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?

Selfishness and socialism

Excellent post by Chris Dillow giving some home truths to the left on the major obstacle confronting it. As he puts it (after quoting Socrates in his support):

…a just society requires a just people. Which we don’t have.

Or to be more specific:

The brute fact is that there is no public demand for liberal socialist policies. Voters don’t want worker ownership, a citizens’ basic income, a liberal immigration policy, steeper inheritance taxes or many other items on the left’s wish list. I’ll grant that there is some demand for higher taxes on the rich, but I fear this is arises less from socialist ideals than from the same motive as hostility towards paedophiles and immigrants – a hatred of people who are different.

Of course, some reading this will disagree vehemently that Dillow’s “wish list” would represent a “just society”, but his point still stands: it’s impossible to build a society like that unless the people in it want a society like that. And, by and large, people in western societies don’t want a society like that.

As Dillow goes on to point out, it’s no use telling people that they are stupid and blinded by the capitalist media, either. So if we want to build “a significantly better world” from “the crooked timber of our own humanity”, how can we go about it? As Dillow asks:

are there any social institutions which can use people’s imperfections – their selfishness, greed and stupidity – for beneficial purposes?

Because that’s what’s needed. And the answer is not a comfortable one for the left:

[H]erein lies yet another embarrassment for much of the left. There is indeed one such institution. It’s called the market. The left – so far – has not found anything to match it.

This is similar to the late G.A. Cohen’s argument, in his book Why Not Socialism?, that socialism is unachievable (at least at present) because of the lack of mechanisms as effective as the market – though Cohen sought mechanisms that would harness people’s instincts for community and altruism rather than (as does the market) harnessing their selfish desires for public benefits.

“The kindness of social justice”

Very impressed by this speech by Jon Cruddas. He describes his political hero when growing up as not Aneurin Bevan or Barbara Castle, but Oscar Romero, and he summarises Romero’s message as “kindness… the kindness of social justice”. That’s really what I’ve taken away from Cohen over the past few days.

A particularly striking passage from Cruddas’ speech:

Labour has lost its language of kindness, of generosity, of community, as it’s lost touch with the enduring character of this country. Britain’s culture has never been socialist in the specific ideological sense, but it has always exhibited a strong attachment to an ethic of fairness and solidarity.

The spirit of these words reminded me of the following from Tony Benn’s diary for Sunday 25 January 2004:

I put to him [Tommy Sheridan] that my object wasn’t to cram socialism down everybody’s throat, but to develop policies that honestly looked after old people and young people and sick people and unemployed people, that worked for peace and justice and democracy. For me, socialism was useful, but it wasn’t ideological lecturing.

Yes, that’s it.

I don’t know if Dr Cruddas is the right person to be Labour leader – perhaps a bit too cerebral, too professorial? – but Labour urgently needs a sane and compelling philosophy to guide it, a new ethic, and what Cruddas describes in this speech has to have a strong claim to forming the outline of this. Cruddas as Labour’s new philosopher king? I hope he stands, though, and I’m certainly going to be keeping an eye on him.

Socialism as moral challenge

Interesting review of G.A. Cohen’s Why Not Socialism?, which clarifies some of the points raised in the discussions about his book on recent posts here, in particular as regards (a) the feasibility of socialism and (b) the question of coercion.

For Cohen, the “two core principles of socialism” are “radical equality of opportunity and community”. Given that (as his camping trip example shows) these ideals “are not inherently unattractive”, at least on a small-group level, why is it that “they are currently undesirable on a societal level”?

Cohen sees this as a “technological” problem, stemming from the lack of appropriate mechanisms (equivalent to capitalism’s market mechanisms) to implement socialist principles within society. As the reviewer puts it:

Capitalism, a social technology which harnesses selfish desires to public benefits, is at present unrivalled as the organising spirit of our society. Socialism in Cohen’s sense, where citizens’ interactions are guided by their preference for community over inequality, remains technologically infeasible, for we do not understand how to orchestrate mass interaction and mutual dependence through the more elegant engine of altruism.

