and economic power becomes more concentrated and centralized. The "left" criticizes capitalism as a tool of "big capital". Resentment towards the system grows.

Every citizen in society does benefit from economic growth, but the majority does not see it in any tangible way. It is difficult to understand a national economy. It is also difficult to believe that the economy is getting better if the individual's situation is worsening.

We are aware of our political rights - one person = one vote - gives us all political equality. Unfortunately that one vote, which occurs once every 4 or 5 years in most democracies aggregates a wide range of issues into one vote. In the one vote people make compromises and vote for a basket of goods which they might not want in their entirety.

Political and economic models must provide a more viable alternative to the socialist idealism and big government structures.


Solution - Make everyone a capitalist

People value what they own. To give all citizens a direct stake in the economy each person should become a shareholder in the economy. We propose the development of a National Fund of which each citizen would receive one share and thereby have a right to vote as a shareholder. The National Fund would be a sort of super-mutual fund made of two components, the first being a sort of index fund based on the stock market(s) of the nation and the second being a natural resources fund based on revenues earned from resource royalties.


When each citizen has an account in the National Fund they have something tangible via which they can observe and track economic growth. Each year each shareholder would receive a report on the economy similar to an annual shareholder report similar to reports that publicly traded corporations provide to their shareholders. The individual will see tangible results of decisions made in previous shareholder votes.

Annually each shareholder would receive a dividend check based on the success and growth of the economy and the National Fund. At present monies from resource royalties and other monies that the government skims from the economy go into a black hole called the national budget and then the government decides how to spend the money for the benefit of the citizens. Our proposal would direct a portion of the monies collected to the shareholders as dividend checks so that they can decide how to best spend the dividends of the economic growth.

If everyone has a stake in the economy, if everyone is a direct beneficiary of the free market capitalist system, then everyone will have an incentive to improve the system rather than to fight against the system.



What the model incentivizes

The interest of the vast majority of shareholders will be to maximize the dividend check (within reason) that they receive every year. In order to accomplish this the shareholders will vote for the following:

  • Maximize budget deficits and public debt
  • Minimize expenses (government costs) and thereby decrease size of government
  • Maximize utilization of natural resources at appropriate royalty levels
  • Optimize regulation in order to foster economic growth
  • Promote more direct democracy on political side
  • Corporate / special interests would need to lobby the shareholders rather than politicians




Increased and improved voting

The shareholder-citizen concept would give people the ability to vote in two ways;
  1. the traditional vote based on political equality which would determine the "social and political" direction of the nation
  2. a shareholder vote which would determine the economic direction of the nation including fiscal matters, regulation/deregulation, resource development, etc.




Political voting would occur as it does now for the political vote, once every 4 or 5 years, to select ministers responsible for various government departments.

Shareholder voting, to set economic policies, would happen annually. Due to the increased amount of voting more efficient voting processes will need to be developed. An interesting issue that could be debated is the possibility of proxy voting which exists in annual shareholder votes. Should people be allowed to designate a proxy to vote for them and then how many proxy votes could one individual vote as there is an opportunity for abuse if one person, a super proxy, can vote 10,000 proxy votes.


Shareholder vote administration

Having an annual shareholder vote to make economic decisions will be complex and costly but improved decision making is worth the cost. Modern information technology can make the voting process simple, cost effective and of course secure. The Canadian government trusts Internet technology enough to allow me to submit my annual income tax papers online so why would it not trust the technology for voting purposes?

Voting could take place either online or over the telephone. In developed countries the vast majority of people have access to the Internet, either at home or local libraries. The government could expand online voting potential by setting up information and voting kiosks in public places giving everyone access to government information and the ability to vote.

Common sense leads me to believe that if individual corporations can hold annual shareholder meetings and votes, so can a national government.


"Share" lifecycle

  1. At birth each person receives one share from the national fund
  2. Each year shareholders receive annual report and dividend check
  3. Each year shareholders vote on economic issues
  4. Shares held by underage persons are managed by parent or legal guardian
  5. On the death of the individual, the share goes back into National Fund






Benefits to voters

Under the present system a person might be a social liberal and a fiscal-economic conservative bringing the voter to a difficult decision to prioritize the two issues voting for one and sacrificing the other. For example an individual might be socially liberal but a fiscal-economic conservative who decides to vote based on the social liberal issues and sacrificing the fiscal-economic conservatism. Under this system the individual can vote both as a liberal in social issues and as a conservative in fiscal-economic issues.

