Industrial Democracy

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Industrial Democracy was a catch-phrase used by the left in the 20th century. It meant empowering workers to have a say in business decisions at their factory. The term originated with the British Fabians Beatrice Webb and Sidney Webb's Industrial Democracy (1897). The concept was widely discussed in leftist, socialist and labor union circles around the world in the 20th century. The decision making powers for an industrial democracy in the Webbian system resides in the consumers, the managers, and a state bureaucracy.

In a separate non-controversial sense, the term "industrial democracy" is also used to describe modern countries that have both an industrial sector and practice democracy.

United States

When the term was imported by Socialists from Britain in the early 20th century and used by both the socialist and progressive movements alike. It meant ownership of industry by the government (that is, Nationalization), or some other form of worker control. Individuals and organizations such as the Federal Council of Churches, Lyman Abbott and Jane Addams[1] worked tirelessly in the direction of these beliefs.

World War I

Hard work was necessary to win the war, and strikes were destructive. The Wilson Administration was highly favorable to labor to ensure the uninterrupted production of war material. Government agencies authorized the payment of prevailing wages and the election of shop committees, but stopped short of supporting closed shops. In 1918 Wilson set up the War Labor Conference Board, later renamed the National War Labor Board with equal union and management representation and co-chaired by militant Frank Walsh and conservative former President William Howard Taft. The Labor Board sought to prevent strikes and lockouts, create a right for workers to bargain collectively, as well as support a living wage and minority rights. Given the tight labor markets and Labor Board protection, AFL membership rose almost 50% percent, to 3.2 million from 1917 to 1919. The Labor Board, although it had no formal enforcement power, had the full support of President Wilson. It helped legitimize three things that appealed to blue collar workers, a rule of law in the workplace, a voice for unions in determining the conditions of work, and their desire for recognition as positive elements in the war effort. NWLB-supported shop committees contributed directly to the surging demand for democracy that marked so much political discourse during the era of the war.[2]


But the unions overreached. When the war ended they launched a series of major strike—against steel and meatpacking especially—looking for more power for the unions. Despite their use of violence to shut down plants, the unions failed in 1919 and their membership sank to low levels until 1934.

By the 1920s "industrial democracy" still meant a powerful voice for labor unions in economic affairs. But it was challenged by welfare capitalism and "company unions" sponsored by companies that fostered good relations and provided most of the benefits the workers wanted without violent, wasteful strikes. Company-sponsored employee representation programs became the way in which employers attempted to lay claim to the ideal of industrial democracy.[3] Industrial democracy to employers meant elected shop committees and company unions, rather than labor unions that excluded supervisors and permitted assistance from national unions. Employers recognized that workers believed that they were entitled to some form of industrial democracy and were willing to voluntarily limit their autocratic power if this would secure greater efficiency in production. Leading edge companies set up profit-sharing plans, grievance procedures, and job ladders, and used seniority to allocate jobs.

New Deal

The New Deal enacted the Wagner Act (1935) that facilitated union organization. The unions grew rapidly but split into two feuding factions, the older AFL, and the newer more radical CIO. Their battles and strikes hurt the economy in 1937–38, and divided the potential political power of the unions, and energized business and conservatives to counterattack, under the leadership of Senator Robert A. Taft


Labor leader Walter Reuther of the UAW (the autoworkers) in the 1940s envisioned major national economic decisions would be made by new regulatory boards comprising industry, labor unions and the government, perhaps with consumers and farmers also represented.

By the 1970s conservatives started using the concept to demand democracy inside labor unions. Unions had (almost) never been democratic; they were run as top-down hierarchies controlled by a small group of leaders. Conservatives changed the laws to require democracy inside unions in terms of fair elections of the main union officials.


In the 1970s there was considerable talk (but little action) regarding employee stock ownership plans (ESOP's). Employee ownership was proposed by economist Louis Kelso in 1958 as a way of diffusing the concentration of private ownership of capital, but it was not until the 1970s that legislation provided appropriate incentives. Senator Russell Long was a major proponent.[4] Proponents argue that employee ownership is not a mechanism of socialism undermining the concept of free enterprise because the firms are still privately owned and responsibility for survival of the firm is placed on the employees and owners, not the government.


Lenin, who had translated the Webbs' Industrial Democracy (1897) into Russian, accepted their argument that, as a working-class movement grew, it increasingly required the guidance of professionals trained in administrative and political skills and forming part of a centralized national organization. Although Lenin generally denounced the Webbs as opportunists and betrayers of authentic Marxism, he nevertheless sought to adapt their model of leadership to a Russian Social Democratic Workers' Party endangered, he believed, by lack of discipline among its rapidly growing membership. Lenin ignored the Webbs' warnings that, without checks on their power, professionals would gradually become an official class divorced in sentiment and interests from the party's working-class membership.[5]



The Trades Union Congress, the umbrella group to trade unions, in the 1970s pursued the objective of giving workers' representatives parity on company boards of directors with shareholders' representatives. This led to a crisis in the national economy, with widespread strikes and disorder, deep divisions in the Labour Party. Voters called in Margaret Thatcher in 1979 to clean up the mess, which she did.


