Subsidiary Democratic Structures as One of 17 Principles of Regional Economic Order Under the Maxims Democracy and Market Economy.
An Article in the Compendium of Market-Based Social-Ecological Economics
Key issues in view of the neoliberal crisis:
How can we guarantee employment and fair income?
How can we protect the environment effectively?
How should we shape the economic globalization?
What should the economic sciences contribute?
What must be the vital tasks of economic policy?
How can we legitimize economic policy democratically?
Table of Contents
In view of the threatening extent of the devastations caused by the neoliberal economic doctrine, the turning towards compatible economic principles becomes almost existential. But only when these principles are combined to form a model of sustainable regional and global economic order, can the urgently needed economic policy measures be derived.
All 6 global principles are summarized in the article Principles of Global Economic Order in the form of questions. The supplementary 17 regional principles are listed in the article Prinzipien regionaler Wirtschaftsordnung, also as questions.
In the context given here, the term »regional« refers to largely homogeneous entities, currently primarily nation states and supranational political and economic areas (unions), that meet all the requirements for political sovereignty and economic autonomy and are therefore in a position to form a viable foundation for the prosperous coalescence of the world. Hereafter, these entities are mostly referred to as economic areas.
The European Union (EU) and, in particular, the euro zone existing within the EU, can serve as a cautionary example here. Both are supranational entities that have emerged from the political and economic self-interest of powerful players, and whose inhomogeneity and centralism have since unfolded great destructive potential (as a supplement see the article Demokratie und europäische Integration).
In the course of the historical economic development in Europe and the USA democracy and market economy have emerged as useful and reliable Maximes of Economic Order. Both maxims have, however, been distorted by the neoliberal indoctrination since the 1990s to such an extent that the »natural principles« inherent in them are hardly perceived by the citizens any more. It is therefore essential to return to these principles and to combine them into a model of a sustainable regional and global economic order. See also the article Market and Market Economy.
In contrast to the centralistic structures produced by modern Neoliberalism, the model presented here is based on decentralized structures, or, better still: on subsidiary structures. Only if the citizens in as many countries as possible are recognizing democracy and market economy in their interaction again as convincing maxims, can a culture of political co-determination and economic self-determination return to society, politics and the economy and work towards social and ecological justice. Embedded in subsidiary structures, the citizens bear full responsibility for their actions and well-being, so that they are always brought to shape the conditions in their immediate environment in exchange with each other and at the same time create the preconditions and the foundation for global exchange.
Social and ecological justice, by the way, arise from a multitude of economic mechanisms: For example, the terms Efficiency and Productivity as well as specialization, which are wrongly defined in the neoliberal context, are redefined in the sense of social justice and ecological sustainability and are no longer subject to the arbitrariness of »liberalized« (unregulated) markets, but to economic policy control. The market thus regains the freedom it deserves, which enables it under meaningful and uniform framework conditions, rules and standards to allocate economic resources efficiently and equitably like no other mechanism.
Thus, the price is able to perform its original function again as the central information medium and control element of market transactions of individual economic players, because under the conditions of social and ecological justice and productivity it reflects all internal and external costs. By allowing the players to be guided by truthful prices resulting from the interplay of supply and demand, economic resources move – as if steered by an »invisible hand« – to where they provide the greatest benefit to individuals and, at the same time, to society as a whole. As a supplement see the article Economic Pricing.
Subsidiary structures ensure that prosperity and welfare are no longer at the mercy of the imponderables of a worldwide production quantity achieved under oligarchic rule and high capital concentration, but result automatically from the domestic production structure. The production structure alone is decisive for local and regional economic diversity and consequently for the level of employment, the performance-related equal distribution in society and the preservation of natural resources.
Unlike domestic competition, international competition can not, by its very nature, be granted the freedoms of regulated domestic markets. It must rather be based on bilateral trade agreements given the completely different traditions, standards and resources in the world. In these agreements the exchange rate must be set as the crucial trading link, supplemented by autonomous tariffs and trade quotas to balance out the differences and to grant trade profits to both sides. The primary objective of these agreements must be to ensure that imported products with their characteristics and prices are integrated into domestic competition in the most stimulating but harmless way possible.
