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Mutuals: Opportunities but also dangers for the left

(Cross-posted to Compass)

In barely three months, mutualism has been transformed from an interesting but much-neglected idea into the left's Next Big Thing. Both Progress and LabourList have heralded Tessa Jowell's enthusiasm for mutual ownership as "our mutual moment", while last week's New Statesman described it the idea that "could yet unite Labour's left and right".

And mutualism's appeal extends beyond the left. "Progressive Conservative" Philip Blond makes similar arguments in his ResPublica report "The Ownership State", while ConservativeHome today reports of Tory plans to invite public sector workers to own primary schools, job centres and other state-funded services as co-operatives.

Surely no-one would churlish enough to question this sudden outbreak of cross-party consensus? Step forward William Davies, who has written a spot-on critique for Demos, "John Lewis vs easyCouncil". Davies is no opponent of mutuals - far from it: he is also author of last September's Demos report "Reinventing the Firm", which combined trenchant analysis of the economic crisis with concrete suggestions for an alternative, more mutual form of capitalism.

But he's absolutely right when he complains of a "sleight of hand" that has allowed a debate about the crisis of the private sector to turn into one about the public sector:

"Labour has made lots of noises about this being a ‘mutual moment’, about wanting a fairer model of capitalism and attacking greed in the financial sector… and then slipped seamlessly into a discussion of public service reform.

"There are some decent arguments for greater use of mutual-type models in the public sector, and some impressive examples of this working well already. But this is an entirely different (and more humble) agenda from the one which many of us were hoping promote, namely of achieving a different way co-ordinating management, financial capital and employees in businesses."

He outlines three important distinctions between the private and public sectors:

"Firstly, private sector organisations typically make a profit, while public sector organisations don’t... In the private sector, employee-owners receive whatever dividend is distributed. This isn’t necessarily what they value most about being owners, but it necessarily affects their psychology one way or the other...

"Secondly, public services exist for the public good, usually with some notion of their users as equal citizens of society. It is no criticism of John Lewis to say that they are more concerned with their ‘users’ as consumers. Mutualism may be an effective way of injecting the public, citizen interest into public services, and almost certainly a better alternative than privatisation. But there is still a risk that accountability and public interests could be weakened by what is, after all, a severing of public institutions from a democratically elected state that otherwise owned and governed them...

"Mutualism makes private sector organisations more attuned to the common good, but equally makes public sector organisations more attuned to particular private interests.

"And finally, unless one believes David Cameron’s peculiar 2009 conference speech, the crisis was more a consequence of capital behaving badly than of the state doing so. It seems perverse, therefore, that we should seize the subsequent opportunity to reinvent the state, as necessary as that may be, while leaving capitalism roughly as it was."

Indeed, taking Davies's last point further, there are real reasons to fear that focusing on the public sector alone - while failing to tackle the defects of capitalism - will simply leave public services ever more vulnerable to corporate capture. The danger was spelled out succinctly in a lead letter in the Guardian following Tessa Jowell's announcement of a commission to study public sector mutualism:

"As the NHS continues the transition to becoming a commissioning service, a few mutual providers will be added to the mix to distract attention away from the multinationals that will increasingly dominate. Outcomes will be engineered to demonstrate the success of these purchaser/provider arrangements and a few social enterprises will be among them. Within a relatively short time it will be discovered that economies of scale dictate that all these contesting enterprises will work better if they are brought under a handful of super-providers – it will be at this stage that multinationals will come in to save the day."

And yet the ideas that underlie mutualism - of co-operation and trust - are profoundly relevant to the public sector. That's why it's also possible to agree with the second contribution on the same Guardian letters page, which puts the case for more mutuality:

"I note Tessa Jowell is suddenly interested in forms of ownership and management. It's somewhat ironic after 12 years of New Labour, during which time more of our public services have been outsourced and privatised, while at the same time the government has idolised the private sector and its mantra of growth at any cost. There was a time when the Labour party not only debated mutuality and co-operation, but was committed to socialisation more generally. The post-war form this took was nationalisation, which included top-down structures that gave no real contribution or say to workers and consumers and ultimately failed. A more democratic form of state ownership could offer a popular alternative to the current situation."

A more democratic form of state ownership - and one in which control is ceded to staff and users where possible - is indeed worth striving for. These ideas can be found not just under the banner of mutualism, but in public sector approaches that encompass systems thinking, co-production and public value. There is rich debate to be had around how such ideas can be synthesised. But it is a debate that must displace and not be bolted on to the market-driven model of the last 30 years.

• Update 1: Dave Semple has written this good appraisal of "Tories and Co-ops", while Nigel Stanley sounds a note of caution similar to ours.

Update 2: Tory plans for introducing co-ops indeed involve grafting yet more quasi-markets onto the public sector, by introducing a profit incentive - even if the Tories don't call it profit.

Posted by Other TPA at 04:22pm on 15 February 2010
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Hey Clifford, thanks for the shout-out.

Posted by Dave Semple at 07:16pm on 15 February 2010

This is all very well but completely devoid of reality.

Most people work for small firms. Small firms are set-up by private capital. Capital placed at risk in an effort to build an enterprise.

Employees can, and do, walk away when a business fails or when they want a new, different job. Business owners whose capital is at risk don’t have this luxury. They have to stay and make things work or lose the money they have invested.

