In an industrially developed capitalist economy, the working producers are predominantly wage and salary workers — employees.
       
These employees work together in the industries to produce the goods and services people need and want.
       
However, the goods and services the workers produce don’t belong to the workers. The entire product of their labor belongs to the employer, the owner of the business the workers are employed by, be it a sole proprietorship, a small business, a corporation or a government entity.
       
Workers have no legal claim to the goods and services they produce. The only way they can attain them is by buying them from the private or state enterprises which own them. The money to buy them comes from the wages and salaries they receive as payment for the use of their labor by the employers.

How to make a profit
While the pro-capitalist ideologues claim this exchange between workers and employers is “fair” and “natural,” it in fact is a concealed form of exploitation — the workers give to the employer more than they receive, on a regular and ongoing basis.
       
Business enterprises exist to make a profit. Profit is the difference between what it costs the company to produce the product and its value, what it can be sold for in the market.
       
The profit goes to the owners of the business, who, as owners, contribute no labor to the production of the good or service the company sells. This is what makes it possible for individuals to have incomes from stock and other capital assets in the millions of dollars and more per year, doing no productive work whatsoever.
       
The entire value of the product is created by the labor of the workers. Profit is thus value produced by labor but taken by capital without compensation.
       
This exploitation, which is the necessary foundation of the so-called “free market” system, is the underlying cause of financial crisis, recession and, ultimately, depression.
       
Shortfall in consumer demand
Companies realize their profit by selling the product of the workers’ labor in the market. Workers constitute the overwhelming majority of the consumer market in developed capitalist economies. But since their total combined wages are less than the total value of the goods and services they produce, the system suffers from a built-in shortfall of demand relative to the supply of consumer commodities for sale.
       
This shortfall creates a competition among companies for the available markets. They compete by lowering their prices to win sales. But lower prices mean lower profits or possibly no profits — unless the cost of producing the product can be reduced.
       
Market competition forces companies to strive constantly to lower their costs, which means lowering either the amount of labor it takes to produce the product, or the pay of the labor producing it, or both.
       
But the consequence of such labor cost-cutting for the overall economy is to further reduce workers’ total spending power.
       
To keep sales growing so the economy can expand and continue to generate profit, workers are encouraged to borrow more and more to keep buying, even as their real incomes remain stagnant or fall.
       
While consumer debt works to maintain demand, it is obviously only a temporary expedient since the debt eventually has to be repaid. If it is not repaid, the lenders go bust and a financial crisis ensues. A cascading flow of personal and business debt defaults occurs, with the ultimate consequence an economic collapse and depression.

Government spends to prop up demand
Since the Great Depression of the 1930s, it has been the accepted practice for the government to step in to augment inadequate consumer demand and stave off depression. By borrowing money from excess capital funds, whose owners cannot invest profitably in business expansion because of low consumer demand, the government can instead spend that money and stimulate the economy.
       
The capitalists who lend to the government benefit by receiving interest-paying government bonds. Workers benefit by holding onto their jobs and continue spending. So on the face of it everyone wins, and capitalism’s business cycle seems to be tamed.
       
But as the government borrowing continues year after year, its total accumulated debt keeps growing. The interest it pays on the debt likewise keeps growing. More and more new borrowing is needed just to pay off the old borrowing, and less and less of it is available for new spending to stimulate demand.
       
At the same time, the competition which compels continued cuts in the cost of labor drives on, intensified as more nations industrialize and become, with their low wage rates, fierce competitors in world markets.
       
However long crisis can be averted through personal, business and government debt expansion, the day of reckoning must inevitably arrive — with devastating consequences for the workers of every nation.
       
There is no solution within the system because the system is the problem. The system’s need for profit compels the ever more efficient exploitation of labor, which in turn sabotages the future consumer demand needed to realize the profit.

The solution: a market-free economy
Working Democracy is the solution to economic breakdown because it ends exploitation.
       
Like today, people will work together in the industries to produce goods and services. Unlike today, the people, as a unified community of working producers, will own the product of their collective labor.
       
Since you don’t have to buy what you already own, a market system of buying and selling, and credit and debt, will not be needed.
       
Goods and services will be distributed directly to individuals and families for their consumption. As we will be working for ourselves instead of for employers, we will distribute the product of our work to ourselves, instead of having to buy it back from employer-owners.
       
Of course, not all production will be for consumption. Some resources and labor will be allocated to replace, develop and upgrade the means of production and distribution — the technology and other facilities that belong to the democractic economic community of the nation. These nonmonetary investments will insure future improvements in living standards and security, and the environmental solutions necessary for the future security of planet Earth.
       
Whether for consumption or investment, the decisions on allocating and distributing the wealth of the community will be made by the community to serve the needs of individuals and the community, through the democratic workplace government of Working Democracy.


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