Economic democracy and the Labour tradition

There is a familiar picture of the place of economic democracy in the Labour tradition that can be found in many histories of the British left, namely that there was an all-too-brief period – roughly between 1910 and the early 1920s – in which guild socialist ideas set the left's agenda and raised the prospect that widening democratic participation rather than redistribution would become the left's central concern. But this was a short-lived episode, so this standard account goes, representing a suppressed alternative path that the left might have taken, because guild socialism was in short order pushed out of the way by the return of a dominant centralising and redistributive Fabianism.

In this article I want to ask: what happened to ideas about economic democracy in Labour thinking after guild socialism? Did they just disappear, subsumed under Fabian redistributionism and governmentalism? I will suggest that they did not. In fact, a commitment to economic democracy persisted in an attenuated form into mid-century social democracy, but the nature of this commitment also mutated, becoming less radical and intertwined with the growing power and prestige of the trade union movement. As I will discuss, radical ideas about economic democracy were not so much the victim of Fabianism as they were of a particular understanding of the role of trade unions within Labour ideology and culture.

Keynes and the end of laissez-faire

A useful place to start this argument is with John Maynard Keynes' seminal 1926 lecture, 'The end of laissez-faire'. In that lecture, Keynes diagnosed that advanced capitalist economies were effectively evolving into a hybrid of capitalism and socialism. First, he thought that semiautonomous public corporations were more and more taking on the organisation of economic affairs. Second, he argued that large capitalist enterprises were increasingly run by a salaried managerial class rather than by the owners of the enterprise, who were more and more often a dispersed group of relatively passive shareholders. This supposed split between ownership and control meant that, in Keynes' view, big corporate organisations were effectively socialising themselves, since the management of such organisations had no direct stake in maximising shareholder profit but were concerned rather with the stability and reputation of the organisation.

In short, Keynes' vision was of an emerging economic era in which the state and large private and public corporations collaborated in managing the economy, particularly with respect to certain important tasks that Keynes thought would simply remain undone in the absence of such collective management (such as the coordination of savings and investment). In some ways, Keynes' ideas correctly anticipated the evolution of mid-century social democratic political economy – it is in certain respects close, for example, to the model laid out in Anthony Crosland's 1956 The Future of Socialism. Like Keynes, Crosland was fascinated by the split between ownership and control and its implications for the relationship between private and public ownership. But one important element of social democratic political economy remained absent from Keynes's account (although it was certainly part of Crosland's). Keynes stressed a broadly elitist model, in which large public and private corporations were run by experts and professional managers. The idea that the representatives of the workers might have any special role to play in this new social dispensation was not one that Keynes integrated into his prognostications.

So while British social democracy in its pomp drew extensively from Liberal thinkers such as Keynes and William Beveridge, perhaps the most distinctively Labour element of the political economy of that era was a commitment to ensuring that workers' voices, as well as those of technocrats and managers, would be heard in enterprises and in public policy debates. Mid-century revisionist Labour thinkers, such as Hugh Clegg and Allan Flanders (the influential academics who formed the so-called 'Oxford school' of industrial relations), as well as politicians such as Crosland, followed in the footsteps of Keynesian analysis by setting out a social democratic programme that bypassed the familiar socialist focus on nationalisation and drew on ideas about the separation between ownership and control in corporations. But what they added to the Keynesian vision was a distinctive Labour emphasis on the associational autonomy of the trade unions to negotiate wages and conditions on behalf of the working class. They did not present this form of worker representation as purely about redistribution or wage bargaining; rather, they also claimed that union representation was itself an important democratising influence on economic and social relations.

Collective bargaining as economic democracy

This discourse of democratic corporatism was in the fortunate position of inheriting the social patriotism aroused by the second world war. Its exponents emphasised the extent to which 'stable democracies' – in essence, the English-speaking nations and Scandinavia – had developed a mature democratic culture in part because of the important democratising role played by labour organisations. A Whiggish story about the gradual growth of Anglo-American liberty and democracy was adapted to encompass the emergence of constitutional government in industry thanks to the union movement. The existence of such pressure groups, corporatist thinkers argued, helped to diffuse any potentially totalitarian concentrations of power, of the sort exhibited in Nazi Germany and the Soviet Union.

