30 March 2010

Democracy, labour unions and a healthy economy

Former governor of New York Alfred E. Smith once said, "All the ills of democracy can be cured by more democracy," and I'm generally inclined to agree. Certainly more democracy in the work place -- a commonly overlooked place when it comes to thoughts of democracy -- would help to cure some of our economic ills.

A recent article in Harper's Magazine describes how greater participation of workers and labour unions in German companies has helped make that country the world's leading exporter second only to China. As the article reports, "even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They’re beating us with one hand tied behind their back." Indeed, the fact that Germany, an industrialized nation of 82-million people can out-export an industrialized nation of 308 million people is truly extraordinary.

The article suggests one of the reasons is that German workers have more control over the means of production than any other country in the world. "Because German workers are at the table when the big decisions are made, and elect people who still watch and sometimes check the businessmen," author Thomas Geoghegan writes, "they have been able to hang on to their manufacturing sector. They have kept a tool-making, engineering culture, which our own entrepreneurs, dreamily buried in their Ayn Rand novels, have gutted." He goes on to discuss the strengths and weaknesses of the German model, ultimately concluding, "German companies will lead the next industrial revolution, the 'green' one, while we in the United States will merely watch."

The German experience indicates that more workplace democracy leads to sounder economic decision-making. It can also help preclude problems in the economy. The recent financial collapse in the United States which eventually affected all of us was triggered largely by American workers going excessively into debt particularly by buying homes they couldn't afford. One reason they couldn't afford them is that the dramatic weakening of unions steadily eroded the ability of workers to obtain good wages and benefits, with many of the well-paid, blue collar, union jobs being shipped offshore. Accordingly, the United States has sacrificed much of its "tool-making, engineering culture" to the corporate pursuit of cheap labour. Unlike in Germany, American workers have not been able to do much about it.

More workplace democracy could have aided in both preventing the financial collapse in the U.S. and contributing to the country's economic recovery. We Canadians might keep this in mind for our own economic well-being. Just last week, Bank of Canada Governor Mark Carney warned once again that Canadian business's failure to reinvest in their companies is seriously hampering Canadian productivity. One suspects that if workers and unions had more say in Canadian companies, they would be much more likely to invest in worker productivity. We have not seen our union sector weakened to the extent it has been in the U.S., but its membership as a per cent of the labour force is declining. This is not a wise direction to take.

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