This piece is #5 in the 'Visions for the Future of Democracy' series curated by Involve for its 15th anniversary. We have asked authors to provide their vision or take on democracy 15 years from now.
It is a simple enough idea. Just as the governance of cities and nations has shifted from systems of inherited control to systems of democratic accountability, so we could move over time to systems of economic democracy. But will it take a revolution to get there?
The case for democracy in economic life is an extension of the idea that we are active citizens, with the right to a voice in decisions that shape our lives. The reality at present is that control in most private sector employment is instead vested, through the construct of ownership, in the hands of others. Who makes the decisions, in short, follows the principle of one dollar, one vote rather than one person, one vote. But it has not always been seen that way, and some trends point to how it might be different in time.
The phrase ‘Workers’ Control of Industry’ was coined in the years leading up to the First World War but it drew on a longer history, which in the UK included attempts to run union shops and Exchange Bazaars in the century before. In 1912, the pamphlet The Miners’ Next Step set out options for future action by miners in South Wales and concluded with a vision of future society in which “every industry thoroughly organised, in the first place, to fight, to gain control of, and then to administer, that industry.”
Ours is an economy of rocketing top pay and inequalities.
The trade union activist and leader Tom Mann, who himself started working in mines at the age of ten, was a key advocate. For him, economic democracy would not just complement political democracy, but in time overtake it, removing the need for state action to act as a counterweight and a corrective to the markets that generate inequality.
The arguments building around this time drew on a rich mosaic of everyday democracy in the associational life of trade unions, friendly societies and co-operatives. But the moment passed. After the Russian Revolution in 1917, it was seen as more straightforward to gain control of the state instead and from this to reshape the economy. Trade unions, for example, focused in on representing workers to managers and on advocating state action for workplace rights rather than promoting worker control and management itself.
The limits of this agenda, of correcting economic injustice through state action, has been exposed in recent decades. Over the last forty years, in the UK and the USA, the share of the economic pie in terms of benefits that go to the workforce has gone down dramatically, with weaker trade unions and more precarious work, while the share for those putting up the capital, the investors, and for chief executives has risen to replace it. Ours is an economy of rocketing top pay and inequalities. The High Pay Centre reports that by January 6th in a new year, the average business chief executive will have earned more than workers would earn on average by the end of the year.
There are parts of the economy that stand out perhaps as different. The best of civil society is characterised by participation and stakeholding. The best of public services, such as healthcare, have embedded the voice of workers, at least as professionals. And there is the co-operative and mutual sector, which can trace its roots back to some of the same visionaries of economic democracy in the nineteenth century, such as Robert Owen.
Some, such as the UK worker co-ops, stress participatory democracy, working often without a single Chief Executive Officer and with more fluid job roles which are shaped over time through collective engagement.
When I did the analysis a few years back, trawling through data from different countries, I was able to show that there are more member owners of co-operatives worldwide than there are owners of listed companies worldwide. That is, more co-op members, at around one billion, than investors in the stock market (directly, or indirectly through your pension fund).
The co-operative sector supports the employment of close to ten per cent of all people working worldwide today.
And, economic democracy is on the rise. There has been a surge in recent years of employee ownership trusts, from 42 in 2015 to 250 in 2018, with around 350 employee-owned businesses across the UK today. We have seen firms such as Ardman Animations (Wallace & Gromit) and Richer Sounds go down this route! Around one business every month now converts to employee ownership in Scotland and the Scottish Government has set an ambition for the number of employee-owned businesses to grow from 100 to 500 by 2030.
The worker co-operative SUMA is the largest equal pay employer in Europe. Based close to Huddersfield, SUMA has an extraordinary democratic culture of buzz, plain speaking and great ideas. The co-operative model is also useful for self-employed workers who operate through a consortium-like structure that they own and control. An example is Outlandish – a software business owned by its members and key to an emerging ‘platform co-op’ movement.
