Economic democracy: one shareholder, one vote?

I’ve recently finished reading Wilf Wilde’s book Crossing the River of Fire: Mark’s Gospel and Global Capitalism, a book which – as the subtitle suggests – combines Christian theology with socialist politics/economics.

For a very brief summary of the theological perspective, see this post on my Tumblr. What I wanted to look at in this post is Wilde’s one practical proposal (in this book, at least) for reforming capitalism in Britain: changing the voting structures of existing capitalist corporations to a “one person, one vote” system, similar to that for parliamentary elections. (Though the more precise description that Wilde uses is “one beneficial owner, one vote”.)

As Wilde writes:

The proposal on capital may not sound much of a reform but it is designed to attack and subvert the legitimacy of capital and capitalist thinking. To fully implement it would destroy the concepts lying behind capital’s power over us.

He argues that, until the 1880s, the concept of using one person, one vote to elect MPs “appeared silly”:

Surely those with more property – with a greater stake in society – should have more say. …

Most of the working class and all women were still disenfranchised in Britain until 1918. So, what appears an obvious principle to us now was revolutionary until 1918…

By contrast, capitalist corporations are still run on principles pre-dating the 1832 Reform Act: the more you own, the more of a say you have.

Under Wilde’s proposals, investors in companies would still be able to buy greater or smaller stakes in companies, and thus enjoy greater or smaller gains or losses in their investments. What they would not be able to buy is greater power over those companies: any individual could buy a single share in that company and get the same voting power in it.

The only reasons for buying more than one share would be financial: to get a greater return. So pension funds (who invest primarily for a financial return rather than for control) would be affected less than someone like Rupert Murdoch.

In effect, this would turn every corporation into a mutual. We would still have a market economy (which has a number of beneficial features), but control of the surplus accumulation within that economy would no longer be concentrated in the hands of a few large corporations – or, for that matter, of “a board with a lord”, as happened under nationalisation. Rather:

the mutual corporation would … re-create a new social and democratic control form within civil society.

It’s hard to see how this could be implemented – as Wilde admits, it would go beyond “the limits of existing politics” – but the real question I’d like to pose to those reading this post is how workable it would be. What do you see as the potential pitfalls and problems with this as a concept?

A couple of thoughts I’ve had. First, there would clearly need to be similar safeguards for shareholder voting as apply to voting in parliamentary and local elections – to avoid institutional shareholders simply hoovering up individual’s votes as a block.

Second, Wilde’s proposal seems focused on the largest corporations (FTSE 100 level) where shares are more likely to be owned as an investment than as a means of direct control. But in smaller companies, the control afforded by different sizes of shareholding is often at least as important as the financial value of those shares. Smaller companies could find it hard to secure investment if investors were no longer assured of using their voting power as shareholders to protect their investment.

That said, however, this is still an intriguing proposal for economic democracy – and perhaps Wilde is right in saying that it only seems alien and dangerous to us in the same way (and for the same reasons) that political democracy seemed alien and dangerous in the days of male-landowner suffrage.

So, what do other people think of this?

Monbiot vs Marx

George Monbiot’s last two Guardian columns have been on a similar theme, as summarised in today’s piece:

[T]he government is not managing the economy for the people of this nation. It is managing it for a tiny transnational elite, a kind of global gated community. … The politicians who get to the top in these circumstances don’t just present no threat to the gated community; they actively do its bidding.

Or as he put it last week, concerning changes in corporation taxes to benefit transnational corporations:

I’ve realised that injustice of the kind described in this column is not a perversion of the system; it is the system. … Our ministers are not public servants. They work for the people who fund their parties, run the banks and own the newspapers, insulating them from democratic challenge.

I think Monbiot is right to shift the focus from “abuses” or “failures” of the economic system (language which implies that the system itself is fundamentally just and sound, or would be if properly regulated) to the inherent injustices of the system itself.  However, his rhetoric has some significant dangers in it, because it personalises what are really matters of social relations, impersonal economic forces.

Monbiot presents capitalism as a system in which a wicked “transnational elite” deliberately and maliciously sets out to oppress the rest of us. That’s an analysis which can lead as easily to fascism as to the liberal/democratic/socialist agenda which Monbiot would presumably support. “Transnational elite” is uncomfortably close to “international financiers” – and we all know what that was code for back in the last century. (Hint: try googling “transnational elite” and “zionist”. And then wash your hands.)

Blaming the individual beneficiaries of the economic system – indeed, encouraging us to hate them, the exploitative, gated-community-dwelling, political-system-perverting, Tory-party-financing bastards – is a dangerous path. As a great philosopher put it:

Beware the dark side. Anger, fear, aggression. The dark side of the Force are they. Easily they flow, quick to join you in a fight. If once you start down the dark path, forever will it dominate your destiny. Consume you it will…

What’s needed is not populist rhetoric about the “global gated community”, but a greater awareness of how economic power operates, regardless of the personalities who operate it or benefit from it. Perhaps someone could suggest Monbiot adds some Marx to his reading list?

