Updated: 8/15/2007; 1:12:40 PM

Dispatches from the Frontier
Musings on Entrepreneurship and Innovation

daily link  Wednesday, May 11, 2005

Democratic Capitalism

Regular readers will be aware of my interest in the virtues of workplace democracy.  (See Business: Democracy's Frontier and The Democratization of Entrepreneurship.)  My interest is fueled by pragmatism rather than some utopian dream of a worker's paradise on earth.

As the information content of goods and services increases, the speed of business accelerates.  As the cost of communication and coordination falls, the pressure to specialize increases.  Greater specialization means greater interdependence.  All of it means that dynamic complexity and ambiguity are increasing inexorably.

Democratic decision making is not easy, cheap, efficient, or pretty.  But, democratic systems are more robust than authoritarian systems - particularly in turbulant times.  The 20th century was democracy's crucible.  There can be no doubt that democracies weathered the storms of the last century far more successfully than the totalitarian utopianism of either the right or the left.

In an editorial titled Vladimir Ilyich Jobs? in the May 9, 2005, issue of The Wall Street Journal, Rich Karlgaard celebrates "the greatness of American democratic capitalism."  Rich notes:

The genius, idealism, charisma, salesmanship, obsession, paranoia and cruelty that come together in Steve Jobs...also combine in history's worst tyrants...Deprived of a capitalistic playing field, where would [Job's] energies have gone?  Toward the dark side is one guess...That is the true genius of America: It takes would-be Lenins, redeems them in the crucible of capitalism, and turns out Steve Jobs.

We didn't elect Steve Jobs, but in very real ways customers, suppliers, collaborators, employees, and investors vote with their feet and dollars in our capitalistic system.  Those freedoms and responsibilities undoubtedly do provide a real check on would-be Lenins.

Nevertheless, our capitalist world is full of petty tyrants who collectively do real damage.  In a piece titled Bossing the bosses, the editors of The Economist recently called for giving shareholder democracy a chance:

How much better it would be, then, if the owners of corporate America were to play a more active role in policing the bosses who run their firms.  Alas, the institutional shareholders which, on paper, are big enough to do this job are rarely inclined to do so.

Institutional shareholders, of course, provide financial capital - a necessary, but increasingly insufficient, resource for the modern firm.  As providers of a strategic resource, shareholders have a seat at the table.  But, is it possible that others will begin to step forward and demand the franchise in workplace democracy?

I just finished a delightful historical novel titled A Spectacle of Corruption.  The backdrop of the story is early 18th century London, a time and place where the vested political and economic interests of the landed aristocracy were being challenged by proto-capitalists who gained their wealth through manufacturing and trade and the vote through their ability to purchase land.  The economy had changed, and so did the landscape of democratic participation.

Could we be on the verge of a similar (and similarly messy) change today?  Two hundred years ago, mercantilists' financial capital supplanted natural capital (i.e., land) as the key resource in the advanced economies of the world.  Today, there is reason to believe that human, intellectual capital is ascendant.  Might it be possible that knowledge workers who possess and control strategic know how will demand - and will be able to achieve - a meaningful role in business decision making?  Will there come a day when Steve Jobs is elected (and fired) by the people who both invest in, and work for, the company?

I doubt that such a future will be the result of utopian visions of workplace justice.  Rather, it will emerge in fits and starts for two reasons: A broader workplace franchise will yield more robust, sustainable decisions as measured in a competitive marketplace; and knowledge workers will have the power to insist on it.

10:03:24 PM permalink 

Copyright 2007 © W. David Bayless