Time for economic democracy
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Peter Tatchell says democratising economic decision-making is the key to a fairer, more stable economy
Tribune – London, UK - 15 October 2010
http://www.tribunemagazine.co.uk/2010/10/time-for-economic-democracy/
Three years after a banking crisis that pushed Britain - and much of
the world - into the worst recession for decades, the major parties
still have no policies to prevent a repeat economic meltdown.
They have failed to put in place adequate checks and balances to
overcome the structural flaws in the private-ownership, free market
system.
The Labour, Conservative and Liberal Democrat leaderships support the
highly centralised, largely unaccountable neo-liberal economic system -
a system that allowed irresponsible financial decisions by banks and
big businesses. This failure to remedy the causes of the crisis leaves
Britain vulnerable to more chaos in the future.
A major cause of the near-catastrophe of the last three years is the
way economic power and decision-making is organised: highly
centralised, exclusive, autocratic, secretive and unaccountable. These
factors predispose the economy to risk-taking and recession, as well as
being inherently anti-democratic and unfair.
One element of a sounder and more just economy is greater economic
democracy, participation, transparency, decentralisation, and
accountability. Here are a few suggestions to achieve this
transformation:
• Make corporate negligence and recklessness an
explicit criminal offence, to reign in big business cowboys and ensure
more responsible economic management. Bankers and company bosses should
not be able to wreck whole economies and squander people’s jobs,
pensions and savings with impunity. They ought to be personally liable
for damaging corporate decisions, in the same way that doctors and
others can be held liable for professional negligence. The threat of
legal penalties is likely to result in more prudent corporate
governance.
• Require medium and large-sized companies with
boards of directors to be accountable to their employees and to the
wider public by including on their boards employee-elected directors
and independent directors to represent the interests of consumers.
Similar proposals were included in the 1973 Bullock Report and Labour’s
1976 Programme. Under this system, employee and consumer directors
would promote non-corporate interests and act as watchdogs and
whistleblowers against corporate irresponsibility. If these directors
had been on the board of Northern Rock, I doubt the management would
have got away with so many reckless decisions. Having directors who are
not driven by the profit-motive, also increases the likelihood of
company policies that are more socially inclusive and environmentally
responsible.
• 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 social and
ethical dimension. The nearly £1000 billion invested in pension funds
is a massive counter-weight to the economic clout of big business. It
could be invested in ways that help make the economy more
people-centred and public welfare-oriented. Trade union-controlled
pension funds are, for example, less likely to invest in the arms trade
and clothing sweatshops. They are more open to investment to meet
social needs, including renewable energy, affordable housing and
quality public transport.
• Retain the current full or part public ownership of
the banks that were rescued by the government, to ensure they operate
in the public interest and they use their future profits for the public
good. Why should the banks be returned to the private sector when it
made such a mess of running them? Publicly-controlled – or remutualised
– banks could be the means to fund new social housing and low-interest
loans to poorer families and to employee-owned enterprises.
• Give employees the legal right to buy-out their
companies and turn them into workers cooperatives, with funding from
the publicly-owned banks. This would weaken the power of big
corporations, localise and socialise economic decision-making and give
employees incentives for greater productivity. Evidence shows that
people employed in workers cooperatives tend to have higher output,
better job satisfaction and greater social solidarity.
• Limit corporate bonuses to a percentage of profits
and defer their payment for 10 years. This would deter short-term,
high-risk investments. It would make bonuses conditional on a
business’s long term success. Only people who made successful,
sustainable investment decisions would be rewarded.
• Legislate for the progressive transfer of share
ownership into trade union-administered employee 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. Gradually, probably over many decades, it would 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 not only its democratic and social justice
elements. It also incentivises and rewards employees for economic
success. The more productive and profitable a company, the more shares
it has to issue to the employees’ funds and the sooner employees gain a
controlling stake.
As well as redistributing wealth and power in favour of employees and
the wider public, these reforms would reduce the chances of a re-run of
the economic crisis. They would achieve these twin goals by a
combination of decentralising economic power, democratising economic
decision-making, improving corporate social responsibility and
strengthening the accountability of businesses to their staff and
consumers.
Most of these policies could be implemented unilaterally by a UK
government. However, given the globalised economy, they would work most
effectively if they were adopted by the EU. Although still
predominantly a big business cartel, there is nothing to stop the EU
pioneering this new economic model, if the peoples of Europe elect
parties that demand it. The EU’s massive share of international
finance, production and trade would enable it to withstand pressure to
conform to the dominant neo-liberal economics of the US-China axis. In
other words, Britain and the EU could lead the way in the structural
transformation of autocratic, dog-eat-dog capitalism into a more
democratic, cooperative and accountable green socialised economy.
Why not?