Democracy, character and preferences

My call for workers to exercise greater control over bosses has been criticised by Liam Murray and Kardinal Birkutski on the grounds that workers are often unable to judge the quality of bosses.
This raises a point which was perhaps better grasped by Tocqueville and Montesquieu than by more recent thinkers - that the causality between character and institutions runs both ways, with the result that it’s possible to be trapped in a sub-optimal equilibrium.
I concede that many workers today have little interest or judgment in how their company is run. But this might well be a form of rational ignorance. If you know you can‘t change how your firm is organized, you save yourself the trouble of worrying about it, and just keep your head down. And a mix of the endowment effect and status quo bias causes you to not demand a change.
It looks, then, as if there is neither the demand for workers’ control nor the technical conditions for it. But this two-fold lack is endogenous - it arises from the fact that workers’ control doesn’t exist.
It’s quite possible that, if workers control were to be instituted, then eventually the conditions for it to succeed would emerge. As Tocqueville pointed out, democracy can energize people into taking more interest in affairs. And the endowment effect would change from being a source of contentment with hierarchy to being a source of contentment with democracy.
There is, perhaps, a parallel here with Afghanistan. Sceptics, such as the FT’s David Pilling, say we can’t build democracy in that country because the necessary conditions for it, such as a belief in the peaceful resolution of conflicts, don’t exist. But it’s quite possible that their experience of an albeit imperfect democracy might create a taste for it, so the conditions for democracy to thrive might come later.
In this sense, we Marxists and those who are optimistic about the prospects for democracy in Afghanistan have something in common; we recognize that institutions can shape character and preferences, and that - because of this - the claim that the conditions for democracy are absent is not persuasive. Sometimes, stated preferences are not relevant, so change must be instituted against the apparent will of the people. As Henry Ford is reputed to have said: “if I’d asked people what they wanted, they’d have said a faster horse.”

Comments

[Liam Murray]

Thanks.

I'm sceptical of the idea that the lack of technical conditions to support worker control is endogenous - I can't conceive of any circumstance in which bank tellers or call centre workers would be in a position to judge investment accumen, the wisdom of acquisitions etc (except after the fact of course).

Even outside finance the practicalities seem distant - could a supermarket checkout assistant ever make a meaningful judgement about the skills & achievement of the store manager, let alone a regional or national one?

[John Meredith]

But Liam, worker control would include all those investment and acquisition managers ate the bank. They should be well-placed to judge the competence of the Board. You hadn't forgotten that they were workers too, had you?

[Luis Enrique]

I have this dumb idea that one day (some of) the sorts of discussions that take place in management meetings behind closed doors (what products to invest in, which products to withdraw, which customers to court, etc.) might one day take place via some sort of internal wiki, where managers and workers could contribute arguments for and against, and then workers could edit those arguments, and vote.

You could constrain voting within departments where workers might have some expertise, or you could even only give workers of certain tenure a vote, if you were really worried about voter competence. Confidentiality would be a worry, though.

[jameshigham]

And a mix of the endowment effect and status quo bias causes you to not demand a change.

I adore the way that natural phenomena are given catchy names.

[Dipper]

Lots of commercial organisations are ultimately controlled by the workers or members. I'm regularly asked to vote for directors of building societies, pension funds. Many professional firms are partnerships, and John Lewis is an obviously successful partnership.

The key seems to be firstly that in many cases workers have to have a particular longevity or status in the firm before they get a vote, and secondly they vote representatives to take the individual decisions, and don't get involved in the minuteai themselves

That seems to work quite well when applied. One could imagine many organisations where the staff are the product, eg nurses, council decorators and tradesmen etc where such an ownership structure could work. It's a shame the Labour government never even tried.

[BenP]

Of course workers can rise to the challenge, any decent boss - granted there are many who aren't - 'consult' their underlings in order to know what to do. But why should workers need to judge the character of their boss when they exercise control, this then becomes irrelevant.

Democracy requires a strong and developed working class as has been the history of every successful democratic country. Therefore whilst Afghanistan can have a democracy it will not be one we would recognise. Democracy cannot be delivered at the point of a gun it has to develop by internal social forces, though of course democracy promotion is only one of the last justifications in Afghanistan.

[[email protected]]

Henry Ford mate a fatal mistake. He asked what people wanted (they tend not to know). If he had asked what mattered to people he would have got sensible answers.

I think the problem is that this is about individuals instead of systems.

If you work in a systems thinking organisation there is plenty of intrinsic motivation. There is little conflict with customers because customers are getting what matters to them. No complaints (or very few).

People are paid a decent wage (because bonuses warp the behaviour within systems and cause disruption). The correct sysetms thinking measures are in place and people come to work to do a good job and keep on improving because performance is emergent instead of merely occasional.

