In spite of consistent economic growth and reduction of poverty in the world as a whole, the world continues to be increasingly unequal, with an accompanying increasing gap between those belonging to the more clearly defined socioeconomic groups and a devastating strain on natural resources, again most negatively reflecting upon those on the lower end of the inequality spectrum. The reality and interests of the majority of workers and the world’s poorer classes thus is increasingly less clear to the elites, or those usually in positions of power and greater control over the political and economic life globally. This can only reinforce the vicious cycle and perpetuate, not only economic, but also ultimately democratic exclusion of those unable to participate in the highly market-driven society as people are systematically stripped away of opportunities, including the ability to be heard.
Economic democracy recognizes the need for inclusion of the people in the economic processes and decision-making as much as in political processes, thus allowing for a framework that supports development and sustainability of a true democracy as well as, consequently, a constant commitment to strengthening of the communities, support of human dignity, as well as ecological regeneration and advancements. While political economies have been widely praised and noted for expanding overall economic growth and, importantly, investment in human capital, social programs, and political stability, the benefits of such contributions of political democracy have also been attributed as largely accruing amongst the upper and middle class citizens. Ultimately, one unable to participate in the economic life of one’s community and country cannot be expected to exert much influence on the sociopolitical level, which is why sociopolitical inclusion cannot truly happen without economic inclusion and economic democratization, revealing urgent need for economic democracy as a means of truly democratizing the world and enabling a more holistic approach to development. This article will examine what is meant by the movement for economic democracy as well as what some prospects are for the flourishing of this approach as a means to improving the health of the world’s democracies from here on. Case studies explored in the article will showcase potential to work towards economic democracy as seen in the past and present, as well as some aspects of political democracies, such as referendums, voting habits, and approaches to constitution-making, including the constitutional text itself, that can serve as examples of work towards the principles of holistic inclusion consistent with the economic democracy approach.
On Economic Democracy
The idea of economic democracy comes from an understanding that purchasing and ownership power over resources is intricately tied to the self-governing process proposed by the ideals of democracy, and thus this socioeconomic philosophy is advocating a push towards a world in which a large group of stakeholders instead of, for example, corporate shareholders, would hold ownership rights over the resources in a given community and play a role in decision-making and shaping of the community’s socioeconomic future with respect to individual economic rights. Economic democracy can further be defined as “a system of checks and balances on economic power and support for the right of citizens to actively participate in the economy regardless of social status, race, gender, etc.” and this will be the definition assumed by this paper, with the economic power understood as ability to participate in resource manipulation and decision-making processes in production and resource allocation. The way in which it is practically implemented has evolved from thinking simply in terms of labor unions and collective bargaining to also include community cooperatives and more nuanced and complex ways in which a sense of ownership and economic decision-making power is allocated in a given industrial/productive context. In the context of today’s political polarization, the political and economic issues are too often being seen as separate in spite of the fact that the two are intrinsically linked and it is ultimately impossible to understand one without the other. This creates a paradox because the sociopolitical is seen to impact the economic life more than the socioeconomic, and this is a paradox that economic democracy works to address.
Economic democracy also recognizes the role and agency of the poor in the stride for reversing the effects of climate change, acknowledging that not only the rich should be privileged to care about their environment and instead enabling the movement for ecological health to be voiced and practiced widely. In the unequal and exclusionary world we live in, the poor are forced to watch the degradation of their environment without agency to promote and motivate change, but the principles of economic inclusion and empowerment, the people en masse would be allowed to voice concern for their communities and immediate environment throughout their not only civil and political but also economic and work life, allowing for a more holistic approach to development and ability to most appropriately allocate resources in accordance with the wishes and desires of the local community which is naturally best able to recognize and most equipped to care of the potential negative consequences and sustainability measures in place.