Industrial democracy was tried and failed in Western Europe after 1945, despite financial aid from the liberal Ford Foundation. Ricciardi (2007) examines the failure of Italian industrial democracy in the immediate postwar years, 1945–51, by examining the experience of the Alfa Romeo work council in Milan. A creation of Fascist socialization policy, the work council was transformed after agreement between Italy's principal political parties (in particular, Socialists and Communists) into an instrument intended to increase workers involvement in the business's management. Its duties consisted of supplying advice and expertise concerning the organization of labor and production. The Marshall Plan was pumping fresh American money and know-how into Italy. In the climate of reconstruction-era consensus, the work council initially represented a pivot of interprofessional cooperation (engineers, production managers, and skilled workers all participated) and dialogue with ownership before later becoming a site of union conflict as relations between social partners progressively deteriorated. The example of the Alfa Romeo work council shows how internal tensions, not always political in character, contributed to the transformation of an instrument intended to stabilize factory relations into a cause of these very tensions. The collapse of the compromise on which the work council was founded went hand in hand with technical (the advent of assembly line production) and organizational (the arrival of new management) changes that, taken together, constituted a strategy for rationalizing the activities of the Italian automobile enterprise.[6]


In West Germany the Co-determination Law of May 1951required labor participation in the governing boards of iron and coal industries. It was a great political triumph for Chancellor Konrad Adenauer (1876-1967). Even though he did not personally favor industrial democracy, Adenauer wanted to forestall strikes that could cripple the fast growing economy. He pressed for agreement between labor and industry in order to forestall a ruinous strike, and to gain union support for his foreign and defense policies. Through his successful mediation, he strengthened not only the young West German democracy but also his own position in government, party, and state. The system has been expanded and unions have a major voice in industrial policy, which they use to make it very difficult to fire anyone. Companies therefore are reluctant to hire anyone and job growth in Germany has been slow.


The Social Democratic Party (SAP) of Sweden has 'accepted' capitalism since 1932, and worked for reforms through parliamentary social democracy. Material conditions of the Swedish working class improved dramatically in the years prior to 1976 under the policies of the SAP and the national Confederation of Labor (LO). However, a proposed program by the LO (the Meidner plan), which would have introduced the basic elements of an industrial democracy, directly challenged Swedish capitalism and brought about the defeat of the Socialist party in 1976.[7]


The French working class chose a confrontational approach and a rejection of capitalism, and the French labor movement, because of its divided positions, has been politically weak. Labor reform legislation comparable to that long in place in Sweden was not introduced until 1982 by France's socialist government under the slogan "reform of enterprise."[8]

Further reading

  • Blumberg, Paul. Industrial Democracy: The Sociology of Participation (1969) looks at nne different kinds of participation in the workplace
  • Boyle, Kevin. The UAW and the Heyday of American Liberalism, 1945-1968 (1995) online edition
  • Derber, Milton. The American Idea of Industrial Democracy, 1865-1965 (1970), liberal survey; assumes that giving a voice to union bosses rather than members is democracy enough
  • Dickman, Howard. Industrial Democracy in America: Ideological Origins of National Labor Relations Policy (1987) 445 pp., by a libertarian hostile to compulsory unionization; focus on negative features of Wagner Act of 1935
  • Hinton, James. Shop Floor Citizens: Engineering Democracy in 1940's Britain (1994), shows the failure when British Communists promoted their version of industrial democracy
  • Lipset, Seymour Martin, Martin Trow, and James Coleman. Union Democracy: The Inside Politics of the International Typographical Union (1977); famous study shows that only one union had internal democracy (the small typographers union that set type for newspapers)
  • McCartin, Joseph A. Labor's Great War: The Struggle for Industrial Democracy and the Origins of Modern American Labor Relations, 1912-1921 (1998). 303 pp. online edition
  • Poole, Michael. "Theories of Industrial Democracy: the Emerging Synthesis," Sociological Review 1982 30(2): 181–207, history of the idea in the 20th century; not online
  • Poole, Michael. Industrial Relations: Origins and Patterns of National Diversity (2008), 240pp
  • Poole, Michael. Workers' Participation in Industry (2nd ed. 1978)
  • Roberts, Benjamin C., ed. Towards Industrial Democracy: Europe, Japan and the United States (1979)
  • Woodruff, Abner E. The Evolution of Industrial Democracy (1917) online edition

Primary sources

  • Webb, Beatrice and Sidney Webb. Industrial Democracy (1897), a highly influential statement by British Fabians online edition. Valuable guide to how unions operated in Britain; uncritical and makes the false assumption that unions are democratic even if members have little say in how they are run

See also


  1. The Subtle Problems of Charity
  2. McCartin (1998)
  3. McCartin (1998) p. 215
  4. His father Huey Long was a left-wing demagogue of the 1930s who promoted "Share the Wealth". The son was a conservative.
  5. Robert Mayer, "Lenin and the Concept of the Professional Revolutionary," History of Political Thought 1993 14(2): 249-263,
  6. Ferruccio Ricciardi, "L'echec de la Democratie Industrielle dans L'Italie d'apres-guerre: l'experience du 'Conseil De Gestion' chez Alfa Romeo, 1945-1951" ["The failure of industrial democracy in postwar Italy: the experience of the 'work council' at Alfa Romeo, 1945-51] Histoire, Économie et Société 2007 24(1): 125-142,
  7. Mark Kesselman, "Prospects for Democratic Socialism in Advanced Capitalism: Class Struggle and Compromise in Sweden and France," Politics & Society 1982 11(4): 397-438,
  8. Mark Kesselman, "Prospects for Democratic Socialism in Advanced Capitalism: Class Struggle and Compromise in Sweden and France," Politics & Society 1982 11(4): 397-438,