what do you think?
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Part I Workplace Democracy
The New Unionism network claims to be keen on workplace democracy, but surely there's nothing new about that? Isn't that what unions have been on about for years?
Well, it is and it isn't. It's a question of whether you're talking about positive or negative types of democracy -- about saying "we should do this" rather than "we won't let you do that". Unions have always been very keen on having the right of veto over certain decisions, but as a rule they're extremely suspicious about certain types of participation in management.
So you're talking about unions being able to make suggestions about management issues rather than being able to say 'no' to the latest stupid, penny-pinching idea the bosses have thought up? That's not such a big idea, is it? No wonder unions haven't been too swept away by it.
What we mean by workplace democracy is treating enterprises as if they were political communities with citizens, just like countries or cities. We’re talking about a situation in which everyone has the same right to participate in decision making -- not just whoever owns the company -- and to have management held accountable for their actions. That certainly includes the right to say 'no', but it also includes the right to insist that certain things need to be done, or to be done in a particular way. It's a completely different way of thinking about how a company should be run.
Workers controlling the company? Now it sounds like you're talking about workers' cooperatives, and they're hardly a great success story, are they? It doesn't look much like the next step in the forward march of labour to me. I thought the point was to move towards economic democracy - to change the whole system completely. It's the market economy that does the real damage, and it sounds like you don't want to change that much at all.
Well, cooperatives aren't a million miles away from what we’re talking about, but there are important differences. But we can come back to that later. Your point about the market is much more important, and that's where things start to get a bit complicated. Let’s duck back in history a bit... to the industrial revolution. That's where we saw the emergence of the first recognisably capitalist forms of business organisation.
I can see we’re going to be here for a while.
The important thing to remember about the development of capitalism in its modern form is that it involved the gradual stripping away of social, political and cultural influences from the design of methods of production, forms of organisation and ways of doing business. Trade has existed since the dawn of time, but until relatively recently the profit motive was only one among a number of other, equally important reasons for trading. These other reasons, bound up with cultural and religious beliefs and practices, arguably had much more influence over production and exchange than the mere value of the goods involved. The way in which artisanal production was organised, for example, was based on a conception of the techniques of a trade as valuable in themselves. The rigid organisational hierarchy of master, journeyman and apprentice was derived from this conception of technique as an end rather than a means. It's difficult for us to imagine now the extent to which these kinds of conception governed people's ways of thinking, but it's important to try and get a grip on this idea that for most of recorded history, changing the way things were done simply because there were better or more effective or more just ways of achieving the same end was quite literally unthinkable. The socio-cultural means of doing things was at least as important as the end for which these things were done.
Does that mean that things used to be more democratic? It sounds like you're saying that there was more social and political control over the economy before capitalism arrived.
Well, I suppose you could put it like that, but the existence of social control doesn't mean that that control is exercised democratically. The cultural and religious rules that hemmed in economic practice were in the hands of the aristocracy and the church, not ordinary people – and even those who had a direct interest in the status quo were to a great extent prisoners of inherited ways of thinking.
Okay, but how did we get from there to here, if everyone was so caught up in playing their traditional roles?
Well, you've hit on one of the major questions of twentieth century history and sociology there, and the truth is that there is no single account that can explain it all perfectly. Still, the basic outlines are clearish. At the root of it all is the fact that no worldview is so completely watertight as to be permanently immune to the manifest truth. It's impossible to deny that industrial production is more efficient than craft production. Likewise, as Napoleon showed to devastating effect, armies whose officers are selected on the basis of talent rather than class are more effective. There are also political versions of this truth. Once you step away from relying on the assumption of a religiously-ordered universe, for example, rigid social class distinctions based on heredity are more or less impossible to support. So although it might sound a bit simplistic, the progression from medieval to modern can be characterised as a kind of social learning process.
Now wait a minute, you're not going to argue that we're on a great upward trajectory towards the perfect society, are you?
No, I’m not. You keep running on ahead of me and not letting us get to the 'but', so just hang on for a minute. The 'but' is that alongside the gradual democratisation of the social/political sphere – and incidentally, although it's better than it was, nobody in their right mind could claim that we now live in a perfectly democratic society – the economic sphere gradually inched its way out from under social control. In fact, one of the central aims of the bourgeois revolutions (violent or otherwise) which occurred across Europe starting in the 18th century was to free economic enterprise from the dead hand of the church and state. Bit by bit, economic decision-making was cut loose from its socio-cultural mooring.
Ah, now I think I'm beginning to see where you're going, dubious maritime metaphors aside. Is there one of the famous Marxist contradictions coming up?
Got it in one. The contradiction that hit people in the face was that democratic political rights were all very well, but they’re pretty meaningless when so much power and control in society is in the hands of private businesses who are entirely unaccountable and who do more or less what they liked. The clearer it became that social class distinctions based on heredity and ecclesiastical authority were unacceptable, the more obvious it became that the subordination of workers was based on nothing more than their material need. The dissolution of traditional forms of subordination had been accompanied by the emergence of purely economic subordination. The irony in all of this was that the same process of modernisation was responsible for both developments.
Right. I'm with you so far, but I'm having trouble seeing where you’re taking this. As far as I can see you've got to the second half of the 19th century and spectres are haunting Europe, the Russian revolution is on the horizon and all that, but what's it all got to do with workplace democracy today?
