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Economic democracy and Sweden

Now, they show that such companies have been studied now for almost four decades and economically, they perform well actually, they on average outperform when it comes to productivity and sales and growth companies that are governed by outside capital, the productivity side, they pay somewhat not very much, but somewhat higher wages. One of the most important things is that the people who work there usually get much, much higher pensions through that they also get dividends from the, from the shares from the capital that is in operation. And it’s obvious that people working in such companies are more satisfied and engaged. So, so far, so good. Let’s see. So why am I interested in economic democracy? Well, I take inspiration from two people one is Robert Dahl, who is you can say the big name he’s no longer with us, but the big name in in liberal democratic theory in political science. And interestingly enough, he argued that the liberal democratic perspective there were no reason to shy away from a discussion of economic democracy and he argued quite eloquently that important thing was to do this experimentally. And then he was also to some thought, inspired by a person that I will mention later on, David element. The other person is very much with us. It’s a bit for us. She has written a book about this and she’s argued that we should go for economic democracy through introducing a bad camera system so employees would have one chamber. I want us would have one chamber, and she takes this from how democracy was introduced political democracy. She and five female colleagues have had an enormous success in open article, there will be March. It’s been published, I think, in 47 major international newspapers in 20 languages or so for this. So she is also a big inspiration. And although I’m not very convinced about her idea of my categories, but it’s a little on the agenda. However, in my professor of political science, it’s a completely dead thing. If you take the annual review of political science, that I’m actually on the board of this publication, and I’ve tried to convince my colleagues that we should have at least one article about this, but no, I think within the amount of 500 articles since this is publication started in 19. I think 94 There is not one single article about this. If you take the flagship publication, the American Political Science Review that is usually ranked as number one, there is nothing during the last two decades. At my department, we have a very successful and very impressive program known as the varieties of democracy that is led by my esteemed colleague, Stefan Lindbergh, that has had a huge success in in the Mediterranean theorizing democracy, but also they do not take up economic democracy at all. And if you go to Swedish political science, there was a dissertation at my department, but it was 25 years ago. So the question doesn’t exist in in political science, you can say. So this is doors argument for economic democracy, so long, quote, but he says work is central to the life of most people, for most people that occupies more time than any other activity effects or fantasies of either income, consumption, savings, status, friendship, leisure, security, family life, old age, self esteem, self fulfillment, wellbeing, personal freedom, self determination, self development, and innumerable other crucial inputs, the values of all the relations of authority, control and power in which people are routinely evil, known or as salient, persistent and important in the daily lives of persons as those that are subject to at work with government have such immense consequences for daily life as government of the workplace where could dispute his work ethic more in cities? So he was very outspoken here in the late 1980s about the importance of that we think about economic democracy. I have also a personal experience here. I was for four years in the Research Council of the National Board for social insurance in Sweden and I and my colleague had to decide about getting research money for research applications, and I must have read like 400 of them, and many of them maybe most were about this problem of increasing burnout, psychological problem more being harassment. So it was very clear for me that there were lots of people who felt that they were not respected. They were not taken seriously. They had no influence in their workplace, and this actually made them very sick. So I think there are good arguments for this is very interesting. He sent to the Finnish Civil War, the gruesome Finnish civil war in 1918. By the Social Democratic Party, he’s still party secretary to try to find a solution and he fails and that war goes on, but he draws the conclusion that it’s absolutely central that the struggle for socialism is subordinated to the democratic principles. You think that a Social Democratic colleagues or party friends in finance, are doing very irresponsible and stupid thing, and it ends in a miserable defeat for them, but it’s also interesting when it comes to socialism. It’s actually a very inspiring socialist thinker and one thing he says in 1920s is that it will we have to think carefully about this because it will make no sense to have the high level civil servants in the state run the enterprises, the enterprises should be autonomous and self governed. secd Roselli is also very interesting. Russell is actually the one who coined the word, or the term liberal socialist here is a socialist and is equally appalled by the failure of the social this party in 1919, to take a responsible position in the almost civil war that goes on in Italy in 1990. And then paved the way for fascists he is, becomes a strong Anti Fascist opponent is pretty important prison by Mussolini. He writes this book in prison in 19, let’s say 1929. Yeah, then he flees to France, where it becomes a very, very important Anti Fascist organizer. His ideas are the same as a nurse you have to absolutely subordinate socialist to the democratic principles to liberalism. And he’s also arguing that the socialist production has to be carried out not by the state is very critical of what goes on in the Soviet Union, for example, but by autonomous enterprises Corporation so here’s the first one who writes this little strange term, liberal socialists try to connect them. He. The reason nothing comes out of it is that Rosa was murdered by Mussolini’s French agents in 1937. Mer is dethroned. He was sure and many will show he will become party leader in 1946. But he’s been flown by the next generation who is not interested in socialists but want to build a very strong welfare state. Okay, next. Yeah, so Sweden. Why is Sweden a