Historical instances of economic democracy
Modern stride towards implementation of practices of economic democracy can look to the past for inspiration. Of course, given the nature of economic democracy, it will ultimately look different in every locality as the communities themselves will be given agency. When it comes to historical attempts at implementation of the practices of economic democracy, Yugoslavia is where an example can be found. Unlike the USSR at the time, Yugoslavia looked to decentralize its management as a way to promote the workers’ participation in the economy and established the practice of a worker self-management system in the late 1940s and early 1950s. The goal was to create an alternative to the Soviet state-led socialist program that would democratize economic processes and allow for decisions to be made in the root of production of the country. The idea was practically implemented with mixed results - it created a space for workers to advocate for their rights and become more legally protected and also managed to increase their output, but the extent to which workers ultimately gathered significant power remains up to debate as the state continued to hold onto political power and continued significant involvement in terms of economic planning, which resulted ultimately in overspending and a simultaneous failure of both the political and economic systems of Yugoslavia and the violent break-up of the country.
Chile saw development of production committees in Allende’s era that saw practices of worker management through their labor unions eventually expand to 500 factories. This process, however, came to an abrupt end with the military coup in 1973, which again makes the theories behind these processes and their probable impact more difficult to determine. However, they were a clear characteristic of this historical period and found practical implementation in this context. More recently, following the economic crisis of 2001, Argentina saw the movement of empresas recuperadas flourish as a way of workers to hold onto their labor rights and even recuperate factories that were going out of business under market pressures, with the state allowing worker cooperatives to apply to temporarily use the firms and retain their positions - these cooperatives were treated different depending on the country’s changing political climate, but recent departure from strict neoliberal policies and unprecedented agreement for debt restructuring offer an exciting opportunity for the future of the empresa recuperada movement that gained international support to flourish and adapt to current challenges.
A particularly recent example is Greece that saw a rise in worker collectives and cooperatives that attempted to restructure the way their businesses worked. In the case of Greece, this happened following the economic crisis of 2008-09 that particularly negatively affected Greece forcing it into bankruptcy. Research conducted amongst three small businesses focused around journalism and political and social advocacy work, found that workers were able to successfully challenge the hierarchical structures and promote broader participation on behalf of all of its workers. The challenge here was that in this case there was virtually no attention to this principle coming from the state which resulted in major limitations to broadening the scope of the firms’ decision to institute the practices of economic democracy and worker participation.
What is revealed through these historical examples of instances of economic democracy is that there were divergent contexts and models for implementation of the practices of economic democracy, with the principles of economic democracy finding application within both socialist and capitalist contexts, and that ultimately there was usually inadequate extent of state support for the programs, with such initiatives either being ignored or overly dependent on the state structure. What is needed is a way to implement such principles ensuring simultaneously their independence from the regime in power and resiliency in spite of economic challenges. These historical strides to achieve this and the fact that such sentiments and efforts remain in spite of corporate neoliberal influences in essentially all of the countries mentioned, including their successors, shows that there is the interest and need to continue finding the most appropriate application for a form of economic democracy practice.
Modern instances of economic democracy
On top of aforementioned historical efforts at establishment of economic democracy practice, effects of which still linger on today, there are also active cases of forms of economic democracy that can inspire further progress in this field and that show practicality in the context of today’s day and age.
When it comes to Costa Rica, Coopenae is a cooperative lending institution that now is one of top revenue generating banks in the country. It is known for its successful inclusion of hundreds of people and it incorporates decision-making power amongst all the shareholders. While one may not necessarily think of banks as a “fertile ground” for cooperatives and economic democracy, banks, as the people are quite literal shareholders in the bank, might actually be an easier way to approach it than, for example, the traditionally relied upon agriculture. Costa Rica’s history with cooperatives also can be traced to its agricultural and artisanal past dating to the early 19th century when merchants and farmers began organizing to combat changing climatic and market conditions among other factors and divide the risks, once again showing that there are various historical origins that might influence a group’s thinking about engagement in self-management/cooperative or other means of achieving economic democracy. Also, while Costa Rica has had great success comparatively working within the constraints of neoliberalism and remaining a close ally to the US, it still maintains the virtue of cooperatives, and these are included as a fundamental worker right and even a necessity for worker benefits and sustainable development within the Constitution of Costa Rica. This answers the question of how compatible with free trade these cooperatives can be as it shows the system would work within different macro-level/worldwide frameworks. It is also important to note that fishing, agricultural, and artisanal communities in Costa Rica remain resilient through cooperatives and have successfully been adapting themselves to this day. Environmental benefits and sustainable practices are again linked to cooperatives, though there is debate on how inherent this is to the system given that it is up to the communities to decide trajectories of local changes and progress.
