Economic democracy is most often defended by pointing to the so-called “firm-state analogy.” Hannes Kuch’s recent plea for economic democracy in an earlier post in this series is no exception, arguing that “if being subjected to state government requires democracy, so does being subjected to corporate government. This is the consequence from the analogy between the firm and the state.” This argument presents economic democracy as a project of extension. It takes the existence of political democracy (and the arguments justifying it) for granted and argues democracy should be extended to the economic sphere. Practically, this can be done by granting voting rights to workers and possibly other stakeholder groups (such as suppliers, consumers, or local communities) within the management of firms.
Debates about political democracy on the other hand—both in academia and in the public arena—rarely even refer to the economic sphere. Many political theorists lament the thin, representative nature of democracy in modern liberal democracies and argue in favor of more deliberative, participative, and/or direct forms of democracy. Democratic innovations such as citizens’ assemblies and deliberative fora are popular topics. Debates between these conceptions of political democracy are waged with arguments from epistemology, social psychology, and political sciences (are voters sufficiently rational, can they be motivated to participate, etc.?). The political domain is tacitly assumed to function autonomously, without taking economic relations or conditions into account.
From a historical perspective, this absence of a linkage between political and economic spheres is an anomaly. I want to argue that the link should be reestablished. More specifically, through an analysis of the problems of political democracy today, I will make the case for presenting economic democracy not as a project of extension of a political democracy-presumably-well-established but as a project of redemption. To save political democracy itself from oligarchic tendencies, economic democracy is needed.
In the larger arc of history, democracy was not conceived as it is today, as the “rule of all” in a universalist moral framework. It was associated with the rule of the poor. The existence of a large cleavage between a wealthy class of aristocrats (the few) and a large class of poor people (the many) was taken for granted. The design challenge in thinking about the best political regime revolved around the problem of how to create societal balance between these two classes. In the view of Aristotle, for example, the rule of the few (aristocracy) would tend to degenerate into oligarchy because aristocrats would selfishly prioritize their own interests instead of ruling virtuously. The rule of the many (“polity” in Aristotle’s terminology) would degenerate into democracy because the poor would equally selfishly seek to confiscate the possessions of the rich. To prevent class warfare, some form of mixed regime was necessary that would include both popular and aristocratic elements. Different variations of mixed regimes were proposed over the centuries by authors such as Aristotle, Polybius, and Machiavelli (see the work of constitutional scholars such as Forbath and Fishkin and Sitaraman, and political theorists such as Kalyvas and Chakravarty and Schmon, who have retrieved this history).
A turning point occurred in the eighteenth century with the advent of modern liberal regimes, such as the regime described in the constitution of the newly independent United States. These regimes inaugurated an era of representative government, which began to be referred to as “democracy” only over the course of the nineteenth century. The association of democracy with the rule of the poor disappeared and instead it acquired the by-now familiar association of the “rule of all” in a universalist mode. Especially after the abolition of property qualifications for the franchise, class oppositions disappeared as a salient issue in thinking about the nature of the political regime. Liberal democracy is born.
For liberal democrats, the representative nature of democracy is defensible as a practically necessary accommodation when applying democratic principles to large-scale modern industrial societies. This accommodation becomes even more necessary when property franchise is abolished and universal franchise is accepted. Drawing a contrast with ancient Athens, modern democracy prides itself for being much more inclusive than Athens ever was, as large parts of its population were excluded from participation. The flip side is that modern democracy has to be less direct and more reliant on elected intermediaries. One cannot expect millions of people to be actively involved in national decision-making processes in the same way in which male, propertied Athenian citizens were in the Pnyx. A trade-off between formal inclusiveness and active participation is inevitable.
From a critical perspective, the liberal conception of democracy uses the distance created by representative mechanisms to mute and exclude the voice of the poor in political democracy, even if they are formally included. Marx lamented the merely formal character of liberal regimes as a pretext under which capitalist domination can flourish. Many socialists since then have followed in his footsteps. Republicans such as Camila Vergara and John McCormick have raised similar concerns about the elite nature of today’s democracies as a new form of oligarchy under a cover of democracy. Empirical political scientists such as Larry Bartels have traced the disproportionate influence of the wealthy on democratic politics. According to these critical accounts, oligarchy and democracy can coexist, not because their basic principles are mixed (as in Aristotle) or their institutions counterbalanced (as in Machiavelli) in some sort of mixed regime, but because a formally democratic regime allows the wealthy to rule behind the scenes. Various mechanisms and practices (from campaign finance to lobbying, from revolving doors to threats to relocate and disinvest) are used for this purpose. Contemporary political scientist Jeffrey Winters sums this up as follows: “democracy and oligarchy can coexist indefinitely as long as the unpropertied lower classes do not use their expanded political participation to encroach upon the material power and prerogatives of the wealthiest. This is precisely the equal-yet-unequal political arrangement that exists in all stable capitalist democracies” (11). Following this analysis, there is leeway to have truly democratic decision-making but only on issues that do not challenge the economic power and interests of the wealthy classes.
Was this sort of oligarchy-constrained democracy an intended outcome for defenders of liberal democracy? Political theorist Corey Robin argues that for the political right (he includes conservatives and reactionaries here), this has been a strategy, ever since Edmund Burke. Their analysis was, according to Robin, that liberal democracy could not be stopped—a return to an aristocratic Ancien Regime was impossible. Hence they grudgingly accepted it, and they turned to other strategies to maintain elite rule in democratic times: “cede the field of the public, if you must, but stand fast in the private. Allow men and women to become democratic citizens of the state; make sure they remain feudal subjects in the family, the factory, and the field. The priority of conservative political argument has been the maintenance of private regimes of power— even at the cost of the strength and integrity of the state” (15).
