For worker democracy

For me, the EU referendum raised a question which nobody has so far asked, namely: if there was a case for a referendum, isn’t there a far stronger case for worker democracy?

Many of us were appalled by the atrocious standard of debate in the referendum. Robert Harris called the episode “the most depressing, divisive, duplicitous political event of my lifetime.” Perhaps Thatcher and Attlee were right: referendums are a “device of dictators and demagogues.”

Which brings me to the question. If you think the referendum was a good idea, you must surely think worker democracy is a far better one. I say so for three reasons:

 - In a company, the electorate is much smaller, so one’s vote – and that of one’s immediate colleagues - is much more likely to matter. This sharpens one’s incentives to think clearly and gather evidence. Ignorance and inattention are not so rational in an electorate of 1000 as in an electorate of 50 million.

 - In worker democracy, voters have more skin in the game. Whereas in a national election one might hope that the costs of a bad decision are spread across the whole nation, or borne by others, this is less likely to be the case in a company. If it does badly, everyone suffers. Again, this sharpens incentives to get decisions right.

 - Worker democracy asks a better question. It asks: “what do you know? How can this company do better?” It’s a device for doing what Hayek thought a well-functioning market does – aggregating dispersed and fragmentary knowledge. By contrast, a referendum appeals to prejudice, ignorance and feeling.

On top of all this, worker democracy might have longer-term cultural benefits. For one thing, it would change the nature of management, by forcing bosses to listen to workers. And for another, it might increase the self-reliance and vigour of workers. As Tocqueville wrote:

Democracy does not give the people the most skilful government, but it produces what the ablest governments are frequently unable to create: namely, an all-pervading and restless activity, a superabundant force, and an energy which is inseparable from it and which may, however unfavorable circumstances may be, produce wonders. These are the true advantages of democracy.

And this is not to mention the obvious, and I think overwhelming, case for worker democracy – that it increases both productivity (pdf) and well-being.

All this raises the question. Given that the case for worker democracy is obviously so much stronger than the case for a referendum, how can anyone who favoured having a referendum oppose worker democracy?

The answer isn’t that I’m vague about the precise form worker democracy should take. There are countless possible forms, just as there are many different types of political democracy. The appropriate form will differ from firm to firm.

Nor is it because shareholders are the owners of the company and so it is they rather than workers who should have control rights. For one thing, shareholders don’t own the firm. And for another, they have in many cases already delegated control to rent-seekers of dubious competence: why shouldn’t they therefore do so to more competent agents?

Nor is it good enough to complain that worker democracy might introduce adverse incentives, such as a reduced (pdf) incentive for firms to expand. Actually-existing capitalism has all sorts of agency problems. It is silly to compare worker democracy to some mythical idealized form of capitalism. And if we’re talking high theory, the first theorem of welfare economics says that a competitive equilibrium is Pareto efficient. This draws our attention to the possibility that worker democracy plus well-functioning markets might well be more efficient than crony capitalism.

Nor is it acceptable to say there is no demand for worker democracy. This might be due to adaptive preferences, learned helplessness and to management’s control of the political agenda, rather than to the fact that worker democracy is inherently undesirable.   

My point here is a simple one. Worker democracy should – to say the least – be on the political agenda. That it is not is yet further evidence that politics is systemically dysfunctional.

Comments

[Xavier Trapnel]

every staff meeting i have ever attended that had more than a dozen participants has turned rapidly into a perfect demonstration of the iron law of oligarchy.

student unions and trade unions are internally democratic but not clear they represent the interests or preferences of members due to poor incentives to actively engage.

workers democracy just isn't that democratic.

[Matt Moore]

@Xavier - I think the point is, if you favour democracy at the national level, where public choice problems such as you describe are acute, you should favour it in more local settings, where they are less acute (although still present, as you say).

I would make two other points. First, political / democracic decision making is so flawed, that it should only be used when we absolutely must have a common solution. For example, criminal law. In situations where individuals can easily exit the institutio or start their own, there is no argument for political decision making. You don't need to impose the position of the 51% on the rest when you should be able to persuade.

Second it a revealed preference argument. If worker democracy is so much better than managerialism, then why don't we see it everywhere already? It isn't illegal. They are no major institutional penalties that I can see.

[chris]

@ Matt - revealed preference suggests there is a demand for control at work: the numbers of self-employed have been rising for years.
The reason why big firms don't swithc to worker democracy is that bosses would rather take multi-million salaries and work in sub-optimal firms than accept a pay cut, less power but work in a better one.
@ Xavier - there's nothing wrong with a lack of engagement if it betokens satisfaction. The problem is that under existing arrangements, it might instead be a sign that people just don't think that (eg) staff meetings change much of substance.

[Bob]

There is one government within a nation - usually.

There are lots of businesses - all running with different management systems. And you can choose which one you want to work for - within reason -or at least you could with correct fiscal policies.

As usual that's the bit that Chris misses. You don't have expert led systems in a government because that like having one company that does everything - a monopoly led by madmen with power over everything.

Similarly there is a reason you don't have a democratic army.

I notice the "Given that the case for worker democracy is obviously so much stronger than the case for a referendum, how can anyone who favoured having a referendum oppose worker democracy?"

That's another of the logical fallacies that seem to have become very popular amongst Chris's class. It's a riff on "not all Leavers are wacists, but all wacists will vote Leave".

It's almost like you guys believe that identity politics tricks actually have any effect outside your little clique. Rather than just being laughed at for their crudeness and obvious sophistry.

[aragon]

How much control should workers have?

1. Japanese continuous process improvement: Kazien
2. German workers representatives on boards.
Co-determination.
3. Where the workers are the owners.
Co-operatives.

If companies are not owned by their shareholders (EU), they are equally not owned by the employees.

The rent seeking of management has grown from an attempt to align the interests of management with shareholders by making management shareholders (stock options).

Extending this to workers, through share holdings, or ownership does not align the companies with the interests of society in general, although it does broaden the mandate.

We have the examples of several co-operatives including John Lewis partnerships through to Mondragon.

"Vincent Navarro wrote that from a business perspective, Mondragon is successful in matching efficiency with solidarity and democracy. However, he writes that the number of employees who are not owners have increased more rapidly than worker-owners, to a point that in some companies, for example in the supermarket chains owned by Mondragon, the first are a much larger group than the second."

Again a two/three tier system has developed, workers who are owners, workers who are hired help, and society in general (non-participants).

Distributionalism but not Horzontalism (wikipedia is fun)
https://en.wikipedia.org/wiki/Distributism
https://en.wikipedia.org/wiki/Horizontalidad

Given that increasingly human labour is disconnected from the creation of wealth (via machines), there is the potential for increased rent seeking and concentration of wealth, an issue society in general needs to address.

The issues are distribution, control and rent seeking. The mandate needs to extend to all in society, not just the economically active or rent seeking, especially as potentially the economically active group shrinks from the majority of adults (in a nation).

[Neil]

Struggling a bit with the difference between private and public, are you Chris?

Your argument basically boils down to "if we're going to consult ordinary citizens on the decisions facing the country, we should be thinking about forcing private businesses to consult their employees on *their* decisions."

Which only works if you think that a) having a contract of employment with a company is equivalent to being a citizen of a country, and b) people who are neither employees NOR shareholders have a right to decide how a private business should make decisions.

Classic Marxist thinking "this is the model I favour therefore everyone else should be forced to follow it."