I live in a democracy but I spend half my life in a tyranny. Go figure

Review of The Return of the Public by Dan Hind

Part Three 

In 1970 the US-based Czech economist Jaroslav Vanek said, “One of the main reasons why the western world is so schizophrenic is that we have political democracy and economic autocracy.”

As the ‘great recession’ which began in 2007 unfolds, the schizophrenia engendered by economic autocracy is not only producing strange hallucinations but endangering the life of the subject.

Hind unmistakably echoes US economist Richard Wolff in locating the germ of the crisis in the way corporations are organised. Corporations, the source of financial survival for most people, are run as autocracies. Corporate boards of directors receive the profits from the work of millions of people who rent their time and effort. A small elite decides what to do with this huge amount of money. In political terms, corporations are tyrannies.

And corporations - private tyrannies - were responsible for the downturn that began in 2007

In the US, where the crisis started, corporations were basking in a 30 year profits bonanza as the influence of trade unions, the only check on their power to do as they pleased, declined. The result was stagnating wages for the majority, while productivity raced ahead. The reaction to this change took the form of a huge increase in borrowing. People borrowed from the banks, the very organisations who received the increased profits, in the form of deposits, from corporations. The banks then tried to make more money by lending, as banks do.

Eventually, the circle could not be squared. The need for ever-increasing consumption could no longer be met by substituting historically unprecedented borrowing for stagnating demand. Reality – the reality of stagnating wages – eventually caught up with the prevailing delusions and crisis ensued.

It is a crisis fomented by the dominance of corporations. There is, in the words of Oscar Wilde, only one thing worse than not getting what you want, and that is getting it.

Not just the crisis, but many of the related ills besetting us today, would evaporate says Hind (with Wolff nodding in the background) if corporations were organised differently: If they were run, not by their boards of directors, but by the workforce as a whole.

“It is likely that they [the workers] will prevent managers from behaving in ways that jeopardize their own livelihoods,” says Hind. “Asset stripping, ill-considered mergers and takeovers, and financial engineering will all become less attractive in companies where the overriding preoccupation is with maintaining stable and rewarding conditions of employment.”

Worker-run companies would not seek tax havens abroad, says Hind, because their workers are also taxpayers in their own countries and have no desire to rip themselves off. These companies would not gleefully outsource functions overseas because they are not just interested in securing the cheapest price for labour, but the best working conditions for workforce: for themselves.

At its simplest level, the case for economic democracy is that you don’t normally shoot yourself in the foot. Unless you’re mad or a very bad shot. Or have read a lot of Milton Friedman.

The fundamental cause of the economic crisis was not that the fortunes of investment banking were inextricably linked with those of retail banking, but that the small elite running the economy have interests different from, and in conflict with, the interests of the vast majority of the population. Until that basic conflict at the heart of the economy is dealt with, crisis will always haunt us.

Imagine, says Richard Wolff, that for the last 40 years we had lived in an economic democracy. Worker self-directors would not have stopped real wages rising in the 1970s. It “made sense for capitalist boards of directors to enrich themselves and their shareholders [through stagnating wages and thus soaring profits] but it would not have made sense for worker self-directors,” he says.

A subterranean interest in economic democracy has developed that remains invisible to the political mainstream. Apart from Dan Hind and Richard Wolff, the authors of The Spirit Level, Kate Pickett and Richard Wilkinson, have embraced worker ownership as the only solution to mushrooming economic inequality. Human rights campaigner Peter Tatchell and occasional Labour party adviser Maurice Glasman, have both advocated the German model of co-determination, where all enterprises with 50 or more employees would have to share control between management and the workforce.

These thinkers, to their credit, accept that a real answer to the economic impasse we face has to delve far deeper than the cosmetic solutions offered by politicians. The needs of the 1 per cent can’t continue to override the needs of the 99 per cent. But they do, as this blog has suggested before, present half an argument.

Full employment is now a chimera, both in the sense of what society actually needs, and in the sense of the number of employees that enterprises, worker-controlled or otherwise, require. “No matter how hard we try, the current economic system needs fewer and fewer of us,” Hind says. Another economic system will have different aims, but it won’t magically create permanent paid employment for everyone.