Well, we have to stick with the modernisation thing for a moment. If economic decision-making has been cut loose from social control, then the only thing that matters any more is profit. Business and economics becomes an area of social action free from the influence of politics, ethics and culture. It's a form of social action in which all that matters is the outcome, not the action itself. The point is to make money, not to produce things of a particular kind or in a particular way, and still less to play out a set of social relationships, whether sanctioned by the wisdom of ages or established by negotiation among participants. What matters is the market, and everything else comes second. It’s as if business and the economy are bracketed out from the normal rules and processes by which societies are organized. There’s a crucial part of society that democracy can’t touch.
So you’re saying that there’s a bit of society that missed out on democratization, and that what we’re about here is finally putting this bit of society within the reach of democratic processes?
Yep, that’s more or less it. In fact, this is essentially what socialists and communists have been trying to do for 150 years or more. The problem is that how you go about trying to do it depends on why you think the economy has ended up excluded from the democratic process. There’s more than one way you can look at this. The most obvious possible reason, and the one which motivated most early socialists, was that the economy was largely in private hands. There was a set of real, concrete, identifiable individuals who had control over the means of production, and who used it for their own ends rather than for the benefit of society as a whole.
The simplest apparent solution to this problem was to take that property into public ownership, by force if necessary. Once this had been done, decisions about production and distribution could be made on the basis of the democratically-expressed will of the people. The economic sphere thus ceases to be separate from the rest of society, and ceases to operate according to its own logic.
But that’s a bit old hat, these days, isn’t it? And not just because it’s not trendy any more. I mean, you might start by righteously expropriating the capitalist dogs of the means of production, but you end up with tanks on the streets in Hungary and gulags and food shortages and rubbish cars.
You’re right; just because something is simple and obvious doesn’t mean it’s a good idea in practice. But there have always been socialists who proposed different approaches to revolution, or those who held that the route of ongoing reform will ultimately get us to the same place.
So it all depends on why you think the economy is excluded from the democratic process? What did the reformist lot reckon?
Well, the most sophisticated version of this sort of liberal or social democratic approach was that most people misunderstood the true nature of the economy. They argued that it was fundamentally mistaken to think that the economy embodied (or should embody) some kind of general or public interest. They agreed with the revolutionaries that business and the economy had missed out on democracy because the means of production were in private hands, but took the view that there was no need to go to the other extreme of collectivising private property to get economic democracy. They argued that the owners of capital and those who possess nothing but their labour should be thought of simply as groups within a pluralist society. The property rights of the owners of capital should be recognized, but at the same time it had to be accepted that working people had the same kind of property rights over their own labour. Thus capital and labour were thought of as separate but mutually dependent groups of individuals pursuing their own interests in the economic arena. In this model democracy exists when there is no longer any unilateral control; when each side – but particularly the workers – is able to negotiate the terms of its own engagement in any joint activity.
Now that sounds familiar. It’s good old-fashioned trade unionism, based on collective bargaining, isn’t it?
Exactly. The whole edifice of formal negotiating machinery, trade union rights, employers’ associations, union recognition procedures, arbitration systems and all the rest was built on this idea that workers and employers should be engaged in real, meaningful bargaining. For most of the reformists this included not just pay and basic terms and conditions, but the organisation of work itself. The industrial relations pluralists (that’s what this lot were often called) argued that once you have established this kind of bargained democracy you also have optimal economic efficiency. If you get rid of exploitation and conflict at work by giving workers the right to bargain, you also get a more efficient form of organisation. Even though bargaining frequently looks like a cost to business, in practice the trust and confidence that collective bargaining generates between management and workers brings significant operational advantages in terms of day-to-day problem-solving and cooperation with change. So bargaining was thought to be desirable not just for reasons of principle, but also because it improves the performance of the economy as a whole.
That’s not a policy position you hear much about any more…
No. The minor problem with this otherwise very appealing idea was that in most organisations it didn’t really work. As with a lot of the stuff we’ve been talking about here you could spend months discussing why it didn’t work, but you’ll be relieved to hear I’m not aiming to do that. Instead, let’s go back to industrial history for a bit.
Very well, if you must. Carry on.
OK, so the whole collective bargaining thing really took off after the second world war. It was then that governments in the western world took it on board as THE policy on industrial relations, with strong support from one of its principal international backers, the International Labour Office in Geneva. Now, part of the reason for this enthusiasm was that this kind of union-friendly but strictly non-revolutionary approach to industrial relations was thought to be an effective weapon for combating communist influence in the international trade union movement. Employers were behind it because it gave them a way of dealing with what they were obliged to concede were legitimate worker concerns without this having a major impact on their freedom to run their businesses the way they wanted to. Trade unions, at least those not dominated by communists, were also happy (1) because they were extended a kind of institutional security – a degree of respect and an official place in the governing framework of society; (2) because the system gave them at least a limited capacity to say ‘no’ to employers; and (3) because they remained on the outside of the capitalist decision-making process. This was seen as a matter of honour and integrity.
The last bit might seem less important than the others, but for my money it’s the key to all of this. The reformist industrial relations approach left workers and unions on the outside of economic and business decision-making. Any control it brought them was strictly in the form of external limits on the capacity of owners and managers to take action. (Likewise, employers put external limits on the social ambitions of the labour movement.) The whole point of the system was that each side should make its own strategic decisions for its own reasons and that those on the other side of the table were not expected to accept those reasons. All they were required to do was to accept that the position taken by the other side was as it was, and to try and find some mutually acceptable compromise. This deliberate absence of any attempt to understand was really rather convenient and, for the labour movement at least, comforting. In particular, union officers were able to rebut the accusation that they were participating in the management of capitalism because they played no part in constructing corporate strategy. With respect to enterprise decision-making their role was purely reactive. The social and environmental problems that arose from capitalism were purely the fault of “them”, the bosses, and had nothing to do with “us”, the workers.