The shareholder-citizen model promotes a dramatic increase in direct democracy. As citizens get accustomed to voting annually in shareholder votes they may grow to expect voting more often in the political votes and thereby demanding more direct democracy taking direction setting power away from the politicians.

The biggest benefit will come from the possibility that shareholder-citizens might be willing to more quickly react to fix mistakes than would politicians. Politicians become more of a board of directors that determines how to implement the desires of the shareholders rather than being the decision makers.


Changes to government structure

A government manages a nation and the economy. There are three components related to money in the national economy:

1. The activity and the value generation of the economy
2. Value skimmed from the economic activity by the government
3. How the value (money) skimmed from the economy is used by the government

The government would need to be divided into two parts, the first to include ministers involved with traditional decision making in legislative, social, military, foreign affairs issues etc, and the second to include ministers involved in the economic issues. The economic minister would not be in the chain of command of the prime minister.

The most dramatic change would come from the fact that the shareholder-citizens would need to approve the annual budget and how it gets distributed among the government departments. The ministers then develop their own departmental budgets.





The concept is an extension of some things that are already being done:

Government Funds and investments


Personal Investments
  • Stock market investments - many are already direct beneficiaries of capitalism
  • Registered Retirement Savings Plans (RRSP) in Canada
  • 401k in USA
  • Profit sharing in companies




The problem with the government managed funds is that the citizens have no say in the management of the fund. These funds are still part of "big government".

The problem with the individual investments is that most people have too few shares to have any meaningful voting power in corporations they invest in. People are happy to take the money without being active in the ownership and investment of the company.



Summary

In summary, each citizen would have
- one political vote
- one shareholder vote

The Problems that need to be overcome
  • People feel disenfranchised - they are not beneficiaries of the system
  • People feel that they are just workers making capitalists rich or that they are just "mouths" in the consumption economy
  • "The economy" is too abstract for the average person and they are too "distant" from it and have no idea how to influence it (the average person feels powerless)


Solution
  • Make everyone a direct beneficiary of the economy in a tangible manner by allocating to them a piece of the economic pie, at birth.
  • At present citizens have the right to vote in political elections once every 4 or 5 years, but in this model they will have "shareholder rights" and be able to vote annually at "shareholder meetings"
  • Everyone, no matter what the economic situation of the family, receives the same amount of shares


In order to maintain economic equality in the shareholder vote system:
  • only physical persons and not legal persons/entities can receive a share and have shareholder vote rights.
  • limit one share per person - people can not buy more shares in the National Fund.
  • shares can not be transferred to another person


Note - potential weakness: Somehow we need to promote long term rather than short term decision making as this is a major problem in many corporations and might become a problem in this structure.

We believe that it is better that the people make the wrong decisions for themselves rather than some small group make all the decisions for them. The role of the intellectuals should be to educate and inform the citizens on how to make the best (right) decisions rather than making the decisions for them.

Updated 23rd-January-2014 at 07:03 PM by Željko Zidarić

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  1. Željko Zidarić avatar
    Does the Tragedy of the Commons apply to an economy?


    Distributism

    http://en.wikipedia.org/wiki/Distributist
    http://en.wikipedia.org/wiki/Three_acres_and_a_cow

    Distributism (also known as distributionism or distributivism) is an economic ideology that developed in Europe in the late 19th and early 20th century based upon the principles of Catholic social teaching, especially the teachings of Pope Leo XIII in his encyclical Rerum Novarum and Pope Pius XI in Quadragesimo Anno.

    According to distributists, property ownership is a fundamental right[4] and the means of production should be spread as widely as possible rather than being centralized under the control of the state (state socialism), individuals (plutocracy), or corporations (corporatocracy). Distributism therefore advocates a society marked by widespread property ownership and, according to co-operative economist Race Mathews, maintains that such a system is key to bringing about a just social order.

    Distributism has often been described in opposition to both socialism and capitalism, which distributists see as equally flawed and exploitative. Thomas Storck argues that "both socialism and capitalism are products of the European Enlightenment and are thus modernizing and anti-traditional forces. In contrast, distributism seeks to subordinate economic activity to human life as a whole, to our spiritual life, our intellectual life, our family life".
    Updated 10th-March-2014 at 01:08 AM by Željko Zidarić