What is the common cause of escalating inequalities, the concentration of capital ownership and climate damage – the three major problems we are facing today? According to Ewan McGaughey, Senior Lecturer at King's College London, it is the fact that votes in the economy (on company management and investment, etc.) are controlled by banks and asset managers. The remedy to this problem is thus to democratise the economy, as we have done with the political system. As McGaughey declared in his presentation at an ETUI lunch debate on 28 October, “Instead of one person, one vote, in the economic system it’s one euro, one vote.”

He started his presentation by showing figures from the UK and US on the relationship between union membership and income inequality which demonstrate that increases in the latter mirror a decline in the former. This is true for countries in which unions represent the only channel for workers to have a voice in the economy, such as Italy, Denmark, Sweden, Australia and Canada, but also for France which has a different industrial relations system. In countries with strong codetermination laws such as Germany, and to a lesser extent the Netherlands, these laws insulate inequality from changes in union density, and make inequality dependent, rather, on who’s in government. McGaughey then showed how since the 1990s workers’ capital in the UK starts to go down as a result of the continuous attacks on collective bargaining provisions. Similarly, in the US, since the Tax Reform Act of the late 1980s, individual pension funds have come to be managed by three big asset management companies (BlackRock, State Street and Vanguard). In Germany’s bank-dominated system, meanwhile, three banks (Deutsche Bank, Commerzbank and UniCredit) have taken “custody” and now control 60% of votes. All of this means that a few people (for example, there are under 50 people working in the corporate governance departments of the three US asset management companies) take decisions on the use of other people’s money – and their decisions go predominantly against what trade unions want. Research has found that they support increases in directors’ pay, oppose fair wages and fail to combat climate damage and close the gender gap. Even if specific instructions are given by the owners of the money, they are largely ignored.

The solution to this situation is, according to McGaughey, to look at the limits to the existing laws and propose new legislation. In the UK, the 2016 Manifesto for Labour Law proposed worker votes and pension reform and was adopted by the Labour Party and the Greens. In the US, the Dodd-Frank Act of 2010 banned “broker banks” from voting (but not asset managers). Two leading US presidential candidates, Elisabeth Warren and Bernie Sanders, are now competing with each other to come up with a more radical proposal on corporate accountability and democracy. McGaughey has also developed a proposal for a European Economic Democracy Directive 2020 which, among other things, would give workers the right to vote in meetings, the right to elect at least two directors, and the right to prevent that banks and asset managers vote without instructions.