Managers go into the work and work with the workers to improve the work. They are there to remove the obstacles that are in the way of doing a good job.

[ad]

"some sort of internal wiki, where managers and workers could contribute arguments for and against, and then workers could edit those arguments, and vote."

I'd rather use a prediction market: people tend to think more clearly when betting than when voting. I believe a number of firms have experimented with this.

In the meantime, Dipper is quite right: lots of worker-controlled firms have been set up over the years. Simple observation suggests that they work well enough in some industries, but not in others.

There are also franchise operations, like McDonalds. Again, they work in some industries, but apparently not in others.

It might be a good idea to think about why.

[Straus]

"I'm sceptical of the idea that the lack of technical conditions to support worker control is endogenous - I can't conceive of any circumstance in which bank tellers or call centre workers would be in a position to judge investment accumen, the wisdom of acquisitions etc (except after the fact of course."

That may be true, but, equally, managers often make stupid and counter-productive decisions about how things work at the coalface, because they haven't bothered to consult workers properly; and the workers don't volunteer information about inefficiencies and failures, because they don't feel sufficiently involved or committed to the cause to be bothered.

[Bull Fax]

It is a truth universally acknowledged, that companies that do not listen to their employees have to listen to the distress hedge funds'. But most of the time this is necessary simply in order to make the employees more productive.

This may or may not however lead to increasing anyone's well-being or make the company more responsible.

At the end of the day all public companies have a single objective they need to maximize - profit. In this sense corporations are complete sociopath and maniacs, that do not have to have ethics or morals of any kinds. They must earn money and they just do not have to be caught breaking the law.

Until we find a way ( and in an information society that's not that hard ) , to make companies pay some serious attention to the society/people they operate in , little will change.

[kardinal birkutzki]

At last I am famous! Fortunately though, Chris, I am unable to come back on this one, since I can't work out what on earth this post is saying. I'll come back to you in a month or two when i've read de Toqueville and Montesquieu and researched the endowment effect and rational ignorance etc etc..

[gordon]

From the post: "It looks, then, as if there is neither the demand for workers’ control nor the technical conditions for it. But this two-fold lack is endogenous - it arises from the fact that workers’ control doesn’t exist".

Steady on, mate! There is a big literature on industrial democracy and worker participation, and quite a few case studies. There is at least one journal ("Economic and Industrial Democracy") devoted to it. It's not just speculation and What If?

[alanm]

I would have thought a marxist would look to economics to propel the history of Afghanistan above even institutions (though not surprised you don't have truck with the idea of individuals character mattering).

Wouldn't they (in marxist view) need industrialisation first for democracy? Technology for communication, classes, the rquirement for an educated workforce etc.

[Frank the sales forecaster]

Andy Grove maintains that strategy comes from the middle management of the company. Each middle manager has a certain amount of leeway within which to do their job and when a proponderance of them pick the same behavior within that range a strategy is created. I also think that several of the knowledge based organizations (Bain, Accenture, etc) are extremely wiki-ed and to a large extend operate as a big cooperative intelect.
Corporations remain sociopathic in values and making them more "responsive" to the workers won't reduce the sociopathy of an human individual entities.

[Frank the sales forecaster]

dang I need a proofer. The last sentance should read "of non-human individual entities."

[Liam Murray]

John Meredith - I hadn't forgotten about those people.

But in the post on my blog that Chris links to I point out that to make the judgement of workers meaningful you need to include senior people, experts of the sort you're talking about - near peers in fact. That effectively takes you to the same place we're in at the moment where peers award each other ridiculous pay settlemens.

[Jacques]

Dear Chris,

Your statement about Montequieu and Tocqueville reminds me a wonderful book by Philippe d'Iribarne: La logique de l'honneur (The logic of honor) - you really have to read this book, one of the best in the field of labour sociology, which clearly explains (through M. and Tocque.) the most notable differences between the anglo-american system (ruled by a logic of contracts) and the French system (ruled by a logic of honor and status, inherited from our ancestral aristocratic culture)

[jameshigham]

This raises a point which was perhaps better grasped by Tocqueville and Montesquieu than by more recent thinkers - that the causality between character and institutions runs both ways, with the result that it’s possible to be trapped in a sub-optimal equilibrium.

Certainly you could have all workers in a firm doing their MBAs and spending five years at the helm - all chiefs and no indians but the problem is - would they all be satisfied?

[john malpas]

You just want to meddle but what if you mess up - will you take the stick?

[gordon]

Well, Mr. Malpas, have the investment banks and shadow banks which brought us the GFC taken any stick? I thought they got bailed out. Let's meddle, for God's sake, and meddle a lot!

[rolex gmt]

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html