We only live in half a democracy

General, Democracy, Interviews, Law, Social question, Economic policy discourse

"We only live in half a democracy" (Interview with Heinz-J. Bontrup)
A new balance between capital and labor – through more co-determination for employees and their direct participation in companies

The richest one percent of the population not only has the largest fortunes, it also owns the majority of businesses. Germany's operating wealth of an estimated three trillion euros is extremely unevenly distributed and accumulates at the top of the wealth pyramid. But businesses are not only assets, they also give power over millions of people who need work and income. "The entrepreneur has an investment monopoly and may deprive people of their economic livelihood, their job, at any time in order to increase the rate of profit," criticizes the economist Heinz-Josef Bontrup in an interview with this newspaper. He therefore calls for a democratization of the economy. Democracy "must not end in front of the factory gate".

Interview by Stephan Kaufmann with the economist Heinz-J. Bontrup in the Frankfurter Rundschau of 12.09.2021:
[This article published on 9/15/2021 is translated from the German on the Internet, "We only live in half a democracy" (Interview with Heinz-J. Bontrup) - iWiPo.]

Mr Bontrup, it is often said from the liberal side that the democratic state must act more economically. They, on the other hand, want to make the economy more democratic. What does that mean?
The starting point is the following statement: We only live in half a democracy. The state superstructure is democratic. The base, on the other hand, the economy, is autocratic, here the owners of capital alone rule. I am therefore in favour of equal participation and participation in the economic results of workers in order to make democracy complete.

What you call "autocracy", however, is considered legitimate. After all, the companies belong to the entrepreneurs, they are their property.

But a special property! A business is different from a car, a home or a wall unit that I use privately. Because the vast majority of other people depend on the machines and decisions in the company. They need employment and wages. However, the entrepreneur allocates this alone, according to his investment monopoly. He has power over people and over what is produced and in what way. If one wants a real self-government of the population, then one cannot declare large parts of economic life to be a private matter of the entrepreneurs.

The entrepreneur cannot decide on his own – there are trade unions and co-determination...

The term "co-determination" is deceptive. There are only limited rights of participation or consultation, but there is no participatory equal participation of employees. And the trade unions are weakened – they no longer even manage to enforce wage increases within the framework of the distribution-neutral leeway. The result is a redistribution in favor of capital.

But there are laws that limit the power of corporations.
That's right. At the same time, today we are in a situation in which the big capitals use their growing power not only in the economy itself, but also to influence the democratically legitimized state in their interest. In this respect, it is currently less democratization that threatens the power of corporations, but vice versa: the power of corporations threatens democracy. Apart from this political argument, the employees already have a right to a real say in purely economic terms.

What does that mean?
Employees never receive the full value of their work with the wage. That is the essence of capitalism. The work creates the value. However, the workers only receive a part of it with which they finance their lives. The rest is received by the entrepreneurs as profit.

Hardly any economist today is likely to agree with you. According to the prevailing doctrine, value creation is distributed among all three factors of production: labor, capital and land. All three are therefore entitled to parts of the value created.

Yes, but this is only perverted neoliberal doctrine that has nothing to do with economic reality. Here I recommend the classical economists Adam Smith, David Ricardo and Karl Marx, who saw it correctly. Capital itself is merely past labor and does not create new value. It merely appropriates the added value that the work creates. And that's the only reason why entrepreneurs hire people.

Let's assume that we have an economic democracy and that the employees are really allowed to have a say in the company – but then there would still be the profit and the employees would still only receive their wages.

That is true, with an economic democracy the market conditions would not be abolished. But there is a crucial difference: in an economic democracy, employees would participate in the added value – profit. This would result in completely different distribution relationships. There would be no poverty and no wealth like today.
By what standards and in what way would this redistribution take place?

In a first step, of course, all employees must be paid according to a collective agreement. Based on the added value of a company, the employees first receive their remuneration, so to speak as an "advance" for their individually provided workforce. Thereafter, the lenders are satisfied with interest and the landowners with a basic pension. Subsequently, the state receives its taxes. The equity investor – i.e. the owner – receives a certain share of the after-tax profit. From the remaining balance, necessary investments must then be financed, debts paid off and a capital reserve formed. The remaining profit can then be divided between shareholders and employees, whereby the share of the employees is not paid out, but converted into a participation in the company. In this way, the employees rise to co-owners, to co-profiteers and co-decision-makers and the companies are democratized. This would solve many problems.

For example, which one?
The French economist Thomas Piketty once stated that if capital ownership were distributed according to strictly egalitarian criteria and every employee received the same share of profits in addition to his wages, no one would be interested in the question of the relationship between profits and wages.

Would economic democracy be completed?
Not at all, there are still many components. Among other things, state support for cooperatives, more socialized companies with public influence in the areas of energy and transport in the course of remunicipalization. The healthcare industry also belongs in public hands, and the state must become active as the owner of apartments on the housing market. Last but not least, the state sector must invest much more in infrastructure. Economic democracy is not just an instrument for redistribution between labor and capital. It is an instrument for the reorganization of production and distribution, not least for achieving real climate protection.
That all sounds quite utopian.

Maybe. However, it would be feasible if the majority of the population only wanted it.

One hurdle stands in the way of your plan, a crucial one: the constitutionally protected private ownership of entrepreneurs in their companies. Voluntarily, they will certainly not give this up.
Yes, indeed, the Constitution unilaterally protects capital through private ownership of the means of production and through entrepreneurial freedom to act economically for maximum profit. As a result, this means that the machine used in the production process counts more in the constitution than the working person who created this machine in the first place. As a result, the employees in the production process are hopelessly inferior to the capital owners. That is the legal situation. But it doesn't have to stay that way.

About the person
Heinz-Josef Bontrup (68) studied economics in Bremen. From 1990 to 1995 he was Labor Director at the Thyssen subsidiary Stahlwerke Bochum AG. From 1996 to 2019 he taught economics with a focus on labor economics at the Westfälische Hochschule Gelsenkirchen Bocholt Recklinghausen. Bontrup has been a visiting professor at the University of Siegen since 2018. He is co-author and editor of the annual memoranda of the Alternative Economic Policy Working Group (Memorandum Group) and its spokesperson.
Tags: work. Distribution of wealth, Democratization, Capital, Co-determination, Economic democracy