The Sovereign Economic Model. A manifesto for rising nations

Wealth Distribution Is Profit Sharing

The idea of distributing wealth comes up often in the Sovereign Economic Model. One significant occurrence is that state capitalism, through the profits of state-owned enterprises (SOEs), indirectly distributes wealth. By channeling profits to the state, the model uses the money to lower taxes, improve services, or support business. It lowers both the cost of living for citizens and the cost of doing business.

A balance between the owner of production and the workers is needed. Both Karl Marx and Friedrich Engels discussed this topic broadly, advocating for the workers to own the means of production as practiced in communism. The following might be a better way:

• Assign 20—30 percent of profits to workers.

• Assign 10—15 percent of stock as company remuneration or for voluntary purchase by employees.

Such a scheme could create a stabler balance in the economy.

Politics of the sovereign economic model

Politics and the Sovereign Economic Model

The Sovereign Economic Model focuses only on economic theories for strengthening the economy. It is by itself apolitical. It is strongly driven by an attempt to fix the excesses and imbalances of liberal capitalism. The Sovereign Economic Model is not a rejection of capitalism, but an endeavor to improve its efficiency. It implicitly contains many political elements, not because of political inclinations but because economic control also implies political influence. As with any form of sovereignty, it means the country controls processes within its borders. In economic terms, economic sovereignty means a country controls the currency flow within its borders. When someone outside a country controls food, medicines, electronics, industrial production, energy, media, military hardware, land ownership, and other major businesses in that country, it means the country is not in charge of itself or is not sovereign. Therefore, the Sovereign Economic Model implicitly tries to reverse such external control. Through state capitalism, import substitution, market regulation, and industrialization, it tries to move the economic control levers back into the hands of the country and its people.

The Sovereign Economic Model also has a preponderant long-term view of economic well-being in terms of independence, self-sufficiency, and stability. Simultaneously, it tries to capture and keep the wealth created in the country. Increased competition is not a welcome concept for many of the largest international industry players and for countries with such industries. Thus, a country that follows this path faces very intense pressure. It is therefore criticized, despised, and ostracized in both the media and academia by most economic experts and stakeholders. It is sad to see that only a few countries, such as China, Russia, India (partially), and Iran, have sovereign economic policies. Others, willingly or unwillingly, have given up economic control of their country. This negatively affects their economies in the longer term.

The political implications of the Sovereign Economic Model also have an unintended political angle for countries that want to retake the reins of their economies to organize amended mechanisms suitable for local conditions. Some countries have more «socialist» inclinations. Russian President Vladimir Putin has several times mentioned the «social obligations» of businesses; in China, President Xi Jinping and the Chinese Communist Party created the concept of «common prosperity» in 2021. Both of these leaders want to remove their economies from the «liberal order» -defined status quo and its economic modus operandi. Both want to create their own flavor that is more beneficial to their own country and its citizens.

In countries like the US, economic nationalism, with mottoes such as «Made in USA,» «Buy American,» and «American jobs» still stir up a sort of nationalistic, patriotic sentiment in some people. It is comparable to the Palestinian Boycott, Divestment, and Sanctions (BDS) Movement, but generalized against any foreign brands or goods.

Many think that import substitution is economic isolation, that it means blocking off all imports and becoming an economic hermit. This is not true unless complete sanctions or an embargo are involved. Sometimes there are sectoral sanctions, in which case that delimited part of the economy struggles. The import substitution relies on established supply chains and slowly starts to «indigenize» the supply chains into domestic ones. So, an industry begins with low-level economic activity and assembly of parts and only slowly, at a later stage, replaces the entire stack of suppliers with local companies. Also, usually imports are still allowed, but with high custom excises.

For some countries, especially those in Africa, a sovereign economy with import substitution was part of the plan to gain economic independence in the 1960s. So, after they achieved independence, political emancipation gave way to certain policies. These were decided upon and implemented, but without planning and foreign interference, they produced little progress.

A political will to improve the national economy is needed, and many reasons and slogans are declared, but generally no real changes occur because the status quo is convenient to most. That needs to change.

What Is Economic Sovereignty?

In a business context, sovereignty is the concept that a state or country is fully in charge of its largest businesses and business policies. To be sovereign, it needs to be free of resistance or interference from external (or externally controlled) actors who act for ideological or geopolitical reasons or sabotage business processes out of «pure greed.» Consequently, a country must firmly control its largest companies, its economic infrastructure, and its main economic driving mechanisms. With that said, often the participation of several market actors and external minority shareholders is useful for governance. It acts as a counterweight to the bureaucratic and political nature of state companies and as a benchmark for quality and product innovation.

The sovereignty, including the economic sovereignty, of a country is equivalent to the human rights that belong to a human being. It is the right of a country to have equal standing with other countries, to choose a certain path, and to make independent decisions for smoother economic growth.

Socioeconomic Implications and Influences

Several countries are trying to put forward unique visions of different variants of capitalism • trying to smooth the edges, remove the poor traits, and make it increasingly sustainable. Their visions are strikingly similar, but with different terminology coming from different perspectives and ideologies. China and Russia are ahead in implementing parts of this vision, while the West is sorely lacking.

