Heba Khalil

 

Introduction:

Any plan for an alternative economy that goes beyond the current capitalist system requires a state with an independent administration as far as decision-making is concerned, one that is well connected to society and the private sector, especially different forms of production including cooperatives and labor unions. The existence of an independent and uncorrupt administrative structure is one of the most important steps for the transition to an alternative economy that replaces that current neoliberal order and challenges the dominant capitalist discourse. Such administration would protect the economy from its enemies both on the domestic and foreign levels and would only give precedence to their interests, whether political or financial. It is not only important to establish an alternative economy, but also to find ways to maintain this economy against all forms of pressure whether by local capitalist classes or global capitalism including international financial institutions.

That is why it is not possible to envision the characteristics of an alternative economy without also thinking of the shape of the state in which it will be established. Although several forms of alternative economy are established by workers, farmers, or average citizens rather than the state, the state remains capable of either supporting this emerging economy or undermining it. The role of neoliberal states across the world and particularly in the Arab region serves as a good example since such types of administration obstruct, though with varying degrees, alternatives to the current system and restricts different forms of economic and social solidarity as well as cooperative activities.

This paper tackles the organizational structure and administrative system that should accompany an alternative economy. It also examines the link between bureaucracy on one hand and businessmen, the private sector, and private capital on the other hand as well as the relationship between the state on one hand and workers and farmers associations, trade unions, and cooperatives on the other hand.

It is noteworthy that the vision of an alternative economy provided here will determine several of the characteristics and roles of the state and the state’s relationship with different sectors in the society. For example, the proposed form of alternative economy could surpass the neoliberal system yet still allow private ownership especially in production sectors while allowing state intervention in planning and regulating production. Another option would be an alternative economy based on public ownership, which will totally change the relationship the state has with production and with citizens. In such case, planning and managing the economy will be participatory in the sense that all citizens will take part in the decision-making process. In all cases, the condition of the incumbent economies in the region necessitate going through a transitional phase before actually managing to establish an alternative economy. The shape of an alternative economy will be determined based on the characteristics of the society in which it will be applied and the forms of alternative production citizens will be willing to take part in to make sure that the result will be a participatory and solidarity economy.

The role of state administration in alternative economy:

An alternative economy is based on moving beyond the neoliberal system and replacing it with a new one that prioritizes the interests of the people and works on achieving a comprehensive development program whose implementation relies on solidarity and participation. The concept of development here is not similar to that of international financial institutions such as the World Bank and the International Monetary Fund. These organizations adopted a narrow perspective of development that does not target the core foundations of poverty and inequality, but rather deals with the external symptoms so that it does not compromise the dominant neoliberal systems. This concept does not only obstruct the achievement of real development, but also aggravates the situation as international financial institutions keep imposing their terms that consolidate the influence of neoliberal policies, hence bringing about more injustice. That is why an alternative economy needs to do away with the incumbent system that does not effect a real change on the ground, but rather serves the interests of capitalist elites. This alternative economy will be based on the drawbacks of the current system as underlined by citizens, workers, economists, and social movements and will challenge the prevalent assumption that “there is no alternative”[1].

The implementation of the policies of an alternative economy and the expected challenges need to be studied. Economic transformation is not unprecedented, for all countries go through such transition, which is accompanied by changes in institutions, laws, and the relationship between the state and different segments of society including businessmen and workers. Since economic transformation has precedents, it is necessary to benefit from the experience of other countries that managed to apply a new system that eliminate the control of capital and redistribute wealth in a manner that addresses the core of the problems caused by neoliberal policies imposed by international financial institutions in several countries in the global South.

This paper will examine two main issues; first, the characteristics of state institutions that will launch and implement the policies of an alternative economy and second, the roles to be played by the state including planning, participatory decision-making and implementation, and the redistribution of wealth.

