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Consider Industrial Democracy- aber ratz fatz! by Stephan Peter
9/18/2010
 
It’s time to have a dialogue over the state of economic democracy, about employee
participation in the decision-making process; to recall a rich European tradition and to learn
from current experiments here and abroad – to be able to assess how participatory democracy
in the economy can work today.

Heinz Bierbaum

Vice Chair, ‘Die Linke’ Party, Germany.


“... Labor is prior to, and independent of, capital; that, in fact, capital is the fruit of labor, and
could never have existed if labor had not existed first; that labor can exist without capital, but
that capital could never have existed without labor. Hence... labor is the superior – greatly the
superior – of capital.”

Abraham Lincoln

“Annual Address before the Wisconsin State Agricultural Society.”

Milwaukee, Wisconsin, September 30, 1859.


Consider industrial democracy – aber ratz fatz!
For a transatlantic dialogue.
By Stephan Peter, Saarbruecken, Germany.*

“When the wise man points at the moon, the idiot looks at the finger,” Confucius is known to
have said. Facing a hegemonic market paradigm claiming omnipotency, widening income and
wage gaps here and abroad, and a culture that fosters growth over sustainability, today’s
German progressive change agents, not least Social Democratic Party (SPD) officials, talk
much about the need for a minimum wage. This tendency toward self-retreat verges on self-
ridicule. The SPD’s near surrender as an emancipation movement - under recent party leaders
Schroeder, Muentefering, or Clement - has been costly. In 2010 Germany’s progressive camp
is atomized into an unprecendented four political parties – the SPD, the Left Party, the
Greens, and non-voters. Only now is German – and European – social democracy emerging
from the depoliticizing ‘third way’ and ‘new middle’ paradigms that dominated party
programs and policies over the past fifteen years. As important as national minimum wage
legislation may be, it’s a metaphor for the lack of political vision and purpose, and nowhere
more so than in the one area that serves as principal justification, as raison d’etre, of social
democracy, that is, extending democracy into the economic realm. ‘Economic democracy,’ as
Europeans put it; ‘industrial democracy,’ to use an Anglo-Saxon term.

Not coincidentially, the proud, nearly hundred year history of European grass-roots,
participatory economic democracy, of communal socialism, is nearly forgotten: the ‘Red
Vienna’ of the interwar years, the kibbutz movement, Mondragon/Spain, French LIP and
l’autogestion, and Ken Livingstone’s Greater London Enterprise Board (GLEB), to name but a
few examples. Recent attempts to continue or revive this legacy have been timid or entirely
lacking.

A brief history. AUSTRIA. “During the 1920s and early 1930s ‘every visitor to Europe who
had any interest whatsoever in reform, housing, social progress, went as a matter of course to
look at the magnificent workers’ apartments that Vienna had built,’ the distinguished
American journalist Marquis Childs observed. Between 1923 and 1934, the city’s socialist
administration launched an extraordinary campaign to provide housing for working-class
residents, who were among the party’s most enthusiastic backers. The government
constructed 400 apartment complexes – 64,000 new apartments in all – that together housed
one-tenth of the city’s population. The pride of Vienna’s residential building program was the
majestic Karl-Marx-Hof (Karl Marx House), designed by Karl Ehn. Stretching almost a mile
along a major railway line, the Karl-Marx-Hof featured five monumental archways, a striking
red and yellow stucco facade, and lush interior courtyards as well as state-of-the-art
kindergartens, playgrounds, maternity clinics, health care offices, lending libraries, and a host
of other social services” 1).

The buildings housed local chapters of trade unions, the Socialist Party, consumer co-ops,
tenants councils, and numerous other associations. Hundreds of co-op members living in the
buildings organized special events throughout the year: film seminars, cooking lessons,
parties for the kids, etc. Political campaigns and mass rallies were held in the buildings’ inner
courts – in the Karl Marx Hof, George Washington Hof, Goethe Hof, Liebknecht Hof, Bebel
Hof, Lassalle Hof. Housing construction was financed by progressive taxes, not credits. Thus
the city fathers, Vienna’s Social Democrats, stayed independent of creditors and did not have
to service debt. The end of ‘Red Vienna’ came with the rise of fascism in Austria in the early
1930s. The Karl Marx Hof was actually shelled.

