Michael Taft

A central feature of the Irish economy stems from its historical inability to develop a strong indigenous market sector. This article argues that workplace democracy is indispensable in creating a strong domestic enterprise base, privileging workers to do what native capital has been unable to. There are persuasive normative arguments for workplace democracy: Robert A. Dahl maintains that if democracy is justified in governing the state, then it must also be justified in governing economic enterprises. ¹ Isabelle Ferreras argues that labour is an equal ‘risk-taker’ with capital and so is entitled to equal rights to influence a firm’s operation. ² These provide helpful insights. However, if it cannot be shown that workplace democracy produces a superior market outcome, it will gain little popular support. We need to reject the notion that there is a trade-off between democracy and prosperity and argue instead that greater democracy actually leads to better outcomes. Regardless of rights- based arguments, this is the terrain on which workplace democracy will be won or lost.

This article begins with an abridged history of the Irish indigenous sector. It examines the employers’ hegemony in the public debate before advancing a programme of workplace democracy, providing a progressive critique of business ownership entrepreneurship and cultural narratives maintaining the status quo.

Short history of the Irish indigenous sector

Fianna Fáil came to power in the early 1930s determined to create a strong industrial base through a protectionist regime. The theory was that this would protect native industries, giving them space to grow scale, skills, and experience. While there were early successes in boosting industrial employment, it also resulted in profiteering and price cartels, where indigenous industries were protected from external competition. The policy eventually collapsed under mass unemployment and emigration, leading to the malaise of the 1950s and a turn towards foreign capital.

In the late 1970s Fianna Fáil launched a programme that has been described as ‘vulgar Keynesianism’, stimulating domestic demand through public consumption and social protection. A supply-side response from indigenous business, generating employment and investment, was expected but proved naive. When Taoiseach Charles Haughey lectured the country about ‘living beyond its means’, he failed to acknowledge the government’s own inept misreading of the economy – pursuing a demand-led strategy in a small open economy with considerable infrastructural deficits and a limited export base. The result was the stagnation of the 1980s.

At the turn of the millennium, the indigenous sector came into focus again. Following the multinational-led expansion of the 1990s, employment in export-facing sectors peaked around 2000 and fell back in the following years. The government turned to the domestic sector to drive economic growth: in particular, property, construction and financial sectors. In a highly damning critique, Davy Stockbrokers declared in 2010: ‘One of the great misconceptions about Ireland is that it is a wealthy country.’ ³ Years of high income in the preceding decade was ‘largely wasted’. Private investment in productive capital was ‘pitiful’. Davy noted that ‘the increase in our “core” productive capital stock was related to the state or semi-state sectors. It was not driven by private enterprise.’ The Irish economy experienced a massive misallocation of private capital that led directly to the crash.

Today, with generous subsidies during the Covid-19 years and cost-of- living crisis, domestic business experienced substantial profit growth as owners took advantage of inflation to profiteer. The Central Bank⁴ estimated that almost all domestically-sourced inflation in 2021–22 came from significantly increased profits, while the CSO estimates that in the years 2019–2023 domestic profits rose by over 45% compared to 29% for wages.⁵ Yet, domestic employers continue to demand further supports, grants, and tax cuts as well as suppression of wage increases for the low-paid.⁶ Domestic capital is reduced not to increasing share in the market but to demanding an increasing share of corporate welfare.⁷

Building resilience in the indigenous sector

We are entering into an era of uncertainty and disruption, characterised by climate change, technological disruption, deglobalisation, geo-political instability, ageing demographics, social inequalities, and more. This has spawned a debate around the idea of ‘resilience’ – the ability of an economy (households and enterprises) to prepare for, withstand, and adapt to economic shocks and instability.