Hence socialism is like “one of Da Vinci’s inventions: a vision for a splendid contraption which cannot be constructed for lack of tools”.

Since no such tools currently exist, and no effective mechanisms have been found to “orchestrate mass interaction and mutual dependence” through altruism rather than self-interest, what are we to do in the meantime? Key to Cohen’s position is the moral challenge for individuals to behave in a way that promotes equality, community and care for others. For him, equality is not “an ideal to be achieved in the abstract” but rather “a practical principle to preside over everyday actions as a matter of conscience”. In particular, socialism is not something that can be achieved by force, coercion or central control:

Cohen’s vision is of justice as a mode of interaction between citizens rather than a state-fashioned framework against which we can act as we please – socialism cannot be delegated to the state, in the way that liberal democracy involves delegating politics to politicians. Even with the appropriate social technology, Cohen’s socialism can exist only if enough of us believe in it, and act on this belief.

In conclusion, Cohen’s socialism can be seen as a humanist version of “love your neighbour as yourself”, and of humility regarding one’s own privileges:

Though certainty of state socialism’s advent has all but melted into air, capitalist society still presents myriad opportunities for incremental progress. Cohen’s achievement is to convince us that we should not take the impracticality of state-wide socialism as an excuse for a sense of entitlement to our talent. Instead, integrity invites us to turn to the socialist value of serving the needs of others, not through expectation of reward, but out of care.

Speaking personally, that’s the key for me. As someone who has had significant blessings by birth and upbringing (a good education, ability to pursue a professional career), am I to feel “a sense of entitlement to my talent”, or a sense of indebtedness: not only to my family, but to the wider society? Not “liberal guilt”, but a rational awareness that most of what I have is not by my own choice or efforts, but by a combination of genetic inheritance, upbringing, education and the gift of living in a particular society – and a consequent belief that our political, social and economic settlement should reflect that mutual indebtedness of one to another better than it does now, even if I am extremely hazy as to how exactly that is to be done, or even the extent to which it is possible.

Three types of equality

As we saw in my previous post, G.A. Cohen’s aim in his book Why Not Socialism? is to consider two questions: is socialism desirable? And: is it feasible?

Before those questions can be addressed, however, it is necessary to define what one means by “socialism”. For Cohen it is not a question of government ownership or central planning: rather, he starts from a consideration of equality of opportunity, of which he identifies three levels.

First, bourgeois equality of opportunity. This involves the removal of “status restrictions, both formal and informal, on life chances”. Serfdom and slavery are examples of “formal” restrictions; racial prejudice is an example of an “informal” restriction. Bourgeois equality of opportunity removes these restrictions (to a greater or lesser degree).

Second, left-liberal equality of opportunity. This seeks to remove social restrictions on opportunity: “those circumstances of birth and upbringing that constrain not by assigning an inferior status to their victims, but by nevertheless causing them to labour and live under substantial disadvantages”. The aim is to ensure that people’s life chances are “determined by their native talent and their choices” rather than by their social backgrounds, through initiatives such as “head-start” education programmes for those from deprived backgrounds.

The third level of equality of opportunity is what Cohen calls socialist equality of opportunity. This “treats the inequality that arises out of native differences as a further injustice”, since differences in native abilities is as unchosen as differences in social background. “When socialist equality of opportunity prevails, differences of outcome reflect nothing but differences of taste and choice, not differences in natural and social capacities and powers”. What this means in practice is, for example, in everyone being paid the same hourly rate for their work, so that differences in income reflect nothing more than different tastes for the time spent working.

To be honest, I feel pretty uncomfortable with this concept. I’m not sure that absolute equality of this nature – as opposed to avoiding extremes of inequality – is what we should be heading towards. I found these sections of Cohen’s book the most difficult and least convincing. Perhaps that just means I’m a “left-liberal” rather than a “socialist”, in Cohen’s terms.

