potlatch

20 public-spirited lawyers could change the world

There are two prominent traditions through which social and economic research is married to the critique of capitalism. The first is critical theory, in which knowledge and judgement are turned upon the conditions and practices of domination, following in the tradition of Marx. The second is liberal republicanism, in which knowledge of alternative, non-dominating institutions is collected and publicised, following in the tradition of (say) Mill. But I wonder if we can add a third: the analysis of the surprising frailties of dominant institutions.

David Graeber's recent articles have got lodged in my mind, as examples of social science optimistically down-playing the power, durability and authority of the status quo. Graeber highlights the fact that contemporary capitalism is so lacking in authority or hegemony, that a huge amount of resources are diverted towards simply propping it up. This inverts the perspective of critical theory, which, by contrast has traditionally viewed power as totalising and suffocating (I guess Graeber has the benefit of an anarchist tradition, which has long committed to playfulness and laughter). Luc Boltanski's departure from critical sociology occurred in a parallel way, focusing on the unlikeliness of sustained institutional domination, rather than its inevitability.

In this vein, I have a proposition: twenty public-spirited lawyers could change the world. Capitalism, as a political-economic system, is an attempt by certain individuals - entrepreneurs and financiers - to dwell in the future, through a system of promises and plans. Its durability derives partly from the fact that, by the time the rest of us reach next week, it has already been occupied by those who were parcelling it up the week before. Capitalism is the German beach towel that we find already laid out on the sunlounger at 9am.

But what is it that allows this conversion of future promises and plans into a lived reality, that the rest of us have to abide by and view as 'real'? It is pieces of text, backed up by the sovereign state - contract backed by law. Without law, without lawyers, entrepreneurs and financiers would be nothing but a throng of Big Lebowski's, pledging and scheming, but never getting anywhere. "Hey, dude, I totally thought of that idea first." "Look, man, you totally promised me you'd obey me". As anarchists might agree, it's all somewhat laughable.

Napoleon said that "an army marches on its stomach". Nye Bevan said that the NHS would need to "stuff the doctors' mouths with gold". And is it any surprise that lawyers are so handsomely paid, when they occupy a pivotal position in the enforcement of a future that few of us have had any say over. Imagine if they went on strike! 

Law is a form of symbolic and discursive violence. Through the foggy complexity and uncertainty of a modern society, law enables individuals and institutions to send laser beams (of varying quality, depending on cost) from one point in time and space to another, saying "this is what will take place; this is what we agree has happened; this is what must happen; these are the conditions of co-operation". Law, more than the media, allows money to be converted into publicly-agreed and enforceable statements.

Imagine if this capacity were diverted to alternative ends. Imagine a lawyer - and not simply a civil rights or legal aid lawyer, as noble as those are - who was not interested in getting rich. We obsess over 'social' entrepreneurship, but entrepreneurship only determines particular qualities of capitalism, whereas law determines its general form. This, potentially, is a far more potent object of innovation and reform. This is exactly what the ordoliberal lawyers in Freiburg realised during the 1930s, 40s and 50s (for some excellent research research on this, see Werner Bonefeld's ESRC project and papers). They hoped to reform the very basis and form of capitalism, not through tinkering with economic policy-making, and less still through economics, but through drawing up a new blueprint for its rules. This blueprint was instrumental in the design of the German social market economy, albeit following wartime devastation and then Allied reconstruction.

The area that I've witnessed this critical-legal potential most closely is in an area where I've done some work in the past, namely ownership and control of firms (my work on this is collected here). Last summer I had the pleasure to work closely with Cliff Mills, a lawyer who has become an integral part of the co-operative and mutuals movement in the UK, and on whom a large number of existing 'public service mutuals' depended for their advice and constitutional design. Cliff and I did much of the drafting of a document for the International Co-operative Alliance, offering a Blueprint for a Co-operative Decade.

What I found enlightening about this experience was the discussions we had about core instruments of capitalism - equity, voting rights, debt, share, audit - and how far they can be tweaked in various directions, before they become something else. In the process, one starts to imagine a wholly different economy, simply through considering how freedoms, powers and responsibilities might be combined differently, via subtly redesigned legal instruments. This discussion is the necessary accompaniment to Erik Olin Wright's Real Utopias project, which seeks to categorise institutions in terms of their distribution of social and economic power, and Will Hutton's 'stakeholder capitalism' agenda, which aimed to bring German corporatism to Britain. (Stuart White and Martin O'Neill recently wrote an interesting piece about what it would mean for the Labour Party to revive these concerns.) Multiple levels of abstraction are needed in tandem. Models of political economy are all very well, but I've rarely heard such a nuanced take on the nuts and bolts of capital as I got from Cliff.

But for the most part, Cliff is on his own. Another lawyer, Graeme Nuttall, carried out a review of employee ownership for the government last year, and no doubt there are others scattered around. Though I understand that some people are tired of his messianic demeanour (or is it just his disciples that bother people?), Lawrence Lessig has also shown what an individual with a political critique and a legal training can achieve. What we need is something like a new ordoliberalism (which is not so far from saying we need a new neoliberalism...), that is, a group of lawyers intent on transforming the framework of capitalism and non-capitalism, through a concerted, not-for-profit effort.

Governments and policy-makers are now more ready to admit how little can be done to transform the fabric and norms of society, beyond the state. The 'Big Society' meant far more as a negative category than a positive agenda: these are the areas of social improvement that government can't really help with. Entrepreneurs are expected to pick up some of the slack, through personality and charisma alone. Why not lawyers? If economics 'performs' markets, as Michel Callon has argued, it's only a slight exaggeration to say that law 'performs' society. Written rules are one necessary ingredient of a society that hangs together in a certain way. Coming up with alternative rules, making them available to the public, giving them plausibility, is one path to an alternative future. As much as anything, this would highlight the contingency and exoticism of the status quo, which we deem unmovable but is in fact just the practical work of the professions which slavishly - or make that, lucratively - repeat it, year after year.

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 [email protected] 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.