Such Labour thinkers therefore adopted the guild socialist emphasis on independent labour organisations as the primary mechanism by which economic life could be democratised, and stressed the authoritative democratic credentials of a political system that institutionalised the formal representation of unions in the policy-making process. JK Galbraith's famous phrase 'countervailing power', which made its entry into political debate in his 1952 book American Capitalism, was eagerly adopted by these authors as crystallising their goal: a society where the power of capital was constrained and regulated by the state and by powerful civil society organisations such as unions and consumer groups.

According to this analysis, however, unions could only play their legitimate role in a pluralist democracy if they remained independent of both management and the state. Furthermore, on the basis of the experience of industrial relations in the nationalised industries in Britain since 1945, the ownership of industry was deemed largely irrelevant to the role and status of organised labour. Under both private and public ownership, Labour revisionists argued, independent trade unions would be required to ensure the voices of workers were articulated. Crucially, though, it was the process of collective bargaining that revisionists argued would promote democracy and not direct worker participation in industrial decision-making. Through collective bargaining, rules and procedures could be agreed that would narrow the scope of arbitrary management decisions and hence grant protection and control to workers. As Allan Flanders put it, collective bargaining should be seen as introducing 'the "rule of law" in employment relations'.^[1]

The corollary of the emphasis on collective bargaining as democratic was that direct democratic control of industry by the workers was deemed unnecessary and undesirable; the role of labour organisations was to act as if they were a parliamentary opposition. In Hugh Clegg's famous phrase: 'The trade union is thus industry's opposition – an opposition which can never become a government.'^[2] Post-war corporatists ruled out the syndicalist or guild socialist dreams of earlier radicals; they narrowed the definition of industrial democracy to such an extent that it became, to all intents and purposes, co-extensive with collective bargaining.

Why did such Labour revisionists object to stronger forms of industrial democracy? Three reasons were offered. First, it was argued that formal worker involvement in the making of industrial decisions (as opposed to merely influencing them) would jeopardise the independence of trade unions. Their pluralist vision depended on the bracing democratic effects of independent groups – the state, business and unions – contending with one another; collusion between these groups, in particular between management and unions, was thought likely to undermine the union leadership in the eyes of its members. The suspicion of 'being in the boss's pocket', maintained Clegg, would inevitably attach itself to the union leadership if it was involved in making management decisions.^[3]

Second, revisionists believed that a more radical form of democratic self-government in industry was likely to be inefficient and perhaps even impossible to render workable in practice. A clear functional division was said to exist between managers and workers. While workers could play a role in influencing management decisions, the technical requirements of modern industry, and its large-scale, meant that managers must nonetheless be granted the power to make the final decisions themselves.

Third, revisionists argued that a radical model of industrial democracy offered a romanticised image of democratic self-government that failed to get to grips with the then cutting-edge findings on this subject by social scientists. It is clear, for example, that the work of Joseph Schumpeter and Robert Dahl had been read and absorbed by these authors. From these sources they derived a 'realist' view of democracy, which was sceptical of the appetite and capacity of the average citizen when it came to engaging in detailed democratic deliberation, and emphasised bargaining between multiple pressure groups as the primary means of fostering democratic government. This 'realist' theory was also extended to internal union democracy. Revisionists had low expectations of the degree of participation in union affairs that could be reasonably required from union members and saw the centralisation and professionalisation of union leaderships as inevitable.

