Wednesday 23 September 2009

What rights should a capitalist have?

Over at OurKingdom, William Davies has added to the ongoing discussion of democratic republicanism with a stimulating post on republicanism in the workplace. It draws on his recent report for Demos, Reinventing the Firm.

Underpinning Davies' post and report is a basic question which is perhaps too seldom posed these days: What rights should a capitalist have?

That is to say, if I put capital into a firm, what sort of claims ought this to give me over how the firm runs and with respect to the division of any trading surplus?

Historically, the British Liberal tradition has had very interesting and radical things to say about this, things which draw on or echo republican ideas.

First, Liberals have argued that there are properly limits on the control rights that capitalists have over firms. Workers should not work under authority structures which make them subject to the arbitrary power of owners and/or their managerial representatives. To respect their status as free persons, workers must have their own rights to participate in decision-making. Thus, when a capitalist advances capital for use in a firm, they must accept that their authority to direct the firm is qualified by the rights of workers to a say in decision-making.

As William Davies notes, contemporary management thinking is replete with appeals to worker 'autonomy'. But much of this discourse tacitly subordinates autonomy to an unquestioned priority of maximizing profitability. On the republican view, echoed historically by the Liberals in this country, respect for workers' freedom is actually a moral constraint on seeking profits - and one that should be enforced by means of legislation which democratizes the workplace.

Second, Liberals have argued historically that there are limits on the income rights that capitalists have over their firms. Liberals posited a 'normal' rate of return for capital (perhaps weighted according to the risk factors in a given industry) and argued that any trading surplus over and above this 'capital wage' should be shared equally between capitalists and workers. Echoing an idea that in fact goes back to the co-operator, Robert Owen, they argued that the trading surplus should not simply go to the capitalist by default.

One radical version of the latter idea is that workers' share of the profits should be automatically invested in capital. In this way, over time, workers can collectively build up a large stake in the firms in which they work, helping to erode the social division between workers and capitalists. 'Capital growth sharing' schemes of this kind were widely discussed in Western Europe in the late 1960s and 1970s, reflecting the power of organised labour at this time and the consequent pressure to create a more egalitarian and democratic capitalism.

But that was the 1970s. After a brief flirtation with Will Hutton's ideas about 'stakeholding', New Labour largely accepted as given an authoritarian, inegalitarian and unrepublican model of the firm. And, as I have pointed out previously, the Lib Dems themselves have retreated from their earlier radicalism, gradually diluting their commitment to industrial democracy to vanishing point.

However, William Davies's report is one of a number of recent signs of a renewed interest around these ideas. The Social Liberal Forum held a session on industrial democracy at the recent Compass conference. One can see how industrial democracy could fit into a new politics of the kind that Compass favours, one focused on quality of life rather than simply quantity of output. Nick Clegg's pamphlet, The Liberal Moment, also marked a return of Liberal interest in the topic. And it certainly fits well with James Purnell's emphasis on 'power egalitarianism'.

In the emerging Lib-Lab dialogues which Sunder has analysed, the ideal of a republican firm is one where there seems particular potential for fruitful discussion and cooperation. Let's put our heads together and reopen that fundamental question of what rights a capitalist really has.


Anonymous said...

Great article.

I must say, one of the things i really like about Next Left is that a thoughtful and interesting piece like this can go up without the comments thread being crawled-over by libertarians spouting that e.g. because only the state limits freedom due to it's evil attacks on self-ownership, whatever capitalists do with property is ipso facto justified.

I hope it stays this way, though the libertarians appear to be spreading ever wider...

_______ said...

Sweden has legislated industrial democracy by-way of giving employees in firms larger than 25 people, to elect 2 representative governors via their trade union.

Sweden also ranks in the top 3 countries for doing business in the world.

But there's bigger problems out there right now to solve than the democratic deficit in the workplace.