Equality, Participation, Transition: Essays in Honour of Branko Horvat

Jaroslav Vanek 21
There is another well-known example of participation which
would at first sight appear as optimal, with D1 and the intensities of
involvement ‘d’ respected. It has to do with common stock ownership
and voting in capitalist corporations. But there is a fundamental problem
which illustrates the need for, and helps us to define what we call,
the second fundamental law of optimal participation. In the opinion of
this writer – to be judged by the reader as we go along – this second
law is of tremendous importance, and if applied, promises a major step
in the direction of a more just and happy society and the elimination
of a lot of human misery.
Obviously, in the practice of large capitalist corporations the postulates
of the first law are not fully respected, with large stockholders typically
having disproportionately strong power, and vice versa for the
small stockholders. But it is not this flaw that we speak about here.
What concerns us is that there is a category of people, the workers,
who, while significantly involved, do not participate at all in the decisions
of the corporations, save sometimes indirectly, via labour unions.
Thus, on our terms, D is significantly below unity and the degree/
intensity of involvement ‘d’ is not respected in determining participation
in decisions. This is a highly imperfect, suboptimal, solution indeed.
Some would suggest that the solution should be sought in various
forms of co-determination, such as that practiced in the German economy.
While probably a step in the right direction, this is not an optimal
solution and may even imply a dead-end street. Co-determination in
general terms postulates that capital and labour produce jointly. Thus
it should be treated along the lines of the first law with the ‘d’ intensities
somehow determined numerically, perhaps as proportions of value
added by the various factors and their suppliers.
The suboptimality of co-determination can be argued on both practical
and theoretical levels. The economic performance of such solutions
is good but certainly not the best: 2 in theory, because the primary
objectives of capital is profit maximization, and of labour, maximization
of income or wages. The situation is likely to become unstable,
depending on who holds the majority, and the incentives structure
especially can be quite flawed. But we do not have to spend much time
on this subject, because our principal purpose is to move our analysis
towards the determination of true optimal solutions.
The key to the road of optimality is, in addition to intensity of
involvement, the consideration of the nature or quality of involvement.
We have here at least three major historical analogies or antecedents.
(1) The nature and quality of involvement of the owner in his slaves