March 1987By Dale Vree
Dale Vree, formerly a political scientist, is Editor of the NOR.
A Preface to Economic Democracy. By Robert A. Dahl. University of California Press. 184 pages. $14.95.
One of the best kept secrets in the academic discipline of political science is the social teaching of the Roman Catholic Church. While modern political history has been dominated by various essentially secular options, the Church has long been articulating her own vision of economic justice in general and the proper relationship between labor and capital in particular. More to the point, from Pope Pius Xl's 1931 encyclical Quadragesimo Anno to Pope John Paul II's 1981 encyclical Laborem Exercens, and from the U.S. bishops' 1919 "Program of Social Reconstruction" to their current pastoral letter on the economy, the leadership of the Church has in essence been calling for what is now generally termed "economic democracy" -- i.e., various forms of worker or employee participation in the management and ownership of enterprises. Economic democracy falls within the purview of political science because, among other reasons, it raises the question of the way in which enterprises should be governed.
Now that the shortcomings of both Marxist state socialism and free-market capitalism are becoming increasingly manifest, political science is in a sense beginning to catch up with the Church's vision of economic justice. The author of the book under review here, Robert A. Dahl, is Sterling Professor of Political Science at Yale, the author of numerous classics in political science (including A Preface to Democratic Theory), and indisputably one of the world's most accomplished political scientists. That a political scientist of Dahl's stature has recently been charting the prospects for economic democracy is of great significance - for Church teaching, but especially for political science.
That Dahl does not acknowledge economic democracy's debt to the Church is, I suppose, par for the course: one learns to expect as much from academia. Nevertheless, the book performs an invaluable service. This is so because the work of the Church is not the work of political science: the Church does not feel called to get involved in lengthy technical discussions of politics and economics; that she leaves to others.
And so, this book offers us in effect a discussion of how the Church's vision might be implemented (indeed, this book is footnoted approvingly in the U.S. bishops' 1986 pastoral letter on the economy) -- as well as an example of how that vision can be articulated in non-theological terms (whatever Dahl's personal views on religion might be, he does not write as a religious thinker, which is typical of American political scientists).
The purpose of Dahl's treatise in favor of economic democracy is to "help strengthen political equality and democracy by reducing inequalities originating in the ownership and control of firms...." This may sound daringly progressive, but Dahl's appeal is instead literally reactionary: he appeals to the Founding Fathers, many of whom saw a positive correlation between (relative) equality and political democracy. In this early American view, political democracy is considered meaningful only when citizens are, in Dahl's words, "approximately equal in their resources -- property, knowledge, social standing, and so on -- and consequently in their capacities for influencing political decisions." In the agrarian economy of early America, such an approximate equality obtained. But the subsequent rise of "corporate capitalism" in America disrupted this rough equality of condition, for it helped create "a body of citizens highly unequal in the resources they could bring to political life." Money is power, and the excessive power of monied interests grossly and unfairly distorts the democratic political process.
A second way in which our economic system works against democracy is found in the very governing structure of enterprises. Says Dahl: "with very few exceptions the internal governments of economic enterprises are flatly undemocratic...."
An aside is appropriate at this point: Dahl is not a mindless egalitarian absolutist. He states that there are values other than equality which could be endangered by pressing egalitarianism too far, and that democratic governance is not valid in every form of human association. As examples of locales where egalitarian democracy would not be appropriate, one might cite the family, the military, the university, medicine, and the Church herself.
Dahl affirms the right to private property, yet he says, "We cannot leap from my entitlement to secure possession of the shirt on my back...to a fundamental moral right to acquire shares in IBM...." He acknowledges that any form of enterprise requires capital; but the question for Dahl is "whether those who provide capital must necessarily own and control the enterprises to which they supply capital." (One way of supplying capital without the investor enjoying ownership and control is through loans and bonds, he says.)
But is the investor perhaps entitled to personal ownership and control because of the sacrifices he makes? Dahl finds this justification for undemocratic ownership inadequate: he suggests that "workers sacrifice more of their lives by working than investors sacrifice by investing."