The separation into regional and global order thus results quite naturally from the principle difference between domestic and foreign trade. Besides, this explains why there can be no superordinate, all-dominant, self-regulating and self-stabilizing world economic order in a desirably diverse and democratic world. For more details see the article Future-Proof Foreign Trade.
Among politically sovereign and economically autonomous nation-states and economic areas, the global order is reduced to agreements of norms of conduct, especially regarding norms of international trade and cooperation. By applying these norms, economic subsidiarity can be extended beyond national borders and find its perfection at the global level in the form of projects of global interest and scale.
With domestic and cross-border subsidiarity the doctrinal practice of transferring economic powers from lower to higher levels (especially nonstate) is overcome, of which neoliberal protagonists claim it would bring about »more appropriate« and »more efficient« decisions. Along with overcoming this practice, the justification is removed for a World Trade Organization, which is entrusted by its current 164 member states as the guardian of the Grail of global cut-throat competition based on dumping prices in lead currency (i.e. US dollar or euro). This is an unprecedented event in economic history, especially because the condition for membership is the (voluntary) renunciation of national economic autonomy.
It should be noted that the demarcation of the specific functions of the various economic levels, i.e. the subsidiary structure of autonomous nation-states and economic areas both domestically and beyond their borders, is absolutely crucial for the future viability of economically autonomous entities and for the global economy as a whole:
Functioning regionality is a prerequisite for sustainable globality. Globality is the complement of functional regionality.
In what follows, is the plea for the vibrant subsidiarily structured democracy as one of 17 principles of regional economic order:
3. The Vibrant Subsidiarily Structured Democracy
On the history and constitutionality of democracy: Democracy is rule by the people for the people. What sounds so simple and convincing, however, only emerges from a protracted process of liberating a people from authoritarian claims of individuals or groups and their ideological justifications. This includes the liberation from the clericalism of religious organizations. Thus, two independent spheres emerge in modern democracy, a state policy sphere and a private ideological-religious sphere, which, in order to coexist, must grant each other autonomy, just as the different private spheres must respect each other’s self-determination. All transcendental beliefs and their practical exercises are thus assigned to the private sphere. From this follows the strict separation of the institutions of the state from those of the religious communities and finally, based on practical common sense, the secularization of the state policy sphere and its decisions.
The fact that the process of secularization has not yet been completed is demonstrated by the current struggles in Western democracies over, for example, same-sex civil partnerships, euthanasia and sexual ethics.
During its liberation process, a people becomes a responsible constitutive people, a sovereign of the state – hence the term people’s sovereignty – and the citizens become responsible citizens who know how to distinguish between their political and private degrees of freedom. »All power of the state emanates from the people« is therefore the meaning of Article 20 of the German Constitution (Grundgesetz) of 1949. The constitution on which a responsible sovereign people agrees usually marks the beginning of the institutionalization of a democracy. A genuine democratic constitution is always an expression of sovereignty, freedom and the rule of law:
Because sovereign are only those who are free to re-decide at any time. This means: sovereignty is indivisible! In Switzerland, for example, the principle applies: majority over truth!
In order to be binding and unassailable, a constitution must in principle relate to a geographically defined state (nation state) and the responsible constitutive people living in that state.
The purpose of a constitution is to clearly identify those values that are non-negotiable and eternally excluded from democratic discourse. This includes fundamental and human rights without restriction. But the sovereignty of the people itself must also be protected from curtailment, for example by transferring powers to non-state institutions only for a limited period of time and on revocation. And even the federal structure of a state can be written into a constitution, as in the German Grundgesetz, or its amendment be protected by high representative or plebiscitary hurdles.
Great caution is called for in the transfer of sovereign powers to supranational institutions. Because supranational sovereignty and democracy are contradictions in themselves. The peaceful unification of inhomogeneous constitutive peoples into a new, unified nation state with a common national identity is an illusion. At first glance, Switzerland seems to refute this statement. However, the Swiss Confederation is only sustainable because its linguistically and culturally different ethnic groups (and cantons) grant each other extensive autonomy. Every Swiss citizen is thus fully sovereign, being free to decide the fate of his or her canton as well as that of the Confederation. However, Switzerland also stands its ground because the ethnic groups do not share the national consciousness of their European neighbours of the same language, simply because the neighboring nation states emerged at a later date. In this respect, Switzerland is de facto a stable confederation of states with limited powers at the federal level.