ISRAEL. From 1910 on, and accelerating with the foundation of the Jewish state in 1948,
came the creation of waves of kibbutz and similar cooperatively organized agricultural
settlements. Today there are about 270 villages with up to 1,700 inhabitants 2). ‘Practice what
you preach’ was paramount; to create a classless society in which working and living is based
on participatory democracy in the community. While there were never more than a small
percentage of Israeli citizens living in kibbutzim, this experiment had a profound effect,
worldwide, on debates about alternative living and working. “In the past 40 years, 400,000
youngsters from all five continents have spent some of the most memorable days of their lives
as volunteers in kibbutzim in Israel. Hundreds of them have stayed on the kibbutz and are
now proud members” 3). The kibbutz movement’s attractiveness to newcomers has varied.
“...After almost two decades of an economic and social crisis in most sectors of the kibbutz
movement, resulting – among others – in a sharp decline of kibbutz population, the last few
years are indicating a fresh and a new trend. Many kibbutzim report of growing numbers of
youngsters – singles and families – seeking to join kibbutzim, either as permanent members,
or as non-member inhabitants” 4).

SPAIN. In the mid-1950s Father Jose Maria Arizmendiarrieta established a small polytechnic
school in the Basque region of Spain. Its five graduates, helped by Father Arizmendi, opened

Ulgor, the first Mondragon cooperative. “Today, the MCC [Mondragon Cooperative
Corporation] is a complex worth 24 billion dollars and employing 100,000 in 120 enterprises
all over the globe. It comprises factories, banks, insurance agencies and a network of retail
stores throughout Spain. Globally, the MCC invests in industries located all over Europe,
Latin America and Asia” 5).

Putting people first means “every worker-owner owns an equal share and has an equal vote
through ‘one class’ ownership. All worker-owners can participate in the General Assembly to
elect its Board of Directors, which is comprised of fellow worker-owners in the cooperative”
6). Mondragon is a network of co-ops where mutual pooling and sharing of some profit
increases the stability of the entire network.

Of course, there are issues in an enterprise the size of a global player. How to ensure co-ops
retain democratic principles not just by law but spirit? How to develop the relationship
between co-op members and non-member workers and how to facilitate the path towards full
membership? How to face a lack of democratic structures and culture in developing countries
in which MCC does business? Still, most observers of the MCC experiment remain
optimistic. They view Mondragon as prime evidence that co-ops can be more than
neighborhood cafes or bookstores; that it is possible to organize large enterprises in a
democratic, cooperative way.

FRANCE. L’autogestion or worker self-management is a type of workplace decision-making
which was popularized in the early-1970s by watchmaking company LIP in Besancon. Under
the slogan ‘It is possible: we make them, we sell them, we pay ourselves,’ this worker self-
management experiment garnered international attention and became a symbol for an entire
generation of ‘60s activists in Europe. Twelvehundred workers reacted to company plans for
restructuring, downsizing, and outsourcing by occupying the factory and taking two
administrators and a government labor inspector hostage. After French riot police rescued the
hostages, “the workers decided to take materials hostage to block the restructuration plans.
They seized 65,000 watches and hid them in various remote locations. They discussed the
moral legitimacy of the action, wondering if it was a theft or a sin – Catholicism was strong in
this region” 7).

The workers decided to occupy the factory day and night. The strikers opened the factory to
the media and eventually moved to run it by themselves. Workers at other Besancon firms
went on strike, accompanied by a number of large demonstrations. The organizational and
legal structure at LIP has changed several times since but it is the 1970s experience in
workers’ self-management that holds a firm place in the history of economic democracy.

GREAT BRITAIN. To defend and protect local communities in the face of economic crisis
the Labor-controlled Greater London Council (GLC) in the early 1980s developed a
paradigmatic alternative to standard economic development approaches which sought to
establish traditional ‘enterprise zones’ and attract large corporations – often pitting
community against community in bidding wars over who would offer the highest tax breaks
and financial giveaways. The council‘s Greater London Enterprise Board (GLEB) enacted a
number of measures, e.g., encouraging ordinary citizens, members of neighborhood projects,
shop steward committees, and worker cooperatives to make use of ‘technology centers,’
alternative R&D and learning centers. GLEB set up the London Cooperative Enterprise Board
(LCEP) to review and support the needs of area co-ops. It worked closely with trade unions to
assure worker participation and workplace democracy at those mainstream firms receiving
financial support. And GLEB invited trade union and community groups to participate in
local economic planning.