counterfactual as well? Sweden is first a very democratic country. Democracy is basically the religion. There are lots of producer and consumer cooperatives in the country housing cooperatives, many in the agricultural industry. There is a very vibrant civil society, lots of very active voluntary organizations. The country has a very high level of social trust. There is a strong union movement that programmatically is in favor of economic democracy. It’s in their program. As you know, we have a strong social democratic party. But there are very, very few such companies in Sweden and there is no big sort of showcase company that is governed by their employees, such as Mondragon in Spain or the John Lewis companies in the UK, or the public company that currently employs 200,000 people in the United States. And there is, according to the European Union, to investigate this Sweden has the worst institutional support structure for such companies. So it’s very strange why we don’t have them because this really should have been fertile ground for such companies. So this needs to be explained next. Yeah, we have many more such companies in Spain, Italy, in the UK, and especially in Super capitalistic United States. Currently, about 10 million employees work in what is known as such a sub company there, it’s about 10% of the workforce 7000 companies, of which 4000 are majority controlled by the by the employees. And what is interesting is that employees in the United States, due to this insert program can buy companies with a future profits or security, thereby not risking their own money. This is legally not possible in Sweden. It’s also very interesting that this has very strong support both from the Republicans and the Democrats, actually, one of the most eloquent supporters of the Aesop movement is now a close advisor to President Joe Biden. Next, please. So the first explanation I hear and this is quite surprising to me and says freedom I’m very much against economic democracy. Let me take a personal experience. In 2006, both SAAB and Volvo were in deep trouble in my part of Sweden, and especially the sole people both the unions and the management team probably consent we had everything to be successful. We have the models, we have the knowledge, we have the market, we have the technology, we have everything. The only thing we need is a new owner. And it was basically the same message from from Volvo. So I wrote an open article in our newspaper he said, when I say basically, if everything what you say is correct, and I have no reason to doubt this, what is this new owner going to contribute with? No new technology, no new markets, no new knowledge, no nothing. It’s just capital. So why don’t you go to the big pension funds and other capital agencies and just borrow the money if what you say is correct. The next day I got two phone calls, spoke from the civil engineers, union. People at both Volvo and Saab, especially at Volvo they said we have actually tried this we have actually put up a special organization for making such a bit, but it cannot work at all here. Why? Because the blue collar Metal Workers Union even doesn’t even want to talk about they say absolutely not. So now so doesn’t exist. And Volvo cars is owned by a big Chinese capitalist with a close connection to the Chinese Communist Party, not a very democratic organization. Next piece.
I also when I published a book a number of years ago, I did a small experiment that one of my assistant to an FAQ remember that she made calls to the Central Union, asking for help to establish a worker cooperative with the local municipality or city wanted to privatize a public service for example, a school a daycare center or elderly castle and next place, or for unions responded that this was not their business at all and that the members return to an employee’s organization. Next place. The result of this is very few employee cooperatives in public services have been established in Sweden. Instead, many are now operated by for profit driven risk capitalist corporations. So what we have is that the public sector unions here miss the golden opportunity to establish economic democracy. Next, please. Here we have two people. This first picture is Richard P. Freeman, one of the world’s leading labor economist professor at Harvard, and with tons of publications here and the other one is called editorials. From the Sherman, former chairman of the Swedish blue collar union takes place. In 2015, Freeman wrote a report that was commissioned by the Swedish blue collar union about this model for profit sharing. It’s a very good report. He makes all the good arguments why such companies work very well. It makes all the good arguments why such a model would contribute to a decrease in economic inequality. He also shows that this could be a very new interesting way for the union movement that has been losing members and steam for a long time. I actually read this report for the first time in about eight weeks ago or something and I so I emailed Freeman and asked, So what was the response from ello from this report, you wrote and Friedman wrote me back the next day saying, people are very polite, that very clear answer from potato tubers on it. We’re we are never going to do this. And you have to ask why. And in the paper, I present two arguments first, lessons from organizational theory. One is that the organization interest four are more important than the authority for the EU. So by this I mean that they are afraid that they would lose power in such a situation where their members would actually be the ones who were running or at least appointing the ones who were running their companies. And then you have what I call organizational learning are kind of trained in capacity. The union officials in Sweden have become utterly skilled in playing on the very complicated and complex and huge huge system in Sweden of industrial relations to those this is work safety relations and laws about who can be fired or when about working conditions for so on. And so they have they have trained not to take sort of the responsibility for the company. They play the always the adversarial game. So they are sort of against this idea that that most of that knowledge sort of their sunken costs would would become pretty, I wouldn’t say useless but not very valuable if such a model would be established. So the unions are in Sweden are clearly against this. At least the blue collar unions I should say, next base. This is a long story actually. In 1920, when the chairman of the Metal Workers Union was a member of the DEM social democratic governance committee on industrial democracy, and he argued strongly against codetermination concept because this would be his thinking heard the job