Measuring Economic Democracy

– Brexit demonstrates a
number of profound issues about democracy, in terms
of many of the issues that might have motivated
people to vote for leave may well actually transcend
the U.K.’s membership of the European Union. In some cases, this isn’t
necessarily the case, so there is a school of
thought, a more political, economy-based school of thought, which suggests that those
who voted leave for issues associated with, for example,
the European Union’s, perhaps, ordoliberalism or neoliberalism,
and its potential impact on labor markets, for
example, may well be those who suffer most as a consequence of this. Hi, my name’s Professor Robert McMaster. I’m at the University of Glasgow’s Adam Smith Business School. I’m currently working on,
with colleagues at Glasgow and elsewhere, developing an
“Economic Democracy Index.” What we endeavor to do is just
to contribute to the debate on the use of indices as indicators of
economic/social wellbeing. What we’re endeavoring to
do by this is generate ideas about economic democracy,
broaden the notion of economic democracy
beyond the workplace, and interrogating and investigating
potential relationships between economic democracy
and, for example, productivity, poverty, income inequality,
growth, and so forth. OECD and the European
Commission have issued guidance on the construction of composite indices. What we’ve endeavored to do is follow this as closely as possible. As a consequence of this,
we’ve been confined to the use of particularly reliable data
sets, so the data that we use is mainly relating to OECD member states. So I’m afraid for the
moment we’re confined to OECD member states, just on the basis of data reliability. Even there, we’ve had to
exclude two OECD member states simply because of data issues. “Economic Democracy Index”
has revealed quite a marked and pronounced differences
between Scandinavian economies and mainland European economies
who rank fairly highly, relatively speaking, and there’s
another group of economies founded in Eastern Europe
which rank more modestly. Anglo-American economies,
primarily the U.K. and U.S., also rank relatively modestly,
and in our latest sample or iteration of the index, we
find that the U.S. is ranked 32 out of 32, which is
interesting in itself (laughing). There are some changes over time, but in terms of those groups of economies, they tend to be fairly consistent, in that the Scandinavian
economies tend to perform relatively well vis-a-vis other types of capitalist or economic systems. Differences in placements may
arise as a result of weighting that’s applied as part of the index, so some economies do
relatively well, for example, in what we call associational
economic democracy, which refers to collective organizations. So, for example, Ireland
performs well in terms of financial cooperatives,
which we deem more democratic than other forms of financial enterprise, and trade union density. The U.K. doesn’t perform
that well across the range as we understand it. In terms of the “Economic
Democracy Index,” what we’ve found is a very
mixed picture before and after the financial crisis, with
some economies actually performing better post-financial crisis than they did beforehand. We’ve yet to investigate
the potential reasons why that may well be. Others haven’t performed that well. Greece certainly hasn’t performed that well post-financial crisis. I think we need to investigate further in terms of qualitative data, so, interviews with key academic players, other types of stakeholders, politicians, trade unionists, civil society. We’ve endeavored to do
that in three economies, Portugal, Slovenia, and
Denmark, in order to interrogate their performance or relative performance in “Economic Democracy Index.” Unfortunately, we haven’t been able to do that for a wider
set, so anything I say about an economy’s
movements has to be couched with a good deal of caution,
and we have to look at, essentially, the historical
factors and cultural factors that may contribute to this. What we’ve endeavored to
do is investigate potential relationships with poverty,
with inequality in particular, and with productivity, and what we find is with income inequality, there’s quite a pronounced correlation. So, the higher the
“Economic Democracy Index,” the lower the levels of income inequality. What we’ve done since
establishing this correlation is trying to investigate
possibilities of causation, and we find that there is a
robust causal relationship, and again, we’re trying to
develop our analysises in this. In terms of factor
productivity, we also find a positive correlation
between economic democracy and labor productivity,
certainly as it’s conventionally measured, and the same
with poverty levels, that the higher the levels
of economic democracy, the lower the measurable poverty levels as assessed by the Gini coefficient. In terms of policy implications of the “Economic Democracy
Index,” in those economies that perform relatively well in the EDI, they also perform
relatively well in a range of other indexes, such as
“Human Development Index.” The array of institutions
endeavoring to democratize them implies that people react
fairly well to having a voice and being able to participate
in decision-making processes. We’ve attracted some interest in terms of, for example, the chief economist of the Scottish government
has expressed interest. Various other organizations,
such as Oxfam, New Economics Foundation,
and so forth, have expressed interest in exploring the
policy implications with us. Perhaps one of the policy
implications would be, in terms of, well, the
conventional organization of funds, lending greater voice to employees might well be highly beneficial. Also, beyond that, greater
financial diversity, for example, may well contribute to a
democratizing of the economy and have beneficial implications. In terms of predicting
the impact of Brexit, economic tools aren’t really adequate because they’re dealing
with a profound uncertainty and something that is
potentially transformational of the U.K. economy. There are important
challenges for economists in how they contribute to
this debate, and indeed, prior to the referendum, some economists in the British government
treasury were forecasting, essentially, an apocalypse post-referendum if there was a leave
vote, which there was, and, of course, that hasn’t happened. What is certainly happening
is that growth is slowing, incomes are falling, relatively speaking, because of the changes in exchange rates, but nothing on the scale
that was predicted by some. I think Brexit has the
potential to transform the U.K. economy in ways
that could exacerbate income inequalities and
existing poverty levels. It sends a very, very bad
signal to the rest of the world. It’s not xenophobic, but it’s
certainly inward-looking, so there are a number of
challenges presented by Brexit. I’m also concerned about climate change and the lack of action that
seems to be taking place in terms of that, certainly
on a global scale. There are many instances
of local initiatives that appear to be bearing fruit, but I remain skeptical of buy-in from the major powers, but we’ll see.

