By Michael Taft.
“It is the supreme paradox of democracy that every man is a servant of the matters of which he possess the most intimate knowledge, and for which he shows the most expert proficiency; namely, the professional craft to which he devotes his working hours; and he is a master over that on which he knows no more than anybody else, namely, the general interests of the community as a whole.”
Beatrice and Sydney Webb pointed out that where people had intimate knowledge and expert proficiency – the workplace – they were denied the right of participation they were allowed in political society. Democracy is not a 24/7 process. It stops at the beginning of each working day.
There are many arguments for economic democracy: rights-based arguments that claim people should have the same entitlements as they do in political democracy; performance-based arguments showing how greater democracy improves economic and social outcomes; and psycho-social arguments emphasising how it enhances the individual.
All of these arguments are valid but unfortunately they are made ineffectual as they are painted as naïve or impractical, anti-business or anti-entrepreneurial.
But the real complaint is the privileging of labour. This is economic democracy at its most audacious – the idea that people, the producers, have the capacity to run workplaces and economies in a better, more efficient and sustainable way than capital.
The privileging of labour: both the trade union movement (producers coming together to exert more power than they can do individually) and the cooperative movement (where labour hires capital rather than the other way around) are agents of this. But, unfortunately, with so much in common, they do not always act in concert.
Ladder of participation and productivity
The jury is not out. It came in a long time ago. We have what can be called the ladder of participation and productivity. It is the same ladder. Let’s take one example: employee participation, a rather bland term which, however, conceals a more insidious, essential message. Academic studies and government papers, institutes and special commissions: all report that the greater the participation of producers in the decision-making processes of the enterprise, the better the performance.
Participation operates in a continuum, or on different rungs of the ladder, ranging from the minimal right to information, to the right to suggest, to prior consultation, to bargaining, to veto, to co-decision, and finally to unilateral workers’ decisions, or labour-managed enterprises. Each step up these rungs has been shown to improve the performance of the enterprise.
So if the evidence is so overwhelming, why isn’t democracy at enterprise level more widespread? Simply because it undermines so many vested interests – the status of senior executives and management, and the financial interests of shareholders. And more.
Ever since societies started producing surpluses, there has been a hierarchy that dictates what is produced, how it is produced, who produces it, on what terms, and – most importantly – who derives the greatest benefit. This is the source of social and political power.
The trade union and cooperative movement enter the frame at the enterprise level. However, they enter at different rungs on the ladder. Trade unions enter at the most basic level, organising workers, their voice and their potential collective strength.
The cooperative movement enters at the top of the ladder – as contractual owners of the firm. These different stations inevitably create different perspectives and strategies.
Rethinking enterprise and ownership
One perspective might be that workers in a cooperative are both the producers and owners whereas workers in a traditional, capital-privileged enterprise produce but do not own. However, the distance between the two is not so great in practice.
Workers in both types of enterprises want the business they work in to succeed. Obviously, workers in the cooperative want the business to succeed. But so do workers in the traditional firm. Living standards, job security, social benefits and social networks are all vindicated by and through the enterprise. Nobody wants the business they work in to fail.
Indeed, the biggest group within any enterprise that wants the business to succeed is the workers. They outnumber management and shareholders. Shareholders are mostly passive, rentiers by definition, extremely short-term, with no interest in the company beyond dividends and share appreciation. Workers look to the enterprise to provide for their future; for shareholders, the future is short-term and contingent.
Given its centrality to economic democracy and people’s lives, we need to redefine and reconceptualise the enterprise. We need to reframe the very idea of ownership. In this task we will have a lot of help. Academics, lawyers and researchers – even court rulings – have concluded that no one owns a corporation. Instead, it is described as a legal person, a nexus of contracts, a franchise government which is neither public nor private, and an economic commons.
In other words, the enterprise is a social space where a number of interests – workers, management, shareholders, creditors, suppliers and the community – have contractual rights and obligations but no one group owns the business. If shareholders or management have power, it does not derive from the essential activity of the enterprise, but from law. Its power is politically defined.
This may appear as highly theoretical and detached from day-to-day struggles. But it helps us to go to the heart of the problem. We are all too aware of how the odds are stacked against us when are adversaries frame the debate and define the terms.
Labour is a cost and we need to keep our costs down, we need to be flexible, we need to adapt quickly, we need to be competitive, we no longer can afford permanent full-time jobs, etc. etc. Employers, management, entrepreneurs are the wealth creators and who would oppose wealth creation. We lose the debate before we enter it.
Economic democracy as a cultural struggle
Democracy’s enemies license what is acceptable and what is unthinkable in society and the economy; in other words, they determine what is ‘common sense’.
And how do they enforce that license? They rely on us. We adopt what is acceptable and what is unthinkable as if we came up with these ideas on our own. Such is the power of this ‘common sense’ that we end up policing ourselves. Ironically, the debate that we lose before entering is actually framed by us.
Therefore, economic democracy first presents itself as a cultural struggle – a struggle over ideas, over what is desirable and practical. We must refashion common sense, reframe the debate and redefine the key terms. The current construction of the enterprise masquerades as a natural order.
In an alternative construction, the enterprise is a social space. Capital may have rights based on contract but this does not equate to ownership. And employees, in this construction, cease to be a mere vendor of their labour, a downsized party in the hierarchy of the enterprise.
Our pragmatic and ideological arguments for economic democracy may receive a wider audience if, at the same time, we reframe the debate into a new common sense.