Capital flow and the professions

In my previous post I looked at how David Harvey (in his book The Enigma of Capital) argues that capital needs to find new areas in which to expand in order to:

• absorb accumulated capital surpluses; and
• maintain compound growth in capital accumulation.

One means by which this can occur is through deregulation. This opens up previously-restricted areas for increased capital expansion in several ways: through increasing competition, through removing restrictions on external capital investment, and so on.

This process can currently be seen at work in the legal profession in the UK. Until now, solicitors have been prohibited from sharing their profits with non-lawyers. This has prevented solicitors from entering into partnership with other professionals (such as accountants) or accepting external capital investment. Non-lawyers have been unable to employ solicitors to provide legal services.

All this is now changing with the (gradual) implementation of the Legal Services Act 2007. This will allow solicitors to enter into partnership with other professionals and to accept external investment, and will allow non-lawyers to employ solicitors to provide legal services, albeit still subject to extensive regulation.

While the effects of this remain to be seen, there is broad consensus over certain likely effects. In particular, two predictions frequently made (though not to unanimous support) are as follows:

• Small high-street law firms are seen as being under severe threat. Many will end up being driven out of business by new commercial providers (“Tesco Law”). Many of those that survive may end up in “Specsavers”-style franchise operations, of which an outfit like Quality Solicitors may be a nascent form.
• Many larger firms are expected to seek external investment, or even to float on AIM or the Stock Exchange.

In each case, this is likely to lead to a major cultural change for lawyers. In particular, many senior lawyers will cease to be “capitalists” – partners owning a significant share of the business and having a say in how it is run – and become employees.

Many who today would be sole practitioners or in small partnerships will end up employed by “Tesco Law” or the Co-op instead, just as high-street butchers have ended up working behind supermarket meat counters. In the large firms, most of those who today would be partners will remain employees, albeit very well-remunerated ones in many cases. Even if they own shares in the plc that has replaced their LLP, that will be more in the nature of an employee benefit than a genuine stake in owning and running the business.

In short, a higher proportion of lawyers will be “labour” and a lower proportion will be “capital” (and those who remain capitalists will have diminished power next to their external investors). It’s no exaggeration to describe this as a proletarianisation of the legal profession – provided we expunge from our minds all associations of the term “proletariat” with manual labour, flat caps and horny-handed sons of toil, and focus instead on the technical meaning of “those who sell their labour to capitalists” (which therefore includes many whom we would regard as “middle class”).

Perhaps the result won’t be quite as extreme as I’ve described it here – though the stockbroking partnerships of “the old City” were no doubt as confident of their continuing existence in 1986 as most law firms are today. But the basic point will remain the same: external capital will have new avenues (however closely-regulated) in which to absorb surpluses and pursue compound growth. And the law will complete its transition from being a profession (with a slightly sniffy approach at times towards the whole grubby business of “trade”) to being a business. (Not in all respects a bad thing: it’s not as if the legal profession of old was a by-word for great customer service. But still a significant change.)

As Marx and Engels put it back in 1848:

The bourgeoisie has stripped of its halo every occupation hitherto honoured and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage labourers.

Money in search of money: a “capital eye’s view”

We live in a capitalist society, but what is capital and how does it work? How can we understand its effects in remodelling and transforming society? I’m currently reading David Harvey’s The Enigma of Capital, which aims to answer these questions.

Prof Harvey defines capital as follows:

Capital is not a thing but a process in which money is perpetually sent in search of more money.

The aim of his book is to improve our understanding of this process of capital flow, “the lifeblood that flows through the body politic of those societies we call capitalist”. To put it another way, it’s a “capital’s eye view” of economic processes, showing how many social and political phenomena can be understood from the perspective of capital flow and accumulation.

Two key points which Harvey reiterates throughout his book are:

• Capital creates a problem of capital surplus absorption: in other words, capital is accumulated that needs somewhere to go, something to do with it, somewhere to reinvest it.
• A healthy capitalist economy requires endless capital accumulation at a compound rate of three per cent. Why? A number of reasons, but partly because a capitalist whose enterprise ceases to grow is unlikely to remain a capitalist: they will be overtaken and eventually driven out of business (or bought out) by their competitors. A pension fund whose assets fail to grow will go out of business. Similarly a capitalist country that ceases to grow will be left behind and ultimately exploited by its competitors.

These imperatives of capital surplus absorption and compound growth at a rate of three per cent are what drive both the creativity and destructiveness of capitalism, its relentless expansion into new areas of life and human activity. Capitalism requires continuous compound growth at 3 per cent in order to survive (like the proverbial shark that cannot stop swimming), and builds up surpluses that require reinvestment. Together these factors operate to turn what were previously absolute limits for capital into barriers that must be, and soon enough are, overcome.

