Data that counts for all: the political and technical issues arising from measuring economic democracy

In recent years many national and international organisations and activists have been highlighting the importance of data; emphasising the significance of having the right information in decision-making and the crucially important role of data on transparency and accountability. Two good examples of this trend are the creation of the United Nations Data Revolution Group for Sustainable Development and the Open Data for International Development platform. This shows that there is an increasing awareness regarding the role of data in facilitating and enabling better decision-making, coordination, transparency and assessment of the results of policies and interventions in a globalized world.

Additionally, considerable amounts of public and private money are being spent by states and private corporations on “Big Data” while the use of metrics and information from social media has also increased dramatically. Vast amounts of data and information are being collected on individuals, groups and communities, some of which is openly available but much of which is never disclosed or made available to wider society. Clearly, there are important democratic issues that arise from this concerning how data is used and for whose interests. In this regard, two areas where there remains a paucity of data is in the trans-national activities of multinational corporations and in the disclosure of information on financial interests, as noted by the investigative journalist Nicholas Shaxsen in his excellent recent book on tax havens.[1]

In the economic sphere, there is an interesting juxtaposition between the supposed availability of data and the increased financial fragility of the global economy. Mass availability of data does not always make for good decision-making, particularly if our theories and models that use data are simplistic or shallowly conceived and unable to take in the dynamics and complexities of economic life. Increasing quantification does not always provide better information and cannot automatically enhance our knowledge, two important issues at the heart of the work of Nobel Prize winning economist, Daniel Kahneman.[2]

In our research project “Transforming Public Policy through Economic Democracy” the construction of an Economic Democracy Index is a key objective. This is a composite indicator that maps levels of economic democracy between countries. Recognising the limits of data set out above, our aim is an imperfect attempt to capture the extent of democratic decision-making in the economy. This endeavour involves both conceptual and methodological challenges, but also opportunities that we discuss briefly below. We believe this research is critically important in a context of greater income and wealth inequalities, accompanied by increasing susceptibility to financial crises, where economic decision-making appears increasingly monopolised by elites in detriment of the broader population. As we embark on this research project, a number of challenges emerge, in particular issues related to conceptual and theoretical considerations – most importantly, how do we begin to define economic democracy? Which dimensions and indicators better capture this multidimensional concept?

On the other hand, in order to empirically capture this concept as accurately as possible, data availability also becomes a very prominent issue, in particular in relation to geographical and time coverage. Since indices are composite indicators formed by multiple dimensions, individual indicators and variables used for its construction (Munda, 2012[3]), issues concerning data quality and coverage could greatly affect the measurement validity of the index. Given the limitations of the data available across the four dimensions that we have identified – workplace; degree of associational economic governance; distribution of economic decision-making powers across space and sector; and transparency, openness and democratic engagement of broader population in macro-economic decision-making – we are concentrating on the OECD countries in the first instance. Lack of data relating to the global south, means that our index begins with the richer countries of the world, a problem that we fully recognise.

Data is increasingly viewed as “the life-blood of decision-making and the raw material for accountability” (IEAG, 2014[4]). Unfortunately, many organisations and individuals are still excluded from accessing and using data and this is normally due to the lack of resources, opportunity or capacity, but it is also clear that many individuals and institutions (often the very richest people on the planet) deliberately choose not to disclose information on key areas (as the recent Panama Papers case clearly revealed). As a vast number of academics and activists have been pointing out, without a systematic effort to collect and make data accessible, both scientific research, public scrutiny and democratic processes (in particular accountability, deliberation and transparency) are seriously impeded.

20/06/2016

[1] Shaxson, N. (2012) Treasure Islands: Tax Havens and the Men who Stole the World, Vintage, London.

[2] Kahneman, D. (2011) Thinking Fast and Slow, Farar Strauss and Giroux, New York.

[3] Munda, G. (2012), “Choosing aggregation rules for composite indicators.” Social Indicators Research 109: 337-354.

[4] UN Secretary-General’s Independent Expert Advisory Group on the Data Revolution for Sustainable Development (2014), “A World that Counts. Mobilising the data revolution for sustainable development”, accessed online via http://www.undatarevolution.org/wp-content/uploads/2014/12/A-World-That-Counts2.pdf.

Promoting Economic Democracy in the Twenty First Century

Amidst the furore created by the recent Panama Papers revelations and the growing clamour to shed light and rein in the tax dodging activities of the super-rich, a more fundamental truth is evident in the workings of the global economy. As various commentators have pointed out, this adds up to a very basic underlying reality. The economy seems to be increasingly structured and organised to benefit the wealthy at the expense of the vast majority of the rest of the population. Whether it is the way that employment laws and regulation favour corporations at the expense of workers, housing markets seem to be out of reach of people on average incomes, or more fundamental issues such as the way central banks operate to serve the interests of financial classes, it is difficult to escape the revelation that the economy seems to be becoming less democratic. The UK seems to be the paradigm case of this phenomenon with the over-centralisation of decisions making power, assets and resources in London and the malevolent influence of the Treasury-City nexus.

 

There is a sense that elsewhere things might be different. In Scandinavia, Germany and even further afield, the capture of the economy by elite and vested interests is less assured and more democratic and deliberative forms of economy are still evident. Anecdotally, such countries seem to do better at tackling the big questions that face as such as combating climate change and dealing with inequality. In a new research project, with colleagues at the University of Glasgow, Nottingham Trent, Oxfam and New Economics Foundation and with the support of organisations such as CLASS, we are investigating the issue of economic democracy on a more systematic and robust basis. More specifically, we are creating a global index of economic democracy that can develop a set of comparative indicators about levels of democracy and public participation in the economy.

 

The Index will include traditional indicators of economic democracy such as workforce participation and levels of union representation but will be novel in compiling statistics and indicators about the broader decision making processes in the economy. Three other areas that we want to explore are: the degree of associational economic governance (e.g. level of cooperatives within economy, number and extent of business and labour associations in economic policy forums); the distribution of decision-making powers across space and sector between different economic and political governance institutions; and the levels of engagement of the broader population in macro-economic decision-making (e.g. governance of central banks, nature of economic policy formulation, governance structures in economic policy formation at national and subnational levels, role and participation of different interest groups).

 

The project started in February and we have already compiled an extensive statistical database. The next eighteen months will see us develop the index and conduct research on the relationship between economic democracy and key public policy goals. Key questions are: what is the level of public engagement and deliberation in economic decision-making and how does this vary internationally? What is the relationship between different levels and types of economic democracy and achieving key public policy goals around sustainable economic development and social justice? We will be posting regular updates and findings on the CLASS website as our research unfolds.

Andrew Cumbers

14 June 2016

Blog- Coming Soon

Welcome to our new blog on Democratising the Economy. For further information please follow these links:-

http://www.gla.ac.uk/schools/business/research/centres/transformingpublicpolicythrougheconomicdemocracy/meettheteam/

http://gtr.rcuk.ac.uk/projects?ref=ES/N006674/1

If you wish to find out further information regarding the project you can email us on democratisingtheeconomy@gmail.com

3 June 2016