Three practical, achievable ideas for economic democracy

Text of Peter Tatchell’s Huffington Post Soapbox speech at Westfield Stratford, East London, on 6 December 2011:

Britain is an economic dictatorship. The captains of industry, commerce and finance 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.

It is, in part, this lack of economic democracy and accountability that led to the reckless corporate decisions that have bought us to the brink of economic catastrophe.

There were, and still are, insufficient checks and balances on big business. We can’t carry on as usual with the system that caused the present crisis.

We expect political democracy, why not economic democracy too?

It is time to put economic democracy on the political agenda; to bring the economy into democratic alignment with the political system.

To help prevent a repeat economic disaster, and get us out of the current mess, we need greater economic democracy – more participation, transparency, decentralisation and accountability in the way the economy is run.

There are three ways we could begin to achieve this:

First: Make corporate negligence and recklessness a criminal offence
, to reign in big business cowboys and ensure more responsible economic management.

If other professions like doctors can have disciplinary procedures for negligent actions, why not business people?

Bankers and company bosses should not be able to wreck whole economies and squander with impunity people’s jobs, pensions and savings. They ought to be held personally liable for damaging corporate decisions.

This spectre of legal penalties is likely to result in more prudent corporate governance.

Sir Fred Goodwin would have thought twice about the gambles he took with RBS if he’d known that he could have ended up in jail.

Second: Require private companies and public institutions like the NHS to appoint employee and consumer directors to their boards.

By law, one-third of the boards should be employee-elected directors and directors independently appointed to represent the interests of consumers.

Having employee directors, similar to the successful German model, would incline an enterprise to greater workplace fairness and more harmonious industrial relations; in turn resulting in employees with better job commitment and higher productivity.

Not being driven solely by the profit-motive, employee and consumer directors could push for workplace policies that are more socially inclusive. They could act as watchdogs and whistleblowers against corporate irresponsibility.

If such directors had existed a few years ago, we can be fairly sure that Northern Rock chiefs would not have been able to pursue the reckless corporate decisions that culminated in the financial ruin of their company.

Third: Give trade unions a majority stake in the management of their members’ pension funds
, to decentralise and democratise investment decision-making and to give it a more ethical dimension.

The £900 billion invested in pension funds represents one-third of the stock market. It is a sizeable counter-weight to the economic clout of big business.

If managed by financial experts, under union oversight, pension funds could be invested in ways that are less fast-buck-focussed and more weighted towards meeting social and environmental needs.

Trade unions are less likely to authorise investment in the arms trade and sweatshops. They would be more open to ethical investments that pioneer socially-useful technologies, such renewable energy, medical treatments and green transport.

Conclusion: These are three simple, practical and achievable reforms, which would very substantially reduce the chances of a re-run of the economic crisis.

They would stabilise and rebuild the economy by a combination of devolving and decentralising economic power, incentivising wiser economic decision-making, improving corporate social responsibility and strengthening the accountability of businesses to their staff and the wider public.

This structural transformation of autocratic capitalism could be the beginning a more democratic, participatory, cooperative and effective economy.

Economic democracy. The time is now.