Nigeria has a number of interesting cooperatives whose goals are to be people-centered and provide workers with appropriate living conditions and benefits for their work. It seems that there is an understanding that they can in the long run lead to greater economic democracy as well, but at this stage they are more of a stepping stone to it functioning as a skill and practice builder on the way to achieve economic democracy. It seems that Nigeria Police Cooperative is the largest cooperative in Nigeria and all of Africa, and it was formed precisely with the goals of enabling greater worker rights and protections. It is unclear to what extent there was intentional aim toward worker participation as well, but the process seems to naturally head in that direction as workers gain greater empowerment. Cowries Multipurpose Cooperative is another example of a successful cooperative in Nigeria and also another example of a funding/lending-based cooperative institution to show success in member inclusion probably due to the fact that shareholding comes more naturally in bank/stocks settings. Their aim is to keep improving, incorporating more innovative technologies, training for its personnel, and better planning strategies in order to remain on the track of development and the mission to achieve successful collaborative effort at development and, importantly for economic democracy, “mentally empower [their] members, expound their economic means and influence their financial choices in the fight against poverty and mediocrity for the continuous improvement of individuals and ultimate transformation the society as a whole.” It seems that funding issues and lack of trained personnel and practitioners poses a great challenge to sustaining cooperative efforts in the African context, but this certainly shows awareness of the issue and Nigeria’s readiness to address these issues and use this as a potential framework for future development can function in part also as a corrective measure to the uneven development through the traditional neoliberal corporate framework.
Another approach to collective organizing that can support broader economic democracy initiatives is found in Nordic housing policies. In this case, cooperative associations own the housing units and rent or sell them to their members at a more affordable price. The system of cooperative housing was developed in the early 1930s and survived the shift towards market liberalization successfully adapting itself to the laissez-faire scenario. One example is Búseti in the greater Reykjavik area that serves about 1,200 dwellings. Such housing initiatives also benefit greatly the elderly and those in need of additional accommodation and services thus resulting in greater inclusivity and promoting greater social cohesion. Such initiatives are increasingly promoted around the world, including in the US, though Nordic countries provide a particularly coherent and widely spread and implemented framework.
Germany is particularly notable for ensuring board-level representation of its workers. Between 30 and 50 percent of board members are labor representatives, with firms over 2,000 employees and heavy industries such as steel and iron production featuring a mandatory even spread of worker and shareholder representation on the board. Workers on the board are protected from discrimination, reimbursed for training, and entitled to compensation for their membership and equal participatory rights to any other board member. The system is implemented and works relatively well in practice in over 600 large companies.
Yemen remains entrenched in a complex, multi-sided war that triggered one of the biggest humanitarian crises in the world, with currently an estimated 24 million in need of assistance. In spite of devastating consequences of the war, communities on the ground remain resilient and proactive. This led, among other things, to initiatives such as Sabcomeed’s trading initiatives to support coffee farmers nationwide. Companies such as Sabcomeed support local farmers’ coffee growing initiatives and have facilitated the process of building roads and exporting while Qima Coffee productions facilitated the production of coffee and sponsors schools in the area, allowing coffee cultivators of Al-Ruwad cooperative to sell their product and earn two or three times more than an average coffee exporter and ensure the benefits of this business reach all aspects of the community. The business would generate income that contributes to all stakeholders and the companies involved in the building of community infrastructure and generating this trade would describe themselves as part business, but also part humanitarian organization and an NGO. Initiatives such as these show the capability for community organization and planting of the seeds for economic democracy even in the moments of great crisis. The experience of Yemeni coffee growers also shows the ability of the private sector to invest in communities and work towards mutual development, though the ways in which such initiatives will further be developed were the government to invest in them more, either through supportive policies or direct investments, remains to be seen and has been noted as something communities and supporting companies would benefit from and currently desire.