It would be a mistake to assimilate all defenders of liberal democracy to this kind of position. Others emphasized that it would need to be accompanied by a rough equality of condition, so that the democratic process would rely on the political support of a middle class, serving as a stabilizing force. Thinkers such as James Harrington and Alexis de Tocqueville and U.S. Founding Fathers John Adams and Thomas Jefferson all argued in favor of a balanced distribution of wealth to make representative government work. Proposals for agrarian reform were discussed in the eighteenth and nineteenth century, with the purpose of making the republic consist of many small and independent landowners, who would be able to conceive of each other as economic and political equals. If—and only if!—such an egalitarian economic condition is realized, liberal democracy can truly break with the premodern constitutional tradition, which always assumed the persistence of a sharp wealth divide. It can then accept representative mechanisms but still reject the trade-off between inclusive-but-passive and exclusive-but-active democracies. For with a large middle class, even a largely passive citizenry confining itself to voting in regular elections and other occasional moments of participation (a protest or petition here and there) can give stability to democracy and prevent oligarchic tendencies.
The problem is that liberal democracy was implemented but the egalitarian assumption has—perhaps except for a few postwar decades—never been realized. With renewed wealth disparities and oligarchic tendencies in politics today, we are back at square one. To simplify, we seem to be faced with a choice between two strategies. One is to fight once more for wealth redistribution, thus redeeming liberal democracy’s so-far unrealized assumption. The other is to reject (or at least seriously supplement) liberal democracy in favor of more active (i.e., participatory, direct, and/or deliberative) forms of democracy. These strategies are not mutually exclusive; one could also argue that each could do half of the necessary work in keeping economic power in check.
Enter economic democracy. The case for economic democracy can be inscribed in this longer history of political democracy. My suggestion is that economic democracy is crucial for a successful execution of both the strategies of redistribution and democratic innovation.
First, redistribution must take a different form today, since economic power in a post-agricultural economy is no longer predominantly based on land ownership. The economic power of the wealthy relies heavily on their ownership of financial assets, which are linked to investment in corporations. The new reality has been with us since the end of the nineteenth century, with the rise of the first giant corporate conglomerates. At that time, the first anti-trust laws were passed. Their goal was not merely economic, to prevent market concentration and higher prices for consumers. The goal was explicitly (also) political: to safeguard the threat of corporate power encroaching upon democracy. Economic democracy proposes to extend the franchise within companies beyond shareholders to include workers and possibly other stakeholder groups affected by the company. This can be seen as the modern-day equivalent of land reform, as well as a form of “anti-trust by interior means,” which aims to create a balance of power within the corporate structure. Such proposals redistribute control over the economic assets managed by corporations but also simultaneously redistribute control over the political activities (lobbying, campaign finance, etc.) of these corporations.
Strategies of democratic innovation promise to reinvigorate liberal democracy by creating a more active citizenry. The unresolved issue is how these proposals will activate a considerable part of the population. Often proposals rely on a selection of a small number of citizens (typically through lotteries) and do not require mass participation. I acknowledge that such experiments can lead to different policy outcomes compared to decision-making by professional politicians with career interests. But one recurring problem is the lack of uptake: official representative bodies do not implement the results of a citizen assembly, even if they committed themselves to doing so in advance. The case of France is a renowned example, where Macron’s government refused to implement the recommendation from the citizen convention on climate change. This, I would suggest, is not coincidental. The recommendations were not followed up for the same reason that they were not introduced by parliamentary and governmental bodies in the first place. Mass participation is needed to pressure politicians to move against established economic interests. Continued mass participation over time to keep politicians accountable remains a challenge for political democracy, given that citizens have private lives to lead. Economic democracy may resolve this conundrum, since citizens are already workers in firms. Active participation may be a challenge in firms as well but, given the smaller scale and hence the higher stakes per-worker, it may be easier to realize. Also, since participating in democratic positions within firms can become—with the right support—one of the legitimate activities in one’s work time, the major barrier of a lack of time (and energy) is much less present in the firm context. The intuition is that whatever results would be reached through economic democracy (in terms of curbing oligarchic tendencies) would obviate the need for measures through political democracy.
Much more could be said, but I hope this opens up at least a prima facie case for taking seriously economic democracy’s potential contribution to solving the ills of political democracy. Economic democracy, as I stated above, is most prominently defended through the “firm-state analogy” argument, which does not connect economic and political spheres. It is worth mentioning that a second prominent argument for economic democracy, entertained since John Stuart Mill, does make this connection. This is the so-called “spillover argument,” that workplace democracy would lead to higher levels of political participation. The workplace would be the training ground for citizenship. Interestingly, this argument does connect the case for economic democracy to the political domain but only via its effect on the skills and abilities of citizens. Unfortunately, empirical proof for such an effect is inconclusive. But if my argument here is convincing, then such an effect is unnecessary to begin with. Economic democracy would do its supportive work for political democracy just by being effective in the economic sphere, by dispersing the economic power that would otherwise undermine political democracy.
Rutger Claassen
Rutger Claassen is Professor of Political Philosophy & Economic Ethics at Utrecht University. His current research interests lie in property theory and in the political theory of business corporations. He is the author of Capabilities in a Just Society (CUP 2018).