It’s also the case that to turn enterprises into cooperatives, and that is essentially what we are talking about here, will not automatically ensure that the needs of society, of the public in general, are met. These cooperatives could well be just as competitive, seeking to benefit solely their own employees, as conventional capitalist businesses. The limits as well as the virtues (and there are many) of syndicalism, workers running their own enterprises, have been scrutinised before, in reflections going back as far as the drawbacks of worker control during the Spanish Civil War of the late 1930s. In contemporary society, a pertinent criticism of Conservative attempts to make public sector worker form cooperatives, aside from the jaw-dropping irony, is how would the needs of the users of public services, be represented?

Caveats to economic democracy have been expressed by another economist who has been reviewed in this blog, Harry Shutt. Hind echoes Shutt’s proposal on how to ensure that enterprises don’t stray from the public interest.

Shutt, too, wants a “more functional and publicly acceptable pattern of enterprise organisation”. But he does not advocate economic democracy. Instead he says that companies should only benefit from state-granted limited liability if the community is represented on their board or they are run on a non-profit basis.

Limited liability means that investors can lose only the amount they invest in a company, no matter what wrongdoing it is guilty of. This artificial limit, for free market aficionados granted by the state, does not apply in ordinary life.

“A man who causes harm in the course of his work can be sued for the full cost of that harm to the point of personal ruin,” Hind points out. “A man who own shares in a company that causes the same harm risks only his original investment.” Adam Smith, the 18th century Scottish thinker who inspires a lot of today’s free marketeers, was against limited liability.

Hind’s idea is that the privilege of limited liability should be reserved for companies controlled by their workforce. For all other companies, the behavioural check of unlimited liability would apply.

Without limited liability, for example, banks would not have been so keen to sell sub-prime mortgages, package those same mortgages into investments that they did not own, and then rely on the taxpayer to cough up £1.5 trillion to save them when everything went wrong. The externalising impulse of all corporations – we just want the profits and the subsidies, the problems we cause aren’t our responsibility – would be impossible without limited liability.

“There can be no principled objections to reforms that inculcate a proper prudence into the actions of large commercial concerns,” says Hind.

The adoption of unlimited liability, or in other words ethical responsibility, would make profit harder to contrive. It might lead in time to a more rational economic system.

In Hind’s system, the carrot of limited liability would still be on offer – as a way of inducing companies to change in ways which gave overall control to their workforce.

The reason is that without economic democracy, political democracy is denuded of meaning. The current system of corporate ownership means that senior managers have the resources to control the political process and the world of ideas. Recent UK and US history is inexplicable without understanding this dominance, and the concomitant political passivity of most people.

 We are not really schizophrenic, as Jaroslav Vanek described us in the 1970. Now economic autocracy has hollowed out political democracy.

But, says Hind, if enterprises are democratised, they not only cease to be so toxic to the humans that inhabit them, they will also transform the remnants of political democracy. “Instead of providing funds with which owners and senior managers can intimidate their employees and dominate the political process, enterprises instead become schools for deliberation on matters of general concern.”

If the last 30 years have been dominated by the attempt to remake the public sector in the image of the private sector, now the political imagination has to turn around. In its sights will be banks, pharmaceutical companies, private equity funds, hedge funds, the basic architecture of the misnamed “private” sector. Now it’s your turn.

“He who wants bread is his servant that will feed him.” What does freedom really mean?

Review of The Return of the Public by Dan Hind

Part Two 

On the day of his execution during the English Civil War, King Charles I expressed his essential political philosophy. Freedom, he said, consists of the state protecting life and property. It is nothing to do with anything so presumptuous as everybody having a share in government.

Of course Charles was separated from his head a few hours later. But his idea of liberty has proved remarkably durable and explains the pseudo-democracies in which we live and which have delivered us into crisis – economic, ecological and political.

Absolute monarchy in England died with Charles I. After the restoration of the monarchy power was shared, but it was shared with a very small group of people. The aristocracy, property-owners and the rich had the right to participate in government. They attained “public” status. Everyone else just had to do what they were told. The eighteenth century novelist Henry Fielding said that everybody was a nobody in Great Britain, apart from 1,200 people.