Before going into this, there are two important issues that need to be highlighted:

First: State intervention in the economy:

One of the most frequent allegations used by supporters of neoliberalism and market economy is that the state has no role to play in the economy. Since the implementation of neoliberalism as we know it today, especially in Margaret Thatcher’s Britain and Ronald Reagan’s United States, economic theories did not acknowledge the role of the state in the economy except in creating an investment-friendly atmosphere[2] . Such allegation is among neoliberalism’s most prevalent myths since the state never disappeared under the neoliberal system, but rather changed its role. For example, the state plays a major role in protecting investments, corporates, private capital, and private property instead of protecting the rights of workers. In the case of Egypt, the state shifted on the legislative, theoretical, and practical levels from protecting workers’ rights during the Nasser era, in which the state played a major role in economy and industrialization, to the protecting the interests of investors and allowing the exploitation of workers through low wages and unsafe working conditions as well as temporary contracts while criminalizing strikes and protests. This transformations was done under the pretext of liberating the labor market and rendering working conditions flexible, which practically means absolving employers from any commitments towards their workers or the community and protecting investors instead. This shift in favor of capital is always accompanied by repressive measures that include imposing restrictions on the right to protest and organize and on the establishment of cooperatives to ensure that investments are not compromised[3] . That is why it is always important to stress that the state has a role in all cases; the question is the nature and purpose of this role.

Second: The role of the state in designing polices:

Another myth propagated by neoliberalism is that a free economy needs no strategies or plans since it runs itself. Such assumption was based on Adam Smith’s theory on the “invisible hand” and which is misinterpreted in this case. The World Trade Organization (WTO) tries to impose this myth on developing countries while developed countries reserve their right to plan their economies. For example, developing countries are bound by agreements to remove tariffs on imported goods and services including foodstuffs and agricultural products, the United States applies free trade on specific sectors only based on the economic strategy it adopts and those do not include many agricultural products such as corn extracts in order to protect local production. The latter contradicts what the WTO promotes and states in its agreements with developing countries, especially as far as free trade is concerned. This is despite the fact that the United States is not to be used as a model since it suffers from a wide gap between the rich and the poor and the prioritization of capitalist interests, yet it still demonstrates how the state sets its own economic policies and plays a major role in implementing them. This role is of course rendered more effective in the case of alternative economy, in which the state focuses on achieving real development. Therefore, creating an alternative economy does not mean that the state will be taking a totally new role; it will just be channeling this role towards a different end.

State institutions’ role in alternative economy and bureaucracy:

This paper is based on the assumption that alternative economy cannot only rely on society, but also on state institutions that should encourage and protect different sectors as well as create comprehensive policies under which this economy can operate. There are many structures through which an alternative economy can be founded. That is why it is important to look into administrative and institutional entities that can implement an alternative economy with the participation of the people.

The issue of institutions brings to the forefront the question of centralism versus locality and whether it is possible for the state administration to work on both the central and local levels in a way that efficiently serves the goals of alternative economy. In this regard, it is necessary to strike a balance between planning and participation. Planning in alternative economy should be central especially that the ownership of production tools can be public or private. Planning for alternative economy should also be comprehensive and unified since it is a solidarity economy that should prioritize the welfare of society and cater to people’s different needs. That is why it needs to come from a central administration that sets a holistic plan for the economy, supervises its implementation, and deals with obstacles. This should be done across different sectors as well as across different regions in the country.

An alternative economy also needs local administrations so that it can achieve the participatory and solidarity aspects. This is done through cooperatives, farmers associations, trade unions, student unions, and other entities that represent different segments of society. Central planning should also be based on a thorough examination of reality on the ground in different regions since conditions may differ from one region to another and so are the needs of residents. This cannot be done without coordination with the local administration of each region.

The establishment of an alternative economy should be accompanied by the creation of a planning department that differs from the current ministries of planning. In Egypt, for example, the Ministry of Finance is considered the entity in charge of planning while the Tax Authority is responsible for collecting revenue for the ministry, to which it is also affiliated. The Ministry of Planning, on the other hand, plays a minimal role in development, in its limited form as marketed by the World Bank, and some government investments, but it is not part of the decision-making process in industrialization, investment, or agriculture. In alternative economy, the state has to establish a comprehensive planning department that includes experts from all sectors (agriculture, industry, education, healthcare… etc.) in order to create a unified structural entity that is capable of designing a plan which comprises different aspects of the economy and determining the means through which it can be implemented.