They also expressed doubts about the normative desirability of a more participatory democracy. Crosland, for example, argued on a number of occasions that it was empirically unrealistic to expect widespread participation in decision-making, since 'all experience shows that only a small minority of the population will wish to participate.' But he added to this piece of Schumpeterian political sociology the normative claim that this behaviour was entirely justifiable, since the bulk of the population would rightly 'prefer to lead a full family life and cultivate their gardens.'^[4] The importance of the individual being free to cultivate his or her garden was a theme that Crosland reprised on a number of occasions – as Stuart Hall observed, it was 'Mr Crosland's metaphor for happiness.'^[5] In Crosland's view, liberty required that individuals should be free to opt out of public life:

'if we believe in socialism as a means of increasing personal freedom and the range of choice, we do not necessarily want a busy bustling society in which everyone is politically active, and fussing around in an interfering and responsible manner, and herding us all into participating groups. The threat to privacy and freedom would be intolerable.'^[6]

There was therefore some truth to EP Thompson's observation that, according to this Labour revisionism, 'the main participation demanded of the people is to cross the ballot-paper 13 or 14 million times.'^[7] But behind these ideological arguments on the Labour right, there also lay a fundamental fact about the balance of power within the labour movement at that time, namely the strong distinction between the industrial and the political that pervaded internal Labour politics – the industrial being understood as the province of the trade unions, and thus segregated from the purview of Labour politicians. On these grounds, the revisionist right was reluctant to take any initiatives that might be construed as disturbing the delicate division of labour between party and unions that had evolved over many decades.

The New Left critique

Of course, one further interpretation is that these reasons for limiting direct worker participation in industry were themselves merely cloaks for an underlying desire on the part of Cold War Labourists to preserve or conciliate existing social relations rather than to transform them. Such at any rate was the view taken by the New Left as it emerged in the 1950s and 1960s. Many of the key theorists associated with this movement promoted ideals of participatory democracy that invoked the heritage of an earlier, more radical socialist pluralism. C Wright Mills's first book, for example, was a detailed survey of the American labour movement and its leadership, The New Men of Power: America's Labor Leaders (1948), which concluded with a powerful plea for the democratisation of the productive process that was inspired by GDH Cole's guild socialism. According to Mills, unions should ensure that 'in every workshop or its equivalent the unionised workers would continually strive to encroach upon the functions now performed by owners of industry and their appointed managers.'^[8]

Similar ideas were also expressed by the British New Left as they digested the implications of the ideas expounded by Labour revisionists. When Hugh Clegg's A New Approach to Industrial Democracy (1960) was dissected in the pages of New Left Review, Royden Harrison opened his review with a quote from GDH Cole's Self-Government in Industry (1917) and proceeded to rebut Clegg's argument that guild socialist-style workers' control was impractical and undesirable. Democracy, Harrison argued, did not depend on the existence of organised opposition to government, but on the capacity of the people to change governments. A democratic model of industry should therefore involve direct worker control over management. It was essential, Harrison continued, to set about creating an economy that mixed state ownership of large, strategically important industries (but with worker representatives on their boards) with other industries owned and run as co-operatives or owned by the state but run by the workers themselves.^[9]

Yet the New Left critique of post-war corporatism was a double-edged sword. While in one sense the New Left tried to radicalise corporatism in a direction similar to that sought by earlier guild socialists and syndicalists, in another the New Left helped to foster slogans and arguments that could be used against corporatism per se. Two examples seem particularly striking in retrospect. First, the New Left's critique of union leaderships and bureaucracies, and of the cordial relations between union leaders and corporate bosses, at times cultivated an image of unions as ossified, oligarchic institutions that stood in the way of individual freedom just as surely as large corporations. Second, the New Left's dismissal of interest-group pluralism as a smoke-screen for rule by elites paved the way for an eventual reassertion of individual rights over the group rights enjoyed by unions under the pluralist dispensation. The pluralist model of industrial relations allowed unions a modicum of organisational autonomy to mobilise their members in collective action, even if union activities required individuals in the work-place to comply with decisions and actions that they did not personally consent to. However, the New Left's characterisation of unions as just another elite-dominated pressure group generated a powerful rhetoric that privileged the individual over the group. New Left writers at times suggested that union collective action simply reflected the interests of an elite class of labour leaders. The group rights enjoyed by unions were, on this New Left account, vulnerable to the claim that they did not in fact serve the interests of their membership. Given these assumptions, a discourse of individual rights guaranteed by the state began to hold greater appeal than the more traditional call for union-based solidarity. Both of these strands of New Left thinking – the critique of unions as remote oligarchies and the trumping of group rights by individual rights – were to have a wide cultural resonance, in part because they intersected with another, much more hostile analysis of corporatism that rose to prominence in the same period, namely that of neo-liberalism – but that's a story for another day.