The European Union is suspicious to the Swiss because it confirms their historical experience that size and concentration of power are the enemies of sovereignty and democracy, but also because they face cultural misunderstandings and laborious pacifications among their own ethnic groups on a daily basis. In short, Switzerland is not a good blueprint for a centrally governed European federal state, but it can serve as a model for decentralized autonomy and direct democracy.
It should be noted that powers that are almost irrevocably transferred to supranational institutions by ignoring international law are removed from democratic control and then inevitably fall under the dictates of oligarchic interests. In the light of current European integration, this principle is gaining a very topical significance, especially because it is being violated more and more negligently.
The democratic decision-making processes: In order to practice democracy in an advantageous way, not speed and supposed efficiency are decisive, but good preparation and the hearing of all arguments. Only if the political debate among citizens is redarded as the norm can a community protect itself from being influenced by group interests or ideologized majorities. The charm of democracy lies precisely in its vitality, in the fact that it involves all those affected, masters changing challenges and develops its own rules of the game and the sense of justice of its citizens.
A sure indication of the vitality of a democracy is the tension that regularly builds up between »popular sentiment« and »professional law«, which often leads to the question: Can everything be lawful (or right) what democratic decisions produce? Even if we considered democracy to be only slightly better than other forms of government, it would be logical for law to have to bow to the sovereign’s will – except for the basic and human rights already mentioned. Because it’s not the current state of a democratic community that is decisive for its welfare, but its ability to continuously develop itself further. In other words, there are no permanent claims to truth and validity in democracy. What is majority-capable today can become a minority opinion tomorrow, and vice versa.
Switzerland, which has already been mentioned, repeatedly proves with its referendums who is the sovereign in the country. The recently successful initiative against mass immigration highlights the conflict between popular sentiment and professional law, this time with regard to the bilateral agreements concluded with the EU, especially concerning the freedom of movement for persons and unregulated foreign trade. For the EU, this is a new lesson in direct democracy. The aggressive reactions of EU representatives show how underdeveloped democratic awareness is in the EU and how systematically direct democratic participation is disparaged and suppressed.
The success of the Swiss initiative is based on two seemingly independent developments, both of which, however, are due to misunderstood »liberalizations«: For the urban population, the overloading of the infrastructure and wage dumping caused by immigration have been the decisive factors, especially in Ticino, which is flooded daily by Italian border crossers who, as a kind of modern day labourer, accept dumping wages. While the rural population has used the initiative to protest against the dissolution of smallholder structures by large industrialized enterprises and low-price imports. So if we take the preservation of decentralized (subsidiary) structures as a measure of value, both in industry and in agriculture, then the Swiss have reminded us with their initiative of the need for nationally sovereign regulation of the freedom of movement of persons and for equally regulated economic policy.
An institutionalized democratic culture of debate, which is practised subsidiarily across all levels of a country, as in Switzerland, ideally forms the centre of political life. On the basis of grassroots democratic (plebiscitary) and market-economy principles, a rationally founded critical ability can develop, which is supported by the freedom to question the respective order with its procedures and rules at any time. The liveliness of direct and at the same time regulated commitment of all citizens ultimately creates a locally rooted and globally engaged community. Against this background, it is high time to supplement the representative form of the state power that emanates from the people with appropriate direct citizen participation, especially at the federal level in Germany.
Experience also shows that centralist decisions always exhibit authoritarian, selfish and ideological imbalances, are difficult to revise and have almost without exception caused damage in the history of mankind. This is why even the slowest and most laborious democratic opinion-forming and decision-making is superior to the supposed efficiency of overhasty and selfish-irrefutable oligarchic decisions, mainly because in the democratic process the learning progress and the insight of those who are directly affected by the impacts of the decisions turn the balance. The citizens’ political maturity, which is so readily disparaged, is the decisive capital that needs to be multiplied to shape a future worth living in.
For a more detailed presentation I recommend the article Principles of Democracy.
Click here for the German-language version: Subsidiär strukturierte Demokratie.