So how ‘resilient’ is Ireland’s indigenous sector? There are grounds for pessimism. If we take productivity as a proxy for efficiency, Smart and Taft found that the Irish domestic sector performs poorly compared to other small European open economies (see table below). ⁸ How can an economy with such high levels of low pay, endemic wage inequality (one of the highest in Europe), ⁹ and widespread workforce precariousness¹⁰ be considered ‘resilient’ or prepared for economic shocks? Low levels of business investment¹¹ and environmental protection¹² show either lack of capacity, indifference, or both. Indigenous exports make up only a tenth of total exports, while exporting far less than other European domestic sectors.¹³

Table 1: Domestic Market Economy Real Value-Added Per Hour Worked 2017–2019 Average (€ GDP Deflator)

Source: Smart and Taft, Productivity in Ireland’s Domestically-Owned Market Economy: a Comparative Survey, Nevin Economic Research Institute and SIPTU, 2024

The technocratic response focuses on infrastructural and planning deficits, inadequate labour market and re-skilling policies, coordination failures. This is a widely shared perspective among political elites and is not without considerable force. How can businesses be successful carrying the weight of these malfunctions?

There’s a nagging sense, though, that when it comes to technocratic responses there is a ‘Field of Dreams’ moment – build it and they will invest. History and current practice raise doubts that efficient infrastructure or progressive labour market policies will be sufficient to boost the domestic sector.

Nonetheless, the indigenous sector plays a crucial role in the Irish economy. While the International Monetary Fund (IMF) describes Ireland’s multinational sector as an ‘enclave’¹⁴ (‘heavy reliance on imports … sizeable repatriation of profits’), the indigenous sector employs 75% of all people working in the market economy. Crucially, Ireland’s small export-facing domestic sector generates nearly as much direct expenditure in the economy (payroll and domestic supply chain expenditure) as the far larger multi- national sector.¹⁵ In other words, the indigenous sector delivers a high-level economic impact, even in its diminutive state. It remains to exploit this potential.

Employers’ hegemony

If domestic capital’s performance has been so underwhelming why has there not been serious policy reflection and reorientation? One explanation could be that domestic capital hides behind the success of the multinational sector which, despite its legal and accounting gymnastics to reduce their tax bills, nonetheless drives real productivity, employment, incomes and national wealth. Another explanation is more prosaic – domestic capital exerts considerable power in the economy relative to other social forces. And then there is the almost convincing commonsense argument: ‘who better to talk about business than business people’. Still, domestic capital needs to actively make their case in order to maintain popular legitimacy and influence. This can rest on at least three key points.

(a) Labour is not a cost

The term ‘cost’ has negative associations (costly holiday, costly night out, costly repairs). Therefore, employers’ arguments that we must ‘contain’ costs, in particular wage costs, resonate with everyday experience. However, labour is not a cost to business. A simple accounting breakdown shows this. Compensation of labour (wages) comes from the same pool as compensation of capital (profits); namely, value-added. Value-added can be described as a business’s net disposable income (income after input costs are deducted). Increased wages do not add directly to a business’s costs. Nor does it reduce a company’s net disposable income.

However, increased wages do take away from profits. When employers label rising wages as a cost, it is not a cost to the business but to their own ability to generate higher profits.

(b) Reifying business

It has long been accepted that a company is a legal fiction, a person separate from its shareholders. So how does a fiction communicate its needs to speak to policy-makers and the wider public? This gives employers an opportunity to claim speakers’ right. For instance, a business may require investment, particularly long-term R&D investment. But if owners opt for value extraction in the short term, who is there to argue the case for what the firm really needs? In the public debate, employers are described as spokespersons for business when, in fact, they are spokespersons for their particular interest in the business.

Employees could challenge this by aspiring to speak on behalf of business. However, industrial culture, focus on the labour contract, and the sheer ideological effort makes employees’ efforts to speak on behalf of business interests extremely difficult, and in the current context, strange. We are a long ways from a worker being introduced as a ‘business spokesperson’ on a current affairs programme. That is the true definition of hegemony.

(c) Story time

A key story employers tell is that of the hero-entrepreneur. Never mind that Schumpeter saw the entrepreneur as a disruptor and challenger to a bureaucratised, almost decadent, capitalism. Today’s purveyors of the term use it to reinforce capital’s centrality to political economy. One of the first lines in the government’s austerity-period ‘Action Plan for Jobs’ was ‘Governments don’t create jobs, successful businesses and entrepreneurs do’.¹⁶

Employers monopolise the concept of entrepreneur, define its and give it policy-form; they popularise it through updated Horatio Alger-type tales. Entrepreneurship is an individualised activity. Workers are nowhere in this.