Western stakeholder capitalism is a form of capitalism that considers the interests and needs of employers, suppliers, the local community, and others. Its goal is to create long-term value for all stakeholders. It is an idea for a gentler kind of capitalism. Some, like McKinsey & Company, strongly endorse it, while others strongly criticize it. This vision is much like the Chinese and Russian views of the role of business in society, albeit using different terminology.

In 2021, China introduced and began preaching the concept of «common prosperity.» It is derived both from communist ideology and from Confucian and East Asian philosophies. It aims to remove all «imbalances» and «excesses» from the economy, specifically the poor habits of liberal capitalism: speculation, asset bubbles, profiteering, and over-intrusion by tech companies into government business. This new philosophy will provide stronger stability in financial markets and a wider distribution of investments into more «suitable» forms of business. It reestablishes the sovereignty and primacy of the state in the economy.

Putin, in his speeches, has often said the primary priority of business is to create jobs, the second is to contribute to state coffers, and only if both of the first two conditions are satisfied can businesses enjoy their profits. In Russia, businesses are required to be team players contributing to the overall system, or they are not welcome. It makes sense in that every business must give a proportional «cut» to the larger community.

In summary, the socioeconomic implications of the Sovereign Economic Model are that a country and its people must get a more significant share of wealth from business.

Hidden Power Struggles

Economic conquest is a game the Big Powers have always practiced through their trading companies, and so it continues today. Money is power; therefore, the control of business and money translates into the political sphere of a country in the following ways.

WTO and trade agreements. The World Trade Organization (WTO) is an international organization that regulates trade between nations. It provides a framework to reconcile trading rules for countries with disparate types and levels of economic activity. While it should be independent and neutral, it is not impartial. It is strongly biased toward wealthier nations and their large transnational organizations. It favors them over developing countries by reducing access to technologies (intellectual property, IP), food, and pharmaceuticals. Since its inception, it has been highly negative for poor countries because it allows richer nations to use non-tariff barriers to block imports from developing nations. Infant industries in developing countries are affected particularly by WTO policies and politics. Similar to the global WTO, other regional trade agreements, especially where major differences exist between participant countries, are similarly tilted toward the wealthiest nations, who impose their rules on smaller, weaker countries.

International division of labor is a concept of globalization. Labor is carried out in the most «convenient» places. Some countries are «assigned» many industries, and others are excluded. It is a sort of modern feudalistic vassalage system not in the interest of a sovereign country, a theory and modus operandi pushed by international companies. They are interested in profitability due to reduced labor costs, taxes, and manufacturing and transport costs.

IMF, World Bank, and other international institutions. International financial institutions like the International Monetary Fund (IMF) and World Bank were created to help smaller, poorer countries bridge the gap to the richer countries. They were intended to finance these countries to increase their economic growth and standard of living. In fact, however, both of these organizations use finance to hinder, block, and destroy competitors of large multinational corporations in developing countries. It is well known that countries from the Eastern European post-Soviet bloc were forced to shutter business and power plants to receive financial help. This has increased the economic and political dependence of these countries on the institutions themselves while lowering their chance to implement locally suitable economic policies with existing market sectors.

Measurements of economic sovereignty. The economic sovereignty of a country is measured using different indicators:

• Political sovereignty to decide economic development model and policies

• Control of strategic sectors and business ecosystems

• Independence of food, energy, and technologies

• Ability to produce most strategically important goods and services

Often, poor countries or those in trouble due to war, natural disasters, or other factors are offered generous financial aid. This ostensible help from outside is always tied to political and economic conditions. Such covenants include adherence to disadvantageous terms often in the form of trade treaties, forced privatizations, forced closure of competitors, market access, political concessions, or military access to the territory.

Economic colonialism for developing and emerging markets. In developing and emerging countries, many people complain of economic colonialism base on money, finance, trade and technology. Stronger and richer countries use financial tools to impose colonialism on smaller and weaker countries, creating resentment. These tools might be any of the following:

• Currency exchange pegging to the US dollar

• Payment systems

• Credit cards

• Financial standards

• Financial education

Many large TNCs have colonized smaller or weaker countries using tools of commercial colonialism. By using their vast array of brands and goods, their financial power, and the political force of their home countries, they have pushed the door down and taken over the markets. The host countries could not impede this colonization due to their lack of economic defenses and their inherently weak economies. It is noticeable in many countries that fast-moving consumer goods (FMCGs) made by companies in only a few countries are available. These goods come mainly from US and UK companies, while companies from other regions, such as Europe, are completely missing from the market.

Some economic commentators have pointed out that the developed nations establish and use technological colonialism as a power lever against smaller countries. To some countries, the developed nations deny the right to buy certain technologies by making excuses or imposing sanctions. They do so to put pressure on the smaller countries or to slow their development or progress.

Use of economic instruments by leading nations is a means of geopolitical primacy. It always has been and always will be.

