Reproduced with kind permission from Steven Spadijer at Australian National University:
What is Direct Democracy?
Direct Democracy allows a prescribed number of citizens’ to veto an existing law or enact a constitutional amendment or statute independent of the legislature at a referendum. Today, these procedures complement the day-to-day representative government found in Switzerland and its 26 cantons, 7 German Länder, Liechtenstein, 24 American states and parts of Latin America.
Readers might notice that these regions are some of the wealthiest, well-governed and most stable countries in their region today. But do constitutions matter for economic performance? In particular, does the use of direct democracy matter from an economic perspective?
The Swiss Experience
Authors Feld and Savioz (see references below) found that per capita GDP in cantons which use Direct Democracy more frequently, and have easy access to these rights, are some 5 percent higher than in cantons which have infrequent use (even when controlling for income and other demographic variables). Feld also shows that direct democracy is associated with sounder public finances, lower levels of public debt, better economic performance and higher satisfaction of citizens.
Schaltegger with Feld then reveal centralization of public resources is more likely to occur under representative government while direct democracy is more likely to decentralize the provision of public resources, concluding that :
the empirical analysis provides evidence that referendums induce less centralization of fiscal activities.
In turn, such decentralization prompts vigorous tax competition between the cantons of Switzerland attracting capital from aboard as well as better education outcomes for all.
More recently, Funk and Gathmann find using Swiss data from 1890 to 2000 that a mandatory budget referendum reduces canton expenditures by 12 percent while lowering signature requirements for the voter initiatives by 1 percent reduces canton spending by 0.6 percent.
Pommerehne then examines the effects of direct democracy on the efficiency with which government services are provided. He finds that waste collection in Swiss towns having both a private contractor for the service and direct democratic elements is provided at lowest cost. Additional efficiency losses materialize if waste collection is provided in towns without direct democratic elements.
So far as its economic impact in Switzerland, direct democracy has brought with it unparalleled economic prosperity, despite the country being far from resource-rich.
Progressivism and Direct Democracy
It is important to note that Direct Democracy per se does not lead to lower spending. Rather, it accords with what citizens require given the context. If your infrastructure is state-of-the-art, then there is no need for lavish expenditure. Conversely, if it is dwindling (try taking a train from Western Sydney to the city), then it is a gun behind the door.
In Uruguay, for example, voters repealed privatization of the countries water supply and oil companies, “Norwegian-izing” their natural resources via the initiative process. Matsusaka noted that during the first half of the twentieth century in the United States, which was characterised by massive urbanisation and movement of people from rural to urban areas all of which required railways, roads and schools to be built), initiative states spent more — both statewide and locally, but lower state and higher local expenditure after controlling for income and other demographics.
This was used to bypass the legislature dominated by farmers and allowed the US to urbanise itself. Together with existing evidence from later in the century which shows its ‘libertarian’ streaks, suggests that the voter initiative does not have a consistent effect on the overall size of state and local government.
However, in all cases Direct Democracy systematically leads to more decentralized expenditure. Indeed, Blume and Voigt note in Germany that the introduction of direct democratic elements in local constitutions led to higher rates of expenditures on local infrastructure. For example, Bavaria – one of the most efficient, well governed parts of Germany – has had over 1500 referendums locally from 1995 to 2005.
Reasons?
But why does direct democracy deliver results far superior to that of representative government? There are 3 broad reasons:
1. In a principal-agent framework, citizens are the principals and can only very imperfectly control their agent — the government.
In this situation, direct democratic institutions can have two effects, namely a direct effect, which enables the principals to override the decisions of an unfaithful agent, and an indirect effect, where simply the threat of override is sufficient to compel the agent to behave according to the principal’s preferences.
Potentially, reducing the principal-agent problem by way of direct democratic institutions could affect all of the economic variables discussed in this paper: if citizens prefer an expenditure level that is higher/lower than that preferred by the government, they should be able to achieve it via direct democratic institutions.