Labour costs, reification, and infantilising stories of individualised entrepreneurs are just some of the key concepts that dominate the cultural debate. And even if, historically, native capital has not been up to the task, currently there is no alternative social force to tell a different story about what business requires for success.

Stumbling at the threshold

In public debate and government discourse there is rarely a mention of the actual producers of goods and services. When labour does make the odd appearance in the wings, it is usually as a passive asset to be re-educated, re-skilled, re-purposed.

… the working world is mostly ruled by employers and shareholders, with little or no involvement of employees and their representatives. Democracy currently stumbles at the factory gates and the office doors. The difficulty of crossing those thresholds is one of the major broken promises of democracy.¹⁷

The Irish government’s recent White Paper on Enterprise¹⁸ ignored the role of employees in enterprise decision-making. An enterprise forum established by the government has thirteen participating employers’ organisations but no employee representatives. Little wonder that Ireland ranks in the bottom half of the table in Eurofound’s industrial democracy index.¹⁹

We can start to repair that broken promise with Hayek’s insight²⁰ that economic knowledge never exists in concentrated or integrated form but rather as dispersed bits of incomplete and frequently contradictory knowledge that all individuals possess. This informed his opposition to centralised planning, but it can be applied to any complex organisation, including the firm. Just as the economy possesses too many inputs for a political elite to absorb, analyse and act upon, so the totality of knowledge within an enterprise can be too much for an elite of executives or shareholders. This highlights the desirability of incorporating the ‘knowledge-possessors’ (i.e. all employees) into the decision-making process of the enterprise. This particular reading may be not quite what Hayek intended, but that does not make it any less valid.

Towards more democracy

Employee participation is a process where employees are involved in the decision-making processes, rather than simply acting on orders. This is especially so when employee participation is part of more ambitious democratic initiatives in the workplace, such as the following three mechanisms:

• Collective bargaining
• Co-management or Works Councils
• Board-level employee representation

These have been shown to increase firm productivity, ²¹ enhance financial performance,²² improve service and product quality, increase innovation,²³ improve recruitment and retention, enhance customer service and company investment,²⁴ improve organisational reputation and even reduce tax avoidance activities.²⁵ In short, greater workplace democracy can create a strong, dynamic enterprise base.²⁶

Unfortunately, in Ireland these democratic interventions are largely missing. There is no statutory right to collective bargaining – an outlier in Europe – while there is little history of co-management or board level employee representation in the private sector.

Labour-managed enterprises (workers’ cooperatives, employee trusts) deserve a special mention. They sit on the top rung of the workplace- democracy ladder where labour, rather than being bought by capital, actually hires capital. Similar to other democratic interventions, the impact of employee ownership on firm performance is positive. But, again, such enterprises are rare in Ireland, thanks to factors such as late industrialisation, lack of legislative, financial, and training supports, historical opposition from conservative forces including the Church. The state has been particularly unsupportive of this enterprise model (in contrast to the Italian constitution, which mandates government support for worker-cooperatives). The small cooperative development unit in Foras Áiseanna Saothair (FÁS) was abolished in 2002. Doyle quotes one insider: ‘What do you need co-ops for? Sure look at the place, it’s booming, Celtic Tiger, everything is great, close that nonsense down, who needs solidarity, social bonds and sustainability.’²⁷ Greater employee participation enhances firm performance and efficiency.

Employees are likely to take a long view of an enterprise, seeing it as a source of living standards and employment security. Therefore, there is greater emphasis on long-term strategies (e.g. investment, in-house training, career development) rather than short-term strategies (e.g. value extraction, share appreciation). In terms of long-term commercial resilience, the interests of business are more closely aligned with labour, not capital.

