Democracy: A Roadmap

From the first day we go to school we are told we are ‘free’. We are told that we live in a democratic society. In fact, The Washington Post recently released an article claiming that we have too much democracy in our lives. However, most of us don’t feel that we are decision makers in society, let alone in our own fate.

Why is this? Are we in fact as spoiled as Joe Biden would contend?

Close your eyes. Think about the last 24 hours of your life.

How often were you able to engage in democracy directly? For the majority of us, the answer will be that we did not engage in democracy at all. Most, if not all of the factors, that effected our lives were hoisted upon us by bosses, landlords, bureaucrats, and so called ‘representatives’.

Reimagine the last 24 hours of your life.

The housing cooperative you live in has a surplus of funds at the end of the month and you all vote to decide what to do with it. One of your neighbors suggests that we use the funds to transform the backyard lot into a garden with a greenhouse in order to provide year round food. Another suggests that we start a recycling program in order to bring more money into the cooperative and reduce waste.

The worker owned firm you work at wants to decide what to do with the profits. One of your fellow workers suggest that we all give ourselves bonuses. Another suggests that we add solar panels to the roof in order to cut electrical costs and negate the pollution plaguing the town we live in.

It’s also time to elect your managers. Yes, that’s right, you get to decide to fire or retain your own managers.

You got to the local community board meeting. One of the board members has been embezzling money from the community coffers. Instead of waiting two years for the next election period an immediate recall is called for and they are removed.

There is a need for high speed internet in the community. Everyone uses it. Instead of charging everyone in the community the market price, it is decided that the community will bargain collectively with an internet service provider to get the best price possible. This will be provided from the community at cost.

I could go on but I think you get the point.

So, why the disconnect? Why are we taught that we live in a Democratic society when so many of the factors that effect our life are under total control of others?

The answer is simple: Americans have always thought of democracy in the abstract never in concrete material terms.

Before we jump into this question I want to define some terms so everyone reading this article is on the same page. When I talk about private ownership, I mean a firm that is not owned and operated by those who participate in it. I am not contrasting this with state ownership. State ownership is simply another form of private ownership, such as what was seen in the USSR, for example. I am also not speaking about (less than 100% or non-voting share) Employee Stock Ownership Plans or ESOPs. Many ESOPs include worker ownership, but not worker control via nonvoting shares, and the benefits are manifest in ‘profit sharing’. Additionally, few ESOPs are 100% worker owned. Winco, for example, is only 80% worker owned and while they do have voting shares 20% of the firm is still managed by private owners. It can certainly be said that it is more democratic than most firms it is not democratic as a whole.

Regardless if those who own and operate the firm are state bureaucrats, boards of directors, shareholders, or individual business owners those who participate are not in control.

There’s a couple reasons why democratic firms are not more common, such as subsidization of privately owned businesses and higher rates of taxes on the poor than rich but the primary answer to this question is that private ownership centralizes wealth. When only a small group of people are making the decisions they are incentivized to externalize costs. What this means is since they are not the ones that will be directly affected by choices that negatively effect the public they will externalize those costs onto the public.

An example of this is low wages. Since those in power can afford to live in expensive neighborhoods that have more police coverage or even employ private security, they can externalize the cost of low wages onto the public, which manifest in crime, homelessness, drug use etc.

Another example is pollution, which works similarly in that those with the means to do so can simply move into neighborhoods with higher land values that aren’t affected by pollution. Living in polluted neighborhoods translates to more medical care and lower living standards.

Through externalizing costs these small groups of people can aggregate massive quantities of wealth and have no incentive to build democratic firms, as it would only cut into their profit ⁠— Even if the mass of the public would stand to benefit from such an arrangement. Worse than this, not only do they control the supply of capital that would fund such firms in the first place (since they already have most of the wealth in a society), they can control demand too.

In short, supply and demand are both controlled by those who have accumulated the most wealth. The system of private ownership is completely broken. This essentially turns a market economy into a command economy.

Through both controlling supply and demand they have complete control over the market. It is not democracy but, in fact, authoritarian.

In order to subvert this control and move to a democratic society there are a number of steps that we can take that I will outline in the rest of this article.

Political Solutions

Founding Municipalist political parties

I outlined a theoretical basis for a Cascadian Municipalist Party in my article “Towards a Cascadian Municipalist Party”. In this article, I write about how a Municipalist party would work strictly to orient democratic control back to local governments and workers. A number of policies could be implemented in order to make it easier for democratic firms to become more dominant in our communities.