But why do you seem to be so down on this way of thinking? It seems to me that it’s got a lot going for it, especially the institutional security and saying ‘no’ bits. And you still haven’t said why you think it didn’t work in practice. As far as I know it was working perfectly well before a pile of multinationals and right-wing economists pushed their anti-union sob story through in the 1980s.
Well look, the fact that you’re calling it a sob story says a lot about what the problem was. Let’s concede, for a moment, that there are certain things that organisations have to do; certain objectives they have to reach if they are to stay in business. This is generally agrees in labour movement statements of principle. The British TUC’s code phrase for it in the 1960s and 1970s, for example, was that “businesses has to remain viable”. This is in effect a concession that there are certain constraints on what enterprises can do, and certain other things they are more or less obliged to do if they’re going to stay in business. And, more to the point, it is generally agreed that these things are not constant – that the goalposts for businesses and other organisations are constantly moving.
The issue that we in the labour movement have been reluctant to deal with is how you go about deciding which business decisions ought to be taken. Which are economically unavoidable, which are desirable from the perspective of the enterprise as a whole (i.e. are good for workers, management and shareholders), which are desirable from the social or cultural perspective but not necessarily in the immediate interest of the enterprise, and which just arise because of management or shareholder self-interest.
But hold on, why on earth would unions want to take a line on business decisions? I mean, if you want to make business decisions you have to accept a business agenda, and that means accepting the same things that management wants. Discussions will always be based on competitiveness, and the bottom line will always revert to ‘what’s good for the corporation?’ We can’t accept competitiveness as the dominant criterion.
Well businesses have to be viable, but there is no reason at all that we have to accept the management definition of competitiveness. Why should it be them who get to decide what is and what isn't necessary for the business to be strong and healthy? Their argument is that there is one best way to run a company, just like there's one best cure for TB, and that managers, like doctors, are the technical professionals who know what that way is. Although managers have always been fond of comparing themselves to doctors, it simply isn't true that organisations can be treated like biological organisms, still less like machines. There's a huge amount of research on the way that organisations are managed that clearly points to certain types of management being better than others, not only in terms of sustainable performance but also in terms of quality jobs. High corporate performance – and I mean the kind of performance that’s based on ideas and innovation and not just clever finance – has been strongly linked to systems of management in which the opinions and interests of workers are at the centre of decision-making, rather than being an afterthought. The thing is, there is also lots of research that shows that managers are extremely reluctant to adopt these types of participative management. This may be because they simply don't know how effective they are – although by now they really don't have any excuse for ignoring the evidence – but it is more likely that they know perfectly well that it could work, but also know that there may be greater short term gains to be made by, say, making redundancies at the first sign of financial trouble, or trying to increase productivity by cutting wages instead of investing in training and skills.
With shareholders clamouring for immediate returns, and management ideology rewarding the managers who make “tough” decisions, it is clearly in managers' interests to ignore opportunities for involving workers in decision-making. They aren't stupid, these people – well, OK, some of them are – and they know that involving workers in decision-making is only ever likely to work if you are actually prepared to listen to their advice. Most managers in most companies know that sooner or later they are going to come under intense pressure to implement some small-minded, short-termist restructuring plan in order to make their bosses happy. So why bother pretending that you're going to listen to the workers at all? It's an understandable attitude, given their position, even though it’s not very helpful from the public interest point of view.
I’m getting lost here. You seem to be implying that managers are to be congratulated for having the honesty not to try make workers complicit in their own shafting.
All we’re trying to show is that there is a connection between the overall state of the economy and the state of business, but that managers necessarily know what that connection is. The reason the kind of collective bargaining that we had in the 1960s and 1970s failed was because the intense focus on bargaining, and the insistence that each side was necessarily 100% independent when it came to defending its own interests. This meant that decisions in a vast range of areas were bargained compromises, rather than steps taken in the general interest of those involved. The outcome of bargaining depended on industrial firepower and the skill with which each side plays its cards. You don’t have to be an expert in game theory to see that the decisions that are the possible outcomes of bargaining won’t necessarily coincide with what will keep the business in good shape. But neither does it follow that managers acting unilaterally will necessarily make decisions that are in everyone’s interest. The reason they make the decisions they do is not necessarily because of some plausible or proven connection between the demands of the market and the techniques of business organization. In fact, they don’t usually have much of an angle on what would be good for the organization considered as a whole. They’re usually too busy trying to work out what decisions will have the best outcome for their own careers, because quite frankly they have little or no incentive to do otherwise.
OK, but how does involving workers in decision-making help in any of this? The market won't change, and businesses will still have to deal with the same pressures from the same greedy financiers, so how could the outcome be anything but making workers complicit in their own exploitation? Like you said, there's no politics in the economy any more, and the bottom line in any market system is that its the money that counts. Either workers would have to agree to delocalise their own factory or their company would go under because of competition from cheaper producers elsewhere. Either way they're shafted, but at least with collective bargaining they can go down fighting.
Ah, now I'm glad you said that because I wanted to talk about what the economy does and does not demand that we do. The thing is, you're making the same assumption that neoliberals make, which is that there's only one organisational solution to any given problem. The idea that the economy is like a force of nature, something that operates according to its own rules and is beyond human control, is current on both the left and right of the political spectrum. If you try to argue that a fair globalisation demands that economics itself be democratised, you're likely to get opposition from both the hard right and the hard left. The neoliberals will insist that it can't be done because markets simply won't work if non-economic criteria are introduced. The left will say it is a slippery slope, which will end with workers being obliged to rubber-stamp what managers have already decided.
