This is something of a follow-up to the previous post, as I have just been reading about someone else, James Meade, who proposed a Citizen’s Trust that would hold shares on behalf of the population – a type of property ownership certainly more real than Thatcher’s version in which we all own a lot of debt attached to our homes. The linked article is partly interesting for its record of past debates in the UK. For all of my life there has been no economic discussion, only TINA, so it’s interesting to look back to a time when other options were still talked about in the mainstream.
These schemes to share out share ownership are partly proposed as a solution to the replacement of people by machines, which we’ve partly dealt with so far by e.g. creating new jobs, like a million call-centre jobs in the UK. Anything would be better than that, right?
But the effects of large pots of capital and the manner of controlling publicly-owned shares concerns me. Capital held in trust for a national could still be used against the interests of the people of that nation – indeed some might argue that it is in the nature of large amounts of capital to behave against the interests of ordinary people.
It also seems likely to me that any centrally controlled fund would, like central government, be a massive target for the wielders of private capital. Their aim would be to control it for their own benefit. We can see the results of this in government policy at the moment: vast amounts of ‘public’ capital, in the form of Quantatitive Easing, is being used by the central government against the interests of the population. Whatever the government may claim, the purpose of QE seems to be to downgrade the value of the debt held by banks, while also downgrading the value of people’s pay packets.
If central government can be used like this to undermine our quality of life, why wouldn’t shares held ‘in trust’ be used in the same way? Sure you can have some ethical rules, but they wouldn’t look at the systemic effects. While it seems certain limited ‘ethical’ issues are talked about in relation to Norway’s sovereign wealth funds, for example, the long-term socio-economic effects of how the money is invested don’t seem to be on the table. It never is when the priority is to get a certain level of return on investment.
For me if you talk about economic democracy, you’ve got to talk about us as people actually feeling in control. I’m pretty sure a big pot of shares wouldn’t have that effect.
6 thoughts on “James Meade and property-owning democracy”
Something that might be interesting to think about is how QE and credit condition tightenting affects different kinds of debt differently. For example, QE can fund government debt (actually probably via some kind of hidden inflation tax). If you hold cheap mortgage debt, then your real interest rate might even go negative. But if you are not able to access cheap debt, then you might find your real interest rate rising (for example, as you become unable to refinance your debt on more favorable terms).
Another term that you might be interested in in this context, if you have not heard of it before, is “Financial Repression”.
You say it wouldn’t work, and I agree with you if we kept the same kind of social institutions, but if the institutions were changed and the democracy was run in a participatory and deliberative way – feasible as if we were all share owners, we would want a say in the more important aspects of policy making – it might work. And would certainly be better and fairer than the current representative form of “democracy” we have now.
Good book on the topic: ‘Property owning democracy: Rawls and Beyond’ edited by O’Neill and Williamson (2012).
Thanks, I think more directly democratic owning mechanisms would definitely help. But thinking aloud here, what if the majority of those who own shares only just have enough money? They would end up pushing for higher profits, possibly to the detriment of their own ethical stances and even their own long-term interests. I’m not sure that democratic ownership would entirely make the problems go away. You can be nominally in control but forces beyond your control may make you behave in particular ways.
That’s where the deliberative aspect of democracy steps in. Utilising reasoned forms of discourse, particularly when establishing the basic structure (aka Rawls, and possibly incorporating some form of Habermas’ communicative action) might temper the short termism that seems to apply to western forms of capitalism.
Also if political discourse becomes more commonplace(instead of being frowned upon in polite company) with everyone having an interest in maintaining the rights initiated in the basic structure, new norms could become established that limit the greed driving some and ensuring a basic minimum standard below which no-one can be allowed to fall. As it has been shown, the majority will be relatively happy with their lot if they suffer no real hardships and do not perceive that others are getting much more for doing far less. We would still have the free rider problem, but it would probably be less than in the current form of welfare state capitalism used by the USA and heading that way in the UK.
I’m just beginning to get my head around all this, your blogs have helped a great deal – thanks.
I think that if most of the people owning shares had only just enough money, then some of them would get into finance trouble (due to bad luck, e.g. illness) and be compelled to sell those shares. Others would buy them. The ones that bought them would become richer (due to a higher share of the profits), and so be less likely to get into trouble and more able to buy any available shares. This process would continue until most shares were in concentrated ownership of just a few people.