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Codetermination: A way to rebalance the economy?

Codetermination is one of the most interesting ideas you've never heard of.

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  • Codetermination is the name for corporate governance systems that place workers on the executive board.
  • It is very popular in Europe but has long lost its popularity in the United States.
  • It offers a variety of benefits, but it would change many aspects of the American economy.


We are living in an age where the questioning of major institutions occurs regularly. Large numbers of Americans support changing to a new economic system, and even many who recommend keeping capitalism think it needs a bit of an overhaul.

One idea, common in Europe but less so in America, that does the latter is called codetermination and maintains capitalism and the private ownership of property while giving workers a say in how their workplaces are managed. We'll look at what it is, how it works, and the proposal to bring it to America.

What is codetermination?

Codetermination can be broadly defined as workers' participation in decision-making in business affairs. This can take many forms, from workers' councils that offer advice on how to improve productivity in exchange for bonuses to having workers' representatives on executive boards. The basic idea is to give workers a way to protect their interests and help advance the organization in a formalized way. It has the added benefit of treating workers as people rather than as objects for productivity.

How does it work in the places that have it?

Codetermination is much more common in Europe than in the United States. Of the European countries, Germany is far and away the most invested in the concept. In Germany, all companies over a certain size are required to have some kind of it, with worker and union representatives occupying anywhere from a third to half of the boards of some major firms.

Most Western European companies have two boards, one that manages the day to day affairs of the company and one that supervises them. In the European firms with codetermination, employee representatives are placed on the supervisory board. They vote, deliberate, and otherwise help to run the company in the same way as any other board member but with a different set of values than mere profit.

Other countries in Europe also have codetermination, though we won't look into them here. The Germans also have workers councils that introduce an element of democracy to the shop floor in addition to the boardroom that is also worth digging into.

In the United States, a different kind of codetermination was common during parts of the 20th century. The Scanlon plan, a type of codetermination, was designed in the United States and was widely adopted in many industries. Based on the idea that workers did better when they were participating, the plan creates committees of workers and management that propose solutions to problems and develop ideas to improve productivity. In many cases, improved productivity translates into bonuses.

The plan was designed for failing enterprises but was later adopted by successful ones when they realized its advantages. During WWII, many companies adopted this system as a way to improve both productivity and morale. Interest in this program tanked after the war ended, and today the idea is entirely foreign to most Americans.

What effect does this have?

Studies have shown that codetermined businesses operate with long-term thinking rather than pursuing short-term profit and see improvements to their productivity. Another study found that codetermination can keep income inequality low across an entire country, presumably by keeping executive pay at reasonable levels and putting that money either in the hands of workers or back into the company. Countries with more codetermination also see fewer strikes.

Another study that cast doubt on the productivity benefits did find the system increased the bargaining power of the workers.

It also isn't too horrible for the economy overall to have large firms run this way, given how the German economy is one of the best in Europe. Over the last few decades, their economy has grown a tiny bit faster than America's. Fears that codetermination would turn Germany into Tito's Yugoslavia as the 20th century came to a close have proven laughably inaccurate.

All of the famous Teutonic companies you've heard of have workers on the board of directors. All things considered, they do pretty well. This is in part because there is a culture of pragmatism on these boards. Just because the workers have voting rights doesn't mean that they immediately run the company into the ground; it seems like the people who work at a place understand how to run it.

Elizabeth Warren’s plan to bring it to America

As part of her marvelously wonky campaign for president, Elizabeth Warren has introduced a plan to bring Germanic codetermination to the United States in a big way.

Her plan for codetermination is part of her larger Accountable Capitalism Act bill. The portion that focuses on worker participation is ambitious. Her plan would require some corporations, a few thousand of the largest firms in the country, to allow workers to elect a full 40% of the membership of their executive boards.

The idea is popular, with a majority of voters in every single congressional district supporting more codetermination in American business.

The plan also would require corporations to consider other interest groups than just their shareholders in decision-making, regulate the sale of stocks earned as executive payment more tightly, require near consensus on corporate boards before they could make donations to political organizations, and make the largest corporations seek federal charters rather than state ones.

What might it look like if we had it here?

Codetermination in the United States would have a variety of effects.

As mentioned above, codetermination at even a few of the largest firms would likely improve the condition of American workers a great deal given the decline in their bargaining power over the last few decades. Even if this is the only benefit to workers to be expected, which is a dubious stance, we would expect some increases in pay as a result of this plan. The other mentioned factors can also be expected to increase employee pay.

We might also expect codetermined companies to be less inclined to ship jobs overseas or layoff workers to raise profits as those very workers would have a say on the executive board, a point that has been raised in studies on the subject.

There would also be a variety of effects relating to the sudden inclusion of a new interest group in the C-suites. Rather than just focusing on the needs of shareholders, large corporations would also have to include their worker's interests in decision-making. This could not only change the choices they make, but alter the way our economic decision-makers think of workers, stockholders, managers, and how they can and should interact with each other.

On the other hand, the changes would likely cause the stock market to fall a bit as stock values returned to the actual values of companies for a number of reasons.

This wouldn't be a problem for most people since 80 percent of the stock market is owned by a mere 10 percent of Americans. It will, however, still be a bit of a shock. One estimate suggests the fall would be as much as a 25 percent drop, although that estimate assumed the adoption of a plan much more extensive than Elizabeth Warren's, more like the current German system, and should be considered just outside the scope of probability.