Repugnant motives, desirable ends?

As the question of the “moral” case for socialism (or at least, critique of capitalism) has come up in the comments on my previous post, I’m going to jump to this aspect of Cohen’s book and come back to his definition of socialism later.

Cohen’s overall desire seems to be to have a system that promotes free cooperation and reciprocity among people, in a similar way to how people engage freely in cooperation and reciprocity in certain areas of life (such as a camping trip). Cooperation and reciprocity are found within market exchanges, but only on a “this for that” basis: I serve “in order to be served”. Cohen argues that reciprocity in a market system is based on “greed and fear”:

I give as little service as I can in exchange for as much service as I can get: I want to buy cheap and sell dear. I serve others either in order to get something that I desire – that is the greed motivation; or in order to ensure that something I seek to avoid is avoided – that is the fear motivation.(p.42)

Does that sound unduly negative? It does to me. But I think the point is this: it is certainly true that most people do not behave solely in this way. But that is because the market-exchange aspects of any transaction are not the only ones at work: most of us have other motivations at work too. These include the desire to be liked and to “feel good about oneself”, and also a genuine desire to cooperate and help other people.

The point is that those are distinct from the specifically market-driven aspects of our motivation. I may not like to apply the words “greed and fear” to my own behaviour – and I suspect that Cohen’s choice of such loaded words may distract at least as much as it illuminates – but I find Cohen’s expansion of what he means by them uncomfortably close to home.

Later in the book, Cohen observes that “greed and fear” (in the sense described above) have proven highly effective means of generating productivity in a modern society. He continues:

But we should never forget that greed and fear are repugnant motives. Who would propose running a society on the basis of such motives, and thereby promoting the psychology to which they belong, if they were not known to be effective, if they did not have the instrumental value which is the only value they have?

Cohen cites Adam Smith’s observation that “we place our faith not in the butcher’s generosity but in his self-interest when we rely on him to provision us”:

Smith thereby propounded a wholly instrumental justification of market motivation, in the face of what he acknowledged to be its unattractive intrinsic character.

Too many on the left have ignored the question of the market’s effectiveness, engaging instead in “a moralistic condemnation of market motivation that fails to address its instrumental justification”. Others, more recently, have gone too far in the opposite direction and forgotten that “the market is intrinsically repugnant”:

It is the genius of the market that it (1) recruits low-grade motives to (2) desirable ends; but (3) it also produces undesirable effects, including significant unjust inequality.

Early proponents of capitalism recognised this tension between the “repugnant” motivations and “desirable” outcomes of market mechanism, such as:

…the eighteenth-century writer Bernard Mandeville, whose market-praising Fable of the Bees was subtitled Private Vices, Public Benefits. Many contemporary celebrants of the market play down the truth in the first part of that subtitle.

I’m not entirely comfortable with Cohen’s critique, especially his reduction of market motivations to “greed and fear”. But I do think he is correct in identifying the ethical challenge that is posed to contemporary supporters of capitalism by their own forebears.

Why is it that today we are less aware of (or less bothered by) the “private vices” that underly the “public benefits” of capitalism than were people of earlier ages? As C.S. Lewis pointed out, medieval Christendom was at one with earlier civilisations in condemning the lending of money at interest; now it is the foundation of our economic system. Many writers from earlier centuries (such as Martin Luther) can make for uncomfortable reading for supporters of a modern market economy.

The answer must be that capitalism has shaped how we think, what we consider to be “obvious” and “natural”. In other words, it’s a matter of ideology.

Why not socialism?

A friend accused me recently of having a “French” mindset. He was right in at least one respect: like the stereotypical French philosophe, my approach to things does tend to be: “That’s all very well in practice, but does it work in theory?”

So, let’s turn away from the practical politics of recent posts to something more theoretical: G.A. Cohen’s short (and posthumously-published) book Why Not Socialism?.

