The Organic Economy
The Organic Economy will represent an alternative to the market economy. This will be based on a production system designed to meet demand, and a fair distribution system to allocate goods and services equally. Values such as cooperation and conscious behavior will be included in the design of the system.
Inefficiency of the Market's Economy
The main driver in the market economy is the profit, which arises from the self-interest of economic agents; the fundamental incentive is their own necessities and satisfaction; and the ultimate mechanism is the competition, which determines the level of production and distribution of goods and services on a large scale.
The market economy basis is that resources are scarce and man is individualistic, to set up a massive production and distribution system of goods and services, but unable to ensure that all members are provided equally with them. Therefore, these convenient conventions, but not necessarily true, support production and distribution systems, where fundamental human values are usually ignored, such as cooperation, solidarity, and fair distribution.
The Pricing System
An accurate information system should be set up to replace the Price System of the market economy, in order to establish the Organic Economy.
Milton Friedman states that the economic problem may be subdivided into five interrelated problems: fixing standards; organizing production; distributing the product; providing for economic maintenance and progress; and adjusting consumption to production over short periods.
Prices do three kinds of things in solving the above five problems. They transmit information, they provide an incentive to users of resources to be guided by this information, and they provide an incentive to owners of resources to follow this information. Then, he adds that “the problem solved by a price system is an extremely complicated one, involving the coordination of the activities of tens and hundreds of millions of people all over the globe and their prompt adjustment to ever-changing conditions. The price system is an extremely subtle and complex device for solving this problem.
Current focus is about the efficient allocation of resources and economic problems solving, without any consideration of fair or equal distribution of goods and services.
The economic dilemma should not be only about efficient distribution of goods and services, but about how people can meet their needs. Economic systems are not made up of goods and services, but of people who need them. Human values should rule the economic systems to ensure a decent life to all, rather than efficiency rational arguments.
Another type of system should be created to replace the price system, one that is able to tackle the fair distribution of goods and services, other than the economic problems mentioned above.
The Organic Economy
1) The Organic Incentive: Consciousness of Love
The Organic Society members’ behavior incentive will be the organic level of consciousness, which means that he loves himself and others as well. This will ensure that he takes care of his own needs, and that of others. Since an individual with the organic level of consciousness considers others as part of himself, he considers the well-being of others part of his.
In this respect, a social system made up of people having the organic level of consciousness will create a fair production and distribution system, which will work efficiently and ensure that all members’ needs are met.
The issue to be addressed here is to create an efficient resource allocation system on a large scale, to produce and distribute goods and services equally and fairly.
2) The “Costs” system
The Costs System’s guiding principle should be the following: what price should I ask for a good or service that I am providing to myself? The answer will probably be the cost price. Therefore, every conscious individual will offer his service or product at the cost price. Goods and services price to be offered in an organic economy will be the cost price.
As per current economic paradigms, the Costs System should not be able to provide any company shareholders with the profit required to keep in the business, or any company with the extra cash needed for increasing their production or make investments. Certainly, under current paradigms this system is not feasible. Our proposal is not to maintain the current system, but to evolve from the market economy system to the organic system, where products and services will be available to all.
Let us suppose that a company needs to make investments to increase its production. From the current economic standpoint, a company will not have enough cash to make investments if products are sold at a cost price. Thus, the company will need to have a profit to make investments in the future. From an organic standpoint, this cash can be included in the cost price. Investments can be included as part of the company’s costs.
This seems like the same situation but reversing the events. From an ethical point of view, the organic approach is more justifiable than the first. In the first case, the company is looking to make investments to make profit, based on the self-interest principle. Whereas in the second approach, the company looks for covering its costs, and ensuring there will be enough cash for future investments, to keep on providing the Society with a service.
If there is no profit, why would a company be interested in reducing costs? This should be to provide as many as possible with their products/services. A company’s well-being should include consumers’ well-being. Consider this as if this company is selling to itself or a subsidiary. Likewise, a company should be interested in including technology and increasing productivity in order to benefit all Society members, and to increase its capacity of satisfying more and more consumers, rather than having more cash at its disposal to increase its profit.
Let us make an imaginary mental exercise: A family should be organized so that all members provide others with a good or service. Since all belong to the same family, no member will try to make a profit with the sale of his good or service to the others, but to sell at a cost price to provide them with. This way, any member cares about his family’s well-being. Likewise, he will receive products and services from his family members at a cost price as well. Every member will try to provide others with as many goods or services as they need; and they will make their best efforts to increase their productivity, reduce cost, and have good quality. All this for his family’s well-being.This is the main goal of the Organic Economy perspective: to consider that we all belong to the same family, where the ultimate goal should be to meet all members’ needs.
Thus far, the price system has not been replaced to coordinate and adjust. It only has been redefined as the Costs System. For this purpose, the market economy competition concept should be analyzed and potentially replaced with a more cooperative device, likely to be found in an organic structure.
3) Collaboration
From the organic perspective, producers should be able to constitute a collaborative supply network to provide society with a given product. Each producer should commit to provide quality products, meet demand, and increase productivity for the benefit of Society.
An example will help us explain our point of view: let us assume that ten (10) companies should provide one million (1,000,000) consumers with a specific product. These companies will make up a supply network to meet all consumer’s needs, by means of a collaborative process where companies’ product price will be fair: the cost price. That does not necessarily mean that it will be the same price for all, but that every company will set their price based on their own capital and operations costs: including capital investment, production, transport, payroll, sales, distribution, depreciation, etc. They will agree upon which area of the country they will service, share technology improvements, and backup another supplier in case of supply disruption.
