The Road to Economic Democracy

With all the concern about our economy these days, there is a tremendous amount of discussion on just what’s wrong with the system, and what we could do about it. From the outset, we need to see the difference between merely complaining about things (valid as that may be), and discussion that is joined with a willingness to be part of the change we advocate. Then within that, we need to notice if what we are really about is talking change at a fundamental level, or if it is just about treating the symptoms. Finally, if we do have ideas that could improve matters at a structural level, are they feasible? Do they have a realistic chance of taking root, even on a small scale?

A lot of issues we are seeing today, such as the nefarious activities of big banks, money as debt, the crushing power of corporations, and the political power of the rich, have been around a long time. One “big picture” remedy with enduring appeal is that of economic democracy. The concept has been associated with a very wide range of proposals and programs, including workplace democracy, employee ownership, a national dividend, guaranteed income programs (negative income tax), and many others. H.C. Douglas, who favored a national dividend, published a book entitled Economic Democracy in 1918. Also around that time, some companies began granting stock ownership to workers, in part to lessen the appeal of socialism. Though many proposals made under the banner of economic democracy are outdated or downright utopian, the idea of extending democratic principles into the economic order remains an extremely attractive one.

But just how would that happen? Just as political democracy grants political power to the many rather than to the few, economic democracy would need to find a way to universalize something in the economic sphere. But what? I argue that granting decision-making power, or even direct spending power to everyone equally does not quite hit the nail on the head. This is especially true because of the tough choices needed to transition the economy to sustainability. And worker ownership and workplace democracy, as positive as they are, don’t change the overall conditions of the economy as a whole. When you throw in the competitive environment of global economy today, with many large economies practicing state capitalism, it’s hard to find a way past the “race to the bottom” for wages, employment—and, oh yes, the environment.

Especially when we use a term borrowed from politics like democracy, it is natural to think about a political path to economic democracy. Indeed there are lots of people working for that, whether they use the term or not. If you’re interested in reducing wealth and income disparity, increasing fairness for ordinary people, fostering ecological responsibility of business and so on, these are all pieces of the puzzle of economic democracy.

There are a lot of us who feel that holders of concentrated of wealth (corporations and the rich) need to carry their weight in terms of taxation and environmental responsibility, and especially that they shouldn’t stack the political deck in their own favor. In particular, we need a system in which our collective livelihood does not devastate the natural world on which we and future generations depend. However, the lack of real progress on sustainability generally, and in particular on moving away from fossil energy sources, is symptomatic of the entrenchment of economic power centers that have nothing to do with the public interest.

Though much of the reform spirit active today is directed towards political reforms, such as changes in regulation and legislation, there is a catch-22 at work here. The people we want to make less money from the system as it stands are the very people who have tremendous political power in preventing real change. Although it is honorable to fight for economic and social justice in the political realm on a piecemeal basis, issue by issue, actual change in the system can only come about by more fundamental shifts. These shifts start with changes of outlook at the individual level, such as transcending our relentless materialism and selfishness. But the needed changes are not going come from individual actions or changes of attitude alone. We need to create countervailing systems and institutions. For this reason I have emphasized civil activism as an alternative (and compliment) to the political sort. In short, we could say that there is only going to be a political solution to our economic problems when there is a non-political solution. Though this may seem like double talk, all it means is that unless realistic alternatives are in place (and not just as ideas) the political realm will have no traction, nothing to support, as it were. Reform minded legislation and improved regulation are needed, to be sure, but if we only work in that direction, we will not succeed. I really believe that. And because there are plenty of smart and dedicated people working for political reforms (and against them, I might add), I choose to work in civil domain.

Though it may seem difficult to see how to introduce effective reforms from a civil society direction, a window of opportunity appears if we consider the pattern of influence that capital investment exerts over time on the very character of our interconnected economy. By shifting the management of a portion of society’s capital to civil endowments, there is the possibility of creating capital which is fully devoted to serving the common good. In fact, we could go so far as to say that this aggregation of economic power, which I have called Civil Capital, has the potential to create the conditions for economic democracy.

A civil endowment system would grant everyone an equal beneficial interest in pools of capital fully dedicated to serving the common good. By excluding no one from its benefit, this type of investment by definition could not operate on an extractive, exploitive, or speculative basis. By its very imperative, it would need to find expressions in sustainable and socially just contributions to livelihood. Such capital pools could function at a global, regional, and even individual level, but in every case they would be managed by, and accountable to, civil society. This would emphatically not be a centralized, monolithic system. It could encompass any number of funds and oversight organizations devoted to sustainability, fairness and inclusion, and to building authentic prosperity at the scale of the whole of society. It could be said that the principles of economic democracy are built into the DNA, as it were, of civil capital itself.

It may be helpful to revisit the idea that a Civil Endowment System would be a condition, but not a direct cause of economic democracy. By analogy, a farmer’s field is a condition for the growth of a crop, and the seeds and water and sunlight are various kinds of causes for that growth. In a similar way, a road is a condition that makes travel feasible. It is from that point of view that I make the assertion that a civil endowment system is a road to economic democracy.

Though there may be plenty of valid ideological justifications of economic democracy, it is in some sense a description of an outcome, not a program that provides a causal model for its development. The question of “how to get there from here” is where civil endowment comes in. Even at a small scale, civil endowment capital pools would create capital backing for sustainable enterprises, with job and equity opportunities for workers. The productivity of those investments would be returned fully to the common good in the form of further investment and direct economic benefits to individuals on an egalitarian basis. The beauty of a civil endowment system is that it requires no major political upheavals, does not disrupt basic economic freedoms, and does not require universal buy-in. For example, a symbolic civil endowment fund for the United States, valued at one penny per capita, could be established for just over three million dollars.

Because it means so many things to so many people, economic democracy can’t be regarded as a unified movement. But because it embodies so many positive aspirations and ideals, it is a very interesting “idea sandbox” for learning and discussion on economic reform. Whatever we call it, we need to move toward an economy that provides real fairness and opportunity across the board, and helps the very poor move out of that condition—all while safeguarding the environment. That is a tall order. We need remedies that are equal to the problems at hand. Even if a civil endowment system is the road—or one of many roads—to economic democracy, we still need to build that road, and make the journey. Then again, it could be a very interesting trip.