By Paul Foot
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Democracy: A Grand Delusion

This article is over 20 years, 7 months old
Capitalism as economic democracy? Paul Foot has heard it all before.
Issue 279

For at least a hundred years there has been a continuous and hard-fought struggle between capitalism and democracy. Now a miraculous solution has been discovered by New Labour in the shape of its dynamic secretary of state for trade and industry, Patricia(n) Hewitt. Capitalism and democracy, she asserts in her new pamphlet A Labour Economy: are we nearly there yet?, are the same thing!

There was a time when Patricia was a committed social democrat. She was general secretary of the National Council of Civil Liberties, which was founded in the main by stalwarts of the Communist Party in 1934 to defend the basic liberties of British citizens. Then she was press secretary to Neil Kinnock when he was leader of the Labour Party. Then she was a founder of a New Labour think tank called the Institute for Public Policy Research (IPPR), which in turn set up a Commission for Social Justice under a Labour peer (and director of the union-busting Daily Mirror) Lord Borrie. On the day John Smith died in May 1994, Hewitt became a director of research at Andersen Consulting, then firmly attached to the US-based accountants Arthur Andersen. Hewitt left Andersen in 1996, but not before the firm had arranged a special conference in Oxford at which almost a hundred Labour front benchers were lectured by City experts on the importance of governing in tune with business. As soon as the New Labour government took office in 1997, Hewitt, by now an MP for Leicester, was rapidly promoted to her present high cabinet office. As she scaled the heights of office, the Labour government released Arthur Andersen from their ban (imposed by the Tory government under Thatcher) from all government work because of the firm’s dubious relationship with the crooked entrepreneur John De Lorean. Not long afterwards Arthur Andersen was disgraced in the Enron scandal, and its business was wound up and shared out between the other accountancy moguls.

This glittering history had an electric effect on the cool new secretary of state. She rapidly revised her old-fashioned views on social democracy. Her department of state became, in the view of Bill Morris, the not very radical general secretary of the Transport and General Workers Union, effectively a subsidiary of the Confederation of British Industry. Decision after decision from the department favoured the bosses and by the same token infuriated the unions. Now the secretary of state has exalted this slide into reaction in a new pamphlet published by her old comrades in the IPPR.

The pamphlet takes up the familiar line that the workers already own a lot of industry through their pension funds and investments in insurance companies. A Labour government, she asserts, can pass laws to ‘encourage’ those funds and their trustees to use their clout to force the corporations into fairer and more democratic policies. The problem with this theory is that no Labour law has a hope of democratising the trustees that control these funds. As was horrifically demonstrated by the case of that heroic Kinnock supporter Robert Maxwell, the employers and their class can easily buy off and corrupt the trustees of their pension funds, and the insurance millions are even more closely and tightly controlled by City slickers. Any law to try to democratise these autocratic giants can be sidestepped or suppressed by a flick of the capitalist tiller.

Much more disastrous than this ancient remedy is the objective that inspires Hewitt’s pamphlet. This is that Labour Party members, if only they would concentrate on business and entrepreneurs, can lead us all to the glittering prize of an ‘economic democracy’. Capitalism itself, she suggests, contains within it the essence of democracy. This is an argument often paraded by capitalists. The very dynamic of the market, they argue, is essentially democratic. The choice offered to consumers by the variety of goods and services for sale – and the fact that they choose what to buy and use – ensures a form of democracy in the economy. The problem with this argument is obvious. If income and earnings are grossly unequal, as they are in all capitalist economies, then the whole principle of democratic choice of goods and services is corrupted from the outset. The choice for someone with wealth is entirely different to that for someone with no money. Indeed for the latter there is no choice at all. The fundamentally undemocratic nature of the system becomes much clearer in the facts about control of the system. The idea that a man who owns four newspapers and a couple of engineering firms is equally represented in society with anyone who works in those factories or reads those newspapers is quite obviously absurd. It is the wholly undemocratic distribution of wealth and control of undertakings that drives the capitalist world, and ensures for instance that the trustees of pension funds and directors of insurance companies remain absolutely true to the ‘principles’ of the stockmarket. Capitalism is intrinsically, irretrievably undemocratic. Nothing helps the capitalists more than the statements of trade union leaders and Labour ministers that the system is fundamentally democratic.

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