potlatch

new report on public service mutuals

While I was changing jobs last autumn, I was also working on some research looking at the experiences of public sector organisations that transfer to the status of mutuals. Given that this is quite a major policy theme for the Coalition government, this is a relevant issue at the moment. The resulting report, Becoming a Public Service Mutual, co-authored with my successor Ruth Yeoman, is now published, and you can download it here [pdf].

The report is based on a number of case studies of individual organisations that had been spun out of state ownership, into some form of employee and user ownership (although the status of that 'ownership' tended to remain a little ambiguous, given that a degree of risk and often some assets remain with the traditional public sector). These are in sectors such as housing, health and social care, and in all cases, some sort of new governance model was required, to reinvent accountability and hierachy in ways that were distinct from standard public sector bureaucracy.

In terms of political economy more broadly, what I found interesting about visiting these organisations and interviewing their management was that they have to adopt a very different approach to risk and failure, which defies tidy quantification. Basically, they don't quite know what they're doing much of the time, and have to adapt to that fact. But - as any good Hayekian will tell you - nobody really ever knows quite what they're doing when seeking complex forms of coordination, and it's better when those in authority are aware of this, than if they come to believe that things like spreadsheets and audits will protect them. There's a sense of humility about these organisations, born partly out of the fact that they've often had to invent their governance structures out of thin air, and can't be entirely sure that they won't fail in some unpredictable sense. This makes technical risk management harder, but probably makes the collective intelligence and learning far greater. New Public Management techniques are therefore mitigating against precisely the forms of practice and co-operation that might rescue effective public sector governance from a descent into technocratic stagnation (as David Graeber argues in this superb piece, "whenever there is a choice between one option that makes capitalism seem the only possible economic system, and another that would actually make capitalism a more viable economic system, neoliberalism means always choosing the former").

What you discover, when you visit a co-operative or a mutual that is succeeding (or at least not failing, which, contrary to Blairite rhetoric, is more fundamental), is that a new concept of individual agency has emerged, which is unlike those which are handed down from the HR profession or agency theory. It's a concept of agency which is socio-economic, messy, aware of longer-term consequences (which doesn't necessarily translate into taking responsibility for those consequences, but at least can do), and capable of dialogue. What I don't know is whether such a form of agency could ever be translated into formulaic templates, training or audit, without losing what makes it valuable in the first place.

my new reports on co-operatives and mutuals

Just as I was leaving my previous job, at the Centre for Mutual and Employee-owned Business, I was involved in three different pieces of writing, a couple of which have now been published (the third will follow in the next couple of months).

Firstly, the Blueprint for a Co-operative Decade has been published by the International Co-operative Alliance. This was something that Cliff Mills and I worked on over last summer, and was discussed first at a discussion of the ICA board in Cape Town in June, then at the ICA annual conference in Manchester in October. So in fine co-operative style, it's the result of much dialogue, and a careful effort to forge consensus. In that sense, Cliff and I are 'anti-gurus'.

Secondly, Measuring Mutuality: Indicators for Financial Mutuals [pdf] has been published by the Association of Financial Mutuals. This is an attempt by Jonathan Michie and I to think through how to evaluate performance of risk-managing institutions, other than in terms of profit. Given how much culpability 'shareholder value' in banking holds for our current malaises, this is an issue whose pertinence must extend beyond the mutuals sector, I'd have thought.

Hope these are of some interest. Happy to discuss them further.

what do banks and prisons have in common?

I've published an article at openDemocracy, as part of the Uneconomics debate, in which I attempt to stand back and take a wide-ranging look at the policy dilemmas posed by the banking system. There is, I suggest, a serious problem in that the state has become an under-writer for a wasteful and ineffective risk management system, on which it cannot now easily turn its back. In that respect, the financial system has become like the prison system: a poorly calculated strategy for reducing risk, which may have the exact opposite effect, but which the taxpayer has become entangled with. As I argue:

Nearly five years after the dawning of the financial crisis, we can now identify one of its possible long-term legacies: the implicit association between the modern state and large financial institutions has become an explicit one. It is no longer possible to specify exactly where the state ends and the banking system begins...

