Economic Democracy

David Schweickart

There are two sources of felt discontent with capitalism, discontent already acute in many quarters and likely to intensify. Both sources may be regarded as “democratic deficits”—lack of democratic control over conditions that affect us profoundly.

The first concerns workplace democracy. It is a striking anomaly of modern capitalist societies that ordinary people are deemed competent enough to select their political leaders—but not their bosses…. The other disconcerting feature is capital’s “hypermobility.” The bulk of capital in a capitalist society belongs to private individuals. Because it is theirs, they can do with it whatever they want. They can invest it anywhere and in anything they choose.  This gives capital a mobility that now generates economic and political insecurity around the globe.

As an alternative to capitalism, Economic Democracy offers solutions to these democratic deficits.   It has three basic features:

  • Worker self-management: Each productive enterprise is controlled democratically by its workers.
  • The market: These enterprises interact with one another and with consumers in an environment largely free of government price controls. Raw materials, instruments of production, and consumer goods are all bought and sold at prices largely determined by the forces of supply and demand.
  • Social control of investment: Funds for new investment are generated by a capital assets tax and are returned to the economy through a network of public investment banks.

Worker Self-Management

Each productive enterprise is controlled by those who work there. Workers are responsible for the operation of the facility: organization of the workplace, enterprise discipline, techniques of production, what and how much to produce, what to charge for what is produced, and how the net proceeds are to be distributed.  In a firm of significant size, some delegation of authority will be necessary.  Enterprises will elect a workers’ council, which appoints the chief executive officer and perhaps other members of upper management.  But ultimate authority rests with the enterprise’s workers, one-person, one-vote.

The Market

Economic Democracy is a market economy, at least insofar as the allocation of consumer and capital goods is concerned. Firms buy raw materials and machinery from other firms and sell their products to other enterprises or consumers. Prices are largely unregulated except by supply and demand. This feature it shares with capitalism.   

Social Control of Investment

In any society that wants to remain technologically and economically dynamic, a certain portion of society’s labor and natural resources must be devoted to developing and implementing new technologies and to expanding the production of the goods and services in high demand.  In a capitalist society, these investment funds come largely from private savings, either the direct savings of private individuals or the retained earnings of corporations.  In Economic Democracy, investment funds are generated in a more direct and transparent fashion. We simply tax the capital assets of enterprises—land, buildings, and equipment. This tax, a flat rate tax (essentially a property tax) may be regarded as a leasing- fee paid by the workers of the enterprise for use of social property that belongs to all.

A flat-rate tax on the capital assets of all productive enterprises is collected by the central government, all of which is plowed back into the economy, assisting those firms needing funds for purposes of productive investment. These funds are dispersed throughout society, first to regions and communities on a per capita basis, then to public banks in accordance with past performance, then to those firms with profitable project proposals. Profitable projects that promise increased employment and/or further other democratically-decided goals are favored over those that do not. At each level--national, regional, and local-- legislatures decide what portion of the investment fund coming to them is to be set aside for public capital expenditures, then send down the remainder, no strings attached, to the next lower level. Associated with most banks are entrepreneurial divisions, which promote firm expansion and new firm creation.

These are the kinds of institutions that can empower ordinary working people and meet their needs better than present ones that just enrich the 1%.

David Schweickart is a professor at Loyola University in Chicago and author of After Capitalism.