The GLC was dismantled in 1986 by the national government of Margaret Thatcher. But it
has become a “cause celebre attracting widespread support and publicity under [mayor] Ken
Livingstone’s leadership for its radical policies on transport, industry, equal opportunity and
inner city reconstruction” 8).

The underrepresented history of European economic democracy includes further examples -
like Italy’s ‘Red Bologna of the 1970s,’ or the wave of self-determined projects coming out of
the green-alternative movement of the 1970s and early 1980s in Germany. Writers such as
Fritz Vilmar and Klaus Novy have embedded the latter into a larger ideological perspective
connecting them to the more radical Lassallean tradition of the German co-op movement. In
all, it can be argued that much of this European experimentation with ‘working without a
boss’ is part of or at least has an affinity to the ‘third wing’ of the old labor movement: the
party, the union, the co-ops. Yet, there are also differences between then and now, between
the thrust and direction of economic democratization in, say, the 1920s compared to today.

When Fritz Naphtali published his landmark edition ‘Wirtschaftsdemokratie’ [economic
democracy] in 1928, written on behalf of the German General Trade Union Federation
(ADGB), he suggested a number of ways to gradually democratize the capitalist economy.
Self-managed businesses, state-owned enterprises, consumer cooperatives, and union-owned
companies were among his reform ideas. In fact, the German term ‘Wirtschaftsdemokratie’
was coined by Fritz Naphtali and his distinguished collaborators, among them Rudolf
Hilferding, Hugo Sinzheimer and Fritz Baade, in the late 1920s. “ ‘Wirtschaftsdemokratie’
predominantly refers to co-determination at the sectoral and national economic levels.
[Naphtali emphasized] the work council cannot be a pioneer of the new socio-economic
order” 9). That focus on the macro-economic level as well as the management level in micro-
economics came to fruition in postwar Germany. It was generally known as ‘German co-
determination,’ democratic corporatist capitalism, or ‘Rheinischer Kapitalismus’ – with
employers, unions, and the state as major players. Allied powers had a hand in this
development; “in effect, U.S. planners ‘punished’ postwar Germany with economic
democracy as a way of handicapping concentrated wealth and power” 10) – big business had
supported the Nazi rise to power and the war effort – but ‘Wirtschaftsdemokratie’ is not the
Anglo-Saxon model. Industrial democracy is.

The term goes back to noted British social reformers Beatrice and Sidney Webb, who co-
authored a book with that title in 1897. The Webbs stressed labor unions as democracies.
They focused on ‘union democracy’ and collective bargaining, while contemporary
proponents of industrial democracy also include direct democracy ideas at the shop floor
level. Characteristic of the British debate on socialization is the influence of British
democracy including the tradition of local self-control and ‘Guild Socialism’ which advocates
workers’ control of industry. The Anglo-Saxon emphasis on the grass-roots level, on forms of
participatory democracy, has always played a certain role in German political discourse but
never managed to really break through.

- In the 1920s sociologist Eugen Rosenstock-Huessey takes issue with a work
organization shaped by Taylorism and Fordism. In his book ‘Werkstattaussiedlung’
(1922) he proposes a decentralization of companies and work.

- In the 1950s the British Tavistock Institute develops the so-called socio-technical
approach, which assumes that company technology and organization can be coupled in
different ways – allowing for partially autonomous work groups. The approach is
subsequently much discussed in German social sciences.

- In the 1970s and early 1980s the Tavistock approach influences ‘Humanization of
Work’ (HdA) experimentation in German industry such as Volkswagen. Job rotation,
job enlargement, job enrichment, and partially autonomous work groups are seen as
implementation of American political scientist Ronald Inglehard’s ‘post-materialist’
values, e.g., autonomy, self-determination, and ‘Mitbestimmung am Arbeitsplatz.’
They also serve as a strategy – the expectation that once workers taste freedom, they
will demand more. HdA programs spread to companies such as Volvo, Saab, and
General Motors.