This then explains many of the economic and political developments of the last few decades, as capital finds new areas in which to expand: through investment in what were previously state-operated areas of activity (privatisation of state enterprises, PFI projects), through the expansion of financial markets, through deregulation, and perhaps most significantly through the transformation of economies such as China’s.

What I’m finding illuminating about Prof Harvey’s thesis is this. We tend to see capital’s role as one of responding to other needs or desires: a family need a mortgage to buy a home, an entrepreneur needs venture capital for her start-up company, a government wants to build a new hospital without raising the money in advance through taxation, and so on. The role of capital is then perfectly symbolised by the “Dragons” in Dragon’s Den: intimidating, critical but ultimately benevolent, at least to those of their supplicants who show they have “the right stuff”.

Prof Harvey turns this on its head, however: it is capital whose needs are primary. Capital needs somewhere to flow, in order to use up surpluses and maintain compound growth.

This then helps us understand the pressures to open up new areas to private investment and commercial activity. As has been pointed out, while many of the new government’s “reforms” – such as to education and the NHS – may keep services nominally in the public sector, “free at the point of use” and so on, in practice the newly “freed” schools and GPs will find themselves dependent on private-sector providers to provide services previously carried out by local education authorities and primary care trusts.

Other actions are more nakedly a transfer to private capital, for example the abolition of the Audit Commission, whose auditing functions are likely to end up being carried out (at higher cost) by accountancy firms.

This “capital’s eye view” also helps provide a different perspective on many areas of deregulation, particularly in the professions. I’ll come to this in my next post.

The crises of capitalism, animated

This is fascinating. An animated illustration of a talk by David Harvey explaining the post-2007 financial meltdown in Marxist terms. To summarise: when Mervyn King refers to “systemic risk”, what he means is “the internal contradictions of capital accumulation”, comrade.

Even if you’re not in the market for a Marxist explanation for the crisis, this is still an exhilarating ten-minute ride, and as a critique a lot of it rings true. For example:

• the promotion of home ownership in the US and UK as a means of discouraging debt-laden employees from going on strike;
• the declining proportion of national income paid out in wages since the 1970s – a decline which is then compensated for by increasing consumer debt;
• the suggestion that capitalism never resolves its crises: it just moves them around geographically (so that the resolution of a financial crisis in the US contributes to a sovereign debt crisis in Europe);
• the systematic favouring of the City over industry in the UK since the 1950s, under both the Conservatives and Labour, and the damage caused to our economy as a result.

You can also download the finished illustration for the princely sum of 59p from its creators, Cognitive Media.

Žižek: ideologies only win when they lose

I’ve been reading a little bit by/about Slavoj Žižek over the past few days, and find him an intriguing figure, if also an infuriating and incomprehensible one at (quite a lot of) times.

One interesting argument I wanted to share from his essay Mao Zedong: the Marxist Lord of Misrule, though, is his suggestion that an ideology can only flourish in the face of opposition, and only triumph in its apparent defeat. As he puts it:

The true victory (the true “negation of negation”) occurs when the enemy talks your language. In this sense, a true victory is a victory in defeat: it occurs when one’s specific message is accepted as a universal ground, even by the enemy.

Žižek gives two examples of this (three, if you include his parenthetical remark that “the true victory of science [over religion] takes place when the church starts to defend itself in the language of science”). The first is New Labour’s role in confirming the permanance of the “Thatcher revolution” in the UK:

The Thatcher revolution was in itself chaotic, impulsive, marked by unpredictable contingencies, and it was only the “Third Way” Blairite government who was able to institutionalize it, to stabilize it into new institutional forms, or, to put it in Hegelese, to raise (what first appeared as) a contingency, a historical accident, into necessity. In this sense, Blair repeated Thatcherism, elevating it into a concept, in the same way that, for Hegel, Augustus repeated Caesar, transforming-sublating a (contingent) personal name into a concept, a title.

Thatcher was not a Thatcherite, she was just herself – it was only Blair (more than John Major) who truly formed Thatcherism as a notion. The dialectical irony of history is that only a (nominal) ideologico-political enemy can do this to you, can elevate you into a concept – the empirical instigator has to be knocked off (Julius Caesar had to be murdered, Thatcher had to be ignominously deposed).

