The Case for Economic Democracy: Chapter 3.1

What an Economy is, What an Economy is not, and How an Economy Works

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Welcome! This is Chapter 3 of my new book, The Case for Economic Democracy. Previous chapters examined the philosophy and practice of political democracy. Now, we’ll look at how our undemocratic economy operates to lay the groundwork for extending democratic principles into the workplace.

Enjoy! Joe

Photo by Mathieu Stern on Unsplash

Chapter Three: The Modern Economy

“It’s the economy, stupid.” - James Carville

What is an Economy?

As the focal point of American elections, the economy is touted as the country’s highest regard. There’s no shortage of newspapers, podcasts, and even TV channels dedicated to its coverage, each offering a different interpretation of the forces that impact the country’s production.

With their sensational graphs (down red line = bad, up green line = good), overcomplicated terms (“quantitative easing” is a fancy way to say “printing more money”), and, for the most part, hard-line neoliberal politics, it's easy for the average observer to become overstimulated and shy away from economic understanding.

 But what everyone can, and should understand is how their life is controlled by the economy. Not in the abstract graphs telling effects they won’t feel for years, but in how their daily life is dictated by economic forces, and what little say they have in how this control is implemented. Additionally, we should recognize that America’s economy, which has resulted in the lion’s share of wealth being undemocratically given to a small portion of the population,[i] is not the only way of structuring a feasible and productive economy.

Before diving into what the economy is, it’s necessary to clarify what it is not. The stock market is not the economy. Stocks are an estimated evaluation of a company’s potential value. If someone buys a share (a single stock) of Apple Computers for $20, they are wagering that they will be able to sell that share for more than $20 at some time in the future. The total evaluation of shares currently in the market is called a “market cap.” So if five investors each buy a share at $20, the market cap of Apple is $100.