- Starting in 1974 the German government develops a research program called
‘Humanization of Work’ closely associated with then research minister Hans
Matthoefer.

- The 1989 collapse of the Berlin Wall and subsequent German unification open a
historic opportunity to implement industrial democracy on an unprecedented scale.
Then SPD party leader Oskar Lafontaine remembers: “German unification provided a
unique opportunity to move towards a democratic economic order and thus a truly
democratic society. For this one would have had to transform public assets of the DDR
[East Germany] into employee-owned property. This unique chance was missed... “
11).

- In 2007 then SPD party chair Kurt Beck introduces the concept of a
‘Deutschlandfonds’ [Germany fund] – a way for wage earners to participate in their
company’s success. Employees would pay into a national fund which in turn would
seek to obtain shares in their companies. This indirect participation is designed to
protect employees from bankruptcies. “If the Germany fund has shares from a
thousand companies, for example, it will not collapse, if two go under” 12). The fund
would make available the shares as capital for companies; employees would receive
profits and interest through the fund.

- The ‘Deutschlandfonds’ has its historic precursor in 1960s and 1970s concepts of
‘Vermoegensbildung in Arbeitnehmerhand,’ capital ownership in the hands of wage
earners. These ideas had been supported by paternalistic conservative, social Catholic,
social democratic, as well as labor union circles. Men like Karl Arnold, Oswald von
Nell-Breuning, or Georg Leber. But such ideas saw their most ambitious manifestation
in the so-called Meidner plan in 1970s Sweden. Social democratic trade union
economists Goesta Rehn and Rudolf Meidner proposed the creation of wage-earner
funds through profit sharing intended to democratize the economy over time. The
employee or trade union controlled funds would gradually increase in size and
eventually dominate over privately held shares – all without jeopardizing a company’s
liquidity. The end result would be large Swedish companies controlled by their
employees.

One can certainly identify a number of reasons why the German Left of the past 100 years
was unable to push industrial democracy, bottom-up participatory democracy in the economy,
so little beyond the programmatic level. But the reasons do not add up; what remains is a taste
of intellectual lack of imagination, an ‘exhaustion of utopian energies’ as German social
scientist Juergen Habermas once put it. Today, in 2010, paternalistic government for the
‘right’ reasons, nationalization, more bureaucracy – remedies of the past – are hardly the
recipe for a left future. Socialization is, because it combines, in simple terms, individual
liberty with solidarity, with community.

In ‘Socializing the Welfare State’ American Dissent magazine editor Michael Walzer makes
this case for socialization. “It is not inefficiency that has made nationalized production
disappointing. State-run industries are not (in the West) noticeably less efficient than privately
run industries. ...At the center, in the modern regulative state, nationalized production isn’t
significantly different from private production – and there, of course, lies the disappointment.
Nor is the experience of workers in state-run factories all that different, and, since
nationalization was supposedly undertaken on behalf of the workers, that is the greatest
disappointment. What difference does it make if one’s boss is a civil servant rather than a
corporate official? In principle, perhaps, a great difference, since workers are also voters and
so can take part in choosing the boss of their boss. But the political distance is too great: what
is true in principle is insignificant in practice. [Thus], ... the real alternative to private
management is self-management, autogestion, workers’ control... . The producers themselves
must take over... . Otherwise it is only state power, not the power of ordinary people, that is
enhanced”13).

Juergen Habermas adds another point – like Walzer, making litttle distinction between
nationalized production and distribution: the legal-administrative implementation of political
programs did advance social justice – but often in a merely quantified, monetarized,
controlling form. Nationalized distribution of services is overtaxed, is asked too much of, to
promote compassionate living, a sense of community. But is this not what the essence of
solidarity entails?

While Germany and Europe have a remarkable tradition in industrial democracy, today the
action is in the Americas. The scene is fluid, rapidly changing. Three developments are worth
mentioning.