State support for cooperatives
At first glance, the cooperative movement appears to have solved this problem since they are both producer and shareholders. However, the cooperative can be extremely circumscribed and vulnerable within markets dominated by capital.
They may be forced to compete with traditional companies that pursue ‘race-to-the-bottom’ labour strategies, engage in below-market selling, externalise their costs (especially in the environmental sphere) and other predatory practices while at the same time face discrimination by the financial system.
This is even more so given the weakness of the cooperative movement in Ireland. We do not have the long-established and deep-rooted ecosystems that sustain cooperatives in the Bologna or Basque regions, in the American plywood industry or in the French construction sector.
The cooperative movement would have a better chance in markets where economic democracy is making advances – where collective bargaining is widespread, where transparency is not the exception but the rule, where precarious practices are suppressed, where there is supportive public banking. The wider democratic agenda is the cooperative movement’s best chance of taking root.
Economic democracy is not just about reframing the enterprise as a social space. It constitutes a long march through the market economy itself. This can be done by changing the relationship between the state and enterprises, or creating new enterprise models.
For instance, Mariana Mazzucato has shown that the state is not only an entrepreneur but actively creates markets through its role as risk-taker and first mover in investment and R&D. However, the state does not act like a market investor who takes a direct stake. This means that the costs and risks of investment in companies are socialised but the profits are privatised.
This should be addressed by taking of equity in companies and markets the state supports. The equity can be leveraged to extend democracy – ensuring collective bargaining, introducing participation programmes and even requiring workers’ representatives on the board – within those companies which benefit from direct and indirect grants. This is similar to a ‘social value’ clause in public procurement contracts, requiring enhanced democracy in firms that seek to win public contracts.
Role of public enterprises
A second form of market intervention is the promotion of public enterprise, especially at the local level. Throughout Europe and North America local public enterprises play an expanded role; it is far more limited here in Ireland.
Public enterprises can be used for a number of purposes. For instance, a rural town in Kentucky found itself a victim of a cartel of petrol stations. It countered by establishing a public petrol station that sold petrol at cost. This broke up the cartel and forced other petrol stations to cut their prices.
Local public enterprises can be used to provide goods and services where private capital is absent or engages in monopolistic practices. It can set benchmarks for prices – as in the Kentucky example – for wages and working conditions, and for democratic practices in the workplace.
Local public enterprises can become laboratories where labour-managed practices can be tested, workers trained in self-management, creating spillover effects that can drive the formations of worker cooperatives and other civil-society led businesses.
Social infiltration of the market space
And it is in the promotion of civil society-led enterprises where labour-managed activities can find traction. We must get out of the mindset that the public is only served by state intervention. The creation of community enterprises, labour-managed enterprises, and innovative hybrid models of small capital, public capital and labour-managed – all these represent opportunities for the social to enter the private and market space.
Economic democracy – whether reframing the enterprise or creating new enterprise relationships – can also help the trade union movement square a perennial circle. The Fabian Society, following up on an earlier survey by the TUC, found that employees want a number of things from the workplace: fair pay, certainty of hours, opportunities for advancement and promotion, chances to learn new skills, better work-life balance, reductions in the gender pay-gap and a say in how their work is organised. All of these point to the enterprise as a social space as referred to earlier.
The Fabian survey also indicated that employees want the trade union to protect them from problems that arise – that is, protect them from employers’ actions – while at the same time they want unions to work with employers. This may seem contradictory but it is not; it merely reflects the actual conditions of capital-privileged enterprises.
The enterprise may be the source of workers’ living standards but it is also a place of insecurity, stress and discrimination. Capital allows the former on its own terms and engages in the latter when it suits it, unless there is a counter-veiling collective force.
This dichotomy – working with and being protected from – can be reconfigured in the social space to labour’s advantage. But this requires us to champion that space for interests other than our own. For instance, it has been shown conclusively that collective bargaining leads to productivity gains. When management refuses workers’ collective rights, they are actually undermining enterprise performance and harming other interests or stakeholders in the firm.
Therefore, rewriting common sense requires unpicking alliances that currently oppose labour, finding the fault-lines that can pry apart those alliances, and to develop new – if ad hoc – links that can advance economic democracy.
Challenging the infantilisation of workers
So where do we start? It is very simple and extremely subversive: to challenge the infantalisation of people whether in the workplace and in civil society. We’ve seen this throughout history (‘you are not capable of reading and properly interpreting religious text’. We experience this today (‘you are not capable of understanding complex economic issues or sophisticated business strategies’).
A number of cultural tools are employed to maintain hierarchies in society and in our heads: the idealisation of the lone ‘entrepreneur’ and the assertion that hierarchy is the natural order of the enterprise. These need to be challenged.
This is exactly what both the trade union and cooperative movement do: challenge the sociology of infantilism. All of us promote the idea that people are the producers, capable of writing their own contracts, possessing – as the Webbs put it – intimate knowledge and expert proficiency of their craft, their workplace.
To promote people’s confidence that they can participate fully in the workplace is the very first condition of economic democracy. This is the common station where we both enter, the common ground, the alliance, the partnership. It’s a good starting point. So let’s start. It can only take us to better places.
This article is based on a speech Michael presented at the ‘Economic Democracy and Workers Cooperatives: the Case for Ireland’ seminar held on April 9 in Liberty Hall, Dublin.