The recent rise of employee and worker ownership is reflected in a growing body of evidence on the workplace and business benefits that can follow - boosting both productivity and inclusivity.
One overseas reference point for this policy agenda is advocacy in the USA through the Democracy Collaborative. With rare cross-party support in the Trump years, the 2018 Main Street Employee Ownership Act, sets a requirement on each State to provide funded awareness raising and support for employee ownership.
Operating at scale and with examples around the world of their resilience over time, such as the Mondragon Co-operatives whose motto is ‘dignity at work’, these offer examples of how economic democracy can work. Most are based on models of representative democracy, in short where there is a chain of accountability back to the workers, but not an engagement by workers in every major decision in the workplace. Some, such as the UK worker co-ops, stress participatory democracy, working often without a single Chief Executive Officer and with more fluid job roles which are shaped over time through collective engagement.
There is a joke that goes around the worker co-ops. A member of staff sees the company boss park a yellow Lamborghini outside the office. She complements him on the car and he says ‘well, if you work every hour of every working day, hit all of your targets and go the extra mile to help the company to make a profit, then in twelve months’ time… I’ll be able to buy a second Lamborghini.’ The punchline is not far off the argument set out in a pamphlet of 1917 from the Workers Committee Movement, entitled Towards Industrial Democracy. In both, the complaint is made that workers ultimately pay all the expenses of management, without enjoying any of its privileges.
The recent rise of employee and worker ownership is reflected in a growing body of evidence on the workplace and business benefits that can follow - boosting both productivity and inclusivity. Just as John Stewart Mill argued that political democracy is like a muscle, growing stronger through exercise, so it is with economic democracy. Where you have motivated and engaged workers, you see higher productivity and evidence also shows that in employee and worker owned firms the dividends of strong performance are shared more broadly. The conditions post-COVID may also be a good fit, given the number of enterprises at risk and where there is need both for survival and a succession plan, where employee ownership can be an answer.
An emerging culture across society of participation and openness are changing our expectations of work and the workplace. The idea of one worker, one vote is a natural extension both of this and of the underlying concept of democracy.
But for all this to spread, of course, investors need to step aside. The providers of finance have an armlock on the majority of businesses coming through, because they provide a solution to the capital needs of business at a start-up and growth stage. It is easy to imagine that the platform businesses and technology companies that dominate the digital landscape could be co-owned by those who participate in the business, workers for sure but also their users too. Why should a much-loved games platform such as Minecraft or social media platform such as Twitter not engage their mass of users in this way… if it were not of course for the control already ceded to get to that scale in the first place?
It is for this reason that there need to be sources of capital that are aligned with a transfer of ownership over time, and we do see experimentation of exactly this form around the world. The Working World in New York is one example, while the concept of ‘inclusive ownership funds’ floated by the former Shadow Chancellor, John McDonnell also had echoes of this. Alternatively, as the radical economist Shann Turnbull has argued, there needs to be a sunset clause for financial investors in company law, or equivalent fiscal options that allow them fair returns but no more and which create pathways to transfer business over time to lasting stakeholder ownership.
An emerging culture across society of participation and openness are changing our expectations of work and the workplace. The idea of one worker, one vote is a natural extension both of this and of the underlying concept of democracy. Examples of democratic worker ownership are also on the rise. Yet, at the same time, democratic transitions are not always smooth and not always welcomed. In the case of economic democracy, it is the sovereignty of the investor and the way that the fabric of investor control is weaved into the institutions of business formation and growth that may be points of resistance.
As we evolve our models of enterprise and understanding of sustainability in a networked world, can our ideas and expectations of economic life undergo a revolution?
Economic democracy… it is an idea whose time is coming.
Ed Mayo was the Chair of Involve from 2013 – 2019 and is Chief Executive of the pro bono charity Pilotlight. He has written the books ‘Values’ and ‘A Short History of Co-operation and Mutuality’ and is a co-founder and member of a number of co-operative enterprises.