Do I get the sense that things are about to get complicated??
Nah - it's nothing we can't handle - most unionists live this debate in daily practice. Firstly, and this is a good argument to make to a right-wing audience, just because businesses operate in a market doesn’t mean that the relationships within business have to be market relationships. It has actually been seriously suggested by some on the hard right that each organisation is nothing more than a 'nexus of contracts'. That’s little more than a posh way of saying that the organisation doesn't really exist – it's just a mesh of individual agreements designed to give rise to action in the economic context. But this belief is so detached from any appreciation of the real nature of organisations as to defy credibility. Since the 1920s, industrial sociologists have been producing a steady stream of careful case-study work on business organisations of every kind, and they demonstrate time after time just how important informal social relationships are within organisations. They also show the profound effect that they have on what organisations actually do, and how they do it. Class, race, religion, friendship, politics, culture and history – these things are at least as important as employment contracts in determining how businesses operate internally. In fact they are almost certainly more important, given that the law and the way it is interpreted are products of the same factors.
The reason why this “network-of-contracts” approach has made any headway is because it justifies managerial power. If an organisation is nothing more than a set of contracts, all of which have been freely entered into, then a manager's authority is based on nothing more than his or her contractually-specified duties - the validity of which workers have accepted by signing on. The reciprocal rights and duties specified in the contract are, in turn, no more than the result of “what the market will bear”. So you could even argue from this that managerial authority does not really exist at all. But if an organisation is something more than just a big pile of contracts, it gets rather more difficult to justify executives' power to determine how everyone behaves. Unless contracts are so exhaustive and detailed as to specify every possible situation that a worker or an employer might find themselves in – something that in practice is impossible – there is a large space in which workers' and employers' rights and duties are unavoidably subject to interpretation. This is precisely the space in which class, race, religion, friendship, politics, culture and history are at work. The question is, what makes managers such geniuses, such philosopher-kings, that they have the ability to judge how best to organise and govern this space? One of the big mistakes made by the industrial relations pluralists was to believe that collective bargaining could fill this space. They thought that a properly structured and sufficiently comprehensive collective contract would give rise to a smooth relationship in which everyone's rights and duties were immediately clear and, in the event of some difficulty of interpretation, then more bargaining or third-party arbitration would sort everything out. The history of experiments in extending collective bargaining in this way does not make pretty reading.
The existing research suggests that managers who (a) have their heads screwed on right and (b) have some appreciation of how the world really operates, govern this space in a way which is at least partially democratic. They instinctively consult, discuss, gather opinions, and look for solutions that win wide agreement, rather than just doing whatever will get them the most career brownie points. Then they present their decisions backed with reasons, rather than threats.
OK, fair enough, all of us have known the odd reasonable manager, and now that you mention it does seem to me that the ones I've known have been democrats in practice, if not in theory. But I notice you've been carefully sticking to how businesses do what they do, rather than specifically talking about what they do. I suspect this is a different question.
Yep, it certainly is, and it’s certainly a more difficult one. The traditional argument unions face is that if you consider non-economic factors in economic decision-making then you're get inferior outcomes, and that this endangers the whole organisation. This is another way of saying that if you let workers get their hands on the levers of corporate power, with all of their concerns about dignity, the environment, health, fairness etc. then the whole thing will be an almighty muck up, and we'll all be living in poverty before the next neoliberal government can jump in to save us.
The academic version of this theory is that the economic sphere has become so detached from social and political concerns that even if we were to reintegrate them into decision-making, there is little chance that they would prevail. The market has become the sole effective point of reference for economic and business decision-making, even though it has no moral or political significance, and embodies no values. It is regarded as an entirely abstract phenomenon, no more a carrier of social values or interests than a river valley or a rain storm. At the same time, it is said to have its own inner logic, its own dynamics, which are available for objective interpretation and understanding. These understandings then present arguments for social and organisational action, such as interest rate changes, subsidies, or tax breaks. But these reasons are said to be entirely independent of any social values we hold.
Going back the other way, this means that if we try to imbue economic action with meaning – if we try to pretend that it represents something of value in itself – then we are likely to end up with action that is not as well-adapted to the business environment as it could be. Since it is the organisations who are most exposed to market demands, the ones which insist on giving a place to social or ethical concerns will be the first that are edged out of business.
Well yes, it's known as “the race to the bottom”, isn't it? Socialists have been going on about this for 200 years, and the only real solution that anyone has come up with is the good old-fashioned union idea that you take wages and terms and conditions out of competition. If every organisation has to pay the same going rate, and if business are simply not allowed to compete by cutting wages or speeding up production, then no business is at a disadvantage. What on earth is wrong with that argument?
You're right, of course. Beatrice and Sidney Webb called this 'the common rule'. It's a rock solid argument, but the problem is that it limits trade union and worker action to the contractual items that can be reliably specified, and as I was saying before that is very limited, even without thinking about the extraordinary difficulty of organising a global common rule.
The other thing is that the common rule approach has no bearing on crucial things like environmental damage, production and distribution strategies, marketing models, and every other potentially damaging aspect of capitalism. What has become very clear over the last 15 or 20 years is that there is a need to democratise all areas of corporate decision-making, not just the organisation of production. In fact the whole area we generally refer to as "economics" needs to be reconnected to social and political reality.
