Transforming Public Policy through Economic Democracy

Lead Research Organisation: University of Glasgow
Department Name: Business School

Abstract

The research project centres around the basic proposition that societies with strong and effective forms of economic democracy are more likely to achieve crucial public policy goals; such as combating climate change, reducing inequalities and creating more sustainable forms of economic activity. The research will construct an index of economic democracy (EDI) as a tool to test the basic proposition. As such, the research proposed fits directly within two of the ESRC's current priority areas of economic performance, and creating a vibrant and fair society.

A key argument advanced here is that economic decision-making in many countries is becoming increasingly monopolised by a core of financial and political elites at the expense of the broader population. An increasingly narrow range of interests are therefore dominating economic decision making and policy failing to reflect the broad and diverse interest groups that constitute advanced capitalist societies. Not only is this leading to a democratic deficit in the management of society's resources and assets but it is argued that there are considerable negative public policy effects in terms of greater income and wealth inequalities, increasing susceptibility to financial crises and fragility, and arguably a failure to effectively address the causes of climate change. This leads to another central proposition, that greater economic democracy - more diversity and plurality in economic decision-making - will lead to better policy outcomes in terms of better taking into account critical economic, social and environmental issues.

The research proposed here will be pioneering in developing an inter-disciplinary conceptual framework, drawing upon scholars as diverse as Ostrom, Sandel, Olin Wright, Dewey and Sen who argue for the importance of collective action and public discourse in economic decision making for advancing the common good over vested interests, and for promoting individual economic and social rights.

The research takes a broad definition of economic democracy - employing four dimensions: (i) workplace (nature and structure of employment relations, levels of co-determination, etc); (ii) degree of associational economic governance (e.g. level of cooperatives within economy, number and extent of business and labour associations in economic policy forums); (iii) distribution of decision-making powers across space and sector between different economic and political governance institutions (e.g. ownership structure of the economy, diversity ; (iv) engagement of broader population in macro-economic decision-making (e.g. nature of economic policy formulation, governance structures in economic policy formation at national and subnational levels, role and participation of different interest groups).

Research Aims and Objectives
The research would construct an Economic Democracy Index (EDI), and use it to test several key questions about the relationship between levels of economic democracy and three key public policy goals (see below). Key questions are: what is the level of public engagement and deliberation in economic decision-making and how does this vary internationally? What is the relationship between different levels and types of economic democracy and achieving key public policy goals around sustainable economic development and social justice?

Planned Impact

The research will produce a new set of indicators and research findings regarding democratic participation and good governance in economic decision-making and therefore will be of direct applicability to policy makers at national, sub-national and international levels. Consequently, it will make a timely and important contribution to the growing public debate about how the contemporary economy is governed and regulated, and provide new data and information about the relationship between inequality, increased economic instability and the nature of economic decision-making. The research will also be of direct interest to civil society and business associations concerned with the nature of economic policy-making and its effects.

There are a host of indices seeking to measure numerous dimensions of socio-economic activities, ranging from human development to the multidimensional poverty index to the perceptions of corruption. The EDI explicitly attempts to provide an indication of the levels of economic democracy in particular states. By doing so, it augments existing indices, and also provides information on an area that is currently overlooked in analyses of human well-being and economic governance.

During the course of the project, a wide range of partner organisations including UNRISD, trade union bodies, NGOs and think tanks will benefit directly from access to the research findings and involvement in the construction of the EDI. Through the project website, and through policy briefings the research will also be disseminated to UK government departments involved in economic development such as the Treasury, BIS and devolved administrations in Scotland, Wales and Northern Ireland, as well as supranational bodies such as the EU, ILO, UNRISD, OECD and the World Bank.

By developing research findings and indicators of good governance and transparency, the research will also be relevant to business organisations and associations, helping them to deliver best practice around agendas concerned with employee involvement, corproate social responsibility and broadening stakeholder involvement and access to decision-making.
 
Description The overarching aim of the project was to explore the relationship between levels of economic democracy and key public policy goals aimed at promoting sustainable economic development and social justice. The research would construct an Economic Democracy Index (EDI), and use it to test several critical relationships between economic democracy and key public policy goals (see below).

