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Federal budgets are a complex balancing act. There are multiple competing needs, especially on a government pivoting to seek re-election: various groups expecting a return on their political investment, diverse electorates with competing projects, and the often overlooked need for a treasurer to 'make their mark'.
Aside from the possibility of being a ‘pre-election' budget, the Treasurer’s next update will also faces additional challenges from a cost of living crisis driven by a profit-price spiral and stagnant wages, as well as an inherited debt from the coronavirus pandemic.
However, behind all of that is the desperate need to reconstruct our economy and establish a new economic consensus, one that leaves behind the outdated orthodoxies and shibboleths of our established system.
In short, we need to build economic democracy.
As our industrial profile changes, we need new ways of approaching economic management that maximise the benefits to all stakeholders in the economy, not just private shareholders. The ongoing crisis associated with our once proud national air carrier is symptomatic of the disease at root in our economy.
For too long, we have allowed corporate Australia to do as they please, relying on revenue and profit to be the only yardstick against which their operations are judged. However, if the pandemic and its associated economic crisis has taught us anything, it is that we need to build a new economy that is more resilient and self sufficient, one that is better managed and able to deliver better social outcomes for Australians.
Traditional approaches to economic development, which treat all investment agnostically, do little to keep key production and essential services grounded in communities. Instead, there should be a focus on investment that has a long-term interest in the development of the community.
We need an economic agenda that is circular, rather than extractive, and one which seeks to make the most of local institutions, businesses and networks that are anchored in the community. We must place emphasis on place-based approaches, local ownership, economic multipliers and collaboration, in order to deepen our economic democracy and maximise the benefits returned to the community.
An agenda built on economic democracy realises that neither states nor markets are capable of delivering positive outcomes in isolation, and that more economic power should be given to ordinary people, who know best what they need to lead full and decent lives.
Crucially, political economist Andrew Cumbers highlights that true economic democracy has three aspects: individual economic rights, diverse forms of democratic collective ownership, and the need for greater public participation in economic decision-making.
Firstly, to individual economic rights. Increasingly, workers in our country have little control over their economic lives. The growth of casualisation and the gig economy, alongside the increased use of labour hire and other third party contractors, have reduced our ability to decide when, where, and in what form we work.
The exercise of agency and autonomy in the economic sphere is increasingly reduced, and our ability to rebalance it has been weakened over time. Through legislative reforms the power of the trade union movement has been reduced, and our internationally guaranteed freedoms to associate or withdraw our labour have been curtailed to specific, heavily regulated, codified and sanctionable scenarios.
The Government’s Jobs and Skills Summit has shown that there is some appetite to address these aspects of our economic rights. Since this crucial economic workshop, the government’s reform agenda has begun to increase the bargaining power of workers, close loopholes that facilitate sham contracting arrangements with “employee like” contractors, and reduce the ability of third party contractors to undermine direct employment, and regulating the instances where casual work is allowable.
The second aspect, namely the diverse forms of democratic collective ownership, is far too underutilised in the Australian economy. Fortunately, there are many ways that we can boost this aspect of our economy and ensure that the benefits of growth are distributed more equally throughout our society.
For example, we can (and should) follow the experiences of Germany and implement codetermination legislation. These world leading reforms designate a third of all board seats in public, private, or not-for-profit companies with between 500-2,000 employees, and half of those with 2,000 or more, to be elected by and for the workers of that company. This helps to rebalance the operations of enterprise in the interests of the company as a whole, not just the executive and its shareholders.
As a thought experiment, imagine if codetermination was in force at Qantas during the pandemic: Would the company have laid off 15,000 essential ground crew, engineers and baggage handlers? Would Alan Joyce have still received bonuses and additional stock incentives while making decisions that shrunk the company’s workforce by 43% ? Would we be experiencing the drop in safety and service standards across the country as a result of this reduce capacity? It seems doubtful.
Similarly, we could reform the corporations act to in the interests of employee ownership schemes and establish an employee ownership trust like Canada, to ensure that a reasonable percentage of stock in medium to large enterprises are retained for the workers who make the companies profitable. These schemes also contain no provision for buybacks, ensuring that when the company returns profit from the labour of its employees, they receive the benefit - and get to keep it.
We could also ensure that essential services, particularly those in the care economy, are kept in public hands. While public ownership should be prioritised where there is a natural monopoly, when there is little appetite for keeping these public services solely in public hands, instead of large scale sell off of public assets, we could retain 49% public ownership and lend voting rights for the 2% to a private provider. This would allow for majority operations to be pursued under the profit motive, but subjected to the provision that when the private provider is no longer deliver in the public interest, the state will resume control of operations and return them to the public interest.
Crucially, however, we must create better incentives and supports for worker cooperatives and mutuals to compete in the marketplace. First, we would need to create dedicated investment vehicles for cooperatives, as far too many co-ops that pass a business case test fail to access funding through private channels. We could also implement social procurement policies that better target cooperatives, and other democratically owned enterprises, across primary contracts and supply chains.
Finally, turning to the third aspect of economic democracy, greater public participation in our economic decision making, we could begin to experiment with participatory budgeting at all levels of government. For those unfamiliar with the term, participatory budgeting would allow for citizens to allocate funds that will be distributed in local, state or federal budgets based on their preferences, which are aggregated across the jurisdiction and delivered by said level of government.
This could take the form of citizens dividends, where a certain percentage of the budget is allocated to an equal share for every citizen, and they decide where their dividend will be spent. Alternatively, it could be akin to the kinds of digital tools utilised by the media, wherein you can allocate your preferences for percentage spends in portfolio areas or on specific projects. These preferences could then be collated and recommended to government as the overall distribution within the economy.
We could also experiment with direct democracy on economic issues, by utilising citizens juries where ordinary people are brought together by local, state or federal departments, through a jury like sortition mechanism, and spend a number of days being presented with the problem, the evidence, the arguments and the solutions, and are then required to vote on a course of action.
Additionally, we could trial a Swiss style referendum mechanism, whereby any petition that reaches a certain portion of citizens must be put to a referendum.
None of these ideas are new, and most have worked perfectly well in countries abroad, or in many case already exist in Australia - but often they don’t have the weight of institutional support to function at maximum efficiency.
Clearly, the time to explore new approaches to economic management is now, as we seek to rebuild in the wake of a once in a generation crisis. We owe it to ourselves and our children to leave the world better than we found it, and economic democracy offers us a credible way to build a better future for all.