Workplace democracy will require new industrial relations practices (and one can already see these developing in some countries). Don’t forget, democracy is not just about voting. It will almost certainly involve elections, and hopefully recall procedures, but it also includes evolving structures for decision-making, discussions over goals and targets, review processes, struggles to deepen participation and debate, conflict management procedures, systems of appeal, and so on. This will change the workplace culture, and lead to new employment and work practices. It will also lead to, and be led by, a new unionism.
Sounds to me like you’ve gone back to the idea of revolution.
Some might say that, while others would see such a suggestion as heresy. Let’s not go there. All we know is that at this point in time some unions are pushing hard in this direction, while others are jamming on the handbrake as best they can. Some governments are advocating it; others are blocking it at every turn. Even management is split. Some are trying to convince unions to come on board, others are pushing a similar model, involving the workers but rejecting any kind of union involvement at all. And then there are those who’ve just closed the door and are thinking about calling in some consultants if business gets any worse. Revolution or not, you can bet that they’ll be first against the wall!
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Part II Economic Democracy
So where were we?
I don’t know about you, but I was trying to work out if the idea of workplace democracy was a revolution or a sell-out. I’m not even sure if it belongs on the left or the right side of the spectrum?
Ah yes… back to the French revolution. That left and right wing model came from the seating arrangements in the Chamber of Deputies, you know. Last time we looked at how the French had democratised politics and society, but in the process they handed over the economy to those with all the money. Now we’re wondering whether starting to change this through workplace democracy will lead us into an economic wilderness (that’s the view from the hard right), or trick us into agreeing to cut our own wages, sack our mates and generally participate in our own exploitation (that’s the view from the hard left). It’s a bit like some of the old arguments about partnership.
It’s probably more useful to think of workplace democracy as a continuum, rather than a fixed position. Those who would deny workers any kind of voice at all in the workplace (be they managers, governments or even unions) are coming out firmly on the right wing. Those who want the maximum democracy, with management elected and recallable, with social and environmental concerns incorporated into the bottom-line, with full gains-sharing, and with a guaranteed collective voice, are of the left. What’s interesting is that the research on both quality jobs and business success clearly supports the left position.
Putting that aside for a moment, would I be right in saying the key question is how far we can go in getting stuff that apparently has nothing to do with the economy – politics, ethics, morality – into business decision-making without at the same time messing things up?
In a way. You’ve gone beyond workplace democracy there, and you’re starting to look at how economic democracy might work. This is about ensuring that everyone has the same chance to participate in defining and then creating the kind of society we want to live in. Above all else, it involves finding agreement about our moral, ethical and cultural values… answering the big questions about who we are, what we should do, and how we should live. At the moment a large and increasingly important chunk of our world is simply not accessible to democracy. The vast majority of us simply don’t get any say at all when it comes to deciding what multinational corporations do, and yet they are directly responsible for a great many of our most urgent social problems we face. I’m talking about such things as child labour in developing economies, the ‘working poor’ in the west, and global warming. Because the economy is treated as a separate world, with its own laws, we don’t get any kind of a vote on this stuff. And yet these things affect us all, and they’ve long since become urgent. That’s why this is such an important issue.
But it’s obvious, isn’t it? I mean, the real question is how sorting this ever fell off the political agenda in the first place. What on earth are the left and the labour movement for, if not for getting this stuff back under democratic control?
We seem to be going round in circles. Lots of people, including most politicians, think that business and the economy are not integral parts of society. They see them as operating by a completely different set of rules. We can regulate, , we are told (with increasing reluctance), but we mustn’t interfere. Decisions about how to act within a market economy can’t possibly be taken democratically. They have to be taken by those who have an appropriate technical appreciation of how business works, and how the economy will follow along.
You’re talking about our friends in management, I suppose?
Yes. And the fact that this way of thinking is so convenient for them is one of the things that makes it so difficult to get a handle on whether there’s any truth in it. We simply aren’t invited into the boardrooms to watch or comment. But an even bigger problem is that many people also see the economy in this same mystical light The result is that people find it difficult to get away from thinking about imposing rules and limits.
But what’s wrong with regulation? You’re not suggesting that we should just let businesses do whatever they like, are you?
Well no, I’m not saying there should be no regulation. But think about it as if you were talking about social order in general. Societies are organised according to rules, and breaking those rules has consequences for those who break them. But if the penalty attached to breaking a rule was the only thing that made people obey it, then society would either break down, or turn into an incredibly repressive police state. Rules need what’s called legitimacy… they need to be recognised as valid and worthwhile, regardless of whether you’re likely to get caught. This was an intuition of the sociologist Max Weber. I’ll put it in his words and then translate it into ordinary English:
“An order which is adhered to from motives of pure expediency is generally much less stable than one upheld on a purely customary basis… But even this latter type is in turn much less stable than an order which enjoys the prestige of being considered binding”.
What he meant was that a set of rules and regulations (an ‘order’) which people don’t think about too much, and fall in with simply because that’s what they’re used to, is more likely to remain in place than one which people have to consider carefully, and then decide on whether to obey or not The best, most stable kind of rule system is one where people think that the rules have a real moral value, and that they should be kept because keeping them is the right thing to do. This last kind of system is the kind in which it doesn’t feel like the rules are reducing your options. You don’t think: “I want to do this and I don’t see why I shouldn’t, but the rules won’t let me.” Rather, you take on the rule and make it your own because you recognise that it’s the way you should behave anyway.