2. James Buchannan attributes the poor performance of representative government due to the theory of “adverse selection”:
[S]uppose that a monopoly right is to be auctioned; whom will we predict to be the highest bidder? Surely we can presume that the person who intends to exploit the monopoly power most fully, the one for whom the expected profit is highest, will be among the highest bidders for the franchise.
In the same way, positions of political power will tend to attract those persons who place higher values on the possession of such power. Is there any presumption that political rent seeking will ultimately allocate offices to the ‘best’ persons?
Genuine public-interest motivations may exist and may even be widespread, but are these motivations sufficiently passionate to stimulate people to fight for political office, to compete with those whose passions include the desire to wield power over others?
Under these monopolistic conditions it is entirely predictable that the system will adversely select odious politicians who act in their own interests, with secondary regard for the subjects they rule or that of the opposition. It is inevitable that the dishonest politicians will deliberately misrepresent the state of affairs to the public in their desperate attempts to secure votes, buying off special interest groups and powerful lobbies piecemeal with gifts from the public purse.
And it is only a matter of time before the megalomaniacs pursue some expensive, harebrained, self-serving scheme (like the EU, the Euro debacle, or a war – all of which were rejected by the people) that brings down disaster on their subjects. Does anyone, for example, believe Ireland would be in the position it is today if it had the Swiss system of government, handing over your own sovereignty to the EU? I doubt it.
3. By contrast, direct democracy allows one to serve no one but their own community and families. Buchannan further notes:
…direct democracy [acts as] an add-on or addendum to existing decision rules and procedures, as carried out through legislative bodies or through executive-administrative agencies, provisions for popular initiatives and referenda can operate so as to forestall collective actions that might otherwise be implemented.
And such provisions may exert an influence as a potential check even if no popular efforts toward actual organization of an electoral test are made. Legislators, executives, bureaucrats, and judges will keep arbitrary actions within tighter boundaries when they are subjected to potential reversals through popular referenda.
In sum, the effects of direct democracy add-ons to existing decision rules surely work toward reducing the range and scope for politicization, a result supported by classical liberals.
Conclusion
We can see there is a powerful case for direct democracy from an economic perspective. We can also see that direct democracy, like Switzerland, is a “neutral” force: when governments go too far toward the right, the initiative reverts government back to the left forcing them to spend on infrastructure to avoid unnecessary and crippling bottlenecks.
When the government goes too far left, direct democracy reverts the government to the right, decentralizing expenditure. Presumably, in Australia direct democracy would decentralize taxation and result in competitive federalism (note most centralized power proceeds undemocratically) – perhaps giving [Australia] a fighting chance to compete with Singapore!
References
Lars P. Feld and John G. Matsusaka, ‘Budget Referendums and Government Spending: Evidence From Swiss Cantons’
Lars P. Feld and Marcel Savioz, ‘Direct Democracy Matters for Economic Performance: An Empirical Investigation’
John G. Matsusaka, ‘Fiscal Effects of the Voter Initiative in the First Half of the Twentieth Century’
Lorenz Blume and Stefan Voigt, ‘Fiscal Effects of Reforming Local Constitutions: Recent German Experiences’
Christoph A. Schaltegger, ‘Tax Competition and Income Sorting: Evidence from the Zurich metropolitan area’
Patricia Funk and Christina Gathmann, ‘Does Direct Democracy Reduce the Size of Government?’
Is soo far verry important for the economics, the any COUNTRY the {Direct Democracy}
The problem is when the electorate passes bills for improvements funded by bonds, but doesn’t recognize that the bonds need to be repaid. It’s one part of the problem that is causing California issues.
I also wonder if it would work in the USA where advertising agencies can spin invisible yarns the populous the wears proudly.
The arguments made here ignore culture (Switzerland has a tradition of direct democracy dating back at least to the 14th century) and psychology; the propensity of people to demand services for which they are then loathe to pay (see, once again, California).