Conclusion

Corporatist thinkers on the Labour right therefore envisaged social democracy as not merely an exercise in redistributing economic resources (important though this objective was), but also as centrally concerned with the democratisation of economic life. They were strongly committed to the notion that employees should have greater control and agency in their working lives than would be permitted under unregulated capitalism. This was to be achieved by allotting a powerful role to unions in industry and politics, and in particular by prioritising collective bargaining as the primary means of representing and articulating workers' interests. The boundaries of this industrial democracy were therefore drawn more narrowly than had been entertained by earlier guild socialists such as GDH Cole. As the New Left pointed out, one consequence of this narrowing of Labour's political horizon was that these corporatists incorporated within their theory of industrial relations an elitist view of democracy that to some extent stood in tension with their egalitarian and democratic commitments and promoted a democratic theory of trade unionism largely grounded on opposition to managerial power. It is certainly arguable that a more constructive and durable corporatist culture might have been constructed from an industrial relations system that established greater common ground between the management and the work-force, and experimented with worker involvement in industrial decision-making. However, it should be noted that this was not in fact the New Left's goal, which was after all ultimately to end capitalism rather than revivify it.

An inescapable problem faced by radical proposals for economic democracy in the classical period of British social democracy was therefore that trade union collective bargaining was at that time so potent and pervasive that it crowded out the space for other forms of economic participation. Self-evidently, this constraint no longer applies to present-day Labour politics. Indeed, as Labour once again grapples with how workers' voices might be heard in economic life, it seems likely that new policies in this area will face a quite different problem – the current relative weakness of trade unionism in Britain might tempt policy-makers to design new forms of economic democracy without any meaningful role for unions within them. The danger today is that, far from collective bargaining dominating work-place participation, projects to enhance economic democracy might well fail to engage at all with the existing democratic organisations that, in very difficult circumstances, are trying to push the interests of workers up the industrial and political agenda.

Ben Jackson is associate professor of modern history at Oxford University and the editor of Renewal: A Journal of Social Democracy. This article draws on material previously published as 'Corporatism and its discontents: pluralism, anti-pluralism and Anglo-American industrial relations, c. 1930–80', in Bevir M (ed) Modern Pluralism (Cambridge University Press, 2012).

Notes

1 Flanders A (1970) Management and Unions: The Theory and Reform of Industrial Relations, Faber: 225 ^back

2 Clegg H (1951) Industrial Democracy and Nationalisation, Blackwell: 22 ^back

3 Clegg H (1960) A New Approach to Industrial Democracy, Blackwell: 22–23 ^back

4 Crosland CAR (1968) 'Socialists in a Dangerous World' in Crosland CAR (1974) Socialism Now, Jonathan Cape: 65–66 ^back

5 Hall S (1958) 'A Sense of Classlessness', Universities and Left Review, Autumn 1958: 29 ^back

6 Crosland CAR (1971) 'A Social-Democratic Britain' in Crosland CAR (1974) Socialism Now, Jonathan Cape: 89 ^back

7 Thompson EP (1960) 'Revolution', New Left Review, 3: 6 ^back

8 Wright Mills C (1948) The New Men of Power: America's Labor Leaders, Harcourt, Brace and Company: 252–255, Cole cited at 253, 258, 310 ^back

9 Harrison R (1960) 'Retreat From Industrial Democracy', New Left Review, 4: 32–38 ^back