But what has that got to do with corporations? They just do what the market dictates, don’t they? That’s the only rule they recognise.
Oh come on, don’t go closing down the argument before it’s even started. The whole point of this exercise is to think about whether it’s true to say that managers have to do what the market says or not. It seems like you’ve decided the answer already. Really, I don’t know if it’s worth my while carrying on… !
Okay, okay, loosen up. So you’re saying that you want to get corporations to behave themselves without us constantly telling them what they can and can’t do. You have to admit that’s a pretty dangerous risk to take.
No, what we’re looking at is how corporations can be prevented from taking dangerous risks in the first place. As things stand, there are only two ways to get any kind of democratic input into corporate action, and both of them are essentially negative. One is legislation, the other is collective bargaining. The problem with legislation is that it inevitably comes with procedures to be followed and documented, reporting and compliance requirements and all the other ‘burdens on business’ which corporations spend so much time complaining about. These ‘burdens’ arise precisely because corporations cannot be trusted to comply with regulation in the absence of elaborate monitoring and enforcement. And this is because the only rule that corporate managers see as legitimate is the rule of the market.
Although in principle collective bargaining is a more flexible form of regulation, capable of supporting positive worker interventions and participation in management, in practice it’s about saying one of two things: ‘no’ and ‘we want more’. Now both of these things can be incredibly important and valuable, and they are arguably the first steps on the road to more positive forms of participation, but they remain external restrictions on corporate action. They do nothing to change the internal decision-making processes of enterprises. Precisely for this reason, union organisation and collective bargaining can be painted as a distorting factor in the normal run of businesses, much like ‘excessive’ regulation. This is one reason why unions and workers’ rights remain vulnerable to attack by employers and right-wing governments. At best they’re viewed as an optional extra for corporations who want them. They are certainly not critical factors in integrating society and the economy, as the optimists of the 1960s and 1970s had us believe.
OK, I understand that you want unions to look beyond collective bargaining, and to push for worker involvement in decision-making, but I still don’t see how that puts the kind of ethical compass you’ve been talking about inside corporations. If unions and workers participate in management then surely they’ll simply end up adopting the management perspective? I mean, what’s to say that they won’t lose their own ethical compass in the face of market pressures?
See, now a question like that makes me think you’d make a damned fine union rep. This is going to sound really weird, but the answer I want to give is that the economy itself can serve as a moral and ethical compass, if we believe that that’s what it’s for. I appreciate that at this point you’ll be thinking either (a) that I’m one of those lefties who has a damascene conversion and become a neoliberal, or (b) that I’ve been reading too many new age self-help books. But bear with me and I’ll try to explain what I’m on about.
Ooo-errr! I’ll give you five minutes, but if you haven’t started making sense by then I’m off.
Very reasonable of you. Right, we have to start by thinking about economic exchange. If you cut it down to its essentials, you can easily argue that exchange or trade is a perfectly reasonable social practice. If you have more of some useful thing than you can use, and your neighbour doesn’t have any at all but could use some, then there are two things you can do. You can either just give your neighbour your spare goods (cherries, let’s say) or you can trade them for something that they have a surplus of. Now, if your neighbour has had a bad year in the garden and doesn’t have a surplus of anything, then the obvious thing to do is just to give her some cherries. I mean, if you eat them all you’ll turn purple, and if you don’t eat them they’ll just rot, so it’s an ethical no-brainer really. On the other hand, if next door they’ve had a fabulous year for carrots, then that gives your neighbour the opportunity to pay you back for the cherries and to avoid feeling obliged to you. In fact, if your neighbour didn’t give you some of her surplus carrots, but took your cherries anyway, you might be a bit miffed.
There’s an expectation of reciprocity that arises here. If fulfilled, it puts a kind of seal on the relationship. By exchanging comparable amounts of carrots and cherries, you and your neighbour have done the right thing by each other, and other members of your society are likely to look at your relationship and sagely nod with approval. But, and it’s a big ‘but’, this kind of direct reciprocity is not always a reasonable thing to expect. It depends on the circumstances. I mean, if your neighbour was getting on a bit, and was finding it difficult to keep up the carrot patch, then you wouldn’t stop bringing her cherries, would you? (At least I hope you wouldn’t). On the other hand, if there were carrots a-plenty, but none of them were coming your way, then you’d pretty soon find something better to do with your spare fruit. What I’m saying here is that trade is just one aspect of wider social relationships, and the ‘rightness’ of trade reflects the rightness of that relationship; of your situation as compared to their situation. The exchange of carrots for cherries is saying that you are both grown-up, independent people who are prepared to treat each other as such. The trade reflects a relationship of equals, with no-one either condescending to anyone or trying to get one over on anyone. Most importantly, the relationship takes into account the fact that you and your neighbour are able to make a similar physical or material contribution to the relationship.
This idea of what you are able to contribute in a material sense is why the relationship between you and your elderly, carrot-compromised neighbour can also embody dignity and respect. Through no fault of her own, she just can’t make the same material contribution to the relationship that you can, but her need for fresh fruit and vegetables is as great as it ever was. So you bring her the cherries because it’s the right thing to do, and it doesn’t even occur to you to resent the fact that you’re getting nothing back. Your neighbour, decent woman that she is, will undoubtedly be aware of this, and may try to repay you in some other way, like feeding your cat while you’re away, or baking you a cake. Or she may simply accept the fruit, and be grateful that she has a good neighbour.
