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Time for Economic Democracy

Aside from the unfair voting system and the use of big money to buy political power and influence, Britain is, broadly speaking, a political democracy. But when it comes to the economy, we remain a dictatorship. A rich and powerful economic elite makes all the key economic decisions, disenfranchising millions of employees and consumers.

Our country’s democratic political transformation – pushed forward by the Levellers, Chartists and Suffragettes – has never been matched by a corresponding economic democratisation. ‘One person, one vote’ has been won in the political sphere but not in the realm of economics. Britain’s democratic revolution, begun four centuries ago, remains unfinished.

It is time the labour movement followed the lead of the Green Party and put economic democracy on the political agenda; to bring the economy into democratic alignment with the political system.

Extending the economic franchise is about democracy and justice. It can help create a greater plurality and diversity of economic power, and also lay the foundations for a more equitable and productive economic partnership between all those who contribute to wealth creation and to the provision of public and private services.

Whatever people think of the current economic system, one thing is indisputable: it is characterised by an absence of democracy, participation, transparency and accountability. Employees and their representative bodies – the trade unions – are frozen out of economic influence and decision-making.

Big business rules. The captains of industry, commerce and finance have almost total power. They run their enterprises on totalitarian lines. All decision-making is concentrated in the hands of a tiny, privileged cabal of major shareholders, directors and managers. They alone determine how the company operates. Employees – without whom no wealth would be created and no institution could function – are powerless and disenfranchised. They are little more than servants of the moneyed classes and the government.

Not much has changed in two centuries of capitalism. There have been no major democratic reforms of the economy. Although millions of people bought shares in privatised public enterprises like BT, their individual holdings are minuscule and marginal. They have no real influence. Big corporate interests retain the decisive economic power. This power is as centralised and autocratic as ever. A few determine the fate of the many.

The advent of nationalised public industries, utilities and services changed nothing. They have been run in much the same centralised, dictatorial manner as their privately-owned counterparts. There was never any economic democracy in the state-run railways or coal mines. The system of ownership changed but not the system of management. The employees of nationalised industries remained locked out of the decision-making process.

The same applies today in the NHS and other public services. They are administered according to the classic capitalist model of top-down command and control. NHS big-wigs have almost as much power as private medical bosses. Doctors, nurses and ancillary staff are excluded from policy-making in both public and private medicine. In all sectors of the economy, the democratic deficit is universal.

The idea of economic democracy is nothing new. It was big in the 1970s, in the hey-day of Labour’s left-wing revival, when much of the party was idealistic and visionary. In those days, we wanted to redistribute wealth and power. Some of us still do. There are three ideas from four decades ago that are well worth reviving: industrial democracy, trade union control of pension funds and the transfer of stock ownership into employee share funds.

A system of industrial democracy, broadly based on the 1973 Bullock Report and Labour’s Programme of 1976, would require the boards of all public and private enterprises with 50 or more employees to establish equal representation and joint control between management and elected staff representatives. Under an independent chairperson acceptable to both sides, these boards would have full access to all corporate information and the final say over all corporate decisions, including investment, technology, wages, prices and so on. Although imperfect, this system of co-determination would produce a major extension in workplace democracy. It would also shift the balance of economic
power; constraining the remit of capital and expanding the influence of labour.

Trade union control of pension funds is another way to decentralise, diversify, and democratise the economy. It could be accomplished by legislatively re-assigning the administration of pension fund assets to individual trade unions who would act as trustees of the funds on behalf of their members. Or through a supra-union pension fund investment arm which would be administered by financial experts appointed by, and accountable to, the trade unions and their members involved. Such a scheme would give organised labour direct power over a massive wedge of public and private investment capital. It could then direct these funds into specific enterprises corresponding to the interests of union members and to broader social needs, such as the development of renewable energy and the conversion of arms industries to socially-useful civilian manufacture.

Perhaps the most radical proposal for economic democracy involves the progressive transfer of share ownership into trade union-administered employee share funds. This is a variation on the ‘wage-earner funds’ proposed by Rudolf Meidner of the Swedish trade union federation, the LO, in the 1970s. It would obligate all private share capital companies to assign to a union-controlled fund a proportion of their annual profits in the form of a new share issue. This would gradually, over many decades, give employees, through their unions, a controlling interest in their firms – transforming them into self-governing workers’ co-operatives. The great strength of this scheme is that it incentivises and rewards employees for economic success. The more productive and profitable a company, the more shares it has to issue to the employees’ funds and the sooner employees gain a controlling stake.

In contrast with Labour’s traditional reformist economic doctrines of Keynesianism and Welfare Statism, which merely seek to redistribute wealth more fairly within the confines of the existing free market, private ownership, bosses-rule system, these three models of economic democracy are mechanisms for the structural transformation of capitalism. If implemented, they would alter, fundamentally, the distribution of wealth and power, in favour of organised labour and working people.

Economic democracy is a central plank of progressive politics. It ought to be a high priority for the labour and trade union movement. Alas, under Tony Blair and Gordon Brown, the gap between the rich and the poor widened and the power and rights of employees were constrained. There is no reason to believe that the new Labour leader will be any different.

The trade unions are, sadly, lost in the wilderness, with no agenda to change the system. At best, they fight defensive struggles for a better deal within the status quo.

A new left revival needs to challenge economic dictatorship and set out a new model of economic participation, accountability, decentralisation and transparency, in the interests of employees, consumers and the wider public welfare. The time for economic democracy is now.

For more information about Peter Tatchell’s human rights and social justice campaigns:


  1. What a wonderful idea! I’ll get right on it.

  2. As political democracy, together with, not least, the form of political activism with which you are associated, exists by definition within a constitutional framework, it would appear
    to follow – would it not? – that economic democracy, together with any form of economic activism other than that which is currently practised by plutocratic kleptocrats, could hardly
    be expected to thrive while there is no corresponding economic constitutional framework to support it.

    Political anarchy having largely been consigned to the margins by the global development of political constitutions over the past several centuries, it is only to be expected that the
    non-existence of a global economic constitution permits economic anarchy to thrive, particularly within the current nexus of economic globalization and communications technology, resulting in a disempowering of politicians and a consequent effective disenfranchisement of the general population.

    The great systemic crisis which we are living through, euphemistically referred to as “the downturn”, presents us with a challenge which matches and is intimately related to the global ecological and demographic challenges with which we are faced in this century. The global financial system is seriously damaged and is unsustainable unless it is radically reformed. That reform arguably cannot be effective unless a global economic constitution is established.

    What is meant by the term ‘economic constitution’. To answer that question allow me merely to point you in the direction of some enlightened spirits who are endeavouring to devise one:

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