Did Steven not also cite examples from the US and Uruguay?
Voter initiatives only take up 3 percent of the budget, minus Proposition 98 which is money that would have been spent anyways. I don’t see many problems in the other 24 states with DD. In fact, voter initiatives are often accompanied by either fiscal decentralization or a tax (e.g. stem cells research is often funded by a tobacco tax).
Seems a Spaniard, a Frenchman and a Swiss were talking in a bar. The Spaniard acknowledged that the had had 500 years of bloodshed perpetrated by autocratic rulers,dictators and the Spanish Inquisition. But we have produced Gaudi,Miro,Picasso,Dali and been at the forefront of the arts for centuries.
The Frenchman conceded that they too had had 500 years of autocratic kings, popes and guillotining but had produced writers like Honre Balzac, Gustave Flaubert, Guy de Maupassan and artists like Matisse,Manet,Cezanne and Gaugin.
Finally the Swiss said they had had 500 years of perfect democracy and managed to lead the world with cuckoo clocks.
And nearly free use of some ill gotten gains of foreigners – not bad, beats cuckoo clocks!
They may not have produced many artists but their economy runs like a Swiss watch.
This “joke” is a rehash of a childish slight on the Swiss by Winston Churchill and was completely untrue at the time and more so now. At the time the Austrians and the Germans were the world leaders in “Cuckoo” clocks, which have only migrated to Switzerland because it was the world leader in the manufacture of precision time pieces.
Churchill’s churlish comment was only sour grapes because the British were upset at Swiss neutrality and banking anonymity during the war which he was unable to influence. The Swiss banking system was a world leader in personal privacy and despite vilification over repatriation of Jewish bank accounts is the only country where this repatriation would have ever been possible – in almost every other country in the world if a bank account remains dormant for more than 5-7 years and especially with no personal identity the Government assumes the contents without notice under eminent domain. In Swiss banks the accounts had to be maintained in perpetuity although this has probably now gone the way of banking privacy.
As for other achievements; Swiss pharmaceutical companies are world leaders and their precision optics and scientific measurement industries are still without parallel. As a side line Velcro was invented by a Swiss engineer in 1941.
Usual disclaimer: I am not Swiss and have no Swiss connections other than that I am a satisfied user of many of their scientific products on a daily basis.
I would think that direct democracy exerts tighter control over elected representatives and thereby reduces the power of special interest groups.
Direct democracy can only be as good as the citizens participating in it. In California, for example, 60 per cent of the people do not vote. Remaining 40 percent will be dominated by unions and state employees and narrow interest groups funded by corporations and businesses. Direct voting in California has given enormous power to unions who control politicians like puppets on strings. Direct democracy is not a cure-all remedy, but it could easily be a viper’s nest.
Perhaps we should prescribe election based on 50% plus 1 of ELIGIBLE voters. The interest groups would then need to put effort into having people vote.
Unless the voters provide for any necessary costing and funding for their proposals, the outcome of Direct Democracy will be a financial disaster.
And this reproduced writing is of what value? Seems the reference to the American States, 1) doesn’t mention that Democracy is not the lawful form of government here, 2) the citizens have no standing to complain about their government’s fiscal antics as they are recipients of bribes, ooops I meant entitlements, 3) the relationship between the citizens and their present rogue government is a matter of contract.
Perhaps a few moments reading “The Politics of Obedience” – Etienne de la Boetie, and a review of contract law would be appropriate for all. The economics won’t be an issue once folks stop expecting government to be the engine of growth, fiscal responsibility, efficient allocation of resources……among other things.
WHY are my charts not being updated regularly during the day?
Darrell j Grey
I D 506370
thanx
Try F5 to refresh data from the server.
Switzerland is a beautiful and very interesting country. Their median family income is double that of the U.S. but their suicide rate is 70% greater.