The research would have the following key objectives.
(i) To construct an Economic Democracy Index (EDI) that would provide an international comparative measure of the level of democratic decision-making and broad public engagement in the economy.
(ii) To test hypotheses on the relations between:
- levels of economic democracy and economic stability and resilience;
- levels of economic democracy and income and wealth inequality.
- levels of economic democracy and delivering climate change targets (e.g. using renewable energy and CO2 reductions as dependent variables);
(iii) To inform international policy debates on the most effective means of enhancing public engagement and democratic accountability in economic decision-making.


Most significant achievements of the grant
The project succeeded in developing a robust and novel index of economic democracy (EDI). It also developed a broader definition of economic democracy than established measures taking into account levels of individual employment security and freedom, public participation and the distribution of economic decision-making alongside traditional measure associated with collective bargaining and cooperative ownership. This has been subject to academic and stakeholder scrutiny through meetings of the advisory board, presentations at seminars, conferences, and meetings with policy stakeholders. A host of bodies have expressed interest in the EDI, such as political parties, governments, trade unions, NGOs, and other third sector organisations. Highlights include a workshop with politicians, academics and NGOs at the New Economics Foundation in London in January 2018 and an information session at the Scottish Parliament in November 2017. We also presented to the Scottish Government's economics team in March 2018.

• Significant new knowledge generated
The EDI has generated new knowledge and critical statistical and qualitative data in the conceptualisation and measurement of economic democracy. The index shows the ranking of OECD member states, and the potential impact of policy. The project also provides new evidence on the relationship between economic democracy and key measures of social welfare and economic performance, such as, income inequality, poverty, labour productivity, and adherence to climate change targets. For example, our findings indicate that the EDI is negatively correlated with income inequality and the poverty rate. There is also evidence to indicate that economic democracy is an important driver of income equality. Overall, our findings are important for international policy makers for they suggest that countries with higher levels of economic democracy on our measure also perform better in terms of productivity while have lower levels of poverty and inequality. These tend to run counter to some of the accepted wisdom in international policy by organisations such as the OECD which have prioritised labour market flexibility. These findings are seminal in that the existing literature has not investigated the role of economic democracy in influencing measures of wellbeing. The project also provides the basis for an expansion in the UN's definition of poverty as it relates to participation in the economic domain.


• New improved research methods or skills developed
The project was innovative in that it developed an index, which was then tested against other variables and indices. A considerable database has been constructed around the index with robust time series data concerning different economic democracy from the period 2000 onwards. This will allow us to do further analuysis and research outwith the original aims of the project on changing processes of economic democracy, particularly in comparing the period before and after the 2008-9 financial crisis. The quantitative evidence was augmented by qualitative case studies of three OECD members, Denmark, Portugal, and Slovenia. The qualitative analysis enabled researchers to gain insight into possible explanations for a particular country's performance on the EDI.

• Important new research resources identified
As a consequence of engagement with external stakeholders, especially, the Democracy Collaborative based in Washington DC, and the New Economics Foundation, new research resources in the form of supplementary cases and activist projects aimed at enhancing specific forms of economic democracy, such as participatory budgeting in various countries.


• Important new research questions opened up
Three significant research questions have "opened up" following the project: 1. The variation in index performance between different types of country suggest that there are some interesting further relationships to explore between economic democracy, inequality, economic performance and different 'varieties of capitalism'. 2. Given that the index is constructed at the level of OECD member states, questions of regional variation, especially in countries with decentralised governance, federal structures, or asymmetric regional powers are also raised. 3. The possibility of extending the index to emerging economies, especially the BRIC states is an issue of data availability and reliability. Clearly extending the coverage of the EDI would generate potentially considerable new knowledge and insights about variations in the relationship between economic development and economic democracy..


• Significant negative results or research paths closed off
Under the current configuration of the index, which follows data availability, the influence of independent central banks has not been found to be significant on the degree of economic democracy. This is somewhat surprising, given the economic importance of such institutions. However, lack of more detailed official data on central banks has prevented a more fine-grained analysis of the relations between central bank decision making and economic governance. This would require a more qualitative and extensive research project to generate new primary data. Similarly, the lack of robust data before 2000 for the majority of OECD countries has prevented a longitudinal analysis before this point.


