What About Economic Democracy?
The franchise should be extended to the economy, to empower working people.
Tribune - Labour's independent weekly - 7 September 2007
Britain is a political democracy but an economic dictatorship. There is a jarring disjunction between how we determine our government and how we run our economy. The former is decided on broadly democratic lines, while the latter operates in ways more akin to tyranny. A rich and powerful economic elite makes all the key economic decisions, disenfranchising millions of employees.
Our country's democratic political transformation - pushed forward by the Levellers, Chartists and Suffragettes - has never been matched by a corresponding economic democratisation. 'One person, vote' has been won in the political sphere but not in the realm of economics - proof that Britain's democratic revolution, begun four centuries ago, remains incomplete.
It is time the labour movement put economic democracy on the political agenda; to bring the economy into democratic alignment with the political system. Extending the economic franchise is about democracy and justice. It can help create a greater plurality and diversity of economic power, and also lay the foundations for a more equitable and productive economic partnership.
Whatever people think of the current economic system, one thing is indisputable: it is characterised by an absence of democracy, participation, transparency and accountability. Employees and their representative bodies - the trade unions - are frozen out of economic influence and decision-making.
Big business rules. The captains of industry, commerce and finance have almost total power. They run their enterprises on totalitarian lines. All decision-making is concentrated in the hands of a tiny, privileged cabal of major shareholders, directors and managers. They alone determine how the company operates. Employees - without whom no wealth would be created and no institution could function - are powerless and disenfranchised. They are little more than servants of the moneyed classes.
Not much has changed in two centuries of capitalism. There have been no major democratic reforms of the economy. Although millions of people bought shares in privatised public enterprises like BT, their individual holdings are minuscule and marginal. They have no real influence. Big corporate interests retain the decisive economic power. This power is as centralised and autocratic as ever. A few determine the fate of the many.
The advent of public industries, utilities and services changed nothing. They have been run in much the same centralised, dictatorial manner as their privately-owned counterparts. There was never any economic democracy in the state-run railways or coal mines. The system of ownership changed but not the system of management. The employees of nationalised industries remained locked out of the decision-making process.
The same applies today in the NHS and other public services. They are administered according to the classic capitalist model of top-down command and control. NHS big-wigs have almost as much power as private medical bosses. Doctors, nurses and ancillary staff are excluded from policy-making in both public and private medicine. In all sectors of the economy, the democratic deficit is universal.
The idea of economic democracy is nothing new. It was big in the 1970s, in the hey-day of Labour's left-wing revival, when much of the party was idealistic and visionary. In those days, we wanted to redistribute wealth and power. Some of us still do. Three of the old ideas are definitely worth revisiting: industrial democracy, trade union control of pension funds and the transfer of stock ownership into Workers' Share Funds.
A system of industrial democracy, broadly based on the 1973 Bullock Report and Labour's Programme of 1976, would require the boards of all public and private enterprises with 50 or more employees to establish equal representation and joint control between management and elected staff representatives. Under an independent chairperson acceptable to both sides, these boards would have full access to all corporate information and the final say over all corporate decisions, including investment, technology, wages, prices and so on. Although imperfect, this system of co-determination would produce a major extension in workplace democracy. It would also shift the balance of economic power; constraining the remit of capital and expanding the influence of labour.
Trade union control of pension funds is another way to decentralise, diversify, and democratise the economy. It could be accomplished by legislatively re-assigning the administration of pension fund assets to either individual trade unions who would act as trustees of the funds on behalf of their members, or to a supra-union investment committee which could be administered via the TUC on behalf of all unions and all employees. Such a scheme would give organised labour direct power over a substantial wedge of public and private investment capital. It could then direct these funds into specific enterprises corresponding to the interests of union members and to broader social needs, such as the development of renewable energy and the conversion of arms industries to socially-useful civilian manufacture.
Perhaps the most radical proposal for economic democracy involves the progressive transfer of share ownership into trade union-administered Workers' Share Funds. This is a variation on the 'wage-earner funds' proposed by Rudolf Meidner of the Swedish trade union federation, the LO, in the 1970s. It would obligate all private share capital companies to assign to a union-controlled fund a proportion of their annual profits in the form of a new share issue. This would gradually, over many decades, give employees, through their unions, a controlling interest in their firms - transforming them into self-governing workers' co-operatives. The great strength of this scheme is that it incentivises and rewards employees for economic success. The more productive and profitable a company, the more shares it has to issue to the workers' funds and the sooner employees gain a controlling stake.
In contrast with Labour's traditional reformist economic doctrines of Keynesianism and Welfare Statism, which merely seek to redistribute wealth more fairly within the confines of the existing free market system, these three models of economic democracy are mechanisms for the structural transformation of capitalism. If implemented, they would alter, fundamentally, the distribution of wealth and power, in favour of organised labour and working people.
Economic democracy is a central plank of progressive politics. It ought to be high on the agenda of the labour and trade union movement. Alas, under Tony Blair and Gordon Brown, the gap between the rich and the poor has widened, which is all the more reason to challenge the system of economic dictatorship that has made this possible. The time for universal economic suffrage is now.
* For more information about Peter Tatchell's human rights and social justice campaigns: www.petertatchell.net
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