We are living with a situation in which billions of pounds of public money is still being effectively siphoned into the pockets of private individuals, via quantitative easing and other forms of support for the banking sector. The on-going hand-wringing over the 'fairness' of bankers' pay tends to ignore the graver public insult, that billions of pounds are being removed from the banking system in the form of bonuses, which the taxpayer will have to provide if the system collapses again. Gordon Brown cites figures ^↑ showing that if bankers had reduced their pay by a mere 10 per cent between 2000-2007, the banks would have had £50bn more of capital available to them when the crisis struck, which is the same amount that the government injected into RBS and Lloyds-TSB in October 2008.

There is a structural problem here that has still not been dealt with. If this situation is to change, the government will need to take risks with its modus operandi of risk management. While regulators and policy-makers view the future via traditional risk management techniques, they will effectively endorse traditional risk management institutions of the City of London. Only with an ethos of experimentation can anything genuinely new be anticipated and valued.

You can read the rest of the article here. Comments might be better placed underneath the article itself, rather than on this blog.

Erik Olin Wright lecture on Worker-owned Cooperatives - 23rd May - Oxford

I'm organising and chairing this event with Erik Olin Wright in Oxford on 23rd May. All welcome!

 

Worker-owned Cooperatives: A niche in capitalism or a pathway beyond?

A lecture by Professor Erik Olin Wright, University of Wisconsin

5pm-6.30pm, Wednesday 23rd May, 2012

Lecture Theature, Department of Politics and International Relations, Manor Road Building, Manor Road, Oxford

Worker-owned Cooperatives have an ambiguous relationship to capitalism as an economic system. On the one hand, worker coops constitute a distinctive organizational form that occupies a small niche compatible with a well-functioning capitalist economy. On the other hand, worker-owned and managed firms violate in fundamental ways the class character of capitalism by being organized on democratic egalitarian principles. This contradictory relationship between cooperatives and capitalism poses an important question for critics of capitalism: To what extent could worker cooperatives ever constitute a significant component of an alternative to capitalism?

This lecture, hosted jointly by Oxford University's Centre for Mutual and Employee-owned Business, Public Policy Unit and Centre for the Study of Social Justice, will explore worker-owned cooperatives, as a case of what Wright terms 'real utopias'. It will feature a response by Prof Stuart White (Politics) and be chaired by Dr. Will Davies (Centre for Mutual and Employee-owned Business).

No registration is required. Please email william.davies@kellogg.ox.ac.uk for any further details about this event.

new ownership reports

Jonathan Michie and I have authored a report for the Wales Co-operative Centre, on the risks of business succession (especially in very small businesses), the social costs of succession failures and how employee buy-outs can avert these. You can download the report here. In other ownership news, check out the final report from the Ownership Commission, which Jonathan was a Commissioner on and I provided some research assistance for.

new report on employee ownership: All Of Our Business

My new report, All Of Our Business: Why Britain needs more private sector employee ownership, is published today by the Employee Ownership Association. To accompany it, I had an article in The Sunday Telegraph yesterday laying out its main arguments. And today, Nick Clegg seems to be taking this agenda seriously, as part of the (overdue) political movement towards questioning ownership and control in the private sector, and not just the public sector.

The central argument of the report is this:

[The report identifies] two rival philosophies of economic value, that businesses can embody. The first privileges the power of ‘exit’, and rapid turnover of all stakeholders, including shareholders, management and employees. Its proponents argue that this philosophy breeds efficiency, dismantling obstacles to innovation and profit. But in the last four years, it has become mired in a legitimacy crisis, as it appears to lead primarily to the personal enrichment of those who enforce and facilitate this model.

The second philosophy privileges the power of ‘voice’ and institutional memory, such that relationships between owners, managers and employees are sufficiently strong that information can be shared, and difficult economic times can be weathered. This can be difficult to realise in our culture of short-termism and distrust, but the argument made in this paper is that it is substantially easier in situations where the owners are also employees, and the employees are also owners. Employee ownership is a ‘commitment device’, which can save businesses from their own worst tendencies.