As per current paradigms, objections to this system could be the following:
a) Objection: Why would a company be interested in producing goods if no profits will be obtained?
Organic answer: To meet people’s needs and provide Society with a service.
b) Objection: Since there is no competition, companies will not be interested in improving the product quality, reduce costs, or increase productivity.
Organic answer: Due to producers’ employees’ level of consciousness, they will provide Society with the best possible service, including production improvements, productivity increase, and quality of the product.
c) Objection: The price difference between products will make the least efficient company go out of the market.
Organic answer: All ten (10) companies will be considered as production units supplying their correspondent geographical areas, and sharing the same technology. They will sell products at a price to cover their costs. The price differences will be due to internal costs and location factors. Since consumers will be aware of the collaborative relationship between the production units, they will trust the selling price is fair, and thus, will buy their products. No company will go out of the market because all of them are considered as on big company, and all will be able to sell their products.
In summary, current economic systems are based on self-interest to shape people’s attitudes and way of thinking toward individualistic behaviors. Whereas the organic approach is based on the organic level of consciousness, which makes people consider others as part of himself. This will shape their behavior toward inclusion of others’ well-being within their own.
4) The Organic Information system
The flow of information is fundamental in organic structures. Under the current economic perspective, units are classified as producers, distributors, and consumers. But, in the organic approach, production units can be treated as consumers as well, and eventually distributors. Likewise for distributors and consumers, which can be seen as producers as well. The organic approach states that units make up part of a system where there is a continuous exchange of information and resources.
An organic structure flow of information is:
· Complete: all units have the comprehensive information for operating.
· Permanent: there is a continuous flow of information.
· Pertinent: information is useful and applicable to the units’ functionality.
· Transitive: information received by one unit is shared with other units.
The ultimate goals of the information system are coordination and adjustment for the organization of work.
5) Production Information system
A Production Information system will be put in place to know the availability and necessity of goods/services to be produced and distributed, by means of a constant flow of information of the member’ needs on one side, and production inputs needs on the other side.
From a technological point of view, the creation of this type of system should not be an issue. The main questions to answer should be the following:
· How can the needs of citizens be estimated in advance?
· How can this information be input into the production system?
· Should this be performed by means of a planning process, or by an online system once products are used?
· How long in advance should the information be input into the system?
A unit of time should be defined clearly in the organic information system, so that the production is delivered on a timely manner. The unit of time should be determined by two moments: beginning, when the production units receive information of the consumer’s needs; and end, when the product is produced and actually delivered to the customer.
The information system should have two work paces: normal condition, when the information is sent by consumers in a timely manner to the production units at the beginning of the unit of time, and products are delivered within schedule at the end; and extraordinary conditions, when the delivery time should be shortened in order to meet exceptional conditions, through a fast track production process.
Under normal conditions, the Production Process will be as follows:
a) The unit of time is defined per product. This could be one day, one week, one month, etc. It should not be the same for all products, due to the different production process each one of them require.
b) Customer: every customer should provide his needs information per product to the information system at the beginning of the unit of time. If his needs will be the same on a permanent basis, he will not have to provide this information for every single period of time. This request will be renewed automatically unless informed otherwise.
c) Producers: will receive customers’ information, plan their production, and deliver products at the end of the unit of time.
6) Characteristics of the Information system
Decentralized: there will be as many production units as required to meet demand, scattered throughout various geographical areas. They will be autonomous to plan, produce and meet local quantities requested.
Egalitarian: all citizens will have the same rights to obtain the goods and services they need.
Planned: every member and unit will provide the information system with the input about goods and services they need at the beginning of the process. In the case when this is not possible (i.e. electricity), planning should be performed in advance to estimate users’ needs. This way, production units will be able to plan in advance their product deliveries, including a small surplus in case of any miscalculation, or wrong input.
7) Advantages and Issues to Resolve of the Organic Information system:
Advantages
· Information transmission will be accurate and immediately available.
· Production planning will be fluid, and will eliminate the surplus or scarcity of goods and services.
· Distribution of goods will be accurate. This will reduce inventories.
· Products will have the same quality, due to producers being part of the production network and sharing good practices.
· Goods and services will be distributed equally and fairly.
· Production coordination and adjustment will be performed immediately, thanks to the information input at the beginning of the production process.
Issues to resolve
· The information system will not be easy to set up. But, it should be feasible due to the current level of information technologies.
· Users should be instructed about how to estimate their needs, and input correctly into the information system.
· Production units should receive inputs, plan their production, and deliver in a timely manner. In the case that one unit is not able to meet its local region demand, support will be provided from other production units.
· Paradigms should be changed from the current economic system to the organic information system. An adaptation process should be implemented to instruct users and production units about the new system.
A change of modern society paradigms should be performed in order to replace the market economy with an organic economy. This represents a huge hurdle race: overcome current system inertia, break up with the market logic tradition, convince people about the benefits of the organic system, and persuade large capitals that this does not present a threat to them.
This type of proposal calls for the people’s consciousness. This is addressed to their heart rather than their reason. If people’s heart responds to this call, it means that the new economic system is ready to be implemented.