in 1973, when one of the very few SOP programs were established me is one of the largest Panthers men’s Congress bank and the bank employees union was against the system I should say now pays about 2.5 million US dollars equal to all employees when they retire after about 30 years in the bank. But the unions were against it didn’t work. Next piece so my second explanation is that the political left has had a huge misunderstanding of the relation between the companies that have been studied and that I’ve talked about all work in market economies, of course. My argument is that markets are not capitalist markets are much older than capitalist alternatives to the market the centrally planned production and nationalization of industries have been tried. And I have to say, with very little success, I would like to point out their interesting philosopher, Elizabeth Anderson, who has written about this and she says she has a sense of saying, markets were once left was the left people in the early 19th century, who were in favor of markets. And then we have one of my other favorites from another school of history. And he presented many, many years ago in early I think, late 1980s. A theory about the difference between capitalism that he thought of as controlling monopoly and markets he says, or openness transparency, competition and deliberation, next piece. So it’s also the case that markets are neither built on self interest utility maximization economic, nor that they generate this type of behavior. I refer to a very interesting experiment showing that the more groups are market oriented, the more they will trust in what is known as experimental prisoner’s dilemma games. Well functioning markets are actually built on trust because formal contracts usually cannot be complete, and they also generate trust. This is both social trust and institution. So this idea that the left or the right I’ve had that sort of the left side markets will generate self imposed rent seeking utility maximization and the right says there are built to be both both are romantic. Next please. What is this view of market this right this is the famous Marxist Immanuel Wallerstein when he reviews protests theory, this is what you say, if produced, right, the policy implications for the contemporary world are messy, if capitalist capitalist is monopoly or not the market free market, then what is to be done? It’s a question that may be answered very differently from the ways in which anti systemic movements have been answering it for the past 100 years, and I agree, next place. The second misunderstanding is that both the left and the right we have the Friedman argued that the right to control the production of the enterprise, the firm of the corporation comes from the ownership of the capital that is used for the production. This is a very serious, complete and fundamental misunderstanding of economic power in the market. Economy. Next phase. This is true genius. David element is an American economist. He’s worked as an adviser to the World Bank president and he has constructed what I call the theory the contract theory. He says power does not come from membership but from the construction of the renting contract. When labor that is worthless and capital the capital owners meet in the marketplace. It is not legally preordained, which way the rental contract will be made. Capital may hire labor, labor may hire capital or some third party may hire both labor and the direct control of rights over the use of the capital and the labor in the production are determined by the direction of the rental contract, by whom is who. And I think this is utterly important. So all of us in this seminar could of course tomorrow start a company, say a publishing house and we would go to some bank or pension fund and get the loan that is rent the capital to make this happen. Then it’s we’re not the owners of capital who decides about how to organize the production. So this idea that it’s its power comes from owning it’s kind of bickering. It’s obviously for the next reason. This is an article I wrote in 1984. In Swedish I call it postponing, after a socialist or fleet Allah, the Socialist Party. I saved myself here the basic principle in this model is that it will no longer be the possession of capital that is dominating power in the relations of production, the connection between owning capital and the right to command organization of production. will simply be the sole, what is nowadays two chairs will be transferred to both a transition to socialist does does does not mean a transfer of capital power from one group to another, but the real abolition of the power of capital in the production. So I haven’t read element N. So we came about with the same idea about the same time so it’s a little interesting that this has happened one more time, I should say Next please. Oh, we don’t get this is a mistake. Next please. This I will argue is to some extent already happening that shares are becoming bonds. Now if you own share, and if you own the majority of a share in a company you have capital power, yes. But 85% of the Swedish publicly traded stocks are not owned by capitalists but by institutions, pension funds management, and the large majority of owners of shares now they have no interest or competence in wielding any power in the production. And now we have a new thing that very few people at least in Sweden have had thought about there is a huge increase in index funds that own chips. Now index funds are very different from managed funds because they do not make any decisions about where to put the money. They just use a robot or an algorithm and spread the money all over the place on the stock market and follow the index and the index funds have become very, very popular. Because it turns out that the managed funds those guys who tried to pick the winners, they lose the last 10 years the average managed funds have been beaten by the index funds in the United States. The index funds have gone from owning about 10% to 25% of the stock market in the US in Sweden. If there is a very interesting discussion now in one of the business journals, where the people who are operating management’s are very angry at the index funds because the index funds do not take any responsibility for stewardship for the companies the management do this at least in Sweden by taking a look interest and being active in in selecting people to the board but the end of transit they refuse they’re not interested. So what we see here with the index fund revolution, is that capital is in reality advocating from running the corporations. And this we have to theorize much more and look into much more detail. There’s a new and very, very interesting development. Next piece.