Where is the capital required to start up a co-op going to come from? Who will compensate business owners whose capital would be lost if their business were turned into a co-operative?

The notion that John Lewis is a co-operative is wrong; it displays aspects of co-ownership but is in reality a PLC with a very successfully marketed profit sharing scheme. Sharing profits is not the same as sharing ownership.

The idea that the The Co-op is a succesful business is laughable.

Posted by Brian Smith at 11:44pm on 24 February 2010

Rubbish The Cooperative Group is a highly successful business. Have you seen our accounts recently or even been in one of our new look shops.

What about the cooperative bank It has been uninfected by the banking problems and has needed no bail out.

lets face facts our take over of Summerfield now mens the big 4 is now the big 5 we are the 4th largest pharmacy group. The UK largest and leading Funeral provider and lets not forget CFS and the fact that we are also the largest farmer in the UK. Our travel business is also the largest independent travel agent.

The money for setting up a Cooperaitve generally come from the members who set it up.

You also are very wrong about John Lewis It is a worker cooperaitve. The the board have staff members who serve on it and staff views are taken into account and all staff are able to have a formal say in the business.

Posted by Tom Jones at 10:12am on 1 March 2010

Hi Tom

“In the past we have not been as good a retailer as we should have been but that’s changing (but, as ever, for the future. Brian) and I hope I’ve contributed to that,” says Marks, chief executive of The Co-operative Group.

“Every employee is a partner in the John Lewis Partnership, and has a possibility to influence the business through branch forums, which discuss local issues at every store, and the divisional John Lewis and Waitrose Councils[5]. Above all these is the Partnership Council, to which the partners elect at least 80% of the 82 representatives, while the chairman appoints the remaining. The councils have the power to discuss ‘any matter whatsoever’, and are responsible for the non-commercial aspects of the business – the development of the social activities within the partnership and its charitable actions.” Wikipedia.

The “partnership” is a device for profit sharing and, at a local level, a talking shop. There is no capital participation or liability and the stock in John Lewis PLC (don’t ignore the PLC bit, a partnership would be designated LLP - see Ernst & Young) is held in trust not individually by the partners or other owners.

Like the Coop, John Lewis has traditionally under-performed its rivals in terms of growth, return on capital employed and productivity.

But none of this addresses my point which is always overlooked in these discussions and that is that the majority of people work for small, often, micro businesses which are initiated by and kept going through, owners risking their capital. These small businesses have no voice; large corporations and especially the trades unions, drown out anything they might have to say. And all the while, they employ nearly 60% of our workforce, produce over 50% of GDP and are responsible for nearly all the growth in employment, never require government bail-outs (like unionised Jaguar etc) and are even bigger victims of the banking crisis than the rest of us as the banks latch onto them to try and restore their balance sheets and profitability at their expense.

If successful they are excoriated for being greedy and when they fail they are pilloried and abused by HM Revenue and Customs. Their workers have overwhelming “rights” but can walk away at a second’s notice.

And now there is talk of expropriating their capital because “coops” and “mutuals” - whatever they are - are so much better, or in current Labour doggerel, “fairer”.

That’s what I’m talking about.

Posted by Brian Smith at 01:33pm on 1 March 2010

Brian, I run a small business. Half of what you say is untrue (‘Their workers have overwhelming “rights” but can walk away at a second’s notice.’) and half is based on straw man arguments (‘And now there is talk of expropriating their capital because “coops” and “mutuals” - whatever they are - are so much better, or in current Labour doggerel, “fairer”.’)

Read William Davies’ original report to which I referred - it was about the problems of capitalism at corporate level, and argued for more pluralism in the type of corporations we have.

I can’t see him arguing for the expropriation of capital at all, least of all among small businesses. On the other hand, it could be argued that some corporations - eg those power utility companies that effectively act as a cartel to rip off consumers (and small companies for that matter) - deserve a bit of expropriation.

Posted by Clifford Singer at 01:49pm on 1 March 2010

Hi Cliff

Where is the falsity in the statement,“Their workers have overwhelming “rights” but can walk away at a second’s notice”? Surely, it’s a non-partisan description of the current relationship between labour and capital?

I don’t do straw men and as another small business owner - since 1976 - what I wrote was from the heart with, hopefully, just sufficient input from the head.

The left is myopic; it sees employment and the world of work as represented only by corporations and organised labour - and the antagonism and conflict between them - when the reality is nothing like that. Most employees actually like their employers and value the firms they work in. The idea that you can legislate how the workplace, the fixation of capital in enterprise and the relationships between business owners and their workforce, operate is born of this myopic workworld view.

Every attempt at corporatism - because that’s what this latest idea is espousing - has failed. Experience in the UK - remember the NRDC? - and a short visit to Cuba (and I do recommend keeping it short) will show you how well expropriated capital and forced cooperativisation works.

Things work pretty well as they are. Small business operates with a myriad personalities and just needs a louder voice. Some redressing of the pendulum’s swing between the employer and employee wouldn’t go amiss but to suppose that we need an entirely different enterprise model because the government got addicted to easy tax revenues and the banks gorged themselves on the bonuses they earned supplying them, is unsupportable.

Let’s hear it for the SMEs.

Posted by Brian Smith at 03:06pm on 1 March 2010

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