Governance: The Case Against the Employment System Based on Democratic Theory

Conventional classical liberalism dumbs down the intellectual history of democratic theory into the question of consent versus coercion. Democracy is then represented as “government by the consent of the governed.” But from Antiquity onward there have been intellectual defenses of autocracy based on consent (the pactum subjectionis) which continue to this day in the arguments for charter cities, startup cities, or seasteads with old Hong Kong or new Dubai being examples of non-democratic cities based on consent. Moving to and residing in such a city is taken as consent to its non-democratic structure. Hence the historical Democratic Movement had to develop arguments not just against coercion but against a voluntary contract of subjection or undemocratic constitution. The key distinction was not consent versus coercion but consent to a contract to alienate self-governance rights versus a contract to only delegate certain governance decisions to a representative government—translatio vs. concessio. This chapter recaptures the intellectual history of democratic thought and shows that when expressed in clear modern terms, it applies to all organizations such as firms. Finally, the argument is recapitulated in the context of the corporate governance debate in the last subchapter.