Co-ownership and the Labour leadership
This is a guest post by James Doran.
Following the general election and Labour’s return to opposition, leadership candidates have suggested policy ideas to win voters back to the party: a Living Wage campaign, a National Care Service, a graduate tax, the creation of a High Pay Commission, and worker representation on executive remuneration committees.
The 2007 financial crisis and consequent recession has caused the party to revise its approach to regulation, industrial policy, and taxation. But the leadership candidates have yet to speak in detail of a revised approach to ownership.
Labour’s 2010 General Election Manifesto favoured a “step change” in the role of employee-owned companies in the economy, though how the party would actively achieve this aim was not detailed. Here I suggest a way forward that the Labour leadership candidates might like to consider…….
In government, Labour established Supporters Direct to help football fans gain a collective shareholding in their clubs. Tens of thousands of fans are now co-owners in the club they support through supporters’ trusts.
Though out of office nationally, Labour could work with the co-operative and trade union movements to establish a similar support agency to help employees in the private sector gain a collective shareholding in the firms for which they work.
A recent report by Professor Joseph Lampel & Dr Ajay Bhalla of Cass Business School, and Dr Pushkar Jha from Newcastle University Business School, looked at two hundred and fifty firms. They found that:
the employee ownership model offers particular advantages to small and medium-sized businesses and in knowledge and skill-intensive sectors, where employee-owned companies significantly outperform competitors.
As Professor Lampel observes:
Resilience – the ability of firms to sustain employment and growth during difficult economic conditions – has been neglected as a crucial aspect of company performance over the past two decades.
Instead, business strategy and public policy have been dominated by an unremitting focus on maximising share value. In the current economic conditions, business leaders and policy makers should be looking again at the resilience associated with the employee ownership model – and how it could benefit the economy as a whole.
The next leader of the Labour Party will not only have to co-ordinate opposition to the disastrous measures taken by the Tory/Lib-Dem coalition, but put forward an vision of an Age of Shared Prosperity – and work with the wider movement to make it a reality.
I think most people like the idea of getting their bosses off their back, of having a say and some basic respect at work. But employee ownership through trusts and shares? It doesn’t challenge the power relationship – indeed Lampel’s comments on their resilience reaffirms experience that by tying staff loyalties into a compay, you can make them accept sacrifices that much more easily. Look at the way US co-ops have laid off workers since the financial crisis.
Employee share ownership would seem, typically, to be raised as an incenntive towards privatisation of public assets, rather than an encouraged business model for commercial enterprises, I remember advocates of Royal Mail privatisation floating the idea of postal workers being incorporated into stock ownership schemes. It’s the apotheosis of ‘popular capitalism’; every person a property owner. The fact it seems more prevalent among ‘knowledge and skill-intensive sectors’ should demonstrate to what extent these sorts of staff empowerment guff is directed towards your average shop or office worker.
Actually, Dan, the model of “popular capitalism” that Thatcherite ideologues put forward involved an individualised form of share-ownership along the lines of the voucherisation schemes used to privatise SOEs in Central and Eastern Europe during the ’90s. I do not raise the idea as an incentive towards privatisation of public assets and services but as a way of institutionalising democratic structures within firms.
Actually, James, I know that.
I was making reference to the fact that, while the labour movement may have many positive ideas about how to create new forms of workers’ participation, they have only ever been co-opted by the authorities as ways to siphon off such demands into ‘safe’ areas, rather than realisations of those demands.
Whether direct sales of shares, or mediated by trusts and other bodies, these half-way houses don’t change the structure of the economy, or shield the workers in them from the vissitudes of the market.
Not in themselves, no. But they do change the structure of the firm and its reason for being.
It doesn’t change it’s reason for being, which is Dan’s whole point. The reason for being of any firm – under the current economic system, which you’ve admitted to Dan isn’t being challenged by co-operativisation – is to profit.
This is why in the current climate, cooperatives are shedding jobs. The interests of the business as a whole comes before the interest of workers – either individually or collectively, since ultimately the basis of any company is competition and the success of one company means problems for another, which also employs workers.
There is a distinction to be made between the capitalist firm which aims to *maximise* profits and a firm in which the workforce has an ownership stake. I would argue that the conditions within a co-owned firm are likely to be less exploitative than a capitalist firm.
I think the objections to James’ point are actually irrelevant. Do Co-ops change in themselves the structure of Capitalism? No, but nor do Trades Unions, nor has come to that the LP. Now we could on that basis say because not everything can be done, nothing can be done other than wait for the revolution which will change the structure of Capitalism. But, firstly I don’t see any sign of that happening, or of workers actually being attracted to the idea. Secondly, one reason they are not is the previous occasions that the structure of Capitalism was so changed by such a revolution, the results have not been very good for workers!
Co-ops are reducing wages, and laying off workers. yes, but actually less than private Capitalist enterprises. But again, hey, no one said that setting up Co-ops meant solving all workers problems immediately! Read Capital, Marx says when the first industrial Capitalists were setting up businesses they were often more down at heel than their workers. And Engels in his History of the Working Class comments that Trades Unions will have to steer through wage cuts in recessions to try to hold on to jobs, and keep their organisations together.
The objections are Ultra-Left. Lenin introduced the NEP, and tried to attract foreign Capital to Russia in the full knowledge of what allowing the market and profit maximising meant. He recognised as did marx, that actually the most revolutionary aspect of Capitalism had been precisely Competition, which drove the revolutionising of technique, and through profit maximisation leads to a rapid accumulation of Capital. The task of Marxists is to transcend Competition, and profit maximisation, by the effective development of Co-operation. But, that is a process. You cannot simply abolish the market, competition and profit maximisation by edict, or you can, but the consequence is economic chaos, inefficiency, and ultimately bureaucracy. In 1924, lenin said that there mistake had not been the introduction of NEP, but the fact they had forgotten the importance of the Co-ops. He also said that to build a socialist economy a “cultural revolution” to encourage the involvment of workers in the running of their plants was necessary. The development of Co-ops now is the very process of that culrural revolution, a revolution needed before the seizure of power, because as Russia showed, the timescales afterwards are wrong. Economies cannot wait decades or even years for such a transformation in the consciousness of workers. Decisions have to be made. If workers don’t do it, a bureaucracy arises who will.
A further point. As i’ve demonstrated in my series The economics Of Co-operation, a worker-owned Co-op does not necessarily have as its aim, short-run profit maximisation. In fact, not all private capitalist firms do, which is why some retained workers during the crisis by various means. A worker-owned Co-op could, for instance, decide not to over accumulate, but to put some of its surplus to one side to cover any downturns. In fact, in the 19th Century the Co-op did exactly that. It put a portion of its profits to one side to cover Education and Welfare as marx and the First International had suggested. It was able to educate its members before the Capitalist State set up its “headfixing industry” of State education, and covered worekrs and members whn they were sick or unemployed.
By not over trading, which is the commonest cause of bankruptcy, Co-ops can avoid such problems, and use the resources to re-train and educate their workers rather than lay them off. That is particularly true given that as James says, the most effective forms of Co-ops are those which are labour-intensive, precisely because as Mandel says, workers who have a stake in their own company will be happier and more productive – that is one of our arguments for Socialism after all.
But, in that series, I have shown how the increasing economic weight of Co-ops in the global economy means that they CAN begin to change the structure of Capitalism, if they co-ordinate their efforts. One means of doing that as I have suggested is for workers to demand control of the £800 billion in their pension funds, which would enable them to take over a majority of the FTSE 100 companies. Even now, a campaign for greater democracy could make available the £75 billion in the Co-op Bank.