Economic democracy and the governance problem: lessons from elsewhere
In his recent interview with PoliticsJOE, filmmaker Adam Curtis made an astute observation: No one seems to have a vision anymore. Or, in his words:
It doesn’t really work, and whatever way you try and find out of it […] you somehow come back to the room that you left a few years ago.
It’s easy to highlight what’s going wrong in our society — pick your poison — but, I would argue, it’s actually a lot harder to discuss real ideas for improvement. Anyone can recite an abstract litany of “this bad thing should go away somehow” — the wealth gap should be reduced, politics should be more accessible, etc. But very few people follow this up with concrete ideas on how to achieve these things. And that’s how we end up with myopic milquetoast suggestions of little more than tinkering around the edges from the likes of Keir Starmer. What we actually need is radical ideas that might actually have a snowball’s chance in hell of properly getting us out of the mess we’re in.
Hence this blog. I want to put forward ideas big and small that I think could improve our lives, our communities, and our society. Starting off with a bang, let’s talk about economic democracy.
What’s wrong with economic governance?
Well, setting aside property relations (which will have to wait for another time), here’s what economic governance looks like in most cases:
Sure, in most cases it’s couched in a lot of politeness and procedure, both because most people (yes, even managers) aren’t terrible, and also because HR is generally pretty insistent people don’t behave in a way that will get the company sued for emotional damages. Still, the basic principle holds: In most workplaces, when it comes down to it, people are expected to just follow orders. No matter how stupid those orders — and the people giving them — might be.
That’s not to say there are no reasonable managers or that they never make good decisions. But often they don’t. We’ve all either been in situations, or at least know someone who’s been in a situation, where a whole team of people doing a particular job have an excellent idea of what they should be doing, and some incompetent clown with a fancy title comes along and tells them to do something completely different, and that’s that. Sometimes, in fact, the orders are so catastrophically hair-brained that the clowns get their comeuppance in some way (see also: r/MaliciousCompliance), but generally, they’re just somewhere between “mildly obtuse” and “arguably silly” — in which case, the obtuse silliness merrily continues until the clown moves on.
It seems like everyone agrees that society as a whole should run as much as possible on democratic principles. So why doesn’t the economy?
The root of the problem
The root of the problem isn’t, usually, with the individual team supervisor or regional manager or what have you — it’s with where the control and accountability ultimately lies.
Companies are accountable to their shareholders, and shareholders care (as a rule) about one thing, and one thing only:
No, Ted. It’s profit.
If it’s going to either reduce expenditure or increase revenue, then shareholders want it. If it doesn’t, they don’t. Unfortunately for everyone else, that means quality, integrity, innovation, and myriad other things most people would agree are Good™, are all thrown to the wolves as long as it’s cheaper to do so.
One of the best examples of why that sucks for everyone involved except the shareholders is the video game industry which, as recently explained by “How Money Works” on YouTube, has stopped making video games.
Okay, I admit, that’s just slightly clickbaity hyperbole, but it boils down to this: Video game companies can make more money by making things that turn you into a gambling addict, so you willingly waste all your disposable income on meaningless rubbish. So that’s what most of them are focussed on doing now. A game can have terrible mechanics, lacklustre graphics, and involve zero skill — none of that stuff matters as long as it can turn people into addicted cash cows through the cunning (ab)use of human psychology. For a wider critique of this sort of corporate psychological manipulation, I’d suggest more Adam Curtis: Happiness Machines
So, you might be asking yourself: What are the alternatives?
The problem with state control of the economy
I won’t spend too long on this, because the economic decline of state-run command economies a few decades ago is well-documented, so it’s not hard to think of arguments against this model.
In a nutshell — there are things the government can manage reasonably well. That includes natural monopolies like public transport, energy supply, water supply, and telecommunications. It can also arguably include things like healthcare, housing, natural resource extraction, even commercial banking.
But when it comes to most economic activity — ordinary goods production, for instance — central planners have been stumped time and time again, because there’s just no methodical way to anticipate demand. Nor, of course, can you create demand out of thin air just because you want people to want something: a downright hilarious feature of command economies was the reactive nature of product advertising: Have you produced a whole heap of rubbish that no one wants to buy, and now you have warehouses full of unwanted consumer goods collecting dust? Better put out some ads! (Needless to say, this rarely achieved very much.)
People will argue that, with modern technology, we can create much better predictive models, and adapt production much more quickly to changing consumer demand. True. But you’re still stuck with the same “I’m the boss and you’re the worker” problem from earlier. Sure, it’s marginally better if the incompetent clown making the decisions is accountable to the government than private shareholders, but wouldn’t it be better if the workers could decide for themselves?
The problem with workers’ cooperatives
For fans of democracy, workers’ cooperatives sound like the perfect solution. Let the people that actually do the work also make the decisions. It seems like a no-brainer, and examples of successful workers’ cooperatives exist across the globe.
The problem with the capitalist model of economic governance is that the shareholders receive the profit of a business, and will therefore do anything to increase profits, even if it harms workers, customers, the local community, society at large, or indeed all of them at the same time.
