There’s No Moral Justification for Capitalist-Owned Enterprises

Capitalist "liberty" is just another word for private tyranny. Workers, not capitalists, should control economic enterprises.

Workers on an assembly line at the Fagor electrical appliance plant, part of the Mondragon cooperative, in the Basque town of Arrasate, Spain. (RAFA RIVAS/AFP via Getty Images)

Since the earliest days of democracy in ancient Greece, detractors have regarded it as the worst conceivable form of government. From Plato to the self-styled “anti-Platonist” Nietzsche, critics have condemned democracy for enabling the “swinish multitude,” for producing a “tyranny of the majority” at worst and a mediocre mass society at best.

It is therefore extraordinary how popular the democratic ideal has become, such that nearly every government under the sun, no matter how autocratic, wraps itself in the garb of popular rule. Authoritarian demagogues like Viktor Orbán claim to be defending the people; North Korea’s hyper-autocratic state declares itself a Democratic People’s Republic. If it is true that the greatest flattery one can pay is emulation, then democracy is at least superficially the belle of world opinion.

I say superficially because the existence of thoroughgoing democracy is more rhetorical than real in even long-standing liberal democratic states. Huge swathes of life remain dominated by unaccountable forms of power, many of which are as consequential as the statist authoritarianism that democratic movements first emerged to contest.

One of the most notable is the workplace, where efforts at democratization have not only stalled but been rolled back after decades of neoliberalism. And one of our best guides to this redoubt of private tyranny is Robert Dahl, one of the chief democratic theorists of the twentieth century and the author of the sorely overlooked book A Preface to Economic Democracy.

Opposing the Demos

Born in 1915, Dahl established himself in the decades after World War II as one of the United States’ preeminent political scientists. While perhaps best known for his 1961 study Who Governs?rightly skewered by left-wing critics for arguing that the US boasts a pluralistic political system where no one social group rules — Dahl wrote a series of seminal books and papers that showed a more radical streak. At the heart of his work were an ethical devotion to democracy and a social scientific commitment to empirical research.

In his 1986 work, A Preface to Economic Democracy, Dahl set his sights not on formal political institutions but a domain often overlooked by mainstream political theorists: the economy. He called for its thorough transformation — and responded to critics who would oppose democracy’s extension.

Following Aristotle, Dahl sees the democratic ideal as not just functionally but fundamentally egalitarian, since it is predicated on the political equality of all citizens. That foundational equality creates an internal propulsion toward more democracy: political equality ensures that all, including the “lower orders,” have at least some power to advance their interests.

The classical liberal solution to this supposed problem was well known. While limited forms of democracy would be permitted to shape certain state policies, private property rights, very broadly construed, would be permanently insulated from democratic pressures. Additional antidemocratic checks would be put in place to both enforce this expansive conception of property rights and inhibit the formation of mass movements and popular pressure that might challenge capital’s rule. The liberal state, ostensibly committed to freedom and liberty, could even be used to dispense force against worker organizing and other threats to private property rights.

Dahl spends much of his short book contesting two arguments from classical liberals. His first target is Alexis de Tocqueville, undoubtedly the greatest frenemy democracy has ever seen.

After touring the United States in the early 1830s, Tocqueville admitted that democracy was the way of the future and gave half a cheer for its liquidation of the old aristocratic regimes (to which he himself belonged). But he was deeply worried that liberal democracy was plagued by a fundamental tension between liberty and equality.

Some of Tocqueville’s anxieties were simply updates of the antiquarian critique of “mob rule.” His more original contribution was to argue that democracy generates a cultural tendency toward mediocrity and social leveling, as the crude majority comes to resent and eventually constrain the liberty of the more meritorious. Initially, they may do so through mere social pressure. But eventually a yearning for equality, coupled with the dissolution of local forms of attachment, could become so strong that a giant state would emerge to manage and provide for all through a soft despotism.