If these initiatives improve firm performance and productivity why the opposition? There are routine explanations: management and owners are not apprised of these benefits, have no experience of engaging with them, are trapped by inertia. Or … they fear the loss of control: ‘ … some consideration must certainly be given to issues of power. Many employers are still worried that making their production system too dependent upon employee involvement, it would become more vulnerable and their decisions would be more open to discussion.’²⁸

So a programmatic menu of democratising policies is not sufficient even if backed up by studies, surveys, and case examples. Power-relationships trump the objective benefits to the firm. We need an alternative understanding of what a business really is – one that undermines the ‘we own it, we manage it’ paradigm that so dominates.

Enterprise as a social space

Far from public ear-shot, there is a debate among legal and business scholars challenging the conventional theory that shareholders are the owners of a business. Kay claims that ‘shares give their holders no right of possession and no right of use’ beyond what is laid down in contract. ²⁹ Bainbridge asks, ‘How do you own a legal fiction? Shareholders are simply one of the inputs bound together by this web of voluntary agreements.’³⁰ One British think-tank points out that ‘in British law shareholders are not “owners” of the company. In reality, no one “owns” a public company.’³¹

If no one owns a corporation, who does? The logic implies we should treat enterprises not as something ‘owned’ but rather as a social space which contains a web of contractual relationships and legitimate interests, including shareholders, employees, management, suppliers, creditors, the state, local communities, and the environment. Of course, owners hold the power in any enterprise (without a counter-vailing force such as an organised employee class). But this is not intrinsic to the enterprise. This power is politically constructed. Limited liability, fiduciary duties, election of boards of directors, the rights and responsibilities of particular stakeholders – these are all laid down in law and can be changed in law, that is, through political and democratic action.

The enterprise is, or should be, a shared social space. And the equality between those sharing that space (stakeholders) is something determined not by some inexorable laws of the market but rather by politics.

Democratising entrepreneurship

Reimagining the enterprise as a social space allows us an opportunity to advance a new theory regarding entrepreneurship, one that challenges the concept that entrepreneurship as an elite activity. One academic observed that trying to find the ‘individual entrepreneur’ in the production process was like trying to find the Heffalump, the imaginary creature in Winnie the Pooh.³² Even when it is not found, ‘ … entrepreneurship scholars continued to embody entrepreneurship in a single person, a lone and heroic entrepreneur.

But … the “entrepreneur” in entrepreneurship is more likely to be plural, rather than singular’. Entrepreneurialism can be re-imagined as inclusive, a process rooted in the plural: Rosen observes that it is ‘workers who discover that things are not working as it was assumed they would, who first encounter the unexpected difficulties, the first to hear from the clients about needs that the program is not meeting. In short, workers know the operations most intimately … Workers are not only the natural source of feedback on how things are going, but also the natural source of ideas and insights into the specifics of operations.’³³ That is, workers are entrepreneurs.

Gramsci observed that ‘in any physical work, even the most degraded and mechanical, there exists a minimum of technical qualification, that is, a minimum of creative intellectual activity … All men are intellectuals … non-intellectuals do not exist’.³⁴ Gramsci’s de-hierarchising is a democratic necessity if people are to be brought out of passivity, whether it is imposed or internalised.

Armed with this new pluralist perspective, where workers are the natural source of ideas and non-entrepreneurs do not exist, we can develop a framework in which all workers are treated as entrepreneurs.

A cultural struggle

Posing business as a social space, democratising entrepreneurship, arguing the programmatic benefits of greater employee participation presents itself, first, as a cultural struggle. The dominant ‘business culture’ is about more than just raw industrial power. It possesses democratic consent or at least tolerance. This is not about counting ballots. Business culture shapes how we define, and interact within, the economic world. It shapes how we might change that culture or even if we are inclined to do so.

A key site of this struggle is the term ‘common sense’, a fluid concept that can both reinforce conservative forces or act as an agent of change. That business owners know more about business than civil servants or union officials is an example of conservative reinforcement. Conversely, the concept of the ‘Living Wage’ gained considerable support not because of the economic arguments per se, but because it seemed so common-sensical. If someone is working, they should at least get a wage to live on. ‘Common sense’ can help challenge cultural domination, generating new stories and alternative narratives; it can help us re-look at the world around us.