Principles of economic democracy observed in the current democratic practice
The practice of political democracy also reveals principles that can be either directly tied or translated to function within the economic democracy field. While political democracy in itself may not necessarily be sufficient to reduce inequality and promote equal access to economic and resource agency, some of its methods, including referendum, voting and constitutional practices, are instrumental for economic democracies and show opportunity for political and economic democratic initiatives to exist and develop together.
Switzerland has a very particular referendum system that the country considers a way to maintain checks and balances on the government through essentially direct civilian participation in democracy. A popular vote must be held on any amendment to the Constitution, so this referendum would be mandatory, while any citizen eligible to vote also has the right to request a referendum. A group of at least seven citizens can assemble and form a Popular Initiative group that can then launch a request for amendment to the Constitutions, though not to a law. There is a need for popular majority and double majority across cantons for the change to become constitutionally accepted. This is ultimately the way to consistently keep people connected to the democratic process and promote democracy, transparency, and decision-making power and accountability amongst the citizenry. While voter turnout is low in Switzerland for federal elections, with around 50% of eligible voters actually voting similarly to the US, Swiss voters have plenty of opportunities to vote on various issues and on various elections throughout the 4-year period so 90% report to voting at least once during this period. Selectivity in voting probably comes from the abundance of ways one can participate. The ease at which one can access information on voting roles and referendums is impressive, and this fits the idea of inclusion, common participation, and democratic transparency. There are referendums about business tax laws, public information, naturalization process, biometric passports, pension, migrant workers, animal protection etc. so citizens remain consulted across various topics in the society. Depending on the need, there are repeated referendums on a specific issue within a span of a year or even months. There are even more regular ballot box votes on local and cantonal issues, and there are still town-hall meetings and open-air assemblies across Switzerland (now with adjustments for the pandemic measures). The newest in line is the planned Swiss referendum on COVID-19 lockdown measure as citizens decided to challenge the government’s ability to impose lockdown and other restrictions amidst the pandemic, which will be the newest display and test of Swiss direct democracy. Switzerland’s referendum culture, including high voter turnout, voter education, frequent and accessible town-hall meetings, and opportunity for organization at the local, regional, and national levels are all promising components of economic democracy as well.
Italy showcases a strong referendum culture as well, with the 1946 referendum single handedly and effectively abolishing monarchy, and the 1974 referendum protecting divorcing rights, but more recent referendums reveal the flaw of high quotas that result in virtually every popular referendum between 1996 and 2016 having been deemed invalid due to the failure to meet the quorum of 50% turnout or having low turnout. Due to parliamentary instabilities reflected in frequent changes to parliament members and the executive branch’s tendency to prolong parliamentary referendum-related decisions, 90% of laws proposed from citizens’ legislative initiative from 1996-2001 are still awaiting consideration as a consequence. Lessons learned here are that referendums being held are not necessarily sufficient, with the need to also provide mechanisms for referendums to have actual effect as well as to promote greater citizen participation and greater direct citizen involvement through, for example, showing stronger support for laws and initiatives proposed by the citizens. Greece represents another cautionary tale as another mechanism Greece relied on to resolve the 2008 financial crisis was intended to be a referendum. In 2010, the need for austerity measures after increasingly grim news about the national budget resulted in then Prime Minister Papandreou calling for a national referendum in 2011 in order to get public opinion on whether or not to accept the bailout measures, but then called it off after he got center right opposition to agree. There was a lot of political pressure to call it off given that Article 44 of Greek Constitution allows for referendums on critical social matters but not on economic issues. He ultimately had to step down from his position and protests continued throughout 2012 as a backlash against the bailout. Then Prime Minister Alexis Tsipras called for a referendum in 2015 to discuss continued austerity and privatization measures. At first, he said “no” to the measures and called the public to agree but then just a week after the referendum resulted in a “no”, the Greek government, spearheaded by Tsipras himself, agreed to accept more austerity measures, privatizations, and tax increases citing them as necessary to keep people alive and insisted on keeping the country in the EU and eurozone. Greece thus has a very unfortunate relationship with referendums as they appear to be easily manipulated by prime ministers/political elite.