Are you sure about those new-age books, because I can’t see us getting far against capitalism with this horticultural theory of value!
I haven’t had my five minutes yet. The point I’m trying to make is that our expectation of reciprocity – the social expectation of reciprocity that defines the moral value of the trading/exchange relationship – is related to the material circumstances of whoever it is we’re dealing with. Even the most basic ethical arguments seem to suggest that trading, as opposed to simply giving something away, can be appropriate, but only under certain circumstances. This suggests that the social value of trade can’t be determined simply by considering what goods are exchanged. You also have to look at the material circumstances of the traders. It is not simply a question of finding some acceptable equivalence between cherries and carrots (or between cherries and cat-sitting), but of ensuring that the wider relationship (of which the exchange is one aspect) is itself socially acceptable. What I’m saying here is that a fair exchange has both a material and a social component.
OK, look I’m granting you an extension on your five minutes because I’m beginning to think you might have a point, but can you explain that last thing about fair exchange in a clearer way?
What I’m trying to do is suggest a plausible explanation for why some exchanges are said to be fair while others are not. And I think it’s 100% implausible to suggest that it’s just to do with the quality and quantity of what’s being exchanged. To get away from the barter analogy, what I’m saying is that a fair exchange is not just about the price. Certainly, what you get in terms of quality and usefulness, and how much of it you get is important, but it’s only part of the picture. There are a whole series of other questions that arise about your circumstances, those of the seller, and indeed those of other potential buyers and sellers. For example, demanding a high price for something that you have a great quantity of, simply by virtue of luck, but which you have absolutely no use for, is arguably unfair. But if the thing that you have is very useful or desirable to other people, and if the reason you have it because you worked harder or smarter than other people, and if there is no reason why other people could not have worked in the same way if they had wanted to, and if the people who want the thing are in a position to pay a high price for it, that makes the situation rather different. In this case you could argue that a high price is a fair price, because you are not exploiting any advantages that you have by virtue of your position in society. So the fairness of an exchange depends on how your situation compares with everyone else’s situation. This is what I mean when I say that exchange has a social component.
That helps, but what I’m wondering now is since when did fairness have anything to do with capitalism?
That’s exactly my point. The existing fairness of the relationship between buyers and sellers is one of the most basic assumptions of market economics, even though it’s also the most frequently unrealistic. Market economics thinks of the exchange relationship as something entirely free of moral or ethical contents. It’s just about stuff; it’s just about price. It’s never about people. But if the material capacity of the people involved is not roughly equivalent – if their ability to bargain and/or to threaten to walk away is not more or less the same – then any exchange will be affected by that imbalance. It won’t be about the commodity and the price, but about the stronger participant getting what they want. Rather than ending up in a situation where productive resources go to where they will best be used (that’s the basic idea of market economics), you get those who are already wealthy having a distorting effect on prices.
Hang on though, a moment ago you were talking about how it was important to take everyone’s circumstances into account. Now you’re saying we have to assume that everyone’s in the same boat?
No, I’m saying that most approaches to economics start with the assumption that everyone is in the same boat. If they didn’t, the whole thing would get too complicated and you’d never be able to say anything about anything. But what this means is that you have to be very wary of the basic economic laws of supply, demand and competition. In the long run, and from the perspective of society as a whole, the best, most effective, least socially and environmentally damaging products (and means of production) are the most cost-effective. Organising production and distribution on the basis of fair social exchange is a way of ensuring that these are the ones that are chosen. The market is supposed to make sure that goods get distributed fairly, but conventional market economics starts from the assumption that this is already true. So if the buyer and the seller can agree on a price, then, it is claimed, their relationship must logically be fair and socially acceptable.
Err, okay, at least I think I see what you mean – market economics gets things back to front when it comes to fairness, is that it? But how did you get from swapping cherries and carrots to market economics?
Ah yes, that. Well, it’s actually about statistics. Remember I said that thing about society looking at the cherry-carrot deal and congratulating you and your neighbour on your impeccable relationship? Well, think of the economy as a kind of pool of social knowledge about exchange relationships. Let’s say that you and your carrot-raising neighbour are well known in the area both as talented gardeners likely to raise decent produce, and as generally fair and reasonable people, able to look after themselves and likely to treat each other with respect. Once the word gets out about your root-fruit deal, then it might well be used as a point of reference by other gardeners looking to exchange cherries and carrots. The gardeners in your town recognise that the value you agreed was not arbitrary. Rather, it was fair because it was based on a healthy social relationship.
Because of this it can act as a standard for other deals. After all, it’s relatively simple to make adjustments based on perceptible physical differences between the goods in the standard exchange and those in some later deal. So someone swapping parsnips for cherries might agree to accept fewer cherries for them than you handed over for your carrots, because a lot of people think parsnips are horrible (not me though). Anyway, the fairness of the original deal is passed on through subsequent deals as long as everyone continues to behave reasonably. Once a certain point is passed, your original standard deal gets lost to view amid the plethora of fruit and vegetable swaps that are going on, and instead the standard becomes all the deals that have recently taken place. Or rather, the standard is a kind of average of all of these.
But you’re still talking about bartering. Doesn’t economics involve money somewhere?