For Dahl the strongest argument for private ownership of productive property seems to flow from the premise of political liberty: "the exercise of political liberties typically requires the use of resources, and consequently a sure and protected access to resources is a necessary condition for the exercise of political liberty." But he contends that while such an argument validates a decentralized economic order, such an order does not necessarily require the private ownership of enterprises. Moreover, such an argument does not justify "the right to acquire an indefinitely large supply of resources." Consequently, says Dahl, private enterprise is not inviolate, and citizens "are entitled to decide by means of the democratic process how economic enterprises should be owned and controlled...."
Dahl proceeds to stipulate five marks of an optimal economic order: (1) It would engender more economic equality, which in turn would give all citizens a better chance to participate in the political process on an equal footing. (2) It would have to be efficient. (3) Work itself would have to "become a source of deep and daily satisfaction for most of us." (4) The economic order would have to promote virtue and intelligence in the citizenry. (5) It would have to guarantee economic liberty, in the sense that "we must have a right to gain access to adequate personal economic resources."
Such an economic order would be "fundamentally inconsistent" with Marxist state socialism, says Dahl. Rather, it would be a decentralized order working within the context of both the market and the regulations established by a democratically elected government. Moreover, the enterprises in such an order would be "collectively owned and democratically governed by all the people who work in them."
The people who work in such a firm are the "citizens" of the firm, and they are entitled to "one and only one vote." Within a firm, "its citizens (or their elected representatives or managers to whom they delegate authority) determine wages and decide how surplus revenues are to be allocated." The point would be to shift control of an enterprise from stockholders, or managers nominally controlled by stockholders, to the employees.
It is Dahl's hope that such self-governing enterprises would foster greater "moral responsibility," and this for two reasons: (1) Such firms would "vastly reduce the adversarial and antagonistic relations" between labor and management that "foster moral irresponsibility on both sides." (2) "Being far more numerous and closer to the average citizen than [today's] managers and owners, employees would be more representative of consumers and citizens," and hence less likely to go along with corporate decisions which have harmful consequences for average people.
In the U.S. roughly one percent of the adult population owns over 50 percent of all corporate stock, and this one percent reaps enormous financial rewards. Dahl notes that "American society seems to require economic inequalities more extreme than Jefferson could ever have thought possible or permissible among a people with democratic aspirations." Would a system of self-governing enterprises correct this situation and return us to the egalitarian "classical republican" model of early America? For Dahl, "it is reasonable to suppose...that members of self-governing enterprises would maintain wage and salary differentials within their firms at much lower ratios than the ten-to-one, or even twenty-to-one" that currently exist. "They would also be less likely to provide top executives with the prerequisites that increase the differential even further, in some cases to 100-to-1." Moreover, income and wealth differentials would be further reduced because profits of a self-governing firm would be shared among all its members.
Turning from speculation to precedent, Dahl finds that the differentials in financial reward in actual self-governing enterprises, such as successful Mondragon co-ops in Spain (which were established by a Catholic priest), are generally much less than in private enterprises.
Dahl also addresses himself to various practical questions - e.g., whether workers are competent enough to be engaged in managerial decisions. His position is compelling: If citizens of an enterprise are not competent to govern the enterprise, then citizens of the state are not competent to govern their state. The argument against economic democracy from the premise of incompetence is an argument against democracy as such.
One might also say that the argument for economic democracy is not only an argument for entrepreneurship. If entrepreneurship is valuable because it engenders initiative and a desire for productivity, a willingness to sacrifice and take risks, and a sense of financial responsibility among private entrepreneurs, it should also engender those qualities among workers when workers themselves become collective entrepreneurs. Says Dahl: "in times of stringency when a...private firm would lay off workers or shut down, the members of a self-governing enterprise can decide to reduce their wages, curtail their share of the surplus [profit], if any, or even contribute additional capital funds.... Self-governing enterprises are likely to tap the creativity, energies, and loyalties of workers to an extent that stockholder-owned corporations probably never can...."
Dahl's assessment of the promises of economic democracy is a sober one. He is no dreamy utopian. Much of what he says is based on the experience of self-governing enterprises in various countries, including the U.S. There is no tinge of messianism in his analysis, as he is fully aware of the problems entailed in economic democracy. His argument is not predicated on the conjectures of imported ideologies, but rather is founded on that which is best in the American tradition. The essence of his position is this: "just as we support the democratic process in the government of the state despite substantial imperfections in practice, so we [should] support the democratic process in the government of economic enterprises despite the imperfections we expect in practice."