Democratic deliberation and economic democracy

In Democracy without Shortcuts, Cristina Lafont elaborates the view that participatory deliberation is at the heart of every democracy and that both truth-tracking and mutual justification are the aims of democratic deliberation. What remains unconsidered in her approach is the economic framework in which democratic deliberation takes place. Economies are not neutral structures but exert differently a good or bad influence on democratic deliberation.

It is thanks to John Rawls that this interconnectedness between democratic deliberation and the economic framework has been taken into account. In his theory of property-owning democracy, Rawls holds the following view: no political democracy without a democratisation of the economy. In my comment, I will elaborate on this relationship as a concept of economic democracy. I will argue for that there is no political democracy without an economic democracy.

Highly unequal distributed property – in short, economic inequality – tends to undermine democratic equality and thus the normative core of democracy. In democracies, citizens (according to the idea) have equal opportunities to participate in the process of opinion-forming and decision-making. Economic inequalities must therefore be neutralised for the democratic process by political rights that guarantee every citizen equal opportunities for political participation. However, this democratic equality is threatened by informal influences that transform economic power into political power. Although every vote counts equally in the electoral act, a minority of owners has additional resources for political influence. Such influence can be exercised directly or indirectly.

Direct influences include election campaign and party financing, interlocking personnel, lobbying, cartel formation and corruption. A legislator can put a stop to such influences by taking appropriate measures of transparency, control and containment such as anti-corruption laws, anti-cartel laws and regulation of election campaign financing.

Indirect influence, on the other hand, can hardly be stopped by legislation. Here, economic power is converted into political power via the ‘detour’ of biases. Economic inequality prepares the ground for biases. At the lower end of the social stratification, persons perceive themselves only as recipients of services generated by the property of others. If they are not able to manage their own affairs in the same way as their fellow citizens, they perceive themselves as failed and as persons of low status. As inequality research has shown, this can lead to attitudes of inferiority and bitterness as well as cynical or indifferent attitudes towards the political system. This lack of self-esteem promotes populist ideas of resentment towards anyone who is better off than himself.

Such biases favour the transformation of economic power into political power. Biases are opinions that are considered more justified than they are. They are immunised against arguments, criticism and experience. Opinions are not strengthened here by arguments but by the perseverance with which they are held on. Such insusceptibility to arguments leads to a situation in which rival opinions are no longer mediated by rational reasons. Here, opinions owe their penetrating power not to the better argument but to the socially effective impact. The outcome of will formation is determined by opinions that prevail thanks to their uncompromising hardness. Problem-solving or communication-oriented reasoning is thus replaced by the exercise of power. Economic inequality can therefore impede the unbiased formation of will and thus open a gateway for interest-based influences.

Here, owners of assets have an advantage of power. For only those who possess economic property possess economic power, which can be converted into political power. An informal influence is exerted by investment promises or impending capital withdrawals, by the creation and control of public attention or by cost-intensive advertisements for values and lifestyles. Those who, on the other hand, are excluded from productive property are left with only the ‘merely formal’ electoral act. If economic power is unequally distributed and transformed into political power, then the political participation is unequally distributed too.

The transformation of economic power into political power can be contained by economic democracy. In economic democracies, the ownership of large assets is as widely spread as possible, so that it is possible for all citizens not only pro forma, but also de facto, to experience themselves as politically self-effective.

Firstly, economic democratic property forms a hybrid of individual and collective property. On the one hand, individual owners participate in the privately organised market with free choice of occupation and income incentives. On the other hand, individual property mixes with common property. Above a certain size, the respective economic assets are joint property. Ownership of large assets can only be held by many co-owners, but not by one or a few individuals. For example, a large enterprise may only be jointly owned by owners; thus, a large enterprise cannot be sold on the basis of an individual decision, but only by a majority decision of the community of owners. A well-known example of such a mixed form of ownership of economic democracy is the cooperative economy, as practised by the Mondragòn cooperative association, Spain’s 10th largest corporation. Another example is the socially controlled employee funds, as designed by Rudolf Meidner.

Second, economic democracies are characterised by a direct and participatory mode of distribution. The early predistribution of ownership precedes the late redistribution of wealth. A tax-financed redistribution of results takes place ex post by redistributing them after they have been generated. In contrast, property in economic democracies is already distributed within the value creation process. Property ownership is thus predistributed ex ante before it is used by the owners, among other things, to generate wealth. Through preventive participation in property ownership, the unequally distributed wealth is already prevented in the upstream process of production. Thus, the negative consequences of economic inequality do not have to be rectified by a delayed damage repair.

Third, economic democratic property has rationalising effects on public deliberation. They achieve three effects for the political process.

Firstly, ownership mobilises the willingness to form one’s own judgements. Owners have the power of disposal to use property for purposes which they themselves determine. If someone as owner exerts this self-efficacy, then the question of what is important to him immediately comes to the fore in practical action. Their decision-making power provides owners with incentives to form their own opinion (albeit together with others) about social goals. Ownership therefore motivates people to form well-informed judgements out of self-interest.

Secondly, ownership increases the democratic experience of self-efficacy and thus the willingness to participate in public deliberation. Without the background noises of informal influence, participants experience that their voice is heard and that they can make a difference. This experience of self-efficacy, in turn, stimulates the willingness to participate argumentatively in the common opinion and will formation. If arguments pay off and are not outweighed by informal influences, then the willingness to introduce well-founded considerations into the public debate increases.

Thirdly, ownership promotes the perception of deliberation as a process of social cooperation. Members of economic democracies mutually presume not to be biased by those biases that are constitutive for societies with economic inequality. Thus, they do not participate as opponents but as fellow partners in a public deliberation.

Finally, the argument in favour of economic democracy can be summarised: the first premise is that biases are nourished by economic inequality and are dismantled by distributions of ownership. The second premise is that biases foster the transformation of economic power into political power. It follows from this that the economic democratic distribution of property promotes democratic deliberation and insofar political democracy.