My short explanation for why we do not see such companies in Sweden is the miserable failure of the world wage earner for us. As many of you know they were established in Sweden in 1983 by the Social Democrats under strong pressure from the blue collar unions after a long and very bitter political fight. One of it was that this fight mobilized very much the political right and politicize the business community that started to fund several neoliberal think tanks before that sort of Employees Federation were more likely at national authority. They were not very into politics, but now we have changed. The funds were abolished by the center Conservative government in 1992. After 1992 and the Social Democrats have been back in government, many times they have never suggested to establish. Instead, this defeat has led to a ban within the left to even talk about economic democracy. It’s very clear that you cannot even speak use the word found because people will not listen to you or if you speak about economic democracy. So this this defeat has had several very bad effects on board discussion of economic. Next, please. What was going wrong with the phones? Because it was never clear what the policy would imply for workers in the firms where the phones had chairs. It was not clear how firms where the firm’s own chairs will differ from other firms in how they operate. It was not clear how to handle the eventual injustice for those union members working in firms where the funds did not own any shares. There were not clear what the benefits would be for the individual workers, the local union and the Social Democratic parties had absolutely no to any individual benefits in terms of money from but I think the most important thing here is that our wage earner found that it was based on the gender and capitalist logic and it that is the owning of capital that should give the right to power in the production. And as I’ve argued before, this is this is not how it should work. This is this is a complete misunderstanding of power and capital in America. Next, please. So let me summarize. economic democracy works. We know that Sweden should have been a very fertile ground for such companies, but this has not happened. The first reason is opposition from the unions I think I’ve actually found that historical paradox here. The stronger the unions are in a country, the less likely are we to see economic democracy. I should also say I tried to get some of the business think times interested in this idea because in the US, this is not the politically controversial thing. Also, the Republicans are interesting, but it’s very hard to even get them to talk about this. It’s very obvious for me, business research community, I think tanks, there are several things. They are actually not the first priority is not a very successful market economy because then they would have been interested in this company. Their first priority is the interest of capital owners. Yeah, the second reason is the left complete misunderstanding of the relation between markets and capital. And the third is the political defeat of the wage earner foreign policy that created a ban. It’s very clear, for example, from the excellent documentary movie that Patrick kotsky has produced that is available on YouTube when he interviews the head economist of the blue collar union, it’s very clear that this is what he says after the defeat of the wage earner foreign policy. We do not there even to talk about this. Next piece. Yes. Is there a future for economic democracy? I think so. Political leaders ideas getting increased support, not least in the United States, but also in Britain. For example, and in Italy. And as I mentioned, one of the foremost promoters of this model is now a close adviser to President. But it will not happen through the mobilization of the industrial working class. This is my second big mistake. This idea makes absolutely no sense. It’s never been the case that the subordinated social class has created the new society. It was not the slaves that created feudalism. It was not the peasants despite the endless apparatus that created capitalism. It’s always been a new class with a new logic of production that has created the new economy. I think it’s to some extent already happening in the most advanced areas. Of the production, the knowledge economy is then produced knowledge is the most important asset in the production chapter release power to the employees. Yes, to take one example of this three years ago, six very successful owners or business leaders in what is known as the new economy. The new knowledge economy John Young people, they wrote an op ed article in the leading Swedish daily newspaper donors later, what demands they had for for from the government and their first event. The first event was this, it must become easier to make our employees why is this because they need their engagement, they need their support, they need their knowledge and they cannot command they say I own the capital. So I know what is going to be done in this company because that is not how it works in others. Yes. Is the one more? No? Yes, this was what I had to say. Thank you very much.