This administration should be well connected to the society with its different segments, including businessmen, workers, cooperatives, farmers, and others, all of which should take part in the planning process as well as in the transition towards alternative economy and the protection of the new economy from the pressures it is expected to face from capitalist lobbying groups.

The establishment of institutions in not enough for guaranteeing the efficiency of administration and implementation and the absence of corruption and incompetence on both the central and local levels. That is why it is necessary to make sure that the right decisions are made and the right steps are taken towards their implementation. Several scholars tried in the past decades to set a model for efficient countries as far as development and economic transition are concerned and to examine the structure of their institutions. Several writings on this matter focused on the experience of “developmental countries” in East Asia., especially Japan and South Korea. The economy in developmental countries is similar to an alternative economy in many aspects such as embarking on an economic transition and establishing an economy that is different from the global system. The major difference is the participatory element, which was not one of the founding principles of the developmental state. In fact, the developmental state could at times threaten the interests of certain segments of society. The developmental state is more like Egypt during the Nasser era than an alternative economy state, yet is similar to alternative economy in the way it relies on central planning and defies global capitalism as well as gives precedence to the common good over the interests of businessmen and investors.

Looking at studies conducted about the developmental state, it becomes clear that efficiency in planning and implementation is closely associated with two issues: first, structure and administration as represented by bureaucracy; second, the relationship between state institutions and society.

Vivek Chibber[4]  notes that the efficiency with which development plans are implemented is the result of “intrinsic” and “extrinsic” components of the state and which are responsible for determining the capability of the institutions in this state. According to Chibber, the most important of intrinsic characteristics is the cohesiveness and autonomy of bureaucracy. extrinsic characteristics, on the other hand, revolve around the state’s ability to “extract performance from private firms,” which is also called “the power to discipline big business”[5]. In the same vein, Peter Evans sheds light on the necessity of combining intrinsic and extrinsic components[6]. In order to manage the process of economic, social, and industrial transition, the developmental state has to achieve internal cohesiveness. This is done through bureaucracy, which Evans argues should be the closest possible to the “perfect” bureaucracy proposed by Max Weber. This bureaucracy is founded on a number of characteristics: selection is based on competence, long-term financial benefits to guarantee the loyalty and professionalism of bureaucrats, and prohibiting the mingling between bureaucrats and business owners even though it is important for them to maintain good relations with the private, cooperative, and solidarity sectors. According to Evans, the administrative apparatus of the state should be made up of employees from a unified social and educational background so that they can be equally motivated to rise up the administrative hierarchy. A similar background, Evans adds, makes the administration internally cohesive and guarantees the autonomy of the state structure. It is noteworthy that one of the most important conditions for bureaucratic autonomy is absolute separation between bureaucrats and decision-makers on one hand and banks, corporates, and international financial institutions on the other hand. This means that people who work at the World Bank or the International Monetary Fund cannot occupy official positions and state officials cannot work at any of these institutions after retiring. The only way to guarantee this, hence bureaucratic autonomy and a cohesive administration, is through providing state bureaucrats with long-term, satisfactory financial benefits.

It is necessary to stress that the transition to an alternative economy should not by any means be done through resorting to debts or giving in to any form of neo-colonialism because if the state is not held accountable by its citizens, it will end up reproducing the same neoliberal policies that would only benefit the few and do most segments of society injustice. That is why Chibber, who supports the developmental state model, stresses that the economic transition government has to be a revolutionary one that is capable of mobilizing citizens and garnering their support in order to effect a real change. This government also has to be democratic and should be monitored through a parliament, free press, and an independent judiciary. An authoritarian regime usually leads to abuse of power, which means it would not work for the best interest of the majority, which is the main objective of an alternative economy. Chalmers Johnson[7]  cited the example of protests in South Korea in 1997 against the intervention of the International Monetary Fund and argued that there was a need for a semi-revolutionary regime that can mobilize people for the ultimate goal, which is the welfare of all citizens. The tension that accompanied the establishment of democracy in developmental states is quite telling, especially in the light of the absence of a role by civil society groups and workers. The relationship between the state and the society in several East Asian states is similar to that between the state and the commercial sector with industrial policies implemented at the expense of minorities, the disenfranchised, and workers. This can be demonstrated when a workers’ protest is crushed in a successful developmental state such as South Korea, which proves this is still not the model that places average citizens as the top priority and that surpasses the capitalist system and denotes that a more humane alternative is possible.

