A PREFACE

TO ECONOMIC

DEMOCRACY

ABOUT

QUANTUM

BOOKS

QUANTUM, THE UNIT OF

EMITTED ENERGY. A QUANTUM

BOOK IS A SHORT STUDY

DISTINCTIVE FOR THE AUTHOR’S

ABILITY TO OFFER A RICHNESS OF

DETAIL AND INSIGHT WITHIN

ABOUT ONE HUNDRED PAGES

OF PRINT. SHORT ENOUGH TO BE

READ IN AN EVENING AND

SIGNIFICANT ENOUGH

TO BE A BOOK.

Robert A. Dahl

A Preface

to Economie

Democracy

University of California Press

Berkeley Los Angeles

University of California Press

Berkeley and Los Angeles, California

© 1985 by

The Regents of the University of California

Printed in the United States of America

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LIBRARY OF CONGRESS CATALOGING

IN PUBLICATION DATA

Dahl, Robert Alan, 1915—

A preface to economic democracy.

Bibliography: p.

Includes index.

1. Employee ownership—United States. 2. Management— United States—Employee participation. 3. Equality— United States. 4. Democracy. 5. Liberty. I. Title.

HD5660.U5D34 1985 338.6 84-8483

ISBN 0-520-05345-1

Contents

Contents

Acknowledgments

Introduction

1 Is Equality Inimical to Liberty?

2 Democracy, Political Equality, and Economic Liberty

3 Democracy and the Economic Order

4 The Right to Democracy Within Firms

5 Ownership, Leadership, and Transition

Epilogue

Bibliography

Index

Acknowledgments

I should like to express my appreciation to the University of California, Berkeley, for the opportunity to present the essential argument of this book in the Jefferson Memorial Lectures in 1981. For many helpful comments and criticisms I am indebted to my Yale colleagues in the faculty seminar on American Democratic Institutions, to the readers of the manuscript for the University of California Press, and to Joseph LaPalombara, Nelson Polsby, and Aaron Wildavsky. My debt to several generations of graduate students in my seminar on the government of economic enterprises, though less precise, is no less great. Research by Jo Beld Fraatz was of great help to me in writing Chapter 2. Finally, I appreciate the contributions of Amy Einsohn, who made useful suggestions and corrections as copyeditor, and Mary Renaud, who as staff editor guided the manuscript through the process of editing and publication.

Introduction

Within a generation or so after the Constitutional Convention, a rough consensus appears to have been reached among Americans—among white male citizens, at any rate—that a well-ordered society would require at least three things: political equality, political liberty, and economic liberty; that circumstances in the United States made it possible for Americans to attain these ends; and that, in fact, to a reasonably satisfactory degree these three ends had already been attained in America. Such was the state of mind that Alexis de Tocqueville encountered among Americans in 1831.

At the same time, however, some eminent and philosophically minded observers of the human condition believed that the three goals might very well conflict with one another, quite possibly, indeed, must conflict with one another. John Adams, Thomas Jefferson, and James Madison, together with many of Madison’s fellow members of the American Constitutional Convention, were deeply concerned that political equality might conflict with political liberty. This possibility forms a major theme—in my view, the major theme—of Tocqueville’s Democracy in America. Echoing an already ancient idea, in the penultimate chapter of his second volume Tocqueville asserts his belief that

it is easier to establish an absolute and despotic government amongst a people in which the conditions of society are equal, than amongst any other; and I think that if such a government were once established amongst such a people, it would not only oppress men but would eventually strip each of them of several of the highest qualities of humanity. Despotism therefore appears to me peculiarly to be dreaded in democratic ages. I should have loved freedom, I believe, at all times, but in the time in which we live I am ready to worship it.

(Tocqueville [1835] 1961, 2:385)

While Tocqueville was mainly concerned with the threat that equality—political, social, and economic— posed for political liberty and personal independence, many of the Constitution’s framers had been alarmed by the prospect that democracy, political equality, majority rule, and even political liberty itself would endanger the rights of property owners to preserve their property and use it as they chose. In this sense, democracy was thought to menace economic liberty as it was then commonly conceived—in particular, that kind of liberty represented by the right to property. Like the conflict between equality and political liberty, this potential conflict between democracy and property was also part of a much older debate. In the United States, the concern expressed at the Constitutional Convention has been frequently voiced ever since.

In considering the threat posed by equality to liberty, Tocqueville, like Jefferson and the Framers before him, observed a society in which it was by no means unreasonable to expect, and hope, that male citizens would be approximately equal in their resources—property, knowledge, social standing, and so on—and consequently in their capacities for influencing political decisions. For they saw a country that was still overwhelmingly agrarian: seven of every ten persons gainfully employed were in agriculture, and the citizen body was predominantly composed of free farmers, or farmhands who aspired to become free farmers. What no one could fully foresee, though advocates of a republic constituted by free farmers sometimes expressed worrisome anticipations, was the way in which the agrarian society would be revolutionized by the development of the modern corporation as the main employer of most Americans, as the driving force of the economy and society. The older vision of a citizen body of free farmers among whom an equality of resources seemed altogether possible, perhaps even inevitable, no longer fitted that reality of the new economic order in which economic enterprises automatically generated inequalities among citizens: in wealth, income, social standing, education, knowledge, occupational prestige and authority, and many other resources. Had Tocqueville and his predecessors fully anticipated the shape of the economic order to come, they probably would have viewed the problem of equality and liberty in a different light. For if, in the older view, an equality among citizens might endanger liberty, in the new reality the liberty of corporate enterprises helped to create a body of citizens highly unequal in the resources they could bring to political life.