Thank you. So much for this very interesting talk. was a bit tricky circumstances. Now. We’ll take a five minute break before we start the question and answer period. So we will reconvene at three minutes to three o’clock. Okay, it’s time to start the question and answer period. So welcome back. Everybody else would say something around this. We will use the chat function so you can send your question in the chat, or also in, if you want to do that, and that’s usually called 56075607. And since we get mixed results from different fields, we also tell you your area of study so we can make sure that we take question from different disciplines. Quite a nice mix. So if you want US president wrote your name and era study in the chat, for example, custom philosophy files the question and we also do follow up questions. So the main questions or follow up questions, and then just write follow up and then the name of person want to follow up to and follow ups that are taking before new questions. And when it’s your turn, I would call upon your saying the spotlights so that your videos have come available to the audience, and you can then ask the question out loud, so that we start with and we do have already one question from others. So can you take us into the spotlight?
This is really interesting stuff. I was wondering if you were talking about the role of education in seeing how companies shifted. And I think a notable trend at least within large technology firm is that they give out stocks to high skilled employees but not all their employees. They might be moving towards a partial democracy incentive not everyone gets gets to partake in the bottom corner. Not everyone gets a stock option, but only when the sun more likely to the early democracies were only the rich people got to vote. And I was wondering how do you view these intermediate phases?
There are many ways to organize this. economic democracy there are countless problems to solve like for example, how do you deal with retiring people they are no longer work and should they still owe shares in the company for example, there are solutions to all these problems, but they are usually not very well known. For what you say here i There are one parallel and that is many firms that are run by for example, architects, or lawyers. They have a system that it takes a number of years until you become a full member. It’s like an academic department. It takes six years until you are getting away. So that is that is one way to think about it. You the very first thing you’ll come into the business as a junior person, it makes a little sense that you cannot have the same building power as people who have worked there for 15 years and are much more senior and so but I think the solution to this is to is to think of it like political democracy. Yes, first, the rich people were voting with them, they can demand that everyone should have the right to do so I think that would be that would be the parallel to me. That of course they are more willing to give money to the dividend sort of shares to the to the more highly skilled or more important people. I think the system can respond to that I mentioned it’s very interesting, because it is based only on years. So when a janitor in the bank after 30 years gets the same from this fund they have as the CEO, and it’s big money, it’s they don’t want to talk about it. But I think about it’s about 80 million Swedish crowns, you know, that comes from your 63 year old. So that is one way that you differentiate between the money you get the voting power, or the power here. So it gets a different
thing that the companies that move it up and do so for high end tech companies, you’re worried that we will get the further increase in difference between the middle class and the working class. So the lawyers have talked about they get in. But the Secretary said there’s no law firms never become voters.
That’s true. That’s true. No, I mean, I think of this as you know, if you take political democracy, it’s easy to come out with 10 dimensions that can vary so you can a presidential list with elementaries by calories but one chamber, endless referendum for no referendum strong local government, weak local government, strong judicial review, no recovery. So I don’t know how to say it in English. It’s 1048 ways of organizing democracy. So I think it’s very important that we realize that this will look very different in different branches in different sectors for different skill people. But for example, in this book that was published last linquist have studied dental care. It used to be public record them given over to their to their employees, and he shows that it works democratically that the very quite low educated, I don’t know the under nurses. The very skilled dentists they have the same input, so they’re all very happy with this report.

From Malcolm Fairbrother, put Malcolm in the spotlight.
distinguish that capitalism is one thing the markets or another capitalist is a system where those who owe capital have the power in the relations of production. The Socialist must be and that is why I call myself a liberal socialist socialist must be the opposite. It was those who work at the enterprise have had this problem. No, I don’t think this is paradise. But you know, ordinary democracy is also not paradise. Like I have basically to see we have the office. It’s not a very good system, but all the alternatives and it’s already happening you can you can see that. What is happening now with these index funds is that the managers implant those words you know, the Guardians, the experts are taking all the power, and the index funds have no clout in controlling them so they are rewarding themselves more and more and more with all those ridiculous bonuses. But this will raise the fundamental question Who should go the Guardians? If not the capitalist, keep them in check, then it seems quite logical that the employees actually you can read about this in the most unexpected publications now like Harvard Business Review, for example, that this system is not working because no one is is controlling the leading managers. And this is also what you see. Economical you know, if you go back 50 years ago, maybe they were paid 10 times industrial work, and now they are paid 100. So this is what happened. They have Christmas Eve because capitalism doesn’t work for the capital owners. Thanks for your thoughts. I’ll let you move on to the next question.

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