Sunday, June 28, 2015

The economics of democratic communism: the firm

Like capitalism, the heart of economic productivity under democratic communism is the firm.

Note that this is a broad overview; the specifics will depend on legal decisions of the people and the judiciary.

Rather than imposing a specific kind of organization on firms, democratic communism empowers workers to exert their own control on the internal organization and operation of firms. The first empowerment is employment of last resort: anyone can get a job paying 1 SVU per hour for up to 40 hours per week, with 24 SVU per week (12 paid in taxes) being the minimum living wage. So no firm can keep its workers if they exploit or mistreat them worse than the government does.


A firm must have a charter, which specifies the details of how the firm is actually operated. Charters can specify a range of operating paradigms, from a typical hierarchical modern corporation, where managers can arbitrarily hire and fire workers, to a horizontal democratic organization that decides everything by consensus, or any other organizational paradigm.

Regardless of the specific character of a charter, every charter must include the following provisions:

Every firm must have financial transparency: at any time, all workers can see all financial information about the firm, including individual wages. (In general, an individual's income is public information; his or her spending is strongly private.) Hiding or misrepresenting financial information, or acting as an accessory before or after the fact, is a serious individual property crime, for which "I was just following orders" is no defense. Any worker may, without criminal penalty, disclose its firms financial information to the government; such disclosure cannot be grounds for malfeasance.

Communicating with other workers regarding pay, working conditions, or the character of the charter, including proposed changes, cannot be grounds to prove malfeasance or incompetence so long as the act of communication itself (irrespective of content) does not directly, materially, and substantially interfere with the productivity of the firm. If the charter permits dismissal without grounds, workers can be dismissed for such communication, but they are permitted to attend and vote in the next assembly.

Every three months, the firm must assemble all workers eligible to vote, for at least two working days. Workers must attend, and the firm must pay the workers at least 16 SVU to attend. Any worker involuntarily* dismissed in the three months prior to the assembly for any reason other than proven malfeasance, proven incompetence, an uncoerced majority vote of all the workers, or during his or her probationary period (not to exceed one year), is eligible to attend, speak, and vote at the assembly. One worker, one vote.

*What constitutes "voluntary" or "involuntary" dismissal is a matter of public policy, decided by the people. The people can determine, for example, whether dismissal with severance pay constitutes voluntary or involuntary dismissal; they might determine, for example, that the dismissal is involuntary, regardless of statements made at the time of dismissal, if the individual later returns the severance pay.

During the assembly, every worker may freely speak, lobby, and attempt to persuade others using any reasonable medium. The assembled workers may amend the existing charter by majority vote. The workers must put affirmation of the (possibly amended) charter to a vote by the end of the meeting; if the charter fails to gain a majority, appropriate emergency procedures are introduced until a majority of workers can affirm a new charter. If, after a reasonable period of time, a majority of the workers are unable to agree on a new charter, the firm is placed into receivership.


Firms must pay every full time worker at least 24 SVU per week, and every part-time worker at least 1 SVU per hour actually worked. How much a worker actually works during that week and how much compensation he or she is entitled to for that work is a matter of negotiation between the worker and the firm. If a firm cannot pay all workers the minimum wages every week, the firm is immediately and automatically placed into receivership.

For example, a worker might negotiate a pay package that includes 24 SVU for 40 hours per week for a year, then 40 SVU for 40 hours for the second year, then 80 SVU per week for the third year, after which the contract is renegotiated. In the first year, the firm must pay this worker 24 SVU each week. In the second year, the firm may, without fear of receivership, pay only 24 SVU per week, but incurs an obligation of 16 SVU per week, which is superior to any claims by creditors or the government. In the third year, the firm may still pay only 24 SVU per week, but incurs an obligation of 56 SVU per week. If at any time, the firm is unable to pay the worker 24 SVU, the firm is forced into receivership. Firms must always pay unpaid wages in the order they were incurred, before paying any creditor, its capital tax (see below), or any current or former worker an amount greater than 24 SVU per week.