The employee-owned sector is not currently large enough to bring about a wholesale change in the character of the British business model, although the mutuals and co-operatives sector at large (which includes building societies, credit unions and consumer co-operatives) can make a significant contribution to alleviating many of the malaises of corporate governance, especially in the financial sector. They are also more numerous and high-performing than many policymakers appear to realise. The point that this report seeks to stress is that it is not only employees who suffer from a model of short-termist, earnings-obsessed business, but also shareholders, entrepreneurs and businesses, whose long-term interests are frequently neglected by the ethos of profit-maximisation. Eventually, society and public services are impacted negatively by business models and business culture that take such a narrow view of human psychology, as has prevailed in the UK over the past thirty years. The spill-over costs of bad workplace relations are now increasingly falling on the NHS. Viewed this way, it’s not clear that dominant notions of ‘efficient’ business practices are really as efficient as all that.

I'll try and blog a bit more about this in the coming days.

Update: British readers can hear Charlie Mayfield, Chair of John Lewis Partnership, and I discussing employee ownership on Radio 5 yesterday evening, at 2:24mins here.

the demise of football

Thomas Friedman famously offered the 'Golden Arches Theory of Conflict Prevention', on the basis that no two nations with a McDonalds within their borders had ever gone to war. Allow me to offer its successor: the 'White Goalposts Theory of Crisis Resolution'. This theory states that we will know that our present economic crisis is being resolved (rather than deepened), once a front-bench politician comes out and publicly attacks football, in terms of its business models, culture and economic norms, and not only for its sporadic eruptions of racism or corruption. My prediction, for what it's worth, is that this event will occur in October 2013, and that the politician in question will be Yvette Cooper, Leader of the Labour Party.

Football was once such worthless political currency that Margaret Thatcher publicly questioned whether England should be allowed to compete in the 1990 world cup, due to the threat of hooliganism. Euro96 was the turning point, although English hooliganism was still rife at the Euro 2000 championships. Since Euro96, no politician has had the guts to question any aspect of the game or its status within our media, public sphere or national self-image. The 'old' aspects of the game - racism and FIFA corruption - are routinely attacked, but the 'modern' game cannot be questioned.

But look how grizzly things are getting. I read last week that Carlos Tevez may be prepared to take a pay cut from his £250,000 a week job at Manchester City, on the one condition that his new club has it written into his contract that he remain the highest paid player in the squad. Wayne Rooney's behaviour regarding his Manchester Utd contract was criticised by many, but politicians repeatedly duck these issues, despite viewing consumerism, (some) advertising and (recently) X Factor as fair game. Energy oligarchs have removed whatever sense of 'level playing field' may have remained in the English Premier League, turning the top of the football labour market into a far less dignified version of what goes on in boardrooms, as players shamelessly strategise towards remuneration increases (hilariously still termed 'wages') through any means possible.

What precisely are we celebrating when we enthuse about football? Increasingly it is referred to as 'athleticism', in which case lets all start following Usain Bolt. If we have to turn our backs on the tediously-adored Barcelona at the same time, then so be it. It's a price worth paying. The football-obsessed sports shops in British high streets have nothing to do with athleticism or even physical exercise any longer. Just try buying some new laces, socks or functional trainers in JD Sports. You could come out dressed from head to toe as Michael Jordan, but there are much cheaper ways to get a fancy dress outfit.

Football is more interesting as a bellwether of contemporary capitalism, and should be criticised accordingly. Not long ago it was PLC ownership structures that looked like they were stripping the heart out of clubs, seeing them run 'for profit'. Now the problem is the opposite: they are owned by private billionaires, run 'for power', but at a vast loss. Roman Abramovich's takeover at Chelsea in 2003 thefore anticipated the broader trends that I've argued the present crisis will unleash.

Regulation School Marxists define a capitalist crisis as a situation where neither 'more of the same' nor 'less of the same' will resolve the situation. Our present debt crisis is a case in point. More debt makes it worse; paying off debt also makes it worse. Resolving such situations requires a fundamental revaluation - innovation not only in policy measures and mechanisms, but in the culture and values that underpin how government and business institutions operate.

