What sort of Business models could deliver social ownership?

If you wanted public ownership and accountability, and did not want a simple situation in which a Minister in Whitehall controlled a business, what sort of organisation could you look to?

The question is a very real one for Britain, where decades of privatisation and the private finance initiative are running into the sands of debt and inefficiency. It is also a philosophical one. Functional as the market is, it is simply a tool, and should not become a shibboleth, an incantation to be invoked in order to stop debate.

The question is bound up with two realities. The first is that some things are natural monopolies, or they are public goods. The former have such a cost advantage and profit so much by being big that they cannot ever make a loss, nor face any competition. The latter are vital goods that a market cannot provide because they cannot face any competition and cannot exclude non-clients, like lighthouses or the police. Some things, in addition, are merit goods that are good for society but that will be under provided and overpriced by the market.

The second reality is that forms of organisation affect product delivery. A private TV company must chase ratings, for instance, and a private rail provider must please shareholders; a public producer responsible to the government might not care as much as it should about efficiency.

Since vast sums of public money are involved whatever the solution--either in subsidy, or tax breaks, or pensions, I thought that I might trawl for examples of company that could deliver public services and redistribute profits whilst corresponding to a form of democratic social regulation that wasn't based wholly on market worship.

Surprisingly, I found quite a few. In the private sector, for instance, Britain has three good examples. Britain has recently initiated a form of non-profit organisation called a community interest company. These are privately owned, but organised in a similar way to charities so that they can redistribute profits to a social enterprise. The model might be a better one for hospitals or schools than primary care trusts soaked with PFI funds, and is similar to that used by the railway company Network Rail.

Britain also has co-operatives which are of very long standing, and indeed are a part of British life. My granny used to be a member of the 'co-op' and I remember waiting in line to exchange the benefits of ownership for lower prices. It was better by far than any store card. For many working people in Britain, the co-op bank, the c-op store, and the co-op funeral parlour marked out the everyday things of life and for some they still do.

There are legion examples of co-operatives in business, and of employee-owned firms in which the sale of shares is actually strictly limited but the benefits of good performance by contented staff are not. Lucas Aerospace in the past and John Lewis now are very successful. There used to be a very strong element of non-government mutuality about the English economy, until greed and the short term incentives of the capital markets encouraged people to sell their ownership of building societies and mutual associations; thank god that was never done to the co-op.

Britain's last colliery was a highly functional cooperative. Since we are going to have to open the coal mines again, it might make sense to retain the lessons of its experience for the day when the men go back down into the dark.

There are also plenty of examples of hybrid companies that deliver services with a market aspect but upon which social institutions and the voices of the people who work in them have a big say. They don't necessarily involve central government either. The Welsh Water company, for instance, is such an institution; so is Cafedirect. Both are private and public, but not wasteful in the way cumbersome government-public partnerships are.

There are, as ever, many German social institutions that parallel this model. I suppose the most famous was the stupendously successful Bundesbank, upon which the European Central bank is modelled. As my reader will know, I have had my problems with the euro idea, but not the organisation of the bank. Trade Unions, businesses, local and national government and specialists all sit on its board, and it is therefore more ponderous but in a way more democratic than the British equivalents in England, Scotland and Northern Ireland.

I like the German social model. Indeed, as the rail unions point out, the Chiltern railway has now been nationalised in England; the trouble is its owners are the German nation. They do seem to be doing a better job than the previous crowd.

Sometimes, social ownership could be achieved through the grouping of private organisations around a clear, competent holding trust, and again, the government centrally would only be involved in a strictly limited way. Look at the BBC in England, which is a tax-raising monopoly and all the better for it too, or the Spanish Railways, which are some of the most modern, efficient and expansive in Europe.

Can a private confederation really be said to be socially responsible and open to pressure? Perhaps the US Baseball commissioner model could be adapted, and we could elect Commissioners of Television to the BBC trust, and to the Athletic, Soccer, Rugby and cricket organisations.

The main point is that business is for life, not life for business. If we have a mono cultural market model that only operates in terms of shareholders and the bottom line for hot global money, all our lives are diminished. If we have a culture that encourages voting, participation and ownership, and responsibility, we would be a happier country.

I have one last thought. I am obviously suggesting that we break down the barriers between public and private provision, and not in the way the USA has always done in its successful electronics and defence-based government businesses like the old Sematech company. It may be that we could encourage local government to take on debt through bonds that could be issued to citizens and commuters with a limitation on their amount.

If every tube passenger had a say in the tube in return for a five pound bond, which would deliver at the end of the year up to a maximum of say, five bonds a month, we could fund the London tube and abolish non-oyster prices altogether. New York, like many American cities, effectively has a democratic public say over its subway in this fashion.

This would require local government to be better qualified. We should cut the numbers of councillors by half or two thirds, and we should link the pay and pensions of members of parliament, as was done in the past, to their local councils. It would also be imperative that any money saved or earned by the central state when we sloughed off private finance schemes and wasteful subsidies should not be spent on tax cuts but should go to a fund with the sole purpose of paying down the national debt. If local people wanted more service, local people could buy more bonds or pay higher local taxes.

It isn't impossible to have social accountability, or social ownership, or a culture of life and respect for people rather than a monoculture of greed. The oil is running out, the wheat is becoming dear, the world is turning. The future goes, surely, to people who make small but definite steps after asking 'why not?'

UPDATE: Jock Coats in Oxford has just suggested that I look at the 'Open Capital' website, detailing new forms of Limited Liability Partnership, and you may want to too! My Correspondent Neil has also pointed out that EWS, the country's biggest rail freight company, is also owned by Deutsche Bahn.


Jock Coats said…
I urge you to have a look at the work of Chris Cook, developing the Limited Liability Partnership as a means of social ownership. He calls it Open Capital.
Martin Meenagh said…
Thanks Jock, I will update the post with that. I owe you a drink the next time I am in Oxford!
neil said…
EWS, the country's biggest rail freight company, is also owned by Deutsche Bahn. Makes you think, doesn't it?
Martin Meenagh said…
That it does, Neil. Thanks for the update!

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