• Noteworthy new research networks, collaborations or partnerships
Networks have been established with bodies and individuals such as, the Chief Economist to the Scottish Government; the New Economics Foundation; Democracy Collaborative, Oxfam, Wellbeing Alliance (Costa Rican, Scottish, and Slovenian governments), and stakeholders in Denmark, Portugal, and Slovenia. Academic collaborations are being developed in the US, and within the University of Glasgow. The research has also been important for developing linkages in two subsequently successful research proposals by the PI to the EU Horizon 2020 and the European Research Council on projects researching in the broader theme of economic democracy.


• Meeting of grant objectives
The grant objectives have all been achieved as noted above. We have carried out the construction of the index, undertaken the statistical and qualitative data collection and analysis around the three key hypotheses and developed policy implications, including a briefing note. Further briefing documents and academic publications are in the process of preparation and we have submitted a full length monograph proposal to Routledge.
Exploitation Route Academic outputs are being progressed, and the academic dissemination of the project's findings is underway. A book proposal has been submitted to an international publisher. There is further work to be done in exploring other relationships between economic democracy and key social goals (especially around health and care). Our index can be used by other academic researchers and policy organisations to monitor country performances around economic democracy and more generally wellbeing. We have ongoing relationships with the New Economics Foundation and the Scottish Government's Chief Economist as a result of the initial publication and dissemination of research findings.
Sectors Communities and Social Services/Policy,Environment,Government, Democracy and Justice

URL https://theconversation.com/new-index-of-economic-marginalisation-helps-explain-trump-brexit-and-alt-right-71172
 
Description An article for The Conversation (705 reads) and republished by Newsweek in Japan. We have also publicised findings on our project blog: https://democratisingtheeconnomy.wordpress.com/ and are organising two events (i) in the Scottish Parliament (ii) at the New Economics Foundation in London. These events have now taken place (May 2017 and January 2018) and were very successful in raising the profile of the EDI with politicians, media and civil society actors.
First Year Of Impact 2017
Sector Government, Democracy and Justice
Impact Types Societal,Economic,Policy & public services

 
Description European Research Council: Advanced Grant
Amount € 1,766,278 (EUR)
Funding ID 789100 GLOBALMUN 
Organisation European Research Council (ERC) 
Sector Public
Country European Union (EU)
Start 01/2019 
End 12/2023
 
Title Established a new index of economic democracy 
Description Established a new set of indcators relating to economic democracy 
Type Of Material Model of mechanisms or symptoms - human 
Provided To Others? No  
Impact Early days to assess impact as the index has only just been constructed and we are currently developing robustness checks. 
URL https://democratisingtheeconomy.com/2017/02/14/economic-democracy-index-methodological-note-13-02-20...
 
Description Economic Democracy Index Scottish Parliament Information and Knowledge Exchange Event 
Organisation Scottish Parliament
Country United Kingdom 
Sector Public 
PI Contribution We are delvering a seminar on the index to the Scottish Parliament.
Collaborator Contribution Hosting our event and organising the guest list, inviting key public policy actors, etc.
Impact Scottish Parliament information event
Start Year 2017
 
Description New Economics Foundation Launch Event 
Organisation New Economics Foundation
Country United Kingdom 
Sector Charity/Non Profit 
PI Contribution Delivering a launch event seminar in London
Collaborator Contribution Hosting the event and inviting key public policy actors and civil society groups
Impact Launch event (London)
Start Year 2016
 
Description Oxfam partnership 
Organisation Oxfam GB
Country United Kingdom 
Sector Charity/Non Profit 
PI Contribution Compiling the EDI.
Collaborator Contribution Advise and consultancy, attending Project Advisory Board
Impact none beyond intangible advice and consultancy.
Start Year 2016
 
Description Article in The Conversation on the EDI 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact An article in The Conversation about the initial findings of our research project and in particular the Economic Democracy Index.
Year(s) Of Engagement Activity 2017
URL https://theconversation.com/new-index-of-economic-marginalisation-helps-explain-trump-brexit-and-alt...
 
Description Established a website and blog 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other audiences
Results and Impact Established a blog and have posted various articles and papers relating to the project.
Year(s) Of Engagement Activity 2016,2017
URL https://democratisingtheeconomy.com/