It remains to be seen, however, how their economy will be impacted now that U.S. law has significantly negatively impacted Switzerland’s role as one of the leading respositories of laundered money and evaded U.S. income taxes.
Jim in Boise
Thank you for the article “Direct Democracy and Economics.” It is most interesting and timely in these times of disfunctional, locked up legislative disputes in the United States.
Winston Churchill once remarked that Democracy is a poor form of government but unfortunately it is the best we have got.
The Westminster System as used here in Australia, which has compulsory voting at all elections allows for a situation whereby a small number of people living in marginal electorates decide who is to govern. This allows politicians to ‘bribe’ these areas to win their votes. Maybe a system such as the one suggested would stop this if the ‘pollies’ knew that their actions were subject to another review at the hands of the whole voting population.
We have a current situation where one independent member of an electorate decided to side with one major political party to allow them to stay in office and govern our country on the basis that he believed that the introduction of our NBN (National Broadband Network), as advocated by this major political party was in the best interest of his electorate. Once his support had been guaranteed his electorate was favoured with early supply of the NBN. The take up of the provision of the network by householders is optional – in his electorate the take up rate has been 2%!
Direct democracy, with a parliament/house of non-aligned independents (this means abolition of political parties) might deliver government more aligned to the interests of the people. Political parties their hierarchies, lobbyists, powerful interest groups tend by dent of human nature to corrupt governmental processes.
The biggest trouble in the world is the politicians seem to put their own self interest before the people.
When i went to school we were told democratic countries elected these people to look after the voters.
Where as a communist country you followed what they said.
It is no wonder the world is in such a mess with people with no business skills running countries.
The problem is the public/voters … they are too short sighted and easily bribed without understanding this money has to be paid back. This is the reason why we have continual boom and bust cycles (ie Recessions and once a century or so a Depression). If all countries had legislation that all government budgets must be in surplus (albeit even a small one), we would get alot more control on spending as tax increases are something governments try to avoid. ie. all governemnt spending, like the NBN, should be funded by private sector, government savings or tax increases, not debt! This will not stop the cyles as it is human nature, but it will make downturns alot less painful and shorter in duration.
The present system encourages politicians to borrow from future tax revenues in order to keep current voters happy. There are times like war/the current crisis where deficits are required to prevent catastrophic results. The challenge is to restrict deficit-spending in other circumstances.
you give no reference for the James Buchanan quotes
References from Steven:
The first quote is from his book Rules for Reason (Collected Works); the second is ‘Direct Democracy, Classical Liberalism, and Constitutional Strategy’ (2001) 54 Kyklos 235-242
Direct democracy in a country which has not used it before needs either compulsory voting or a high threshold for the number of eligible voters who must vote to make a referendum count. And it does not guarantee that the right choices will be made. You only have to read the comments in a typical economics/investment blog to realise that there is a large number of unhappy, badly educated, aggressive, uncultured people in the world; and there is no reasonable ground for expecting that direct democracy will always lead to better choices than those made by their elected representatives.
But the present system is leading to such dire consequences that we do need to explore methods of making democracy work better, or we may end up losing it.
The thing that gives me hope is the internet. It makes it possible to run direct democracy at a low cost and it also makes it easier for information about choices to be widely discussed.
Is there a forum devoted to discussing the topic of how to make democracy work better?
I have never found such a forum, so have tried my best to promote discussion here. We often complain about government, but there is general apathy when one tries to change it. There are many people/institutions to blame for the global financial crisis, but to me it exposed a failing of our democratic system — and will keep re-occurring until we fix the problem.
Interesting paper – in bear markets democracy comes under challenge whether it be direct or indirect because without prosperity people polarise more along political, economic, religeous, social, ethnic and regional lines. Solidarity grows within these groups (tribes) while friction (conflict) between them rises. The global secular bull market from 1982 to 2000 was marked by increasing peace and cooperation. The global secular bear market since then has been characterised by rising conflict and tension. The 1930s depression ended with the second world war, the 1966-82 stagflation period marked the height of the cold war and the post 2000 doldrums has seen the Iraq and Afganistan wars in response to Islamic terrorist movements. Lets hope the next secular bull market is not too far away lest democracy come under further strain as disenchanted voters look for scapegoats to blame and favour demogogues over democrats as leaders.
