FACT: Europe is completely capitalist, not socialist, with more Fortune 500 companies and more small businesses than in the U.S. But Europe has figured out how to harness capitalism’s tremendous wealth-creating capacity so that its prosperity is broadly shared.

Key to this harnessing are practices of economic democracy known as “codetermination,” “supervisory boards,” “works councils” and “flexicurity.” Codetermination allows workers to elect representatives to corporate boards of directors (known as supervisory boards). Fully half of the board members for the largest corporations in Germany — Siemens, BMW, Daimler and others — are elected by the workers.

In Sweden, one-third of a company’s directors are worker-elected.  Imagine Wal-Mart’s board of directors having anywhere from a third to half of its directors elected directly by its workers – that certainly would change Wal-Mart’s behavior towards its workers. It’s hard for Americans to even conceive of such a notion, yet, most European nations employ some version of this. The impact has been immensely significant, and research shows it has fostered a healthy degree of consultation and cooperation between management and workers.

Works councils are the other twin pillar of codetermination. Elected works councils at individual companies allow workers to gain significant input into their working conditions. Works councils, which are separate from labor unions, have real clout. They have “co-decision rights” to meet with management to discuss the firm’s finances, daily work schedules, scheduling of holidays, work organization and other operating procedures; and “consultation rights” for the introduction of new technologies, mergers and layoffs.

Codetermination fosters the right balance of workers’ rights and consultation with robust commerce and entrepreneurship. It is one of the keys to how Europe’s brand of “social capitalism” has managed to harness its economic engine.

– Steven Hill, guest blogger

Ed. comments:

You can see all the posts in this series here.

Steven Hill is the author of “Europe’s Promise: Why the European Way is the Best Hope in an Insecure Age” (www.europespromise.org). He’s visiting Seattle and Bellingham this week:

• Monday March 15 at 11 a.m., interview on the Dave Ross Show, KIRO 97.3 FM

• Monday March 15 at 7 p.m., presenting at the University of Washington Communications Building

• Tuesday March 16 at 7:30 pm: presenting at Town Hall Seattle (tickets here)

• Wednesday March 17, 7:00 p.m.: presenting at Village Books, Bellingham