The question I want to confront, therefore, is whether it would be possible for Americans to construct a society that would more nearly achieve the values of democracy and political equality and at the same time preserve as much individual liberty as we now enjoy, and perhaps even more. Or is there an inescapable trade-off between liberty and equality, so that we can only enjoy the liberties we now possess by forgoing greater equality? Would therefore the price of greater equality necessarily be less liberty?

More concretely, I propose to explore the possibility of an alternative economic structure that would, I believe, help to strengthen political equality and democracy by reducing inequalities originating in the ownership and control of firms in a system like that we now possess—a system that for want of a better term I call corporate capitalism. The last three chapters describe an alternative, explain its justification, and examine some of its problems.

In examining this possibility I have deliberately narrowed the scope of our inquiry into the problem of freedom and equality: first by focusing on political equality, then by focusing on the consequences of owning and controlling enterprises. Important as it is, political equality—equality among citizens engaged in governing themselves by means of the democratic process—is not the only relevant form of equality that might serve as a standard for a good society. And owning and controlling firms is not the only source of undesirable inequalities among human beings, or even of political inequalities.

Yet narrowing the focus is, I believe, justified on several grounds. For one, the general problem of equality is so complex that perhaps we can deal with it well only by examining parts of it. As Douglas Rae concludes at the end of his masterly analysis of the meaning, kinds, and values of equality:

Equality is the simplest and most abstract of notions, yet the practises of the world are irremediably concrete and complex. How, imaginably, could the former govern the latter? It cannot. We are always confronted with more than one practical meaning for equality and equality itself cannot provide a basis for choosing among them. The question Which equality? will never be answered simply by insisting upon equality.

(Rae 1981, 150)

Moreover, of the various kinds of equality that might exist in a good society, political equality is surely one of the most crucial, not only as a means of self-protection but also as a necessary condition for many other important values, including one of the most fundamental of all human freedoms, the freedom to help determine, in cooperation with others, the laws and rules that one must obey. In a somewhat similar way, differences in ownership and control of enterprises, while certainly not at the origin of all forms of inequality, are deeply implicated in inequalities of many kinds: in esteem, respect, and status, in control over one’s daily life, in income and wealth and all the opportunities associated with them, in life chances for adults and children alike. It seems to me scarcely open to doubt that a society with significantly greater equality in owning and controlling economic enterprises would produce profoundly greater equality than exists among Americans today.

Before considering whether an alternative to corporate capitalism might strengthen political equality without sacrificing liberty, we first need to search for a clearer understanding of the relationships between political equality, political liberty, and economic liberty. In my view these relationships have often been misconceived, or asserted in so general a fashion that we can scarcely judge the truth of statements about them. An enormously influential example of what I believe to be a mistaken view of these relationships is to be found in a very great work by a very great writer—Tocqueville himself, in Democracy in America. In the first chapter I examine this view, insofar at least as it can be teased out of Tocqueville’s two volumes, and explain why I think his view is in some crucial respects misleading. In the second chapter I set out my conception of the relations between democracy, political equality, and economic liberty. The alternative discussed in the last three chapters may then be seen as an element in a system of liberties and equalities superior to what Americans now possess.

1

Is Equality

Inimical

to Liberty?

According to an old and widespread view, equality is a danger to liberty. But why and how, exactly, does equality threaten liberty? What kinds of equality and what kinds of liberty? And in order to judge the validity of answers to questions like these, what body of experience should we draw on?

An appropriate place to look for answers is Tocqueville’s Democracy in America. For although what is immediately obvious to the reader is Tocqueville’s fascination with equality and its effects, his central concern and his highest value is liberty. A fundamental theme running through both volumes is his fear that equality will crush liberty, and his search for a solution to the problem of how, if at all, they might be made to coexist.

However, because his argument and his answers are not always explicit, my interpretation seeks to make Tocqueville far more distinct and schematic than he was or, I feel sure, would have wished to be.1 Although my treatment may do less than full justice to Tocqueville, it may help us to grasp why equality is so often seen as a threat to liberty, and to uncover some of the problematic aspects of such a view.

Tocqueville’s Argument

Let me summarize what I understand to be the essential premises of Tocqueville’s argument in four sets of propositions. First, throughout the civilized world equality is increasing and inevitable. Because equality has nearly reached its natural limits among the (white, male) citizens of the United States, America is a testing ground for the world, and, not least, for France. Second, liberty is a good of supreme importance, perhaps indeed a good greater than equality; but the love of equality is stronger than the love of liberty. While the advance of equality is sure, then, the survival of liberty is more doubtful. Third, a necessary condition for liberty is the existence of strong barriers to the exercise of power, for concentrated power inherently spells the death of liberty. In the past, liberty has sometimes been protected against concentrated power by the existence of strong intermediate organizations standing between the individual and the state. However—and fourth—in a democratic country where political, social, and economic equality prevail, and all barriers to the unlimited exercise of power by the majority are removed, the majority has an opportunity to rule despotically: The very essence of democratic government consists in the absolute sovereignty of the majority; for there is nothing in democratic states which is capable of resisting it (Tocqueville [1835] 1961, 1:298). Taken together, these four assumptions constitute strong grounds for Tocqueville’s fear that in a democratic society polity equality will invite the destruction of liberty. Indeed, the more democratic a people are, it would seem, the greater the danger to liberty.

In effect, then, Tocqueville poses a crucial dilemma. For although equality is clearly a necessary condition for democracy, it may not be a necessary condition for liberty; and equality is