The challenge of resolving a serious crisis is that it involves a degree of truth and reconciliation regarding the past. One often has to accept that critics (sometimes quite eccentric ones) are right, and even that they have been right for a long time. The demise of Keynesianism was as slow as it was because it involved coming to terms with the fact that full employment was no longer a useful goal of policy. This was a severe moral revaluation, not simply a technical paradigm shift. The enemies of Keynesianism (the monetarists) had to be welcomed in to the fold. This takes time and much pride swallowing. There is also some first mover advantage on these occasions, just as Britain seemed to benefit from giving up on the ERM, before its terms were loosened anyway.

To accept that football - or should we say 'Football' as an idea - may actually be part of the disease, and not a harmless supplement to our economy would take some pride-swallowing. The idea that 'talent' has its 'desert' in very large amounts of money is so ingrained, we so want it to be true, that we carry on adhering to it no matter how grotesque the spectacle it generates. The media maintains the pretence of separating Ashley Cole the 'talented' footballer from Ashley Cole the unruly working class 'yob' (as if the latter is just his unfortunate inheritance), ignoring the obvious liklihood that football is far more responsible for his noxious personality than his upbringing.

Those on the liberal-left are able to see through the rhetoric of bankers, when they demand that London remain a 'level playing field' so as to ensure that their industry's 'David Beckhams' are still attracted to work here. The liberal-left is able to debunk football as a metaphor. But why not go a stage further, and attack the whole sorry charade that's been making fools of so many people (me included) for the past 15 years?

Why must Jonathan Freedland write a sensible argument about extreme inequality in pay, but in the same article offer a justification for Wayne Rooney's £250k a week? Once you give in to the neo-classical vision of a labour market, that wages are simply a reflection of 'demand', then the door has been left ajar for the likes of Fred Goodwin. Why not just take the bull by the horns, and accept that the whole thing should just be shipped off to a vast in-door Nike sports complex in Dubai where it belongs? Is it not possible that the constant news reports of footballers attacking women, of fans being charged £50 a ticket and replica shirts being 'outdated' every 9 months, of Manchester Utd's Nani having a life-size marble sculpture of himself in his house do not happen inspite of the vast sums of money that are now at stake in this game, but because of it?

At some point in the future this will appear obvious. Soon after that, we will find it difficult to ever believe we tolerated, even celebrated, this circus in the first place - just as, by the 1990s, it seemed extraordinary to think that governments once targeted full employment. For the time being, any politician would shudder at the thought of criticising the game, as opposed to its undesirable 'externalities' or its metaphorical distortions. Which, according to the White Goal Posts Theory of Crisis Resolution, only goes to show how far into our current crisis we are: not even half way.

twitteratus

In my day-job, The Centre for Mutual and Employee-Owned Business is now on twitter! Follow ye, follow ye!

Policy Network mutualism report

Policy Network have just published a new essay collection, What Mutualism Means for Labour, containing various pieces, including a modified version of my previous piece for them, Bringing Mutualism Back Into Business. There's a nice piece in today's Guardian, covering the report, and Tessa Jowell's contribution in particular.

mutual activities

Tomorrow I'll be speaking at the Mutuo annual Mutuals Forum, which will see the launch of the 2011 Mutuals Yearbook (available for download). I've written a short introduction, trying to ram home the political significance of this sector in the current economic climate, arguing the following:

The current economic and political imperative is to promote ways of organising finance, risk, public service and enterprise, that are both dynamic and responsible at the same time. For a while, ‘social enterprise’ appeared to offer a third way, between state and market; today, we’re told that it is the ‘Big Society’. Regulators and policy-makers are seeking principles via which to distinguish the ‘socially useful’ parts of the private sector, from those which seek only to inflate private earnings as fast as possible. Mutualism adds much-needed clarity to all of this, by offering well understood, viable organisational structures, that are entirely alien to both Whitehall and the deal-makers in the City.

On the same topic, I'll be speaking at the ippr on 2nd November, at an event 'Corporate Governance Reform: Can alternatives to share holder capitalism drive growth in a new era economy?'. The other speakers are all much more famous than me, so either I'm going up in the world, or they're going down. It's very hard to tell in the current economic climate.