Discussions about how the economy should be structured are taking place ever more frequently and are increasingly focusing on ideas that have long been on the fringes of American thought. Codetermination may soon return to the American workplace as a way to help alleviate our economic concerns. While it isn't a silver bullet that cures all societal aliments by any means, it could prove an effective method to rebalance the economic scales.

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Iranian Tolkien scholar finds intriguing parallels between subcontinental geography and famous map of Middle-earth

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  • The massive star in the Kinsman Dwarf Galaxy seems to have disappeared between 2011 and 2019.
  • It's likely that it erupted, but could it have collapsed into a black hole without a supernova?
  • Maybe it's still there, but much less luminous and/or covered by dust.

A "very massive star" in the Kinman Dwarf galaxy caught the attention of astronomers in the early years of the 2000s: It seemed to be reaching a late-ish chapter in its life story and offered a rare chance to observe the death of a large star in a region low in metallicity. However, by the time scientists had the chance to turn the European Southern Observatory's (ESO) Very Large Telescope (VLT) in Paranal, Chile back around to it in 2019 — it's not a slow-turner, just an in-demand device — it was utterly gone without a trace. But how?

The two leading theories about what happened are that either it's still there, still erupting its way through its death throes, with less luminosity and perhaps obscured by dust, or it just up and collapsed into a black hole without going through a supernova stage. "If true, this would be the first direct detection of such a monster star ending its life in this manner," says Andrew Allan of Trinity College Dublin, Ireland, leader of the observation team whose study is published in Monthly Notices of the Royal Astronomical Society.

So, em...

Between astronomers' last look in 2011 and 2019 is a large enough interval of time for something to happen. Not that 2001 (when it was first observed) or 2019 have much meaning, since we're always watching the past out there and the Kinman Dwarf Galaxy is 75 million light years away. We often think of cosmic events as slow-moving phenomena because so often their follow-on effects are massive and unfold to us over time. But things happen just as fast big as small. The number of things that happened in the first 10 millionth of a trillionth of a trillionth of a trillionth of a second after the Big Bang, for example, is insane.

In any event, the Kinsman Dwarf Galaxy, or PHL 293B, is far way, too far for astronomers to directly observe its stars. Their presence can be inferred from spectroscopic signatures — specifically, PHL 293B between 2001 and 2011 consistently featured strong signatures of hydrogen that indicated the presence of a massive "luminous blue variable" (LBV) star about 2.5 times more brilliant than our Sun. Astronomers suspect that some very large stars may spend their final years as LBVs.

Though LBVs are known to experience radical shifts in spectra and brightness, they reliably leave specific traces that help confirm their ongoing presence. In 2019 the hydrogen signatures, and such traces, were gone. Allan says, "It would be highly unusual for such a massive star to disappear without producing a bright supernova explosion."

The Kinsman Dwarf Galaxy, or PHL 293B, is one of the most metal-poor galaxies known. Explosive, massive, Wolf-Rayet stars are seldom seen in such environments — NASA refers to such stars as those that "live fast, die hard." Red supergiants are also rare to low Z environments. The now-missing star was looked to as a rare opportunity to observe a massive star's late stages in such an environment.

Celestial sleuthing

In August 2019, the team pointed the four eight-meter telescopes of ESO's ESPRESSO array simultaneously toward the LBV's former location: nothing. They also gave the VLT's X-shooter instrument a shot a few months later: also nothing.

Still pursuing the missing star, the scientists acquired access to older data for comparison to what they already felt they knew. "The ESO Science Archive Facility enabled us to find and use data of the same object obtained in 2002 and 2009," says Andrea Mehner, an ESO staff member who worked on the study. "The comparison of the 2002 high-resolution UVES spectra with our observations obtained in 2019 with ESO's newest high-resolution spectrograph ESPRESSO was especially revealing, from both an astronomical and an instrumentation point of view."

Examination of this data suggested that the LBV may have indeed been winding up to a grand final sometime after 2011.

Team member Jose Groh, also of Trinity College, says "We may have detected one of the most massive stars of the local Universe going gently into the night. Our discovery would not have been made without using the powerful ESO 8-meter telescopes, their unique instrumentation, and the prompt access to those capabilities following the recent agreement of Ireland to join ESO."

Combining the 2019 data with contemporaneous Hubble Space Telescope (HST) imagery leaves the authors of the reports with the sense that "the LBV was in an eruptive state at least between 2001 and 2011, which then ended, and may have been followed by a collapse into a massive BH without the production of an SN. This scenario is consistent with the available HST and ground-based photometry."

Or...

A star collapsing into a black hole without a supernova would be a rare event, and that argues against the idea. The paper also notes that we may simply have missed the star's supernova during the eight-year observation gap.

LBVs are known to be highly unstable, so the star dropping to a state of less luminosity or producing a dust cover would be much more in the realm of expected behavior.

Says the paper: "A combination of a slightly reduced luminosity and a thick dusty shell could result in the star being obscured. While the lack of variability between the 2009 and 2019 near-infrared continuum from our X-shooter spectra eliminates the possibility of formation of hot dust (⪆1500 K), mid-infrared observations are necessary to rule out a slowly expanding cooler dust shell."

The authors of the report are pretty confident the star experienced a dramatic eruption after 2011. Beyond that, though:

"Based on our observations and models, we suggest that PHL 293B hosted an LBV with an eruption that ended sometime after 2011. This could have been followed by
(1) a surviving star or
(2) a collapse of the LBV to a BH [black hole] without the production of a bright SN, but possibly with a weak transient."

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