All wages, including unpaid wage obligations, are always denominated in SVU. When they are paid in currency, the exchange rate between currency and SVU at the time of payment obtains.

Firms are prohibited from discriminating in hiring, firing, or internal operation on the grounds of race, sex, gender identification, religion, national origin, or sexual orientation; any private conduct that does not directly, materially, and substantially affect the productivity of the firm; or any specific category that the people or the judiciary declares protected. The burden of proof is on the firm to disprove discrimination.

Receivership and Liquidation

The people must make legal provisions for receivership, where the operation of a firm unable to meet its financial obligations to its workers becomes subject to direct public policy. If a firm is placed into receivership, the receiver may, with due process of law, decide to liquidate the firm.

When a firm is liquidated, the firm ceases operation and all its financial and physical assets revert to the government. Physical assets are valued at current market rates. The government is required to use these assets to pay the following claims, in order: First, unpaid minimum wages, denominated in SVU; if the assets are insufficient, the government pays the difference. Second, all other unpaid wages, denominated in SVU, per individual contract; if the remaining assets are insufficient for full payment, payment is made proportional to claims. Third, any debts owed to individuals or entities other than the government, denominated as per the original contract, again proportional to claims. Next, the government keeps the nominal value in current dollars of any previous government investment not previously repaid. (If the government provided \$1,000 of investment, it receives \$1,000, regardless of when the original investment was made; in other words, the government's claim to financial assets is eroded by inflation). The value of any remaining assets are distributed to assembly-eligible workers in proportion to their total time of employment.

Other than as specified above, no individual or entity other than named above may have a claim to the assets of the firm. Thus, firms are always owned by their current workers.


The ordinary means of capitalization is from autonomous government investment. A firm may, at any time, request capitalization from the local, regional, or national government. These requests are approved by the civil service if they meet the guidelines established by the people, or can be approved directly by a vote of the appropriate delegates.

The level of autonomous investment is determined by the national government. The national government must allocated this investment to regions and localities on a per capita basis. Allocated investment must be actually invested by each body in a timely manner, to firms not operated by the government. (Government-operated firms have a different funding mechanism.)

Firms pay a proportional tax on the amount of investment received from the government, set by specific negotiation. A firm must pay this tax at the appropriate time, set by the people; if it cannot do so, the firm is immediately placed into receivership and may be liquidated. The government can never require that a firm repay the principal amount of its investment, but firms may choose to do so, reducing its tax.

The civil service is forbidden from discriminating in the allocation of or tax on capital on the grounds of anything but the type of business and the character of the charter. The people have broad discretion to allocate and tax capital, but if a judge or by the regional or national government has a reasonable basis to find that the local or regional delegates intentionally or in effect discriminate on race, etc., then the regional or national government must directly administer all or part of the locality's or region's per capita investment necessary to correct the discrimination.

All investment is valued in currency, not SVU. Thus, if a firm receives \$1,000 in investment with a capital tax of 8 percent per year, then the firm must pay \$80 per year in capital tax. At any time, it may repay all or part of the \$1,000 to the government, reducing or eliminating the capital tax. By design, as time goes on, inflation will reduce the real value of investment and capital taxes.

Firms may also borrow from individuals, other firms, or international entities (e.g. sovereign foreign governments, international governmental organizations, international non-governmental organizations, citizens of foreign countries). These loans may be freely denominated and structured by negotiation.

A firm's creditors may have, per specific negotiation, a subordinate claim on the income of the firm and a subordinate claim on assets if the firm is liquidated, but they may have no other enforceable claims on either the operation or assets of the firm. (Of course, if the firm believes it is in its best interests to solicit and act on the advice of its creditors, it is free to do so.) What happens if a firm is temporarily or permanently unable or unwilling to pay its creditors is a matter for the people to decide, but in contrast to workers, creditors cannot force a firm into receivership or liquidation if the people decide, either by law or by specific vote, that receivership is undesirable or contrary to the public interest. Caveat emptor.

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