 

The state- society relation: Private sector, cooperatives, and labor unions:

It is important to discuss to role of the state in the transition to alternative economy through discussing the relationship between the state and the private sector on one hand and workers and workers’ unions on the other hand. These relationships constitute the foundations of an alternative economy as well as the channels through which its policies are to be implemented. The establishment of an alternative economy necessitates the creation of a strong relationship between the state and different segments of society, one that is founded on participation.

It is not possible to say that there is one model for the relationship between the state and different segments of society, yet it is possible to reach a set of basic foundations upon which this relationship can be based and through which the state can play a role in the transition to an alternative participatory economy.

First: Participatory planning:

The expression “participatory planning” might seem quite paradoxical since, as noted earlier, planning should be central, yet the plan should be based on the needs of different segments of society, which by definition are provided by different local entities. The implementation of this plan should be in coordination with those local entities, which will also play a major role in determining the sectors that are to take part in the alternative economy, the producers who will take part in implementing the economic plan, the measures to be taken by the state to guarantee and facilitate implementation. In addition, the state is required to protect local producers from external competition and to facilitate production through cooperatives and similar entities that operate within an alternative economy.

Second: Regulation and monitoring:

State regulation and monitoring are very important component of an alternative economy since the state is to oversee the implementation of the economic plan to make sure that its sustainability is guaranteed and that no violations, to workers’ rights or the environment for example, are committed during the implementation process. In an alternative economy, modes of production could be owned by the state or the private sector or managed through solidarity economy under the supervision of production cooperatives. In all cases, the state’s role remains that of the monitor and the regulator that sets rules and supervises their implementation.

Within the framework of this executive role, the state regulates labor markets and guarantees that laws protect the rights of workers and farmers as well as producers in different sectors. This includes strict rules for minimum wages, working hours, healthcare, social security, and safe working conditions. As part of its regulatory role, the state creates communication channels between workers and business owners in the private sectors. The state should also be in charge of settling any disputes that might arise between the two parties through laws that protect workers’ rights including the right to organize and protest and through an independent judiciary or specialized bodies, also independent, that are responsible for tackling such disputes before they reach court.

The state’s regulatory role determines the different patterns of production and their relationship with the state. Whether the alternative economy is dependent on the private sector or not, the state needs to give free rein to different forms of production, especially solidarity production such as production and farming cooperatives. The state’s regulatory role has to guarantee those entities’ ability to work and produce through two main channels: first, setting laws that facilitate the establishment of cooperative entities and the progress of the production process; second, creating of those entities an executive partner that participates in the different phases of the transition to alternative economy.

Third: Production:

Unlike the state’s conventional role in production, and which mainly relies on communal goods or services such as infrastructure projects (roads, water networks… etc.), the role of the state in production within an alternative economy is much broader as it could encompass all sectors. The state’s role in production can be in the shape of partnership with the private sector or can totally rely on publicly owned companies in addition to cooperatives and different forms of solidarity production. While the state’s role in planning remains the same in all cases, its role in production differs according to a number of factors such as the availability of the private sector and the type of production. This role can also be played through the state’s cooperation with cooperatives and solidarity production entities through the plan that determines the production and industrial sectors on which the state is to focus in the new economic structure and the partners with whom it will work to implement this plan.

Fourth: Local business owners and producers:

The state should intervene to protect local producers through different strategies. These include imposing restrictions on imports to protect local production from unfair foreign competition. The state can also impose restrictions on foreign investors and foreign capital through, for example, stipulating that the revenue of a project is reinvested inside the country or through prohibiting private ownership for foreigners. Such procedures aim at protecting local products from the threat of global capitalism. In addition to protecting it from external pressure, the state can also empower local production through offering tax incentives to particular sectors and providing financial support to cooperatives in addition to creating policies that minimize the risks to which local businesses can be exposed, encourage small enterprises and cooperatives to venture into the market, and increase the revenues of emerging projects. Through protecting local production from common market risks that can entail substantial financial losses, the state lays the foundations of a strong alternative economy.

