Wednesday, 2 November 2011

What about a bout of Co-operative Quantitative Easing?

I'm not one of those who react with tribal anger to COMPASS's Plan B for the economy. I was actually quite pleased that at least some sections around the Labour Party were seriously engaging in the issue of how to get growth going, I also have a sneaking suspicion that if we had not taken on the burden of sharing government with the Tories(chiefly because the Labour Party had lost the public's confidence and hence their votes) we would be floating plans not too distant from Compass Plan B but with some distinct differences.

Like many Liberals I have been impressed with the arguments that David Boyle and others have put forward for 'Green  Quantitative Easing'. :

  • Put it directly into the new institution, buying small business bonds.
  • Buy bonds in the new Green Investment Bank, so that the money goes directly into loans that build the green economy (green quantitative easing).
In addition part of fixing the banking mess is to create regional (mutual) banks. I have long envied the regional banking structure in Germany and as I have mentioned before part of what most impressed Jo Grimond on his visit to the Mondragon Workers' Co-ops was their hybrid mutual bank which was the engine behind what has been called 'the most successful entrepreneurial support programme ever seen anywhere' .(The bank mentored and funded well over 100 businesses virtually without failure, all of them employee owned, independent and democratic....)David Erdal in Beyond the Corporation 

I have long believed (and so had our party) that we need to transform the ownership of businesses. We have the most regressive form of company ownership in Western Europe. The Director's only responsibility is to share holders who take short term decisions for a quick buck. We need to change the basis of ownership not to the hydra headed multi stakeholder model beloved by some new Labour folk, but straight forwardly to acknowledge the role of workers in wealth creation by giving them at least the same rights as share-holders and promoting outright employee ownership as our preferred model. Was I was young it was simple, Labour believed in Sate Ownership, Tories believed in Capital ownership and we believed in Employee Ownership. In some measure the others tacked towards the position we appear to have abandoned!

In the quest to get the banks to lend we want that to happen to sustainable businesses which create jobs and products for the long term. We are not interested in fattening up companies to be sold off and dismantled where the most significant beneficiaries are the investment bankers and the senior managers. Local Banks like Mondragon's Caja Laboral Popular should be our model and if the next round of quantitative easing can fund such new institutions well that is surely better than pouring money into the existing banking structure.

David Boyle interviewed in the Ecologist magazine made a similar point -but without the essential ingredient, Employee Ownership.

 DB: We are not going to sort out banking in this country until we split them up into a smaller scales. I don't just mean splitting up the investment banks from the ordinary retail banks. I think they've got to create a new small banking sector. Some of that is going to come out of the existing banks.
We are incredibly impoverished in this country, in our banks, compared to all the nations we compete with - France, Germany the US - where there is a huge diversity of banking and local banking.
I think we need a Community Reinvestment Act like they have in the States, which has in effect capitalised the new community banking sector.
I spent the first two months of this year is a town in western Massachusetts where there are 11 banks. Sure, there are arguments about whether or not they are vulnerable. But the fact is, they are flexible, they've got local knowledge, they can understand their local market and can lend on things other than property bubbles, which is currently all that our banks are lending on.
The Liberal Plan C should be based on reforming the company. That is the case we have argued for nigh on a century. For it to work we need financial institutions that will fund it as the present banks are failing. If we want businesses that are here for the long term spreading wealth through co-ownership and creating jobs that last we already know some of the key measures that need to be taken

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