Bear markets are even worse for autocracies — as Gaddafi, Mubarak, Ben Ali, Saleh, Assad and others have discovered. Democracy is more likely to adapt to avoid a repeat of past excesses.
Societies are Darwinian too! In the USA, many voters that are exempt from the tax rolls love the politicians that transfer other peoples (tax) money to their own benefit. Eventually, the productive tax paying (host) sector of a society is overwhelmed by this non-tax-paying (parasite) sector, and collapse is predictable! And as in nature, the host and parasite expire also.
Several versions of the following “quote” exist.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.
Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.”
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury.”
The consensus-based Swiss style of democracy, with Direct overrides, would make it difficult for the majority to exploit other groups.
Direct democracy works fine in Switzerland (I’m from Switzerland) but doesn’t yield great results in California (I live in CA), go figure. Moreover, and I’ve been thinking about that for some times, direct democracy can work in relatively small communities. I could not imagine meaningful US wide referendums on a regular basis (they can barely count the presidential votes every 4 years). The key is decentralization. People should fight to keep the money close to their problems and day to day lives. At the local level you need schools, transportations, health, security. If these issues are not satisfied, the society will not prosper. Decentralized societies enjoy better standard of living than centralized ones. They may not produce geniuses like Napoleon and Cezanne but who cares.
Thanks for your viewpoint. I agree that decentralization produces better results. But not all decisions can be decentralized (e.g. Economy and Defense/International policy). We still need a central government. Would a more consensus-style government, like the Swiss Federal Council, not deliver more stable management of the economy and international policy?
Hi
I am missing your charts and TA of world indices. When do you plan to do them again?
Thanks
G
As soon as the market shows some direction. At present we seem to be in limbo.
Direct democracy works only under certain conditions. I can think of following requirements which must exist for it to work.
1. A fair degree of uniformity in cultural, religious and ethnic make up of the society. For example, Swiss but not Iraqis..
2. A fair degree of homogeneity in fiscal and economic views and morals of the citizens. For example, Swiss but not Iraqis.
3. A good degree of nationalism without jingoism among citizens, for example, Swiss but not Iraquis.
4. A fair degree of prosperity to start with, for example, Swiss but not Iraquis.
5. A fair degree of political savvy a decent level of education of the citizens, for example, Swiss but not Iraquis.
So, it works in Switzerland. It wouldn’t work in Iraq or in USA.
“A fair degree of uniformity in cultural, religious and ethnic make up of the society” – that is definitely not the Swiss who are divided across 4 national languages: French, German, Italian and Romansh. Their 7-member Federal council is representative of all major political parties and decisions are more consensus-based than the US or Iraqi system.
So I suggest that it would work a lot better in Iraq or the US than their present system.
Diversity in Switzerland is like Sunday picnic at the Lutheran church. If you want to see diversity come to California. There are people speaking at least 100 languages, practicing at least half a dozen major religions and in educational achievement, range from those who cannot sign for themselves in English the best scholars at our Universities. To compare Swiss for their diversity to California is like comparing variations of English spoken in England to languages spoken in India. Now, there is another country where direct democracy cannot work, majorities will simply crush minorities like so many insects. Mr. Twiggs, direct democracy is a wonderful concept; it simply can’t work where people do not have a democratic bone in their bodies.
The Swiss model is not a simple, direct democracy.
Direct democracy is then added:
The system is designed to cope with diversity: have you ever tried to get an Italian, a Frenchman and a German to agree on anything?