In this we can reach into our own history. Seán Lemass wrote in 1957,

‘Nobody nowadays regards an important industrial undertaking as being the exclusive private concern of its owners. Rather, each such undertaking is looked upon as a national asset contributing to the country’s economic and social advancement … The industrial manager has unavoidable responsibilities, wider than those placed on him by his employer. He should be regarded and regard himself as a public servant in the finest meaning of that term.’³⁵

While, today, these sentiments seem like a universe away, they have deep roots in the democracy that formed the state, even if articulated through a corporatist vocabulary. Whatever about the owners of capital, the rest of us are allowed to consider what that public interest is. We are being invited, however tentatively, to step outside the ideological box.

Conclusion

We must (re)start with an intangible – imbuing people with the social confidence to even begin considering alternative ways of doing business, never mind becoming a social force to rival capital. This is what trade unionism did in its early days. It was emblazoned on their banners. It made up the refrain in their songs. In this culture, employees occupied the centre stage. Democracy became possible. They didn’t just resist, they ennobled. This is what the American trade unionist Big Bill Heywood intended when he said, ‘If you want to find the capitalist’s brain, look under the worker’s cap.’³⁶ While trade unionism cannot address all issues related to democratisation (this requires a popular alliance within and between civil society and state actors), the role of workplace organisation is indispensable.

Workplace democracy plays only a part in a wide-ranging agenda for economic democracy: de-commodification of public services, the re- invention of public-led enterprises, strong income floors and strengthened in-work benefits, green industrial policies and the democratic management of digitalisation, along with technocratic policies to increase infrastructural efficiency. These are all needed for a resilient economy and a prosperous society. These are all part of the long march through the indigenous economy. But to where?

The destination is a new common sense in the popular debate. Of course, the production process needs capital and labour. Capital needs labour to generate profits. Labour needs capital to secure employment and life quality. But – and this is the pivotal point – while labour needs capital, labour, armed with a profound democratic agenda, does not need capitalists.

Michael Taft is Research Officer with the SIPTU trade union. He is a member of the Low Pay Commission and the National Competitiveness and Productivity Council.

