Democracy is an evolving form of government. It has only been around for a few hundred years, but has changed over that period. What comes next?

There have been three main forms of government.

Autocracy is where a king, or president, or sole leader runs the country. This was the common form of government for most of the last few thousand years. From people like Alexander the Great to the Chinese Emperors to British Kings and even Putin and Xi. There might have been some form of representation from the people, but it is only token. It has little power.

Theocracy is where a state is organised around a religion. Iran is a good example today but it has existed in Christianity, Islam, Hinduism and just about any major religion you can name. As with Autocracy it is not exclusive. It can co-exist with another form. Many Kings ruled as autocrats with the backing of the relevant God.

Democracy is the representation of the people in the management of a country. Note I said “representation” not for the good of the people. If you look at the origin of democracy, it was not the general population that was represented in most countries. It was the landowners. They were the first to get the vote. In other words, it was the rich who had most influence. Around the beginning of the 20th century woman started to get representation which means before that, half the population were not represented. Hardly democratic.

Democracy has consistently pushed the economy to the forefront. From Clinton’s famous remark “It’s about the economy stupid!” to almost any election today, economics takes centre stage. This is a legacy of the origins of democracy. It was focused on money. As pressure came to improve social conditions, the spotlight fell on how to pay for it, and what needed to be done to expand the economy. In other words, how to make the rich richer and how to minimise social change.

The key point glossed over is that governments REDISTRIBUTE money. That means they take money from taxes and provide services to those who need them. Someone wins but someone has to lose. Someone gets a benefit and someone has to pay tax.

The logical outcome from this is that those with the most money pay the most tax to support those with the least money. The greed gene kicks in and people say why do I have to pay so much tax? It is not cool to be seen as greedy so the argument morphs to higher taxes will hurt the economy. This is a far more subtle way of saying if you tax more, I will generate less profits and not be as rich.

Government is not about generating a profit to make someone rich. It is about generating a profit to pay down debt and fund the future quality of the country. In a bigger view it is about helping less fortunate countries but this brings a whole new load of issues which I will not cover in this post. Let’s just stick with Government profits are not to make individuals rich. Greed should not be part of the equation.

Now we have a point of difference between something run by the Government and something run by private enterprise. It comes down to profits. Government will reinvest any profits and private enterprise will take the profits to make people rich and only reinvest what it needs to fund the increase of profits.

Governments are short term thinkers. They only have to make it through to the next election, and get re-elected. A ten year plan that will make things worse in the next three or four years before the benefits flow through is not feasible for government. They would be tossed out. Perhaps this is our fault as we are too focused on our present rather than our future.

A good example is aged care where there are not enough qualified staff. The real solution is to train a whole load of people over the next three to five years to fill the vacancies. This probably requires a year to gear up by finding trainers, setting up facilities, enticing people into the training, probably some migration of suitable people, and providing the funding. Instead all parties in Australia want to throw some cash at the issue and move on. None talk of a long term approach to actually solve the staffing shortages.

If we look at the other side of the coin, the taxation system, Australia has some problems. Trying to compare tax rates is a statistical nightmare. Take income tax. There are all sorts of things to consider including progressive scales, how many are in each group, are social service taxes included, is superannuation included. I will not spend pages doing the comparison. Below are some key figures. You can read more here.

  • Australia has the second highest income tax percentage of total revenue in the world – 41%. The OECD average was 24%. In other words we pay more tax as individuals and collect less from other sources (including corporate) than all but one other country in the developed world.
  • This shows that Australia has a relatively high top marginal tax rate (49%) but not the highest among OECD countries (Sweden is top, at 60%). The rub is that our top marginal rate cuts in at a relatively lower level of income than most other OECD countries (2.2 times our average wage). Workers get into the top tax bracket sooner in Australia than elsewhere.
  • Looking at OECD data, Australia’s highest marginal tax rate is higher than the OECD median. Out of the 34 OECD member countries in this data set, Australia ranks 13th for the top marginal rate of tax, meaning 12 countries have a higher top marginal rate, and 21 countries have a lower top marginal rate.
  • When social security contributions are taken into account, Australia’s “ranking” in terms of top marginal rate of tax drops to 16 out of the 34 OECD member countries – making it still higher than the OECD median top marginal rate, but not by much.

So because other taxes are low, personal taxes account for a bigger proportion of all taxes than other countries. Corporate and other taxes are too low by international standards. We would need to either reduce personal taxes or increase other taxes to achieve the normal balance for an OECD country.

Now to the big question. What comes next? This is where I see us going but don’t expect it in the next decade or even the one after. If it happens it will evolve over time. I called it Socialocracy. It is a democratic system where we put more services in the hands of government, and raise taxes to fund those services.

If you want to look at a model, the Scandinavian countries are leading the way. In a nutshell, it is a system where governments focus on improving services to those who need services. Where revenue collection is seen as a duty rather than a burden; where corporate taxation is not a game of moving the pea and the thimbles; where social limits are put on wealth; where corporate profits are progressively taxed.

On the benefit side where services are delivered by an efficient, well funded public service; where real estate is a right not a profit goal; where health, food and a roof over our head is seen as a right; where a living wage exists; where a job focuses on fulfillment rather than extraction of labour.

It requires that the public has been educated to take a long term view; that tax avoidance is actually unacceptable; where independent judicial structures are in place to monitor and where necessary, prosecute those who break the law; where the political point scoring is taken out of government.

By this stage you are wondering what I am smoking. What I talk about is too idealistic. I would offer two points.

Firstly look how far we have come. 150 years ago we passed laws to get kids out of mines. 100 years ago we gave women the vote. Things like unemployment benefits, Medicare, delayed payment for university fees, the 40 hour week, gay marriage, Aboriginal rights and superannuation did not exist a hundred years ago. Eighty years ago when my mother was married she had to give up her job. When she had children, there was no subsidised child care. There were no government grants to help first home buyers. All that changed in a few decades. What will change in the next decades to bring a better quality to our lives?

Secondly, it will require some adjustment to democracy to turn it into Socialocracy. I don;t have a cunning plan as Blackadder would say but here are a few things that need to happen.

  • A move away from a two party system.
  • Policy replacing politics at elections
  • Voting on policy possibly by online voting during an electoral term
  • New proposals by government will include the source of funding – possibly through new taxation packages
  • More engagement from the public
  • Limits on wealth through ceilings on earnings at the corporate and individual level
  • Removal of tax havens
  • Steps to make real estate a non attractive area for those seeking a quick profit
  • Increase in philanthropy from those with wealth being seen as an obligation rather than a discretion.

Most importantly it will need a shift in social views. A shift bigger than recent ones around gay marriage or improvements to aged care, womens rights or Aboriginal recognition. Those only took a decade but this will take much longer.

It means people need to see themselves as more than victims of democracy. As more than someone who toils away so someone else can reap the rewards. As a profit centre. As a person living week to week with no way forward. As a part of society who both gives and takes.

We need to flatten society. Reverse the growing gap between rich and poor. History shows that when the gap gets too big, revolution follows. Let’s hope there is a revolution but a peaceful one. A revolution where people drive a change towards a Socialocracy.

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