1. A ‘solidarity economics’ approach has emerged out of Latin America’s social movements
and progressive party politics of the past fifteen years, as well as the so-called anti-
globalization movement since the 1999 anti-WTO protests in Seattle. Discussed at the 2002
World Social Forum in Porto Alegre, Brasil, and later at the 2007 U.S. Social Forum in
Atlanta, Georgia, and the 2010 U.S. Social Forum in Detroit, Michigan, the term encompasses
a wide variety of joint self-help, and often locally operating, grassroots projects and
organizations. “For some, it refers to a set of strategies aimed at the abolition of capitalism
and the oppressive social relations that it supports and encourages; for others, it names
strategies for ‘humanizing’ the capitalist economy – seeking to supplement capitalist
globalization with community-based ‘social safety nets’ ” 14).

In the U.S. two noteworthy efforts have been part of the ‘solidarity economy’ concept. “The
Data Commons Project is a collaborative effort betwen a diverse array of organizations in the
U.S. and Canada who share a mission of building and supporting the development of a
democratic and cooperative economy. The goal is to collectively develop an accurate,
comprehensive, public database of cooperative & solidarity-based economic initiatives in
North America as a tool for democratic economic organizing” 15). The project has been
active since 2005.

Furthermore, and perhaps more significant, the Solidarity Economy Network is a young
national network of organizations committed to developing a new framework for social and
economic development, one grounded in social solidarity, cooperation, egalitarianism,
sustainability, and economic democracy 16). The effort has been inspired by similar solidarity
economy networks in Brazil and Canada. A forum was held in 2009 to provide direction and
strategic planning for the effort.

2. Besides ‘solidarity economics’ there is an effort by some of the more progressive American
labor unions to reach out and do networking with other social movements that have been
engaged in anti-globalization protests – chiefly environmental groups and movements. A few
years ago the Minnesota Steelworkers Union formed a partnership with the Sierra Club to
promote renewable energy jobs and a green economy. Today, such initiatives have blossomed
into a national ‘blue-green alliance,’ which includes a number of labor unions and
environmental groups – in various states. It’s a distinctly labor-environmentalist alliance, that
is to say, it does not include business groups; and the green focus should permit openness
towards an aspect of industrial democracy and cooperation that’s hot: cooperatively organized
windmills and farms which - as a bonus - can save the family farm and corresponding
lifestyle.

3. The arguably most ambitious endeavour to establish worker co-ops and promote industrial
democray is the fall 2009 collaboration between the United Steelworkers Union (USW),
North America’s largest trade union, and the world’s largest worker-owned cooperative,
Mondragon International, from Spain. Good work [gute Arbeit] is an important focus. “ ‘We
see today’s agreement as a historic first step towards making union co-ops a viable business
model that can create good jobs, empower workers, and support communities in the United
States and Canada,’ said USW International President Leo W. Gerard. ‘Too often we have
seen Wall Street hollow out companies by draining their cash and assets and hollowing out
communities by shielding jobs and shuttering plants. We need a new business model that
invests in workers and invests in communities’ ” 17). The USW intends to proceed cautiously
but their collaboration with Mondragon has the potential to become a national trendsetter
stimulating similar efforts by other players.

The relationship between U.S. labor unions and the cooperative movement has been complex.
The USW “will insist on at least one modification of the Mondragon model: the worker-
owners will be organized into trade unions, and will sign collective bargaining agreements
with the management team” 18). Apparently, it’s not a huge step since within existing
Mondragon enterprises there are already social committees that deal with worker concerns –
not entirely unlike a union.

Contemplating current industrial democracy initiatives and experimentation in the U.S., one
cannot help but be reminded of a term that served as a progressive paradigm in the upper

Midwest and into Canada early in the 20th century. The Farmer-Labor movement and party in
Minnesota, the North Dakota Non-Partisan League, and the New Democratic Party in
Manitoba, Ontario, and elsewhere were informed by a viewpoint known as Cooperative
Commonwealth. It was “vintage American socialism. It symbolized an economic-political
system based on individual freedom and the common good. ...The program itself with its
emphasis on grassroots economic organization through producer and consumer co-ops, as
well as state ownership, further reinforced this image. [It] would mean more freedom for the
worker and farmer. Its brand of collectivism promised community participation rather than
bureaucratic control” 19).

