This argument applies way more to the status quo than the alt – a truly democratized economy would eliminate many of the political pressures that produce government capture in the first place

Joe Guinan and Martin O’Neill, “Taking Control: Arguing for Community Wealth Building,” in The Case for Community Wealth Building, Polity Press 2020, non-paginated pdf.

Alongside the ‘municipal protectionism’ critique that we have been concerned to rebut above, there’s a parallel strand to the economists’ critique of Community Wealth Building that is less concerned with the allegedly self-defeating logic of each city or municipality being especially concerned with the advancement of its own local economy, and instead is motivated by a broader scepticism about the very possibility of having a more democratic economic system. The argument here is that, as soon as one departs from decision-making made purely on the basis of narrowly defined economic criteria, and instead finds space for genuine democratic agency within local authorities’ decisionmaking in the economic domain, then one somehow opens the door to a free-for-all in which cronyism and rent extraction will proliferate. Here’s The Economist again:

The bigger question-mark over Labour’s plans to ‘democratise’ the economy is whether they would really put ordinary people in charge. Distant, out-of-touch private managers could simply be replaced by distant, out-of-touch public bosses or by party apparatchiks. Removing the focus on economic returns might make it easier to justify doling out jobs or contracts to political allies.33

One can allow that this raises an important issue while resisting the apparent assumption that there is a stark choice to be made between either an impeccably efficient economistic focus on marginal cost to the exclusion of everything else, or a more democratic approach somehow bound to degenerate into cronyism. There are of course other possibilities, and there are ways of protecting procurement processes from abuse. It is clear even from the UK’s existing 2012 Social Value Act that conceptually there is nothing unattainable about having transparent and auditable procurement criteria that go beyond consideration only of marginal economic cost.

But the broader point here is that we need to guard against the besetting vice of a certain kind of economistic outlook which is concerned always to compare an idealised or perfect version of neoliberal capitalism (rather than its less savoury reality) against a non-idealised or dysfunctional version of an alternative system. (Of course, we should also guard against the opposite tendency.) One can, and should, admit that rent-seeking and ‘corporate capture’ are real problems for any economic system, without being too quick to find the mote in the eye of the democratic economy while ignoring the beam in the eye of neoliberalism. One has only to look at the operations of outsourcing companies like Capita or Carillion in the UK to see how traditional approaches to procurement have led to an extravaganza of failure and rent extraction.34

Clarity in procedures, and probity in their application, can certainly be achieved under a more democratic economy and, in fact, the more democratic engagement and scrutiny that can be generated, the more likely such outcomes are to be realised. As for The Economist’s worry that a democratic local economy may end up being insufficiently democratic, far from being a critique of the idea of economic democracy, it actually amounts to a recommendation that such policies be pursued either in their radical and ambitious versions or not at all. We are happy to take that as a welcome recommendation.