The Competitive Advantages of Nations

In the past, cities, trading posts, fortifications, and ports were built in strategic geographic locations for trading, security, safety, and easy access to natural resources like water and fertile land. Cities were erected near rivers and cultivable land, fortifications on easily defensible hills and mountaintops, trading posts on bustling trading routes or near production areas, and ports in defensible bays with quiet, protected waters. These strategic locations are constantly contested by many countries for military and trading advantages. Many countries still enjoy competitive advantages given by geography and have adapted their economies to take advantage of that. Therefore, most countries have some sort of advantage over others in certain categories of goods. Most times, this advantage has been built upon to create extensive economic activity and even advanced industries. Some industries have ended for various reasons, such as replacement by newer technologies or simply finite resources. It is in the interest of countries to identify such competitive advantages and build on them. They may be simple things like water, large land surfaces, or natural resources. These sectors should constitute the foundation of an economy. Catalysts to economic development are categorized into two macro groups:

• Naturally occurring competitive advantages

• Evolutionary development from agriculture, natural resources, and infrastructure

Natural competitive advantages should be used for evolutionary economic development. Once competitive advantages have been identified, both historical and new ones, the focus should be to take advantage of them by progressing and innovating to achieve quick evolutionary developments. As a base, agriculture, natural resources, and infrastructure are used to improve the economy. Even at a basic level, because they require tremendous manual input, these sectors need automation and innovation by machines, tools, materials, and technologies. The footprint of such primary goods and activity is unusually large, and there are huge margins to start production of capital goods as a part of import substitution programs. This brings a considerable drive to upgrade a country’s skills and industrialization and affects many sectors. Agriculture and food production require a vast variety of machines and industrial processes to convert raw agricultural products into tradeable goods with added value. Natural resources require many large industrial machines to transport, filter, and process raw material extracted from underground. Infrastructure, beyond the construction stages, needs machines and vehicles to transport people and goods, so it is an excellent starting point for heavy industry.

Moreover, all three «basic» industries of agriculture, natural resources, and infrastructure impact other industries, such as the chemical industry, because they require hundreds or thousands of substances for processing. A key government task is to identify the most critical or convenient industries and goods to bet on by considering their benefits to the economy. A government must assess the nation’s industrial and technological capabilities and skills, internal demand, competitiveness, exportability, and a variety of other economic and strategic factors. Once this analysis is done, a country can plan the next steps of its economic development evolution.

Regional Raison d’être of the Sovereign Economic Model

Within countries, often regions or states in a federal political system are granted a certain autonomy in economic matters. Taxation might be different, and local laws might have precedence over federal and other autonomous prerogatives. Therefore, even a semi-independent region of a country might mold its economy quasi-independently of the central government. For example, a regional legislature can certainly use the Sovereign Economic Model as an inspiration. Regional administrations have leeway given their partial autonomy to create local economic plans and investment opportunities, which are ideal for small and mid-sized companies with a large local presence and local interests. Thus, even local administrations can make smart, independent choices and apply economic policies for the benefit of both businesses and residents.

Economics of the sovereign economic model

Wealth Creation as the Economic Ideal of the Sovereign Economic Model

A long-forgotten basic tenet of economics is that wealth is created by raw resources and labor with the manufacture of physical goods. In the modern era, that concept is partly extended to goods built with non-physical, intellectual labor. Capital allows businesses to increase their production by utilizing more labor, more resources, and more capital goods. Money, if not used in the production process, is merely a convention for the exchange or accumulation of wealth, a measurement tool. Money is used to buy goods, which requires a producer to create even more goods to replace those sold. Until this arrangement ends, money does not equal wealth. This is why the Sovereign Economic Model prefers a widespread and large distribution of money instead of an enormous concentration of wealth in a privileged few people.

Once the model has been implemented, only the real economy can create wealth. The primary and secondary sectors of an economy, agriculture and manufacturing, are the catalysts. The service sector adds services to a finished product and manages the surplus wealth. This sector includes sales, distribution, repairs, servicing, professional services, and finance • services that merely reuse and recycle money by shifting it in one or several directions while producing little or nothing. Perhaps incoming tourism is the only exception, as its geographic and cultural nature attract many people. This creates demand and thus the construction of infrastructure, real estate, and increased food production. The knowledge economy, as a quaternary sector, adds technologies like artificial intelligence (AI), Big Data, and robotics to automate mechanical and industrial processes by making finer use of data.

Under the Sovereign Economic Model, a strong distinction will be drawn between different wealth operators:

• Wealth creators produce a typically physical object using labor and raw resources.

• Wealth recyclers add services to a finished good or wealth by recycling wealth.

• Wealth consumers produce unproductive output that consumes wealth.

• Wealth destroyers render a physical object less valuable, e.g., natural disaster, wars, inefficient government, crime, over-taxation, misallocation of funds, and bankruptcies.

The concept of wealth is truly important as some business activities create real wealth, while others do not. A sovereign country creates the right conditions to make creation of wealth more convenient.