A similar lesson can be drawn from the Communist Party’s introduction of capitalism to China over the past thirty years, so that the truly revolutionary force in China today is capitalism, with its “breath-taking dynamics of self-enhancing productivity” in which “all things solid melt into thin air”. In the Marxist view, this revolutionary dynamism is an ultimately futile attempt to escape the contradictions of capitalism, and Žižek continues:

Marx’s fundamental mistake was here to conclude, from these insights, that a new, higher social order (Communism) is possible, an order that would not only maintain, but even raise to a higher degree and effectively fully release the potential of the self-increasing spiral of productivity which, in capitalism, on account of its inherent obstacle/contradiction, is again and again thwarted by socially destructive economic crises.

In short, what Marx overlooked is that, to put it in the standard Derridean terms, this inherent obstacle/antagonism as the “condition of impossibility” of the full deployment of the productive forces is simultaneously its “condition of possibility”: if we abolish the obstacle, the inherent contradiction of capitalism, we do not get the fully unleashed drive to productivity finally delivered of its impediment, but we lose precisely this productivity that seemed to be generated and simultaneously thwarted by capitalism – if we take away the obstacle, the very potential thwarted by this obstacle dissipates…

In other words, the economic stagnation seen in Communist countries – and, by the 1970s, in countries following the social democratic/Keynesian policies that were swept away by Thatcherism – were the paradoxical result of the apparent removal of an obstacle having the effect of removing the potential which it had appeared to thwart.

But those who long for fully free and unleashed capitalism, released from the remaining constraints of regulation and social provision should be aware that the same principle may apply in both directions:

[I]t is as if this logic of “obstacle as a positive condition” which underlied the failure of the socialist attempts to overcome capitalism, is now returning with a vengeance in capitalism itself: capitalism can fully thrive not in the unencumbered reign of the market, but only when an obstacle (the minimal Welfare State interventions, up to the direct political rule of the Communist Party, as is the case in China) constraints its unimpeded reign.

Turbo-capitalism’s autumn of discontent

Michael Tomasky opens his latest column (on the opportunity that the economic crisis presents for Barack Obama) as follows:

The basic identities of America’s two political parties have been in place for at least 40 years and, on core economic questions, for 70, since Franklin Roosevelt’s time. Whatever so-called “low-information voters” do or don’t know about politics, they know that the Democrats are the party of working people, and the Republicans are the party of the rich.

It doesn’t end up being as positive for the Democrats as that formulation makes it sound. Since the 1980s, Republicans have been successful in shifting public opinion among America’s middle-class more towards the view that their economic fate is tied up with rich people’s. In addition, a weak union movement – just one in 14 private-sector workers is a union member today – means that class consciousness exists only on the margins.

It’s the highlighted sentence that I found particularly perceptive.The same shift has happened in the UK over the same period, of course, though to a lesser extent than in the US.

But as Larry Elliott points out in an analysis of the likely effect of this week’s events on future economic policy, the British middle classes are increasingly waking up to the idea that their interests may not, after all, be perfectly aligned with those of the rich:

One headline screamed “Don’t let the spivs destroy Britain” – not Socialist Worker, but the Daily Express. For Middle Britain, the traders who bragged about £1,000 bottles of Krug are now as loathed as the bolshie shop stewards of the 1970s. Only rarely is there a palpable public mood swing in Britain; the Winter of Discontent was one; this is another.

Elliott also argues that “having cosied up to the City for more than a decade, the prime minister has belatedly rediscovered his party’s social democratic roots”:

Labour, it seems, no longer believes that the market is king. It no longer assumes that the “masters of the universe” have all the answers. For the first time in living memory it has ceased cringeing and sent out the message that finance should be the servant of the people and not vice versa.

Well, maybe. But in any event, I thought Gordon Brown’s Guardian piece today was another step in the right direction, landing one particularly effective blow on the Tories:

Last year [the Conservatives’] even proposed to abolish mortgage regulations, saying the banks should be left to their own devices and simply “nudged” to act responsibly. You cannot “nudge” your way through a financial crisis.

Until this week, the Tories’ talk of “nudging” and so on could seem like a refreshing new perspective on how government can act in a low-key way to alter people’s behaviour. Now it looks lightweight and dilettantish – a mask for what Brown describes as “the Conservatives’ instinct … for government to walk away rather than intervene”.

Where now for capitalism?

Interesting selection of viewpoints on the BBC website from various talking-heads, in response to the question “Where now for capitalism?”

Noam Chomsky (who I don’t always see eye-to-eye with) nails it:

The unprecedented intervention of the Fed may be justified or not in narrow terms, but it reveals, once again, the profoundly undemocratic character of state capitalist institutions, designed in large measure to socialise cost and risk and privatize profit, without a public voice.

That’s exactly what we see happening in the financial sector at the moment: after years of huge private profit, it’s the taxpayer who is called upon to bear the losses.

And as Chomsky goes on to point out, this is not unique to the financial markets:

The advanced economy as a whole relies heavily on the dynamic state sector, with much the same consequences with regard to risk, cost, profit, and decisions, crucial features of the economy and political system.