Direct Democracy is an interesting concept. My belief is that, in most countries, this situation is unachievable, for a number of reasons,but mainly beacause those elected to Government do not want to relinquish their power and control. I lived on the Gold Coast in 1999, as did you Mr Twiggs, and was a small part of a movement which was trying to prevent the GST from being implemented. If we we were able to prevent the GST being implemented in Queensland through a PEOPLES Mandate, then it would have prevented it being imlemented throughout Australia, as the States have to have a level playing field to in which to conduct their commerce. We must have been awfully close to the 51% of the Queensland electorate that was needed, because the main organiser of this effort was set upon by TWO MEN IN BLACK, who had guns with them, and he was told to stop organising with the aside and the guns showing, “You do love your family, Don’t you.” He lft Australia with his family the next day, and has since lived in Haiwii. I won’t at this juncture, put his name in the limelight again, but I new the man personally, a genuine and highly intelligent man, who used his own money to have all the necessary forms printed and distributed.
I am afraid that this attempt at Direct Democray was a FORCED FAILURE.
Put simply, if there was direct democracy in Australia, there would be no carbon tax.
Rob Oakeshott and Peter Windsor might have asked their constituents which party they should support.
Peter Slipper might have decided switching parties wasn’t a good idea.
In all cases the people would have won out over those who ignore their wishes.
Here is an article about Iceland’s experience of direct participatory democracy, which is ongoing as they rewrite their Constitution online all as a consequence of neo-con policies and the 2008 financial crisis:
http://www.reenagagneja.com/icelands-ongoing-revolution
The countries of the world can do worse (and probably will) than imitate Iceland.
Dear Colin,
if you use a simple word the picture is much clearer for instance “privatisation” comes from the latin word “privare” which means (to depradete), so mostly any privatisation is to depradete society and the avarage tax payer has to pay the bill. Since 1913 the USA had no income taxes on personal labor but with the federal reserve act president Thomas Woodrow Wilson unwittingly signed this act. Within this federal reserve act ha gave away the right to print money for the US goverment to a private banker elite. So the federal reserve bank is a private as federal express, but it has the right and the power to print the federal reserve note and charge interest to the american taxpayer for that service. There are some decisions from high cort hat the IRS is not a mandatory tax it,s voluntary, but you as a citizen are not allowed to mention this decisions if you have a trial against the IRS for tax problems. These are the problems a plutocracy and excessively privatisation can bring for a nation. They even don,t know where this federal tax is going, so i think there is no better way to buypass political impersonators than direct democracy. Why do i say “political impersonators” instead of politician ? Because they have nothing to decide they are only giving the citizen the impression that they change something if the are voting. The power is in the hand of a small banker oligarchie worldwide, so the fears that Thomas Jefferson came true. I was shocked that they now teach to juveniles and children in the USA that one of the smartest presidents ever was only a terrorrist because he fought for freedom and independence from british and french rule. England was in the hand of the banker oligarchie at an earlier time and so direct democracy is a good pill for that ailment.
(abolish interest rates now)
Depredate: To ransack; plunder.
The Federal Reserve Act created a special-purpose-entity (think Enron) called the Fed. The Fed is owned by banks but controlled by Congress and the majority of board members are appointed by the President. That enabled the government to bypass the Constitution which only authorizes gold and silver as legal tender and forbids the issue of “bills of credit” by the government — what we now refer to as paper money.
While the Federal Reserve has an eagle on its crest and an official-sounding name it is not part of the federal government. That is why, when the Fed issues dollars, they are “Federal Reserve Notes” presentable to the federal reserve banks — and not to the federal government, which would be a breach of the Constitution.
It occurs to me that large Banks and Corporations in particular could benefit from a dose of direct democracy from all shareholders (not just major shareholder blocks such as insurance Co’s and similar institutional investors representing them).