The state can also interfere directly with the private sector to make sure it will contribute to the establishment of an alternative economy through supporting different sectors that are taking part in the new structure. The state can, for example, negotiate with international companies on behalf of local production entities and cooperatives to make sure the former will provide the latter with the latest technology it needs. The state can also set laws that regulate the relationship between multinationals, which generally monopolize technology, and local businesses to guarantee the smooth continuation of the work process.

 

Conclusion: The challenges of establishing an alternative economy in a capitalist age:

Despite all the above-mentioned possibilities, which make the establishment of an alternative economy not as far-fetched as it might always seem to, global capitalism and the international economic structure remain major challenges that could still obstruct such a transition.

Countries that would attempt a transition to alternative economy under the current capitalist system will have to face a number of restrictions, many of which are related to customs, imposed by the global trade system through WTO agreements or bilateral trade and investment agreements that particularly prevailed following the failure of the Doha Round negotiations and their final termination in 2016. Several scholars such Peter Evans stressed the importance of the state’s role in the protection of local industries from foreign competition, yet most national economies still lack the amount of autonomy required for planning and regulating their own trade rules.

WTO agreements constitute sufficient hurdles that render states incapable of making their own economic decisions independently. For example, the regulations of the WTO National Treatment principle require that party states treat foreign investors as they do their local counterparts under the pretext of “trade without discrimination.” However, any state that adopts an alternative economy is expected to prioritize local and small businesses and protect them from foreign competition while creating markets for them in case none existed. This is not in line with international trade agreements through which the state is required to support foreign investors and equate them with local ones whether in tax exemptions or market access. Such obligations strip the state of any independence as far as economic planning and regulation of local markets are concerned, hence rendering an alternative economy impossible.

In addition, new WTO members are also subjected to “subsidy ceilings,” which means cutting subsidies on particular sectors, especially agriculture, with a particular percentage of total expenditure. Therefore, Europe and the United States reserve the right to offer subsidies to their investors and different sectors and to protect their agriculture, while developing countries were told during the Doha Round negotiations to lift or reduce subsidies.

Such restrictions constitute an example of the challenges countries face in the present time under international financial institutions and global capitalism. Credit rating agencies are among the restricting entities that analyze economies, evaluate the abilities of debtors, and measure the power of an economy to withstand crises and shocks. Those agencies are neoliberal dictators who have the ability to tarnish the reputation of countries and compromise their interests if they steer away from the economic methodology accepted by international financial institutions, on top of which is the International Monetary Fund. While it is possible to renegotiate bilateral investment agreements, multilateral agreements such as those signed with the WTO are almost impossible to renegotiate. The question is how to deal with this upon establishing an alternative economy.

Regional alliances, especially among countries of the global south, could constitute a solution. The Doha Round negotiations failed after developing countries stood together to reject the unjust conditions of the agreement. That is why if states with economies of similar size manage to forge alliances, whether regional or not, the sanctions imposed by the WTO will be rendered impractical. Whether these alliances work for reforming the WTO from inside or for quitting it altogether, they would in all cases work towards away with different forms of subordination[8]. This is because subordinated countries need to detach themselves from the perpetrators of their deprivation in order to move forward. And despite the fact that this detachment is still the subject of negotiations, it is still possible through regional alliances coupled with serious steps towards the protection of local industries.

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[1] Wael Gamal. “The Foundations of Alternative Economy [Arabic].” Arab Forum for Alternatives. Cairo, 2017.

[2] David Harvey. A Brief History of Neoliberalism. Oxford: Oxford University Press, 2005.

[3] David Harvey, Ibid, p.37.

[4] Vivek Chibber. Locked in place: State-building and late industrialization in India. Princeton University Press, 2003.

[5] Ibid.

[6] Peter B. Evans. Embedded Autonomy: States and Industrial Transformation. Princeton University Press, 1995.

[7] Chalmers Johnson. “The Developmental State: Odyssey of a Concept.” The Developmental State (1999): 32-60.

[8] Samir Amin. “Contemporary imperialism.” Monthly Review 67, no. 3 (2015): 23.