Well, money is a medium of exchange. It’s a kind of universal translator for the value of stuff. If five hens are worth two piglets, and a piglet is worth 5 kilos of cheese, then a hen is worth 2 kilos of cheese. But you could just as well say that cheese goes for €5 a kilo, hens cost €10 and piglets €25. It’s not just a question of convenience, though. Money is more important than that. Probably the two most important things about money are that it makes the range of people you can trade with much wider, and it makes getting a grip on the available information about exchanges a lot easier. First of all, if you want carrots and have cherries, you don’t have to find someone who has carrots and wants cherries. All you have to do is find someone who wants cherries and someone who has carrots. They don’t have to be the same person anymore. Secondly, instead of a confusing record of swaps involving relationships between different quantities of different kinds of stuff, the information you get from the market (which starts up when someone uses an existing fair exchange as the standard for agreeing a second exchange) is just a series of prices for a given quantity of each thing. It becomes very easy to understand what each product is worth in relation to other products that are available.
Right, got it. But how does this relate to the argument that market economics has got things back to front?
As I suspect you have surmised, that’s the most important bit in all this. What we said before was that in your typical piece of neoliberal market economics, the basic assumption is that if the buyer and the seller can agree on a price, then logically their relationship must be fair. Neoliberal market economics is a political project not because of the hard sums, but because it insists that we behave as if this assumption were true. And yet we know full well that in very many cases it isn’t. The Thatchers and Reagans of this world argue that intervening in markets to improve their fairness gets in the way of their proper functioning. What I’ve been saying here points to exactly the opposite conclusion.
||“ ..the real change that’s needed, if our economic system is to operate fairly, has to come from within business itself. This is where workplace democracy and economic democracy fit together.”
This is where the idea that the system of exchange, in itself, can be a moral and ethical compass comes in. The market is supposed to improve the distribution of material goods. It‘s supposed to make work and investment as efficient and effective as possible. But it would be absurd to say that the ways things are is the best way they can be, just because most types of production, distribution and exchange are organised in markets. There are any number of ways that markets can be unfair and market actors can behave unfairly. The mere existence of a market is no guarantee of fairness, and we certainly have very little reason to believe that big corporations will scrupulously try to ensure that they do nothing but good. So we need to keep a grip on what the market is for. We need to ask whether money and time are getting invested in useful, sustainable ways, and whether (as a consequence) the world is becoming fairer. If it is not -- for example if only a tiny proportion of the price the consumer pays for a product ends up in the hands of the people who do most of the work to get it there -- then the market is getting it wrong. Somewhere along the line, someone is taking a profit they don’t deserve.
However rather than throwing up our hands and saying that our exchange system doesn’t work, we can use records of exchange to pin down where that excess profit is arising, why it is arising, and how to fix it. Are the people who work in the factories free to offer their services to another business? Are they free to negotiate their pay and conditions with the businesses they work for? Are companies that own brand names using their monopoly power to screw down prices to such an extent that their suppliers’ labour standards go out the window? Are there government subsidies to producers in certain countries that mean that producers in other countries can’t exchange fairly? Are international trading rules being settled on the basis of what works for everyone, or are they the result of the geopolitical jostling and lobbying of multi-national corporations? What all this comes down to is one simple question: is our exchange system really free?
Wait a minute though, it sounds to me as if you’ve talked your way round to arguing for more external regulation. What happened to the moral compass?
Part of the solution may be better regulation, especially at international level, but I still think that the real change that’s needed, if our economic system is to operate fairly, has to come from within business itself. This is where workplace democracy and economic democracy fit together.
Ah-hah. And from that I think I’m starting to see what you mean by a new role for unions.
Exactly. At workplace level, at national level, and at international level.
And is this what you lot mean by New Unionism, then?
As I said before, what we are talking about is a continuum, rather than a fixed position. The New Unionism network is made up of people who think along these lines, but some seek to push it further than others. Because it is a network I can’t speak for them, and nor can they speak for me. But I think this is our strength. We all work in our own contexts, and at the end of the day this is where our struggle is played out; be it in workplaces, in unions, in community organisations or in academia.
Okay, are you finished now? Or do you want to go out with some kind of rhetorical flourish?
Draws a deep breath: There’s no way that we can regulate the kind of decision-making that needs to be regulated from the outside. You can have all the labour standards and corporate codes of conduct you like. There is no doubt that these can help ameliorate problems, but if your main customer is putting pressure on you to cut prices again, and you know that they can shift production to another country, then investing in better conditions won’t be top of your list. You can’t regulate who people buy stuff from, or how hard they bargain over the price they pay. Big corporations throw their market weight around and say that things will work out fine, just because the assumptions of neoliberal market economics say they will.
Every time businesses make decisions, whether about contractual relationships, internal organisation, product development, marketing or anything else, there needs to be an assessment of whether the effects of those decisions are fair in the light of the existing relationships between shareholders, workers, suppliers, consumers and the world in general. There is no way that this kind of assessment can be left to management alone. It involves making judgements about ethics, politics and morality, and that territory belongs to all of us. It’s not just a question of technically assessing what the market requires, but of judging whether the market is requiring something reasonable. If society is not already reasonably fair, then it’s likely that the direction given by the market will need adjusting. This adjustment will make our system of exchange work better. It compensates for the distortions caused by uneven economic power, and points back towards the kind of fair exchange that was at the evolutionary root of economics.
So if I were to sum up what you’ve been saying here, could I say something like this: Workplace democracy actually makes economics work better, as long as we all accept that the point of exchange is to make the world a fairer place, rather than making money for people who already have it?
Perfect. Now is this actually a viable way forward? And if so, what opportunities and threats arise for unions and the labour movement?
to be continued...
Part III of this paper will look at how these changes can be (and are being) implemented, and will consider the critical new role that this suggests for trade unions.
A Microsoft Word version of this document can be downloaded here»