Monday, 14 September 2009

Labour should hire capital

The second in my series of folk rallying to once unfashionable causes. I see Demos have published a report on what used to be called Industrial Democracy. For years Liberals argued this case to be met with general disinterest or hostility. In the aftermath of the economic crash people are beginning to look again at models for running firms and realising that the one which has been dominant for so long-increasing share owner value-has failed. As Demos says:

How can firms be modelled so that not only shareholders but employees, the economy and society profit? Many of these models already exist. Mutual and employee-owned models of business operate with longer time-horizons, achieving higher levels of performance and customer satisfaction. They nurture greater power for individuals over their economic lives and increase the accountability of managers. This report argues it is time to bring these models out of the wilderness and into the debate about where capitalism goes next

When I first joined the Liberal Party the example of co-ownership Liberals quoted was Scott Bader, a firm that was essentially gifted to its workforce by their founder. I recall Richard Wainwright arguing at a Liberal Assembly that the model we should promote was one where 'labour hired capital' and not viser versa. He was drawing on a rich vein of Liberal thought going back to John Stuart Mill and his book on Political Economy when he asserted:

Mill goes on to examine the 'gang' structure of Cornish tin miners as an early form of self management. This practice continued in English industry and my father working for the Standard Motor Company immediately after WW2 worked in a self managing group of workers (discussed on page 61 here) . Such ideas appeared in Liberal Party policy in the early 1920's and their is a whole chapter in the famous Yellow Book 'Britain's Industrial Future' published in 1928 and reviewed here by Duncan Brack. The Demos pamphlet does give the Liberal Part passing credit for its stand.

As Young Liberals in the early 1970's we were enthusiastic about the notion and Roger Cowe-late of Liberator and the Guardian-published a review of all the workers' co-ops in England to promote the idea. Towards the end of his life Jo Grimond got very enthusiastic about industrial models of 'job ownership' that existed in Spain.

One of the big problems of 'building share value' as the only objective of a firm is that it leads to high risk taking by managers and clearly shareholders have not been an adequate check on that. Vince Cable identified some while ago the negative impact that de-mutualising the Building Societies have had on the banking sector. The Northern Rock debacle would surely not have happened if it was still owned and controlled by its members.

Anyway it is good that this discussion is back on the agenda. The crude market capitalism of Thatcher and Regan blotted out all other models of firms save one- and that has failed.