Cooperatives and tax codes

First and foremost, for any political program to effectively foster growth of a cooperative economy it’s important that cooperatives have specific legal statutes. While this may seem obvious, few states actually have statutes for cooperatives as they are discussed in this article. This is of the utmost importance because it allows cooperatives to have the same opportunities that privately owned firms have in terms of things such as lending. A good example of such a bill is HB172 which was to create a Cooperative status in Virginia.

Employee Ownership Centers

The basic function of these centers is to provide education and legal help for those looking to experiment with democratic ownership. These operate in a number of states. One example is the Vermont Employee Ownership Center or VEOC. The VEOC was founded in 2001 and has helped a number of firms restructure into both cooperatives and 100% ESOPs.

Other examples include the Rocky Mountain Employee Ownership Center, the Ohio Employee Ownership Center, and National Center for Employee Ownership.

Right to Own

These proposals come in a number of different forms. Labour UK has floated the idea of giving workers the right of first refusal if any privately managed firm wants to sell or go public. This essentially means that if the company you were working for wanted to sell, they would have to offer it to you and your coworkers first. Included in this proposal is government to match worker investment in buying out these firms.

In 2019, Bernie Sanders introduced the WORK Act. The bill would primarily provide forty-five million dollars to expand Employee Ownership Centers. Secondarily, it would appropriate 500 million dollars for the creation of low interest loans for ESOPs and worker cooperatives. He introduced a similar bill in 2014.

Marcora Law

The Marcora program is probably the most interesting proposal out of these. The Marcora Law was passed in Italy in 1985. It allows recently laid off workers to pool unemployment benefits (up to three years) to either buy out an existing privately owned firm or form their own cooperative. Through its years of operation it has a 90% success rate and only 5% capital/job loss rate.

The program had to be reconfigured in the 2000s to favor buyouts verses the creation of new cooperatives as it was deemed by the European Union to favor worker ownership over other ownership schemes.

More history and information on the actual workings of the program can be found here.

Community based Cooperatives

In one of my articles I provided a framework for what I termed Community Cooperatives. These cooperatives seek to reconcile the issues with Consumer Cooperatives. In short, any product or service that has a high enough demand to overcome the need for profit incentive could be provided at cost. The residents of a community would pool funds, establish the firm, own a stake (similar to a consumer coop), and run at cost not for profit. Examples could include anything from grocery stores to auto shops.

Beyond Politics

If we are to build a concrete path forward for transforming our society into a democratic one we must think beyond politics. As I stated before, those who stand to gain the most in society from privately managed undemocratic firms are those in our society with the most money. Due to the undue influence of money political systems worldwide, we must expand our tactics beyond politics (though, it is a mistake to neglect it entirely).

Education

We need to be educating people that they have this option because most people in the United States are unaware that cooperatives are a viable alternative. Employee Ownership Centers will not be enough, we need to take it upon ourselves personally to talk about democratically managed firms.

Unionism

Establishing labor unions that push management towards inclusive management instead of fringe benefits, such as better wages or healthcare plans, may be a viable tactic. However, I am unaware of any unions that do so.

This tactic can become problematic if not applied properly. If a firm is democratically managed, the role of the union becomes nullified as there is no private owner for the union to advocate to on behalf of workers. The final goal of the union, therefore, would be to dissolve itself. Given the roll that most major unions have historically played, I think this is a long shot. In the same way that private owners externalize costs onto workers union officials can act similarly to preserve their position of power.

Striking against the Privately Managed Economy

I wrote earlier about how those in charge of privately managed firms control both supply and demand. We must use the same tactics that they do to the best of our abilities. Wherever we can shop at democratically managed firms, we should do so. While we should be skeptical of claims that emphasize ‘ethical consumerism’ to change a society at large, on a localized level a politically motivated group of consumers could have a large effect. This will be reflected positively in our communities as local owners have no incentive to externalize costs onto their own communities.

A good list of democratically managed firms can be found here.

This tactic needs to be more broadly applied however. A full strike against the privately managed economy would consist of democratically managed firms cutting privately managed firms out of their production lines. Through a cohesive strike from all democratic firms, the privately managed economy would have no choice but to liquidate assets or sell out to democratic forms of management.

Conclusion

If we are to take the project of building a democratic society seriously we must use all tools at our disposal and this may mean, for some, stepping outside of our comfort zone and using tactics that we had not previously considered. Most importantly we must shift our individual and societal perceptions of what constitutes democracy to our everyday experience not abstract ideas or symbols.

We face many problems worldwide, from climate change to rampant economic instability, humanity is at risk of losing everything. These problems seem complex, confusing, and monolithic but I don’t think they are. We have surrendered control of our communities, workplaces, and homes to those who live far away and have no personal connection to us. It’s time for us it’s take them back.

It’s time that we finally give democracy a chance.

Big thanks to all my patron supporters for making this and future articles possible.