Referendums are ultimately criticized to be expensive and logistically difficult to frequently execute. This is where modern practices can be combined with the traditional democratic principles to launch more elaborate e-democracy initiatives where citizens would be encouraged and supported in electronic voting. This is one way in which direct democratic participation, both politically and economically, can be achieved as members of collectives, be they countries or firms, will be more easily reached and coordinated using modern technologies.
Finally, constitutions themselves are framing documents basing the orientation of the country, not only politically but in every other sense, including economically. In the case of Greece, we have already seen the way that economic democratic participation can be marginalized through constitutional wording. However, constitutional practices and framings can also serve to promote economic democracy. In the very practice of writing the constitution, countries can in fact show exceptional strides towards greater and more holistic democratization.
A very particular development was the 2008 crisis that saw Iceland going bankrupt and people going to the largest protest in the countries’ history since 1949. Citizens emphasized that they do not feel like their vote at elections matters, and it was largely the inability to have a real say in the economic life in the country that was the source of dissatisfaction and that was starting to stand out as opposed to the ideals of democracy. As a result, almost a thousand people drawn at random, though controlling for age, geographical location, gender etc., were combined in the National Forum and asked to give input in redrafting of the constitution, and people felt empowered as this was the first time such a thing was done. Public officials were to be bound to respond in accordance to agreed upon fundamental Icelandic values of honesty and integrity. Now, while the main principles of the country’s future trajectory were established, such as the wish for transparency, animal rights protection etc., critics describe this episode as shallow and without tangible plans. Of course, drawing so many participants together without previous experience in politics nor management was never expected to have specific, profound results, but rather to begin the discussion and remind the public and the government of the shared values, identity, and goals so that the country overcomes the crisis, in which it can be said that this initiative succeeded.
The realization process of the National Forum included the 950 participants organized into groups of 8 and seated for roundtable discussions facilitated by specially trained personally that did not contribute views, but simply guided the discussion and ensured participation - the discussions were centered around the core themes needed for the constitutional drafting assembly, such as values, principles etc. and a sentence was drafted to reflect the input from each roundtable discussion; these were then grouped together and summarized, and personal recommendations to the Constitutional Assembly were also written, including by the facilitators. The ultimate text of the Constitution is said to in some parts reflect the core values identified in the National Forum, including ideals “such as the public ownership of Iceland’s natural resources, an article on information rights, and an attempt to enshrine the Parliament’s role in the supervision of financial management.” Out of the 950 participants, 75% said the forum was organized exemplary and 95% considered it a success. Iceland’s very low Gini coefficient of 0.24 after government taxes and transfers means that Iceland is actually the lowest amongst the OECD countries, and 4 out of 5 people, according to this OECD study, use the internet to interact with the authorities, so relative equality, as well as access to and a culture of interacting with authorities do exist, potentially representing contributing factors to the success of the National Forum. Iceland’s population of a little over 356,000 people and general identification with the middle class of the majority of Icelanders may result in an easier facilitation of such attempts at more direct forms of democracy, but it is important to note that class awareness differs from class reality, so identification with middle class can often come from a relative point of reference, and a full 10% of Icelanders remained in poverty at the time of the National Forum in 2010, with that number more recently becoming 8%, showing that prospects for success are more complex than mere population size and baseline statistics, but also involve complex social processes and understandings.