Cohen’s book – really no more than an essay – is very much a work of philosophy rather than practical politics. He begins by observing that there are times when people do behave like socialists: for example, a camping trip among friends, in which equality and community are the basis of their activities rather than a market-based approach (“I’ll let you use my can-opener if you pay me”).

Cohen’s point is not that society can be run like a camping trip, but to use this as a basis for asking how society differs from a camping trip, so that he can then go on to consider two questions:

• Is socialism desirable?
• Is socialism feasible?

Above all, though, what clearly animates Cohen is not so much the detailed analysis as his ethical conviction that socialism is to be preferred, as least as an ideal, to the “injustice of market results and the moral shabbiness of market motivation” – of which more, I hope, in a later post.

Note also that Cohen is at pains to point out that the question in his title is not rhetorical: he acknowledges that it is by no means certain that the objections to socialism can be overcome. In the same way, my blogging about the book should not be taken as a sign that I agree with everything Cohen says.

The first question the title of his book raises, however, is what Cohen means by “socialism”. I’ll look at this in my next post.

The essence of “co-operative socialism”

Greg Rosen’s book Serving the People quotes two statements in particular that seem excellent summaries of what “co-operative socialism” is about, in contrast to the centralised state-socialism that characterised much of Labour’s actions.

The first was written by Harold Campbell in 1947 (p.27):

The Co-operative Party advocates the sovereignty of the consumer. It declares that the state should be controlled in the interests of the consumer as a co-operative society is controlled in his interests. …

It bases its advocacy upon the socialist ground that consumer control is the only truly classless control. The consumer interest is all embracing: any other is a limited interest. … The specific role of the co-operative movement in politics is the advocation of libertarian socialism, based upon the classlessness of consumer sovereignty.

In the drive to make as much headway in five years towards a new and planned Britain by the Labour government, much that is kindly and human and liberal (in its wider sense) is in danger of being overlooked. … In the clash of interests apparent in the transition to the new order – the clash between capital and labour – the claim of the consumer to be the only non-sectional and therefore classless or unifying interest, is in danger of being ignored or – when it is heard – not understood.

The second is from the party’s annual report in 1979, which contained the following repudiation of the “Bennites” then seeking to dominate the Labour Party (p.54). (Note: I have a lot of admiration for Tony Benn. But I certainly find the following a more appealing account of socialism than the “Old Labour” path of nationalisation and state control):

We have regarded it as a principal function of the Party to demand the organisation and government of society so that the maximum degree of free and voluntary association is provided. Our Labour Party allies have not always followed this precept. This is largely because the emphasis of Labour Party thinking has been the interest of the producer in the form of the organised worker.

For many years we have questioned the validity of nationalisation as the ultimate development of socialism and claim that it does not in fact mean consumer control, since it encourages uniformity rather than diversity. …

Co-operators are by natural inclination social democrats. They believe that power belongs to the people, authority rests on consent and should be granted, sparingly, to those leaders chosen by the community. And those leaders should at all times be accountable. …

We advocate co-operation as the form of social ownership most likely to succeed. It will succeed because it attracts the support of those engaged in the enterprise. The Co-operative form of social ownership is the alternative to nationalisation and state ownership. Nationalisation is right for some industries but not for all. … The state is not always the same thing as the community.

The common themes in these statements, separated by 30 years and written in very different contexts, seem to be:

• a “libertarian socialism”, based on voluntary co-operation rather than state ownership;
• the “sovereignty of the consumer”, in which our interests as consumers are seen as a unifying force, contrasted with our opposing interests as “capital” or “labour”;
• a scepticism about nationalisation, seeing it as leading to “uniformity rather than diversity”, and as harmful for “much that is kindly and human and liberal”; and
• the need for power to be granted to the state “sparingly” and with full accountability.

If “socialism” – a word which, let’s face it, can be something of an empty container into which a wide variety of conflicting ideas can be poured – has any future, then it has to be along these lines.