The case for common ownership
Posted on Wednesday 13 June, 2007
Filed Under Uncategorized
Common ownership is essential for economic democracy. Let’s get away from the lie that the unfettered market economy the Tories and New Labour have worked so hard to bring into being has been a unmitigated success.
It has wrecked manufacturing industry, and reduced British workers to the lowest level of employment rights in the industrialised world.
The notion that private sector management is inherently superior to, or necessarily ‘more dynamic’ than, public sector management surely stands as comprehensively shredded as the last set of Enron accounts. Consider such triumphs as Railtrack, Equitable Life and Marconi.
Privatisation has freed taxpayers of the need to pump tens of millions of pounds a year into inefficient nationalised industries. Now we can pump hundreds of millions of pounds a year into inefficient privatised businesses instead.
That’s why the railway system is subsidised by the taxpayer to the tune of £5bn a year, three times what was paid out to BR. According to the House of Commons transport committee, the tube now costs the taxpayer a staggering twenty times as much as it did when it was in the public sector.
Some industries are – as economic theory used to recognise – natural monopolies. There is no point building a second set of water pipelines and installing a second set of taps in every household.
Privatising a natural monopoly simply licences the fleecing of the customer for the sake of private profit.
Legally speaking, the first duty of a private company is act in the best interests of shareholders. But I want hospitals to act in the best interests of patients, schools to act in the best interests of pupils, water and electricity companies to act in the best interests of consumers.
But in order to control or influence a major company, the choice is basically between regulation, financial incentives and public ownership. Given that private firms exist to maximise profits, it is perfectly reasonable to legislate that they do not do so by cutting down rain forests or using toxic chemicals.
It is unrealistic and unreasonable to try to use regulation to ensure that it pursues a goal entirely different from maximising profits, such as satisfying social needs within a framework of sustainable growth. After all, the company can be taken over and the management sacked if it strays from the profit maximisation path.
Somehow the very words ‘social ownership’ are considered tantamount to political suicide if they issue from the lips of Labour MP or a trade union leader. Unite might not want to see Jaguar and Land Rover handed over to the private equity boys, but I will be very surprised if even the ostensibly leftwing Tony Woodley puts forward the obvious alternative.
The right have won the propaganda war on this one for more than two decades. But if the left cannot put the idea back in circulation, nobody else will.
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11 Responses to “The case for common ownership”
And what about that PriceWaterhouseCoopers report on the pharmaceutical industry?
The study suggested drug companies’ reliance on heavy marketing of a few drugs in the hope of huge sales meant they were “operationally incapable” of acting quickly enough to produce innovative treatments demanded by global markets.
If that’s not an argument for common ownership and a not-for-profit medicinal research, sales and production sector, I don’t know what is. Obviously PWC see it a bit differently – patent protection for drugs, set at about 20 years, could be extended to a much longer period to incentivise the companies to produce more innovative drugs and sell them at a lower cost..
http://business.guardian.co.uk/story/0,,2101576,00.html
Exactly – we need to be making the case for democratic common ownership. That means rejecting the old-style Morrissonian bureaucratic forms of nationalisation that created top-down public corporations. Mass working-class opposition to Thatcherite privatisation was hardly likely to arise as a result – after all, workers had no more stake in publicly owned British Gas than any other private company.
Democratic social ownership should meant joint control of industries by workers, consumers and the elected government. The RMT’s proposal for a socially owned railways could be extended right across the board – a management board divided into three: a third for workers’ representatives, a third for passengers’ representatives, and a third for Government representatives.
This form of democratic social ownership – or democratisation of the economy – is an explicit rejection of ‘Old Labour’ and should be at the very foundation of a new 21st century socialism.
Spot on Owen. We’ve got to be framing the debate about public ownership in terms of economic democracy, for workers (and, yes, ‘consumers’) – rather than “renationalisation”, which inherently has connotations of going back to something from the past. For the same reason, “repeal Thatcher’s anti-trade union laws” isn’t much of a slogan when you’re talking to people who can’t remember when those laws were even passed. It’s got to be about “new rights in the workplace”.
Goddam, that’s what a post looks like.
If the boot was on the other foot an ad hoc committee of well funded rightists would form, boil the issue down to a series of big fat numbers, add a bit of primary coloured editorialising and release it to a grateful press.
Just the kind of effective propagandising the left never does.