4 thoughts on “Measuring Economic Democracy

  1. Faith in free markets implies a faith in human virtue, in the democratic abilities of the dollar and the informed consumer. The truth is less utopian, human self interest trumps morality in the market as well as the real world.

    The reality, whether we like it or not, is that political power follows economic power. We must begin to accept the fact that we cannot have liberty without ownership of capital. Worker ownership is necessary for the preservation of American freedom.

    "Power (influence and control) always follows property… The only possible way then of preserving the balance of power on the side of equal liberty and public virtue, is to make the acquisition of land (potential productive capital) easy to every member of society: to make a division of the land into small quantities, So that the multitude may be possessed of landed estates (established productive capital)." – John Adams

    We need to learn to how to view worker ownership and cooperation outside the distorted lens of the traditional dichotomy.

    Conservatives like the idea of self-reliance and self-determination, but they’re concerned that cooperation is too much like socialism. It’s seen as impractical in a competitive market.

    Progressives are attracted to cooperation because they like the idea of equality: no bosses, everything is shared. But this is an incorrect view; worker ownership does not imply equality or an absence of hierarchies.

    Most of the theories of socialism and anarchism reject private ownership when it fact it’s the solution. Instead of social ownership, we need to spread out individual ownership as widely as possible so that everyone is a proprietor.

    "The consistent anarchist, then, should be a socialist, but a socialist of a particular sort. He will not only oppose alienated and specialized labor and look forward to the appropriation of capital by the whole body of workers, but he will also insist that this appropriation be direct, not exercised by some elite force acting in the name of the proletariat." – Noam Chomsky, Notes On Anarchism

    Private ownership is a natural right. We can compare it to the concept of inheritance, which, in ancient times, carried both literal and symbolic meaning. It’s our prerogative to claim that which is rightfully ours, but that doesn’t mean that it’s delivered to us on a silver platter. We still have to seek for it.

    Americans have tended to turn to political leaders who promise to increase or decrease spending, raise or lower taxes, regulate or deregulate. But traditional strategies will have little effect on the underlying problem.

    Today we need a new generation of pilgrims. We need to seek for our promised land. In our quest to escape tyranny, we need to rediscover natural moral laws and universal truth, not just in our political system but also our economic system.

    One of these natural laws is the principle of ownership, which can be described by a simple statement of purpose:

    We must seek to become owners of productive capital. Seeking ownership is the first step in building economic republics.

  2. Liberal democracy and liberal market economies are two sides of the same fiat coin. The opposite of democracy isn't "capitalism". That seems to be what's being said here regarding EU and their "neoliberalism". There's a difference between the supply-side liberalism of Friedman and Hayek, and the demand-side liberalism of the 30s.

    "Economic democracy" just isn't a thing. Marxism =/= democracy

  3. Where does the role of civil society organizations fit into the ED index? The US has a large civil society and high poverty rates

  4. Brexit could go either way depending on the leaders in charge. If the EU wasnt such neoliberal authoritarians then i would be against Brexit. If the EU were as Thatcher said, socialism through the back door, then remain would be the best choice

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