Dahl concedes that it is possible for a democratic society to turn to despotism, soft or otherwise. History has too many examples to wave this away. But merely raising the specter of a possibility isn’t proof of anything: capitalist “liberty” can often fuel open despotism, as apartheid South Africa, Chile, and Singapore show. And the primary cases cited by democracy’s critics today — 1930s Germany, Spain, and Italy— are instances of authoritarian rollbacks, not democratic explosions creating “mob rule.”

The second argument Dahl takes up is more important for his claims about workplace democracy. His target: the classical liberal contention that property rights should be permanently insulated from the democratic process — including the right of capitalists to own large-scale corporations and firms.

Dahl divides the argument into two main prongs. The first is an instrumental or utilitarian defense, which holds that an expansive conception of property rights will benefit all, either in the short or the long run. The second defense is a purely moral one. For instance, Robert Nozick argues in his libertarian treatise Anarchy, State, and Utopia that private property rights belong in the basket of fundamental rights that no state can violate, including whatever one earns through market exchanges.

Dahl launches a furious attack on both defenses, taking particular aim at the moral one. As Dahl points out, the latter often rests on an assertion that private property is some kind of natural right, which says “close to nothing at all.” Moreover, it conflates personal property rights — for instance to my body, my immediate possessions, etc. — with private property so expansively that suddenly Jeff Bezos has a right to monopolize space and capitalists have an unfettered right to own gigantic firms that operate on a worldwide scale.

Each step of the argument — from a simple defense of personal property to ever more capacious conceptions of private property — needs to be justified, and supporters of capitalism rarely do so. Instead, Dahl notes, we get gigantic fudging: the labor and sacrifice invested by capitalists gives them the unfettered right to own a firm, while the sweat and blood invested by workers gives them nothing but the opportunity to continue selling their labor to the capitalist.

I would go one step further than Dahl. An expansive conception of private property is one of the biggest impediments to political liberty. When a political system withdraws fundamental questions of property relations from deliberation and pressure, it limits the social freedom of individuals to determine what kind of society they want to live in and the laws that govern them. (This is one of the fundamental flaws of the libertarian “nonaggression” principle, which holds that state coercion is wrong while implicitly depending on such coercion to maintain respect for private property even in the face of dissent.)

The Argument for Workplace Democracy

After swatting away classical liberals’ objections, Dahl moves on to make the case that democracy should be extended into the workplace. He advocates “self-governing enterprises,” which would be organized collectively by politically equal workers who would determine, through voting and other procedures, how the enterprise’s assets would be spent, how production would be organized, and so on.

Self-governing enterprises would compete with one another in a market consisting of other democratic firms. The state would also have a role to play, regulating self-governing enterprises to inhibit the formation of monopolistic power, tax wealth, and redistribute it through social services, as well as inhibit harmful activities. Dahl hypothesizes that all of this would likely be easier in a market of workplace democracies, since there would already be a more egalitarian spread of profits among workers and “all citizens [would have] a more nearly equal stake in maintaining political equality and democratic institutions in the government of the state.”

Unfortunately, Dahl is rather thin on examples of self-governing enterprises in action. The Mondragon cooperative in Spain seems to be one example, but how things would look at a larger scale remains to be seen. It seems to me the best path forward would be experimental; simultaneously agitating for democratization of the workplace at the firm level while organizing politically to pressure liberal democratic institutions to create more legal space and rights for unions, labor organizing, cooperatives, etc.

But Dahl was onto something. One of the great tragedies of twentieth-century socialism was that it came to be associated with Stalinist tyranny at worst and bloated bureaucracy and inefficient central planning at best. This perception is at least partially the fault of pro-capitalist propaganda, but the fact remains that actually existing socialism was often deeply undemocratic. Social democratic movements were much more successful at building humane societies, particularly in the Nordic countries, but in the 1970s and ’80s they failed to push beyond capitalism and win a democratic socialism.

Dahl’s Preface to Economic Democracy is an argument for why the ideal of democracy isn’t just about citizens controlling the state but of constructing a shared world together, in the workplace and beyond. In this sense, it is an inspiring vision of a future that still could be.