Oren M. Levin-Waldman will discuss his most recent article: “Participatory Democracy vs. the Price System” By Oren M. Levin-Waldman, Ph.D., https://www.yonkerstribune.com/?p=39102, on Wednesday, February 28, 2018th at 10am EDT on the Westchester On the Level radio broadcast. Listen “Live” or “On Demand”. Use the following hyperlink … http://tobtr.com/s/10611999 … (NOTE: This URL is activated 5 minutes before the 10am hour on the day of the broadcast and is thereafter part of our archive … To listen, make an inquiry, or share your perspective, please call 347.205.9201. Participants are asked to be respectful of all our guests and to stay on topic. This segment will air from 10-11am.
“Participatory Democracy vs. the Price System” By Oren M. Levin-Waldman, Ph.D.
Inequality speaks to an underlying problem of scarcity. One model for addressing scarcity is the price system in the neoclassical model. In this model goods are allocated on the basis of who can afford to buy them. As goods become more scarce, the price rises. Inevitably scarce goods will be rendered out of reach to some because of their exorbitant price. And yet, this model also does not distinguish between those things which people need and those which people would like to have.
The neoclassical model, in other words, assumes rational beings to have preferences; not needs. Therefore, if we really desire to have say healthcare enough and it is scarce, we will be willing to pay for it. The problem with this model is that not all that which we may demand can easily be reduced to preferences. Individuals’ desire for food is not merely a preference, but an actual need.
The other model is participatory democracy, whereby, through the democratic process in which everybody is free to participate, decisions are made about how to allocate scarce resources. This model, assumes that any number of goods are anything but preferences. Rather they are needs and to simply rely on the price system means that some will get while others — those — who cannot afford — will not. The price system, after all, is intended to preserve the status quo.
What, then, is the status quo that the price system preserves? An unequal distribution whereby those at the top have much and those at the bottom have little is one. That, of course, is obvious. Less obvious is that it preserves the power of those at the top over those at the bottom. What the neoclassical model is blind to is the asymmetrical power imbalance between the top where wealth is concentrated and everybody else.
A participatory model, on the other hand, recognizes the need for the political community to step into the marketplace from time to time in order to achieve a measure of fairness. According to the neoclassical model, governmental intervention is rarely needed because all — employers, employees, consumers and producers — are considered to be equal in their bargaining power.
It is because employees and employers are not equal in bargaining power that labor market institutions like unions and minimum wages are needed. Remember the worker is a needs trader who must work in order to eat. Because of that the worker is often forced to accept whatever wages are available, thereby leaving the worker vulnerable to exploitation. The employer, however, is more of a wants trader who can wait it out until the worker capitulates and agrees to the offer being made.
Similarly, the consumer lacks the power that the producer has. Yes it is true that if enough consumers refuse to buy the producer cannot remain in business. But in today’s economy whereby big corporations and box store type operations dominate the marketplace, they too enjoy a form of market power that even Adam Smith when he spoke of the evils of monopolies could not have imagined.
Consider the reality of low-wage workers who are forced to shop at Walmart because of its low prices. Because Walmart has a captive audience, it really does not have to offer the level of customer service that say a high-end retailer would offer to say higher wage customers. Or for that matter, it doesn’t have to offer quality goods. Again the traditional price system is maintaining a status quo of one class with economic power over another class without.
When we extend this to the political realm we have a situation whereby politicians tend to be more responsive to those with economic power and completely unresponsive to those without. In other words, scarcity which underlies income inequality only reinforces political inequality too.
The price system, then, rationalizes the unequal distribution of both resources and power simply by hiding behind the fiction that everything is a matter of preferences and the ability to acquire based on price is ultimately at the heart of what it means to talk about freedom. Participatory democracy will be seen as an attempt to infringe on personal freedom precisely because it creates an alternative route to the price system for allocating otherwise scarce resources.
Usually participatory democracy is offered as an answer when we have really scarce goods like natural resources like water. Everybody needs water to survive. We can certainly talk about healthcare as a scarce good if we are framing it in terms what is affordable. Affordable healthcare, especially if defined as being inexpensive, is scarce. If left to the price system, many more people would be without. But a healthcare system developed by one party in Congress and which offers goodies to the insurance industry is hardly participatory democracy. On the contrary, those with more resources and power can still get better healthcare.
The reality of today’s global economy where the wages of those at the bottom continue to be pushed down effectively makes most things scarce to low-wage workers. Workers who barely earn subsistence wages are often priced out of most goods that can be said to be needs. We see this in New York City’s housing market where affordable housing, especially for low wage workers, is practically non-existent.
Participatory democracy has often been proposed as a form of workplace democracy whereby workers should have a voice in the operations of the firms they work for. Surely firms that pay low wages aren’t going to give their workers voice in the wages they pay. But we could employ a variant of participatory democracy.
The neoclassical model tells us that wages are low for low-wage workers because they are unskilled and there is an oversupply of low-skilled workers, thereby driving down wages. In other words, there is a scarcity of higher paying jobs. A model of participatory democracy would respond with policies aimed at ensuring that all workers earn a decent liveable wage that would enable these workers to purchase more.
Were it truly to be a model of participatory democracy, more than policies enacted by politicians in the form of bones intended to purchase the quiescence of low-wage workers are needed. We would need to have say wage councils whereby workers can fully participate in the process of setting wages. Workers would truly have to have voice in this process because the outcomes profoundly affect them.
It isn’t only that low wages result in less economic equality, but they also result in less political equality. Of course, this would threaten the status quo, but it would be a recognition that wage setting according to the neoclassical model has been anything but natural, and that the price system only works to serve the interests of those who currently have power.
Restoring the Middle Class through Wage l Oren M. Levin-Waldman l Palgrave MacMillan, https://www.palgrave.com/us/book/9783319744476.
This book makes the case for minimum wage as a way to improve well-being of middle-income workers, reduce income inequality, and enhance democracy….
Minimum Wage: A Reference Handbook – ABC – CLIO
The Minimum Wage: A Reference Handbook By Oren M. Levin-Waldman. As of 2014, the minimum wage in Seattle is $15 an hour — double the federal minimum wage.
Oren M. Levin-Waldman, Professor at the Graduate School for Public Affairs and Administration at Metropolitan College of New York, Research Scholar at the Binzagr Institute for Sustainable Prosperity, as well as faculty member in the Milano School for International Affairs, Management, and Urban Policy at the New School. Direct email to: firstname.lastname@example.org