Spotted the problem yet? If workers own the workplaces, who receives profits? The workers. The same workers that also now run the workplaces. So what are they going to try to do? Increase profits, even if it harms customers or society at large.
What direct local worker control does ensure is that a decision doesn’t harm the workers themselves or their local community (though, if it benefits the workers enough, the local community might still be a casualty too!) So they’re a step up from capitalism, and also most likely a step up from the command economy given, for all their proletarian rhetoric, a lot of the 20th century’s command economies had abysmal working conditions. But sadly, workers’ cooperatives aren’t perfect, either.
Of course, we could be optimistic and trust that ordinary workers would be a lot less likely than billionaires and hedge funds to throw ethical considerations to the wind in the pursuit of a quick buck, and that’s probably the case. But, as a German proverb says: Trust is good. Making sure is better.
So…cooperatives are good, but workers’ cooperatives might result in workers making bad decisions at the expense of customers (among others). So how about customer cooperatives?
The problem with customer cooperatives
I’m not going to spend too long on this — I’m sure you’ve spotted the pattern by now: Shareholders don’t really care what’s good for workers or customers, the state might care but often has no idea, and the workers will probably care slightly what’s good for everyone else, but most likely not enough if that’s not what’s good for them. Customers are much the same, with the added problem that they often don’t even really know what they want themselves.
All that aside, customer cooperatives are also just a mess. Most of them don’t require you to become a member to do business, but then require membership to participate in the decision-making. Understandable, but it kind of defeats the point: You’re not really governed by your customers, you’re governed by a self-selecting subset of them. And even where all customers are members: They all get an equal vote. Does it really make sense for a restaurateur who spends £300 a day at his local food cooperative to get the same say as a single guy who spends maybe half that in an entire month? I don’t think so.
So, what now? Are we stuck between a rock and a hard place? Seems like it, doesn’t it!
An obvious solution?
What we’ve learnt so far is:
- Private shareholders are completely pointless
- The Government should only be involved in high-level regulation of the economy, not micromanagement
- Workers’ cooperatives are okay but might suck for customers and others
- Customer cooperatives are okay but might suck for workers and others
So we definitely don’t want capitalism and we definitely don’t want a command economy, and cooperatives are great but still a bit factional. The two most viable candidates seem to be cooperatives, but do we want workers or customers to control them? Well…
Germany: a practical example
No, I’m not about to tell you that Germany has worker-customer power-sharing cooperatives everywhere. But what Germany does have is a dualistic structure of economic governance: Rather than just having a Board of Directors, German companies — at least large ones — have a “Vorstand” (Executive Board) and an “Aufsichtsrat” (Supervisory Board). Half of the Supervisory Board is elected by the shareholders, the other half by the workers. The Supervisory Board then appoints the Executive Board.
This is significantly better than the Anglo-American model because it gives workers at least a semblance of control over their workplace — though it falls short of direct election of lower-level management by workers or even less hierarchical methods of working (like consensus-based approaches)
This isn’t the approach I’m suggesting, of course — it still involves pointless parasitic shareholders. The fundamental idea of sharing power between multiple interest groups, though, is the same, demonstrating that it isn’t just a pipe dream but a workable system that could be implemented.
Higher education: the right idea
I work in higher education. Although my experience is limited to UK (specifically Scottish) higher education, I understand that most universities across Europe have hybrid/power-sharing models of governance to some extent, involving both the workers (academics) and “customers” (students) in governance in some way, while also having some directional input (via regulation and funding) from both central and local government.
It’s not perfect, especially not in this country, where universities have increasingly become corporatised, being governed by mostly unelected boards of random external appointees with experience in “business leadership” (read: working toward a shareholder profit motive, not for the common good, which is what a university should be doing). But it didn’t use to be that way, and elsewhere in Europe universities are still governed more or less exclusively by decision-making bodies comprised of, and elected from among, the academic and student body.
As a non-academic worker at a university, I obviously don’t think that’s perfect either — we support staff should also have a voice — but again, much like the German example, it goes in the right direction: different stakeholders balancing each other out to ensure that both their interests are met as much as possible without negatively affecting each other, while the government ensures at a high level that the whole operation also works in the interest of wider society.
Conclusion
So, that’s it, really. Remove private shareholders from the equation, engage both the productive workforce and the consuming public in economic decision-making through democratic mechanisms, and leave the state to set the framework conditions (and/or provide financial incentives). Day-to-day decisions can be made by workers and any operational managers can be elected by workers, while strategic direction is set and strategic managers appointed by a joint body of worker and customer representatives.
It may sound far-fetched because of how far removed it is from the governance structures we know and hate today. But it’s not that far-fetched. The examples of Germany and of the wider higher education sector show not only that something like this can be done, but that it has been done successfully. This wouldn’t involve reinventing the wheel or embarking on some grand experiment, only taking an existing, working model from one type of organisation and applying it to all workplaces.
