London’s tube strikes and the prospects for ‘economic democracy’

The London Underground is normally a place from which most types of social interaction are barred, but tube strikes are times during which that rigid social code is temporarily suspended. Sharing one’s frustration about the situation now becomes socially acceptable, in ways that can, in extreme cases, even resemble a conversation between random strangers.

When this happens, what you most often hear is disbelief about how the transport unions, whose members are seen to be in an economically very comfortable position, can still present themselves as the voice of the victimised and downtrodden. Commuters know that tube drivers earn very generous salaries and fringe benefits for a not-too-demanding job. As long as the services are operating, this does not bother them greatly. But when unions adopt the pose of the underdog in a class struggle while paralysing the city, there is a clear credibility shortfall. Most commuters see tube drivers simply as a group of people who have nothing to complain about, and who should thus refrain from doing so.

Yet it is important to note that the anger of the transport union members is no less genuine than the anger of commuters. How come that the disgruntled commuter and the union representative have such irreconcilable perspectives? How hard can it be to put oneself into the other guy’s place for a moment, and develop some understanding of their position, even if one disagrees with it?

The answer, unfortunately, is that it is very hard, bordering on impossible. Everybody believes that their own job is harder than everybody else’s. Everybody believes that they are putting in more than their fair share, while others slack and free-ride on their effort. Everybody believes that their own contribution is underappreciated and under-remunerated. I have yet to meet somebody who thinks that they are overpaid, or that their job is on the easy side.

And that is why ‘economic democracy’, an arrangement in which economic variables like wages rates and working hours are set politically rather than by impersonal market mechanisms, is a terrible idea. Never mind the economic inefficiency. Economic democracy is also a recipe for permanent conflict and mutual resentment.

If you listen to faddish lefties such as Russell Brand, you could get the impression that the world works, more or less, like this:

There is one subset of the population which is called ‘The People’. The People are wonderful. They are kind, collaborative, generous, and always eager to share with their fellow men. Sometimes The People are a bit messy, too, but that only makes them all the more charming and lovable.

Unfortunately, The People are not the only ones in the world. There is a separate species called The Corporate Elites, or The Plutocrats. They are an entirely different breed from The People. They are greedy, exploitative and hateful, and yet somehow they have ended up with all the wealth and all the power. They own all productive facilities, and they control all political parties and most media outlets. They are so powerful that they can even generate artificial conflicts within that otherwise so peaceful tribe, The People, to distract their attention from who really calls the shots.

The implication, of course, is that The People have to sweep aside The Corporate Elites, and run the economy themselves, democratically. Then ‘we’ can decide who should earn what, and do what in return.

The problem with these sentiments is not that they are too optimistic about the goodness of human nature. We are, by and large, a fairly cooperative bunch. We like to get together and do things together, and we are quite good at it. The problem is that we are terrifically good at persuading ourselves that what is good for us is also good for society as a whole, as well as fundamentally just and moral.

Think of a controversial refereeing decision in a football match. Among the fans of the team that benefits from the decision, the overwhelming majority will defend it, and come up with well-argued reasons to justify it. Fans of the other team, meanwhile, will be equally confident in their condemnation of the decision, and will come up with equally well-argued reasons to reject it. Each side will sincerely belief that their own position is plain common sense, while the other side is being biased and unreasonable.

That is the way our minds work, whether it is in football or in economic matters. For the sake of peace and quiet, we should therefore try to minimise the occasions on which we have to consciously agree on something. One way of doing this is minimising the scope of the politicised and semi-politicised sectors of the economy, and maximise the scope of impersonal market exchange. Agreement is overrated.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).