The intervening centuries have seen the expansion of the right to vote to everyone. Theoretically we are all equal and have equal power. But public status and the right to real participation is still jealously guarded. In Britain and the US, “the investing classes” Hind notes, “usually described in abstract terms as ‘the market’ or ‘market forces’, constitute “the effectual public in both countries”. A group of just a few thousand people control $100 trillion, two-thirds of the world’s total assets. Almost everybody, as Henry Fielding said almost three centuries ago, is still a nobody politically, despite universal enfranchisement.

We should be a public, but we are still just an audience.

A concept of liberty forged in the mid-twentieth century has given its blessing to this situation and, more importantly, persuaded a lot of people that any deviation will lead to humanitarian disaster. And it is an idea of what freedom is that has a lot in common with what Charles I said before he was escorted to the scaffold.

It was the philosopher Isaiah Berlin who said there were two contrasting ideas of liberty, positive and negative. Positive liberty is the liberty of the French Revolution and the Bolsheviks. A group of people constituting a party or the state decide they know what freedom is and how humanity must get there. Because they know, other people can be ‘forced to be free’. And if they disagree, they can be guiltlessly exterminated, for the good of all. Positive freedom leads inexorably to the gulag.

Here is a description of the two ideas of liberty by the documentary maker Adam Curtis

Negative liberty, the kind of liberty Berlin believed in, was by contrast necessarily limited. Freedom was achieved when people or institutions were “left unmolested” to do what they chose to do. It is this idea of liberty – which traces its lineage back to Thomas Hobbes and the soon to be headless Charles I – that has proved incredibly influential in recent decades. The crimes of Communism have taught an unavoidable lesson and we will have to put up with injustice if we want to be free.

But this concept of negative liberty – leaving private institutions unmolested – has delivered us into seemingly unending economic crisis. And left us powerless to get out.

Berlin’s concept of negative liberty has been described as the classic English interpretation of liberty. But, as Hind shows, that is false in more than one way. The choice Berlin presented was false. We don’t have to decide between Joseph Stalin and Milton Friedman. And there was another English interpretation of liberty, created at the same time as Charles I was insisting we should always remain subjects, that was neither about positive or negative liberty.

During the English Civil War, an English republican, James Harrington wrote a book called The Commonwealth of Oceana. Freedom was only achieved, he argued, when citizens determined government policy. If citizens do not hold power they are not free. Any other form of government was a condition of dependence.

In words of another English republican of the time, Algernon Sidney: “Liberty solely consists in an independency upon the will of another”.

This belief that economic independence was the fountainhead of political liberty meant that Harrington supported “equality of estate”. He believed in widespread land ownership – England was an agrarian country then – that everyone should be their own landlord. As Harrington pithily summarised the situation. “He who wants bread is his servant that will feed him”.

Note that the belief that economic independence is a precondition of freedom and that freedom must mean participation has nothing to do with the positive liberty of Isaiah Berlin’s nightmares. It does not mean the abolition of power – that is impossible – but it does mean that power should be dispersed and not held by a political elite – a Communist party for example – who can coerce others into the utopia or dystopia they desire.

We all still want and need bread, and are thus, as English republicans like Harrington would see, in a state of economic dependence and unfreedom. We not only fear sudden dispossession – losing our jobs – but are captured by the hope of advancement. It is not just that we live in a state of constant precariousness and fear of poverty. We are driven, as Hind puts it, “to alter our conduct and speech, even our beliefs, in order to obtain advantage. Even our desire for independence drives us into an ever more slavishly dependent cast of mind.”

While this material dependence remains people cannot “assert themselves fearlessly as citizens” “A citizen who fears she may lose her livelihood if she speaks out is not meaningfully free,” says Hind, “unless she is a hero or a fool”.

There is a near perfect correlation between career advancement and acceptance of the status quo. Because most of us want career advancement, we don’t stray into areas that will upset our employers. As a result, says Hind, “the individual is left alone in a horribly uneven struggle”.

Hind is inspired by this English Republican notion – dating back to the 17^th century – that freedom means material independence. We shall examine in the third and final part of this review how Hind thinks this need should be expressed now, through economic democracy. But he thinks that material independence has to be buttressed by accurate information. The first step towards changing the world, is understanding it.