The constitutional texts themselves ultimately are fundamental to orienting the goals of the country, and pursuit of economic democracy can become one of those goals. Bolivia has seen its fair share of constitutions, precisely 17 since its founding in 1825. What is significant about the latest constitution is that it for the first time acknowledged to such an extent the position of indigenous people of the land, dedicating an entire chapter to the country’s ethnicity and declaring Bolivia to be a plurinational state; some of the country’s economic sectors such as the gas industry were nationalized and the country’s political system was decentralized to include departmental, municipal, regional, and indigenous authorities. What is very interesting about the 2009 Constitution is that it actually took 3 years to be approved with the process starting with creation of the constitutional assembly in 2006 as promised in Morales’s campaign and then this body spent two years collecting data and creating a draft later approved by the National Congress, though the National Electoral Court and the opposition debated the process, and then was finally approved with a historic referendum with 90.24% voter turnout and 64.43% agreeing to the new constitutional framework. While all political parties and ethnic groups were called to participate, and the nation’s people were able to vote for members of the constitutional assembly, the assembly itself got mixed reviews, the process was deemed transparent, respected the separation of powers as neither branch was to be involved in the drafting and influence the assembly, and the process empowered the people as the constitution had to be approved by at least 51% of Bolivian voters and it guaranteed that departmental heads would also be subject to the will of the people, thus promoting and cementing democratic and participatory values of the country and beginning a process of decentralization, but this time in a democratic, transparent, and accountable fashion. The 2020 peaceful elections after turbulent 2019 political crisis that saw Evo Morales resigning due to pressure from the military and still debated accusations of manipulated election results were also praised by international observers - the success is attributed to diversification of the electoral tribunal, successful campaigns to educate voters, agreement that the losing party will yield to the winners, and the public’s genuine exhaustion with political unrest and desire to establish normalcy and peace in the country’s political life. In any case, this crisis put the constitutional groundings to the test and showed that this constitutional experiment demonstrates resilience and stability on top of promoting plurinationalism, inclusivity, and some principles of economic democracy such as decentralization of economic decision-making as well as an emphasis on the people’s self-determination when it comes to community resources.
Ecuador’s constitution is the first in the world to acknowledge the right of nature “to exist, persist, maintain and regenerate its vital cycles” through a chapter titled the Rights of Nature, which moves past seeing nature as a commodity or property. Citizens are also encouraged to actively participate in the country’s democracy and guaranteed the right to inclusion in all aspects of social interaction - these ideals are reinforced through the Law of Citizen Participation (2010) that puts additional emphasis on inclusion and the country’s orientation towards participatory democracy, and one way in which this is manifested in practice is the push towards the Participatory Budgeting framework in which citizens are asked to play a role in decision-making in terms of the national and local budgeting. Research surrounding the Municipal Autonomous Decentralized Government of Gualaquiza canton that has 10 districts and around a dozen millions of dollars in its budget showed that political participation was promoted through the participatory budgeting initiative, but that only 2% of the budget was allocated to this initiative and that the outcome was ultimately highly dependent on the will of local authorities, with limited outreach to rural communities. The reasons for limited outreach of the participatory budgeting initiative included lower educational levels, as well as the type of work rural communities do as work in the field positions them farther from decision-makers physically and creates additional logistical problems in realization of contact with the communities, showing the shortcomings in political democratic process as a consequence of socioeconomic positioning of a population. While the scope of this initiative remains limited, it still shows that legal basis for economic democracy can help launch and better augment strides towards economic empowerment and democracy.
Conclusion
Economic democracy is asking us to think outside of the current divide between political and economic liberation, ensuring inclusivity, and showcasing clear compatibility with human rights and even rights of nature and ability to advocate for environmental regeneration. It is also not an unachievable ideal as there are not only historical initiatives, but also present-day frameworks, including through current political systems, that support ideals of broader economic participation and agency. In a world that so deeply values democracy and freedom, it is only natural to also pursue the goals of economic democracy and make this ideal at least more visible and more widely studied and applied in the future.
*This article was developed in collaboration with the International Center for Globalization and Development (CIGLOB)