Political Equality, Firm Size and the Choice of Social System: A Rawlsian Recovery of a Neglected Ideal-Type? John Wilesmith UCL, School of Public Policy PhD Political Theory 1 Declaration ‘I, John Wilesmith confirm that the work presented in this thesis is my own. Where information has been derived from other sources, I confirm that this has been indicated in the thesis.' 2 Abstract Recent years have seen a resurgence of interest in the evaluation of models of political economy in normative political theory. These debates raise questions of both a substantive and a methodological nature. On the substantive side, an important question is 'What restrictions, if any, need to be placed on corporations and other types of firms in order for a social system to conform to the demands of justice?' From a methodological standpoint, a central question is 'How should we conceive of the choice between different types of political economy or social system?' These are the two main questions that I shall address in this thesis, offering my answers in three parts from a broadly Rawlsian perspective. In Part I, I address the methodological question and defend a flexible approach to evaluating social systems that allows for 'recombinant possibilities'. In Parts II and III, which make up the bulk of the thesis, I turn my attention to the substantive question. In Part II, I set out the theoretical underpinnings of my argument. I argue that Rawlsians should include a principle of political equality within a lexically prior principle of justice, and then specify some constraints that this places on constitutional design. In Part III, I build on these arguments to make the case that the very existence of large firms poses a threat to the realisation of political equality, and therefore justice, regardless of whether they are owned by many small shareholders (as in a property-owning democracy) or controlled by their workers (as in a liberal socialist society). This concern about large firms has been largely overlooked by Rawlsians. Accordingly, I end with some suggestions as to how these theorists might usefully supplement their existing institutional recommendations by combining them with a neglected model of political economy. 3 Table of Contents Declaration ............................................................................................................. 2 Abstract .................................................................................................................. 3 1. Introduction: Rawlsians and the ‘Choice of Social System’ ........................... 7 1.1. A Broadly Rawlsian Perspective .................................................................... 9 1.2. Rawls, Rawlsians, the 'Choice of Social System’ and the Firm .................... 15 1.3. The Terms of the ‘Choice of Social System’ ................................................ 20 PART I: METHODOLOGY ...................................... 30 2. Ideal-Types, Idealism and Ideal Theory .......................................................... 31 2.1. Introduction ................................................................................................. 31 2.2. Weber, Ideal-Types and the Rawlsian ‘Choice of Social System’ ................ 34 2.3. Idealist vs. Empirical Ideal-Types of Existing Social Systems in the ‘Choice of Social System’ Debate: The Implausibility Case Against the Former .................. 37 2.3.1. Rawls, Rawlsian Loyalists and Idealist Ideal-Types of Social Systems . 38 2.3.2. Rawlsian Defectors and Empirical Ideal-Types of Social Systems ........ 41 2.4. The Normative Case Against Idealist Ideal-Types of Existing Social Systems in the ‘Choice of Social System’ Debate ............................................................. 45 2.5. Descriptive vs. Normative Ideal-Types: A Place For Idealist Methodological Assumptions and Idealist Methodological Assumptions in Their Place ............... 52 2.5.1. Descriptive vs. Normative Ideal-Types .................................................. 53 2.5.2. Abstract Descriptive Ideal-Types, Normative Ideal-Types and Acceptable Idealism .......................................................................................................... 56 2.6. Descriptive Ideal-Types, Normative Ideal-Types and Ideal Theory .............. 60 2.7. Conclusion .................................................................................................. 68 PART II: THEORY ................................................... 70 3. The Priority of a Principle of Political Equality .............................................. 71 3.1. Introduction ................................................................................................. 71 3.2. Political Equality, Priority and the Fair Value Proviso ................................... 74 3.3. The Politics of a Well-Ordered Society ........................................................ 80 3.4. Evaluating Three Rawlsian Arguments for the Fair Value Proviso as Grounds for the Priority of Political Equality ...................................................................... 87 4 3.4.1. An Original Position for a Democratic Society ....................................... 87 3.4.2. The Self-Protection Argument ............................................................... 90 3.4.3 The Epistemic Argument ........................................................................ 93 3.4.4. The Status/Self-Respect argument ....................................................... 99 3.5. Constitutions and Policy Experts ............................................................... 108 3.6. Conclusion ................................................................................................ 110 4. What Would It Mean for a Well-Ordered Society to Realise Political Equality?: Some Necessary Principles of Constitutional Design .................. 112 4.1. Introduction ............................................................................................... 112 4.2. Four Stages of Politics in a Well-Ordered Society ..................................... 115 4.3. Political Equality and the Vote ................................................................... 118 4.4. Populating the Agenda .............................................................................. 128 4.5. Social Deliberation: Before (and After) the Vote ........................................ 132 4.6. Conclusion ................................................................................................ 142 PART III: INSTITUTIONS ...................................... 145 5. How Might Resource-Rich Firms Compromise Political Equality in a Well- Ordered Capitalist Democracy?: Taking Resource Power Seriously ............ 146 5.1. Introduction ............................................................................................... 146 5.2. The Idea of a Well-Ordered Capitalist Democracy ..................................... 149 5.3. Six Ways in Which The Presence of Firms Might Violate Political Equality in a Well-Ordered Capitalist Democracy ................................................................. 151 5.4. Business Power and Beyond: Power-Over, Power-To and Political Equality ......................................................................................................................... 155 5.4.1. Business Power-Over ......................................................................... 156 5.4.2. Resource-Rich Firms, Power-To and Political Equality ....................... 159 5.5. Taking Resource Power Seriously in a Well-Ordered Capitalist Democracy: The Possibility of Economic Actors Being Motivated by Egoism in Politics ....... 168 5.6. Conclusion ................................................................................................ 178 6. Why Firm Size Matters: The Limits of Widespread Ownership and Democratic Control ........................................................................................... 180 6.1. Introduction ............................................................................................... 180 6.2. Large Firms ............................................................................................... 183 6.3. The Idea of a Well-Ordered Property-Owning Democracy ......................... 185 5 6.4. The Logic of Large Corporations as Resource-Rich Political Actors in a Well- Ordered Property-Owning Democracy ............................................................. 186 6.4.1. The Logic of Collective Action ............................................................. 186 6.4.2. The Appeal of the Large Corporation to Small Investors ..................... 190 6.5. The Limits of Widespread Ownership: The Large Corporation vs. Political Equality in a Well-Ordered Property-Owning Democracy ................................. 193 6.5.1. The Large Corporation vs. Small and Medium Sized Firms ................. 194 6.5.2. The Large Corporation vs. Non-Economic Interest Groups ................. 200 6.5.3. The Managers of Large Corporations vs. the Shareholders of Large Corporations ................................................................................................. 204 6.6. The Limits of Democratic Control: The Large Democratic Firm vs. Political Equality in a Well-Ordered Liberal Socialist Society ......................................... 209 6.6.1. The Large Democratic Firm vs. Small and Medium Sized Democratic Firms ...........................................................................................................