In Australia where traditional democracy is well established and political voting manditory, this “political culture” could possibly be transferred to the private sector for purposes of direct corporate democracy. In the first instance say, testing whether the exorbitant salary and perks (for success or failure to produce results) is really tolerated by the actual majority of shareholder individuals, as opposed the insurance institutions etc. who act as super agent voting blocks for them?
Perhaps direct democracy thoughtfully examined, codified and implemented may have potential in the corporate sphere ?
Good idea.
Interesting debate. Seems to me there are two separate strands to it – one being the idea that “direct democracy” effectively means providing a nation’s people with a mechanism for reviewing / overturning government policy (i.e. national referenda), the other being increased decentralisation whereby local communities (Swiss cantons etc.) are able to reject central direction and instead take their own decisions on issues through voting.
What both strands have in common is an overall quest for checks and balances against “elected dictatorship” by national governments who act in ways that the people regard as contrary to the national or local good.
At the national level, the empirical evidence in Australia is that referenda rarely result in change (8 carried out of 44 to date). Whilst there are many theories as to why this is the case, the fact remains that as an “agent of change” the national referendum appears of limited effect at a practical level. There is no obvious reason to believe that expanding the scope of referenda from being limited (as at present) to approval / veto of proposed changes to the national constitution to broader rights of democratic review of policy would result in the central government juggernaut having to make popularly driven course corrections on a regular basis.
At the local level, I recall the issues that arose when “Red Ken” Livingstone (then leader of the Greater London Council – the GLC) pushed through a series of populist measures, with a democratic mandate from the people of London, that were effectively moving London in the direction of a quasi-independent city state based on a socialist Utopian model. For example, massive subsidies to London’s transport (and much more affordable travel for its citizens) funded by swingeing (around 400%) increases in commercial rates paid by businesses occupying premises in London. The majority of Londoners (the “workers”) loved it – cheap buses paid for by the fat cats! The minority (those at the pointy end of the social pyramid who – by and large – were stakeholders in corporations) were outraged and – in some cases -started relocating their operations to less radicalised parts of the UK. Huge amounts of time and money were sunk into legal wrangles over the GLC’s actions, and social divisions of the “us and them” type were accentuated with workplaces becoming battlegrounds between senior management and the majority of the workforce that reflected the broader social schism (not good for productivity). The issue was finally resolved by Thatcher abolishing the GLC (a measure of dubious constitutional legality but – in the eyes of her supporters – hey, it’s just got to be done…)
I therefore remain sceptical about direct democracy. I am even more sceptical that the current system is sufficiently broken that it needs a major overhaul. The best checks and balances against elected dictatorship remain – as always – a free press, a strong and impartial judicial system, and a well-educated and politically engaged population. Australia has two out of three which, as Mr. Meatloaf would observe, ain’t bad.
The benefits of direct democracy are that voters have a means of overriding actions taken by their agent (the elected government) when they do not accord with their mandate. Would Julia Gillard have pushed through the carbon tax if voters had the right to call a national referendum on the issue?
Direct democracy would not prevent populist measures such as those proposed by Red Ken — but then neither did a free press, a strong and impartial judicial system, and a well-educated and politically engaged population. Proportional representation on the GLC, as used to elect the Swiss 7-member Federal Council, would, however, go some way towards reducing the personality-cult of the individual leader and focus on building consensus between the major parties.
Take your points, Colin – well made if I may say so.
However, if we take the (imperfect) analogy of a nation as a corporation, your example of a carbon tax referendum raises the thorny question of the “right to manage” – as epitomised by the age-old battle (or dynamic tension, depending on viewpoint) between workforces and corporate leadership. If the board takes the view that the best option for the company is to outsource a particular function, should that be susceptible to overturn by a workers’ council? Maybe Mr. Joyce would have a view!
Anyway, keep up the great work.
I like the idea of direct democracy in corporate management, where shareholders can hold a referendum on board decisions. In Australian parlance, it will “keep the b*****ds honest”. But only shareholders should vote. Turning workers into shareholders…… that is another favorite subject of mine.