Economic democracy: meaningful, desirable, feasible?

Abstract

Daedalus Summer 2007 To some, economic democracy is self-evidently a good thing if it means spreading economic opportunities more widely, giving workers a greater say in the workplace, and allowing communities to participate in the investment decisions that shape their future. Indeed, a classic argument has it that political democracy–universal suffrage, civic freedoms, and all that is needed to make them practical and effective–will work better if accompanied by ‘social’ or ‘economic’ democracy. Absent the latter, real civic participation will be low and big money will corrupt the political process, especially in complex societies where commercial networks can shape political agendas and the cost of campaigning is high. While few deny the need to reform the way elections are run and 1⁄2nanced– a source of recurrent scandal in nearly every rich country–another line of thought would challenge the conclusion that it makes sense to aim for economic democracy. The very phrase is thought to be a contradiction in terms, or a category mistake. Economic processes are too complex to be governed by votes and electioneering. Governments can and must lay down some basic ground rules, but, as Friedrich Hayek showed, they lack the locally speci1⁄2c information required to run complex enterprises effectively, still less to plan the entire economy. On the one hand, consumer needs are too intricate and changeable; on the other, the myriad of speci1⁄2c investment opportunities at the local level can never be known at the planning center. While Hayek’s critique of central planning was in many ways compelling, it failed to acknowledge the extent to which markets rely on the wider social context in which they are embedded. It also did not demolish the argument that public initiative and collective resources are necessary to meet large-scale and manifest threats.1 Robin Blackburn