Notes

1. R. A. Dahl, A Preface to Economic Democracy (University of California Press, 1985).
2. Isabelle Ferreras, ‘Democratising Firms – A Cornerstone of Shared and Sustainable Prosperity’, The Jus Semper Global Alliance, May 2021.
3. Rossa White, ‘Years of high income largely wasted’, Davy Research, 19 February 2010.
4. Central Bank of Ireland, Quarterly Bulletin 2 (Dublin: Central Bank of Ireland, 2023), <www. centralbank.ie/publication/quarterly-bulletins/quarterly-bulletin-q2-2023>
5. Central Statistics Office, ‘Quarterly Productivity in Ireland’, <https://data.cso.ie/product/PIQ>
6. Joe Cunningham, ‘Employers have manufactured the SME “crisis” to boost profits using assertion and anecdote’, The Irish Times, 15 April 2024.
7. Nat O’Connor, ‘Public Spending and Ireland’s Mixed Economy’, Nevin Economic and Research Institute, Labour Market Conference, 2024, <www.nerinstitute.net/sites/default/files/2024-05/ Nat%20O%20Connor%20Maynooth%20University%20and%20UCD%20Session%201B%20 presentation%20May%2024.pdf>
8. C. Smart and M. Taft, Productivity in Ireland’s Domestically-Owned Market Economy: a Comparative Survey (Dublin: Nevin Economic Research Institute and SIPTU, 2024).
9. Eurostat, ‘Structure of earnings survey: hourly earnings’, <https://ec.europa.eu/eurostat/databrowser/ product/page/EARN_SES_HOURLY>
10. C. Nugent, S. Pembroke and M. Taft, ‘Precarious work in the Republic of Ireland’, NERI Working Paper Series, July 2019.
11. Eurostat, ‘Foreign control of enterprises by economic activity and a selection of controlling countries (2008–2020)’, <https://ec.europa.eu/eurostat/databrowser/product/page/FATS_G1A_08>
12. Eurostat, ‘National expenditure on environmental protection by institutional sector’, <https:// ec.europa.eu/eurostat/databrowser/product/page/ENV_AC_EPNEIS1>
13. Eurostat, ‘Trade by type of ownership’, <https://ec.europa.eu/eurostat/databrowser/product/page/ EXT_TEC07>
14. International Monetary Fund, ‘Ireland IMF Country Report’, No. 10/366, December 2010.
15. Department of Enterprise, Trade and Employment, Annual Business Survey of Economic Impact 2022 (Dublin: Department of Enterprise, Trade and Employment, 2024).
16. Government of Ireland, Actional Plan for Jobs 2012, <https://assets.gov.ie/298192/f0727e8c-c96c- 40f0-b38c-a261eab0bd95.pdf>
17. European Trade Union Institute, ‘Democracy at work: what, why and how?’, in Benchmarking Working Europe (European Trade Union Institute, 2019).
18. Department of Enterprise, Trade and Employment, White Paper on Enterprise, 2022–2030 (Dublin: Department of Enterprise, Trade and Employment), <https://enterprise.gov.ie/en/publications/ publication-files/white-paper-on-enterprise-2022-2030.pdf>
19. Eurofound, Measuring key dimensions of industrial relations and industrial democracy (Luxembourg, Publications Office of the European Union, 2023).
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23. A. Brysona and H. Dale-Olsen, ‘Union Effects on Product and Technological Innovation’, Workplace ProductivityandManagementPractices, 47 (2021); Julimar da Silva Bichara, et al, ‘Collective bargaining and technological innovation in the EU15: An analysis at establishment level’, TheWorldEconomy, 46:9 (2023), 2891–2924.
24. S. Jager, B. Schoefer & J. Heining, ‘Labor in the Boardroom’, NEBR Working Paper, 26519 (August 2020).
25. S. Vitols, ‘Board Level Employee Representation and Tax Avoidance in Europe’, Accounting, Economics, and Law: A Convivium, 13:4 (2019), 457–478.
26. The Aspen Institute, A Seat at the Table, Worker Voice and the New Corporate Boardroom (August 2021); National Economic and Social Council, Towards a National Better Work Strategy (Dublin: National Economic and Social Development Office, July 2024).
27. Gerard Joseph Doyle, ‘Socialising Economic Development in Ireland: Social Enterprise an Untapped Resource’, in Value Creation for Small and Micro Social Enterprises, ed by Chi Maher (Hershey PA: IGA Global, 2019).
28. Jacques Belanger, ‘The Influence of Employee Involvement on Productivity: A Review of Research’, Applied Research Bureau, Human Resources Development Canada.
29. Peter Kay, ‘Is It Meaningful To Talk About The Ownership Of Companies?’, Social Europe Journal, 7 December 2015.
30. Stephen Bainbridge, Who Owns the Corporation?’, ProfessorBainbridge.com (website), 2006,<www.professorbainbridge.com/professorbainbridgecom/2006/01/who-owns-the-corporation.html>
31. The Institute for Public Policy Research, ‘Who “owns” a company?’, 10 March 2017.
32. C. Ben-Hafaïedh, ‘Essay on a team-based view of entrepreneurship’, IÉSEG School of Management, January 2006.
33. E. D. Rosen, Improving Public Sector Productivity: Concepts and Productivity (Thousand Oaks, CA: Sage Publications, 1993).
34. A. Gramsci, ‘The Formation of the Intellectuals’, Prison Notebooks, 1929–1935.
35. Seán Lemass as quoted in J. J. Lee, Ireland 1912–1985: Politics and Society (Cambridge University Press, 1989).
36. D. Montgomery, The Fall of the House of Labor: The Workplace, the State, and American Labor Activism, 1865–1925 (New York: Press Syndicate of the University of Cambridge, 1987).