This where the idea of public commissioning, discussed in Part One, comes in. “It is difficult to get a man to understand something when his job depends on not understanding it,” said the American novelist Upton Sinclair in the 1920s. So we must start to understand the world outside our own jobs and the private institutions that mediate the information we receive. We must start to reason independently, in a Kantian sense. Enlightenment, said Kant, was only possible when we are able to reason and communicate outside of private institutions.

Currently the population is only audible when they echo governing assumptions. In the US, for example, 53 per cent of Republican voters are in favour of higher taxes on the rich. But Republican senators recently succeeded in voting down a $60 billion Democrat jobs programme because it involved a 0.7 per cent tax increase on people with incomes above $1 million.  On that issue, Republican voters are politically silent. Or just plain irrelevant.

In Britain the story is eerily similar. Conservatives and their friends in the City of London are aching to abolish the 50 per cent tax rate on people earning over £150,000. But Conservative voters – let alone everybody else – want to keep it.

Hind’s idea is that £80 million a year in Britain should be controlled by the population through a system of participatory commissioning. The population, on the way in Hind’s terms towards becoming a public, would decide what subjects to investigate and how they would be publicised. The money would be enough to employ 3,000 journalists and researchers, 250 full-time investigative journalists in each region or devolved nation.

Here is Hind taking about public commissioning

Publicity, how the world is understood, would no longer be in the sole discretion of professional editors and private owners.

It will immediately be objected that the population, given a chance to indulge its wishes in an undirected way, would choose reactionary subjects to investigate. Or, at best, an incoherent mess of reactionary and progressive policies. Capital punishment, for example, has long had wider support among the general public in Britain than among politicians. 125,000 Britons have recently signed an e-petition on the government’s Downing Street website calling for cheaper petrol and diesel. A 2010 e-petition advocating taking climate change seriously and investing in renewable energy, by contrast, attracted just 11 signatures. 

There is a sense in which a participatory Left now should echo Tyler Durden in Fight Club: “let the cards fall where they may”. Reality is bad and getting worse so something has to shift. But it’s also true that a real revelation of the way the world is, can only benefit the anti-capitalist Left. The current order of things depends, as Hind says, on “accepting the comforts of a hallucinatory system of descriptions”.

As an example consider the way disabled and ill people in Britain has are now often branded as “scroungers” and benefit “cheats”. According to polls there has been a substantial increase in the number of disabled people suffering abuse and aggression. Focus groups have uncovered the regular assertion that seven out of ten disabled claimants are faking it.

But these views, vindictive and horrible as they are, also come from somewhere. “Participants justified these claims by reference to articles they had read in newspapers”, says a Glasgow Media Group study of the focus group results. The same study discovered a near tripling of words such as cheats, skivers and scroungers in newspapers. But the fact is that levels of fraud for disability benefits are just 0.5 per cent.

If this subject were investigated through Hind’s system of public commissioning, these fact, as opposed to the distortions perpetuated by the Daily Express, couldn’t help but be exposed. It is a question of shining a light, and if the alternative media can never reach enough people to do so, an alternative has to be found.

Popular resentment of benefit “scroungers” and “cheats” is real enough as many people can testify. But it depends, in the absence of effective scrutiny, on believing that the main problem is the transfer of wealth from the working majority to the poor, rather than on siphoning wealth from most people to insider companies.

Hind quotes Thomas Jefferson – and it should be the motto of a participatory Left today - “there is not a truth existing which I fear, or would wish unknown to the whole world.”

Public commissioning, as Hind concedes, might appear a modest step, dwarfed by the scale of the challenges facing us. But a well-informed citizenry is a precondition for changing the world, a necessary though not sufficient condition as Marxists used to say. As Machiavelli said, without approval, “one change always leaves a toothing stone for the next”.

In Hind’s opinion, as publicity changes so too will general opinion. And when opinion changes, so does the scope of the political, and the idea of what is open to change.

What can this lead? You can’t prejudge democracy but just as the last three decades of neoliberalism have involved remaking the state in the image of business, Hind believes that as neoliberalism implodes, it is not the public but the private sector that needs reforming. And, as we shall see in the third and final part of this review, this involves ending the economic dictatorship in which we exist.