Maybe there’s a reason for that, does anyone know if the press receives much advertising income from potential candidates for renationalisation?
I think there is a way to wrong foot the right, and outflank them. We don’t need common ownership epr se, but the effect of it. Simple way to go about this – make large companies subject to the freedom of information act, remove commercial confidentiality from government procurement processes, et Bob est ton oncle. Further, scrap the information commissionaer and make it all operate through the courts, and pretty soon we’d find companies who have to behave in the interest of the public, and be closer by far to an administered economy.
Great Article Dave, I believe John McDonell is working on new strategies to popularise common ownership. We need to take the ideas of ‘nationalisation’ and remould them for the 21st C version of socialism. Having said that, we can’t go back to the model of the last century, i lived near Cammell Lairds(british shipbuilders) and the level of skiving was incredible, I used to see plenty of workers climbing over the wall to get away early and friends who worked there told me, sleeping was one of the most common activities there!
“Legally speaking, the first duty of a private company is act in the best interests of shareholders.”
At the risk of sounding cheeky… so what?
This is a particular hobbyhorse of mine, but in countries with funded pension systems the shareholders are, basically, the public. If you look at the share register of a typical UK-listed company the names you will always see are the mineworkers pension fund, the post office pension fund, local authority pension funds. These days you also see big public sector funds from the US, Canada, and the rest of Europe as the capital of working people is increasing deployed globally. So really the duty of companies is (or should be) to act in the best interests of the public.
The problem is not that companies are run in the interests of shareholders, but that often they are not, or that the definition of “best interests” is a narrow and exclusively financial one. Part of the problem is that pension funds delegate all responsibility for this stuff to the professional investment firms they hire. These are typically conflicted by commercial relationships with the firms in which they invest our money, and because of their cultural make-up don’t tend to be motivated by issues such as exec pay, or corporate social responsibility. In addition their definition of “best interests” is usually just “making the share price go up”.
However it does not need to be like this. Our trustees of pension funds – many of them TU members – could take back control, and adopt more progressive investment policies. There is a global movement amongst TUs to try and do this – see the ITUC’s committee on workers capital – http://www.workerscapital.org/
Also have a look at the book The New Capitalists. One of the authors is the former Labour Party AGS David Pitt Watson.
I think we effectively have “common ownership” because of the modern nature of shareownership, but most on the Left don’t (or maybe don’t want to?) acknowledge it. While we fail to do this we effectively let the City decide what “best interests” means.
Finally it’s worth noting that this touches lots of different areas. Where do you think all the money piling into private equity is coming from? Billions of pounds of it is coming from our pension funds. Again at the moment our trustees just hand over the money, but this doesn’t need to be the case. Lot’s of potential here.
“I used to see plenty of workers climbing over the wall to get away early”
Lightweights.
The night shift at Spillers down the Dock Road used to use a rowing boat to slip out to the boozer.
That’s the kind of initiative that only free enterprise can inculate.
When NALGO complained about the companies being propped up by the Manchester City Council pension fund (yes, it was a while ago) we were told that the fund managers’ hands were tied – they had to take a narrow view of ‘best interests’, disregarding corporate social responsibility etc. I don’t know if this was true; depressing if so.
if the Labour Left (or whoever) were politically shrewd then they would start a campaign for “public ownership”, and expand it out to incorporate all major public utilities, electric, gas and railways, for starters
it would be a winner, nearly everyone is annoyed by the tangible consequences of privatisation and politically it allows a wider message to be given out
so the Left should forget about the 5th, 6th or 7th International (whatever it’s called now) and try to work on some tangible mass campaign of public ownership
this is, if the Left is serious, that is
“When NALGO complained about the companies being propped up by the Manchester City Council pension fund (yes, it was a while ago) we were told that the fund managers’ hands were tied – they had to take a narrow view of ‘best interests’, disregarding corporate social responsibility etc. I don’t know if this was true; depressing if so.”
Nope, it’s not true. This is an argument that gets rotted out quite bit by opponents of doing things differently – namely that it is trustees’ fiduciary duty to ignore social and ethical considerations. That was always a misreading of the (limited) case law that exists in this area. The most recent legal opinion suggests that if you think social and environmental mismanagement damages companies then trustees have a fiduciary duty to consider such issues. So the legal position has flipped 180 degrees.