Today, for instance, the Minneapolis-based North Country Cooperative Development Fund
(NCDF) can be understood to stand in this tradition. The fund is itself cooperatively organized
and provides support for community owned cooperative enterprises throughout the upper
Midwest. The fund publishes a list of co-op members of NCDF, testimony to the impressive
variety and size of the co-op movement there.

The ‘Cooperative Commonwealth’ and ‘solidarity economics’ vision can serve as an
inspiration for those seeking to give renewed meaning to social and economic democracy.
What’s needed now is a more systematic assessment of the current state of economic
democracy in Western Europe, and an evaluation of what can be learned from a more vibrant
North American scene. Such education could take the form of a scientific study, narrations,
youtube-style video clips, short film, or an international symposium – stepping stones towards
popularizing a vision. ‘When the wise man points at the moon, the idiot looks at the finger.’
It’s time to start looking at the moon, not the finger.




Sources:

1). Rabinbach, Anson. “Red Vienna: A Workers Paradise,” in: www.virtualvienna.net.
2). Kibbuz, from: http://de.wikipedia.org/wiki/Kibbuz.
3).”40 Years of Kibbutz Volunteers,” in: Kibbutzim Site, www.kibbutz.org.il/eng/
4). “The Kibbutz Movement – Facts And Figures,” in: Kibbutzim Site,
www.kibbutz.org.il/eng/
5). Marszalek, Bernard. “Mondragon:What Relevance for US Cooperative Development,”
October 27, 2009, in: http://jasecon.wik.is.
6). Witherell, Rob. Keynote Speech. Western Mass Jobs with Justice. March 6, 2010, from:
http://77wmjwj.org.
7). LIP (Company), from: http://en.wikipedia.org/wiki/LIP_(company).
8). Nolan, Peter and O’Donnell, Kathy. “Taming the Market Economy? A Critical
Assessment of The GLC’s Experiment in Restructuring for Labour,” in: Cambridge Journal of
Economics, 1987, 11, p. 251, from: http://cje.oxfordjournals.org.
9). Mueller-Jentsch, Walther. “Industrial Democracy: Historical Development and Current
Challenges,” in: Management Revue, vol. 19, issue 4, 2008, from: www.management-
revue.org/papers/mrev_4_08_Mueller-Jentsch.pdf.
10). Hill, Steven. “Europe’s Answer to Wall Street,” in: The Nation, April 21, 2010, from:
www.newamerica.net.
11). “Man kann die Zeit nicht zurueckdrehen,” Linken Fraktionschef Oskar Lafontaine ueber
die Waehrungsunion und die Folgen fuer das vereinte Deutschland, in: Saarbruecker Zeitung,
July 2010.
12). „Arbeitnehmerbeteiligung: Beck schlaegt Deutschlandfonds vor,“ June 26, 2007, in:
www.stern.de/
13). Walzer, Michael. „Socializing the Welfare State,“ in: Gutmann, Amy. Ed. Democracy
and the Welfare State, 1988, Princeton University Press.
14). Miller, Ethan. “Solidarity Economics. Strategies for Building New Economies from the
Bottom-Up and the Inside-Out,” 2005, from: www.geo.coop.
15). Miller, Ethan. “Other Economies Are Possible! Organizing Toward an Economy of
Cooperation and Solidarity,” in: Dollars&Sense, July/August 2006, from:
www.dollarsandsense.org.
16). The U.S. Solidarity Economy Network (SEN) – homepage.
http://populareconomics.org/ussen/node/14.
17). Davidson, Carl. “‘One Worker, One vote:’ US Steelworkers To Experiment with Factory
Ownership, Mondragon Style,” in: Znet. The Spirit of Resistance Lives, November 03, 2009,
from: www.zcommunications.org.
18). Ibid.
19). O’Connell, Thomas Gerald. “Towards the Cooperative Commonwealth.: An Introductory
History of the Farmer-Labor Movement in Minnesota (1917-48),” (Thesis), Feb. 1979, from:
http://justcomm.org/fla-hist.htm.



__________
* Stephan Peter is a long-time member of the German Social Democratic Party (SPD) and of
the Democratic Socialists of America (DSA). He is national Co-Chair of DSA International
Commission.













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