Economic Democracy: The Role of Privilege in Advancing Civilization

• DOI: http://doi.org/10.1111/ajes.12304
• Published date: 01 November 2019
• Author: Drew L. Harris,Teresa M. Twomey
• Date: 01 November 2019

Economic Democracy: The Role of Privilege

in Advancing Civilization

By Drew L. Harris* and Teresa M. TwoMey†

absTracT. What characterizes the progress of civilization? We propose

that it can be understood as expanding democratic principles in

governance and economic affairs. In both cases, progress involves

advance followed by retreat. Advances come from democratizing and

de-concentrating privileges. This counterbalances the opposing

tendency towards monopolization. A two-by-two typology of privilege

identifies four distinct categories: formal (state sanctioned) vs. informal

(culture-based) privileges on one axis, and efficient vs. inefficient

privileges on the other. This matrix leads to a set of propositions that,

taken together, should aid in understanding how to advance economic

democracy and hinder concentration of economic power: 1) remove

inefficient, formal privileges, 2) collect economic rents from efficient,

formal privileges, and 3) recognize sovereign rights of individuals in

economic activity (which leads to removing taxes on labor and

savings). We define our core terms, provide examples to illustrate

meaning, provide historic examples to illustrate the feasibility of our

analysis, and analyze the dynamic implications of putting our

propositions into action.

Introduction

One could view the advancement of civilization as a step-by-step

saw-toothed climb of complexity, interconnectedness, and cooper-

ation, interrupted by backsliding of fundamentalism, fragmentation,

and hostility that are fueled by monopolistic tendencies. The key to

each major upward step is what we will call the democratization of

American Journal of Economics and Sociology, Vol. 78, No. 5 (November, 2019).

DOI: 10.1111/ajes.12304

© 2019 American Journal of Economics and Sociology, Inc.

*Professor of management and former Associate Dean at the Central Connecticut

State University School of Business where he leads the entrepreneurship program for

the university. Email: harrisdrl@ccsu.edu

†Writer and adjunct professor at Southern Connecticut State University. Juris Doctor.

1230 The American Journal of Economics and Sociology

formal privilege—the decentralizing or de-concentrating of rights or

advantages shared by some and denied to others.

A social pattern that inhibits the advance of civilization, by con-

trast, is the tendency toward monopoly. Monopoly concentrates eco-

nomic and political power in the hands of a few, to the exclusion of

others. Politically, this monopolization takes forms such as monarchy

and oligarchy. During long periods of history, the joint political and

economic monopoly of feudalism stifled the capacity of the majority

of the population to contribute meaningfully to the development of

culture. There was little room for individual initiative or creativity.

Eventually, democratic political structures and capitalism displaced

feudalism. Initially, it seemed that a decentralization of political mo-

nopolies, such as provided by political democracy, combined with

capitalism would overcome the monopolistic tendencies of feudalism

by encouraging free trade and greater intellectual tolerance. By the

late 19th century, however, it had become clear that capitalism had

entered a phase of development in which economic power became

concentrated in the hands of a few, operating with the same level of

elitism as feudalism.

Michels ([1915] 2001: 241) asserted this tendency towards monop-

oly as an “Iron Law of Oligarchy”—that large organizations inevitably

tend towards concentration of power in few hands as a tactical and

technical necessity of organization. This applied to both markets and

governments. He presented bureaucratization and specialization as

the driving processes behind the Iron Law. This article suggests that

government-granted privileges are at least the mechanism for, if not

the driving force towards, economic oligopoly (which feeds a self-

reinforcing feedback loop with political oligopoly towards monopoly).

For simplicity, we will henceforth use “monopoly” and “monopolistic”

to encompass “oligopoly” and “oligopolistic.”

Today, we face the question of what will come next in the develop-

ment of civilization. Will government-supported monopolistic capital-

ism prevail, or will a new system emerge that enables the energies and

talents of the many to flourish? A system called economic democracy

has been proposed to facilitate the latter. This article aims to articulate

the conditions under which that might emerge, what it would look

like, and how, with effort, it might evolve from the present situation.