Economic democracy (sometimes called a democratic economy) is a socioeconomic philosophy that proposes to shift ownership and decision-making power from corporate shareholders and corporate managers (such as a board of directors) to a larger group of public stakeholders that includes workers, consumers, suppliers, communities and the broader public. No single definition or approach encompasses economic democracy, but most proponents claim that modern property relations externalize costs, subordinate the general well-being to private profit and deny the polity a democratic voice in economic policy decisions. In addition to these moral concerns, economic democracy makes practical claims, such as that it can compensate for capitalism's inherent effective demand gap.
Proponents of economic democracy generally argue that modern capitalism periodically results in economic crises, characterized by deficiency of effective demand; as society is unable to earn enough income to purchase its own production output. Corporate monopoly of common resources typically creates artificial scarcity, resulting in socio-economic imbalances that restrict workers from access to economic opportunity and diminish consumer purchasing power. Economic democracy has been proposed as a component of larger socioeconomic ideologies, as a stand-alone theory and as a variety of reform agendas. For example, as a means to securing full economic rights, it opens a path to full political rights, defined as including the former. Both market and non-market theories of economic democracy have been proposed. As a reform agenda, supporting theories and real-world examples can include decentralization, democratic cooperatives, public banking, fair trade and the regionalization of food production and currency.
Deficiency of effective demand
According to many analysts, deficiency of effective demand is the most fundamental economic problem. That is, modern society does not earn enough income to purchase its output. For example, economic geographer David Harvey claims, "Workers spending their wages is one source of effective demand, but the total wage bill is always less than the total capital in circulation (otherwise there would be no profit), so the purchase of wage goods that sustain daily life (even with a suburban lifestyle) is never sufficient for the profitable sale of the total output".
In the Georgist view of any economic system, "wealth" includes all material things produced by labor for the satisfaction of human desires and having exchange value. Land, labor and capital are generally considered the essential factors in producing wealth. Land includes all natural opportunities and forces. Labor includes all human exertion. Capital includes the portion of wealth devoted to producing more wealth. While the income of any individual might include proceeds from any combination of these three sources—land, labor and capital are generally considered mutually exclusive factors in economic models of the production and distribution of wealth. According to Henry George: "People seek to satisfy their desires with the least exertion". Human beings interact with nature to produce goods and services that other human beings need or desire. The laws and customs that govern the relationships among these entities constitute the economic structure of a given society.
Alternately, David Schweickart asserts in his book, After Capitalism: "The structure of a capitalist society consists of three basic components: "The bulk of the means of production are privately owned, either directly by individuals or by corporations that are themselves owned by private individuals. "Products are exchanged in a market -- that is to say, goods and services are bought and sold at prices determined for the most part by competition and not by some governmental pricing authority. Individual enterprises compete with one another in providing goods and services to consumers, each enterprise trying to make a profit. This competition is the primary determinant of prices. "Most of the people who work for pay in this society work for other people, who own the means of production. Most working people are 'wage labourers'".